GE Aerospace 2026 Q3 Earnings Call

Please proceed. Thanks, Liz. Welcome to GE Aerospace's third quarter 2026 earnings call.

I am joined by Chairman and CEO, Larry Culp, and CFO, Rahul Ghai. Many of the statements we are making are forward-looking and based on our best view of the world and our business as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul will speak to total company and corporate financial results and guidance today on a non-GAAP basis.

Now, over to Larry. Blaire, thank you, and good morning, everyone.

At any moment, nearly one million people are flying on aircraft powered by our technology. That is the responsibility behind everything we do at GE Aerospace, and it underscores our purpose to invent the future of flight, lift people up, and bring them home safely. In the third quarter, we delivered strong results. Demand continues to be solid across the business, even in a dynamic environment. Third quarter orders were up 49%, led by commercial engines and services or CES, which was up 58%. We continue to see strength in commercial services, with orders up 23% in the third quarter and 30% year-to-date. Combined with our backlog of over $170 billion, we are well-positioned to close out 2026 and now expect low double-digit services growth in 2027.

We had a historic Farnborough Airshow announcing commitments for more than 1,800 engines, including an agreement with IndiGo for the largest LEAP agreement ever for more than 1,000 LEAP-1A engines to power its A320neo aircraft. Just last week, we announced an agreement with Turkish Airlines for more than 300 LEAP-1B engines to power its 737 MAX fleet, along with a long-term service agreement for its entire LEAP-1B fleet of over 600 engines. In the quarter, total company revenue increased 18%, with CES up 21% and Defense and Propulsion Technologies, or DPT, up 7%. Operating profit grew 30% and margins of 22.5%, up 220 basis points year-over-year. EPS increased 36%, and we generated more than $2 billion of free cash flow. These results reflect the impact of Flight Deck fundamentals to drive continued output momentum, with year-to-date commercial services revenue and total engine deliveries both up over 20%.

We remain focused on investing to meet customer needs with our recently announced agreement to acquire Consolidated Precision Products, or CPP, to expand capacity of mission-critical castings. At the same time, we are advancing current and future technologies with over $3 billion in annual R&D spend. This quarter's performance builds on progress from the first half, with year-to-date orders now up 49%, revenue up 23%, EPS growing 28%, and 105% free cash flow conversion. Given the strength of our results, combined with our fourth quarter expectations, we are raising our 2026 guidance. I want to take a moment here and thank the entire GE Aerospace team and our supplier partners for their commitment to delivering for our customers. Turning to slide 4. Flight Deck is at the center of how we drive safety, quality, delivery, and cost, always in that order.

We are making meaningful progress with the year-to-date commercial services revenue up 26% and total engine deliveries up 21%. With the LEAP-installed base expected to more than double between 2025 and 2030, our team focused on increasing capacity for the LEAP fan assembly. Using Flight Deck, the team reoriented the layout of the production line and developed standard work at various workstations, resulting in greater capacity with output more than doubling. To improve F-18 readiness for the US Navy, we partnered with a key supplier to reduce repair times for a critical F414 component. Using Flight Deck to improve the flow of parts, we doubled output, helping meet our customers' needs. These actions demonstrate the power of collaborative problem-solving to unlock constraints which contributed to priority supplier material input, increasing double digits year-over-year again in the third quarter.

Thanks to the work of our team and the partnership with our suppliers, this quarter marks the 10th consecutive quarter of sequential material input growth, which contributed to LEAP engine deliveries growing 26% year to date. The gains we are driving with Flight Deck are further accelerated with AI. At Celma, our largest MRO site, the team developed an AI-enabled tool to automate collection of technical records required for each CFM56 shop visit. This helped decrease record processing time by around 25%. Actions like this across our network resulted in another quarter of record internal shop visit output with turnaround time down by over a week since the end of 2025, including LEAP now down two weeks. This progress, combined with other efforts, has reduced LEAP engine-driven grounded aircraft to nearly zero since the summer. All in, while there is always more to do to meet customer expectations, we are making meaningful progress.

Shifting to slide 5. Given airframer order books are full through the end of the decade, along with strong growth in aftermarket and defense, we are continuing to invest to ensure timely delivery for our customers. Our agreement to acquire CPP, a long-term supplier, is a significant investment to build adequate capacity of mission-critical castings for the entire aerospace industry. Beyond increasing delivery, acquiring CPP allows us to accelerate the introduction of new engine technologies that improve cooling and enhance durability and efficiency of our current fleet and future programs. We are making meaningful progress on next-generation programs while building additional capabilities through partnering with disruptors to move at pace. It was a moment of great pride for our team this summer when, alongside our partners at Beta Technologies, we completed the world's first high-altitude hybrid-electric flight.

We're grateful for the collaborative partnership with Beta to demonstrate that hybrid-electric technologies are viable for commercial aviation through NASA's Electrified Powertrain Flight Demonstration program. Together with Kratos, our GEK800, now known officially as the F143, was designated as a second-source propulsion for the Joint Air-to-Surface Standoff Missile, or JASSM, moving it from development to a funded U.S. Air Force program. Our XA102 adaptive cycle engine was selected by the U.S. Air Force for the next phase of the NGAP program, moving into hardware procurement and sub-component testing. The U.S. Navy's recent announcement of the F/A-XX is another example of the administration's leadership in moving forward important sixth-generation programs that ensure the U.S. maintains air superiority, building off last year's F-47 news.

We're excited about the progress our Edison Works team has made on advanced engines and how it positions us well to support the U.S. administration's efforts in modernizing our military. Stepping back, we continue to position GE Aerospace for long-term growth by focusing on what matters most to our customers.

Rahul, over to you. Larry, thank you, and good morning, everyone.

GE Aerospace delivered another strong quarter with double-digit growth across orders, revenue, profit, and EPS. Orders were up 49%, with CES up 58% and DPT up 18%. Revenue increased 18%. CES was up 21%, marking our sixth consecutive quarter of at least 20% growth, and DPT grew 7%. Operating profit was $3 billion, up 30%, and margins increased 220 basis points to 22.5%, driven by services volume, productivity, and price, partially offset by inflation. EPS was $2.25, up 36% from increased operating profit and a reduced share count. Free cash flow was $2 billion. Working capital was a use as receivables grew from timing of services billings and an increase in balance due from airframers. Net contract assets and liabilities were a source in the quarter from strong utilization billings.