GE Aerospace Q3 2026: $19B of Orders Against $2B of Cash

GE Aerospace booked $19.0 billion of orders in the third quarter — up 49% — while free cash flow fell 14% to $2.0 billion, and the stock still slipped about 3% on a beat-and-raise day. That contradiction is the quarter: demand has never looked stronger, with the commercial-services backlog past $170 billion and full-year guidance raised across the board, yet the cash register rang lighter than the order book suggests it should. We rebuilt GE Aerospace's financials as a public Beancount ledger — FY2023 through FY2026Q3, the pure post-spin aerospace company — so every claim below reconciles to a filed number.

The Headline Numbers​

GE Aerospace's fiscal year is the calendar year; Q3 2026 ended September 30, 2026. Every figure below comes from the Form 10-Q and the earnings release (Exhibit 99 to the Form 8-K), both filed October 20, 2026.

Read the growth rates top to bottom and the quarter tells on itself. Revenue up 16%, pretax profit up 12%, net income up just 7% — and operating cash flow down 14%. Each step down the income statement grows slower than the one above it, which means something between the top line and the cash is absorbing the quarter's strength. Two somethings, really: the run-off insurance operations, whose losses more than doubled to $1,020 million from $500 million a year ago, and working capital, where receivables swelled $2.2 billion in nine months as revenue outran collections. Adjusted EPS, which strips out insurance, the pension benefit and equity gains, grew 36% to $2.25 — comfortably ahead of the roughly $2.01 consensus — while GAAP diluted EPS from continuing operations grew 14% to $2.32. The adjustments flatter the trend this quarter because the excluded insurance result swung from a $363 million pre-tax gain to a $210 million pre-tax loss.

Revenue Deep Dive​

Segment revenue comes from the 10-Q's segment note (equipment plus services; insurance revenue and eliminations bridge to the $14,118 million total). Note that January 2026 moved the Aeroderivative business from Commercial Engines & Services into Defense & Propulsion Technologies, with prior amounts recast — the segment histories below are on the new presentation.

Commercial Engines & Services is the company. At $10.3 billion — 75% of adjusted revenue — it grew 21% on services up 17% and equipment up 38%. The release's demand language is unusually specific: internal shop visit revenue up 12% "from higher volume, including LEAP up over 40%, and heavier workscope," spare parts revenue "grew over 20%," and equipment revenue driven by "engine deliveries up 8%, including LEAP up 5%, and GEnx growth." Year to date, LEAP deliveries are up 26% and the company logged "another quarter of record internal shop visit output." CEO H. Lawrence Culp, Jr. tied it together on the demand side: "solid demand drove orders up 49%, with strength in commercial services up 23%." The mix signal is textbook aftermarket leverage — the installed base flying more, visiting shops more, and consuming more parts — and the ledger confirms it: nine-month services revenue of $26.7 billion is already 89% of full-year 2025 services.

Defense & Propulsion Technologies is steady, not stellar. Revenue up 7% to $3.5 billion, with Defense & Systems up 5% and Propulsion & Additive Technologies up 10% "with growth driven by Avio Aero and Unison." The segment's quarter was really about orders — up 18% to $4.3 billion, including a contract worth up to $2.9 billion supporting the F414 engines on the Navy's F/A-18 and EA-18G fleets — plus program milestones on the GEK800 cruise-missile engine and the XA102 adaptive-cycle engine for the Air Force's NGAP program. Defense is the ballast here: lower growth, lower margin, but funded by budgets that do not cycle with airline traffic.

The thesis the mix supports is that GE Aerospace is a services company wearing an engine-maker's uniform. Services are two-thirds of revenue, carry the pricing power ("higher services volume and price" drove the CES profit gain), and sit on a backlog measured in decades: of the $178.7 billion services remaining performance obligation, only 12% is expected to convert within a year. What management did not say is also informative — there is no "demand exceeds supply" or sold-out language anywhere in the release. Instead the supply story is about improvement: "increased material input from priority suppliers double-digits year-over-year." The constraint is easing, not binding.

