Boeing Surges on $567B Backlog But Operating Losses Linger

Date of Call: Jan 27, 2026

Financials Results

• Revenue: $23.9B, up 57% YOY
• EPS: $9.92 per share, primarily reflects a $11.83 gain from divestiture
• Operating Margin: BCA operating margin of negative 5.6%; BDS operating margin of negative 6.8%

Guidance:

• Expect positive free cash flow of $1B to $3B for 2026, with Q1 usage similar to 2025 and acceleration in H2.
• BCA deliveries expected to be up ~10% in 2026, led by 737 (~500 aircraft) and 787 (90-100 aircraft).
• 737 production to increase to 47/month later in 2026, with further ramp to 52 planned.
• 787 production to increase to 10/month later in 2026.
• Expect sequential improvement in BDS performance and gradual reduction of prior charges.
• Target $10B free cash flow as very attainable, with potential for higher thereafter.

Business Commentary:

Commercial Aircraft Deliveries and Backlog:

• Boeing's BCA segment delivered 160 airplanes in Q4 and 600 for the year, the highest annual total since 2018.
• The backlog ended at a record $567 billion, including over 6,100 airplanes.
• The increase in deliveries and backlog was driven by improved operational performance and strong customer orders, notably the largest order ever from Alaska Airlines.

Financial Performance and Free Cash Flow:

• Boeing reported revenue of $23.9 billion for Q4, a 57% increase year-on-year.
• Free cash flow was positive $375 million, slightly higher than expectations.
• Revenue growth was driven by improved operational performance across commercial and defense businesses, while free cash flow benefited from higher commercial deliveries and improved working capital.

Defense Business and Development Programs:

• The defense segment delivered 37 aircraft in Q4, with revenue growing by 37% to $7.4 billion.
• Key milestones included the delivery of the first T-7A Red Hawk and progress on the MQ-25 program.
• The growth was attributed to stabilization efforts and successful program milestones, despite cost adjustments on certain programs like the KC-46A tanker.

737 and 787 Production Stabilization:

• Production for the 737 program stabilized at 42 airplanes per month, with plans to increase to 47 later in the year.
• The 787 program stabilized at a rate of 8 airplanes per month, with plans to increase to 10.
• These stabilizations were achieved through improved operational performance and disciplined processes, supported by investments in facilities and supply chain improvements.

Sentiment Analysis:

Overall Tone: Positive

• "As we start this year, we've set the foundation for our turnaround with stronger performance and record-breaking backlogs... we're making real progress." "We have a lot of work ahead of us... but the strong foundation we're building... will position us to put our recovery behind us and restore Boeing." "I remain confident in our team and our plan to deliver on the opportunities and address the challenges."

Q&A:

• Question from Myles Walton (Wolfe Research): Could you clarify the quantum and normalization duration of excess advances and customer considerations?
  Response: Total impact ranges from low to high single digits; excess advances will burn down quicker than considerations, which take longer; dependent on production rate increases.

• Question from John Godyn (Citigroup): Can normalized free cash flow a few years out be much higher than the $10B target?
  Response: $10B is the immediate target and is very attainable; potential for higher exists afterward, but focus is first on achieving $10B.

• Question from Douglas Harned (Bernstein): What are the bottlenecks and challenges for 737 and 787 production ramps, and how are you addressing Spirit issues?
  Response: 737 ramp to 47 is manageable; 47 to 52 will be tougher due to supply chain normalization. Spirit integration provides capacity growth. 787 ramp to 10 is on track with no major supply constraints.

• Question from Sheila Kahyaoglu (Jefferies): How should we think about near-term and longer-term BCA cash margins, especially with Spirit?
  Response: 737 and 787 cash margins are currently depressed but expected to improve over time; Spirit's impact is a temporary headwind that does not alter long-term cash flow confidence.

• Question from Peter Arment (Baird): What are 2026 delivery expectations for MAX and 787, and any cadence?
  Response: 737 deliveries expected around 500 (up from 447 in '25), with 787 deliveries between 90-100; production rollouts will be the primary source, leading to ~10% overall BCA delivery growth.

• Question from Seth Seifman (JPMorgan): How is KC-46 turning the corner, and what is the state of BDS and investment for defense increases?
  Response: Tanker charge was program-specific and aimed at ensuring on-time deliveries; follow-on tanker contract will be re-priced. Multiyear contracts likely for PAC-3; major CapEx already invested, with F-15 investment being key.

• Question from Ronald Epstein (BofA): Can the airline industry's profitability change, and what needs to change?
  Response: Profitability depends on better risk management and contract underwriting; OE companies must understand and mitigate risks to capture value from the market.

• Question from Robert Stallard (Vertical Research): Are you worried about tariff risks or European local procurement shifts?
  Response: Watchful but not worried; U.S. administration is supportive of commercial aerospace; will manage trade barriers and negotiations to minimize impact.

