Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns. Lastly, our capital structure and allocation are a key part of our value creation methodology. To do this, we stay focused on both the details of value creation as well as careful allocation of our capital.

As you saw from our earnings release, we delivered a good quarter. Our Q2 results ran ahead of our expectations, and we once again raised our guidance for the year. During the quarter, we saw solid growth in revenue, both sequentially and compared to the prior year in all three of our market channels: commercial OEM, commercial aftermarket, and defense. Through February, commercial aerospace market trends have been favorable, with takeoffs and landings increasing in the 4% ballpark year-over-year and RPM growth trending in the 4%-7% range.

Excluding the Middle East, March RPM growth was 8%, highlighting strong demand in other regions of the world. Note that we are increasing our commercial aftermarket guidance today despite this market uncertainty. As mentioned, and as you saw in our results, commercial aftermarket growth rebounded in Q2 from prior recent quarter growth rates. Our EBITDA as defined margin was 52.6% for the quarter, which includes slightly less than 2 full percentage points of dilution from recent acquisitions.

What went well
  • Q2 results ran ahead of expectations and the company raised full-year fiscal 2026 sales and EBITDA as defined guidance, lifting sales guidance by $420 million and EBITDA as defined by $210 million at the midpoint.
  • All three market channels grew sequentially and year-over-year, with bookings meaningfully outpacing shipments across commercial OEM, commercial aftermarket, and defense, and Q2 commercial aftermarket bookings reaching an all-time high.
  • Commercial aftermarket revenue rose about 14% with all sub-markets growing, led by engine and passenger, and distribution point-of-sale grew double digits while the prior destocking headwind dissipated.
  • Commercial OEM revenue increased about 12% (commercial transport OEM up 19%) as Boeing and Airbus ramped build rates, and defense revenue grew about 11% with a sizable backlog built to support second-half and fiscal 2027 growth.
  • EBITDA as defined margin was 52.6%, up sequentially from 52.4%, despite nearly 2 points of dilution from recent acquisitions, with Servotronics and Simmonds margins running slightly ahead of plan.
  • The company closed Jet Parts Engineering and Victor Sierra after quarter end, continues working toward closing Stellant, and retains M&A firepower in excess of $10 billion pro forma.
What went wrong
  • Activity took a step back in March and April due to the conflict in the Middle East, with global RPM growth slowing to 2.1% in March and takeoffs/landings dipping into slightly negative territory.
  • Middle East carriers most directly impacted saw RFQs down more than 50%, and the conflict raised oil and jet fuel prices, adding uncertainty and risk to the second half that management flagged as a reason for caution.
  • Q2 free cash flow was about $350 million, lower than the average quarterly conversion due to the timing of interest and tax payments, and net working capital consumed roughly $170 million in the quarter.
  • Recent acquisitions remain dilutive to margins (slightly less than 2 points of dilution this quarter), a drag management expects to persist through the remainder of this year and next.

Guidance Changes

MetricPeriodCurrent guidance
Sales (full year FY2026)FY2026raised $420 million at the midpoint (raised)
EBITDA as defined (full year FY2026)FY2026raised $210 million at the midpoint (raised)
Commercial OEM revenue growthFY2026low double-digit to mid-teens percentage growth (increased)
Commercial aftermarket revenue growthFY2026high single-digit to low double-digit range (raised)
Defense revenue growthFY2026high single-digit growth (updated)
Free cash flowFY2026closer to $2.5 billion (increased)

Performance Breakdown

MetricYoYNote
Total commercial OEM revenue +~12% continued support of higher Boeing and Airbus build rates; commercial transport OEM up 19%
Total commercial aftermarket revenue +~14% all sub-markets positive, led by engine and passenger; strong direct pull-through (75% of CAM) and absence of prior destocking headwind
Defense market revenue +~11% new business wins and elevated domestic and international demand, with aftermarket running slightly ahead of OEM
Organic growth rate +~11% all market channels contributed
EBITDA as defined margin 52.6% commercial aftermarket growth and operating strategy expanded margins across segments, partly offset by nearly 2 points of acquisition dilution

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Middle East conflict / fuel prices impact on aftermarket—no meaningful impact to date but cautious; effect expected to lag and likely sharp then correctingNew/watchful
Commercial aftermarket destockingheadwind from distribution destocking in prior quartersmost channel-inventory noise is behind; expected to shift from headwind to tailwindImproving
Aftermarket growth gap vs peerslagged peer group by ~5-6 points (half engine, half distribution noise)engine businesses growing nicely toward high end; distribution noise largely resolvedNarrowing
M&A pipeline and firepower—active small-to-midsize pipeline, balanced commercial/defense mix, >$10 billion firepower pro formaActive
Margin expansion framework—expects ~1 to 1.5 points same-store YoY margin improvement, noisy near-term from acquisition dilutionSteady

Q&A Summary

If crude stays elevated, how does the fuel-price impact flow through the business, and what is the 2027 downside? (Ken Herbert, RBC)
About half of CAM shipments in a quarter ship that same quarter; no significant impact seen in April gives confidence for Q3, with less backlog cover further out. Middle East is roughly 6-10% of the market; engine business stays strong. Management took guidance up for the balance of the year and will not discuss 2027 until next year's guidance.
Was any particular aftermarket sub-market abnormally strong, or was it channel inventory normalizing? (Scott Mikus, Melius)
Engine and passenger, the two largest sub-markets, were both strong; all were favorable. No significant rebound effect, and the prior destocking headwind was absent, which helped. Growth was good across the board.
Are we at the end of the channel destock, and where do margins go in 2027-2028 given acquisition dilution? (Noah Poponak, Goldman Sachs)
Roughly 75% of CAM goes direct and 25% through distribution; distribution inventory was up slightly versus Q1 but not significantly, with strong POS, so destocking is not expected to recur. Margins are expected to improve about 1 to 1.5 points YoY on a same-store basis, with near-term noise from heavier-than-usual acquisition dilution; the historical framework still holds.
How does the ~5-6 point aftermarket growth gap versus peers close over time? (David Strauss, Wells Fargo)
The gap previously came half from engine mix and half from distribution-channel inventory noise. Engine businesses are now growing toward the higher end of the range, and most of the inventory channel noise is behind and should become a tailwind rather than a headwind.
Are supplier lead times stable or extending across the subsidiaries? (Scott Deuschle, Deutsche Bank)
Supply chain has largely returned to pre-COVID conditions; no core supply issue was highlighted at recent business-unit meetings. CAM businesses are performing in the high 90% range on delivery, so supply chain is not a constraint for the vast majority.
What underlying assumptions support the raised aftermarket guidance? (Sheila Kahyaoglu, Jefferies)
Guidance is a bottoms-up forecast where each operating unit assesses its market position, inventory, and customer signals. Engine businesses have high confidence with few open MRO slots, and passenger businesses are doing far better than last year. Mike added that historical disruptions of this type tend to be sharp and correct quickly, with no permanent demand destruction expected.

More on TransDigm Group INC

Reported 2026-05-05 · figures from the TransDigm Group INC Q2 2026 earnings call.

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