General Electric Co (GE) Q3 2026 earnings call transcript

General Electric Co (GE) held its earnings call for the third quarter of fiscal 2026 on 20 October 2026. What follows is my machine transcription of the company's public webcast, made on 20 October 2026, and not the company's official text.

A machine mis-hears names and numbers, so where one reads oddly, the webcast is the record. This recording is not split by speaker.

Transcript

Good day, ladies and gentlemen, and welcome to the GE Aerospace Third Quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. My name is Liz and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Blair Brown from the GE Aerospace Investor Relations team.

Please proceed. Thanks Liz. Welcome to GE Aerospace's Third Quarter 2026 earnings call. I'm joined by Chairman and CEO Larry Kolb and CFO Rahul Gai. Many of the statements we're making are forward-looking and based on our best view of the world and our business as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul will speak to total company and corporate financial results and guidance today on a non-GAP basis.

Now over to Larry. Blair, thank you and good morning everyone. At any moment nearly 1 million people are flying on aircraft powered by our technology. That's the responsibility behind everything we do at GE Aerospace. And it underscores our purpose to invent the future of flight, lift people up and bring them home safely. In the third quarter we delivered strong results. Demand continues to be solid across the business even in a dynamic environment. Third quarter orders were up 49% led by commercial engines and services or CES, which was up 58%.

We continue to see strength in commercial services with orders up 23% in the third quarter and 30% near-to-date. Combined with our backlog of over $170 billion, we're well positioned to close out 2026 and now expect low-double-digit services growth in 2027. We had a historic Farnborough air show announcing commitments for more than 1,800 engines, including an agreement with Indigo for the largest LEAP agreement ever, for more than 1,000 LEAP 1A engines to power its A320neo aircraft. And just last week we announced an agreement with Turkish Airlines for more than 300 LEAP 1B engines to power its 737 MAX fleet, along with a long-term service agreement for its entire LEAP 1B fleet of over 600 engines.

In the quarter, total company revenue increased 18% with CES up 21% and defense and propulsion technologies or DPT up 7, operating for offer grew 30% and margins of 22.5% up 220 basis points year over year. EPS increased 36% and we generated more than $2 billion of free cash flow. These results reflect the impact of flight deck fundamentals to drive continued output momentum with year-to-day commercial services revenue and total engine deliveries both up over 20%. And we remain focused on investing to meet customer needs with our recently announced agreement to acquire consolidated precision products or CPP to expand capacity of mission critical castings.

At the same time we're advancing current and future technologies with over $3 billion in annual R&D spent. This quarter's performance builds on progress from the first half with year-to-day orders now up 49%, revenue of 23%, EPS growing 28%, and 105% free cash flow conversion. Given the strength of our results combined with our fourth quarter expectations, we're raising our 2026 guidance. I want to take a moment here and thank the entire GE aerospace team and our supplier partners for their commitment to delivering for our customers.

Turning to slide 4, flight deck is at the center of how we drive safety, quality, delivery and cost, always in that order. We're making meaningful progress with year-to-day commercial services revenue of 26% and total engine deliveries up 21%. With the LEAP installed base expected to more than double between 2025 and 2030, our team focused on increasing capacity for the LEAP fan assembly. Using flight deck, the team reoriented the layout of the production line and developed standard work at various workstations resulting in greater capacity without output more than doubling.

To improve F-18 readiness for the U.S. Navy, we partnered with a key supplier to reduce repair times for a critical F-414 component. Using flight deck to improve the flow of parts we doubled output, helping meet our customers' needs. These actions demonstrate the power of collaborative problem-solving to unlocked constraints which contributed to priority supplier material input, increasing double digits year over year again in the third quarter. Thanks to the work of our team and the partnership with our suppliers, this quarter marks the 10th consecutive quarter of sequential material input growth which contributed to LEAP engine deliveries growing 26% year to date.

The gains were driving with flight deck are further accelerated with AI. At Selma, our largest MRO site, the team developed an AI-enabled tool to automate collection of technical records required for each CFM56 shop visit. This helped decrease record processing time by around 25%. Actions like this across our network resulted in another quarter record internal shop visit output with turnaround time down by over a week since the end of 2025, including LEAP now down two weeks. This progress combined with other efforts has reduced LEAP engine driven grounded aircraft to nearly zero since the summer.

