v3.26.1
CONTRACT ASSETS AND CONTRACT LIABILITIES
 6 Months Ended
Jul. 03, 2026
Revenue from Contract with Customer [Abstract]  
CONTRACT ASSETS AND CONTRACT LIABILITIES
NOTE D: CONTRACT ASSETS AND CONTRACT LIABILITIES
Contract assets represent unbilled receivables for revenue recognized in advance of billings, primarily under the percentage-of-completion (“POC”) cost-to-cost method. Contract liabilities consist of advance payments and billings in excess of revenue recognized. Contract assets and liabilities are reported net on a contract-by-contract basis.
Contract assets and contract liabilities are summarized below:
(In millions)July 3, 2026January 2, 2026
Contract assets
$3,674 $3,566 
Contract liabilities
(2,936)(2,262)
Contract liabilities, non-current(1)
(83)(108)
Net contract assets$655 $1,196 
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(1)Included as a component of the “Other non-current liabilities” line item in our Condensed Consolidated Balance Sheet.

During second quarter and year to date 2026, we recognized revenue of $481 million and $1,342 million, respectively, related to contract liabilities that were outstanding as of January 2, 2026. During second quarter and year to date 2025, we recognized revenue of $517 million and $1,215 million, respectively, related to contract liabilities that were outstanding as of January 3, 2025.
NOTE O: CONTRACTUAL BACKLOG
Contractual backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Contractual backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog (i.e., orders for which funds have not been appropriated and/or incrementally funded). Contractual backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite-delivery, indefinite-quantity contracts.
As of July 3, 2026, our contractual backlog was $42.0 billion. We expect to recognize approximately 40% of our contractual backlog as revenue over the next twelve months and 65% as revenue over the next twenty-four months, with the remainder to be recognized thereafter.