豪梅特航空 (HWM) 2026财年第三季度业绩电话会议：上调业绩指引，IGT强劲增长

核心要点

• 豪迈航宇公布2026财年第三季度营收为27亿美元，同比增长29%，有机增长25%——创下该公司有记录以来的最高单季有机增长率。
• 调整后EBITDA增长43%至8.79亿美元。调整后EBITDA利润率达到32.5%，同比提升310个基点，环比提升40个基点。
• 调整后每股收益增长54%至1.46美元。在扣除1.47亿美元资本支出后，自由现金流创下5.62亿美元的单季历史新高。
• 商业航空营收增长32%，工业燃气轮机营收增长45%。备件总营收增长30%至约5.70亿美元，占总营收的21%左右。
• 管理层上调了2026财年全年业绩指引：营收预计约为103亿美元，调整后EBITDA预计为33.3亿美元，调整后每股收益预计为5.50美元，自由现金流预计为20.0亿美元。
• 公司对2027财年的初步展望预计营收增长率为12%（上下浮动0.5%），营收将达到约115亿美元。董事会还将股票回购授权额度增加了50亿美元。

关键财务数据

豪迈航宇在本季度减少了6000万美元的总债务。稀释后流通股股数降至3.995亿股，过去八年中股票数量减少了超过1亿股。季度股息提高了17%，增至每股0.14美元。

业务与经营业绩

发动机产品部门实现营收14.5亿美元，增长33%。商业航空营收增长39%，燃气轮机营收增长44%。调整后EBITDA增长57%至5.67亿美元，利润率扩大580个基点至39.1%。该部门在本季度净吸纳了约520名新员工，以支持未来的增长。

紧固系统部门营收增长41%至6.30亿美元，其中包括对CAM和Brunner的收购。有机增长率为10%。商业航空营收增长42%，防务航空增长56%，商业运输增长6%。调整后EBITDA增长34%至1.85亿美元，但由于CAM收购的营收结构影响，利润率同比下降140个基点，环比下降70个基点。

工程结构件部门由于剥离了萨凡纳（Savannah）盘件锻造工厂，营收下降4%至2.95亿美元。剔除该交易后，营收增长8%。调整后EBITDA增长9%，利润率扩大290个基点至23.7%，因公司继续优先考虑高利润率的机会。

锻造车轮部门在销量增加和铝成本顺价转嫁的支撑下，营收增长32%。调整后EBITDA增长18%至8600万美元。利润率有所下降，原因是铝成本顺价收入大幅增加带来了摊薄效应。

在各终端市场中，受原装设备和备件需求增加驱动，商业航空增长32%（含27%的有机增长）。防务航空增长10%（有机增长3%）。随着北美市场的复苏，商业运输增长28%，而燃气轮机业务得益于强劲需求和市场份额提升，大幅增长45%。

管理层业绩指引

管理层对2027财年的初步展望为营收增长12%（上下浮动0.5%），营收约为115亿美元。预计在2027年2月的业绩电话会议上将提供更详尽的飞机产能假设。

管理层预计，商业航空业务将受益于飞机在手订单、计划中的提产以及强劲的备件需求。管理层提到了波音737、空客A320、波音787和空客A350的预期交付量增长，以及窄体机发动机的入厂大修需求。

该公司还预计工业燃气轮机业务将进一步增长。管理层目前预计，IGT销售额将在三年内比2025年基线翻倍，并在五年内可能达到2025年水平的2.5倍，即在本十年末达到约25亿美元。公司正在考虑新增产能，但管理层表示投资将保持在维持强劲自由现金流转化率的框架内。

风险与值得关注的领域

• 管理层表示，高企的航空燃料价格和较高的机票价格可能会影响冬季至2027年期间的部分航班计划，但预计不会对备件交付产生影响。
• 伊朗冲突后，中东地区的出行量有所下降。公司未来的展望中尚未包含与该冲突相关的潜在国防库存补货需求。
• 导弹相关需求可能需要大幅提升产能，但最终协议尚未敲定，且2027财年国防预算仍存在不确定性。
• 航空、防务和燃气轮机领域的强劲需求正使工程、劳动力和制造产能面临压力。豪迈航宇目前正运营或新建7座新工厂，并正在评估另外3座工厂。
• 对CAM的收购摊薄了紧固系统部门的利润率，而较高的铝成本顺价转嫁则降低了锻造车轮部门报告的利润率百分比。
• 鉴于较长的交付周期以及2030年代需求的不确定性，管理层强调需要避免盲目过度建设IGT产能。

分析师问答环节亮点

垂直整合与轮机叶片竞争：管理层表示，豪迈航宇在涡轮叶片技术、质量、制造良率和规模方面的能力历经数年甚至数十年才建立起来。公司正在为GE筹备新增产能，预计安装需耗时两年，并继续就2030年代未来的叶片产业化进行讨论。

