General Electric Company (GE) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call indicates a strong financial performance with positive revenue and EPS guidance, robust R&D investments, and strategic initiatives like FLIGHT DECK and U.S. manufacturing investment. Despite some supply chain challenges and cautious outlook, the overall sentiment from management is optimistic, especially with the LEAP program's progress and the RISE program's promising tests. The Q&A section didn't reveal significant risks or uncertainties, and the company's strategic plans and financial metrics suggest a positive stock price movement.

Key Financial Performance

Orders Up 27% year-over-year, driven by strong demand across CES and DPT.

Revenue Over $10 billion, up 23% year-over-year, with CES growing 30% and DPT up 7%. Growth driven by services volume and price.

Profit $2.3 billion, up over $400 million or 23% year-over-year, supported by services volume and price.

Margins Reached 23%, supported by services volume and price.

EPS $1.66, up 38% year-over-year, driven by profit growth, favorable tax rate, lower interest expense, and reduced share count.

Free Cash Flow $2.1 billion, nearly doubling year-over-year, driven by improved profit and operational performance.

CES Services Revenue Up 29% year-over-year, with spare parts revenue up more than 25% and internal shop visit revenue up more than 20%.

CES Equipment Revenue Up 35% year-over-year, driven by higher output and demand.

DPT Revenue Up 7% year-over-year, with Defense & Systems up 6% and Propulsion & Additive Technologies up 9%.

DPT Profit Roughly $360 million, up 5% year-over-year, driven by volume, productivity, and price, offsetting inflation and investments.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

Composite Fan Blades: GE Aerospace has developed composite fan blades, which are lighter and stronger than traditional metal blades. These blades have been used in the GE90, GEnx, and LEAP engines, contributing to enhanced durability and fuel efficiency.

CFM RISE Program: The program focuses on open fan technology to deliver a 20% reduction in fuel burn, leveraging composite fan blades and advanced cooling technology.

AI-Enabled Blade Inspection Tool: This tool improves inspection accuracy and consistency, reducing inspection time by 50%.

Commercial Engines & Services (CES): CES services 3 out of every 4 commercial flights globally, with over 49,000 engines in service. Revenue grew 13% in 2024, driven by robust services demand.

Defense & Propulsion Technologies (DPT): DPT powers 2/3 of U.S. military combat and helicopter fleets, with $10 billion in revenue in 2024, up 6%.

Global Market Expansion: Strong growth in Asia Pacific and the Middle East, with air traffic expected to outpace global GDP. International defense spending is also rising due to geopolitical tensions.

FLIGHT DECK Operating Model: This lean operating model improves safety, quality, delivery, and cost. It has been instrumental in reducing lead times and enhancing operational efficiency.

MRO Expansion: Investing over $1 billion in MRO and component repair facilities, including a new facility in Poland, to grow capacity by 40% by 2030.

Supplier Stability: Material input at priority supplier sites increased by 10%, with suppliers delivering 95% of committed volume.

Trade Agreements: The U.S.-U.K. trade deal eliminates tariffs on the aerospace sector, promoting free and fair trade.

Capital Allocation: GE plans to return over $24 billion to shareholders through dividends and buybacks by 2026, a 20% increase from prior plans.

Defense Investments: Significant investments in advanced hypersonic propulsion systems and next-generation military programs, including the XA100 and XA102 engines.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Supply Chain Constraints: Ongoing supply chain constraints are impacting material availability, leading to trapped inventory and delays in completing shop visits or engine deliveries. This has resulted in increased inventory levels and reduced inventory turnover.

Material Inflation: Material inflation remains elevated, posing a challenge to cost management. While pricing actions are being taken to offset this, it remains a risk to profitability.

Tariff Impacts: Heightened tariffs are resulting in additional costs for the company and its supply chain. Reciprocal tariffs, if implemented, could have a net impact of approximately $500 million in 2025.

Durability and Reliability Challenges: The company is working to improve the durability and reliability of its LEAP engines, which are critical for maintaining customer satisfaction and reducing shop visit costs. However, these improvements take time to materialize.

Geopolitical Risks: Rising global tensions and evolving geopolitical landscapes could impact international defense growth and supply chain stability.

New Product Introduction Costs: The introduction of new wide-body platforms like the GE9X is expected to result in incremental losses of a few hundred million dollars in 2028 due to higher volume and initial ramp-up costs.

CFM56 Fleet Retirement: The gradual retirement of the CFM56 fleet poses a risk to revenue, as this fleet has been a significant contributor to the company's profitability.

