Boeing (BA) Q3 2026 earnings review
The FAA certifies Boeing's new 737s, but airplane losses grow
Boeing's defense business carried the quarter, while its airplane unit lost more money on the same deliveries. Revenue rose 4% to $24.2 billion because defense sales grew 15% and commercial airplane sales slipped. Chief executive Kelly Ortberg called the quarter's milestones important steps but said "we are not done".
| Revenue | $24.2B +4% from a year ago |
|---|---|
| Commercial Airplanes operating margin | −6.5% −2.7% last quarter |
| Free cash flow | $464M $238M a year ago, after a ~$700M settlement payment |
| Full-year cash outlook | Not restated July plan of $1–3B needs $1.4–3.4B in Q4, by our math |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because the two biggest moves offset each other. The FAA opened the certification gate on the new 737s, but the airplane unit's loss widened to 6.5% of its sales. The good news: defense booked $23 billion of orders, so its backlog is growing again. The bad news: Boeing now books "higher projected costs associated with future production rate adjustments", and both delivery lines trail the year's targets.
The question now is what "future production rate adjustments" means. Either Boeing is slowing a planned rate step, delaying the airplane unit's return to profit, or it is spending early to reach 52 a month. Fourth-quarter deliveries and cash will tell.
🐂 Bull Case
The FAA Certified Both New 737 Models
The 737-7 and 737-10 are the smallest and largest versions of the 737 MAX, and roughly 40 finished ones sat parked in July, by management's count, waiting for the FAA to approve the designs. Both approval dates had slipped once already, from 2025 into 2026, so this was the gate the whole 737 plan ran through.
The FAA issued the 737-7 certificate during the quarter and the 737-10 certificate in October, the planemaker said. Chief executive Kelly Ortberg called them "important steps as we continue building on our progress". The parked jets can go to airlines from 2027, and the 777-9, the last open gate, "remains on track for first delivery in 2027".
What to watch: how many stored 737-7 and 737-10 jets Boeing hands over in the first quarter of 2027 on top of normal factory output. A large count would add cash that the 47-a-month rate alone cannot.
Defense Orders Ran at Three Times Revenue
Boeing's defense arm builds fighters, tankers, helicopters and satellites, and for a year its orders had lagged its sales. Finance chief Jay Malave has tied its margin target, high single digits by the end of the decade, to better-priced new contracts, so orders are the raw material for that target.
This quarter the orders arrived. The unit booked about $23 billion of them against $7.9 billion of revenue, and the US Navy chose Boeing to design and build the F/A-XX, its next-generation fighter. That award is "not included in backlog pending completion of the source selection and evaluation review process", the company said, so the backlog jump below excludes it.
- Defense backlog: $101 billion, up 18% from June
- Unobligated backlog, orders not yet funded: $52.7 billion, up $11.9 billion in the quarter
- PAC-3 missile seeker: a seven-year contract to expand production
- Deliveries: 33 units, including seven KC-46 tankers, against 32 a year ago
What to watch: defense orders against sales in the fourth quarter, when the KC-46 advance usually lands. A reading near one would say this quarter bunched several awards rather than set a new pace, and the margin target would still rest on the older backlog.
Cash Stayed Positive After the $700 Million Settlement
Boeing paid the Justice Department about $700 million in the quarter under a legal settlement, which finance chief Jay Malave had flagged in July, telling investors to expect free cash flow of only a few hundred million dollars after it.
Boeing produced $464 million, after $1.0 billion of capital spending on its Charleston and St. Louis plants. Operating cash flow of $1.5 billion reflected "working capital timing", the company said. That means customers paid ahead of deliveries, because the quarter still produced a $116 million net loss, so the cash came from the order book rather than from profit.
What to watch: fourth-quarter free cash flow, which Malave said carries the seasonal KC-46 tanker advance. By our math the $1–3 billion plan from July needs $1.4–3.4 billion in that one quarter, and the release does not restate the plan.
Positives this quarter didn't test
Two of the positives in Boeing's story got little new evidence in the release and slides, because the facts behind them live in the quarterly filing and on the call. Each item below names the reading that would move it.