IGT市场份额机遇：管理层指出，第三季度IGT 45%的增长显著超越了行业基础增速，反映出获得了额外的市场份额协议。预计航空与IGT的利润率将大致保持一致，若IGT销量继续上升，有望发挥固定成本杠杆效应。

数据中心电力需求与自研自产：当被问及SpaceX潜在的叶片生产计划时，管理层表示数据中心运营方正在寻求多元化的电力来源。管理层承认内部自产有助于缓解近期涡轮叶片的短缺问题，但强调更广泛的需求覆盖了数据中心、工业市场、石油天然气以及未来的备件需求。

防务展望：基于目前可见的需求，豪迈航宇预计2027财年防务业务营收将实现增长。然而，导弹项目、库存补货以及多年期合同的潜在规模，取决于最终的合同条款以及国防预算的进一步明确。

产能投资：管理层预计2027财年投资额将更高，2028财年资本支出或将继续保持在较高水平。管理层表示，新产能决策得到了客户合同、业务量区间以及对延伸至下一个十年的强劲需求的信心支持。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and welcome to the Q3 2026 Howmet Aerospace Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Paul Luther, Vice President, Investor Relations. Thank you, and over to you, Paul.

Paul Luther

Thank you, Danish. Good morning, and welcome to the Howmet Aerospace Third Quarter 2026 Results Conference Call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Patrick Winterlich, Executive Vice President and Chief Financial Officer. After comments by John and Patrick, we will have a question-and-answer session.

I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find the factors that could cause actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In today's presentation, references to EBITDA, operating income and EPS mean adjusted EBITDA, adjusted operating income and adjusted EPS. These measures are among the non-GAAP financial measures that we've included in our discussion.

Reconciliations to the most directly comparable GAAP measures can be found in today's press release and in the appendix in today's presentation. In addition, unless otherwise noted, all comparisons are on a year-over-year basis.

With that, I'd like to turn the call over to John.

John Plant

Good morning, everybody, and welcome to Howmet's Q3 earnings call. Let's start with the highlights on Slide 4. Howmet performance in Q3 was solid in all dimensions. Revenues at $2.7 billion were up 29% year-over-year and up 25% through organic growth. EBITDA was $879 million and was up 43% with a margin rate of 32.5%. Margins were up 40 basis points from the second quarter and year-over incrementals were 43% after the dampening effect of the CAM acquisition.

Free cash flow in the quarter was $562 million after capital expenditure of $147 million which was a quarterly record. A strong cash flow supported by share buybacks of $500 million. And in addition, gross debt was reduced by $60 million in the quarter and we ended with approximately 1.3x net debt to EBITDA.

We have repurchased $1.1 billion of shares to date, of which is $400 million more than the total repurchases in 2025. I would like to note that our diluted share count fell to just below 400 million outstanding shares, at 399.5 million at the end of Q3. Over the last 8 years, the share count has been reduced by in excess of 100 million shares. Earnings per share were $1.46, a 54% increase year-over-year, and this sets us up well to achieve the remainder of our 2026 objectives.

Good progress was made on several fronts with new business being booked in line with our outlook expectations in Commercial Aerospace, Defense Aerospace and Industrial Gas Turbines. Of particular note in the quarter was the 45% Gas Turbine revenue growth, which demonstrates both the extraordinary addition to output and even more importantly, the increased market share. Further commentary will be provided during the outlook section of the call.

I'll now turn the call over to Patrick, who will provide further commentary on end market growth and segment performance.

Patrick Winterlich

Thank you, John. Good morning, everyone. Please move to Slide 5. Howmet delivered another strong quarter with all end markets growing. We are well positioned for the future and continue to invest for growth. Total revenue was up 29% in the third quarter. Excluding the net impact of the 3 transactions we completed this year, revenue was up 25% year-over-year an acceleration from the 21% organic growth rate in the second quarter and 19% in the first quarter.

Commercial Aerospace growth was very healthy at 32%, and with organic growth of 27%, driven by demand for both OE and spares. Commercial Aerospace spares demand continues to increase significantly driven by both legacy and next-generation engine programs. Defense Aerospace growth was 10% with organic growth of 3% driven by spares demand, particularly on legacy [indiscernible] platforms. Commercial Transport revenue was up 28%, reflecting both volume increases as the North America market recovery continued and the pass-through of higher aluminum costs. Gas Turbine growth was very strong at 45% and as end market demand remains robust. Growth in Other markets of 48% was largely driven by the Brunner Fastener acquisition completed in February.

Spares growth remained robust across Howmet markets. Total spares revenue was up 30% to approximately $570 million and represented approximately 21% of total revenue in the quarter. In summary, continued strong performance in Commercial Aerospace, Defense Aerospace, Gas Turbines and Commercial Transportation.

