10-Q: Boeing Narrows Losses, Boosts Deliveries Amid Delays

Boeing reported reduced net losses and increased revenues for the first nine months of 2025, despite significant program delays and quality control scrutiny.

Summary

• Net loss attributable to Boeing shareholders decreased to $5,985 million for the nine months ended September 30, 2025, from $7,952 million in the same period of 2024.
• Total revenues increased by $14,240 million to $65,515 million for the nine months ended September 30, 2025, compared to $51,275 million in 2024.
• Commercial Airplanes (BCA) revenues rose by $12,016 million to $30,115 million, driven by higher deliveries (440 aircraft in 2025 vs. 291 in 2024).
• Defense, Space & Security (BDS) revenues increased by $1,310 million to $19,817 million, primarily due to lower net unfavorable cumulative contract catch-up adjustments.
• Global Services (BGS) revenues grew by $879 million to $15,714 million, reflecting higher commercial and government services revenue.
• Operating loss improved to $4,496 million from $6,937 million year-over-year.
• Total backlog increased by $114,352 million to $635,688 million as of September 30, 2025, with BCA backlog increasing by $99,438 million.
• Net cash used by operating activities significantly decreased to $266 million from $8,630 million in the prior year, driven by higher commercial airplane deliveries, lower customer considerations, and working capital improvements.
• A $4,899 million reach-forward loss was recorded on the 777X program in Q3 2025 due to certification delays and production challenges.
• The acquisition of Spirit AeroSystems is progressing, with an Outside Date of December 31, 2025, and Spirit stockholders' approval received.
• Boeing plans to sell portions of its Digital Aviation Solutions business to Thoma Bravo for $10.55 billion, expected to close in 2025.
• An ongoing strike by IAM 837 employees in St. Louis since August 4, 2025, is disrupting BDS programs.

Sentiment

Score: 4

Explanation: While Boeing showed improvements in revenue and reduced its net loss, driven by higher commercial airplane deliveries and better performance in its defense segment, significant headwinds persist. The substantial $4.9 billion reach-forward loss on the 777X program, coupled with further delays in 737 MAX variant certifications and 777-9 deliveries, indicates ongoing operational and reputational challenges. The substantial decrease in cash and increase in shareholder deficit are also concerning, despite improved operating cash flow.

Positives

• Net loss attributable to Boeing shareholders significantly decreased to $5,985 million for the nine months ended September 30, 2025, from $7,952 million in the same period of 2024.
• Total revenues increased by $14,240 million to $65,515 million for the nine months ended September 30, 2025, compared to the same period in 2024.
• Commercial Airplanes (BCA) deliveries increased to 440 aircraft for the nine months ended September 30, 2025, up from 291 in the prior year.
• Defense, Space & Security (BDS) segment returned to operating earnings of $379 million for the nine months ended September 30, 2025, compared to a loss of $3,146 million in the prior year, primarily due to lower net unfavorable cumulative contract catch-up adjustments.
• Global Services (BGS) earnings from operations increased by $310 million to $2,930 million for the nine months ended September 30, 2025.
• Total backlog grew by $114,352 million to $635,688 million as of September 30, 2025, indicating strong future revenue potential.
• Net cash used by operating activities improved substantially, decreasing from $8,630 million in 2024 to $266 million in 2025 (nine months ended September 30).
• The 737 production rate increased to 38 per month in the first half of 2025, with an agreement to further increase to 42 per month in October 2025.
• Rework on 787 aircraft in inventory was completed in February 2025, with 10 aircraft remaining to be delivered in 2025 and 2026, down from 25 at December 31, 2024.
• The company maintains investment-grade credit ratings across all three major agencies.

Negatives

• Commercial Airplanes (BCA) operating loss increased by $568 million to $6,447 million for the nine months ended September 30, 2025, primarily due to a higher reach-forward loss on the 777X program.
• A significant reach-forward loss of $4,899 million was recorded on the 777X program in the third quarter of 2025 due to certification delays and production challenges.
• The 737-7 and 737-10 models' certification process has been delayed, now expected in 2026.
• First delivery of the 777-9 is now expected in 2027, a delay from previous expectations.
• An ongoing strike by approximately 3,200 IAM 837 employees at St. Louis sites since August 4, 2025, is disrupting key BDS programs (F/A-18, F-15, T-7A, MQ-25, Weapons).
• U.S. government funding for departments like DoW, NASA, and DOT (including FAA) lapsed as of October 1, 2025, posing risks of payment delays and operational impacts.
• Cash and cash equivalents decreased significantly to $6,173 million at September 30, 2025, from $13,801 million at December 31, 2024.
• Total shareholders' deficit increased to $8,250 million at September 30, 2025, from $3,908 million at December 31, 2024.
• Net cash used by investing activities increased to $5.9 billion from net cash provided of $0.7 billion in the prior year, primarily due to net contributions to investments.
• Net cash used by financing activities was $0.8 billion, compared to net cash provided of $5.2 billion in the prior year, reflecting net debt repayments and preferred stock dividends.
• The U.S. Department of Justice determined that Boeing did not fulfill its obligations under the Deferred Prosecution Agreement (DPA) related to the 737 MAX accidents, leading to a new non-prosecution agreement with a $244 million fine and $445 million in additional compensation for family members.
• The S&P credit rating has a negative outlook, and Moody's rating is Baa3 with a negative outlook.

