Executive Summary / Key Takeaways

• Strategic Transformation and Market Leadership: GE Aerospace has successfully transformed into a pure-play aerospace leader, leveraging its extensive installed base of 78,000 engines and a robust $175 billion backlog to dominate commercial and defense propulsion markets.
• Robust Financial Performance and Upgraded Outlook: The company delivered exceptional Q3 2025 results, with revenue up 26% and profit also up 26%, leading to a raised full-year 2025 guidance for revenue (high teens), operating profit ($8.65B-$8.85B), EPS ($6.00-$6.20), and free cash flow ($7.1B-$7.3B). The 2028 outlook was also significantly raised, targeting $11.5 billion in operating profit and at least $8.5 billion in free cash flow.
• Technological Differentiation as a Core Moat: GE Aerospace's substantial R&D investment (approximately $3 billion annually) in advanced engine designs, durability kits (e.g., LEAP-1A HPT blade doubling time on wing), and next-generation propulsion systems like CFM RISE and adaptive cycle engines underpins its competitive advantage and long-term growth.
• Operational Excellence Driving Deliveries: The proprietary FLIGHT DECK lean operating model is enhancing supply chain efficiency, improving material availability, and expanding MRO capacity, directly translating into increased engine deliveries and aftermarket service throughput.
• Disciplined Capital Allocation: With a strong balance sheet and robust cash generation, GE Aerospace is committed to returning substantial capital to shareholders, increasing planned returns to $24 billion for 2024-2026, while selectively pursuing strategic bolt-on acquisitions.

Setting the Stage: A Transformed Aerospace Powerhouse

GE Aerospace has emerged as a formidable, focused entity in the global aerospace and defense industry, following a multi-year transformation that culminated in its spin-off as a standalone public company in April 2024. This strategic pivot, which included the divestiture of GE HealthCare (GEHC) in 2023 and GE Vernova (GEV) in 2024, has sharpened the company's focus on its core purpose: to invent the future of flight, lift people up, and bring them home safely. With an installed base of approximately 78,000 commercial and military engines, GE Aerospace commands a leading position, powering three out of every four commercial flights and two-thirds of all U.S. military combat and helicopter fleets. This unmatched scale and scope across the world's most successful aircraft platforms provide a resilient foundation, with aftermarket services representing approximately 70% of its revenue.

The company operates within a dynamic industry landscape characterized by robust demand for air travel, increasing global defense budgets, and a strong push towards sustainable aviation technologies. Commercial air travel departures grew 3% in the first nine months of 2025, with expectations for continued low to mid-single-digit growth. New aircraft builds and airline expansions remain healthy, supporting the growth of GE Aerospace's installed base. On the defense front, government funding is a key driver, with domestic and international departments prioritizing modernization and scaling of forces. This environment, coupled with a substantial $175 billion backlog, positions GE Aerospace for sustained growth, with the overall market expected to expand at a mid-single-digit compounded rate through 2028.

Technological Edge: Fueling Flight's Future

At the heart of GE Aerospace's competitive moat is its deep-seated commitment to technological differentiation and innovation, backed by approximately $3 billion in annual R&D investment. This investment spans foundational platforms to next-generation propulsion systems, delivering tangible benefits to customers and strengthening the company's market position.

One of GE's core differentiated technologies is its composite fan blades, first introduced on the GE90 engine. With over 140 million flight hours on more than 2,500 engines, these lighter and stronger blades contribute to industry-leading departure reliability. This experience directly informed the development of fourth-generation composite fan blades for the GE9X, enhancing durability and fuel burn. The GE9X, set to be the most tested engine in GE Aerospace history with over 30,000 cycles and 9,000 endurance cycles, has already undergone 1,600+ dust ingestion tests, informing product enhancements like second iteration HPT blades and CMC nozzles. The company targets a 30% cost reduction by the 50th GE9X unit and another 30% by the 250th engine.

For its current generation narrow-body engines, the LEAP-1A durability kit, featuring an upgraded High-Pressure Turbine (HPT) blade, was certified in late 2024 and is now incorporated into all LEAP-1A deliveries and shop visits. This enhancement is designed to improve time on wing by more than twofold, matching the industry-leading performance of the CFM56. Further certified design improvements for the HPT blade are slated for production in the second half of 2025, enhancing producibility. The company is also working to certify the LEAP-1B durability kit in the first half of 2026. These durability gains have contributed to a win rate of over 70% on the A320 family since 2023. Lessons from the GEnx durability package, which achieved a 2.5x increase in time on wing and boasts fleet leaders approaching 4,000 cycles in harsh environments, are being applied to LEAP to accelerate its learning curve.