All in, while there is always more to do to meet customer expectations, we're making meaningful progress. Fifting to slide five, given airframe or order books are full through the end of the decade along with strong growth in aftermarket and defense, we're continuing to invest to ensure timely delivery for our customers. Our agreement to acquire CPP along term supplier is a significant investment to build adequate capacity emission critical castings for the entire aerospace industry. Without increasing delivery, acquiring CPP allows us to accelerate the introduction of new engine technologies that improve cooling and enhance durability and efficiency of our current fleet and future programs.

And we're making meaningful progress on next generation programs while building additional capabilities through partnering with disruptors to move at pace. It was a moment of great pride for our team this summer when alongside our partners at beta technologies, we completed the world's first high-altitude hybrid electric flight. We're grateful for the collaborative partnership with beta to demonstrate that hybrid electric technologies are viable for commercial aviation through NASA's electrified powertrain flight demonstration program. Together with CRADOS, our GE-K800, now known officially as the F-143, was designated as the second source propulsion for joint air-to-surface standoff missile or JASM, moving it from development to a funded U.S. Air Force program.

Our X-A102 adaptive cycle engine was selected by the U.S. Air Force for the next phase of the end gap program, moving into hardware procurement and sub-component testing. The U.S. Navy's recent announcement of the FAXX is another example of the administration's leadership in moving forward important six generation programs that ensure the U.S. maintains air superiority, building off last year's F-47 news. We're excited about the progress our Edison Works team has made on advanced engines and how it positions us well to support the U.S. administration's efforts in modernizing our military.

Stepping back, we continue to position GE aerospace for long-term growth by focusing on what matters most to our customers. For who? Over to you. Well, thank you, and good morning, everyone, GE aerospace delivered another strong quarter with double-digit growth across orders, revenue, profit, and EPS. Orders were up 49 percent, with CES up 58 percent and DPT up 18 percent. Revenue increased 18 percent. CES was up 21 percent, marking our sixth consecutive quarter of at least 20 percent growth, and DPT grew 7 percent.

Operating profit was 3 billion dollars, up 30 percent, and margins increased 220 basis points to 22.5 percent, driven by services volume, productivity, and price, partially offset by inflation. EPS was two dollars and 25 cents, up 36 percent, from increased operating profit and a reduced share count. Free cash flow was two billion dollars. Working capital was a use as the receivables grew from timing of services billings and an increase in balance due from airframeers. Net contract assets and liabilities were a source in the quarter from strong utilization billings.

Our results build on the strength from the first half, with ear rate orders up 49 percent, revenue up 23 percent, operating profit growth of 1.5 billion dollars or 22 percent. Free cash flow is up 13 percent to 6.7 billion dollars, from higher earnings and a meaningful reduction in inventory growth. This reflects 105 percent conversion with continued favorability in net contract assets and liabilities. Going deeper on our 36 percent EPS growth this quarter, higher operating profit drove 55 cents or over 90 percent of the improvement in EPF.

Both segments grew profit, and corporate cost was lower by about 160 million dollars from timing of a growth and cost management initiatives, partially offset by a slight increase in eliminations. The remainder of the EPS growth in the quarter was driven by a reduction in share count from our previously announced capital allocation actions, while the tax rate was roughly flat at around 15 percent. Turning to CES. In the third quarter, orders grew 58 percent, with services orders up 23 percent year over year and nearly 300 million dollars sequentially.

Spearpass orders grew faster than total services, including continued strength in CFM 56. Equipment orders more than tripled. Revenue increased 21 percent, with services growing 17 percent. Fuel chopposite revenue grew 12 percent, higher volume and heavier wide-body workscopes were partially offset by customer and product mix, with leap volume up over 40 percent. Spearpass increased over 20 percent from improved material availability that helped fulfill strong customer demand, growth in leap external channel and price. Workscopes remained stable for CFM 56.

Even with strong revenue growth, Spearpass delinquency increased sequentially, reflecting strong underlying demand. Equipment revenue grew 38 percent, with engine deliveries up 8 percent, including leap up 5 percent. This reflects continued sequential improvement, marking our fifth consecutive quarter of at least 500 leap engine deliveries. Wide-body engine deliveries were up over 50 percent, and GE NX shipments nearly doubled. While we delivered GE 9X engines this quarter, the impact from these shipments will be recognized post-mid-seal certification. Profit was 2.9 billion dollars, up 21 percent, with margins of 27.9 percent, driven by higher services volume and price partially offset by mix and inflation.