Moving to Slide 6, starting with the P&L. Third quarter revenue, EBITDA, EBITDA margin and earnings per share all exceeded the high end of guidance. On a year-over-year basis, revenue was up 29% and 25% organically, the strongest quarterly growth rate on record for Howmet. EBITDA continued to outpace revenue growth of 43%, EBITDA margin increased 310 basis points to 32.5%. The incremental flow-through of revenue to EBITDA was solid at 43% year-over-year. Earnings per share were $1.46, up 54% compared to Q3 2025.

Now let's cover the balance sheet and cash flow. The balance sheet remains a source of strength for Howmet. The quarter end cash balance was $508 million, with quarterly free cash flow of $562 million. Net debt to trailing EBITDA improved to 1.3x. During the quarter, we paid down $60 million of commercial paper. Liquidity remains strong with an undrawn $1 billion revolver complemented by a $1 billion commercial paper program with $390 million outstanding from the $450 million that was drawn to support the CAM acquisition.

Turning to capital deployment, CapEx was $147 million. The majority of our capital spend continues to be in the Engine Products segment as we continue to invest for growth in both Aerospace and Gas Turbines markets. Investments are backed by long-term customer contracts. In the quarter, we repurchased $500 million of common stock at an average price of $265 per share. This brings year-to-date repurchases to $1.1 billion at an average price of $251 per share. We continue to be confident in strong future free cash flow. We increased the quarterly stock dividend in Q3 by 17% from $0.12 per share to $0.14 per share.

Now let's move to Slide 7 to cover the segment results for the third quarter. The engine products team delivered exceptional performance again across revenue, EBITDA and EBITDA margin. Revenue grew 33% to $1.45 billion. Commercial Aerospace was up 39% and Gas Turbines was up 44%. Demand continues to be strong across both original equipment and spares. EBITDA outpaced revenue growth with an increase of 57% to $567 million. EBITDA margin increased 580 basis points to 39.1% while absorbing approximately 520 net new employees in the quarter, positioning us well for future growth.

Please move to Slide 8. Fastening Systems delivered another solid quarter. Revenue increased 41% to $630 million, including the impact from the CAM and Brunner acquisitions. Commercial Aerospace was up 42% and Defense Aerospace was up 56%. Commercial Transportation was up 6% year-over-year. Excluding the impact from acquisitions, total Fastening's growth was up 10%. EBITDA increased 34% to $185 million. EBITDA margin declined 140 basis points year-over-year and 70 points sequentially, reflecting the increased revenues from CAM, which we acquired in April.

Moving to Slide 9. The Engineered Structures team continues to drive improvement in the business. Revenue declined 4% to $295 million due to the divestiture of the Savannah disc forging facility. Excluding the impact of Savannah, revenue growth was 8%. We continue to focus on higher margin and stronger return opportunities in the business. Sequentially, revenue was up 10% from the second quarter, driven by increased Commercial Aerospace OE demand. EBITDA increased 9% year-over-year despite the revenue decline and EBITDA margin expanded 290 basis points to 23.7% as we continue to focus and optimize the Structures segment to maximize profitability.

Please turn to Slide 10. Forged Wheels delivered another solid quarter. Revenue was up 32%, driven by higher volumes in addition to increased aluminum cost pass-through. Volumes also increased sequentially from Q2 as the North American market recovery continued. EBITDA was $86 million, an 18% increase year-over-year. EBITDA margin declined year-over-year and sequentially, reflecting the significant dilutive effect of sharply higher aluminum cost pass-through. We continue to outperform the market driven by our premium products.

Now let me turn the call back to John.

John Plant

Thanks, Patrick, and let's move to Slide 11 and turn the calls of the outlook. Firstly, of course, we provided guidance for Q4. Our glide path continues towards the conclusion of another good year for Howmet. The specific numbers will be commented upon in a few moments, plus our initial [indiscernible] chart of 2027. Regarding Commercial Aerospace, the flight schedules and load factors held up well during the summer months both for domestic and international travel. Naturally, the Middle East was lower given the Iran conflict and its fallout. Oil prices, notably jet fuel and diesel, are especially high and with the resultant effect on ticket prices, overall travel will potentially impact some schedules as we go through the winter into 2027.

Having said that, we do not expect there to be any impact on our spares deliveries during this period and indeed throughout 2027. In fact, we expect solid demand given the timeline ring issues experienced by the new generation of narrowbody engines and also the backlog of aircraft engines, which are scheduled for shop visits and the ongoing underbuild of aircraft compared to plans. And also, this means that spares demand will continue to be very robust.

