GE (GE) Q3 2025: Services Revenue Surges 28% as Flight Deck Drives Supply Chain Output
GE Aerospace’s third quarter showcased a decisive operational inflection, with supply chain improvements fueling a 28% leap in services revenue and robust double-digit growth across commercial and defense engines. Management’s raised guidance and detailed execution on Flight Deck, GE’s proprietary lean operating system, signal sustainable gains into 2026, while ongoing investments in durability and capacity position the business for long-cycle aftermarket strength. Investors should watch for normalization in growth rates and the durability of margin expansion as the LEAP engine ramp matures.
Summary
- Supply Chain Unlocks: Flight Deck-enabled material availability drove record engine deliveries and services acceleration.
- Aftermarket Momentum: Pent-up demand and heavier work scopes continue to decouple services growth from flight activity.
- Guidance Raised: Upward revisions across revenue, profit, and cash flow cement confidence heading into 2026.
Performance Analysis
GE Aerospace delivered a 26% revenue increase in Q3, with both Commercial Engines and Services (CES) and Defense & Propulsion Technologies (DPT) segments exceeding 25% growth. Services revenue, the core aftermarket business tied to shop visits and spare parts for GE’s installed engine base, surged 28%—outpacing expectations and driving a 35% rise in CES operating profit. Internal shop visit revenue climbed 33% as improved material flows enabled higher throughput, particularly for LEAP engines, GE’s latest generation narrow-body platform.
Defense engine deliveries spiked 83% year-over-year, marking the second consecutive quarter of outsized output, while DPT profit soared 75% on volume and mix. Operating margins held steady at 20.3%, with segment-level expansion offset by higher corporate costs. The company generated $2.4 billion in free cash flow, reflecting over 130% conversion of net income, as working capital investments supported the ramp.
- Commercial Units Drive Growth: Total engine deliveries rose 41% YoY, with LEAP deliveries up 40% and commercial units up 33%.
- Aftermarket Outpaces Departures: Spare parts revenue grew over 25%, fueled by pent-up demand and heavier shop visit work scopes.
- Defense Backlog Strength: DPT backlog reached $19 billion, with book-to-bill above 1.2 year-to-date, supporting ongoing output momentum.
Management’s upward revision of full-year guidance across all key metrics reflects both operational momentum and sustained demand visibility, but normalization in growth rates and margin headwinds from 9X ramp costs remain on the horizon.
Executive Commentary
"We're making meaningful progress to accelerate delivery of our services and products, to meet robust customer demand. And our commitment to ongoing investments in leak durability and the future of flight is centered on delivering value to our customers."
Larry Culp, Chairman and CEO
"Revenue was $11.3 billion, up 26%, with both segments growing over 25%. Services volume, price, and productivity were partially offset by OE growth, investments, and higher corporate cost."
Rahul Gai, Chief Financial Officer
Strategic Positioning
1. Flight Deck Operational Model
GE’s Flight Deck, its proprietary lean operating system, is now embedded across engineering, supply chain, and manufacturing, enabling cross-functional problem solving and yield improvement at both internal and supplier sites. This approach delivered a more than twofold increase in output at key suppliers and a 35% YoY rise in priority supplier material input, establishing a foundation for sustained delivery reliability and cost containment.
2. Aftermarket Services as Growth Engine
The CES segment’s services growth is structurally decoupling from airline departures, as pent-up shop visit demand, heavier work scopes, and external MRO (maintenance, repair, overhaul) network expansion drive elevated spare parts sales. The LEAP engine aftermarket, in particular, is expected to see shop visits and external channel participation continue ramping through 2030, supporting long-cycle revenue visibility.
3. Defense and Propulsion Technologies Expansion
DPT delivered 26% revenue growth and 75% profit expansion, leveraging commercial best practices and supply chain improvements. The $19 billion backlog, with book-to-bill above 1, anchors future growth, while cross-pollination of commercial durability and sustainment lessons positions GE as a differentiated defense supplier.
