GE — Q3 2026 Financial Report Analysis

GE Aerospace, the jet-engine maker that is what remains of General Electric after the GE Vernova and GE HealthCare spinoffs, grew third-quarter 2026 revenue 16% to $14,118 million. The engine business itself did better than that headline. Operating profit (GE's own measure of what the engine business earns, which leaves out its old insurance book and some one-off items) rose 30% to $2,988 million, and adjusted EPS rose 36% to $2.25. GAAP results grew more slowly (continuing EPS +14% to $2.32) because GE's run-off insurance operation swung from a $361 million profit to a $210 million loss after its annual reserve review. Orders jumped 49% to $19.0 billion and management raised full-year guidance again. The one weak line was cash: operating cash flow fell 14% as customers owed GE $1.7 billion more over the quarter.

The numbers

Sources: Form 10-Q for the quarter ended September 30, 2026, and the October 20, 2026 earnings release (orders and quarterly cash flow; the 10-Q reports cash flow only year to date). "bps" = basis points; 100 bps = 1 percentage point. Prior-year total orders are implied from the stated 49% growth. "Discontinued operations" are businesses GE no longer runs, mainly a Polish mortgage portfolio (Bank BPH).

Net income and diluted EPS in the first rows include a $124 million loss from discontinued operations, $108 million of it a new pre-tax charge for borrower litigation at Bank BPH. That item has nothing to do with engines, which is why net income grew only 6% while the engine business's profit grew 30%.

Where the growth came from

Commercial Engines & Services (CES) is roughly three-quarters of adjusted revenue. It sells engines for Boeing and Airbus jets, mainly through CFM International, GE's joint venture with Safran, which makes the LEAP. It also earns money every time one of those engines comes in for overhaul (a "shop visit") and from spare parts.

The 10-Q explains the revenue gain as "growth in internal shop visit volume with heavier workscope, increased spare parts volume, increased engine deliveries and pricing." A heavier workscope means more work done per overhaul, which means a bigger bill. Per the earnings release, internal shop-visit revenue rose 12% (LEAP shop visits were up over 40%) and spare-parts revenue more than 20%.

Two things changed from Q2:

• Services growth slowed. CES services rose 17%, down from 26% in Q2. Internal shop-visit revenue grew 12% against 33% in Q3 2025, a tough comparison. Commercial air departures were only "slightly up" over nine months, so growth still comes from an ageing fleet needing heavier work, not from more flying.
• Equipment revenue grew far faster than deliveries. Equipment revenue rose 38% while engine deliveries rose 8% and LEAP deliveries 5%. The release attributes the gap to GEnx growth (the engine on Boeing's 787) and pricing. Deliveries are now growing in single digits after +26% in Q2, so the year's delivery ramp is slowing quarter by quarter.

CES margin was nearly flat (−10 bps from "mix and inflation") after falling 160 bps in Q2. In Q2 the cause was shipping more low-margin new engines, especially GE9X. This quarter GE did ship GE9X engines, but the 10-Q says "the financial impact from these shipments will be recognized post certification from the Federal Aviation Administration" of an upgraded midseal (a seal inside the engine). The financial impact of those units is on hold until then, and early-programme GE9X units carry thin margins at best. CES's guidance raise also cites "reduced GE9X impact." Some of Q3's margin strength is therefore a delay, not a saving.

Defense & Propulsion Technologies (DPT) grew more slowly:

Revenue growth slowed from 16% in Q2 to 7%. Defense engine deliveries rose only 4% (202 vs 195 units), against 11% for the nine months. Orders grew 18%, though, and DPT's backlog is up 22% since December "from orders outpacing revenue recognized." That points to delivery timing rather than weaker demand. It includes a contract worth up to $2.9 billion to support the F414 engines on US Navy fighters.