The current extraordinary aircraft OE order backlog will ensure that new aircraft production continues and increases throughout 2027 and beyond. We expect volume increases for the 737, the A320, the 787 and the A350 to be healthy, and they help to underpin our Commercial Aerospace business outlook. Defense sales continue to be strong with further increases likely in legacy aircraft build and spares. Notably, F-35 spares continues to be healthy with an expanding fleet of aircraft. We have not yet assumed in our forward look, the replenishment of inventories, which have been depleted as a result of the Iran conflict.

The most important growth factor as a percent of sales is up to one sector of defense sales is that of missile parts. We are being asked to increase production significantly, albeit final agreements have yet to be concluded. We believe that how much technological and operational leadership position in the industry, coupled with our ability to develop the most sophisticated turbine blades at scale in both Commercial and the Defense Aerospace sectors will ensure that Howmet's market position and strong financial performance will continue well into the middle of the next decade and beyond.

Industrial Gas Turbines growth and the growth as we continue to look forward to with customers will strengthen, and we look forward to further increase these volumes into the future beyond the previous expectations. This impact is likely to be felt in the outer years beyond 2028 since the new capacity currently being installed is totally sold out. More recently, we've seen major gas turbine customers state that 2031 is now also sold out. And indeed, 2032, we're likely to sold out in the next 1 or 2 quarters. This growing level of demand continues into the 2030s and combined with the need for significant increases in future gas turbine spares provides us with even greater confidence. Further capacity is likely to be considered for addition, albeit within the framework of maintaining a high level of free cash flow conversion.

Most importantly, the whole of the IGT growth serving broad-based demand across the industrial, oil and gas as well as data centers will be completed without adding any depth to the company. Indeed, this year, we'll have completed 2 acquisitions for approximately $2 billion, spent $0.5 billion on CapEx and bought back shares in excess of $1 billion. And yes, our leverage level at the end of 2026 is expected to be similar to the exit level of 2025.

The Commercial Transportation sector continues to experience North American market recovery. Production volumes continue to climb after the Q1 low point with truck OEM build slots largely fall in the second half and now into the first part of 2027. The more gradual phase-in of the 2027 NOx emissions regulations should also be supportive of the industry volumes going into 2027.

While I will comment on specific Q4 numbers in a moment, the new guide has been raised from the prior outlook. But perhaps the most important view is the initial growth outlook for 2027 which is seen at 12% plus or minus 0.5%, resulting in revenues of approximately $11.5 billion. Further refinement and underlying aircraft volume build assumptions will be provided during our February 2027 earnings call. Finally, the share buyback authorization has also been addressed by the Board and has been increased by a further $5 billion.

Now moving to specific numbers for Q4. We envisage revenues to be approximately $2.75 billion, plus or minus $10 million, EBITDA of $900 million, plus or minus $5 million. Earnings per share at $1.50, plus or minus $0.01. For the full year, the guidance increased again across the board to revenues of $10.3 billion, plus or so minus $10 million. EBITDA $3.33 billion, plus or minus $5 billion; and earnings per share of $5.50, plus or minus $0.01. And free cash flow has been increased to $2 billion, plus or minus $50 million.

In terms of the full year commentary, we're pleased with our sales growth of 25%, including a 22% organic growth so far this year and an earnings per share growth of over 45%. We note that free cash flow of around $2 billion represents a very healthy cash flow to revenue and the margin -- a cash margin of over 19%, which is at a very high level.

We can now move to Q&A.

Operator

[Operator Instructions] The first question comes from Kristine Liwag with Morgan Stanley.

分析师问答

Kristine Liwag

I guess blades and veins remain a critical bottleneck in aerospace supply chain, which seems to be driving OEMs to take greater control of their manufacturing capabilities. We saw this with Pratt when they invested in the Asheville facility, NG announced its acquisition of CPP. John, you've previously highlighted the difficulty of replicating how much technology, your manufacturing yields and scale, but how do you view these vertical integration initiatives reshaping the competitive dynamics in this aerospace blades and veins market? And what implications could they have for how its future market share? And how do you think about pricing power?

John Plant

I think the first comment I would like to make is that we have excellent relationships with all of our engine customers. So namely GE, Safran, Pratt & Whitney, Rolls-Royce to name just a few. Our investments in technology, quality and ability to invest in capacity have been fundamental to the increase in volume of modern jet engines and indeed support of the airline fleets worldwide. This capability has taken years, if not decades to achieve. And right now, we're actually poised to further increase capacity for GE, which will take 2 years to install and then there will be a multiyear runway after that.

In fact, regarding this particular capacity for GE, I was reviewing yesterday for one of our sites and it is a significant investment. We are also in dialogue with what's been called the Blue First Blade and its future industrialization in the 2030s. I know that this audience though likes to have quantification and numbers rather than just words. And of course, it's difficult to give dollar values since I also recognize that competitors are listening. So I thought I tried to provide some views on scale and quantification of the central thrust of your question, which was the GE acquisition of CPP.

