TransDigm fiscal Q3 2026 (Apr–Jun): sales up 22.5% to $2.74B on 12.6% organic growth plus acquisitions, but net income rose only 9.5% as acquired lower-margin businesses and a 29.5% jump in interest expense diluted profits; FY2026 guidance raised.
Revenue
$2.7B
+22.5% YoY
Net income
$540M
+9.5% YoY
Diluted EPS
$9.39
+10.9% YoY
Operating margin
44.8%
Overview
TransDigm makes specialised, mostly proprietary aircraft parts: actuators, pumps, valves, ignition systems, cockpit displays, seat belts and hundreds of other components that sit on nearly every commercial and military aircraft flying. Its fiscal year ends September 30, so fiscal Q3 2026 is the thirteen weeks from March 29 to June 27, 2026 (roughly April–June).
Sales rose 22.5% to $2,741 million, but only about half of that came from the businesses TransDigm already owned a year ago. Organic sales (sales from existing businesses, excluding anything bought in the last twelve months) rose 12.6% to $2,521 million; the other $220 million, or 9.8 points of growth, came from acquisitions, mainly Simmonds Precision (bought October 2025 for about $757 million) and Jet Parts Engineering plus Victor Sierra (bought April 7, 2026 for about $2.2 billion).
Profit grew more slowly than sales. Net income rose 9.5% to $540 million and earnings per share rose 10.9% to $9.39. The gap comes from three places: newly bought businesses running at lower margins than TransDigm's existing ones, higher overhead and deal costs, and a 29.5% jump in interest expense on a larger debt load.
Key figures
Metric
Q3 FY2026
Q3 FY2025
YoY Change
Net sales
$2,741M
$2,237M
+22.5%
Organic sales
$2,521M
$2,237M
+12.6%
Gross margin
59.4%
59.5%
-0.1 pts
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Operating margin is income from operations divided by sales: the share of revenue left after running the business, before interest and tax. "Commercial" lines include a small amount of non-aerospace sales, as the 10-Q labels them. Channel growth rates are our own arithmetic from the 10-Q's revenue table and include acquired businesses.
What drove the quarter
All three end markets grew by double digits. TransDigm sells into three channels: parts for new airliners (commercial OEM, "original equipment manufacturer"), replacement parts and repairs for planes already flying (commercial aftermarket), and defense.
Commercial aftermarket was the biggest mover in reported terms, up 30.1% to $908 million. Much of the jump beyond the organic trend is acquired: Jet Parts Engineering and Victor Sierra are both aftermarket parts businesses (independent, lower-cost alternatives to original manufacturer parts, and parts for business and private aircraft). CEO Mike Lisman put commercial aftermarket growth at 17% in the earnings release. The 10-Q attributes the demand to air travel, with "passenger load factors remain strong," and says aftermarket orders have not changed significantly since the conflict in the Middle East began, even though that conflict has softened overall airline capacity.
Commercial OEM rose 19.2% to $639 million. The 10-Q ties this to Boeing and Airbus raising production, and notes TransDigm's shipments "generally run ahead of aircraft delivery schedules," so parts sales move before the planes are delivered.
Defense rose 19.2% to $1,148 million, now 41.9% of total sales. The 10-Q credits "continued growth in defense spending in both domestic and international markets," and the CEO said defense "built sizable backlog" (orders received but not yet shipped).
By segment, Power & Control sales rose 32.5% to $1,509 million while Airframe rose 12.1% to $1,186 million. The faster growth in Power & Control came with a lower margin: its EBITDA As Defined margin fell from 56.7% to 53.5%, while Airframe's edged up from 53.8% to 54.4%.
Why margins slipped
EBITDA As Defined is TransDigm's preferred profit measure: earnings before interest, tax, depreciation and amortization, further adjusted to exclude stock compensation, acquisition costs, currency swings and refinancing costs. It is not a standard accounting measure, but it is what the company uses to run the business and test its loan covenants. It rose 18.9% to $1,447 million, yet the margin fell 1.6 points to 52.8%.