Regulatory and Safety Compliance: The company is investing heavily in safety and quality management systems to meet regulatory requirements and maintain its reputation. However, any lapses could have significant operational and reputational impacts.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

2025 Financial Guidance: GE Aerospace raised its 2025 guidance across all key metrics. Total revenue growth is now expected to be in the mid-teens, up from low double digits. Commercial services revenue growth is projected to be in the high teens, while commercial equipment revenue growth is expected to be in the high teens to 20%. Total operating profit is forecasted to range between $8.2 billion and $8.5 billion, an increase of $350 million at the midpoint compared to the April guidance. Adjusted EPS is expected to be between $5.60 and $5.80, reflecting over 20% growth at the midpoint year-over-year. Free cash flow is projected to range from $6.5 billion to $6.9 billion, up from the previous range of $6.3 billion to $6.8 billion.

2028 Financial Outlook: GE Aerospace raised its 2028 outlook for profit and free cash flow by $1.5 billion compared to the prior view. Adjusted revenue growth is expected to sustain at a double-digit compounded rate, supported by robust demand for services and equipment. Operating profit is projected to reach approximately $11.5 billion, with margins expanding to more than 21%. Adjusted EPS is expected to reach roughly $8.40. Free cash flow is forecasted to be at least $8.5 billion, with conversion around 100%. This represents operating profit growth of more than $3 billion compared to the updated 2025 guidance, driven by commercial services.

Market Growth Projections: The market is expected to grow at a mid-single-digit compounded growth rate through 2028. Air traffic growth is anticipated to outpace global GDP, particularly in Asia Pacific and the Middle East. New aircraft builds and airline expansions are expected to remain healthy, supporting the growth of GE Aerospace's installed base. On the defense side, faster growth is expected internationally compared to the U.S., driven by rising global tensions and evolving geopolitical landscapes.

Commercial Services Growth: Commercial services revenue is expected to grow at a double-digit annualized rate between 2024 and 2028. Narrow-body revenue is projected to grow at a low double-digit CAGR, while wide-body services revenue is expected to grow at a high single-digit CAGR through 2030. The LEAP installed base is expected to triple, and GEnx is expected to double by 2030. CFM56 and GE90 fleets are expected to sustain demand, with CFM56 shop visits peaking in 2027 and GE90 internal shop visits growing through 2028.

Capital Allocation Plans: GE Aerospace plans to return more than 100% of free cash flow to shareholders through 2026, increasing the total cash return to $24 billion, including $19 billion in buybacks and $5 billion in dividends. Beyond 2026, the company expects to return at least 70% of free cash flow annually through dividends and buybacks. The company is also open to opportunistic bolt-on M&A with a high threshold for strategic, operational, and financial fit.

Technological Advancements and Investments: GE Aerospace is investing in next-generation technologies, including the CFM RISE program and open fan technology, to deliver a 20% reduction in fuel burn and enhanced durability. The company is also advancing military propulsion technologies, such as the XA100 and XA102 adaptive cycle engines, and investing in hypersonic propulsion systems. Over $1 billion is being invested in MRO and component repair facilities over the next five years, with a goal to grow internal and external capacity by approximately 40% by the end of the decade.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Dividends: GE plans to return approximately $5 billion in dividends to shareholders, which is roughly 30% of net income, as part of their capital allocation strategy through 2026.

Share Buybacks: GE has increased its share buyback program to approximately $19 billion through 2026, raising the total shareholder return plan to $24 billion, which includes dividends.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:Rahul, the high end of the 2025 guide implies second half EBIT nearly $500 million lower than the first half. Can you reconcile that second half EBIT decline for us?

A:Rahul Ghai explained that the company is having a good year, with raised revenue growth expectations and a $350 million profit increase at the midpoint versus April. He attributed the second half EBIT decline to factors such as a lower spare engine ratio, increased corporate expenses, and R&D step-up in the second half. Additionally, conservatism around departures impacts spare part sales expectations. Despite these factors, the company expects strong year-over-year profit growth in the second half and overall profit growth exceeding $1 billion for the year.

Q:What would the pricing assumption through 2028 imply for the go-forward period '26 through '28?

A:H. Lawrence Culp stated that pricing is expected to more than offset inflation in '25, with mid-single-digit growth on a net basis for spare parts. He mentioned that better pricing dynamics are anticipated as the company moves past launch, with LEAP well into its lifecycle. The pricing strategy is grounded in significant investments in next-generation platforms and appropriate returns.

Q:Can you give us some baseline for the retirement step-up to 3% to 4%?

A:Rahul Ghai explained that retirements for CFM56 have been trending extremely low in recent years but are expected to pick up as the fleet ages. The assumptions are based on Airbus and Boeing reaching their stated goals, leading to a 6%-7% increase in installed base growth and departures up 3%-4%. These factors drive the projected retirement ratio of 3%-4%.

Q:Can you talk about LEAP aftermarket profitability and how it progresses today to '28 to 2030?