Takeaway: The 30% rise in operating profit is mostly real: segment profit rose $538 million, driven by overhauls, spare parts and price. But two of the quarter's best-looking numbers are borrowed from later quarters. The CES margin was helped because low-margin GE9X deliveries won't be booked until a part is certified, and $152 million of the profit gain came from corporate costs falling from an unusually high Q3 2025 level. Meanwhile, cash fell 14% as receivables jumped. Demand is clearly not the problem, with orders up 49%. What Q4 needs to show is that the cash arrives and that GE9X costs land within the raised guidance.

What the headline numbers hide

Cash conversion weakened this quarter. Cash conversion is how much of reported profit actually turns into cash. Q3 operating cash flow of $2,203 million was 0.91 times continuing net income ($2,420 million), and free cash flow (operating cash minus capital spending, as GE defines it) was 87% of adjusted net income. The cause is in the working-capital lines. Year to date, the rise in current receivables used $2,351 million of cash; the first-half figure in the Q2 10-Q was $694 million, so roughly $1.66 billion went into receivables in Q3 alone, against about $0.1 billion in Q3 2025. On the balance sheet, receivables rose to $14,019 million from $11,773 million at year-end (+19%), after rising only about 5% in the first half. The MD&A attributes the increase to "higher volume, partially offset by higher collections primarily in CES." Over nine months, operating cash of $7,329 million is still 1.08 times continuing net income of $6,761 million, so this looks like a timing problem, not a structural one. But it reverses the first-half pattern, when cash ran ahead of profit.

Allowances are still flattering cash. The "sales discounts and allowances" liability is mostly credits GE owes aircraft makers and airlines, plus durability reserves, which have been booked as costs but not yet paid. It rose another $608 million in Q3, to $5,601 million (from $4,993 million at June 30 and $4,037 million at December). Year to date it added $1,564 million to operating cash, against $554 million a year ago. Strip it out and nine-month operating cash would be about $5.8 billion, roughly 0.85 times continuing net income. This cash has to be paid out eventually.

This time the gap between GAAP and adjusted earnings runs against GAAP. Adjusted EPS ($2.25) grew 36% but continuing GAAP EPS ($2.32) grew only 14%, almost entirely because of insurance. GE still carries a run-off insurance book from its old GE Capital days: long-term care and life policies it no longer sells but must keep paying claims on. Its annual reserve review produced a $328 million pre-tax charge this year ($259 million after tax), "primarily related to claims experience and long-term care cost of care inflation." The 2025 review cost $126 million. Insurance went from a $361 million profit to a $210 million loss, which is −$0.19 a share this quarter against +$0.27 a year ago. GE's reconciliation also removes non-operating pension income (+$0.13) and gains on equity stakes it holds (+$0.09) from adjusted EPS. For judging the engine business, the adjusted figure is the better guide this quarter. The insurance book is still a real liability, and its reserve has been raised in two consecutive years.

How much of the EPS growth came from operations? Most of it. Adjusted pre-tax income rose 33.6% and the adjusted tax rate edged up to 15.2% from 15.0%, so taxes added nothing this quarter (in Q2 a lower tax rate supplied part of the growth). Diluted shares fell 2.3% to 1,041 million: GE bought back 5.0 million shares for $1,983 million in Q3, with $16.0 billion of its $20 billion authorization left. Roughly 3 of the 36 points of adjusted EPS growth came from the smaller share count. One caution: of the $689 million rise in operating profit, $152 million came from adjusted corporate costs and eliminations falling to $373 million from $525 million, which the 10-Q puts down to "lower functional costs and lower EHS costs" (environment, health and safety). Q3 2025 was a high base, and nine-month corporate costs are actually up 9% ($966 million vs $887 million).

Small one-offs. Restructuring and other items were a net $28 million pre-tax credit, and gains on equity securities were $117 million, against $8 million a year ago. Both are excluded from adjusted EPS. GE also says it "received a portion of previously paid IEEPA tariffs" after the Supreme Court ruled against those tariffs, but does not give the amount. Management repeats that the Middle East conflict "did not result in a material impact" through September, while flagging lower flying hours and airline credit as risks.

