Executive Summary / Key Takeaways

• Unmatched Market Leadership and Resilient Business Model: GE Aerospace commands a dominant position in commercial and defense propulsion, powering 3 out of 4 commercial flights and 2/3 of U.S. military combat and helicopter fleets. Its business model is highly resilient, with approximately 70% of total revenue derived from predictable, high-margin aftermarket services, supported by a massive installed base of 78,000 engines and a record $175 billion backlog.
• Technological Edge Driving Durability and Efficiency: The company's century-plus of innovation, coupled with substantial R&D investment (approx. $3 billion annually), yields differentiated technologies like composite fan blades and advanced durability kits for LEAP and GEnx engines. These innovations are demonstrably improving time on wing, fuel efficiency, and operational reliability, directly translating into competitive wins and stronger customer relationships.
• Operational Excellence via FLIGHT DECK: GE Aerospace's proprietary lean operating model, FLIGHT DECK, is systematically addressing supply chain constraints and enhancing internal efficiencies. This has led to significant improvements in material inputs, supplier delivery predictability (over 95% committed volume), and MRO turnaround times, underpinning the company's ability to meet surging demand.
• Strong Financial Performance and Accelerated Outlook: The company delivered robust Q2 2025 results, with total revenue up 21% and operating profit up 23%. This momentum, combined with an improved services outlook, has led to a raised 2025 guidance (mid-teens revenue growth, $8.2-$8.5 billion operating profit, $6.5-$6.9 billion free cash flow) and an accelerated 2028 outlook (approx. $11.5 billion operating profit, at least $8.5 billion free cash flow), signaling sustained double-digit growth.
• Disciplined Capital Allocation and Shareholder Returns: With a strong balance sheet and robust free cash flow generation, GE Aerospace is committed to returning a majority of cash to shareholders. It plans to return $24 billion through 2026 (including $19 billion in buybacks and $5 billion in dividends) and at least 70% of free cash flow annually thereafter, driving compounding shareholder returns.

A Century of Flight: Forging an Aerospace Powerhouse

General Electric Company, now GE Aerospace, traces its roots back to 1892, evolving over a century to become a global leader in aircraft propulsion, services, and systems. This storied history is not merely a chronological account but a foundational narrative that underpins the company's current strategic prowess and competitive advantages. Early innovations, such as the pioneering introduction of composite fan blades on the GE90 engine, laid the groundwork for a legacy of technological differentiation. These blades, with over 140 million flight hours across more than 2,500 engines, continue to inform new designs and demonstrate GE's long-standing commitment to advanced materials and performance.

The company's strategic transformation culminated in its emergence as a standalone public entity, a multi-year endeavor that saw the spin-off of GE HealthCare (GEHC) in 2023 and GE Vernova (GEV) in 2024. This sharpened focus on aerospace has allowed GE Aerospace to dedicate its formidable resources and expertise to its core mission: inventing the future of flight. Central to this renewed focus is FLIGHT DECK, a proprietary lean operating model. This model is not just a set of tools but a cultural imperative, driving continuous improvement in safety, quality, delivery, and cost—always in that order—to serve customers and deliver on its approximately $175 billion backlog.

The aerospace industry itself is experiencing robust tailwinds. Commercial air travel demand continues to grow, with departures up nearly 4% in the second quarter of 2025. Air traffic growth is expected to outpace global GDP, particularly in Asia-Pacific and the Middle East, fueling healthy new aircraft builds and airline expansions. On the defense side, global momentum towards modernization and localization, coupled with increased government funding for sixth-generation aircraft programs, provides a solid demand backdrop. This favorable market environment, combined with GE Aerospace's strategic positioning, sets the stage for sustained growth.

Technological Moats: Engineering the Future of Flight

GE Aerospace's competitive moat is deeply rooted in its technological differentiation and relentless innovation. The company's commitment to R&D, with approximately $3 billion invested in 2025 (6% to 8% of revenue), is not merely about incremental improvements but about delivering step-change advancements that redefine industry standards.

A prime example is GE's composite fan blade technology. GE Aerospace and its partners are the only ones with these lighter, stronger blades in service today, boasting over 140 million flight hours. These blades contribute to industry-leading departure reliability and are a cornerstone of the GE9X engine, featuring fourth-generation composite fan blades that enhance durability and fuel burn. The "so what" for investors is clear: this proprietary technology offers superior performance, translating into lower operating costs for airlines and a compelling competitive advantage that underpins GE's strong win rates.

The company's focus on engine durability is another critical differentiator. The GEnx platform, launched in 2011, received a significant durability package in 2021, resulting in a more than 2.5x increase in time on wing. This allows customers to keep engines on wing for approximately five years between shop visits, even in hot and harsh environments, with fleet leaders approaching 4,000 cycles. This proven durability has underpinned a 90%-plus win rate for GEnx since 2023. Similarly, the LEAP-1A durability kit, featuring an upgraded High-Pressure Turbine (HPT) blade, is now incorporated into all new LEAP-1A deliveries and shop visits. This is expected to improve time on wing by more than twofold, matching the industry-leading CFM56 performance. Further design improvements for the HPT blade, already certified and entering production in the second half of 2025, will enhance producibility. These advancements have supported a win rate of over 70% on the A320 family since 2023. For investors, this means reduced maintenance costs for customers, increased engine utilization, and a stronger value proposition that drives long-term service contracts and recurring revenue.