The Margin Story​

GAAP margins compressed while operating margins expanded — pretax margin down 80 basis points to 19.9% as operating margin rose 220 basis points to 22.5%. The entire wedge is the excluded middle: insurance swung $573 million pre-tax against the quarter, and the non-operating pension benefit shrank $20 million. Mechanically, the operating business did exactly what the release claims — CES profit up 21% "from higher services volume and price" — but two details deserve attention. First, CES margin itself contracted 10 basis points "from mix and inflation" despite 21% revenue growth: install-engine deliveries (low-margin) grew faster than the aftermarket mix the segment wants. Second, pricing is doing real work in both segments — DPT's 20-basis-point expansion came "from increased volume and price, partially offset by mix and inflation" — which reads as genuine pricing momentum rather than surcharge pass-through, since volumes grew alongside.

The per-share bridge from GAAP to adjusted EPS is exact to the penny and worth showing, because it names what the 36% growth rate leaves out:

The One Big Question​

If demand is this strong, where is the cash?

Start with what the order book promises. A $19.0 billion quarter against $14.1 billion of revenue is a 1.35 book-to-bill — the company sold a third more than it shipped. Total remaining performance obligation stands at $212.1 billion, up from $190.6 billion at the end of 2025, and Culp guided 2027 commercial services to "grow low-double-digits supported by our over $170 billion commercial services backlog." Demand is not the question. Conversion is.

Quarterly free cash flow fell 14% to $2.0 billion while operating profit rose 30%, taking the FCF margin from 19.4% to 14.5% of GAAP revenue. The 10-Q's cash flow statement names the absorber: current receivables consumed $2,351 million in nine months, nearly double the $1,270 million a year ago, as the balance sheet shows receivables up from $11.8 billion to $14.0 billion since December. Some of that is just growth — revenue up 20% year-to-date will always pull receivables with it — and the nine-month picture is healthier, with free cash flow up 13% to $6.7 billion. But the third quarter specifically converted only about two-thirds of its operating profit into free cash, and that is the number the market stared at.

Then there is what management is doing with the cash it does collect. Nine-month buybacks ran $6.5 billion — nearly the entire $6.7 billion of free cash flow — plus $1.4 billion of dividends, which is why cash fell from $12.4 billion to $8.8 billion even in a record-orders year. And the quarter's biggest capital decision has not spent a dollar yet: the agreement to acquire Consolidated Precision Products, the castings maker, for $11.75 billion, funded with "approximately $7 billion in cash and the remainder in new debt," closing in the second half of 2027. That is 1.3 times the cash currently on hand, for capacity — mission-critical castings "to meet demand across commercial engines, aftermarket and defense." It is both a bullish tell (management is buying capacity because it believes the backlog) and the reason the balance sheet will carry more leverage into 2027. The bear case writes itself from these lines: a company returning 117% of free cash flow to shareholders while gearing up for an $11.75 billion acquisition has no margin for a demand surprise. The bull case is that with a 1.35 book-to-bill and a $212 billion backlog, no surprise is coming.

What Wall Street Thinks​

The print beat expectations and the stock fell anyway. Adjusted EPS of $2.25 came in about 12% ahead of the roughly $2.01 consensus, with revenue also ahead, yet shares slipped roughly 3% on Tuesday — trading down around $303 against a prior close of $311.28, per Kalkine's session recap. That recap also notes this is the company's second guidance raise of 2026, which makes the red session a pure expectations story: with the stock richly priced for the aerospace upcycle, a 14% free-cash-flow decline and a 10-basis-point CES margin contraction gave sellers all the excuse they needed. Consensus for the quarter had centered near $2.00–$2.01 of adjusted EPS (StockStory).

Tracking a $14B Quarter in Plain Text​

A conglomerate shedding two spin-offs in fifteen months is exactly the situation where reported history misleads: every "five-year trend" either includes businesses GE no longer owns or quietly restates them away. Modeling the company in Beancount forces the choice into the open — every dollar must come from a named filing and reconcile to its totals, so this ledger is the Aerospace-only continuing operation in every period, with HealthCare and Vernova isolated on a discontinued-operations line you can read separately. Here is how we model every company: how we model every company.

