TDG · Q1 2026 Earnings

Bullish

TransDigm Group

Reported February 3, 2026

30-second summary

Q1 revenue grew 13.9% YoY to $2.29B with organic growth of 7.4% and EBITDA As Defined margin of 52.4% — comfortably above the 51% trough threshold flagged last quarter and in line with the new FY26 ~52.4% margin guide. Management raised every line of FY26 guidance (revenue midpoint +$90M, adjusted EPS midpoint +$0.87 to $38.38, EBITDA +$60M) and on the print commercial OEM was up ~17% pro forma as Boeing and Airbus ramped build rates. The one nuance: management explicitly characterised the OEM recovery as still "bumpy and uneven" with Tier 1/Tier 2 customers continuing to right-size inventory — so the destocking story is not yet declared over despite the strong Q1 OEM number.

Headline numbers

EPS

Q1 FY2026

$8.23

Revenue

Q1 FY2026

$2.29B

+13.9% YoY

Gross margin

Q1 FY2026

59.2%

Operating margin

Q1 FY2026

45.6%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$2.29B	+13.9%	$2.44B	-6.2%
EPS	$8.23	—	$10.82	-23.9%
Gross margin	59.2%	—	60.3%	-110bps
Operating margin	45.6%	—	47.6%	-200bps

Guidance

RTX raised full-year FY2026 guidance across revenue, EPS, adjusted EPS, EBITDA, and net income following strong Q1 operational performance (13.9% YoY revenue growth, segment growth 8.5–10%) and margin expansion.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	$9,750 million to $9,950 million	$9,845 million to $10,035 million	midpoint +$90M (+0.9%); low end +$95M, high end +$85M	Raised
Earnings Per Share	FY2026	$31.55 to $33.59	$32.47 to $34.39	midpoint +$0.84 (+2.5%); low end +$0.92, high end +$0.80	Raised
Adjusted Earnings Per Share	FY2026	$36.49 to $38.53	$37.42 to $39.34	midpoint +$0.93 (+2.4%); low end +$0.93, high end +$0.81	Raised
EBITDA As Defined	FY2026	$5,075 million to $5,225 million	$5,140 million to $5,280 million	midpoint +$65M (+1.2%); low end +$65M, high end +$55M	Raised
Net Income	FY2026	$1,906 million to $2,026 million	$1,952 million to $2,064 million	midpoint +$44M (+2.2%); low end +$46M, high end +$38M	Raised
EBITDA As Defined Margin	FY2026	approximately 52.3%	—	—	Raised

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
EBITDA As Defined	$1,197M
EBITDA As Defined Margin	52.4%
Organic Sales Growth	7.4%
Adjusted Net Income	$479M

Management tone

Q3 FY25 "OEM destocking is temporary" → Q4 FY25 "recovery will be bumpy" → Q1 FY26 "still bumpy and uneven, expected to continue."

Three quarters ago management characterised commercial OEM destocking as temporary; last quarter that confidence visibly cracked into "bumpy and will likely remain so." This quarter Patrick was explicit in prepared remarks that "the OEM recovery to this point has been bumpy and uneven on a quarterly basis, and we expect that to continue as OEMs and our Tier 1 and Tier 2 customers' right-sized inventory levels." So while the Q1 OEM print at +17% pro forma is strong — driven by build-rate ramps and the prior-year Boeing comparison — management is deliberately not declaring destocking complete. The FY26 OEM guide range remains wide (high single-digit to mid-teens) precisely to absorb that ongoing risk.

On margins, the tone shifted modestly positive. Last quarter emphasised ~200bps of acquisition dilution (Simmonds/Servotronics) plus a 50–100bps OEM/defense mix headwind as the dominant FY26 story. This quarter Mike said the Q1 margin "was a little bit better than we expected," base-business margins "improved nicely…more than we had expected," and the FY26 EBITDA margin guide ticked up to ~52.4% from the prior ~52.3%. Integration appears to be tracking better than the Q4 framing implied.

Defense narrative remains where Q4 left it: structural acknowledgement that quarterly forecasting is difficult given long lead times, with strong bookings as the offsetting confidence signal. Q1 defense growth at +7% sits inside the mid-to-high single-digit FY guide band, with bookings "significantly surpassing sales" — consistent with management's prior framing that there is conservatism embedded.

