# GE Aerospace (GE) — Narrative, Q3 2026

## Business

*From the 2025 Form 10-K (fiscal year ended December 31, 2025), accession 0000040545-26-000008.*

GE Aerospace (legally General Electric Company) designs, builds and, above all, services jet engines for commercial airlines, airframers and militaries. Its installed base is roughly 50,000 commercial and 30,000 military engines, and the aftermarket that fleet generates (overhauls, shop visits, spare parts and long-term service agreements) is about 70% of revenue. It sells to customers in about 120 countries; 60% of 2025 revenue came from outside the U.S., and sales to U.S. government agencies were 10% of revenue.

The company reports two segments:

- **Commercial Engines & Services (CES)** — about 73% of 2025 revenue, of which services were 75%. CES makes engines for narrowbody, widebody, regional and business aircraft, and for some Boeing models it is the sole engine source. Its main customers are Boeing, Airbus, airlines and third-party MRO shops. Much of its narrowbody business runs through CFM International, a 50-50 joint venture with Safran Aircraft Engines that is not consolidated. CFM's LEAP engine entered service in 2016 and is expected to overtake the CFM56 as the industry's largest fleet; as LEAP engines come due for overhaul, shop visits and the need for MRO capacity are expected to rise sharply. In widebodies the range runs from the mature CF6 and GE90 through the GEnx (in service since 2011) to the GE9X, which will power the Boeing 777X.
- **Defense & Propulsion Technologies (DPT)** — about 23% of 2025 revenue, of which services were 51%. *Defense & Systems* makes and services combat, rotorcraft and marine engines (F110, F404, F414, T408, T700, T901, LM2500) plus avionics and power systems. Most of its revenue depends on U.S. Department of War funding or allied budgets. *Propulsion & Additive Technologies* sells components and systems under the Avio Aero, Unison, Dowty Propellers and Colibrium Additive brands. Avio Aero is the Italian Ministry of Defence's propulsion partner, with work on the EJ200, the Global Combat Air Programme engine and the Catalyst engine.

From 2026, CES covers the whole commercial engine lifecycle: safety and quality, engineering, supply chain, manufacturing and aftermarket. The Aeroderivative business moved from CES to DPT, and prior periods have been recast in 2026 filings. The 2025 segment percentages above are on the old structure.

Under long-term service agreements, which typically run 10 to 25 years, GE is paid according to how much customers use their engines and recognizes revenue as it incurs costs. At December 31, 2025 these contracts carried an estimated $174 billion of life-of-contract billings and were on average about 19.2% complete. A one-point change in their estimated profitability would move the balance by about $0.4 billion.

Total R&D was $2.99 billion in 2025: $1.58 billion company-funded and $1.41 billion funded by customers and partners, mainly the U.S. government. Spending targets ceramic matrix composites, additive manufacturing, CFM's RISE program (Open Fan, compact core, hybrid electric) and adaptive-cycle combat engines. At year-end 2025 the company had about 57,000 employees, about 30,000 of them in the U.S., with manufacturing and service operations at 70 facilities in the U.S. and Puerto Rico and 62 facilities in 23 other countries. Its operating model is a lean system it calls FLIGHT DECK.

The company also still owns businesses left over from GE's former financial services arm:

- **Run-off reinsurance.** Employers Reassurance Corporation and Union Fidelity Life Insurance Company reinsure long-term care, life and structured-settlement annuity business, and both are closed to new business. Long-term care GAAP reserves were $23.8 billion across about 201,700 policies, with an average policyholder age of 80.
- **Bank BPH.** This Polish mortgage portfolio is held in discontinued operations.
- **U.S. tax equity investments.**

## Risk factors

*From the 2025 Form 10-K, accession 0000040545-26-000008. The Q3 2026 10-Q adds no new risk factors.*

