CAE's Q4 2025 Earnings Call: Unpacking Contradictions in Revenue Outlook, Margins, and Market Recovery

Civil revenue outlook and backlog conversion, defense margin expectations, business jet market recovery, defense segment revenue and margin stability, and Civil segment demand and growth outlook are the key contradictions discussed in CAE's latest 2025Q4 earnings call.



Financial Performance and Cash Generation:
- CAE Inc. reported free cash flow of $289 million in the fourth quarter and a record $814 million for the full year.
- The cash conversion rate was 211%, reflecting strong performance in execution and cash management.
- The increase was driven by disciplined capital management and efficient operations across both Civil and Defense segments.

Civil Segment Growth and Backlog:
- CAE's Civil segment achieved a record adjusted segment operating margin of 28.6% in Q4 and a full-year margin of 21.5%.
- The backlog grew by 37% year-over-year, reaching $8.8 billion.
- Growth was driven by strong demand for training services and full flight simulators, despite challenges in global aircraft supply.

Defense Segment Improvement:
- The Defense segment reported an adjusted segment operating income margin of 9.2% in Q4, with an annual margin of 7.5%.
- The adjusted Defense backlog nearly doubled year-over-year to $11.3 billion.
- This was due to solid program execution, higher margin contracts replacing legacy programs, and increased demand from military spending.

Innovation and Future Outlook:
- CAE secured $1.3 billion in new orders in the quarter, increasing the end-of-year adjusted backlog to $20.1 billion.
- The company is expanding into the air traffic controller training market, aiming to train 500 personnel by 2028.
- This expansion is supported by recurring revenue streams and growth in global demand for aviation training and services.