Airbus’ revenue grew by 7% to €47.4bn over the first three quarters. This reflected an uplift across all business units, including mid-teens growth in its Helicopters and Defence & Space divisions. Commercial aircraft deliveries totalled 507 (9m 2024: 497 aircraft).
Underlying operating profits jumped 48% higher to €4.1bn, well ahead of market expectations driven by beats across all divisions. There was also a sharp return to profitability in its Defence & Space division.
Free cash outflows improved from €0.9bn to €0.8bn, but remained in negative territory reflecting an inventory build-up to support a planned acceleration in final quarter deliveries. The net cash position stood at €7.0bn.
Full-year guidance has been maintained, with Airbus expecting to deliver around 820 commercial aircraft. Underlying operating profit and free cash flow are expected to be around €7.0bn and €4.5bn respectively.
The shares rose 3.1% in early trading.
Our view
Airbus had another good quarter, with growth across all divisions helping profits to land well ahead of market expectations. Commercial aircraft deliveries are picking up pace as supplier issues ease, but it will need to be all hands on deck in the final quarter if the group’s to meet its full-year targets.
At its core, Airbus builds aircraft using thousands of parts from companies worldwide. Market dynamics are very favourable given it’s dominated by just two companies, with the split standing at roughly 60/40 in Airbus’ favour. Meanwhile, high barriers to entry help to keep outside competition at bay.
Demand is strong as airlines try to upgrade their fleets after years of COVID-19 underinvestment. As a result, the order backlog rose to 8,665 aircraft. That’s more than 11 times the number of planes Airbus delivered in the whole of 2024, giving the group great revenue visibility.
Issues with suppliers continue to be the main bottleneck to Airbus meeting demand. The picture looks to be improving, at least in the near term, and management’s hopeful that planned production increases can happen on schedule in the coming years. But keep in mind, the potential for suppliers to fail to deliver parts on time is largely out of Airbus’ control, and likely to remain a key risk moving forward.
The impact of tariffs has been labelled as a €100-200mn hit to operating profits. With full-year operating profit guidance of €7bn now including the impact of tariffs, it translates to a low single-digit upgrade to the full-year outlook. But the picture on tariffs has been changing quickly and further changes in the future can’t be ruled out.
The Defence and Space division offers some diversification from the current macroeconomic uncertainty. After a tough period of write-downs, performance has picked up significantly, and the division is back to turning a profit. With Europe looking to ramp up its defence spending in the coming years, Airbus looks well placed to deal with the shifting landscape and increasing demand.
The balance sheet is in great shape, with net cash standing at €7.0bn. That means regular dividend payments are well covered, and we see scope for increased shareholder returns if cash levels improve further. But remember, shareholder returns can vary and are never guaranteed.
The valuation on a forward price-to-earnings basis is sitting in line with peers, which we think underappreciates its market position and strong demand outlook. If Airbus can iron out supply chain issues, there could be a long runway of growth ahead. But execution risk and the uncertainty surrounding tariffs mean there could be some turbulence along the way.
Environmental, social and governance (ESG) risk
The aerospace and defence sector is high risk in terms of ESG. Carbon emissions from products and services and product governance are key risk drivers. Data privacy, business ethics, and security and labour relations are also contributors to ESG risk.
According to Sustainalytics, Airbus’ management of ESG risk is strong.
The Ethics, Compliance, and Sustainability Committee, which reports to the Board of Directors, oversees all ethical and sustainable businesses. The group has developed and implemented very strong programmes to manage bribery and corruption, business ethics and human rights, along with a robust whistleblower programme. Overall, Airbus remains one of the lowest risk companies in the Aerospace and defence industry.
Airbus key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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