- FAA trust: the regulator let Boeing issue its own airworthiness certificates for 737 MAX and 787 jets again in July; the next reading is whether the FAA agrees to the step above 47 a month without a new review.
- Services aftermarket: Global Services, the parts, training and maintenance arm, grew revenue 11% once the software unit sold last October is removed from the comparison, on "favorable volume and mix"; a fourth-quarter margin below this quarter's 18.3% would say the sale, not demand, flattered it.
🐻 Bear Case
Airplane Losses Widened on Flat Deliveries
Boeing's slides say the results "reflect higher defense volume and improved segment operating performance". In the largest segment the opposite happened. Commercial Airplanes delivered 161 jets, almost exactly a year ago's count. It lost $697 million on them, against $322 million in the spring, so the loss widened while volume stood still.
- Operating margin: −6.5%, after −2.7% in the second quarter
- Revenue per delivery: $66.6 million, down 4% from a year ago by our math
- Wide-bodies: five 777s and 22 787s delivered, against nine and 24 a year ago
- Cost of products, company-wide: 79.2% of revenue, 0.2 points lower than in the second quarter
The company blamed "less favorable delivery mix, higher projected costs associated with future production rate adjustments and higher estimated supply chain costs". The first is a fact of the quarter, because fewer wide-bodies went out and revenue per jet fell. The other two are forecasts, and the second is new. Boeing is booking today the cost of a change to its production plan that it has not described, which is why the segment lost 3.8 more points of its sales while the group-wide cost line barely moved.
What to watch: Boeing's explanation of "future production rate adjustments" in the quarterly filing, and the fourth-quarter Commercial Airplanes margin. A slower rate step would delay the segment's return to profit, which Malave has tied to 2018-style programme margins by the end of the decade.
A One-Off Gain Made the Defense Margin
Defense reported a 6.2% operating margin, its best in two years, but the figure includes a $252 million gain on the sale of HRL Laboratories, a research business. Finance chief Jay Malave had told investors in July to expect the rest of the year near 3.5% before any charges.
Take the gain out and the margin is 3.0% by our math, a shade under Malave's zone and half a point below the spring quarter once its VC-25B presidential-aircraft charge is excluded. So the underlying business did roughly what he said, no better. The balance sheet now also carries $688 million of assets held for sale, which the release does not explain.
What to watch: the fourth-quarter defense margin with no sale inside it, and whether a new charge lands on VC-25B, T-7A or the KC-46. A fifth charge in six quarters would say the fixed-price development tail is not closing.
Deliveries Fell Behind the Year's Targets
Finance chief Jay Malave set full-year delivery targets for the 737 and the 787 in July, and neither line is on the pace they need. The 737 factory is moving toward 47 jets a month, yet its deliveries slipped from the spring, and the 787 line, held at eight a month, handed over fewer jets than a year ago.
- 737: 124 delivered, after 129 in the second quarter; the 500 target leaves 133 for the fourth quarter by our math
- 787: 22 delivered, after 25; the 90–100 target leaves 28–38 for the fourth quarter by our math
- 737 deliveries per month: 41, against the 47 the factory is building toward
- Best quarter in the last five: 129 for the 737 and 27 for the 787
This matters because 133 would be the most 737s Boeing has delivered in any quarter of the past two years, and the 787 ask is above anything the line has done at eight a month. Malave tied the 787 pace to GE engine deliveries and seat certifications in July; the release mentions neither, and it does not restate either target.
What to watch: the fourth-quarter delivery tally. A 737 count below 133 would mean the 500 target slips, and a 787 count below 28 would mean the engine problem has not cleared.
Risks this quarter didn't answer
Several of the risks in the standing story live on the call and in the quarterly filing, not in the release or slides, so this quarter gives no reading on them. Each item names what would move it.
- Engineering union: the contracts in Puget Sound expired on October 6; the release does not say whether a deal was reached or work continued.
- 787 engines: GE engine deliveries were behind plan in July and gate the move to ten a month; the move goes unmentioned.