And I think -- I was thinking about sort of how do we move into the 2030s and beyond, especially given the investments I've talked about in commercial aerospace, but also, you've seen us make a lot of investments in this year and already talked to the planned increase in investment in 2027 and beyond in the IGT space. And so I thought maybe I can give some quantification of this by just think about the fleet of turbines that we are enabling to be built from like 2025 through 2030 and the large increase in the fleet of turbines, which will produce for us spares demand into the 2030s.

And when we have done our modeling, we think about that increase in spares demand, they just pick, let's say, one year, I just picked it around an like 2031 and what our expectations are in our planning assumptions is that we see the sales value increase in spares revenues from IGT in that one year. That would exceed the total value of the sales of the first blade of our largest narrow-body [indiscernible] blade to any of our customers.

So -- and if you think about it, we don't expect to lose any of that business anyway, but just to quite provide [indiscernible] context, should we lose a first blade to a narrow-body engine is that that would be more than compensated by just one thing, which would be the spares increases in our IGT segment in one year. And then, of course, we're expecting similar values of increases in 2032, 2033, 2034 and beyond, given the continued build-out that we envisage.

Patrick Winterlich

So let me just turn back from a quantification to back to some more, I'll say, stores around CPP and -- and when we consider their capabilities, we seem to be probably the higher order in structural castings and that's probably augmented recently by the acquisition of Precicast from Switzerland that they closed in the last month or so. And when I think about the industry, we've heard a lot about forgings and castings, which seems to be the word that people reach for immediately. And in fact, structural castings have probably been the main pain point of the industry that commercial aerospace has suffered in recent years. And therefore, I consider the capabilities that maybe CPP has in structural castings to be possibly of an more important relevance.

And when I think about it, even though Howmet has been increasing our market share, and we're actually currently considering a further buildout of another manufacturing plant in this area. Maybe it will affect the scale of the plant that we're considering and indeed, where we place that investment. But -- so we expect that we'll continue to grow even in this segment with [indiscernible] strength that CPP may have in the future.

And then I think just turning the call into like a broader perspective for what Howmet's going to do over the next few years. I think I'd just like to return to that IGT theme. And I think it may be worthy of updating our guide regarding growth that I provided, I think, during last year, especially in the light of our growth in 2026. And as you know, it's been above expectations. In fact, growth accelerated in the third quarter from the 30% plus revenue increases in the first and second quarter to a 45% level.

And as I commented earlier, that level of growth is clearly well in excess of the loan based gas turbine industry and a result of further market share agreements that we've achieved during the course of the negotiations that I referred to in recent calls. So what I see now is that whereas our prior commentary had been around a doubling of IGT sales from 2025 as the base year within a 3- to 5-year period, we now see this as being achieved in 3 years so 2 years at the front end of that. And maybe [indiscernible] to 2.5x inside 5 years, which would take those sales to about $2.5 billion by the end of the decade.

So hopefully, I've covered the perspective of the investments we're making in Commercial Aero, the investments that we're anticipating making right now for GE and the way that those investments will bring additional capacities on towards the end of this decade and into the 2030s.

And also, the impact should something like the first blade have a different destination, albeit we don't think it does. And we see growth in both Commercial Aero and IGT as we go into the next decade.

Operator

Our next question comes from the line of Seth Seifman of JPMorgan.

Seth Seifman

Maybe just to round that out, and this might be kind of a quick one in light of your prior comments, but it might be a good time to round out. You kind of addressed fairly directly potential impact from CPP and on your plans in Aero. When you think about the IGT plant, how do you think about the role of potentially in-sourcing at SpaceX and what that might mean for the IGT market?

John Plant

First, maybe the comment I should make is that SpaceX is indeed an extraordinary company, which has almost limitless access to capital. And I guess, fundamental to their current plans as the company indeed is to build out sort of the data center business, I think referred to as Colossus 1 and 2. And if you study that part of SpaceX in detail, then it's clear that they sold capacity of those, let's say, ultra modern data centers with the latest, let's say, custom silicon in them to other frontier AI companies such as Google and Anthropic to name a couple.

I think it's important again to note that for those cutting-edge data centers, the gross margins on the tokens that you use like AI token is exceptional. And I'm sure you're aware of how high those are. And hence, the uptime and keeping those data centers going is fundamental and indeed, you can't have interruption of service to that really important revenue stream with that level of margin. And I'm sure it's in that contract with those front AI companies.