Year to date, CES orders are up 54 percent, with services up 30 percent, which positions as well for 20.7. Revenue is up 27 percent, including services up 26 percent, supporting operating profit growth of 1.4 billion dollars while delivering 25 percent increase in engine deliveries. According to DPT, orders increased 18 percent. In the quarter, we were awarded a five-year contract worth 2.9 billion dollars to provide ongoing support for the F-414 engines, barbering U.S. Navy's F-18 and EA-18G fleets, focused on keeping the fleet mission ready.

Defense book to build was 1.0 in the quarter and 1.5 year to date. Local BPT backlog was over 30 billion dollars, up over 5 billion dollars since the start of the year. Revenue grew 7 percent, defense and systems revenue was up 5 percent, driven by growth in both services and equipment with engine deliveries up 4 percent, propulsion and additive technologies grew 10 percent, with growth driven by Avio Aero and unison. Revenue grew 8 percent and margins were up 20 basis points to 13.7 percent from increased volume and price, partially offset by mix and inflation.

AeroDate, DPT has delivered 33 percent orders growth, 13 percent revenue growth and 1.3 billion dollars of profit, up 14 percent. Moving to guidance on slide 10. Using the strong year-to-date performance and visibility entering the fourth quarter, we are raising our total company guidance across the board. We are now expecting revenue growth of 19 to 20 percent, from high teens previously. We expect CES growth of low 20s, up from prior outlook of around 20 percent. Commercial services is at the higher end of the prior outlook and we now expect approximately 5.5 billion dollars of year-over-year revenue growth, up approximately 400 million dollars at the midpoint from a prior expectation.

We now expect commercial equipment to grow low 20s, up from around 20 percent previously and we continue to see DPT growth of low double digits. Emerging profit is now expected to be in the range of 10.9 to 11 billion dollars, up 300 million dollars from our prior outlook at the midpoint. CES operating profit is now expected to be in the range of 10.5 to 10.6 billion dollars, up 250 million dollars at the midpoint from our prior outlook.

Off the increase, around 100 million dollars is from reduced impact from GE 9X in the second half. We continue to deliver engines to Boeing with the upgraded mid-seel and are working to achieve FAA certification by the end of 2026. However, given the expected certification timing, we have assumed fewer units in the year. The remaining 150 million dollar increase reflects the drop-through from higher services growth. We have over 100 percent of the engines fourth quarter internal shop visits currently in the shop with additional engines waiting for induction and re-entering the quarter with more than 95 percent of spare parts in backlog similar to prior quarters.

We continue to expect DPT profit of 1.6 to 1.7 billion dollars. Corporate costs and eliminations are trending toward the lower end of the 1.2 to 1.3 billion dollar range. Taken together, we are raising our EPS guidance to a range of eight dollars to eight dollars in 10 cents, up 30 cents at the midpoint. This reflects higher profit combined with the lower tax rate of around 16 percent for the year, down from our prior outlook of below 16.5 percent.

We are also raising our free cash flow guidance to 9.1 to 9.4 billion dollars, up 200 million dollars from our prior guide, reflecting higher earnings and above 100 percent conversion for the year. Overall, we are set to close out another excellent year in 2026, with around 1.9 billion dollars of profit growth and 1.6 billion dollars of free cash flow growth. And given our commercial install base continues to grow low to mid-single digits annually ongoing work scope capability, combined with price and elevated backlog, we are positioned for low double-digit commercial services growth in 2027.

With that, Larry, back to you. Rahul, thank you. We're encouraged by the momentum we see across the company. It's a testament to the strength of our leadership team and the positions that we enjoy across commercial and defense, and we remain focused on what matters most, delivering for our customers. Our performance is underpinned by our sustained competitive advantages. With the industry's largest fleet, 80,000 engines and growing, and more than 2.3 billion flight hours, we operate at scale across decades long lifecycles, which keeps us close to our customers and supports continued services momentum.

Our fuel experience enables continuous improvement in time-on-wing and cost of ownership, results our customers value most. Across our narrow-body, wide-body regional and defense platforms, we offer the best-performing products under wing supported by deep technology expertise and a growing services network. To build on our current leadership positions in both commercial and defense propulsion, we invest over $3 billion in the annual R&D and over $1 billion in CAF-X to develop next-gen technologies with improved durability and performance that will meet the evolving needs of both our commercial and defense customers.

And with Flight Deck, we're turning strategy into results with a focus on safety, quality, delivery, and cost, always, in that order. Taken together, we're confident in the path ahead and our ability to deliver exceptional value. Thank you to the GERO Space team for your continued commitment to deliver for our customers and our shareholders. With that, let's go to questions. Ladies and gentlemen, before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible.