; FY2026Q3 Income Statement — three months ended September 30, 2026
; Check: −14,118 − 432 + 9,096 + 1,114 + 458 + 1,077 + 385 + 124 + 2,296 = 0 ✓
 
2026-09-30 * "General Electric Company" "FY2026Q3 Income Statement"
  Income:Revenue                          -14118 MUSD  ; total revenue: equipment 3,924 + services 9,361 + insurance revenue 833
  Expenses:CostOfRevenue                    9096 MUSD  ; cost of equipment sold 3,951 + cost of services sold 5,145
  Expenses:SellingGeneralAdministrative     1114 MUSD  ; selling, general and administrative expenses
  Expenses:ResearchAndDevelopment            458 MUSD  ; research and development
  Expenses:OtherNet                         1077 MUSD  ; separation costs 3 + interest and other financial charges 231 + insurance losses, annuity benefits and other costs 1,020 − non-operating benefit income 178 = 1,076; posted 1 more (the filing's printed total costs 11,745 exceed the line-item sum 11,744 by 1, and filed net income ties to the printed total)
  Income:OtherNet                            -432 MUSD  ; Other income (loss)
  Expenses:IncomeTax                         385 MUSD  ; benefit (provision) for income taxes
  Expenses:DiscontinuedOperations            124 MUSD  ; net losses from discontinued operations, net of taxes
  Equity:Adjustments                         2296 MUSD  ; net income offset (RE set by balance assertion)

Beancount's sign convention: income posts negative (credits), expenses positive (debits), and the transaction sums to zero with net income as the offset. The one balance-sheet number that tells the narrative is treasury stock: $93.1 billion at cost, up from $80.0 billion at the end of 2023 — the buyback machine is visible as a single debit that now exceeds total equity five times over. The companion number is receivables at $14.0 billion, up 19% this year: growth you can see before it becomes cash.

The Multi-Year Arc​

Three years, one arc: revenue compounding at 14% annually while the backlog grows even faster, up 38% since the end of 2023. Read the pretax margin with care — 2023's 29.5% is flattered by $6.7 billion of Other income, mostly gains on the retained HealthCare stake the company was selling down; the operating margin trend underneath runs from 19.7% to 21.8%. Cash declining every year while revenue grows is the deliberate other half of the story: sales of retained Vernova and HealthCare stakes funded the early buybacks, and operating cash funds them now. The ledger starts at FY2023 because no filing restates the 2021–2022 balance sheets to exclude Vernova — anything earlier would mix the old conglomerate with today's engine company, and the whole point of the reconstruction is that it does not.

The Verdict: Bull vs. Bear​

Bull Case

• A 1.35 book-to-bill with a $212 billion backlog de-risks the next several years of revenue; equipment orders "more than tripling" in CES is about as strong a forward indicator as industrials produce.
• 2027 commercial services guided to low-double-digit growth off a $170 billion-plus backlog, with LEAP deliveries up 26% year-to-date and record shop visit output — the aftermarket flywheel is visibly turning.
• Pricing power is confirmed, not assumed: both segments cite price alongside volume as profit drivers, with DPT margins expanding 20 basis points.
• Second guidance raise of 2026 — adjusted EPS now $8.00–$8.10 (from $7.65–$7.85), operating profit $10.9–$11.0 billion, free cash flow $9.1–$9.4 billion — signals management sees the momentum continuing into Q4.
• The CPP acquisition buys the constraint: $11.75 billion for castings capacity directly addresses the supply chain's tightest link and accelerates new-engine technology into the fleet.

Bear Case

• Free cash flow fell 14% in the quarter and the FCF margin compressed nearly 5 points to 14.5% — demand means little if it keeps arriving as receivables, up $2.2 billion this year.
• GAAP margins are going the wrong way: pretax margin down 80 basis points as insurance losses doubled to $1.0 billion, and even the prized CES margin contracted 10 basis points on mix and inflation.
• Capital allocation is running hot: $6.5 billion of buybacks plus $1.4 billion of dividends against $6.7 billion of nine-month free cash flow, with an $11.75 billion acquisition ($7 billion cash plus new debt) on top.
• The 2023 earnings base is unrepeatable: $9.4 billion of net income included roughly $5.8 billion of equity-sale gains — trend growth computed off 2023 flatters the out years.
• Execution risks cluster in 2027: GE9X revenue recognition awaits midseal certification, the CPP close needs regulatory approval, and tariff/IEEPA refund outcomes remain uncertain.

Our Take: Buy the franchise, watch the conversion. A 1.35 book-to-bill, a second guidance raise, and a $212 billion backlog settle the demand debate so completely that the only live question is whether GE converts it — and the third quarter's answer (receivables up, free cash flow down, buybacks undiminished) is the weakest part of an otherwise commanding print. The CPP deal sharpens both edges: it is exactly the capacity a sold-out aftermarket needs, funded exactly the way that leaves no cushion. If Q4 cash conversion snaps back toward the raised $9.1–$9.4 billion guide, this quarter reads as a timing dip inside a super-cycle. That guide, not the backlog, is now the number to beat.