A:Rahul Ghai stated that LEAP is progressing well, with financial and operational milestones on track. Key drivers of LEAP service profitability include leveraging fixed investments in MRO shops, mid-single-digit pricing growth, growing aftermarket channels, and repairs. LEAP service margins are expected to approach overall service margins by 2030, with profitability equaling CFM56 margins by that time.

Q:How do you get comfortable projecting LEAP service margins comparable to overall service margins 5 years out?

A:Rahul Ghai clarified that LEAP service margins are expected to equal overall service margins, not CFM56. He cited improvement in LEAP durability, experience with long-term service agreements, and conservative modeling as factors supporting confidence in achieving these margins. Larry Culp added that product performance improvements and cost efficiencies also contribute to the outlook.

Q:How long are you expecting it to take to retrofit the roughly 9,000 plus LEAPs that are already delivered?

A:H. Lawrence Culp stated that retrofitting the LEAP engines with new HPT blades will be a multiyear process as engines come in for their next shop visits. The process will take years, not months, and will include both new make and aftermarket upgrades.

Q:How do you bridge the trajectory of margin from the second half of this year through '26 to '28?

A:Rahul Ghai explained that the company expects momentum from 2025 to continue into 2026, driven by strong backlog, LEAP installed base growth, and wide-body work scopes. He advised using the full year as a baseline for projecting margins into 2026, as quarterly or half-year results may be impacted by factors like corporate expenses, R&D, and shipment timing.

Q:Is the conservatism in the second half of the year informed by behavior changes from airlines or just caution?

A:H. Lawrence Culp stated that the conservatism is more about caution than behavior changes from airlines. Departures are expected to be up low single digits for the full year, and there has been no significant change in customer behavior regarding fleet planning or retirements.

Q:What makes you feel so good about the RISE program today?

A:H. Lawrence Culp expressed confidence in the RISE program due to progress in over 350 program tests, including durability and propulsive efficiency. He highlighted collaboration with Airbus and the industry's pivot to relying more on propulsive efficiency. The company is committed to open fan architecture and making investments in next-generation propulsion platforms.

Q:What are the production rate assumptions underlying your loss forecast on the 9X?

A:Rahul Ghai stated that the company expects a couple of hundred million dollars of profit headwind in 2025 due to initial shipments with the highest losses. Cost reductions of 30% are expected by the 50th unit and another 30% by the 250th unit. Losses per engine are expected to peak a year after entry into service in 2026 and gradually decline, with the program becoming profitable in the 2030s.

Q:Has something specifically broken wide open in the supply chain improvement process?

A:H. Lawrence Culp stated that supply chain improvements are due to better deployment of lean principles, improved collaboration, and technical problem-solving. The company has seen a 10% sequential improvement in supplier deliveries and 95% delivery to commitments from critical suppliers. However, supply chain challenges remain, and continued efforts are needed.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer to the question about the duration of pent-up demand in the aftermarket and its impact on pricing. They acknowledged the complexity of the issue and pointed to the $175 billion backlog as a key factor but did not provide a clear timeline or specific details.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

GE Transcript

General Electric Company (GE) Presents at Baird 55th Annual Global Industrial Conference Transcript

Neutral11-11

General Electric Company (GE) Q3 2025 Earnings Call Transcript

Positive10-21

The earnings call highlights strong financial performance with significant EPS and free cash flow growth, and raised guidance for 2025 and 2028. Despite some order timing issues, revenue and profit growth are robust. The Q&A section confirms strong demand and strategic capital allocation, although some details on future improvements were vague. Overall, positive financial metrics and optimistic guidance suggest a positive stock price movement.

General Electric Company (GE) Q2 2025 Earnings Call Transcript

Positive7-17

General Electric Company (GE) Q1 2025 Earnings Call Transcript

Positive4-25

The earnings call highlighted strong financial performance with significant profit and EPS growth, margin expansion, and increased guidance, which are positive indicators. Despite supply chain challenges and tariff concerns, the company is taking proactive measures like pricing strategies and cost controls. The raised guidance and shareholder return plan further boost sentiment. The Q&A revealed management's confidence in overcoming tariffs and maintaining growth. Considering these factors, the overall sentiment is positive, suggesting a stock price increase of 2% to 8% over the next two weeks.

GE Slides

GE Aerospace Q3 2025 slides: Revenue soars 26% as company raises full-year guidance

2025-10-21

GE Report

GENERAL ELECTRIC CO 10-Q

10-Q

2025-07-21

GENERAL ELECTRIC CO 10-K

10-K

2025-02-03

GENERAL ELECTRIC CO 10-Q

10-Q

2024-10-22

GENERAL ELECTRIC CO 10-Q

10-Q

2024-07-23

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.