Looking to the future, the CFM RISE program (a joint venture with Safran (SAFRY)) represents GE Aerospace's most ambitious technological undertaking. This program, which has completed over 350 component and module tests, is exploring pioneering technologies like the Open Fan architecture, compact cores, and hybrid electric systems compatible with alternative fuels. The Open Fan is designed to spin slower (1/6th the speed of a traditional jet engine), promising a quieter engine than today's LEAP and gaining efficiency through the fan system rather than pushing the core to higher temperatures, a key driver of engine removals. The stated goal is a greater than 20% reduction in fuel burn, a critical requirement for next-generation aircraft. This forward-looking R&D ensures GE Aerospace remains at the forefront of propulsion technology, positioning it for future market leadership and sustained growth in a decarbonizing aviation sector.

In defense, GE Aerospace is pursuing similar generational advancements. The T901 engine has completed initial ground runs on a Black Hawk helicopter, a significant step towards a more powerful and mission-ready aircraft. The XA102 adaptive cycle engine has completed its Detailed Design Review, aligning with the U.S. Air Force's Next-Generation Adaptive Propulsion (NGAP) program. These initiatives, supported by over $1 billion in U.S. manufacturing investments and the hiring of 5,000 U.S. workers in 2025, demonstrate GE's commitment to maintaining military air superiority and securing future defense contracts.

Competitive Landscape: Dominance Through Scale and Innovation

GE Aerospace operates in a highly competitive global market, but its scale, technological leadership, and strategic partnerships provide significant advantages over rivals. The company's installed base of approximately 49,000 commercial and 29,000 military engines is the industry's largest, supporting its aftermarket services business which accounts for roughly 70% of revenue. This unmatched scale allows GE to leverage its vast data insights (over 2.3 billion flight hours accumulated) for continuous product improvement and predictive maintenance.

Compared to RTX Corporation (RTX), a key competitor in both commercial (Pratt & Whitney) and defense engines, GE Aerospace demonstrates superior profitability and growth. In 2024, GE's revenue grew 13% compared to RTX's approximately 10%, and GE's operating margins in commercial segments (26.2%) significantly exceeded RTX's 12-15%. GE's LEAP engine, for instance, offers 15-20% greater fuel efficiency than RTX's geared turbofan, translating to lower operating costs for airlines. While RTX holds a strong defense market share, GE's diversified portfolio and strategic investments in next-gen military propulsion (e.g., XA102) aim to narrow this gap. GE's AI-driven predictive maintenance tools offer 20-30% quicker engine diagnostics, enhancing operational efficiency where RTX lags in integrated digital solutions.

Against Rolls-Royce Holdings plc (RYCEY), a major player in wide-body and defense engines, GE Aerospace maintains a financial edge. Rolls-Royce saw revenue growth of approximately 15% in 2024, but GE's operating margins (26.2%) are notably higher than Rolls-Royce's 10-12%. GE's engines often provide a 10-15% better thrust-to-weight ratio, leading to lower operating costs per flight. While Rolls-Royce focuses on bespoke partnerships and modular designs, GE's comprehensive AI platform provides a 15-20% edge in predictive maintenance, driving operational efficiency. GE's superior financial health and technological advantages could yield 5-7% higher market share in growth markets, though Rolls-Royce's niche strengths may limit GE's penetration in Europe.

With Safran SA (SAFRY), GE Aerospace has a unique relationship as a joint venture partner in CFM International (LEAP, CFM56 engines). While Safran is a strong competitor in propulsion and systems, GE's overall margins (26.2%) surpass Safran's 8-10%, reflecting GE's broader scale and integrated ecosystem. GE's AI investments provide a 15-20% edge in predictive maintenance, while Safran excels in cost-optimized designs. This collaboration allows GE to benefit from the success of the LEAP program while maintaining its own distinct technological and market advantages.

GE's strategic positioning is further bolstered by its customer and supplier dynamics. The company's robust backlog, including over 1,600 commercial and defense engines effectively sold out through the rest of the decade, provides significant revenue visibility. Recent major deals, such as Qatar Airways' agreement for over 400 GE9X and GEnx engines (the largest wide-body win in GE Aerospace history) and the U.S. Air Force's $5 billion contract for F110 engines, underscore its preferred partner status. This strong demand reduces dependency on any single customer and enhances resilience.

Operational Momentum and Financial Strength

GE Aerospace's operational execution, driven by its FLIGHT DECK model, is translating directly into strong financial performance. The company's relentless focus on improving safety, quality, delivery, and cost is evident in recent results. In the second quarter of 2025, total revenue increased by $1.9 billion, or 21%, to $11.02 billion compared to Q2 2024. This growth was fueled by a 30% increase in Commercial Engines & Services (CES) revenue to $7.99 billion and a 7% increase in Defense & Propulsion Technologies (DPT) revenue to $2.56 billion.

