Boeing’s Earnings Call: Recovery Builds Amid Heavy Risks

Boeing Company ((BA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Boeing Earnings Call Signals Real Recovery, But Heavy Lifting Still Ahead

Boeing’s latest earnings call painted a picture of a company clearly moving out of crisis mode and back into commercial momentum, yet still weighed down by costly legacy programs, certification delays, and integration challenges. Management highlighted record backlogs, sharply higher revenue, better delivery performance, and tangible factory productivity gains. At the same time, investors were reminded that negative margins in key segments, a large KC‑46 tanker charge, ongoing 777X cash burn, and near‑term cash and CapEx pressures mean the turnaround remains a multi‑year execution story rather than a finished recovery.

Quarterly Revenue Surge Marks Strongest Quarter Since 2018

Boeing reported Q4 revenue of $23.9 billion, its highest quarterly total since 2018 and a 57% increase year over year, driven primarily by higher commercial aircraft deliveries and improved defense volume. This surge underscores how far demand has rebounded across Boeing’s key markets, particularly as airlines seek to refresh fleets and defense customers continue to place large orders. For investors, the jump in top‑line activity is evidence that the demand side of Boeing’s story is largely intact, even as the company continues to work through operational and financial headwinds.

Full-Year Revenue Jumps, EPS Inflated by Asset Sale

For the full year, Boeing generated $89.5 billion in revenue, up 34% from the prior year, confirming that 2025 marked a step‑change in scale. Core EPS for the year came in at $1.19, but that figure was heavily influenced by a one‑time $12.47 per‑share gain from the sale of its Digital Aviation Solutions business. Similarly, Q4 core EPS of $9.92 was boosted by an $11.83 gain from the same divestiture. Stripping out this non‑recurring boost, profitability remains fragile, underscoring that Boeing’s improving earnings power is still dependent on operational progress rather than accounting gains.

Commercial Deliveries and Orders Build Long-Term Visibility

Boeing Commercial Airplanes (BCA) delivered 160 jets in the quarter and 600 for the full year, its highest annual total since 2018. Order activity remained robust: BCA booked 336 net orders in Q4 and 1,173 net orders for the year, driving the commercial backlog to a record $567 billion, representing more than 6,100 aircraft. This combination of higher deliveries and record orders gives Boeing unusually long demand visibility and supports the thesis that, once execution normalizes, the company’s large installed order book can translate into sustained revenue and cash flow growth.

Production Stabilization and Factory Rework Progress

Operationally, Boeing emphasized concrete improvements on the factory floor. 737 production has stabilized at 42 aircraft per month, with on‑time delivery performance improving threefold versus last year, supported by more than 5,100 simplified work instructions. The 787 program is holding steady at rate‑8, with average rework hours down nearly 30% year over year and overall factory rework reduced about 20% in Q4 versus the first half of the year. These metrics are key for investors watching whether Boeing can deliver on its promises of stable production, lower rework, and ultimately better margins and cash generation as rates later move higher.

Certification Milestones Advance, But Risks Persist

Boeing reported meaningful progress on key certification programs. The 737‑10 received TIA2, allowing it to expand flight testing in the final phase of certification, while the 777‑9 received TIA3 and continues certification flight testing. On the defense side, milestones included the MQ‑25’s inaugural engine run and delivery of the first operational T‑7A Red Hawk, both important steps in expanding Boeing’s military portfolio. While these updates show momentum toward bringing new platforms to market, the company acknowledged that certification timing remains a central risk, especially for the 777X and MAX derivatives where delays have previously hit cash flow and customer confidence.

Defense and Services Backlogs Hit Record Levels

Boeing Defense, Space & Security (BDS) booked $15 billion in orders in the quarter, pushing its backlog to a record $85 billion, signaling strong multi‑year demand from global defense customers despite near‑term margin issues. Boeing Global Services (BGS) also delivered a strong quarter with $10 billion in orders, a record $28 billion in annual orders, adjusted revenue growth of 6%, and an adjusted operating margin of 18.6%. The services business in particular stands out as a stable, high‑margin engine of profitability, offering a counterbalance to the volatility of Boeing’s large commercial and defense development programs.

Strategic Portfolio Moves Reshape Supply Chain and Balance Sheet

Strategically, Boeing completed the acquisition of Spirit AeroSystems, a key fuselage and structures supplier, aimed at tightening control over its supply chain and aligning manufacturing more closely with its aircraft programs. At the same time, the company completed a $10 billion sale of its Jefferson digital aviation assets, which bolstered the balance sheet while allowing Boeing to retain critical digital capabilities. These portfolio moves highlight management’s focus on both operational resilience—through deeper vertical integration—and financial flexibility, though the Spirit integration will also bring its own short‑term costs and execution challenges.

Cash Position Improves and Free Cash Flow Turns Positive in Q4

Boeing ended the period with $29.4 billion in cash and marketable securities, strengthened in part by proceeds from the Jefferson divestiture. Free cash flow in Q4 was a positive $375 million, slightly better than expectations, while full‑year free cash flow usage improved versus the prior year. While the company is still burning cash on a full‑year basis, the move into positive territory in the fourth quarter suggests that operational improvements and higher deliveries are beginning to show up in cash generation, an important signal for investors focused on balance sheet repair and leverage reduction over the coming years.

KC‑46 Tanker Charge Weighs on Defense Results

Despite strong order intake, BDS was hit by a significant headwind from the KC‑46 tanker program, where Boeing recorded a $565 million loss in the quarter. The charge was driven by revised cost estimates for production support, supply chain challenges, and allocations tied to the Everett facility. This discrete yet material charge underscores the ongoing risk embedded in fixed‑price defense development contracts, which continue to pressure margins and cloud the near‑term earnings profile of Boeing’s defense segment even as backlog grows.

