“Operating profit is now projected to be in a range of $10.55 billion-$10.75 billion, with improvement in both segments.”

In context

“Rahul Ghai: Larry, thank you, and good morning, everyone. GE Aerospace delivered another strong quarter, marked by double-digit growth across all key metrics. Orders were up 17%, with CES up 18% and DPT up 12%. Revenue increased 24%, marking our fifth consecutive quarter of at least 20% growth. CES was up 27% and DPT grew 16%. Operating profit was $2.7 billion, up 18%, driven by services volume and price. As expected, margins decreased 130 basis points to 21.7% from installed engine growth, investments, and inflation. EPS was $2.02, up 22%, from increased operating profit, a lower tax rate, and a reduced share count. Free cash flow was $3 billion, up 43%, from higher earnings and nearly a $200 million reduction in working capital and AD&A, including year-over-year favorability from tariffs. Net income conversion was over 140%. Our results build on the strong first quarter, with year-to-date revenue up 27%, operating profit up nearly $800 million, largely driven by strong growth in commercial services, and free cash flow up over $1 billion. Going deeper on our 22% EPS growth this quarter. Increase in operating profit drove $0.31 or over 85% of the improvement in EPS. Growth in segment profit was partially offset by corporate cost from lower interest income and an increase in intercompany eliminations. The remainder of the EPS growth was driven by lower tax rate and reduction in share count. Tax rate decreased two points to 16.7%, primarily from tax planning and benefit from recent tax legislation. Share count was down 24 million from 2%, or 2% from our previously announced capital allocation actions. Turning to CES. In the second quarter, orders grew 18%. Services were up 22% and up 34% in the first half. Equipment was up 7% as some orders shifted to second half, while nearly doubling year-to-date. Revenue increased 27%. Services grew 26%. Internal shop visit revenue grew 25% from higher volume, including LEAP internal shop visits up over 50% and widebody mix. Spare parts sales increased over 25% from improved material availability that helped us fulfill strong customer demand, growth in LEAP external channel, and price. Even with strong revenue growth, given robust orders, spare parts delinquencies, which represents shipments that have been delayed due to material availability constraints, grew 20% sequentially in the second quarter. Work scopes continued to be favorable for LEAP and widebody programs and remained stable for CFM56. Equipment revenue grew 30%, with engine deliveries up 26%, including LEAP up 24%. Widebody deliveries were up 30%, with the GEnx up significantly more. Profit was $2.7 billion, up 20% from higher services volume and price. As expected, margins were down 160 basis points to 27.3% from installed engine growth, including GE9X investments and inflation. Year-to-date, CES has delivered a very strong first half, with orders growth of over 50%, revenue growth of 30%, including services up 32%, and operating profit of $5 billion, up approximately $900 million year-over-year. In DPT, orders increased 12%. Defense book-to-bill was one in the quarter and 1.7 in the first half. Total DPT backlog was over $30 billion, up roughly $5 billion since the start of the year. Revenue grew 16%. Defense and systems revenue was up 12%, driven by growth in both services and equipment, with engine deliveries up 7%. Propulsion and adaptive technologies grew 23%, with growth led by Avio Aero. Profit grew 18%, and margins were up 30 basis points to 13.8% from increased volume and price, partially offset by mix investments and inflation. In the first half, DPT delivered solid results with orders growth of 40%, revenue growth of 17%, and operating profit of around $900 million, up 17%. Moving to guidance on Slide 10. Our first half exceeded expectations. We expect strength to continue into the second half. As a result, we are raising our full-year guidance across the board. We're expecting overall revenue to grow high teens, up from prior outlook of low double digits. We expect CES growth of around 20%, up from prior outlook of mid-teens. We now expect commercial services to grow low 20s, up from mid-teens. Commercial services backlog stands at roughly $170 billion, up nearly $30 billion since the end of 2024. Given the sustained demand environment and existing delinquency, we are entering third quarter with more than 95% of spare parts revenue in backlog, similar to second quarter. Engines already off wing and the pipeline of planned removals in the third quarter exceed our full-year shop visit guide by over 40%. This provides us with ample visibility into demand to fulfill our outlook for 2026. We now expect commercial equipment to grow around 20%, up from mid to high teens, with LEAP deliveries up high teens from 15% previously. We expect DPT growth of low double digits, up from mid to high single digits. Operating profit is now projected to be in a range of $10.55 billion-$10.75 billion, with improvement in both segments. CES operating profit is now expected to be in a range of $10.25 billion-$10.35 billion, up $400 million versus the high end of the prior guide. This reflects the drop-through of around $1 billion of improvement in commercial services revenue, partially offset by higher equipment growth. We expect DPT profit to be in the range of $1.6 billion-$1.7 billion, up $50 million at the midpoint versus the prior guide, reflecting drop-through from higher revenue. Expectations for corporate costs and eliminations remain unchanged at $1.2 billion-$1.3 billion. Taken together, we are raising our EPS guidance to a range of $7.65-$7.85, up $0.35 at the midpoint from the high end of the prior guide. This reflects higher profit combined with a lower tax rate, which we now expect to be below 16.5% for the year. We are also raising our free cash flow guidance to $8.9 billion-$9.2 billion, up $650 million from the high end of the prior guide, reflecting higher earnings and better working capital performance. Overall, 2026 is shaping up to be another strong year with high teens revenue growth and around $1.5 billion of profit and free cash flow growth, building on the momentum the business has had in the last few years. With that, Larry, back to you.”