GE Aerospace (GE) Q4 2025: Orders Surge 74% as $190B Backlog Extends Growth Visibility

2026-01-22 | By EarningsIQ Research

GE Aerospace capped 2025 with a 74% orders surge and a $190 billion backlog, reinforcing multi-year revenue visibility and operational momentum. The integration of technology, operations, and customer-facing teams is set to accelerate output and aftermarket strength in 2026. Management signals confidence in sustaining mid-teens commercial services growth, while investment in next-gen R&D and supply chain capacity position GE for further gains despite mix and margin headwinds.

Summary

• Backlog Expansion Secures Demand: $190 billion backlog and 32% order growth anchor multi-year revenue visibility.
• Aftermarket and MRO Network Drive Profitability: Services growth and turnaround improvements support robust cash generation.
• Supply Chain and R&D Investment Shape Competitive Edge: Integration and innovation initiatives underpin sustained outperformance in commercial and defense segments.

Performance Analysis

GE Aerospace delivered a standout Q4, with orders up 74% and revenue rising 20%, driven by strength across both commercial and defense segments. Commercial Engine Services (CES), the company’s largest division, saw services revenue climb 31% and internal shop visit revenue up 30%, reflecting robust aftermarket demand and improved material availability. Equipment deliveries jumped 40%, including a 49% increase in LEAP engine shipments, setting a new record for the program.

Defense and Propulsion Technologies (DPT) also contributed, with orders up 61% and revenue up 13%, underpinned by strong defense engine shipments and higher commercial/military volume at Avio. Operating profit for the year grew 25% to $9.1 billion, as commercial services volume and pricing offset original equipment (OE) growth and investments. Margins compressed modestly in the quarter, reflecting a shift to lower-margin OE, increased R&D, and a planned step-up in 9X engine losses.

• Aftermarket Tailwind: CES services revenue up 26% for the year, with spare parts sales growing over 25% as MRO network expansion unlocked output.
• Shop Visit Productivity: Turnaround times improved over 10% YoY, aided by supply chain reliability and process enhancements from the Flight Deck program.
• Cash Conversion Strength: Free cash flow rose 15% in Q4 and 24% for the year, with conversion above 110% despite inventory build to support 2026 output.

The company’s $190 billion backlog—up nearly $20 billion YoY—anchors future growth, while the installed base of 80,000 engines and $3 billion in annual R&D reinforce GE’s market leadership for the next cycle.

Executive Commentary

Strategic Positioning

1. Backlog and Installed Base: Foundation for Predictable Growth

GE’s $190 billion backlog and 80,000-engine installed base provide multi-year revenue visibility, especially as airlines delay retirements and maximize asset utilization. The company’s open MRO (maintenance, repair, and overhaul) network, which now includes third-party partners handling 15% of LEAP shop visits, offers airlines flexibility and sustains high shop visit volumes. The backlog growth, up nearly $20 billion YoY, reflects both new wins (such as Riyadh Air, FlyDubai, and Delta) and robust defense orders (e.g., Hindustan Aeronautics).

2. Supply Chain and Operational Integration: Unlocking Output

Supply chain reliability underpins GE’s ability to deliver on backlog and capture aftermarket revenue. The integration of technology and operations (T&O) with CES, led by Muhammad Ali, is designed to improve end-to-end engine lifecycle management. Supplier performance improved 40% YoY in 2025, supporting both OE and aftermarket output. Process improvements, such as the shift from batch to flow production, yielded over 10% improvement in turnaround times for key engine lines, accelerating MRO throughput.

3. Aftermarket Services: Margin Engine and Competitive Moat

Aftermarket services—shop visits, spare parts, and repairs—drive GE’s profit and cash flow engine. CES services revenue rose 26% for the year, with both internal and third-party shop visits up sharply. The company continues to expand its repair catalog, with LEAP parts certified for repair up 20% YoY. Mature engine fleets, such as CFM56, remain in service longer than expected, pushing shop visit volumes higher and supporting margin resilience even as OE mix grows.

4. R&D and Next-Gen Technology: Securing Future Cycles

GE’s $3 billion annual R&D spend is focused on durability, efficiency, and next-gen propulsion. Initiatives include the LEAP 1A durability kit (doubling time on wing), hybrid-electric engine architectures, and continued investment in the RISE program. These investments are critical to maintaining product leadership, supporting both current ramping programs and future platforms across commercial and defense markets.

