AerSale's Strategic Shift Toward Recurring MRO Revenue: Assessing Long-Term Value and Capital Efficiency

AerSale Corporation (ASLE) is undergoing a strategic transformation, pivoting from one-time aircraft and engine sales to a recurring revenue model centered on its Maintenance, Repair, and Overhaul (MRO) segment. With a bold $25 million revenue target for its MRO division in 2026, the company is positioning itself to capitalize on the aerospace industry's growing demand for high-margin services. This shift, coupled with a focus on capital efficiency and asset utilization, raises critical questions about AerSale's ability to deliver sustainable long-term value.

Q3 2025 Performance: A Mixed Bag of Progress and Challenges

AerSale's third-quarter 2025 results underscored both the opportunities and risks of its strategic pivot. Revenue fell to $71.2 million, down from $82.7 million in the prior year, primarily due to the absence of aircraft or engine sales-a key revenue driver in 2024, according to a Nasdaq press release. However, adjusted EBITDA rose to $9.5 million, reflecting improved leasing revenue and cost discipline. Gross margins also ticked up to 30.2% from 28.6%, while TechOps margins surged from 13.6% to 25.3%, signaling a successful refocus on higher-margin MRO opportunities, as noted in the Nasdaq release.

The company's inventory position-valued at $371.1 million as of September 30, 2025-provides a buffer to support its USM (Used Serviceable Materials) business and recurring leasing revenue. This strategic shift aligns with broader industry trends, as aging aircraft fleets and rising utilization rates drive demand for MRO services. According to a Oliver Wyman report, the global MRO market is projected to grow to $119 billion in 2025 and reach $156 billion by 2035, fueled by an average aircraft age of 13.4 years.

Capital Efficiency and CAPEX Allocation: A Work in Progress

AerSale's capital efficiency remains a key focus as it expands its MRO capabilities. The company has completed expansion projects at key facilities, including Aerostructures and pneumatics, which are expected to transition to production in 2026, as reported in a Seeking Alpha article. While specific CAPEX figures for MRO expansion were not disclosed in Q3 2025 results, management emphasized a strategic shift toward leasing activities to stabilize quarterly performance, as noted in the Nasdaq release.

The company's inventory acquisitions-$13.8 million in feedstock and $18.6 million under contract-highlight its commitment to supporting long-term leasing and MRO operations, according to the Nasdaq release. However, the absence of detailed ROIC (Return on Invested Capital) metrics or CAPEX breakdowns leaves some uncertainty about the efficiency of capital deployment. For context, industry peers like Howmet Aerospace reported robust MRO margins, with Engine Products achieving 33.3% adjusted EBITDA in Q3 2025, according to a Howmet Aerospace Q3 2025 slide deck. AerSale's 30.2% gross margin in Q3 2025 is competitive but lags slightly behind these benchmarks, as noted in the Nasdaq release.

Strategic Risks and Opportunities

AerSale's success hinges on its ability to execute its MRO expansion and maintain margin discipline. The company's reliance on recurring leasing revenue reduces exposure to volatile one-time sales but introduces risks related to asset utilization and lease placement. Management's confidence in placing the remaining 757 freighters is a positive signal, but delays could strain cash flow. Additionally, the lack of transparency around CAPEX and ROIC metrics may deter investors seeking granular capital efficiency analysis.

Conclusion: A High-Potential Bet on Aerospace Resilience

AerSale's $25 million MRO revenue target for 2026 represents a compelling growth story, supported by industry tailwinds and a strategic pivot to recurring revenue. While Q3 2025 results highlight progress in margin expansion and inventory management, the absence of detailed capital efficiency metrics remains a caveat. For investors, the key will be monitoring the company's ability to scale its MRO operations, optimize CAPEX, and maintain margins in line with industry benchmarks. If successful, AerSale could emerge as a durable player in the aerospace MRO sector, leveraging its asset base to generate stable, long-term returns.