Orders and backlog measure different things. Remaining performance obligation (RPO) is contracted revenue GE has not yet delivered, the closest thing to a backlog in the accounts. It rose only $1.3 billion in the quarter, to $212,084 million from $210,790 million at June 30, even though GE booked $19.0 billion of orders against $13.3 billion of adjusted revenue. Services RPO was flat at $178.7 billion. The filing doesn't reconcile orders with RPO, and some announced deals are not firm contracts yet (the IndiGo agreement for over 1,000 LEAP-1A engines is a memorandum of understanding). So treat the 49% order growth as a strong demand signal, not as $6 billion of new backlog. Since December, RPO is up 11% ($21.5 billion).

Guidance: raised again

The earnings release raised full-year 2026 guidance on every line for the second quarter in a row:

By segment, CES now expects revenue growth in the low 20s (from about 20%) and operating profit of $10.5–10.6 billion (from $10.25–10.35 billion), "driven by higher services growth and reduced GE9X impact." DPT guidance is unchanged at low-double-digit revenue growth and $1.6–1.7 billion of operating profit. CEO Larry Culp also gave a first look at 2027: commercial services revenue growth in the low double digits, "supported by our over $170 billion commercial services backlog." Low double digits would be a step down from the low-20s growth expected for 2026.

The arithmetic for Q4: nine-month adjusted EPS was $6.13, so the $8.05 midpoint implies about $1.92 in Q4. That is lower than Q3's $2.25 but about 22% above Q4 2025's implied $1.57. Implied Q4 free cash flow is about $2.5 billion ($9.25 billion midpoint minus $6.73 billion year to date), above Q3's $2.0 billion. So the guidance counts on the receivables built up in Q3 being collected.

Did last time's read hold up?

Our Q2 report called the second-half guidance conservative: it implied about $1.9 of adjusted EPS a quarter against Q2's $2.02. That held. Q3 came in at $2.25 and GE raised the full-year adjusted EPS midpoint by $0.30. We also said to watch two things in Q3:

• Allowances liability: we said cash would look weaker relative to profit if it stopped growing. It kept growing (+$608 million), yet cash still weakened, for a different reason: receivables.
• Corporate costs: we said Q2's 41% rise in corporate costs had the thinnest explanation in the filing. In Q3 they fell 29% year over year to $373 million. That reverses Q2's increase, but the nine-month total is still up 9%.

We also expected CES margins to stay below the prior year while new-engine deliveries outpaced services. Q3's CES margin was 27.9% against 28.0%, almost flat. The narrower gap comes partly from the GE9X deferral rather than a change in mix.

Our read on what comes next

Demand is not the question; delivery and cash are. Orders rose 49%, DPT orders 18%, and management is already guiding to further services growth in 2027. The two Q3 numbers that slowed were engine deliveries (+8%, down from +26% in Q2) and cash. Both depend on execution: supplier output, and collecting $14 billion of receivables.

GE9X is the swing item for Q4 and 2027. Once the midseal is certified, GE will book the deferred GE9X shipments, and those units carry thin or negative margins early in the programme. CES guidance already assumes a smaller GE9X drag than in July. If certification slips past year-end, the drag moves into 2027.

The CPP acquisition changes the cash story. GE agreed to buy Consolidated Precision Products, a maker of engine castings, for $11.75 billion: about $7 billion in cash and the rest in new debt, with closing expected in the second half of 2027. Cash already fell to $8.8 billion at September 30 from $12.4 billion at year-end, after $6.5 billion of buybacks and $1.5 billion moved into time deposits, and borrowings stand at $19.3 billion. Guided free cash flow of about $9 billion a year can cover the deal and keep buybacks going, but probably not both at this year's pace ($6.5 billion of buybacks in nine months) on top of $7 billion for CPP. Buying a castings supplier also speaks to GE's real bottleneck, the supply of parts.

What to watch in Q4: whether receivables come back down (implied Q4 free cash flow is about $2.5 billion), when the GE9X midseal is certified and what that costs CES margins, and whether the insurance reserve charge stays a one-off this year. Operating profit grew 30% on 18% higher adjusted revenue. The weak spots are cash timing and legacy items, not demand.