Liz, can you please open the line? Ladies and gentlemen, if you wish to ask a question, please press star 1-1 on your telephone. If you wish to withdraw your question, or your question has already been answered, please press star 1-1. Our first question comes from Doug Harnett with Bernstein. Good morning. Thank you. Good morning, Doug. So, you know, this was certainly a strong quarter on services. You've got a big backlog across your platforms and CES, but, you know, we're looking, Grant said $111 today.

You can have, as we look at Gene, I.D. is totally backed up for shop visits. It's hard to get parts, hard to get an engine. CFM56 utilization is down a little bit, but how do you all look at the next couple of years in terms of, with fuel up, looking at airline profitability, and you're planning for growth in that segment? It looks like, you know, we're in a very challenging environment, even though your results are really strong.

Well, Doug, I think that as we look at the environment, there's no question that it is dynamic, right? We've seen that over the last six months, and there are a number of questions out there, but I think we just, we see, we're close to the airlines. We see what they're doing to navigate, and we're helping where we can be that by making sure that the planes they have in their fleets are in the air, why we were so pleased to see the LEAP AOG number down to near zero since the summer time, working on durability, working on cost of ownership, and obviously not only improving deliveries, but bringing those turnaround times that we talked about in our prepared remarks.

There's a lot that we can do operationally to be supported to our customers at a time when they're navigating some of these fuel pressures. We saw that last Friday with Delta. We do see departures growth, right? Schedules perhaps are being trimmed, but we saw the third quarter up 1%, wide bodies particularly strong, and we do anticipate that we'll see departures growth in 2027. From a services perspective, and Doug, you know, this as well as anybody, and that really is what drives this business.

Again, in the third quarter, we saw very strong performance orders up 23%, spare parts up even more. I think as a window on how the airlines are preparing not only for the next several months, but the other side of some of these current pressures are the parking lot that we see with respect to our shops is up 20% since the beginning of the year, removal rates have stayed steady, and just over the last quarter, we've seen parked aircraft in retirements down a quarter on quarter.

So I think as we look at our business and our overall growth algorithm, we know that we're well positioned to deliver low to mid-single-digit growth in the installed base. We see both LEAP and the NX, more or less, doubling here over the next five years. That coupled with work scope expansion is the fleet ages, the opportunities we have with respect to price, and I think, again, the airline posture to make sure that they're ready for the other side of this positions us very well.

That's what's behind the bump in the guide for 2026 and what we're saying with respect to 2027. Now, that doesn't mean that we're not mindful of some of these headline pressures that you've cited. We may see some of that pressure down the road, but as we think about 2027 from a GE aerospace perspective, we think that's primarily driven by the backlog and the cycles that have already been flown by the airlines, and how we will support them in addition to what we're doing with our OEM customers, the air framers, with respect to new engine and new aircraft deliveries.

So net, net, net, a lot of positives at GE aerospace, doing what we can to support the airlines as they work through this, and we'll all get to the other side. There's no doubt about that. Our next question comes from Scott Doyshly with Deutsche Bank. Hi, good morning. Good morning, Scott. Well, can you characterize the internal shop visit revenue growth you saw in the wide-body portfolio this quarter, and whether there is anything specific that prevented that wide-body growth from being stronger than it was?

Thank you. Scott, the overall demand for wide-body shop visits remains really strong. Larry mentioned the removal rates for wide-body than if you see the G90 and NX, I think we've seen single-digit requirements all year. So really, really strong sleep performance. The departures are up strongly as well, so that is translating to strong shop as a demand. And in addition to that, the work scopes for wide-body shop visits continue to grow as well, especially on GE90 as they're transitioning from first to second shop visit, which is to be expected, just given the fact that 70% of the GE90 fleet has not seen a second shop visit.

And NX is also now moving from the quick turns to the first shop visit, so that is transitioning well as well. So the total volume is up, just given the fleet dynamics around wide-body, very few retirements, the parking lot is up, and then the increase in work scopes. So the overall wide-body did really well for us in the quarter. Now overall, for shop visits, the wide-body mix was partially offset by a total customer mix due to a little bit more long-term service agreement versus the time and material contract, and then, you know, LEAP was obviously up 40% year over year, and while the work scopes on LEAP are growing, it's an early-stage fleet.