Recurring themes management leaned on this quarter:

Commercial aerospace recoveryOrganic growth accelerationM&A integration and synergiesMargin expansion trajectoryDefense and government demand stabilitySupply chain normalization

Risks management surfaced:

Commercial aerospace cycle volatilityIntegration execution risk on acquisitionsSupply chain disruptionsGeopolitical tensions affecting defense spendingCompetitive pricing pressure

Q&A highlights

Miles Walton · Wolf Research

Queried on distributor POS running double digits while aftermarket growth has missed that mark multiple times, asking whether this is engine-sensitive. Also asked which aftermarket submarkets are lagging within the +8% overall growth, specifically whether interiors remained low single-digit.

Management confirmed distributor POS is weighted more heavily towards engine content, explaining the divergence. Acknowledged that distributor inventory changes created 1-2 percentage points of headwind in FY25 and persisted slightly elevated into Q1, expected to normalize and turn into tailwind through FY26. Patrick noted all commercial transport submarkets grew above 7%, with BizJet at 1% dragging overall CAM growth; engine, airframe, and airline performance met expectations.

Distributor POS growth: double digitsDistributor inventory headwind in Q1: couple percentage points (elevated vs. historical 1-2 points)Commercial transport aftermarket growth: 8% (ex-BizJet)BizJet aftermarket growth: 1%

Noah Popenek · Goldman Sachs

Requested quantification of how much faster commercial aerospace aftermarket bookings grew versus revenue and a book-to-bill ratio comparison. Asked whether 2Q comps will be much different from 3Q and whether remainder of year growth is expected to be even, given lumpiness.

Management declined to provide specific quarterly bookings numbers, emphasizing they focus on rolling 12-month averages rather than quarterly targets. Stated aftermarket bookings ran in double digits and significantly outpaced sales. Acknowledged 2Q comps will differ from 3Q but refrained from quarterly-level guidance, citing lumpiness in commercial aftermarket and preferring to guide full-year only at high single-digit growth.

CAM bookings growth: double digits (not specified exactly)Book-to-bill: stronger bookings vs. revenue but exact ratio not disclosedRolling 12-month book signal: above 1.0 (magnitude not disclosed)Full-year CAM guidance: high single-digit growth range

Ken Herbert · RBC Capital Markets

Asked for color on puts and takes within commercial OEM guidance range (high single-digit to mid-teens) and sought clarification on whether destocking at Boeing MAX and other major programs has been completed.

Patrick confirmed destocking is complete; Tier 2/3 suppliers experienced mixed ordering patterns during Boeing strike but are now back in lockstep supporting Boeing and Airbus build rates. Management expressed confidence in near-term positive indicators but acknowledged supply chain risks remain. Implied mid-teens is upside case if execution proceeds as planned, with high single-digit reflecting conservatism given recent track record of challenged ramps.

Commercial OEM destocking: confirmed completeCurrent supply chain status: positive indicators from Boeing and Airbus; risks remainGuidance range: high single-digit to mid-teens (implicitly mid-teens = base case, high single-digit = conservative)

Scott Duschel · Deutsche Bank

Asked how management defines 'material' share loss from PMAs and whether JetParts currently has PMAs on existing TransDyne products that could create conflict of interest.

Patrick declined to quantify 'material' specifically, stating it's 'something small' not being observed by operating units. Noted teams are delivering well, on-time delivery improved, and orders growing, so PMA competition is not viewed as an issue. Confirmed there is no significant or sizable overlap between JetParts PMAs and existing TransDyne products; businesses will operate independently per standard model.

Material share loss threshold: not quantified; described as 'something small'On-time delivery: improved significantly over past few monthsOrder growth: strong over past yearJetParts PMA overlap: no significant or sizable overlap with existing TransDyne products

Christine Lewag · Morgan Stanley

Noted defense is now 40%+ of portfolio and asked whether supply chain bottlenecks among sole-source mom-and-pop suppliers represent an M&A opportunity, given some specialized defense suppliers growing 20%+. Also inquired how conservative the defense outlook is and what variables could drive higher growth.

