The Boeing Company (BA) Earnings

Management highlights

### Safety, Quality, and Regulatory Progress - The FAA authorized Boeing to resume issuing airworthiness certificates for all 737 MAX and 787 aircraft, after the company completed required work to rebuild regulatory trust - Safety remains the top priority across all production and certification programs, with factory quality improvements driving stable performance as production rates increase ### Commercial Airplanes Program and Production Progress - 737-7 certification testing is complete, with an amended type certificate expected from the FAA shortly; 737-10 final test flight is complete, with certification to follow 737-7; both variants are on track for first deliveries in 2027 - 777-9 (777X) has completed 55% of required certification flight testing, after receiving FAA approval for the TIA-4B test phase; ETOPS testing is expected to start later in 2026, with first delivery on track for 2027 - 737 production is ramping to 47 aircraft per month, with factory rollouts expected to hit 47 per month in summer 2026; low-rate production has started on the new Everett 737 line, enabling a future ramp to 52 aircraft per month - 787 production has stabilized at 8 aircraft per month; engine delivery issues with GE are expected to be resolved in Q3 2026, which will inform timing for a future ramp to 10 aircraft per month - Post-acquisition integration of the Wichita Spirit AeroSystems fuselage facility is progressing as planned, with targeted quality defect reductions being met ahead of fuselage shipments to final assembly ### Defense, Space & Security Operational Progress - Achieved Milestone C for the T7 trainer and MQ25 drone programs, approving the start of low-rate initial production, which reduces program risk - Added additional resources to the fixed-price VC25B program to support schedule, aligned with the U.S. Air Force to switch to a military certification basis, to meet the 2028 delivery commitment, resulting in a $280 million Q2 2026 charge - Demand remains strong across BDS, particularly for missiles, munitions, and secure communications satellites; the company continues to be selective in bidding for new contracts and improving contract underwriting standards ### Global Services Performance - BGS delivered strong results in a robust aftermarket; no material impact from the Middle East conflict on commercial services, with incremental demand for government services supporting ongoing operations - Process improvement initiatives have delivered measurable operational gains, such as a 44% reduction in flow time for the P-8 modification program in Jacksonville ### Corporate and Labor Update - Early negotiations for a new contract with the Puget Sound engineering union (SPIA) are ongoing, ahead of the October 2026 contract expiration; discussions have been respectful and productive to date, with the goal of avoiding work stoppage - The company continues to execute on debt reduction plans, reducing total debt by $1.3 billion in the quarter and $8.2 billion year-to-date, to strengthen the balance sheet and maintain investment grade ratings

Guidance

- Full-year 2026 free cash flow guidance is maintained at $1 to $3 billion, with management confident in meeting this range after a stronger-than-expected first half - 2026 737 full-year delivery guidance is maintained at 500 aircraft; 787 full-year delivery guidance is maintained at 90 to 100 aircraft - 737 and 787 are expected to reach 2018-era margin levels by the end of the 2020s, with 787 margins expected to surpass 2018 levels by that point - BDS operating margins are expected to improve sequentially each year through the end of the 2020s, reaching high single digits by the end of the decade, matching the target for BGS - Management reaffirms that $10 billion of annual free cash flow is very attainable by the end of the 2020s, with further growth expected into the 2030s, driven by higher commercial deliveries, BDS margin improvement, and BGS growth

