Industrial conglomerate GE Aerospace (NYSE:GE) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 23.4% year on year to $10.15 billion. Its non-GAAP profit of $1.66 per share was 16% above analysts’ consensus estimates.
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GE Aerospace (GE) Q2 CY2025 Highlights:
- Revenue: $10.15 billion vs analyst estimates of $9.52 billion (23.4% year-on-year growth, 6.6% beat)
- Adjusted EPS: $1.66 vs analyst estimates of $1.43 (16% beat)
- Adjusted EBITDA: $2.65 billion vs analyst estimates of $2.45 billion (26.1% margin, 8.2% beat)
- Management raised its full-year Adjusted EPS guidance to $5.70 at the midpoint, a 8.1% increase
- Operating Margin: 23%, in line with the same quarter last year
- Market Capitalization: $276 billion
StockStory’s Take
GE Aerospace’s first quarter results were marked by double-digit revenue growth, driven primarily by its services business and robust demand for commercial aviation support. Management highlighted the significant contribution of service orders, which rose 31% year over year, and noted continued momentum in defense programs. CEO Larry Culp pointed to the company’s ability to increase material input at supplier sites and the effectiveness of the FLIGHT DECK operating model as key operational drivers. The quarter also saw margin expansion, attributed to favorable mix and disciplined cost controls. Culp emphasized, “We’re leveraging FLIGHT DECK to tackle supply chain constraints head-on,” reflecting management’s focus on operational efficiency and customer delivery.
Looking ahead, GE Aerospace’s outlook is shaped by a sizable backlog in both commercial and defense segments, ongoing supply chain initiatives, and the impact of new and continuing tariffs. Management is embedding a more cautious approach for the remainder of the year, anticipating slower growth in flight departures and potential delays in spare parts sales to certain regions, notably China. CFO Rahul Ghai explained, “We expect to primarily mitigate [tariff impacts] through SG&A cost controls and price increases,” underscoring the company’s plans to offset external headwinds. Investments in technology and product upgrades remain priorities, as GE Aerospace aims to balance cost management with sustained innovation.
Key Insights from Management’s Remarks
Management attributed strong first quarter performance to growth in commercial services, improvements in supplier deliveries, and disciplined pricing actions, while acknowledging challenges related to tariffs and supply chain dynamics.
- Commercial Services Momentum: The services segment led revenue growth, with orders rising 31% and revenue up 17%, supported by higher spare parts volume and increased internal shop visits. This growth was driven by robust demand for aftermarket support as airlines focus on maintaining and upgrading existing fleets.
- Defense Business Resilience: Defense & Propulsion Technologies achieved profit growth of 16%, benefiting from global increases in defense budgets and contract wins, including a significant U.S. Air Force order for F110 engines. Management noted that demand for mission-critical technology remains solid in the current environment.
- Supply Chain Improvements: GE Aerospace increased material input at priority supplier sites by 8% sequentially, addressing previous bottlenecks and supporting higher output, particularly for LEAP engines. A joint Kaizen initiative with suppliers resulted in a threefold output increase quarter-over-quarter.
- Tariff Impact and Mitigation: Heightened tariffs have introduced additional costs, but management is utilizing programs like duty drawbacks and expanding foreign trade zones to offset these pressures. Remaining tariff costs are being addressed through cost controls and targeted price surcharges on products and services.
- Backlog and Order Book Strength: The company’s commercial services backlog grew to over $140 billion, providing multi-year revenue visibility. Management reported healthy order activity with commitments from global airlines for both new engines and service agreements, reinforcing the long-term growth outlook.
Drivers of Future Performance
Management expects low double-digit revenue growth in 2025, with performance driven by aftermarket services, pricing strategies, and ongoing supply chain optimization amid external uncertainties.
- Aftermarket Services Growth: The company anticipates continued expansion in its services business, underpinned by strong demand for spare parts and shop visits. Pricing discipline, along with a high backlog of service orders, is expected to support revenue resilience even if overall flight departures moderate.
- Tariff and Cost Management: GE Aerospace plans to offset approximately $500 million in additional tariff costs through SG&A expense controls and price adjustments. Management acknowledges that further escalation of trade tensions or changes in regulatory policy could introduce new risks to profitability.
- Supply Chain and Production Ramp: Ongoing efforts to improve supplier deliveries and material input are key to increasing output, particularly for high-demand engine models like LEAP. Management stated that improvements achieved in the first quarter provide confidence in meeting full-year delivery targets, but cautioned that external disruptions remain a risk.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the pace at which GE Aerospace converts its robust service backlog into realized revenue, (2) the effectiveness of cost controls and pricing actions in offsetting tariff-related headwinds, and (3) ongoing improvements in supplier deliveries and engine output, particularly for LEAP engines. New contract wins and defense program milestones will also be important indicators of sustained growth.
GE Aerospace currently trades at $262, down from $266.37 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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