- **Commercial aviation cycle and customer health.** Demand for engines, spare parts and shop visits follows air traffic, fuel prices, airline finances and how fast airframers can build. Delivery schedules can be rescheduled or cancelled. The company also has significant credit exposure to a small group of large airframers and airlines.
- **Supply chain and the production ramp.** GE operates in a supply-constrained environment and relies on some limited- or sole-source suppliers. Ramping LEAP and the newer platforms depends on suppliers having enough materials, skilled labor and capacity. If a supplier fails, qualifying a replacement can take years because of certification requirements.
- **Product safety and quality.** A design, production or durability failure, a fleet grounding, or certification or production delays on aircraft its engines power (the GE9X on the 777X, for example) could cause large financial and reputational damage.
- **Execution on long-term service agreements.** Profit on these contracts depends on estimates of engine use, durability and future costs. Revisions are booked as cumulative catch-up adjustments. In 2025 tariffs caused an unfavorable change in estimated profitability.
- **Trade policy and geopolitics.** Tariffs, export controls (including on rare earth minerals), sanctions, U.S.–China decoupling and armed conflict can disrupt the global operating model and raise costs.
- **Defense budgets and government contracting.** Governments can change spending priorities, for example toward uncrewed systems, or terminate contracts for convenience. Breaching procurement rules exposes the company to False Claims Act liability, suspension or debarment.
- **Competition and technology.** Rivals may offer heavy discounts or financing to win installed base. Third-party MRO shops compete for the aftermarket. R&D cycles are long and investments may earn weaker returns than planned. A shift to lower-emission technology could leave older products less in demand.
- **Inorganic investments.** Acquisitions may close late or not at all because of regulatory approvals, and integration may fall short of expected synergies. This matters now that the CPP acquisition is pending (see Current quarter).
- **Legacy financial exposures.** Statutory reserve testing at the run-off insurers could require more capital contributions. The trust assets of Union Fidelity Life Insurance Company are held for the benefit of Genworth subsidiaries. Bank BPH's mortgage litigation losses could also rise.
- **Spin-off and tax exposure.** If the GE HealthCare or GE Vernova spin-off were ruled taxable, the company would face a significant tax liability. It also still provides credit support for GE Vernova obligations.
- **Cybersecurity and legal proceedings.** Threats include state-sponsored attacks and incidents at suppliers. Legal exposure includes shareholder suits over legacy GE disclosures and claims over asbestos and PCB exposure.

## Management's discussion — fiscal 2025

*From the 2025 Form 10-K, accession 0000040545-26-000008.*

Total 2025 revenue rose 18% to $45.86 billion. Equipment revenue was $12.16 billion, up on more engine deliveries and higher prices. Services revenue was $30.16 billion, up on more internal shop visits, heavier workscopes and higher spare-parts volume. Insurance revenue was $3.53 billion.

Net income from continuing operations rose $1.9 billion to $8.60 billion, or $8.05 per diluted share, against $6.09 in 2024. Most of the increase came from $2.0 billion more segment profit and lower restructuring, separation and goodwill impairment charges. Lower gains on business sales and equity stakes and a higher tax provision offset part of it. GAAP profit margin widened 210 basis points to 21.8%. Operating profit, which excludes the run-off insurance and other non-operating items, was $9.1 billion at a 21.4% margin. Operating cash flow benefited from higher earnings and higher sales discounts and allowances. Higher income tax payments and $1.0 billion of working-capital growth, mostly receivables, inventory and contract balances, offset part of that. Remaining performance obligation (contracted backlog) rose 11% to $190.6 billion.

- **CES:** revenue rose 24% to $33.31 billion and profit rose 26% to $8.86 billion, a 26.6% margin. Commercial engine deliveries rose to 2,386 from 1,911, including 1,802 LEAP engines, against 1,407. Internal shop visit revenue grew 24%. Higher installed-engine deliveries, inflation, growth investment and the tariff-driven service agreement charge held back profit. Engine commitments came from Qatar Airways, Emirates, ANA, Malaysia Aviation Group, Korean Air, Cathay Pacific and Pegasus.
- **DPT:** revenue rose 11% to $10.55 billion and profit rose 22% to $1.30 billion, a 12.3% margin. Defense engine deliveries were 635, against 490. Awards included a U.S. Air Force indefinite-delivery contract worth up to $5 billion for F110-GE-129 engines sold to allied nations, and a $1.6 billion Hindustan Aeronautics order for F404-GE-IN20 engines.

