〈Earnings〉Boeing's Q2 Loss Exceeds Expectations, but Cash Flow Surprises Positively; Air Force One Takes Another $280M Hit

Boeing (BA-US) released its fiscal 2026 second-quarter results (ended June 30) before U.S. markets opened on Tuesday (28th). Despite an adjusted loss exceeding Wall Street expectations due to a $280 million charge for the new Air Force One presidential aircraft program, the company's free cash flow unexpectedly turned positive, supported by increased customer advance payments and strong aircraft demand. Boeing maintained its full-year financial outlook, driving its pre-market share price up over 1%.

Free Cash Flow Turns Positive; Order Backlog Hits Record $71.5 Billion

Boeing's second-quarter revenue rose 8% year-on-year to $24.6 billion, with an adjusted loss per share of $0.76. While this narrowed from a loss of $1.24 per share in the same period last year, it was worse than the market's estimated loss of around $0.30. The company posted a net loss of approximately $428 million, primarily dragged down by additional costs from the Air Force One program.

Compared to the net loss, investors are more focused on Boeing's improving cash flow. The company's free cash flow for the second quarter reached $631 million, far exceeding analysts' expectations of a $331 million outflow and a significant improvement from the $200 million outflow in the same period last year. This was mainly due to higher-than-expected payments from new aircraft customers.

Figure: Boeing Financial Report

Boeing maintained its 2026 full-year free cash flow forecast unchanged at $1 billion to $3 billion. If achieved, this would mark the company's first return to positive annual free cash flow since 2023. Boeing also increased its capital expenditures to expand 787 Dreamliner production capacity in South Carolina and enhance military aircraft production capabilities in the St. Louis area, Missouri.

Boeing's commercial airplanes segment reported revenue of $11.75 billion, up 8.1% year-on-year, securing 246 net orders and delivering 171 aircraft in the second quarter. The defense, space, and security segment saw revenue rise 13.1% year-on-year to $7.48 billion, becoming a key growth driver this quarter.

As of the end of the second quarter, Boeing's order backlog climbed to a record $715 billion, including over 6,200 commercial aircraft. At the recent Farnborough International Airshow, the company also announced over 170 firm and preliminary orders, indicating that airline procurement demand remains strong.

Boeing is currently producing 47 737 MAX aircraft per month in the Seattle area, up from the previous 42, with plans to further increase output to 63. Raising production is key for Boeing to repair its balance sheet and convert its massive order backlog into cash flow.

Air Force One Takes Another $280 Million Hit; 737 MAX Certification Progress in Focus

The main shadow over Boeing's earnings remains the long-delayed and severely over-budget new Air Force One program. The company recognized another $280 million in charges this quarter, citing increased spending on engineering and quality management staff, as well as additional certification-related expenses.

Boeing secured a $3.9 billion fixed-price contract in 2018 to convert two 747-8 aircraft into U.S. presidential planes. However, delivery timelines are now about four years behind schedule, with cumulative charges exceeding $3 billion. The company currently expects both new aircraft to be delivered in 2028, but whether they can enter service before the end of President Trump's second term in early 2029 remains questionable.

Before the new aircraft are delivered, Trump has begun using a modified 747-8 passenger jet gifted by Qatar as a temporary presidential aircraft. However, this plane still requires further upgrades, and its security equipment has been questioned by outsiders.

On the commercial side, Boeing is nearing safety certification for the 737-7, while the largest 737 MAX 10 is expected to receive certification as early as October. These two long-delayed models are crucial for Boeing in competing with Airbus for the single-aisle aircraft market; the long-range wide-body 777X passenger jet maintains its target of entering service in 2027.

Earlier this month, Boeing also regained the authority to issue airworthiness certificates for 737 MAX and 787 Dreamliner deliveries. The U.S. Federal Aviation Administration (FAA) had previously revoked these authorizations due to the 737 MAX crashes and 787 production quality issues.

CEO Kelly Ortberg stated that Boeing's operations have become more stable, and key aircraft certification programs remain on track. The company will continue to focus on safety, quality, and on-time delivery. However, he cautioned that even as development programs make progress, 'until they are truly complete, they are not complete.'