Profitability has seen significant expansion. For the three months ended June 30, 2025, net income from continuing operations attributable to common shareholders rose to $2.01 billion, up from $1.32 billion in Q2 2024. Adjusted net income reached $1.78 billion, an increase of $0.5 billion year-over-year. Overall segment profit increased by $0.6 billion, driving a consolidated profit margin of 21.7%, up from 15.9% in Q2 2024. This was largely due to increased spare parts volume, internal shop visit revenue, and improved pricing in CES, which saw its segment profit grow 33% to $2.23 billion with a margin of 27.9%. DPT profit also increased 5% to $362 million.

Operational improvements are directly contributing to these results. Material input at priority supplier sites was up 10% sequentially in Q2 2025, with suppliers delivering over 95% of committed volume—nearly double the rate from early 2024. This stability has enabled a 45% increase in total engine deliveries in H1 2025, with commercial up 37% (including LEAP up 38%) and defense up 84%. The company's largest MRO site in Celma, Brazil, reduced CFM56 fan module lead times by over 30% using value stream mapping, bringing turnaround times below 80 days. An AI-enabled Blade Inspection Tool is improving accuracy and consistency while reducing inspection time by approximately 50%. These efficiencies are critical as the LEAP installed base is expected to triple and GEnx to double by 2030, necessitating a 40% increase in internal and external capacity by the end of the decade, supported by over $1 billion in MRO facility investments.

Liquidity remains robust. As of June 30, 2025, cash, cash equivalents, and restricted cash totaled $10.86 billion. Cash flow from operating activities was $3.89 billion for the first six months of 2025, a $1.3 billion increase year-over-year, driven by higher net income. The company's disciplined capital allocation strategy is evident in its share repurchase program, with $3.5 billion in shares repurchased in H1 2025. Total borrowings decreased by $0.4 billion from year-end 2024, and credit ratings have seen upgrades from both Moody's (A3) and S&P (A-), reflecting a strong financial position.

Outlook and Risks

GE Aerospace has raised its 2025 guidance and 2028 outlook, reflecting confidence in its operational momentum and market position. For 2025, total revenue growth is now projected at mid-teens, up from low double digits. Operating profit is expected to be in the range of $8.2 billion to $8.5 billion, a $350 million increase at the midpoint from prior guidance. Adjusted EPS is forecast at $5.60 to $5.80, representing over 20% year-over-year growth. Free cash flow is anticipated to be between $6.5 billion and $6.9 billion, with conversion solidly above 100%. This outlook assumes a low single-digit departures growth for the full year, a conservative view given macroeconomic uncertainties, and a net $500 million impact from tariffs, which the company aims to offset through cost controls and pricing actions.

Looking to 2028, the outlook is even more compelling. GE Aerospace expects double-digit compounded adjusted revenue growth, with operating profit reaching approximately $11.5 billion and margins expanding to over 21%. Adjusted EPS is projected to be roughly $8.40. Free cash flow is targeted at a minimum of $8.5 billion, with conversion around 100%. This substantial growth, representing over $3 billion in operating profit increase from the updated 2025 guide, is primarily driven by commercial services, including significant growth in the LEAP and GEnx installed bases, increased work scopes, and favorable defense mix. The company plans to return $24 billion to shareholders between 2024 and 2026, including $19 billion in buybacks and $5 billion in dividends, and at least 70% of free cash flow annually thereafter.

Despite this optimistic outlook, several risks warrant investor attention. Macroeconomic and market volatility, including potential recession, inflation, and interest rate changes, could impact demand. Supply chain constraints, while improving, remain a challenge, potentially affecting production and delivery schedules. The ongoing geopolitical landscape and trade policies, particularly tariffs, introduce cost headwinds and market uncertainties. Additionally, the company faces legacy liabilities related to GE Vernova parent company guarantees (approximately $12 billion in RPO obligations as of June 30, 2025, with $8 billion maturing by 2029) and ongoing litigation at Bank BPH (estimated total losses of $2.52 billion as of June 30, 2025). While management has historically managed these well, future adverse developments could impact financial results.

Conclusion

GE Aerospace stands as a formidable force in the global aerospace industry, having successfully completed its multi-year transformation into a focused, high-performance enterprise. Its core investment thesis is anchored in an unrivaled installed base, a highly resilient services-led business model, and a deep commitment to technological innovation that consistently delivers superior operational reliability and efficiency for its customers. The company's proprietary FLIGHT DECK operating model is proving instrumental in navigating complex supply chain dynamics and driving internal productivity, translating directly into robust financial performance.

With a strong first half of 2025 underpinning raised guidance for the full year and an accelerated outlook through 2028, GE Aerospace is poised for sustained double-digit growth in revenue, profit, and free cash flow. Its disciplined capital allocation strategy, prioritizing significant shareholder returns through dividends and buybacks, further enhances its appeal. While macroeconomic uncertainties and persistent supply chain challenges remain, GE Aerospace's foundational strengths, technological leadership, and operational rigor position it to capitalize on enduring global demand for air travel and defense modernization, driving long-term value creation for investors.