GE Aerospace's Long-Term Defense Contract Stability: A Strategic Bet on Recurring Revenue and Sector Growth

The global defense sector is undergoing a seismic shift, driven by geopolitical volatility and a relentless push for military modernization. For investors, this environment presents a unique opportunity to capitalize on companies with entrenched positions in high-margin, recurring revenue streams. General Electric's aerospace division, GE Aerospace, stands out as a prime example, with a portfolio of defense contracts that not only ensures near-term stability but also aligns with multi-decade industry trends.

A $5 Billion Anchor: The F110-GE-129 Engine Contract

At the core of GE Aerospace's defense strategy is its $5 billion indefinite delivery, indefinite quantity (IDIQ) contract with the U.S. Air Force, which spans through 2027. This agreement guarantees the production of F110-GE-129 engines for F-15 and F-16 fighter jets, along with spare parts and maintenance services. The IDIQ structure is particularly advantageous, as it allows the Air Force to issue orders as needed, creating a flexible yet recurring revenue stream for GE. Additionally, the contract includes foreign military sales, enabling allied nations to access these engines and further diversifying GE's customer base, according to Financial Modeling Prep.

This contract is not an isolated win but part of a broader trend. According to a report by MarketsandMarkets, global military expenditure is projected to reach $2.6887 trillion in 2025, with airborne platforms alone expected to grow from $102.1 billion to $106.2 billion during the same period. The U.S. Air Force's reliance on GE's propulsion systems, coupled with the geopolitical imperative to maintain air superiority, ensures that this contract remains a cornerstone of the company's defense revenue.

The Next-Generation Engine: XA102 and the Future of Air Dominance

While the F110-GE-129 secures GE's near-term future, the company is also positioning itself for the next era of air combat through its work on the XA102 adaptive cycle engine. This engine, developed under the U.S. Air Force's Next Generation Adaptive Propulsion (NGAP) program, represents a leap forward in propulsion technology. In 2025, GE Aerospace completed the Detailed Design Review (DDR) for the XA102, transitioning into the procurement and testing phase. The engine's adaptive cycle design allows it to adjust in-flight for optimal performance or fuel efficiency, a critical advantage in contested environments.

The NGAP program is backed by a $7 billion investment, with half allocated to GE Aerospace for development and testing, according to Zona Militar. This funding, which extends through 2032, underscores the U.S. military's commitment to maintaining a technological edge. The XA102 is expected to power the Next Generation Air Dominance (NGAD) program, a sixth-generation fighter initiative that will require decades of maintenance, upgrades, and spare parts. For GE, this means a pipeline of recurring revenue that could stretch well into the 2040s.

F-35 Sustainment: A Growing Partnership with Lockheed Martin

Beyond sixth-generation fighters, GE Aerospace is deepening its involvement in the F-35 Lightning II program, which remains a linchpin of global defense spending. In 2023, the company signed a four-year agreement with Lockheed Martin to support avionics and electrical power systems on the F-35, including maintenance and overhaul services. This partnership is critical, as the F-35 fleet is expected to expand to over 3,000 aircraft worldwide, with sustainment costs projected to exceed $1 trillion over the program's lifetime.

The F-35's longevity is further extended by geopolitical pressures. As stated in a Morningstar analysis, delays in sixth-generation fighter programs are pushing governments to upgrade existing fleets, ensuring that platforms like the F-35 remain operational through the 2060s. For GE, this creates a decades-long opportunity in maintenance, repair, and overhaul (MRO) services, a sector that is less capital-intensive and highly profitable.

A Sector on the Rise: Why Defense Is a Safe Bet

The case for GE Aerospace is strengthened by the broader trajectory of the defense sector. In 2024, global defense spending surged by 8.1%, with Europe leading the charge as nations like Germany and Poland accelerate modernization efforts in response to the Ukraine conflict, according to Forecast International. Meanwhile, the Asia-Pacific region is witnessing a parallel arms race, driven by tensions between China and the U.S. and its allies.

According to the Global Defense Industry Outlook, the airborne platform segment is expected to grow at a compound annual rate of 4.9% through 2030. This growth is fueled by the need to replace aging fleets and adopt advanced technologies like stealth and artificial intelligence. For GE, which already holds a dominant position in military propulsion, these trends translate into a self-reinforcing cycle of demand and innovation.

Conclusion: A Recurring Revenue Powerhouse

GE Aerospace's defense portfolio is a masterclass in strategic foresight. The $5 billion F110-GE-129 contract provides immediate stability, while the XA102 engine and F-35 sustainment agreements lock in long-term growth. With the global defense sector projected to expand at a rapid pace, GE's focus on high-margin, recurring revenue streams positions it as a defensive play in an otherwise volatile market. For investors seeking resilience and scalability, GE Aerospace offers a compelling case.