777X Engine Durability Concern Adds Program Risk

Further complicating the widebody outlook, Boeing disclosed a potential durability issue discovered in the 777X engine during inspection. The company is working with engine supplier GE to determine the root cause and necessary corrective action. Boeing indicated it does not currently expect the issue to impact the planned first delivery in 2027, but acknowledged the situation as a program risk. For investors, this adds another layer of uncertainty to a program already carrying significant cash burn and long‑dated payback assumptions.

Certification Delays Continue to Drag on Cash

Delays in certification for 737 MAX derivatives and the 777‑9 remain a drag on Boeing’s financials, driving elevated pre‑delivery spending and pushing out customer payments. The company reiterated that 777X first delivery is targeted for 2027, with inventory spend on the program around $3.5 billion in 2025 and a cash profile that remains negative until roughly 2029. These long timelines reinforce that, while the backlog is robust, Boeing’s path to unlocking the associated cash is still constrained by regulatory and engineering milestones that carry execution and timing risk.

Segment Margins Remain Negative Despite Improving Trend

Profitability across Boeing’s core manufacturing businesses is still in the red. BCA posted a Q4 operating margin of –5.6%, an improvement but still negative, while BDS reported a –6.8% operating margin in the quarter, impacted heavily by the KC‑46 charge and other troubled programs. For the full year, Boeing used $1.9 billion of free cash flow in 2025, underscoring that the company is not yet at a point where its elevated revenue and strong order book are translating into healthy, sustainable margins. The margin path will be a critical metric for investors assessing whether Boeing can achieve its longer‑term free cash flow targets.

Spirit Acquisition Adds Near-Term Cash and Debt Pressure

The Spirit AeroSystems acquisition, while strategic for supply chain control and production stability, will weigh on cash flow and leverage in the near term. Boeing expects the integration of Spirit to have an unfavorable impact of roughly $1 billion on 2026 free cash flow, and the retained Spirit debt helped push total company debt to $54.1 billion. This means investors will need to balance the long‑term strategic benefits of tighter vertical integration against the short‑term pressure on free cash, interest costs, and balance sheet flexibility as the combined operations are brought under control.

Legacy Customer Considerations and Excess Advances Depress Cash

Boeing highlighted that prior delivery delays on the 737 and 787 programs created a buildup of customer considerations and excess advances that will continue to weigh on near‑term cash flow. As production stabilizes and deliveries normalize, these balances are expected to burn down gradually over several years. While this overhang reflects past disruptions, it also means that some of the cash that would typically be collected as aircraft are delivered has effectively been received early or offset by compensation, delaying the benefits of current operational improvements on reported free cash flow.

One-Time and Timing Headwinds to 2026 Cash Flow

The company also pointed to several one‑time and timing‑related headwinds that will shape its cash profile in 2026. Payment timing on a Department of Justice obligation has shifted from 2025 into 2026, creating an additional cash use in that year. At the same time, planned capital expenditures are expected to rise to around $4 billion in 2026, from nearly $3 billion in 2025, as Boeing invests in production capacity and growth initiatives. These factors will make 2026 a particularly heavy investment year, even as Boeing targets a return to positive free cash flow.

Supply Chain and Rate Ramp Remain Key Execution Risks

Management emphasized that the supply chain is the critical challenge as Boeing looks to move 737 production from 47 to 52 aircraft per month, including ramp‑up at Spirit. Achieving higher, stable production rates will require sustained supplier performance and targeted investments across the chain. Additionally, seat and seat‑configuration certifications continue to constrain deliveries for some 787 customers, creating friction even as the underlying demand environment remains strong. These bottlenecks highlight that the next phase of Boeing’s recovery is less about demand and more about operational and supplier execution.

Forward Guidance: Gradual Cash Recovery with 2026 Turning Point

Looking ahead, Boeing guided to positive free cash flow of $1–3 billion in 2026, or high single‑digit billions on an adjusted basis when temporary impacts are excluded. The company expects cash usage in Q1 to resemble 2025 levels, with the first half consuming cash before turning positive and accelerating in the second half of the year. CapEx is projected to climb to around $4 billion in 2026 versus nearly $3 billion in 2025, supporting production and growth plans. Operationally, Boeing plans for 737 output to stabilize at 42 per month, rise to 47 this year, and then be supported by an additional North Line above 47, with about 500 737 deliveries targeted in 2026 versus 447 in 2025. For the 787, deliveries are expected to be 90–100 in 2026 (88 in 2025) with rate‑8 stabilizing and a move to rate‑10 later in the year. The 777X remains planned for first delivery in 2027, with net program cash expected to turn positive by 2029. Across BDS and BGS, the company is leaning on record backlogs—$85 billion in defense and roughly $30 billion in services—along with measured productivity improvements, including more than 5,100 simplified work instructions and sizable rework reductions, to underpin gradual margin and cash recovery.

In sum, Boeing’s earnings call reflected a company with undeniable operational momentum and an enviable order book, yet still wrestling with costly legacy issues, program‑level risks, and a stretched balance sheet. For investors, the story remains one of improving fundamentals but significant execution risk: if Boeing can deliver on its production, certification, and integration plans, the path to multi‑billion‑dollar free cash flow appears credible; if not, the turnaround could extend further. The coming years, particularly the ramp into and through 2026, will be crucial in determining whether Boeing’s current recovery signs translate into durable shareholder value.