Boeing Q3 2026 Earnings Call Transcript

Boeing (NYSE: BA ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Boeing Company delivered 161 commercial aircraft in Q3 2026, marking the highest delivery since 2018, and secured FAA certification for the 737-7 and 737-10. The company won significant defense contracts, including designing and building the U.S. Navy's sixth-generation fighter jet and received a seven-year contract for the PAC-3 program. Boeing set a multi-year free cash flow target, expecting approximately $2 billion in 2026, $3 billion in 2027, and $10 billion in 2029, supported by a $745 billion backlog.

Concerns were raised about stabilizing 737 production at 47 aircraft per month, with plans to reach 52 per month by the back half of 2027. Boeing's defense and space portfolio saw increased demand, with BDS booking $23 billion in orders and maintaining a record backlog of $101 billion. The company is focusing on enhancing safety, quality, and stability in its operations and is confident in its strategic trajectory despite acknowledging the challenges ahead. Full Transcript OPERATOR Thank you for standing by.

Good day everyone and welcome to the Boeing Company's third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's call is being recorded. The management discussion and slide presentation plus the analyst question and answer session are being broadcast live over the Internet.

To ask a question on today's call, please press star then one on your telephone. At this time, I am turning the call over to Mr. Eric Hill, Vice President of Investor Relations for opening remarks and introductions. Mr.

Hill, please go ahead. Eric Hill (Vice President of Investor Relations) Thank you and good morning. Welcome to Boeing's quarterly earnings call. With me today are Kelly Ortberg, Boeing's President and Chief Executive Officer, and Jay Malave, Boeing's Executive Vice President and Chief Financial Officer.

This quarter's webcast earnings release and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risks and uncertainties, including the ones described in our SEC filings. As always, we will leave time at the end of the call for analyst questions. With that, I will turn the call over to Kelly Ortberg.

Kelly Ortberg (President and Chief Executive Officer) Well thanks, Eric, and good morning everyone. Thanks for joining in. Today's call as we enter the final months of the year, we're continuing to make progress across our businesses, having completed many of the key milestones in our 2026 plan and building on the trust we've restored with our stakeholders. Through the third quarter, we delivered 161 commercial aircraft, the most since 2018.

We received FAA certification for the 737-7 in July and 737-10 just last week. We reached a new four-year agreement with the union representing our engineering and technical workforce in the Pacific Northwest, avoiding any work interruption. And we secured major program awards across our defense and space portfolio, including multibillion-dollar contracts on key programs like the PAC-3 and the F-15EX. And we scored a generational win with the U.S.

Navy when they selected Boeing to design, build, and deliver its sixth-generation fighter jet, making Boeing the exclusive sixth-generation fighter company for both the U.S. Air Force and the U.S. Navy. These accomplishments reflect the significant progress we're making, and they're made possible by the sustained focus of our team on safety, quality, and performance.

We know there's more work to do, and I've said before, our progress is not always going to be perfectly linear, but we continue to improve and I'm confident we're on the right track. I'll touch on the highlights I just shared as well as areas that require more attention in the quarters ahead. And let's start with our development programs. All year we've said that certifying our new aircraft models is one of our most important goals.

The FAA certification of the 737-7 and the -10 represents the culmination of nearly 50 test flights and more than 4,000 hours of ground and flight testing. And I want to thank our employees who worked on or supported these programs and never lost sight of our mission. And to our customers and partners, I extend my gratitude for the steadfast support and confidence in these airplanes. And we look forward to the newest members of the 737 MAX family delivering on their promise of greater efficiency and more capability.

With the 737-7 and -10 FAA certification work complete, our focus now centers squarely on the 777-9. We continue to make progress on flight testing and still need approval to begin the balance of the flight test program, including ETOPS testing. We continue to expect first delivery in 2027, and all of our latest assumptions continue to be within the EAC we reset last year. Turning now to our commercial factories.

On 737, we continue to work towards stabilizing production at 47 airplanes per month. Our factory key performance indicators are performing well, particularly in the final assembly where we've seen a 40% improvement in rework since the start of last year. However, as I mentioned at a conference last month, it is taking us longer than we had expected to demonstrate performance at rate 47. We're making progress, but we still have more work to do, and I'm expecting it'll take us into next year to get fully stable at this rate.