• Question from Noah Poponak (Goldman Sachs): Is the total of free cash flow bridge items greater or less than $7B, and what is BCA cash excluding abnormalities?
  Response: Total bridge items range from ~$6B to $7B, including a one-time DOJ payment. BCA cash margins are expected to improve to support the path to $10B free cash flow.

• Question from Gavin Parsons (UBS): Have you been able to get under the hood of all BDS programs?
  Response: Conducted high-level strategic, operational, and financial reviews of BDS programs; any specific EAC issues will be handled through regular processes.

Contradiction Point 1

Supply Chain Bottlenecks and Production Ramp Challenges

Contradiction on the status of supply chain concerns for the 737 and 787 production ramps, impacting production timeline confidence.

What challenges and bottlenecks are expected during the planned production ramps for the 737 (to 47, then 52) and 787 (to 10, then 14), and how is Boeing preventing issues similar to those at Spirit AeroSystems during previous ramps? - Douglas Harned (Bernstein)

2025Q4: For the **737**, the ramp from 42 to 47 is expected to be manageable... The more challenging ramp is from **47 to 52**, which will require improved supply chain performance... For the **787**, moving to rate 10 is the plan... no significant supply chain constraints currently... - Robert Ortberg(CEO)

Where are the most significant supply chain bottlenecks in your programs as production rates increase? - Gautam Khanna (TD Cowen)

2025Q3: The **737 supply chain is less of a concern due to high inventory buffer**. The **787/widebody supply chain** is generally doing well, but **seat certification and availability** remain a specific constraint. - Robert Ortberg(CEO)

Contradiction Point 2

777X Program Cash Flow Outlook

Contradiction on the 2026 cash flow impact and timeline for the 777X program, affecting financial forecasting.

What are the amounts of "excess advances" and "customer considerations" affecting cash flow, and when are they expected to normalize (e.g., by 2027 or 2028)? - Myles Walton (Wolfe Research)

2025Q4: The 777X program, while not directly asked about, has a multi-year cash burn before turning positive in 2029. - Jesus Malave(CFO)

What is the 777X program's negative cash flow in 2026 compared to this year, and how soon after the first delivery can it achieve cash neutrality? - Myles Walton (Wolfe Research, LLC)

2025Q3: The 2026 cash flow is expected to be a headwind of about $2 billion relative to prior expectations... Overall, cash flow will be better than 2025. - Jesus Malave(CFO)

Contradiction Point 3

Free Cash Flow Target Timelines

Contradiction on when the $10B FCF target is achievable, impacting investor expectations on financial recovery.

Does Boeing still believe its long-term normalized free cash flow target of $10 billion is accurate, or could it be higher? - John Godyn (Citigroup)

2025Q4: The immediate focus is on achieving the $10 billion free cash flow target in 2026, which is considered 'very attainable'. - Jesus Malave(CFO)

Is the $10 billion free cash flow target for 2027/2028 still valid? - Noah Poponak (Goldman Sachs)

2025Q2: Nothing is structurally preventing Boeing from reaching the $10 billion free cash flow target. It is a matter of when, not if. The timing depends on... overall recovery progress. - Robert Ortberg(CEO)

Contradiction Point 4

BCA Margin Trajectory

Contradiction on the expected timing for BCA cash margins to improve, affecting financial outlook.

How should investors view BCA's near-term and longer-term margins, considering Spirit AeroSystems' impact and that past delivery delays won't diminish future pricing? - Sheila Kahyaoglu (Jefferies)

2025Q4: The cash margins on the 737 and 787 programs are currently depressed and this is reflected in free cash flow. These are expected to improve over time. - Jesus Malave(CFO)

How did BCA margins progress this year, and what impact did the 737-7/-10 certification timing change have on margins? - Seth Seifman (JPMorgan)

2025Q2: BCA margins: Expected to remain negative for 2025, though improving each quarter... Improvement is expected in 2026. - Brian West(CFO)

Contradiction Point 5

Financial Impact of Tariff-Related Delivery Issues

Contradiction on quantifying the financial impact of planes not delivered to China, affecting loss recognition and financial planning.

Is the total of cash flow bridge items (e.g., excess advances, considerations) above or below $7 billion, and what is the expected cash margin for BCA in 2026 excluding abnormalities? - Noah Poponak (Goldman Sachs)

2025Q4: The aggregate negative cash impact from the items is in the $6-7 billion range... - Jesus Malave(CFO)

Can you quantify the impact of tariffs on China and costs, and explain the drawback process and supplier cost interactions? - Seth Seifman (JPMorgan)

2025Q1: The China delivery impact (~north of $1 billion) is within the company's conservative annual plan. - Brian West(CFO)