Specific to that is on their recent earnings call at SpaceX, they talked about power and specifically behind the meter power and its acquisition, which is so fundamental to achieving that compute increase and switching the compute capabilities are. So to solve those power issues and to get to today's level of compute power, which is using about approximately 1 gigawatt than [indiscernible], the APR company and its fleet of mobile gas turbines to solve the problem. And so these 69 mobile gas turbines were installed and are situated just across the state line to support Colossus. And that power is needed in addition to what power was available from the grid.

And then I guess you know that by the middle of next year, those mobile turbines have to be relocated. And therefore, replacement is required and I think currently to approximately 1.2 gigawatts of parallel to support the Colossus center. And so my understanding from scarring of the Internet and knowing a little bit about the inside of the industry. There are some 33, I'll say, fully fledged titan turbines from [indiscernible] or Caterpillar being installed and the further [indiscernible] 10 Pro Energy 6000 series turbines and you're probably not surprised when I say that Howmet supply those turbine blades to both Titan and to the LM6000 series of aeroderivative turbines.

Getting a bit deeper into it then, on the recent call, Elon Musk talked about his plans going forward for 2027 and he talked about the plans to get to 20 gigawatts of power capabilities to provide you -- to turn on further compute capabilities. And this is by various means, obviously, IGT, wind, solar, the grid, et cetera, et cetera. So it's not coming from one singular source, but part of this was that gas turbines were fundamental to it. And if it's not 20 gigawatts than maybe the thought was at least 10 gigawatts of power could be achieved on top of getting to a 3 gigawatt capability by the mid-year and to be able to turn on that additional compute capacity and then earn that -- those high profits.

And he did comment that to do this, new turbines were required but even like the problem is that the availability of those turbines was restricted in the industry by the availability of turbine blades. And it was commented on the call by SpaceX that these might take another 18 months to 2 years to achieve and therefore, maybe that SpaceX could accelerate the ability of power by providing the blades to those turbines, which turbine could be built, but the availability of the blades wasn't there.

And my understanding is that, one Asian turbine manufacturing company has agreed to supply turbines without the blades. And I assume that those are central to the capability of casting that SpaceX talks about with their special casting capabilities. So I think the SpaceX that can take that step. And maybe even if those blades are not quite at the level that would have been for the original equipment, they can operate at a power rating maybe below the full power rating of the turbine, and it's full durability. But the important thing, it gets power.

And if you think about -- this is all about our acquisition, and what we see generally both for SpaceX and across the industry, the data centers are and constructors are reaching out to get power from any source and -- whether it's by generations of turbines, I think going back to like an E-Series turbine, not today's F-Series or are the more modern 8 -- Series. Just got a Series-E and in addition to that, you've probably read about several start-ups, venture companies, they're looking to get into this segment and launch new companies to provide power using aero derivative engines, which are really at the end of life or aero engines and repurpose them of, let's say, old 737s, as an example.

And our thought is that [indiscernible] those companies will exist and they will start, but maybe they'll become less necessary when additional turbine capacity is brought on stream towards the end of the decade and into next decade. So I'm trying to give like a specific SpaceX answer to your question and then broad it out into the needs of [indiscernible] to achieve the compute levels, which are being planned.

And then I took note and you probably took note from the [indiscernible] call yesterday, their earnings call, they said that now they see that their 2032 order book is largely filled and that obviously, if you think about it, we've talked about being good through '28, good through 2030. Now it's looking at 2031. 2032 looks to be pretty booked. And so views are now turning towards the middle of the next decade for this level of capacity. And my thought is as we see each of those then today's level of investment that we're [indiscernible] is probably not enough. So I don't know whether that covers your specific question, Seth, and then broaden it out into [indiscernible] the data centers.

Operator

[Operator Instructions] Our next question comes from the line of Sheila Kahyaoglu with Jefferies.

Sheila Kahyaoglu

John, you mentioned the Blue Blade coming in the 2030s. It's the first time you've talked about that. Obviously, your technology edge is what provides you additional content on the LEAP and GTF and I'm sure you're first in line for the next-gen LEAP blade. Maybe can you quantify for folks how much of your growth is coming from that technology edge content increases versus just volume and price?

And perhaps to that kind of question, as you think about industry players perhaps starting from a more square one, how do you think about what supply/demand looks like today versus 2030 and 2035 and 2040?

John Plant

Okay. So I guess thematically, what we've been trying to do is step up to the needs for fuel efficiency in the industry and providing a level of capabilities, particularly at the front end of the hot section of the turbine, which could achieve performances at considerably higher [indiscernible] upgrade those turbines to provide that increased fuel efficiency, given the -- especially today, given the cost of jet fuel and maybe what it will cost thematically, it's just the same.

What we envisage is that OE -- further OE production will be required over the next few years with the increases envisaged by the airframe manufacturers and the engines to be supplied to them whether it is for Boeing or Airbus. And if you think about it those things are not going to stand still. There's going to be further content increases. And so I expect that we'll see during the next decade the further capacity that's began to require for OE for the capacity that's going to be required to service these new, I'll say, new fleet of engines on the improvements.