Our output of wings is improving, but we need to demonstrate sustained performance at this level and ensure we have a high-confidence plan to step up to rate 52 when the system is ready. To reach 52 aircraft per month, we have to get the Northline certified and producing, our back shops including wings stable and ready, and fuselages in Wichita stable at the higher rates. Taken together, and integrating our learning from this year, our financial plan will target rate 52 in the back half of 2027. And as I've said many times before, it's more important that we do this ramp right than what particular month we achieve a rate break, and we'll stay disciplined here.

Switching now to 787. We are stable at eight aircraft per month while the factory is performing well. While we have stability in our factory, delivery cadence has been uneven month to month. Due to the seat certification challenges we've discussed previously, we are seeing increased stability in our supply chain and closely watching engine delivery performance as it remains the pacing item for rate 10.

We still expect to start the transition to 10 per month yet this year, and we're making good progress on our Charleston expansion to support even higher production rates. Beyond the progress we're making in our factories, we're also continuing to position Boeing for the long term. That is showing up in the quality of our backlog, the demand we're seeing across the portfolio, and in the investments and program wins that position us well into the future. Last month we achieved a transformational win that will shape the company for decades to come when the U.S.

Navy selected Boeing as the winner of the F/A-XX competition. To be selected for another sixth-generation fighter program is a testament to our innovation, our team, and trust we've built with our customers. It is a true honor to support the national security priorities and a responsibility we take very seriously. In addition to F/A-XX, we continue to see strong demand for proven franchises across our defense and space portfolio.

Boeing received a seven-year contract to accelerate and eventually triple the PAC-3 seeker production, supported by our early investments in facilities, workforce, and supply chain. In the quarter, we also received a contract to manufacture 22 more F-15EX aircraft for the U.S. Air Force, and this award brings the total number of aircraft under contract to 120, with the potential for additional upside as the F-15EX continues to demonstrate the value of its unmatched payload and range capability. Beyond new franchise wins, we also continue to see tangible benefits from the active management approach we've talked about.

As I said last quarter, Starliner was a program where we still had work to do with the customer. We've since worked with NASA on a path forward to support future flights while reducing our program risks, including $359 million of additional NASA funding. Taken together, these are the kinds of actions and outcomes that will support our customers, strengthen Boeing, and position us well for the future. That long-term position is also beginning to give us greater visibility into the financial path forward.

As I mentioned, over the last two years we've made exceptional progress restoring trust, retiring risk, and transforming our culture, and rebuilding the foundation of safety and quality that will help ensure durable success. We have also been deliberate about not getting ahead of ourselves given the range of outcomes tied to the production ramp, certification timing, and other critical program execution. But we appreciate that it's been difficult for shareowners to assess how our progress will translate into financial performance. We're now at a point where the range of outcomes is narrowing as we look ahead.

Our outlook is supported by a record backlog of $745 billion with improved pricing dynamics, a more stable production system, and better underwriting on development programs, and our plans for continued progress on aircraft certification. Taken together, those factors give us confidence to share a multi-year free cash flow target for the business. We've narrowed our range and expect to generate approximately $2 billion of free cash flow in 2026. I'm expecting that that'll improve to about $3 billion in 2027, inclusive of the additional CapEx to support the F/A-XX development.

We believe this should improve to about $6 billion in 2028 as we start to burn off some of the headwinds and accelerate from there, and I expect to achieve the $10 billion target in 2029. Jay will provide further color on the elements driving this trajectory in his remarks, but it's important to highlight we continue to see significant growth potential beyond the $10 billion, in line with our prior comments. So to sum it up, we remain well positioned for the long term. I'm pleased with our progress we've made so far.

We've come a long way, but we're entering a new phase and the bar is higher now, as it should be. Our job is to keep raising our performance to meet higher expectations while always prioritizing safety, quality, and stability. I'm confident we'll get there because we're doing the right work and taking the right actions to build more durable, dependable performance over time. So before I close, I want to thank all of our employees for the work they're doing every day to move Boeing forward.

And with that, I'll turn it over to Jay to discuss our financial results in more detail before we move to question and answer. Jay Malave (Chief Financial Officer) Thanks, Kelly, and good morning, everyone. Starting with consolidated financial results for the quarter, quarter revenue of $24.2 billion was up 4%, primarily driven by higher defense and services volume, partially offset by less favorable commercial delivery mix. In the quarter, operating margin improved to 1.5% and core earnings per share improved to a loss of 34 cents, reflecting higher segment earnings and lower corporate expenses.