4. Durability and Next-Gen Technology Investment
Annual R&D spend of $3 billion underpins ongoing product upgrades, including the LEAP 1A high-pressure turbine (HPT) blade durability kit, which is now in production and expected to double time-on-wing in harsh environments. Early dust testing for the 9X and RISE platforms, plus hybrid electric investments, signal a multi-year innovation runway with both commercial and defense applications.
5. Capital Allocation and Shareholder Returns
GE reaffirmed its balanced capital deployment strategy, prioritizing organic reinvestment and shareholder returns while reserving capacity for targeted M&A. The $24 billion capital return target for 2024-2026, up 20% since the spin, underscores management’s confidence in free cash flow durability and disciplined growth ambitions.
Key Considerations
This quarter’s results reflect a business firing on all cylinders, but the mix of volume-driven aftermarket growth, supply chain normalization, and disciplined capital allocation will shape the durability of outperformance into 2026 and beyond.
Key Considerations:
- Supply Chain Resilience: Sustained material availability and supplier performance are critical as both airframer and defense demand ramps.
- LEAP Ramp and Margin Trajectory: The pace of LEAP shop visit growth and external channel expansion will determine aftermarket margin normalization through 2028.
- Defense Leverage: Cross-application of commercial process rigor and technology in defense could unlock incremental profitability and backlog conversion.
- Capital Deployment Flexibility: Management’s willingness to flex between buybacks, organic investment, and selective M&A will be tested as cash generation accelerates.
Risks
Risks center on supply chain bottlenecks, inflationary cost pressures, and the execution challenge of scaling LEAP aftermarket support while maintaining margin expansion. The transition to heavier 9X shipments in 2026 will more than double losses on that program, offsetting some services gains. Macro shocks or a step-down in airline shop visit demand could pressure the aftermarket revenue trajectory.
Forward Outlook
For Q4 2025, GE Aerospace guided to:
- Continued double-digit revenue growth, with CES services up low- to mid-20% for the full year
- Operating profit of $8.65 to $8.85 billion, up $400 million at the midpoint
For full-year 2025, management raised guidance:
- EPS of $6.00 to $6.20, up $0.40 at the midpoint
- Free cash flow of $7.1 to $7.3 billion, up $500 million at the midpoint
Management cited stronger-than-expected aftermarket volume, continued supply chain stabilization, and robust defense backlog as key tailwinds:
- Heavier LEAP and 9X engine ramp will pressure margins in 2026, but productivity and repair technology investments are expected to offset inflation and cost headwinds.
- 2026 is positioned as a “step along the way” to 2028 targets, with growth normalizing but remaining above double digits.
Takeaways
GE Aerospace has moved decisively past post-pandemic supply chain constraints, leveraging Flight Deck to unlock record engine output and aftermarket services growth. The business is structurally advantaged by its installed base and R&D engine, but investors should monitor the pace of margin normalization and capital allocation discipline as growth moderates.
- Flight Deck is now a proven lever for supply chain and operational throughput, driving tangible financial results and backlog conversion.
- Aftermarket growth is being driven by more than just flight activity, with pent-up demand and heavier work scopes supporting revenue above historical correlations.
- 2026 and beyond will test the sustainability of current momentum, as the LEAP aftermarket matures and new engine ramps introduce cost and execution complexity.
Conclusion
GE Aerospace’s Q3 2025 results confirm a business executing at scale, with operational discipline and aftermarket demand translating to upgraded financial guidance. The company’s installed base, innovation pipeline, and capital deployment flexibility set a strong foundation, but investors should expect growth to normalize and margin expansion to be tested by the next wave of engine deliveries.
Industry Read-Through
GE’s performance signals a broad-based recovery in aerospace supply chains, with aftermarket demand outpacing global flight activity due to deferred maintenance and heavier shop visits. The durability focus and external MRO channel expansion are likely to influence peers such as Rolls-Royce and Pratt & Whitney, while defense backlog strength and commercial-lean cross-pollination highlight the value of integrated supply chain management. Suppliers capable of supporting rapid OEM output increases are positioned for volume upside, but bottlenecks remain a risk across the value chain.