AIR earnings analysis
What we found in AIR's 10-K: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
AAR delivered a strong FY2026 inflection, with sales up 19.0% to $3.308 billion, operating income up 50.0% to $277.8 million, and GAAP diluted EPS of $4.86 versus $0.35 in FY2025. Its strategy is focused on scaling parts distribution, MRO/engineering, and software through four acquisitions and additional MRO capacity, while exiting a low-return, asset-heavy legacy business. The principal offsets are near-term Repair segment margin dilution from HAECO integration, inventory valuation exposure, and the planned multi-year Legacy Commercial Programs runoff.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue and operating-income inflection
- FY2026 sales rose 19.0% to $3.308 billion, following growth from $2.319 billion in FY2024 to $2.781 billion in FY2025. Operating income increased 50.0% to $277.8 million, while GAAP diluted EPS rose to $4.86 from $0.35, aided by stronger operations and the absence of the prior-year $72.4 million loss on sale/exit of businesses.
- Parts Supply scales distribution platform
- Parts Supply was the principal growth engine: sales increased 35.3% to $1.488 billion, including a $295.4 million increase in new-parts Distribution and $115.3 million of ADI acquisition sales. The segment represented approximately 45% of FY2026 sales and generated $186.2 million of operating income.
- Government mix drives margin expansion
- Government Solutions improved profitability materially despite only 1.4% sales growth to $502.3 million: operating income increased 61.5% to $56.7 million and margin expanded to 11.3% from 7.1%. Government/defense gross margin increased to 22.4% from 16.9%, driven by program mix and volume.
- Portfolio shifted to higher-return platform
- The strategy is increasingly centered on a Parts, Repair and Software aviation-aftermarket platform. Four FY2026 acquisitions totaled $270.1 million of stated purchase prices—ADI $137.1 million, HAECO Americas $78.0 million, ART $36.0 million, and Aerostrat $19.0 million—adding distribution, heavy MRO, engineering certification, and maintenance-planning software capabilities.
- Commercial and international growth broadens
- Commercial sales grew 20.6% to $2.384 billion and government/defense sales grew 14.9% to $923.9 million. International revenue reached $1.135 billion, or 34.3% of total sales, while Parts Supply grew 33.1% in North America and 50.8% in Asia.
- Growth investment funded while revolver falls
- Capital was directed toward acquisitions and capacity: operating cash flow rose to $98.7 million from $36.1 million; capex was $36.6 million and hangar-expansion activity was $28.8 million. The company raised $273.9 million net in equity and issued $150.0 million of additional 6.75% notes, while revolver borrowings declined to $200.0 million from $427.0 million.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Legacy-program exit creates runoff and impairment risk
- Newly announced portfolio exit: Legacy Commercial Programs will be wound down over approximately three to four years because its asset-heavy model no longer meets capital-return thresholds. FY2026 sales fell 6.8% to $237.2 million, operating income fell from $8.6 million to zero, and the company states that its assigned $16.4 million of goodwill will ultimately be fully impaired in future period(s).
- M&A integration is pressuring repair margins
- Acquisition integration is a materially expanded execution risk after four FY2026 deals. HAECO added $131.1 million of sales but contributed to Repair, Engineering, and Software margin declining to 7.8% from 9.0%; the company incurred $11.1 million of HAECO integration costs and is closing Indianapolis while relocating most operations to Greensboro.
- Higher inventory raises valuation and cash risk
- Inventory increased $169.8 million year over year to $979.0 million, and KPMG identified the valuation of slow-moving inventory in Parts Supply and Repair, Engineering, and Software as its critical audit matter. The company also recorded a $4.9 million reserve on consumables and expendables inventory upon deciding to exit that product line.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $4.86
- Gross margin
- 18.8%
- Operating margin
- 8.4%
- Segment
- Parts Supply: $1.488 billion revenue, +35.3% year over year, 12.5% operating margin
- Segment
- Repair, Engineering, and Software: $1.081 billion revenue, +16.1%, 7.8% operating margin
- Segment
- Government Solutions: $502.3 million revenue, +1.4%, 11.3% operating margin
- Segment
- Legacy Commercial Programs: $237.2 million revenue, -6.8%, 0.0% operating margin
What they said about what is next.
The 10-K provides no formal revenue or EPS outlook. It discloses approximately $777 million of firm backlog at May 31, 2026, of which approximately 70% is expected to be recognized in fiscal 2027 and 20% in fiscal 2028. Management expects the Legacy Commercial Programs wind-down to take approximately three to four years.
The filing reads better than the one before it.
What came before.
- 10-Q · March 25, 2026
- AAR reported a strong top-line quarter with sales of $845.1M (up $166.9M or 24.6% vs $678.2M a year ago) and a return to profitability: net income of $68.0M and diluted EPS of $1.71 for the quarter. Results were…
- 10-Q · September 23, 2025
- AAR reported quarterly revenue of $739.6 million (up $77.9 million or 11.8% vs. $661.7 million a year ago) and diluted EPS of $0.95 (vs. $0.50 a year ago), driven by higher product sales. Operating income rose to $64.9…
- 10-Q · January 8, 2025
- AAR reported quarterly sales of $686.1 million (up $140.7M or ~25.8% vs. $545.4M a year ago) driven largely by product sales and the inclusion of the acquired Product Support business. Despite revenue growth and a gross…
- 10-K · July 19, 2024
- AAR Corp. (AAR) reported a strong fiscal 2024 operating year with consolidated sales up $328.4 million (16.5%) driven by a $309.1 million (23.3%) increase in commercial sales and continued strength in its Parts Supply…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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