Segment performance

Consolidated: Total revenue of $24.6 billion, up 8% year-over-year; overall operating margin of 0.6%; core EPS loss of $0.76; positive free cash flow of $631 million; total company backlog of $715 billion. Boeing Commercial Airplanes (BCA): Revenue of $11.8 billion, up 8% year-over-year, accounting for 47.9% of total consolidated revenue. Operating margin was -2.7%, an improvement from the prior year. Delivered 171 aircraft (the highest quarterly total since 2018), including 129 737s and 25 787s. BCA backlog remained a record $597 billion, with over 6,200 aircraft. Boeing Defense, Space & Security (BDS): Revenue of $7.5 billion, up 13% year-over-year, accounting for 30.5% of total consolidated revenue. Including a $280 million charge on the VC-25B program, operating margin was -0.2%; excluding the VC-25B charge, operating margin was 3.5%. BDS booked $7 billion in orders during the quarter, ending with a backlog of $85 billion, accounting for 11.9% of total company backlog. Boeing Global Services (BGS): Revenue of $5.3 billion, up 8% year-over-year (excluding the 2025 Digital Aviation Solutions divestiture), accounting for 21.5% of total consolidated revenue. Operating margin of 18.1%. BGS received $5 billion in orders, ending the quarter with a backlog of $33 billion, accounting for 4.6% of total company backlog.

Risks & headwinds

- Supply chain constraints are expected to become more challenging as 737 production rates increase beyond 52 aircraft per month, particularly for tier 2/3 engine supply chain components and 737 wing production - Seat certification delays will continue to impact 787 delivery timing through the end of 2026, leading to lumpy quarterly delivery volumes - Uncertainty remains around Starliner program launch timelines, as Boeing aligns with NASA's updated launch sequence for crewed and uncrewed missions, creating limited cost uncertainty - There is risk of a work stoppage with the SPIA engineering union when the current contract expires in October 2026, though the company is negotiating early to avoid this outcome and has contingency plans in place - Ongoing 777X certification work and engine delivery delays for the 787 could impact production ramp and delivery timelines if issues are not resolved as expected

Analyst Q&A

• Q: How does the 2026 full-year free cash flow guidance split between the second half quarters, and what is the outlook for 2027+ free cash flow?

  A: The stronger first half performance implies a strong Q4 2026, driven by rising 737 and 787 delivery rates, steady BDS performance, and expected seasonal advance receipts (including the annual KC-46 advance). Management remains confident hitting the midpoint of the full-year $1-$3 billion guidance, with upside only if BCA outperforms delivery targets. For future years, the core drivers of free cash flow growth (higher BCA deliveries, BDS margin improvement, BGS growth) are unchanged; management is still in the 2027 planning cycle and will provide more detail later, but reaffirms that hitting $10 billion of annual free cash flow by the end of the decade remains on track.

• Q: What is the path to 2018-era 737 margins, and where will supply chain constraints hit as production rates rise?

  A: 737 is currently slightly above break-even, with drag from legacy pricing on older backlog orders that will gradually dissipate as delivery volumes increase. Higher rates will improve fixed cost absorption, and newer delivery of higher-priced backlog and improved mix will drive further gains; margins are expected to reach 2018 levels by the end of the decade. For production ramps: management sees no major supply chain constraints for the move to 52 aircraft per month; greater pressure is expected when moving from 52 to 57 per month, particularly for wing production, but current flow improvements are on track and the company will only raise rates when the production system is ready.

• Q: What are the risks around the ongoing SPIA union contract negotiations, and what is management's approach?

  A: Negotiations started early specifically to avoid a work stoppage ahead of the October 2026 contract expiration. Discussions so far have been respectful and productive, and management is hopeful an agreement can be reached early to avoid last-minute uncertainty. Contingency plans for a potential work stoppage are being prepared as a standard precaution, but management does not expect a stoppage and is focused on reaching a mutually acceptable agreement.

• Q: How is Boeing thinking about new airplane development and long-term profitability improvement from innovation?

  A: There has been no change to Boeing's new airplane strategy; the company is continuing work on technology, market analysis, and preparation for a future program when the market is ready. Existing product profitability will improve with volume, but major long-term profitability gains will come from a new airplane program, which will use a different value chain and business model structure than prior programs. This may include limited additional vertical integration, new types of supplier partnerships and engagement models tailored to specific commodities, designed to capture more value for both Boeing and its suppliers.