AAR Corp's Q4 2025: Unpacking Contradictions in USM Sales, Defense Opportunities, and Margin Expansion

USM sales dynamics and market conditions, defense opportunities and USM sales to the government, parts supply margin expansion, and USM business growth are the key contradictions discussed in AAR Corp.'s latest 2025Q4 earnings call.



Record Financial Performance and Growth:
- AAR Corp reported record full year results of $2.8 billion, up 20% over the prior year, with adjusted diluted EPS increasing by 32% to $1.16.
- The growth was driven by 14% organic sales growth, excluding Landing Gear, and strong performance across core segments.

Parts Supply and Distribution Expansion:
- Parts Supply sales grew by 17% to $306 million year-over-year, with over 20% growth in new parts distribution activities.
- The increase was due to strong demand in both commercial and government end markets.

Digital Investments and Trax Growth:
- Trax software solution's revenue crossed the $50 million threshold, with a significant win from Delta Airlines for a multiyear implementation.
- The growth was driven by expanding Trax's customer base and upgrading existing customers to new offerings.

Net Leverage Reduction and Financial Discipline:
- AAR reduced its net debt leverage from 3.06 to 2.72x, with a focus on deleveraging and disciplined capital allocation.
- The reduction was driven by strong cash flow from operations and the divestiture of the Landing Gear Overhaul business.