And I also think that fundamentally, when you put higher temperatures, higher pressure into engines is that the replacement cycles actually become more frequent. And so we do envisage a very healthy space demand over that same period of time. And you can see that by the build-out of further MRO shop capabilities in fact, by all of the engine manufacturers, you can look at GE, Safran in particular, and also Pratt & Whitney. Everybody is building that capacity for further [indiscernible] and just keep the same thing going continue to develop our technology and here we are again, having already recruited in the last 5 years, probably several hundred engineers. We're going to increase our engineering staffing again in 2027 by a similar number that we did in 2025 and 2026, as an example, to keep ourselves at the forefront of all the developments.

Operator

Next question comes from the line of John Godyn with Citi.

John Godyn

Follow-up on the outlook for the defense portfolio. John, you flagged that you don't have any replenishment of inventories kind of in your outlook, but the demand signals are very strong. It feels like not long ago, we were talking about IGT in a similar way. Maybe you can talk about the scale of the opportunity there? And just give us whatever color you're sort of willing to offer.

John Plant

Yes. Right now, defense is difficult to really give absolute clarity on in terms of expectation apart from thematically what we're seeing is both the need for replenishment of inventories and parts. Of course, to some degree, we're not clear on the numbers of missions, which have been flowing over the last 3 months. But I think you can assume that they've been extensive and not going to require us to provide provision for a [indiscernible] of spares as we go through 2027, the degree to which we'll probably be also guided by the defense budget rather than the current situation where we have a continuing resolution of the existing level of expenditure.

So I expect that sometime after the midterm that might become more clear. At the same time, there's a lot of other questions that have to be answered in terms of truly definitizing all of the missile work that's there, it's there before us. We've been spending a lot of time with the existing large primes and indeed, some of the, I'll say, newer defense companies getting ready for really putting that into production, albeit again waiting for final definitization of every aspect of the contract as we do that.

So again, probably my thought is that given the situation regarding missiles is that at some point after the midterm, then Congress comes back. The bipartisan agreement is achieved to give us a clarity regarding the defense budget for 2027. And indeed, going forward, given we're now talking about not the individual lots, but multiyear contracts, which are also critical to investments in this area. So while I sort of -- I'm optimistic. I think it's going to be good for us in our planning round. We see the opportunity it's difficult to be precise about it. But we do expect our defense sales to be up in 2027 from what we already know but with an agreed budget, it may become more robust for us.

Operator

Our next question comes from the line of Doug Harned with Bernstein.

Douglas Harned

Can you hear me? Yes?

Operator

Yes, we can hear you.

Douglas Harned

Okay. Good. So John, when you talk about IGT demand, it's really -- it seems like a pretty extraordinary profile going forward. You're up 45% in the quarter, which suggests you've already built ahead of some of this demand, a substantial amount of capacity. And yet, I think the 7 contracts that you set with, the one in Japan being first, that's not even kicked in yet. So I guess, looking forward to this demand profile, can you give us a sense of sort of when these next tranches would come in? But I think more importantly, given your position and the supply-demand imbalance, how should we expect margins to trend on IGT going forward relative to the rest of the business and particularly the Aero Engine side?

John Plant

I've talked about margins in the past, Douglas, seeing really that our IGT margins and Aerospace margins are roughly similar. I mean should the rate of growth continue in the IGT space, then we probably would have a little bit of leverage to that volume just against the fixed costs associated with that segment. But I see it more of a continuing -- I'll say, a continuum of development looking for revenue growth with healthy profitability because we really look to have long-term relationships with our customers, never seek to take advantage and because there's always tomorrow to think about.

And we've tried to be really good partners not only with the Aero IGT customers I listed earlier in response to the first call. But also for our IGT customers, and that's whether it is, as you've mentioned, Mitsubishi for Japan or whether it's [indiscernible] Siemens or is it Solar, Baker Hughes and [indiscernible]. We try to work with all of them in a very consistent way.

And in terms of growth rates, it's also -- it's been trying to find something on what's been a moving target. And in fact, we're already in discussions for the willingness to capacitize for additional demand and indeed also introduce new product developments for the industry as we go through the end of the decade into the early 2030s. And so in fact, this week, it was looking at a new part introduction for particularly sophisticated type of large IGP blades for a customer that doesn't start until 2031. And so we're looking at all of that. I'm trying to pathetize for it recognizing that no matter what we do, it seems like we're not going to be able to totally satisfy what the demands appear to be for 2027 as an example.