So that, in fact, are overall shop visit revenue growth, but wide-body specifically was very strong. Our next question comes from Miles Walton with Wolf Research. Thanks. I think there was some expectation, at least in my part, that CES service orders might decline sequentially, given delinquencies building and the macro backdrop that obviously didn't play out here. Is that something we should normalize to expect that delinquencies will have a role? And then just rule or Larry, within the context of your low-double-digit expectation for 27 years, do you see a burn-down of delinquency, or are you just assuming you're kind of holding this level?

Yeah. I can stop Miles on services orders, and Larry can jump in here as well. So, you know, as you pointed out, really strong quarter on CES orders up 23% year over year in the quarter, and as Larry said earlier, up 30% year to date, with square paths actually going faster than the overall strong growth in both CSM-56 and LEAP. And the other thing we mentioned in our prepared remarks as well, that what was really good to see that the orders growth actually accelerated from 22% growth in the second quarter to now 23% and then orders grew sequentially as well.

So, both from a year over year perspective and quarter over quarter perspective the CES orders did well for us, and we are entering the fourth quarter within about 95% off our revenue in our backlog, which has been consistent. It is up maybe 10 points from where it used to be, but I think it's consistently hovered in that range throughout the year, and that is what gave us the confidence to increase the total services revenue guide for the year, most of the increase that you see here for about half a billion dollars that we are doing in the full year is coming from incremental square path sales to the strong orders that we are seeing.

The internal top of the revenue is kind of hanging in there in that mid-20s range as well, so no change on that front. But our total backlog is up on square path sales, delinquencies up slightly, even though material availability continues to get better, and we are seeing good flow through from that just given the strong demand, the backlog and delinquency grew in the quarter. So, that anything you want to add? I think the only thing I would add is when we talk about the services backlog, obviously the bulk of that are the long-term service agreements, spare parts is just bad, a part of it, and it's spare parts where we are going to see delinquency move with more frequency.

As I said, to the last part of your question, operationally, I think we want to stay focused on bringing down that delinquency. We'd rather take the backlog up and make sure we're satisfying customers with respect and lead times. That said, as Rob highlighted there at the end, a lot of progress from a supply chain perspective. That's the expectation going into what's 27, so I'm hopeful that we can continue to increase our backlog, but at the same time bringing down delinquency, because that will be more in line with customer expectations, but work to do.

Our next question comes from Sheila Kailou with Jeffries. Good morning, Larry Raul and Blair. Maybe I wanted to ask such a gears a little bit on wide-body equipment sales in Q3. It reads like you benefited from the G9X just timing shift on the mid-seal certification and then, if you could also talk about the G9X, where you are in production grants for that program as you think about 787 deliveries for your customer and you've highlighted 50% year over year growth in the output there.

We'll talk N9X, then N9X, let me start with respect to the N9X. Obviously, proud Sheila, as you noted, to be sole source on the 777X. We now are looking at an excess of 1,300 engines on order and the voice of the customer from the airlines is that they love the aircraft, love to see it certified and to see deliveries. With respect specifically to the mid-seal, we've been delivering engines to Boeing with the upgraded mid-seal since August.

I think that is just the ultimate proof point with respect to our confidence that we've begun not only production but also deliveries. Working hard to achieve the certification of the upgraded mid-seal and we're aiming to do that by the end of the year, obviously that is subject to FAA approval. Okay, and then on the G9X, Sheila, you know, the deliveries were up, as you said, and I prepared remarks, you know, more than doubled year over year, up more than 60% kind of year to date.

So we delivered more than 50 engines to Boeing in the quarter, and that delivery to Boeing continued to increase throughout the quarter. So July, August, September, each month was better than the prior month. So clearly, more work to do here is stabilize at the rate that we achieved in September, along with the broader, you know, supply chain for what Boeing needs to do in the future, but good to see the growth that we saw in the third quarter and what we've seen year to date.

And as Boeing has indicated previously, we're not facing deliveries, and in fact, Boeing has more than 30 ship sets on and off wings, and the number of engines in Boeing inventory has grown over the last few months as the engines' deliveries have outpaced the aircraft deliveries. So we're confident we'll continue to grow this and help Boeing get to get to rate 10 long with the rest of the supply chain here. Our next question comes from Seth Seitman with JP Morgan.

Hey, thanks very much, and good morning, everyone. Good morning. No, no, no, no, no, no, no. Wanted to ask, you know, when we think about the order growth that we're seeing this year where we are year to date, and that's fairly significantly ahead of the outlook that you guys have for sales next year, can maybe help to level set us in terms of thinking about, you know, how we should consider the relationship between orders and sales, and including the relationship within that in terms of shop visits and how those drive orders, because you obviously have a visibility to a lot more shop visits in the future than what's considered orders.

