GE Aerospace Earnings Call Highlights Growth And Headwinds

Ge Aerospace ((GE)) has held its Q4 earnings call. Read on for the main highlights of the call.

GE Aerospace Earnings Call Signals Strong Momentum Amid Strategic Growing Pains

GE Aerospace’s latest earnings call painted a picture of powerful growth paired with manageable, well-flagged headwinds. Management highlighted surging orders, robust revenue, profit and cash flow gains, and a record backlog that underpins confidence into 2026. At the same time, they were candid about near-term pressures from the GE9X program, margin mix issues, and inventory and supply-chain constraints. The tone was confident but disciplined, with a clear focus on investing now—in MRO capacity, technology, and integration—to sustain multi‑year expansion.

Orders and Backlog Surge Support Multi‑Year Growth

Orders surged 74% in the fourth quarter and 32% for the full year 2025, pushing GE Aerospace’s backlog to roughly $190 billion, up nearly $20 billion year over year. This rapidly expanding backlog provides strong revenue visibility stretching over several years, particularly in commercial engines and services. For investors, this order momentum indicates resilient demand from airlines and defense customers and offers a buffer against cyclical swings, effectively locking in a large portion of future sales.

Revenue and EPS Post Double‑Digit Gains

The company delivered striking top- and bottom-line growth, with revenue up 20% in the fourth quarter and 21% for the full year 2025. Earnings per share climbed 19% in Q4 to $1.57 and 38% for the year to $6.37. Management attributed this performance to improved operating profit and a lower tax rate, underscoring both operational progress and financial discipline. The combination of strong sales and EPS growth points to solid execution and a business that is effectively leveraging a strong demand environment.

Operating Profit and Cash Flow Strengthen

Operating profit grew 25% to $9.1 billion for 2025, while free cash flow rose 15% in the fourth quarter to $1.8 billion and 24% for the full year to $7.7 billion. Cash conversion was particularly impressive—above 100% in Q4 and over 110% for the year—signaling efficient translation of earnings into cash. Despite some working capital drag, this level of cash generation provides ample room for investment, shareholder returns, and balance sheet resilience.

Commercial Engines & Services Show Powerful Momentum

Commercial Engine & Services (CES) remains the primary growth engine. CES orders grew about 35% for the year, while revenue rose roughly 24%, driven by a ~26% increase in services. CES profit grew around 26% to $8.9 billion. Internal shop visit revenue climbed about 24%, and LEAP internal shop visit volume rose 27%, supported by record LEAP deliveries exceeding 1,800 units—roughly 28% growth. This momentum demonstrates the strength of the installed base and the high‑margin aftermarket, which are critical drivers of long-term profitability.

Aftermarket Improvements and Heavy MRO Investment

The company reported tangible progress in aftermarket operations, with turnaround times improving over 10% year over year in Q4 across key engine families, including LEAP, CFM56, and GE90. CFM56 turnaround improved 20% at the Wales facility, while the Selma site sustained sub‑80‑day cycle times. GE Aerospace is committing roughly $500 million of more than $1 billion in MRO investment specifically to LEAP and is expanding global MRO capacity to roughly double LEAP internal capacity. These moves are aimed at easing bottlenecks, meeting strong demand for shop visits and spare parts, and supporting faster, more predictable service revenue growth.

Defense Segment Delivers Solid Growth and Backlog

Defense performance was a bright spot, with deliveries up 30% for the year and DPT (Defense & Propulsion Technologies) profit increasing 22% to $1.3 billion. Backlog in defense grew by nearly $3 billion to about $21 billion, and the segment’s book-to-bill remained healthy—above 1.5 overall and above 2 in the fourth quarter—indicating more orders coming in than revenue going out. This strong pipeline and profit performance reinforce defense as a stable, growing counterbalance to the commercial cycle.

Technology and R&D Investments Underpin Durability and Efficiency

GE Aerospace emphasized continued progress on technology and R&D, with nearly $3 billion in annual R&D spending. The company completed a ground test campaign for a hybrid‑electric narrow‑body architecture, signaling long-term bets on next‑generation propulsion. Durability milestones included NX fleet leader improvements, such as an HBT blade surpassing 4,000 cycles, and nearly 1,500 LEAP 1A durability kits shipped since certification. These investments aim to improve time-on-wing and reliability, which are crucial for airline customers and help strengthen the high‑margin aftermarket over time.