Risks

• Regulatory Changes and Oversight: Continued FAA oversight of the 737 quality control system, with potential for production rate limitations beyond 38 per month or additional production lines until quality and safety standards are met.
• Program Delays and Cost Overruns: Delays in 737-7 and 737-10 certification (expected 2026), 777-9 first delivery (expected 2027), and 777-8 passenger aircraft (not before 2030) can lead to additional reach-forward losses, customer considerations, and production disruptions.
• Fixed-Price Contracts: Inherent uncertainty in estimating cost and time for complex development programs (e.g., VC-25B, KC-46A Tanker, MQ-25, T-7A Red Hawk, Commercial Crew) creates financial risk for additional material earnings charges, termination provisions, or order cancellations.
• Supply Chain Disruptions: Ongoing inflationary pressures, global supply chain constraints, labor instability, tariffs, and financial difficulties among suppliers can reduce productivity and adversely impact financial performance.
• Labor Instability: The ongoing strike by IAM 837 employees in St. Louis since August 4, 2025, is disrupting key BDS programs and could materially impact financial results if prolonged.
• U.S. Government Funding Lapses: Lapsed funding for U.S. government departments (DoW, NASA, DOT, FAA) as of October 1, 2025, could result in payment delays, impaired contract performance, and negative impacts on future orders.
• Global Trade Tensions: Volatile global trade landscape, including tariffs, export restrictions, and U.S.-China trade relations, could increase product costs, reduce demand, and lead to delivery delays or order terminations. China's pause in accepting deliveries in Q2 2025, though resumed, highlights this risk.
• Spirit AeroSystems Acquisition Risks: The acquisition is subject to closing conditions, including regulatory approvals and the sale of Spirit's Airbus work packages. Failure to consummate the merger by December 31, 2025, or breaches of the Merger Agreement, could result in termination fees or other adverse impacts.
• Legal and Regulatory Proceedings: Ongoing civil lawsuits, class actions, and government investigations related to the 737 MAX accidents and the 737-9 door plug accident, with potential for fines, penalties, and further financial exposure not covered by insurance.
• Customer and Aircraft Concentration: Concentration in the customer financing portfolio poses a risk.
• Credit Ratings and Liquidity: Further downgrades in credit ratings, disruptions in capital markets, or a decline in financial performance could increase borrowing costs and negatively impact access to capital.
• Shareholder Deficit: The company continues to operate with a significant shareholder deficit, which increased from $3,908 million to $8,250 million.

Future Outlook

Boeing anticipates continued implementation of safety and quality improvements, aligning production plans with its comprehensive safety and quality plan. The 737 production rate is expected to increase to 42 per month. Certification for the 737-7 and 737-10 models is now expected in 2026, and the first delivery of the 777-9 is projected for 2027, with the 777-8 Freighter following approximately two years later. The 787 program aims to stabilize production and increase its rate to seven per month. The acquisition of Spirit AeroSystems and the divestiture of Digital Aviation Solutions are expected to close in 2025. The company faces ongoing uncertainty regarding U.S. government budget decisions and global trade tensions, which could impact future orders and operations.

Management Comments

• We are continuing to implement these improvements and align our production plans consistent with the comprehensive safety and quality plan.
• We are continuing to work through the certification process of the 737-7 and 737-10 models, which have been delayed, while we continue to work through the engineering solution for the engine anti-ice system. We now expect certification to occur in 2026.
• We are continuing to follow the lead of the FAA as we work through the certification process and the ultimate timing will be determined by the regulators.
• We continue to anticipate first delivery of the 777-8 Freighter to occur approximately two years after the first delivery of the 777-9. First delivery of the 777-8 passenger aircraft is not expected to occur before 2030.
• We are continuing to monitor supply chain health and factory performance as we work to increase production rates.
• While we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions or other financially significant exposure.
• Risk remains that we may be required to record additional reach-forward losses in future periods.
• If we are unable to successfully negotiate a new contract with IAM 837 and the strike continues for a prolonged period, our financial position, results of operations and cash flows could be materially impacted.