The 10-Q is explicit that this is an acquisition effect, not a weakening of the existing business. Cost of sales rose slightly as a share of sales "primarily due to the dilutive impact of the fiscal 2026 and 2025 acquisitions"; excluding those acquisitions, cost of sales as a share of sales fell, helped by a richer mix of high-margin aftermarket sales and fixed factory costs spread over more volume. The CEO said the same: "adjusting for acquisition dilution, our base businesses continued to expand EBITDA margins." This is TransDigm's normal pattern: it buys businesses at lower margins and then pushes their prices and costs toward its own levels over several years.
Below the gross profit line, costs grew faster than sales:
Selling and administrative expenses rose 37.2% to $332 million (12.1% of sales vs. 10.8%), including $20 million of acquisition and integration costs (vs. $6 million) and $59 million of stock and deferred compensation (vs. $46 million).
Interest expense rose $117 million to $514 million because TransDigm borrowed more; the average cash interest rate was unchanged at 6.2%. In April it added $1.5 billion of new debt ($0.5 billion of 6.125% notes due 2034 and $1.0 billion of term loans due 2033).
The tax rate rose to 24.3% from 22.4%.
Currency moved the other way: a $3 million foreign exchange gain in cost of sales this year against a $21 million loss a year ago.
Debt and buybacks
TransDigm runs with unusually high debt by design, borrowing to fund acquisitions and to return cash to shareholders. Total debt rose to $33,485 million at June 27, 2026 from $30,015 million at the end of September 2025, against $2,773 million of cash. Stockholders' equity is negative (a $9,809 million deficit), a result of years of debt-funded special dividends and buybacks. By our own arithmetic, net debt of about $30.7 billion is roughly 5.8 times the last twelve months' EBITDA As Defined (about $5.3 billion, combining the nine-month figure with fiscal 2025's fourth quarter).
In the quarter the company bought back 809,101 shares for $1.0 billion at an average of $1,208 each, bringing the fiscal-year total to $1.8 billion. That shrank the share count used for EPS to 57.4 million from 58.1 million, which is part of why EPS grew faster than net income.
Operating cash flow for the first nine months was $1,691 million (vs. $1,531 million), while $3,370 million went to investing activities, mostly acquisitions.
Takeaway: TransDigm's existing businesses grew sales 12.6% with widening margins, but the quarter's headline growth was partly bought: acquisitions added nearly 10 points of sales at lower margins, and the debt that funded them and the buybacks pushed interest costs up 29.5%, so net income grew only 9.5% on 22.5% more sales.
Guidance and outlook
Management raised its fiscal 2026 guidance, citing bookings (new orders) that "exceeded expectations." The new ranges exclude the pending Prince & Izant acquisition (about $1.07 billion, announced July 27, 2026, still awaiting regulatory approval):
FY2026 guidance
Range
Change at midpoint vs. prior guidance
FY2025 actual
Net sales
$10,470M–$10,550M
+$150M
$8,831M
Net income
$2,102M–$2,150M
+$60M
$2,074M
GAAP EPS
$35.38–$36.21
+$1.20
$32.08
EBITDA As Defined
$5,490M–$5,550M (margin ~52.5%)
+$100M
$4,760M
Adjusted EPS
$40.62–$41.46
+$1.52
$37.33
Market assumptions were also raised: commercial OEM growth in the mid-teens percent, commercial aftermarket in the low double digits, defense in the high single digits to low double digits.
Subtracting the first nine months from the guidance midpoints implies fourth-quarter sales of about $2,941 million and EBITDA As Defined of about $1,539 million, a margin near 52.3%. That would be a slightly lower margin than Q3's 52.8%, consistent with a full quarter of the April acquisitions in the numbers.
Our read: Demand looks solid across all three channels, and the base business is still expanding margins, which is the core of TransDigm's model. The two things to watch are (1) whether acquired businesses start closing the margin gap, which is the payoff the company is paying for with borrowed money, and (2) interest costs, which now absorb about 42% of operating income ($514 million of $1,227 million) and will rise further if Prince & Izant is funded with debt. Management's aftermarket outlook also rests on air traffic holding up; the 10-Q flags the Middle East conflict's effect on energy prices and airline capacity as a risk it is monitoring, even though orders have not yet weakened.