5. Margin Management Amid Mix Headwinds

While services growth supports margins, the ramp in LEAP OE, increased 9X deliveries, and lower spare engine ratios introduce mix headwinds. Management expects LEAP OE to become profitable in 2026, helping offset margin dilution from rising equipment shipments. The company’s ability to sustain margin expansion will depend on continued productivity gains and aftermarket strength.

Key Considerations

GE Aerospace’s 2025 performance demonstrates the power of its installed base and the operational leverage unlocked by supply chain and process improvements. The company is executing on multiple fronts—backlog conversion, aftermarket expansion, and next-gen R&D—while navigating margin and mix pressures from OE ramp and program investments.

Key Considerations:

• Backlog Monetization: Sustained order momentum and backlog growth support multi-year output and revenue visibility, but require flawless execution to convert into cash.
• Aftermarket Resilience: Mature engine fleets like CFM56 are staying in service longer, supporting shop visit and spare parts growth even as LEAP ramps.
• Supply Chain Reliability: Continued improvement in supplier performance and material availability is critical to sustaining output and turnaround improvements.
• Margin and Mix Dynamics: Rising OE shipments, 9X losses, and lower spare ratios pressure margins, offset by aftermarket growth and productivity gains.
• R&D Investment: Maintaining a $3 billion R&D envelope is vital for defending and expanding GE’s technology leadership into the 2030s.

Risks

Operational execution risk remains high, especially as GE scales output to meet record backlog and aftermarket demand. Supply chain disruptions, inflationary pressures, and the need for continued productivity in both internal and third-party MRO networks could challenge margin targets. Rising OE mix and 9X program losses may dilute margins if aftermarket growth or productivity gains underperform. Any slowdown in airline utilization or accelerated retirements could pressure shop visit volumes and cash flow conversion.

Forward Outlook

For Q1 2026, GE Aerospace guided to:

• High-teens revenue growth, with CES and DPT both above full-year pace
• Year-over-year profit growth, driven by services and absence of prior-year charges

For full-year 2026, management raised guidance:

• Low double-digit revenue growth, with CES services up mid-teens
• Operating profit of $9.85 to $10.25 billion, up $1 billion at midpoint
• EPS of $7.10 to $7.40, up nearly 15% at midpoint
• Free cash flow of $8 to $8.4 billion, with conversion well above 100%

Management emphasized:

• Aftermarket and shop visit demand remains robust, with no signs of softening in early 2026.
• Supply chain and productivity improvements are critical to meeting output targets and backlog conversion.

Takeaways

GE Aerospace’s operational improvements, robust backlog, and aftermarket strength position it for sustained growth, but margin management will require continued vigilance as OE ramps and program investments rise.

• Backlog and Aftermarket Strength: The $190 billion backlog and high shop visit volumes de-risk near-term revenue and profit, but execution is key to cash realization.
• Supply Chain and Integration: The integration of T&O with CES and process improvements are critical levers for output and margin expansion in 2026 and beyond.
• Margin and Mix Watch: Investors should monitor margin trends as OE and 9X losses rise, with aftermarket and productivity gains as primary offsets.

Conclusion

GE Aerospace enters 2026 with strong momentum, anchored by a record backlog, robust aftermarket demand, and operational improvements. Sustained investment in technology and supply chain capacity will be essential to convert backlog into profitable growth, even as mix headwinds and program investments challenge margin expansion.

Industry Read-Through

GE’s results underscore a broader aerospace upcycle, with airlines extending aircraft life and maximizing engine utilization, driving sustained aftermarket demand and MRO network expansion. Supply chain reliability and turnaround time improvements are becoming industry-wide differentiators, with OEMs and MROs investing in digital tools, process integration, and supplier partnerships to unlock output. Rising OE mix and next-gen program investments are a common margin headwind, requiring disciplined productivity and aftermarket leverage. Defense order strength and backlog growth signal continued resilience in military propulsion, supporting multi-year investment cycles across the sector. Investors in aerospace suppliers, airlines, and adjacent OEMs should monitor GE’s execution on supply chain, aftermarket, and technology as leading indicators for the broader industry’s trajectory.

GE Industrials Aerospace Aftermarket Backlog Supply chain R&D