And, you know, now that there's this increased focus on the order number, you know, kind of how we should look at this to gauge the outlook. Yeah. So, Seth, again, just going back to the orders, listen, it's been good to see the growth that we've been seeing from all the things that we've discussed there already on the level, you know, if you look at the orders where we're getting the orders, growth, a lot of orders go from CSM56 in the quarter of the square five sales, the CSM56 retirements are trending lower than what we thought at the beginning of the year.

Remember, we said three to four percent, then at the beginning of the year, we said, you know, expecting CSM56 retirements to be two to three percent, and now we are expecting somewhere, you know, point and a half to two points of CSM56 retirements. So, even though, you know, we are in the environment that we are in, CSM56 retirements have been lower than where we were at the beginning of the year. And the shop visits for next year, we continue to expect based on the number of cycles flown, as Larry said earlier, at that, you know, at the 2,400, closer to the 2,400 mark than the 2,300 mark.

So, trending higher than at the higher end of our range. And along with that, the LEAP prepare for revenue, obviously, countries to grow as the engine is seeing increased utilization, and then we spoke to the whiteboard here. So, the order trend have been very strong, and you would expect these orders to convert into revenue, typically in the six to nine month timeframe. It's been trending longer, given the entire expectation from a supply chain, what's happening on the OE side.

And even though the field deliveries have been up now for 10 consecutive quarters, the double digit goes this quarter, the conversion time is longer. But if you look at our services growth and our revenue growth, they are trending closer to each other. So, this is up 30 percent, the services orders up 30 percent year to date, revenue up 26 percent year to date. So, the trends are converging. And as we think about, you know, next year, that is, it's the backlog that we enjoy right now of 170 billion plus, with the, you know, most of the engines that we need to work in first half of next year already in our drop, plus, removal is expected for the first half to be up more than 10 percent year over year.

So, that is what underwrote our confidence here to increase our 20, 27-hour look to what we were saying kind of double digits previously to lower double digits now. But strong backlog, we are anxious to convert that backlog into revenue. As Larry said earlier, but good to be in opposition here where we can confirm your drive services growth. Our next question comes from Christine Lee Wagg with Morgan Stanley. Hey, good morning, everyone. So, I just wanted to follow up more on AA Larry, following up more on oil prices.

I guess, you know, your 20, 27 outlook, you guys are clear that it's driven by what's already in backlog, but for incremental engines coming off wing with service slots beyond that period, are you seeing any changes in customer behavior considering the high oil prices? Are they becoming more price sensitive? Are they thinking about having lower work scopes? Or when you look at that incremental order, is their decision still factoring, maximizing time on wing considering spare parts are still at a scarcity?

So, just understanding what their tradeoff is for that incremental engine kind of beyond your existing backlog. Well, Christine, I think it's important to look not only at the backlog, but what we see out of in process that's not necessarily in our reported backlogs. But what is indicative of the airline behavior? And again, I think as we look at 27 to the comment that Rahul just made, a good bit of this is a function not only of the backlog, but the cycles that have already been flown.

So when we were talking earlier, not only about the very strong spare parts, order book that we've seen, but the parking lots of engines that are to be inducted, let alone the engines that are coming off wing, that's been fairly steady. And even further back to kind of the operational work stream, when we look at park aircraft and retirements, again, those are down sequentially here in the third quarter. So we think that is in part a function of some of the supply chain constraints that we've touched on a couple of times already in this call, but also the airline posture to navigate through the short term and to be ready for the other side.

That just seems to be in many of the conversations we have with airlines, the enduring lesson of COVID. They want to be ready for the return to a more stable operating environment. And fortunately, given the combination of the backlog and cycles that have been flown, there's an important role that we're going to have to play in that regard as we work through 2027, on top of everything else that we're doing to limit AOGs to reduce turnaround types and improve new engine deliveries to support the airlines as best we possibly can.

And Kristin is to add one comment on the work scopes. We spoke about the wide body earlier, just given that we've seen very, very, very few requirements. I think our customers expect to fly those leads for a long period of time. So we're not seeing any impact of wide body work scopes and back to wide body work scopes are increasing as we discussed earlier. On the narrow body side, a lot of what we're seeing for CSM56 as an example is driven by life limited parts, which need to get replaced at this point in the lifecycle.