The GAAP effective tax rate was 14.1% and the adjusted rate 17.3%. The company bought back 29.6 million shares for $7.4 billion, and the Board approved a new $20 billion repurchase authorization in December 2025. Borrowings were $20.5 billion at year-end. Management committed $1 billion to expanding MRO capacity, $500 million of it for LEAP. It also invested $1 billion in U.S. manufacturing and hired 5,000 U.S. workers in 2025.

## Current quarter — Q3 2026 (three months ended September 30, 2026)

*From the Q3 2026 Form 10-Q, accession 0000040545-26-000064, and the third-quarter results release furnished on Form 8-K, accession 0000040545-26-000063.*

**Results.** Revenue rose 16% to $14.12 billion from $12.18 billion. Equipment revenue grew on more engine deliveries and better pricing. Services revenue grew on more internal shop visits with heavier workscopes, higher spare-parts volume and pricing. Segment profit rose $0.5 billion, and net income from continuing operations rose to $2.41 billion from $2.17 billion. Even so, the GAAP profit margin narrowed 80 basis points to 19.9%. The operating profit margin, which excludes run-off insurance, widened 220 basis points to 22.5%.

The two margins moved in opposite directions mainly because of the run-off insurance business. Its annual review of reserve assumptions produced a $328 million pre-tax charge ($259 million after tax), driven by long-term care claims experience and inflation in the cost of care and partly offset by premium rate increases. That was larger than the $126 million pre-tax charge ($100 million after tax) from the same annual review a year earlier. Insurance swung to a $210 million loss from a $361 million profit. Operating profit excludes insurance results.

Over nine months, cash from operating activities rose $0.9 billion to $7.3 billion. Higher earnings helped, as did $1.6 billion of cash from sales discounts and allowances, mainly allowances on new engine installs and spare parts at CES. Working capital used $1.8 billion, mainly in receivables, contract balances and payables, which offset part of the gain.

**Commercial Engines & Services.**

- **Orders:** $15.3 billion, up 58%. Services orders rose 23% and equipment orders more than tripled.
- **Revenue:** $10.34 billion, up 21%. Services grew 17%: internal shop visit revenue rose 12% on higher volume (LEAP up over 40%) and heavier workscopes, and spare parts revenue grew over 20%. Equipment revenue grew 38%. Engine deliveries rose to 690 from 641, including 535 LEAP engines against 511.
- **Profit:** $2.89 billion, up 21%, with the margin roughly flat at 27.9% because of mix and inflation.
- **GE9X:** GE9X engines with an upgraded midseal shipped in the quarter, but their financial impact will be recognized only after the FAA certifies the midseal.

During the first nine months:

- United and Delta chose the GEnx for their 787 orders, and American and Copa chose LEAP.
- Ryanair signed a long-term material services agreement covering its roughly 2,000 CFM56 and LEAP engines.
- IndiGo signed a memorandum of understanding for more than 1,000 LEAP-1A engines, the largest LEAP agreement ever.
- Iberia became the seventh Premier MRO for LEAP.
- The LEAP-1B durability kit, which includes an upgraded high-pressure turbine blade, was certified. It is expected to roughly double the engine's time on wing.

**Defense & Propulsion Technologies.** Orders rose 18% to $4.3 billion. Revenue rose 7% to $3.47 billion: Defense & Systems grew 5% and Propulsion & Additive Technologies grew 10% on Avio Aero and Unison. Profit rose 8% to $475 million, a 13.7% margin. Defense & Systems engine deliveries were 202, against 195. Year-to-date awards included:

- T408 engines for the Marine Corps CH-53K under a NAVAIR contract.
- Continued F404 integration on Türkiye's Hurjet jet trainer.
- A five-year support contract worth up to $2.9 billion for F414 engines on Navy F/A-18 and EA-18G fleets.

**Backlog.** Remaining performance obligation reached $212.1 billion at September 30, up 11% from December 31. Of that, $180.4 billion was at CES and $31.4 billion at DPT, where it rose 22% as equipment orders outpaced revenue.

