GE Q3 Deep Dive: Service Growth and Supply Chain Progress Drive Results Amid Margin Compression

Industrial conglomerate GE Aerospace (NYSE:GE) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 36.2% year on year to $12.18 billion. Its non-GAAP profit of $1.66 per share was 13% above analysts’ consensus estimates.

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StockStory’s Take

GE Aerospace’s third quarter results exceeded Wall Street’s expectations for both revenue and adjusted earnings, but the market responded negatively, reflecting concerns over margin compression. Management attributed the sales growth to robust demand in its commercial services segment and improving material availability, which allowed for higher engine deliveries. CEO Larry Culp highlighted that the FLIGHT DECK operating model contributed to operational momentum, stating, “We’re making meaningful progress to accelerate delivery of our services and products to meet robust customer demand.” However, operating margins declined year-over-year, driven by increased investments and higher costs.

Looking ahead, GE Aerospace’s updated guidance is shaped by continued strong demand for engine services, a ramp-up in LEAP engine deliveries, and incremental investments in supply chain capacity. Management expects sustained growth in services revenue, supported by improvements in shop visit capacity and new technologies designed to enhance engine durability. CFO Rahul Ghai emphasized, “We’re raising our guidance based on higher services revenue and favorable mix, but margin expansion opportunities will be limited as we invest in growth and manage inflationary pressures.” The company is also preparing for a normalization in growth rates as pent-up service demand is gradually fulfilled.

Key Insights from Management’s Remarks

Management pointed to strong commercial services momentum and supply chain improvements as central to outperformance, while also noting that higher investments and costs pressured margins.

• Commercial services momentum: Services revenue grew rapidly, driven by a surge in shop visits and spare parts orders as improved material availability enabled GE Aerospace to fulfill more outstanding demand from airlines and lessors.
• Supply chain stabilization: Management credited the FLIGHT DECK initiative for improved supplier collaboration and problem-solving, leading to greater material input and output from priority suppliers, which supported higher engine deliveries across both commercial and defense segments.
• LEAP engine ramp-up: The LEAP engine program, a next-generation jet engine used in many narrow-body aircraft, saw record deliveries, with shop visit output up over 30%. The introduction of a new durability kit for the LEAP-1A model was cited as a step toward improved reliability and lower maintenance costs.
• Defense segment recovery: Defense and Propulsion Technologies reported higher output, with engine deliveries up 83% year-over-year, aided by applying commercial best practices to defense manufacturing and supply chain management.
• Increased investments: GE Aerospace made nearly $1 billion in supply chain capacity and technology investments, including a $300 million strategic collaboration with BETA Technologies for hybrid electric propulsion, reflecting a commitment to future growth and innovation in both commercial and defense sectors.

Drivers of Future Performance

GE Aerospace anticipates that continued services demand, LEAP engine scaling, and incremental investment will drive growth, but margin expansion will be constrained.

• Sustained services demand: Management expects robust shop visit and spare parts activity to persist as more engines require maintenance, with pent-up demand from previous years still being addressed and departures growth stabilizing.
• LEAP engine delivery growth: The company aims to grow LEAP engine shipments by over 20% for the year, with external shop visits expanding and the new durability kit enhancing reliability. However, margin progress in the LEAP program will take time due to ongoing investments and learning curve costs.
• Margin headwinds and investments: Operating margin expansion will be limited as GE Aerospace increases spending on supply chain capacity, R&D, and new product development. Inflationary pressures and higher costs related to the 9X engine ramp-up are expected to offset some productivity and volume benefits.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely tracking (1) the pace at which GE Aerospace can improve LEAP engine turnaround times and shop visit capacity, (2) execution on supply chain investments and the rollout of new durability kits, and (3) ongoing strength in the defense segment as backlog is fulfilled. Additional focus will be placed on management’s ability to offset inflationary and program ramp-up costs while maintaining service reliability for customers.

GE Aerospace currently trades at $308.34, up from $302.82 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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