Carpenter Technology's Q4 2025: Unraveling Contradictions in Pricing, Orders, and Market Dynamics

Pricing environment and lead times, aerospace and defense order trends, defense market demand and budget clarity, lead time improvement and demand tightness, and aerospace and defense market growth expectations are the key contradictions discussed in Carpenter Technology's latest 2025Q4 earnings call.



Record Financial Performance and Earnings Growth:
- Carpenter Technology reported adjusted operating income of $151 million in Q4 2025, marking a 21% increase year-over-year and a 10% increase from the previous quarter.
- This growth was driven by strong execution and expanded adjusted operating margins, particularly in the Specialty Alloys & Operations (SAO) segment, which reached 30.5% margins.

Aerospace and Defense Market Performance:
- Sales in the Aerospace and Defense end-use market increased 3% sequentially and 2% year-over-year, with notable improvements in engine sales (up 5% sequentially) and defense submarket sales (up 17% sequentially).
- The increase was attributed to strong demand for materials amidst high MRO demand and an accelerating build rate ramp.

Medical and Energy End-Use Market Dynamics:
- Medical end-use market sales were up 6% sequentially but down 16% from the prior year's record. Energy end-use market sales were up 27% sequentially and 22% year-over-year, with significant increases from power generation customers.
- The medical market showed positive underlying demand, while energy growth was attributed to high demand for power generation applications due to similar high-margin alloys.

Capital Expenditures and Expansion Projects:
- Carpenter Technology is investing $400 million in a brownfield capacity expansion, with $26 million spent in fiscal year 2025, and plans to spend $300 million to $315 million in fiscal year 2026.
- This expansion is expected to support future growth in specialized materials amid strong demand and limited industry capacity.