Free cash flow was positive $464 million in the quarter, an improvement versus the prior year driven by improved working capital, partially offset by the Department of Justice settlement payments of approximately $700 million and planned CapEx for our investments to expand capacity in Charleston and St. Louis. Turning to BCA on the next page, BCA delivered 161 airplanes in the quarter. Revenue was $10.7 billion, down 3% year over year, driven primarily by less favorable delivery mix.

Operating margin of negative 6.5% improved materially versus the prior year's results, which were impacted by the 777X charge. That improvement was partially offset by a reduction in booking rates associated with production rate adjustments and higher estimated supply chain costs. Backlog at BCA increased again to a new record level of $612 billion. It includes over 6,300 airplanes.

This includes orders during the quarter from Turkish Airlines, Ethiopian Airlines, and Lufthansa. Clicking down on commercial program performance, starting with the 737, we delivered 124 airplanes in the quarter. As we close out the year, the delay in stability at 47 per month is expected to translate to the lower delivery output and come in shy of the 500 delivery target. Let me remind you that we've built dash 7 and dash 10 aircraft prior to certification that will start delivering early next year.

Going forward, we expect longer intervals between rate steps the higher we go, which is more in line with our historical demonstrated performance. That said, our team has detailed plans for what is required to get to higher rates, and we continue to make investments to create more capacity and resiliency in our production system that will enable stronger performance at higher levels with a consistent focus on safety and quality. On the 787, we delivered 22 airplanes in the quarter. We continue to expect to deliver 90 to 100 airplanes in the year, but expect to be closer to the lower end given the delays in getting to rate 10 in Charleston.

Our factory expansion is underway, and we expect the majority of the capability to come online late next year. In addition to the two lines in our current footprint, our second final assembly building will add a third line that increases capacity, flexibility, and resiliency in our production system. On the current 777 metal wing freighter, we received FAA approval for incremental production of up to 35 units, further extending the most popular dedicated freighter of all time. During the quarter, our 777 freighter and 767 tanker production lines were disrupted by a supplier of wing components.

Shipments from that supplier have resumed. However, there will be a gap in our production system that gradually flows through these production lines over the next few quarters. The cost of that disruption was not material in the third quarter, but will be treated as abnormal cost and period expensed over the next few quarters. Finally, on 777X, as Kelly mentioned, we remain on track for first delivery in 2027.

As we get closer to certification, we have firmed up our production and delivery plan. We are currently producing airplanes at a rate of approximately one per month and expect to stay at that level for most of 2027. These latest assumptions are within our EAC with respect to program cash flow. We continue to expect 2027 to be a significant use of cash, with 2028 improving before turning positive in 2029.

Like the rest of our programs, we are prioritizing safety, quality, and stability as we ramp this new production system and work towards a delivery schedule that our customers can reliably plan for. Okay, let's shift over to BDS on the next page. BDS delivered 30 aircraft and three satellites in the quarter. Revenue increased 15% to $7.9 billion, driven primarily by higher volume, including growth on classified programs and missiles and weapons.

Spirit contributed approximately $160 million to sales in the quarter, or two points of growth. BDS operating margin was 6.2% in the quarter and includes a $252 million gain on the sale of HRL Laboratories. Across the BDS portfolio, we continue to see operating performance gains in line with our expectations of steady margin improvement, and we remain confident in our path to high single-digit operating margins by the end of the decade. BDS booked $23 billion in orders during the quarter with record backlog of $101 billion, and we remain committed to our strategy of entering into appropriate contract structures on new business.

Importantly, in the quarter, BDS was selected by the U.S. Navy to design, build, and deliver the F/A-XX next-generation fighter aircraft. This order was not included in our third quarter backlog pending completion of the source selection and evaluation process. Now moving to Global Services on the next page, BGS sustained its momentum and delivered another quarter of strong financial performance.

Revenue was up 4% to $5.6 billion. Excluding the impact of the Digital Aviation Solutions divestiture, revenue was up 11% from prior year, primarily driven by government and commercial modifications. Operating margin of 18.3% was up from prior year. Unfavorable volume and mix were partially offset by the divestiture last year.

Both commercial and government businesses delivered double-digit margins in the quarter. Operationally, the BGS team continues to demonstrate process improvements across the business. For example, on the C-17 heavy maintenance program, we continue to perform work at record low rework levels while taking on greater scope of work for our customer, supporting revenue growth and margin performance. BGS received $5 billion of orders and ended the quarter with a backlog of $33 billion.

Shifting over to cash and debt, cash and marketable securities ended at $20.7 billion, primarily reflecting cash flow generated in the quarter, but that balance was unchanged from the prior quarter at $45.9 billion.