BA Q3 Deep Dive: 777X Delay Clouds Rapid Commercial Recovery and Strong Demand

Aerospace and defense company Boeing (NYSE:BA) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 30.4% year on year to $23.27 billion. Its non-GAAP loss of $7.35 per share was significantly below analysts’ consensus estimates.

Is now the time to buy BA? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Boeing’s third quarter was defined by robust sales growth and operational progress but overshadowed by a significant loss and market disappointment. Management pointed to strong demand and increased commercial deliveries, with CEO Kelly Ortberg highlighting that “by August of this year, we have delivered more commercial airplanes than all of last year.” However, the quarter was marked by a $4.9 billion non-cash charge linked to further delays in the 777X certification process, which Ortberg described as “a disappointment,” and which weighed heavily on adjusted earnings. Despite these setbacks, Boeing generated positive free cash flow for the first time since 2023, driven by improved delivery performance, but ongoing challenges in development and certification programs tempered market enthusiasm.

Looking ahead, Boeing’s outlook is shaped by cautious optimism as it navigates complex regulatory hurdles and ongoing production ramp-ups. Management emphasized a disciplined approach to increasing 737 and 787 production rates, with Ortberg stating, “We will not go to the next rate until we show the maturity in the system.” The company’s guidance remains contingent on resolving certification bottlenecks—particularly for the 777X program—and sustaining momentum in its defense and services segments. CFO Jay Malave underscored the focus on “stabilizing the business and completing development programs,” while also cautioning that cash flow improvement will be gradual as Boeing works through near-term headwinds and capital investments.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to higher commercial airplane deliveries, continued strength in defense, and progress in factory quality, but noted that operational disruptions and certification delays presented major challenges.

• Commercial airplane ramp-up: Boeing increased 737 production to 38 units per month, with plans to reach 42, reflecting improved stability and quality in manufacturing. Ortberg credited improved training and reduced “traveled work” as supporting these gains.
• 777X program delay: The most significant headwind was a $4.9 billion charge resulting from further delays in the 777X certification. Ortberg explained the delay was due to underestimated requirements for FAA approval, emphasizing, “We very much underestimated how much work it was going to take for us to get the TIA approvals.”
• Defense segment resilience: Boeing’s defense business secured major contracts, including a $2.8 billion U.S. Space Force award for strategic satellite communications and multiyear missile seeker agreements. These wins helped offset pressure from development program delays.
• Aftermarket and services growth: The Boeing Global Services segment continued to deliver double-digit margins, benefiting from strong demand for commercial and government maintenance, repair, and digital analytics solutions. Notable wins included U.S. Navy contracts and digital platform deals with international airlines.
• Supply chain and operational improvements: Management reported progress in reducing production bottlenecks, particularly in the 737 and 787 programs. However, seat certification and select engine components remain challenging, with Ortberg noting ongoing work with suppliers and certification authorities.

Drivers of Future Performance

Boeing’s near-term and full-year outlook is shaped by the pace of certification milestones, production stability, and the company’s ability to manage cost and cash flow amid large development investments.

• Certification risk and recovery: Management highlighted that further delays in the 777X and ongoing certification efforts for the 737-7 and 737-10 are the largest risks to both revenue and profitability. Ortberg acknowledged, “Some of this is still not in our control,” referencing dependency on FAA processes.
• Production rate increases: Boeing aims to steadily ramp up 737 and 787 output, but emphasized that any increases will be carefully gated by internal metrics and supply chain readiness. Ortberg stated, “We will not go to the next rate until we show the maturity in the system,” and supply chain constraints, especially in seating, could slow progress.
• Capital allocation and investment: Significant capital expenditures are planned for facility expansions, particularly in Charleston for 787 production and St. Louis for defense programs. CFO Malave noted that these investments are essential for supporting long-term backlog execution, but will weigh on near-term free cash flow.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) Boeing’s progress on 777X certification and any updates to delivery timelines, (2) the pace and sustainability of 737 and 787 production rate increases amidst ongoing supply chain constraints, and (3) new contract wins and backlog growth in the defense and services businesses. Execution on cost control and capital expenditures will also be key signposts for improvement in free cash flow and long-term profitability.

Boeing currently trades at $213.75, down from $223.26 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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