Looking to the future, the CFM RISE program is GE Aerospace's most ambitious technological endeavor. This program, which includes Open Fan, compact core, and hybrid electric systems, targets at least a 20% reduction in fuel burn. The Open Fan architecture is designed to spin at 1/6 the speed of traditional jet engines, contributing to a safer and quieter flight experience without a nacelle. Its efficiency gains come from the fan system rather than pushing the core to higher temperatures, a key driver of engine removals. Early development has seen over 350 program tests, including dust ingestion testing on next-gen HPT blades for compact core development, and more than 3,000 endurance cycles. In defense, GE Aerospace is advancing adaptive cycle engines (XA100, XA102) for the U.S. Air Force's NGAP program, having demonstrated significant gains in thrust and range with the XA100 and completed the Detailed Design Review for the XA102. The company also achieved the first flight for the T901 engine on a Black Hawk helicopter and partnered with BETA Technologies with a $300 million equity investment to co-develop a hybrid electric turbogenerator. These innovations are crucial for maintaining GE's competitive edge, driving higher average selling prices, lower operating costs for customers, and ultimately, superior margins and market share.

Operational Excellence: FLIGHT DECK in Action

GE Aerospace's operational prowess, guided by its proprietary FLIGHT DECK lean operating model, is a critical enabler of its financial performance and ability to meet robust customer demand. This model prioritizes safety, quality, delivery, and cost, driving continuous improvement across the value chain.

A primary focus has been on addressing persistent supply chain constraints and material availability challenges. Through intensive collaboration, material input from priority suppliers (12 companies across 18 sites) increased 35% year-over-year and high single digits sequentially in Q3 2025. These suppliers have consistently delivered over 95% of committed volume for three consecutive quarters, a significant improvement from 50% in early 2024. The company has embedded over 550 of its supply chain and engineering resources within its supplier base, leading to breakthroughs like a joint Kaizen that achieved a 3x increase in output quarter-over-quarter with one priority supplier.

Beyond suppliers, internal operations are also being optimized. At the Celma, Brazil MRO site, FLIGHT DECK tools reduced CFM56 fan module lead time by over 30%, bringing turnaround times below 80 days. An AI-enabled Blade Inspection Tool is improving inspection accuracy and consistency while reducing inspection time by approximately 50%. The company is investing $1 billion in U.S. manufacturing in 2025 (hiring 5,000 workers) and over $1 billion in MRO and component repair facilities over the next five years. This includes expanding the LEAP aftermarket capacity by 40% in 2024, with external shop visits growing over 60% in Q1 2025 and projected to reach 30% of total LEAP shop visits by 2030. The goal is to more than double LEAP-specific repairs by 2028, which typically cost 50% less than new parts, reducing both cost of ownership and turnaround times. These operational improvements are directly translating into increased aftermarket output and engine deliveries, which have shown continuous quarter-over-quarter improvement.

Financial Performance: Soaring to New Heights

GE Aerospace's financial trajectory reflects its successful transformation and operational momentum. The company delivered a "standout year" in 2024, with revenue up double digits, profit increasing by $1.7 billion, and free cash flow rising by $1.3 billion to $6.1 billion, achieving over 120% conversion.

The strong performance continued into 2025. For the three months ended September 30, 2025, total revenue reached $12.18 billion, a 24% increase from the prior year. Equipment revenue grew to $3.16 billion, and services revenue to $8.14 billion. Net income from continuing operations attributable to common shareholders was $2.17 billion, or $2.04 per diluted share, a significant increase from $1.71 billion and $1.56 per share in the prior year. Adjusted EPS for the quarter was $1.66, up 44% year-over-year. Profit from continuing operations was $2.52 billion, up 33% from the prior year, with a profit margin of 20.7%. Operating profit was $2.30 billion, with an operating profit margin of 20.3%. Free cash flow for the quarter was $2.4 billion, up 30% year-over-year, with over 130% conversion.

For the nine months ended September 30, 2025, total revenue increased 19% to $33.14 billion. Net income from continuing operations attributable to common shareholders was $6.15 billion, or $5.73 per diluted share, compared to $4.77 billion and $4.34 per share in the prior year. Adjusted net income was $5.10 billion, an increase of $1.50 billion, and Adjusted EPS was $4.80, up 46%. Profit for the nine months was $7.15 billion, up 34%, with a profit margin of 21.6%. Operating profit was $6.78 billion, with an operating profit margin of 22.3%. Free cash flow for the nine months was $6.45 billion, an increase of $1.90 billion compared to 2024, primarily due to higher net income.