**CPP acquisition.** The quarter's largest strategic move was the $11.75 billion agreement, signed September 8, 2026, to buy Consolidated Precision Products (CPP). GE has bought castings from CPP for more than 15 years, for programs including LEAP, GEnx, T700, F110 and F404. About 60% of CPP's revenue comes from commercial aerospace, about 20% from defense and about 20% from power and other markets. Management gives two reasons for the deal:

- **Capacity:** GE expects its airfoil demand to grow more than 30% across commercial engines, aftermarket and defense.
- **Technology:** owning CPP would let GE combine airfoil design with manufacturing, so new engine technology reaches the current fleet and next-generation platforms faster.

The price values CPP at about 18 times expected 2027 EBITDA including about $200 million of expected net synergies, or about 26 times without them. Management targets a double-digit return on invested capital by year five and says its capital allocation plans are unchanged. The deal is pending, with closing expected in the second half of 2027.

**Balance sheet and capital return.** Liquidity was $10.3 billion at September 30: $8.8 billion of cash and $1.5 billion of time deposits. Borrowings fell to $19.3 billion from $20.5 billion, mostly because of debt maturities and currency moves. That more than offset new commercial paper, which the company began issuing in the quarter to diversify its funding instead of issuing long-term debt. Its $3.0 billion revolving credit facility was undrawn. Moody's upgraded GE to A2/P-1 on February 2, 2026, and S&P changed its A- rating outlook to positive on April 16, 2026. Over nine months the company bought back 19.1 million shares for $6.21 billion. Of 2026 repurchases, 11.9 million shares for $4.0 billion were made under the $20 billion authorization approved in December 2025, leaving about $16.0 billion available.

**Environment.**

- **Tariffs:** after the Supreme Court ruled against tariffs imposed under the International Emergency Economic Powers Act, the company applied for refunds and has received part of what it paid.
- **Middle East conflict:** management warns it could cut airline utilization, shop visits and spare-parts demand, and could raise customer credit risk. It had no material impact through September 30.
- **IRS audit:** the IRS is auditing the 2016–2020 tax returns and since March 2026 has issued information requests about additional tax and possible penalties. These relate to tax computations before and after the 2017 Tax Cuts and Jobs Act, including its one-time transition tax. The company believes its accruals are sufficient and would contest any further assessment. It says the IRS may assert a material amount, and any liability would be shared with GE Vernova and GE HealthCare.
- **Bank BPH:** the estimate of total borrower-litigation losses fell to $1.66 billion from $2.33 billion, mainly because amounts were used. Discontinued operations recorded a $108 million pre-tax charge in the quarter.
- **GE Vernova:** the transition services agreement with GE Vernova ended on September 30, 2026. Credit support still outstanding for GE Vernova obligations was about $5.4 billion, 92% lower than at the end of 2023.

**Guidance.** Management raised every full-year 2026 guidance metric for the second quarter running. It credited the increase to Commercial Engines & Services, where it now expects services revenue growth at the high end of its prior low-20s range, equipment revenue growth in the low 20s rather than about 20%, and a smaller GE9X impact. Guidance for Defense & Propulsion Technologies was unchanged.

## Subsequent events

*From the Q3 2026 Form 10-Q (accession 0000040545-26-000064) and the third-quarter results release (Form 8-K, accession 0000040545-26-000063), both dated October 20, 2026.*

The Q3 2026 10-Q has no separate subsequent-events note. Neither it nor the results release reports any acquisition, divestiture, borrowing or litigation outcome after September 30, 2026. The CPP acquisition described above had not closed at the filing date.

One disclosed development falls after the quarter-end. The 10-Q says that during the first nine months GE announced an agreement with Turkish Airlines for up to 300 LEAP-1B engines for its 737 MAX fleet. The results release adds that in October GE signed an agreement with Turkish Airlines for more than 300 LEAP-1B engines. It came with a long-term services agreement covering the airline's entire LEAP-1B fleet of more than 600 engines. No contract value was disclosed.