Industry Context

The aerospace and defense industry continues to navigate significant challenges, including supply chain constraints, labor instability, and geopolitical tensions. Boeing's performance reflects these broader trends, with increased revenues driven by higher commercial aircraft deliveries, indicating a recovery in air travel demand. However, persistent production issues and certification delays for key programs like the 777X and 737 MAX variants highlight the ongoing complexities in aircraft manufacturing. The divestiture of Digital Aviation Solutions aligns with a trend of companies streamlining core operations, while the Spirit AeroSystems acquisition aims to vertically integrate and address supply chain control. The lapse in U.S. government funding poses a sector-wide risk for defense contractors, and global trade relations, particularly with China, remain a critical watch item for commercial aircraft demand.

Corporate Governance

Legal Proceedings

• Multiple civil lawsuits and claims are pending from family members of those who died in the Ethiopian Airlines Flight 302 accident.
• A motion to certify a class of plaintiffs is pending in a federal securities class action arising from the 737 MAX accidents and grounding.
• The U.S. Department of Justice determined that Boeing did not fulfill its obligations under the Deferred Prosecution Agreement (DPA) related to the 737 MAX investigation.
• A non-prosecution agreement was reached with the DOJ on May 29, 2025, requiring a $244 million fine, $455 million investment in compliance/quality/safety programs, and $445 million additional compensation for family members. A hearing to dismiss the criminal information was held on September 3, 2025.
• Multiple legal actions, governmental, and regulatory investigations and inquiries were initiated as a result of the January 5, 2024, 737-9 door plug accident.
• The company cannot reasonably estimate a range of loss, if any, not covered by insurance and in excess of accrued amounts for these pending lawsuits, investigations, and inquiries.

Stakeholder Impact

• Shareholders: Potential for continued volatility due to program delays, legal proceedings, and operational challenges. The increased shareholder deficit and negative outlook on credit ratings could impact investor confidence. The planned divestiture and acquisition could create long-term value but carry integration risks.
• Employees: Ongoing labor strike by IAM 837 in St. Louis indicates potential for labor unrest and impacts on employee morale and productivity. Investments in workforce training and safety programs are positive for employee development and safety.
• Customers: Delays in 737-7, 737-10, and 777X certifications and deliveries could lead to customer dissatisfaction, potential claims, and order cancellations. Increased production rates for 737 and 787 aim to meet customer demand.
• Suppliers: Supply chain disruptions, inflationary pressures, and financial difficulties among some suppliers continue to impact operations. The Spirit AeroSystems acquisition aims to strengthen supply chain control.
• Creditors: Maintained investment-grade credit ratings, but negative outlooks from S&P and Moody's, along with increased debt, suggest potential for higher borrowing costs if financial performance deteriorates further.
• Regulatory Authorities: Continued intense scrutiny from the FAA and DOJ, requiring significant investments in compliance, quality, and safety programs.

Next Steps

• Complete the acquisition of Spirit AeroSystems by December 31, 2025, subject to regulatory approvals and the sale of Spirit's Airbus work packages.
• Close the sale of portions of the Digital Aviation Solutions business to Thoma Bravo in 2025.
• Continue implementing safety and quality improvements and align production plans consistent with the comprehensive safety and quality plan.
• Increase 737 production rate to 42 per month.
• Work towards certification of the 737-7 and 737-10 models, expected in 2026.
• Work towards first delivery of the 777-9 in 2027 and the 777-8 Freighter approximately two years later.
• Stabilize 787 production and increase its rate to seven per month.
• Negotiate a new contract with IAM 837 to resolve the ongoing strike in St. Louis.
• Monitor U.S. government budget and program decisions, including the impact of lapsed funding.
• Monitor global trade environment for new tariffs, retaliatory actions, and U.S.-China trade relations.
• Continue to invest at least $455 million in compliance, quality, and safety programs over a three-year period as per the DOJ agreement.

Key Dates

Recommendation

While Boeing showed improvements in revenue and reduced its net loss, driven by higher commercial airplane deliveries and better performance in its defense segment, significant headwinds persist. The substantial $4.9 billion reach-forward loss on the 777X program, coupled with further delays in 737 MAX variant certifications and 777-9 deliveries, indicates ongoing operational challenges and execution risks. The DOJ's determination of DPA non-compliance and the associated financial penalties, along with an an active labor strike, add to the uncertainty. The improved operating cash flow and strong backlog are positive, but the increased shareholder deficit and negative credit outlooks suggest underlying financial fragility. Given the mix of operational improvements and persistent, material risks and delays, a 'hold' recommendation is appropriate for a seasoned investor, awaiting clearer signs of sustained operational stability and successful program execution.

Keywords

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