Confident 2026 Outlook with Double‑Digit Growth Targets

Management laid out a confident 2026 outlook, guiding to low-double-digit revenue growth at the company level. CES revenue is expected to grow in the mid‑teens, driven by mid‑teens growth in services, internal shop visits, and spare parts, with LEAP internal shop visits up 25%. Equipment revenue is forecast to grow mid‑ to high‑teens, including a 15% increase in LEAP deliveries. DPT revenue is projected to rise mid‑ to high single digits. Operating profit is guided to $9.85–$10.25 billion, implying around a $1 billion increase at the midpoint, with CES profit of $9.6–$9.9 billion and DPT profit of $1.55–$1.65 billion. EPS is expected at $7.10–$7.40, about 15% growth at the midpoint, while free cash flow is projected at $8.0–$8.4 billion with conversion well above 100%. Guidance also incorporates CapEx at roughly 3% of sales, interest expense of about $900 million, a tax rate below 17%, a planned share reduction of around 18 million shares, and corporate costs and eliminations of $1.2–$1.3 billion. Management reiterated multi‑year targets, including a mid‑teens CAGR for 2024–2026 and operating profit approaching $10 billion in 2026.

GE9X Losses Weigh Near Term but Are Baked In

The GE9X (often referred to as NINEX) program remains a key near‑term drag. The program generated losses in the “couple-hundred-million-dollar” range in 2025, in line with prior expectations, and management anticipates these losses to roughly double in 2026 as shipments ramp. Crucially for investors, this incremental headwind is already incorporated into the 2026 guidance, limiting surprise risk. While painful in the short run, such upfront losses are typical for new engine programs and are framed as an investment in future high‑margin service revenues.

Margin Pressure and Adverse Mix Headwinds

Despite strong growth, margins came under pressure from mix and OEM volume. Company-wide Q4 margins slipped about 90 basis points to 19.2%. CES margins were especially affected, falling by roughly 420 basis points for the year to about 24%, as higher OEM shipments, a lower spare engine ratio, GE9X shipments, and elevated R&D and investment spending weighed on profitability. The message from management is that they are prioritizing growth, service capability, and technology leadership, accepting near‑term margin compression to secure longer-term earnings power.

Lower Spare Engine Ratio and Timing Effects Hit Equipment Margins

A planned lower spare engine ratio compared with 2024 also hurt equipment margins. Some of this reflects timing: spare engine deliveries were more back‑end loaded in 2024, so the comparison is tough. The combination of strong OEM volume and fewer high‑margin spare engines created unfavorable mix in 2025, contributing to margin declines. Management presented this as a timing and mix issue, rather than a structural deterioration, suggesting potential improvement as delivery patterns normalize.

Inventory Build Drags Working Capital Amid Ramp‑Up

To support higher output in 2026, GE Aerospace increased inventory by about $1 billion in 2025, partially offsetting otherwise strong cash generation. While contract assets provided a tailwind, the inventory build remains a working capital drag versus the prior year. The company views this as a necessary investment to enable higher deliveries and faster turn times, but investors should expect some continued pressure on working capital as production ramps.

Corporate Costs and Eliminations Nudge EPS Lower

Corporate costs rose to roughly $570 million, an increase of about $170 million year over year, driven mainly by lower interest income and increased spending on AI and related corporate initiatives. Eliminations also increased by around $70 million. While modest relative to the overall P&L, these items slightly dampened consolidated EPS upside and illustrate that corporate-level spending is also stepping up to support future capabilities.

Supply Chain and Execution Still a Work in Progress

Management acknowledged that, while supplier performance is improving—priority supplier material input is up around 40% year over year—there is still significant work to do to fully satisfy third‑party spare part demand and to translate supplier improvements into consistent spare-part flow and shop output. This ongoing execution challenge remains a key operational focus, given its direct impact on turnaround times, customer satisfaction, and the ability to fully capture robust aftermarket demand.

In sum, GE Aerospace’s earnings call showcased a company riding strong demand with accelerating orders, revenue, profit, and cash flow, underpinned by a massive backlog and confident 2026 guidance. The near-term story is not without friction—GE9X losses, margin mix pressure, and supply chain and inventory challenges will weigh on reported numbers—but management is deliberately investing in MRO capacity, technology, and operations to sustain growth. For investors, the call reinforced the view of GE Aerospace as a long-duration growth and cash-flow story, with near-term headwinds presented as the price of securing a larger and more profitable future.