- Supply chain beyond 52 a month: no update; a stated rate plan for 2027 would move it.
- Programme cash margins on the 737 and 787: still described only in words; a figure for deferred production cost per programme would move it.
- Fixed-price development: no charge named on VC-25B, T-7A, MQ-25 or Commercial Crew; reach-forward losses on the 777X and 767 are $86 million this year against $5.1 billion a year ago, and the filing will show whether that holds.
- The $10 billion free cash flow destination: still without a date; Malave said in July the planning cycle had only just begun.
- Geopolitics: nothing on China deliveries, tariffs or the NASA budget beyond boilerplate.
👓 Other Themes
Debt Paydown Paused While Factory Spending Rose
Boeing repaid no net debt in the quarter: consolidated debt held at $45.9 billion, while cash rose to $20.7 billion. Earlier in the year it had repaid $8.4 billion. Capital spending was $1.0 billion, up from $885 million a year ago, on the Charleston and St. Louis plants. Buybacks remain suspended, and preferred dividends cost $87 million a quarter.
💲 Other KPIs
Customer prepayments rose $3.4 billion in the quarter, more than twice the spring increase. Advances and progress billings are cash airlines and governments pay before Boeing delivers, so the balance funds the factories while jets sit in production. It has grown for four straight quarters and sits $8.1 billion above its year-end level, the main source of this year's operating cash.
Inventories grew $2.6 billion in the quarter, roughly twice the spring increase. The stock is 10% higher than a year ago, while deliveries over the nine months rose 8%. Part of the build is finished 737-7 and 737-10 jets held for certification, so the balance should start to fall once those deliver from 2027.
The share count rose 4.3% from a year ago, a touch slower than the 4.5% rise in the spring. The increase comes mainly from shares issued into employee retirement plans, $1.3 billion worth so far this year. Every share added spreads future profit thinner, so earnings per share will recover more slowly than earnings.
🔮 Guidance
Unchanged. Boeing still plans the first 777-9 delivery in 2027, the date it set a year ago after a $4.9 billion charge. The programme "continued to progress on 777-9 certification flight testing", the company said. Malave said in July that approval to start extended-range (ETOPS) testing should come later this year; the release does not mention it.
Unchanged. The factory "continues to progress toward stabilized production of 47 per month", the step it began in the spring. Deliveries ran at about 41 a month this quarter, down from 43 in the spring, so the delivery pace and the stated rate have moved apart. By our math, the full-year target Malave gave in July now needs 133 in the fourth quarter, the most in two years.
Unchanged. The line "remains stable at a production rate of 8 per month", the company said, and 22 jets went out. That is three fewer than in the spring and short of the year's target. By our math, the full-year target leaves 28 to 38 for the fourth quarter. Malave tied the move to ten a month to GE engine deliveries in July; the release gives no date for it.
❓ Key Questions
Does the $1–3 billion free cash flow plan still stand?
Neither the release nor the slides restate the full-year cash outlook Malave gave in July. By our math it needs $1.4–3.4 billion in the fourth quarter, against $375 million a year ago, so a word on whether it holds matters more than any single number.
What are the "future production rate adjustments"?
Commercial Airplanes booked higher projected costs for them this quarter without saying what they are. A slower step to 52 a month, a pause at 47 or a change to the 787 plan each carries a different cost and cash profile.
Are the 737 and 787 delivery targets still 500 and 90–100?
Both lines fell behind the pace the targets need, and the release restates neither. The fourth quarter would need 133 of the 737 and at least 28 of the 787, more than either line has done this year.
Did Boeing settle with its engineering union after October 6?
The Puget Sound engineering contracts expired during the month after quarter end, at the moment the 47-a-month step is being proven. A stoppage would hit deliveries and the fourth-quarter cash the full-year plan depends on.
What sits in the $688 million of assets held for sale?
The balance sheet shows a new held-for-sale line after the HRL Laboratories gain, and the release does not name the business. Another sale would add a one-off gain to a defense margin that already needs the last one.