So we're going to be investing -- we've invested this year. We're going to invest again at a higher level in 2027. And the way things are shaping is that I sense that we're going to have a very continuing high level of capital expenditure into 2028. And we keep reevaluating this, but for ourselves is that given we try to take a very clear-eyed view of capacitization is that for every year, we see an elevated CapEx then give us a little bit of confidence about that future growth and its solidity going into the next decade. And so clearly, we're not going to invest at this sort of levels in '28 and '29, if we're not sure about those revenue increases that are going to happen in the 2030s.

Operator

Next question comes from the line of Ron Epstein with Bank of America.

Ronald Epstein

Just a follow-up on Doug's question. How do you get comfortable? I mean, I think you've talked about this in the past with when you try to think about where the market could be in 2030 or whatever, and you have to make investments upfront here. How do you get comfortable that it's still going to be there in 2030? You know what I mean, when you actually execute a decision.

John Plant

I really do. I mean, something that we've tried to think about a lot, the security of that demand and think about it in relation to both what we see the fundamental demand in terms of construction of data centers, permitting. We saw a few months ago, there's a lot of questions about data centers in space. And what would that do and try to understand that part of the demand. I'm also spending time thinking about the future generations of chips and for example, the degree to which they'll require the same amount of cooling and therefore, electricity consumption. What's the growth rate that's anticipated by the likes of an Anthropic, OpenAI or Grok or any of the other I will say, frontier models.

And it's -- obviously, it's complicated in terms of kind of put it all together. And then we fall back on -- okay. So given the need for power, what other segments could be there for us if it should start and then we go to look at, for example, liquefied natural gas and the U.S. providing energy security to Europe, all the shipping of gas across the ocean, but the [indiscernible] has to be liquefied. And so compressors use for liquidation of gas, then it's also you've got to get the liquefied gas from the source through pipelines to the ports and terminals.

And then indeed, what's going to be the demand in Europe as we see nothing like of short-term El-Nino, but also fundamental, say, changes that might be going on in climate and hotter experiences in the summer and need for air conditioning and therefore, what does that do to electricity demand and therefore, additional turbines, which are the only realistic means of addressing them in the next decade to any substantial degree and so it's a very big picture involving many different aspects to trying to bring together.

And then finally, okay, under what are the customer contracts that we'd like to see to make sure that we have a feel secure in providing that capacity with -- underpins around corridors or volumes, et cetera, while also being responsive to our customers' needs. So I'm trying to give you like all the things we think about without being like passed on about any one of them because the assumptions do move.

And the -- I will say just the picture has been emerging for all of us over the last couple of years, but it's also something that we feel absolutely justified, we should play in this sector, and we have the capabilities in fact, some quite unique capabilities to achieve the performance required of turbine blades at this scale and this size. And also, as you can imagine, what are the turbines being considered for the future even beyond the current version of the current H-class turbines. And what -- how big do they become? And are they all going to [indiscernible] blades and how sophisticated they are and the critical change of technology, which needs to be brought to bear to achieve that. So there's a lot going on, on this one, Ron.

Ronald Epstein

Yes. And then maybe just one quick follow-on. When you look at the end markets that you're confronted with today, I mean, just at a very high level, how strong are they? Do you ever expect to have so much demand out of all the end markets you're in between Aero, IGT, Defense? I mean it seems like everything is just ripping right now.

John Plant

Yes. No, we did not. I used to think to myself, well, we're sort of fortunate in one sense that airfreight manufacturers weren't able to build everything because we haven't -- we're able to continue to drive our company forward and say, improve our level of earnings capability when times are really tough, demand was going to be more robust in the future because of the lack of build of aircraft. So I use to turn that negative into a positive about where I thought. And so I'm always looking for like how can this be better for us in the future? And how do we maximize that technology build out combined with the volume build-out?

I never thought that IGT would look like it is. And so I think sometimes in life, you get lucky. And this is one of the things where I feel as though we've had some good luck. But on the other hand, I temper that with all of the things that go against you and you are having a pass through them. And -- so maybe I got to take a bit of a [indiscernible]a little bit of the rough. And so I quite like it. But I just thought -- at the same time, I don't want to get giddy about it. And certainly, overcapacitized. And that's why I spent a long time talking about the factors that I need to think about in terms of that capacitization.

And some of that was exactly the conversation that I led our Board through, I'd say, 10 months ago and try to say to them, these are all the potential, these are the issues, these are the risks. And this is what I think we need to do and with [indiscernible] left into this is something that we can do, should do, and it's good for us. But you're right, I never thought that we would be seeing, I'll say, defense gas -- land-based gas turbines and aerospace, all moving in a part of the [indiscernible] it's straining us. I mean you think about hundreds of engineers, thousands of production pits, we're probably now at 7 new manufacturing plants and considering 3 more. So there's so a lot going on. I mean, growth could be tough as well.

Operator

Ladies and gentlemen, that was the last question for today. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.