Segment-specific performance further highlights this strength. In Q3 2025, Commercial Engines & Services (CES) revenue was up 27% to $8.88 billion, with profit surging 35% to $2.44 billion, and a margin of 27.4%. This was driven by increased internal shop visit and spare parts volume, higher workscopes, and increased engine deliveries and pricing. Defense Propulsion Technologies (DPT) revenue grew 26% to $2.83 billion, with profit up 75% to $386 million, and a margin of 13.6%. This was primarily due to increased engine deliveries, aircraft systems product growth, and favorable customer mix.

Liquidity remains robust, with cash, cash equivalents, and restricted cash totaling $12.50 billion at September 30, 2025. The company's debt profile is also strong, with total borrowings of $20.80 billion at September 30, 2025. Credit ratings have seen upgrades, with Moody's raising the long-term rating to A3 and S&P to A- in early 2025, reflecting improved financial health.

Strategic Outlook: Clear Skies Ahead

GE Aerospace's outlook is characterized by continued growth and a clear strategic roadmap, underpinned by strong demand and operational improvements. The company has consistently raised its guidance throughout 2025, reflecting growing confidence in its trajectory.

For the full year 2025, GE Aerospace now expects:

• Revenue growth in the high teens, an increase from prior mid-teens guidance.
• Operating profit in the range of $8.65 billion to $8.85 billion, up $400 million at the midpoint from the prior guide.
• Adjusted EPS of $6.00 to $6.20, an increase of $0.40 at the midpoint.
• Free cash flow of $7.1 billion to $7.3 billion, up $500 million at the midpoint, primarily from higher earnings.

Segment-specific guidance for 2025 includes:

• CES revenue growth in the low 20s, driven by services revenue growth in the low to mid-20s and equipment growth in the high teens to 20%. CES operating profit is projected to be $8.45 billion to $8.65 billion, reflecting a $1 billion improvement in services revenue in the second half and favorable services mix.
• DPT revenue growth in the high single digits, with profit expected between $1.2 billion and $1.3 billion.
• Corporate costs and eliminations are expected to be roughly $1 billion.
• Interest expense is projected at approximately $850 million, and the tax rate at 17.5%.

Looking further ahead to 2028, GE Aerospace has significantly raised its outlook, now targeting:

• Operating profit of approximately $11.5 billion, representing more than $3 billion of growth from the updated 2025 guide.
• Adjusted EPS of roughly $8.40.
• Free cash flow of at least $8.5 billion, with conversion around 100%.

This growth is expected to be driven by a double-digit compounded annual growth rate (CAGR) in adjusted revenue. Key assumptions include continued 3-4% departures growth in 2026, with the number of engines needing shop visits projected to be up double digits. The LEAP installed base is expected to triple by 2030, with internal shop visits growing at a 30% year-over-year rate. LEAP OE is projected to become profitable in 2026, and LEAP services are expected to reach parity with overall service margins by the end of the decade. CFM56 revenue is expected to peak in 2028, supported by increased work scopes and pricing, while GE90 internal shop visits are projected to grow through 2028. However, GE9X losses are expected to double or more in 2026 and remain a few hundred million dollars higher in 2028 versus 2025 due to increasing volume.

Capital allocation remains disciplined, prioritizing reinvestment in the business (including R&D and manufacturing capacity) and returning capital to shareholders. The company plans to return $24 billion to shareholders between 2024 and 2026 (up 20% from prior plans), comprising approximately $19 billion in buybacks and $5 billion in dividends. Beyond 2026, at least 70% of annual free cash flow is expected to be returned to shareholders.

Competitive Dynamics: Dominance and Differentiation

GE Aerospace maintains a strong competitive position in the global aerospace market, leveraging its scale, technological leadership, and extensive service network. The company is a dominant force in commercial engine manufacturing, powering 3 out of every 4 commercial flights, and a critical supplier to defense, powering 2/3 of all U.S. military combat and helicopter fleets. This broad market penetration provides a significant competitive moat.

Against key competitors like Raytheon Technologies (RTX), GE Aerospace's strength lies in its deep integration with airframers and its services-driven model. While RTX, through Pratt & Whitney, competes directly in engine manufacturing, GE's focus on comprehensive aftermarket services and digital tools for predictive maintenance offers a differentiated value proposition. GE's composite fan blade technology, with over 140 million flight hours, provides industry-leading departure reliability, a tangible benefit that enhances customer loyalty and operational efficiency. RTX's diversified defense portfolio offers broader cross-selling opportunities, but GE's concentrated R&D in commercial engines yields superior efficiency and durability in its core offerings.