And given lack of use material in the market is given lower retirement. We're not seeing any change to CSM56 work scopes either. And LEAP obviously will continue to grow just given as the fleet matures and we go from quick turns to first shop visits to second shop visits. In fact, LEAP shop visits revenue on a dollar per shop visit is kind of half that of CSM56 just given how early it is in its lifecycle. So I think on both narrow body and wide body overall, we expect the work scopes to increase next year.

Our next question comes from John Godin with Citi. Hey guys, thanks for taking my question. I wanted to just follow up on and maybe get as much color as possible on CSM56 retirement rates. Raul, you mentioned that it wasn't that long ago that this year was supposed to be a three to four percent retirement rate year and even a year ago I think we were talking about two to three percent. It's obviously much, much lower. We also have things around the edges like aero derivatives coming up in the conversation.

But best thinking today, how are you guys thinking about retirement rates from here and is it realistic that they can even just snap up quickly from the levels that they're at given everything that you're seeing? I just love your thoughts. Well John, we think about that a lot for perhaps all the obvious reasons. It's important to step back and just remember that the CSM56 is fundamentally still a young fleet, right? We've got a lot of life left in those engines.

Two thirds of the fleet haven't seen their second shot visit. And we know from history that 85 percent of their bouts of our near term volume is going to come from engines that are less than 20 years old and that's important to remember because retirements tend to kick in for aircraft and engines that are older than 20 years. I think you saw that again in this very strong third quarter services number that we talked about and the CSM56 demand as a component of that was strong.

I talked earlier to Christine's question about what we see from the airlines in terms of capacity management post COVID and how that's playing out both in part in retired aircraft. We did expect retirements to call it two percent this year. Right now we're trending below that level and I think that's probably where we're going to end up. I think as we talk, as we think about 27 maybe more importantly, we do think that we'll see a step up.

Can that happen operationally? We'll see but I think it probably is just prudent modeling at a minimum from our perspective to assume that but even with that assumption we've raised our expectations for CSM56 shop visits to 2,400 in the summertime. I think that speaks to just the strength of the backlog and the demand that we see and that really is before we factor in some of these power gen effects that you alluded to. And then on the power gen side John, we are looking at if there's a technical solution that we can offer to some of these customers who are trying to enter that market.

Right so there's a technical side to it but at a minimum we are selling spare parts because they will need to as they refresh those engines given the lack of use material that is creating another revenue stream for us and it obviously absorbs use material from the market. So net net, you know, the power gen is going to be a plus up to our CSM56 revenue stream which we had not previously factored in when we had given 2028 guidance in the summer of last year.

So it should be a positive over and above everything that we just said here on kind of the aerospace side. Our next question comes from David Strauss with Wells Fargo. Hey good morning everyone. You've talked about or you've died to this low double digit after market growth number in 27. I think you've also previously talked about kind of high single digit DPT growth. We've got this 9x piece now as we think about kind of the margins on CES in the 27.

So I just threw out a couple of the different moving pieces. I was just wondering if you could, you know, kind of talk puts and takes as we start to, you know, think about where 2027 lands. Thanks. David, well I would maybe if I start, I think we're mindful of the puts and takes we will as we always do come back and guide more fully the new year in January at earnings. In addition to some of the company level dynamics that you've referenced, we're obviously mindful that we're going to exceed our 2028 cash outlook here in 26.

And we're going to come close to achieving our 28 profit outlook this year as well. So the things on balance are clearly trending better despite some of the headlines that we've touched on during the course of this call. So that'll all play out and we'll update the guide for 27 when we're together first of the year. Yeah. And then as you think about kind of on the revenue side, I think you've hit on the key things here.

David, you're expecting that multiple times on the call services that kind of low double digits for the year. And again, two sets earlier question, you know, the orders of those has been very strong year to date, but obviously early in the early in the cycle, we'll update that here in Jan. But you know, given where we are in the cycle and given the environment maintaining some level of conservativeness in our low double digit number for next year, DPT, as you said, should be high single digits for next year.

So as we think about our profit dynamics here, the big thing is going to be the drop-through expectation from our low double digit services growth number. So and this is off the higher jumping off point here in in 2026. So you know, at the low double digits level, that's about three and a half to four billion dollars of revenue growth and expecting services margins to be flat, even though, you know, LEAP is growing and LEAP is not yet at the overall C at service margins levels.

We do expect that given the performance in the other product line, we'll be able to more than all the overall three-year service margins for next year. Now the other part is that we always want to continue to grow and perhaps grow faster than services and 9x is going to ramp as well. And on 9x, there are kind of two things happening. One are number of engines that we're going to ship to Boeing is going to grow from what we've done this year.