Management stated they target highly engineered aerospace/defense components regardless of end market, not specifically mom-and-pop shops. Value-add comes from improving on-time delivery, quality, and performance. Acknowledged strong bookings and positive backlog indicators but noted long lead times make near-term revenue conversion unpredictable. Preference remains for commercial acquisitions. Upside could occur if current booking strength sustains, but lead times present visibility constraint.

Defense bookings: strong, ahead of expectations, outpacing salesLead times: longer in defense, hard to anticipate 6-9 month conversionDefense segment growth: mid-single-digit to high single-digit guidanceM&A preference: commercial over defense; larger acquisition focus, not mom-and-pop targeting

Answers to last quarter's watch list

Q1 FY26 EBITDA As Defined margin print — trough above 51%? — Q1 printed at 52.4%, comfortably above the 51% threshold and tracking in line with the new ~52.4% FY26 margin guide (up ~10bps from the prior ~52.3%).

Resolved positively

Adjusted EPS run-rate vs $37.51 FY26 midpoint — Q1 adjusted EPS of $8.23 annualises to roughly $33, which understates the full-year by the typical seasonal pattern. Management raised the FY26 adjusted EPS midpoint to $38.38 (+$0.87 vs prior), implying confidence the back-half ramp materialises. The raise itself answers the question positively.

Resolved positively

Commercial OEM growth print within the wide guide band — Q1 printed at +17% pro forma (transport +18%), above the midpoint of the high-single to mid-teens band, supported by Boeing/Airbus build rate ramps and bounce-back from the prior-year Boeing disruption. However, Patrick explicitly characterised the recovery as still "bumpy and uneven" with Tier 1/Tier 2 right-sizing continuing — so the structural concern is not yet retired. Status: Partially resolved.

Defense bookings vs revenue gap — Bookings were "robust" and "significantly surpassing sales" in Q1, with Q1 revenue growth at +7% inside the FY guide band. Lead-time uncertainty remains the binding constraint on faster revenue conversion.

Continue monitoring

M&A announcements outside traditional aerospace/defense fairway — No new non-aerospace/defense deals announced this quarter. Stellant, JetParts, and Victor Sierra are all squarely within the traditional fairway. Mike's M&A commentary reinforced focus on proprietary aerospace components, not aperture-widening.

Continue monitoring

What to watch into next quarter

Q2 commercial OEM print and whether the "bumpy and uneven" framing softens — the +17% pro forma Q1 print is strong, but management explicitly declined to call destocking complete. Watch whether Q2 sustains a mid-teens print and whether the prepared-remarks language on Tier 1/Tier 2 right-sizing softens or hardens.

Q2 commercial aftermarket print vs the 7% Q1 baseline and double-digit distributor POS — Mike said the distributor inventory headwind flips to tailwind through FY26. A Q2 print accelerating toward 9–10% would validate that framing; a print still stuck in the 7% range would indicate the channel-to-reported gap is more structural.

Adjusted EPS Q2 run-rate — the raised FY26 midpoint of $38.38 requires a back-half-weighted ramp from the Q1 $8.23 base. Watch whether Q2 prints above $9.50 (consistent with the ramp) or stays near Q1 levels (signals back-half risk to the new midpoint).

EBITDA margin trajectory vs the new ~52.4% FY26 guide — Q1 already printed at 52.4% with 200bps of acquisition dilution baked in. Watch whether base-business margin expansion sustains, particularly as commercial OEM mix headwinds reassert through the back half.

Any disclosure on JetParts/Victor Sierra new PMA introduction rate — Patrick deflected on quantifying both PMA share-loss risk and new PMA introduction velocity in Q&A. A first quantitative disclosure here would clarify the integration thesis materially.

Sources

TransDigm Group Q1 FY2026 earnings press release (SEC 8-K exhibit 99.1): https://www.sec.gov/Archives/edgar/data/1260221/000126022126000015/exhibit991tdg2026q1earning.htm
TransDigm Group Q1 FY2026 earnings call prepared remarks and Q&A (Mike Lisman, Patrick Murphy, Sarah Wynn; analyst exchanges with Jefferies, Wolf Research, UBS, Goldman Sachs, Melius, Vertical, Deutsche Bank, BofA, TD Cowen)
TransDigm Group Q4 FY2025 earnings press release (prior FY26 guidance baseline)

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