Applied Aerospace Q3 Results Trim 2026 Outlook

Applied Aerospace & Defense reported record third-quarter revenue and a near-record backlog in its November 11 release. The company narrowed its 2026 outlook after management cited supplier shortages and production-ramp spending that would delay some rotorcraft aftermarket revenue into 2027.

Record Quarter and Margins

Applied Aerospace & Defense (AADX) posted third-quarter 2026 revenue of $182.1 million, a 48.6% increase from $122.5 million a year earlier. Management said about 20% of that growth was organic, with the rest from acquisitions completed in 2026.

Adjusted EBITDA rose 37.4% to $39.7 million, while the adjusted EBITDA margin declined to 21.8% from 23.6%. Gross profit increased to $42.7 million from $34.3 million, but gross margin fell to 23.5% from 28.0%. Net income was $30.6 million, or $0.18 diluted per share, compared with $2.7 million, or $0.03, in the prior-year quarter. A $24.2 million income-tax benefit materially contributed to the profit.

Segment revenue disclosed on the earnings call showed Space & Launch Systems generated $39.1 million, up 31.1% year over year. Defense Aviation & Airborne Systems produced $94.2 million, a 17.3% increase. Advanced Sensing & Precision Strike Systems surged 294% to $48.7 million.

Operating cash flow was $11.5 million, while free cash flow was negative $9.5 million after $21 million in capital expenditures.

Backlog, Guidance and Operational Challenges

Contract backlog reached nearly $1.3 billion as of September 30, 2026, about 12% higher than the prior quarter. The company defines backlog as firm-funded customer orders and excludes potential future releases under long-term agreements. Third-quarter bookings totaled approximately $254 million, yielding a 1.4-times book-to-bill ratio, which compares bookings to recognized revenue. Management said roughly 75% of expected 2027 revenue is covered by existing firm-funded orders, with about $600 million of remaining performance obligations expected to be recognized in 2027.

Applied Aerospace narrowed its full-year 2026 revenue guidance to $660 million–$670 million and adjusted EBITDA guidance to $137 million–$142 million. Management attributed the revision to supplier shortages, delayed approvals, and production-ramp spending that squeezed margins and shifted $15 million–$20 million of rotorcraft aftermarket revenue from the fourth quarter into the first half of 2027. This deferred revenue includes about $10 million of Apache rotor-head overhaul work and $5 million–$10 million of aftermarket spares.

Management cited shortages of forgings, castings, and specialty fasteners as key constraints. Spending on hiring, equipment, and systems to increase capacity added near-term margin pressure. Supplier conditions are expected to ease in the first half of 2027, with a target to return to high-20% gross margins in the second half of the year. The outlook depends on supplier deliveries, customer approvals, production-ramp execution, and the timing of the deferred rotorcraft work.

The backlog and recent bookings provide visibility into 2027 demand despite the narrowed outlook. Execution on supply and approvals will largely determine when the deferred aftermarket revenue is recognized and when margins recover.