Compared to Rolls-Royce Holdings (RYCEY), GE Aerospace often leads in engine durability and overall market penetration, particularly in narrow-body and regional jets. Rolls-Royce emphasizes advanced fuel efficiency and quieter operations, especially in wide-body aircraft. However, GE's LEAP-1A durability kit, designed to double time on wing and match CFM56 performance, directly addresses a key competitive metric. GE's extensive installed base and long-term service agreements provide more predictable revenue streams than Rolls-Royce's more volatile international exposure.

In its joint venture with Safran (SAFRY), GE Aerospace benefits from shared development and manufacturing expertise, particularly with the LEAP engine. While Safran specializes in components and niche applications, GE's broader defense segment and established U.S. defense relationships provide a wider range of technologies and a key advantage in contract awards. The CFM RISE program, a collaboration with Safran, aims for a 20%+ fuel burn reduction, positioning both companies at the forefront of sustainable aviation.

Against Honeywell International (HON), which excels in avionics and systems integration, GE Aerospace differentiates through its core propulsion expertise. While Honeywell offers advanced digital interfaces, GE's focus on end-to-end engine solutions, including advanced analytics-based maintenance and repair technologies, provides a holistic approach to engine performance and cost of ownership. GE's goal to more than double LEAP-specific repairs by 2028, which are 50% cheaper than new parts, directly impacts customer economics and turnaround times.

GE Aerospace's strategic positioning is further bolstered by its "FLIGHT DECK" operating model, which drives operational efficiency and responsiveness. This lean approach, coupled with significant investments in manufacturing facilities and supply chain improvements, enhances its ability to meet demand and mitigate disruptions, a critical differentiator in a constrained industry. The company's consistent contract wins, such as the Qatar Airways deal for 400+ engines and the Korean Air commitment for 103 Boeing aircraft, underscore its preferred partner status.

Risks on the Horizon: Vigilance Amidst Growth

Despite a compelling growth narrative, GE Aerospace faces several pertinent risks that warrant investor vigilance. Supply chain constraints and material availability remain a persistent challenge, impacting production and delivery of equipment and services. While significant progress has been made, management acknowledges "much more work to do" to improve LEAP turnaround times and overall output. The demand for parts for both new engine production and aftermarket services places continuous pressure on the supply base.

Macroeconomic conditions and market volatility pose a risk, including potential recessions, inflation, and interest rate fluctuations. While the company's guidance does not factor in a global recession or a slowdown in airframer delivery schedules, a more significant downturn in commercial air travel demand could impact future revenue and profitability. The company has taken a "conservative view" on a slower second half for North American departures in its 2025 outlook.

Tariffs represent a concrete headwind, with an estimated net impact of approximately $500 million in 2025. While GE Aerospace is implementing cost controls and pricing actions (including temporary surcharges) to mitigate this, and has seen some positive developments like the zero-for-zero tariff agreement with the EU, UK, and Japan, the dynamic trade environment could still introduce additional costs or delays.

The GE9X program is expected to incur "incremental losses of a few hundred million dollars in '28 versus '25 given higher volume," and losses are projected to "double or more" in 2026. While these are part of the new product introduction cycle, they will partially offset profit growth from services.

Finally, legacy liabilities from discontinued operations, such as the borrower litigation at Bank BPH (with estimated total losses of $2.48 billion as of September 30, 2025) and environmental remediation and worker exposure claims ($2.12 billion in reserves), present ongoing financial obligations and potential for increased exposure.

Conclusion

GE Aerospace stands as a compelling investment thesis, having successfully shed its conglomerate past to emerge as a focused, high-performing aerospace leader. The company's core strength lies in its unparalleled installed base, which fuels a highly predictable and profitable services business. This, combined with a relentless pursuit of operational excellence through its FLIGHT DECK model, is enabling GE Aerospace to meet robust demand and overcome persistent supply chain challenges.

The company's substantial investments in differentiated technologies, from the durability-enhancing LEAP HPT blades to the transformative CFM RISE Open Fan and advanced adaptive cycle engines, are not merely R&D expenditures but strategic pillars that extend its competitive moat and secure its long-term growth trajectory. The consistent outperformance against guidance and the significantly raised 2028 outlook underscore management's confidence in this path. While macroeconomic uncertainties and tariff-related headwinds persist, GE Aerospace's strategic positioning, technological leadership, and disciplined capital allocation strategy position it for sustained value creation, making it a powerful force in defining the future of flight.