The cost per unit is coming down meaningfully as you go from even 25 to 20, expecting another step down here as you get into 2027, but the combination of volume growth and with partially offset by cost, the 9x losses, we think, is going to be about $300 million of headwind on a year-over-year basis as you get into 2027 over 2026. And then on DPT, as you said, you know, we expect high single-digit revenue growth and then a little bit of margin expansion on that.

So you put all that together, we expect strong profit growth driven by services, contribution, DPT contribution, and partially offset by OE. But we think that as just as we're doing this year with the 9x ramping, we also expect that 2027 margins should stay in line with where we are in 2026. So we said it all along that even though 9x is growing, we should be able to maintain our margins for the year, we've demonstrated that in 2026 that margins up maybe slightly now over 2025 and then expecting to hold margins in line with 2026 for 27.

And then as we get into 28 and beyond, we should start being margin expansion as the 9x headwind starts to come down and leave services margins get to overall total services margin. So that is another offset that we should see as we get into 28 and beyond. Our next question comes from Noah Papinek with Goldman Sachs. Hey, good morning everyone. Good morning. Well, there's been a decent amount of discussion on here on the aftermarket inputs. Just giving you have 2026 and 2027 growth guidance now, can you quantify what you have in 26 growth and 27 growth for leap shot visit growth and CFM 56 shot visit growth just as we continue to try to understand the shape of the narrow body handoff within your aftermarket?

Yeah, so on CFM 56, no, I would think that it's largely flat. I don't think we're seeing a lot of growth in CFM 56 shot visits. It's in that, as you said previously, 23 to 2400 range kind of in that, you know, 27. Maybe you see a little bit of growth with the higher end that Larry said a minute ago on the CFM 56 question. So we expect maybe a little bit of growth and leave we are we haven't quantified the number of shop visits, but we are, you know, we are experiencing strong growth this year, as we said about, you know, 40% growth in the quarter.

And then we had similar growth in the in the first half as well. So I think the leap shop is sort of more than kind of in that, you know, 50% range even for first half. So strong growth on the next shop visits this year and then we are beginning to 2027. We get to be what are along with a long term guidance that we provided that the leap shop visit should be up kind of in that 25% Kager from now to 2030.

So a little bit of the, you know, steadiness in the leap shop visit growth, maybe from that 40% growth that we think is in the in the third quarter to about maybe 25, 26% growth in in 2027. Liz, we have time for one last question. This question comes from the line of Gavin Parsons with UBS. Hey, thank you. Morning. Morning. I know it's still a little bit early, but I was hoping you could go into the CPP enhanced cooling in a little bit more detail given, you know, for for years it's all just been engines running hotter.

Well, it is early. I think what we wanted to make sure everybody understood was in effect. The primary reason we're at CPP clearly is to have a platform to continue to invest in capacity for ourselves and for others. We think CPP is a wonderful business in that regard. We have no intention of being a captive provider. We'll support ourselves and others as we grow that business. But this idea of being able to partner up more closely with CPP to bring development and manufacturing closely together with respect to these next gen airfoils is really an important part of the value proposition from a GE aerospace perspective.

It's important that we remember that when we talk about this, it comes back to these customer requirements for durability and efficiency. What we're working on will be applicable to both the current fleet and next generation programs. It's not just about technology that will be fielded in the next decade. There'll be more to come later, but I know what I'd say is I think we're about 3,000 endurance cycles along in the development process, so good learning, good progress in that regard.

More to come with respect to just the levels of improvement in engine performance and the timing with respect to commercialization and everything we've talked about at least with respect to 27 and even in our longer term outlook doesn't take any of the potential time on lean benefits into account yet. So it's early, we've got to work through the regulatory process obviously, continue to think that we're looking at next summer with respect to approvals, but the customer feedback has been good.

The response from the CPP team, the broader team as they have learned about our partnership has been very positive and I'd say six, seven weeks in since the announcement we're even more excited about the potential here than we were when we brought forward the formal news. Larry, any final comments to wrap the call? Blair, thank you. Now just to close I'd say our focus remains clear, deliver for customers, improve time on wing and lower cost of ownership.

With flight deck we are turning these focus areas into measurable results. We have more to do for sure, but we are confident in our path ahead and the long term value creation for our customer center and our shareholders. So I'll wrap by just thanking everybody for their time today and your continued interest in GE Aerospace. Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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