ATI Q4 Earnings Call Highlights

Key Points

• Robust 2025 results: ATI reported Q4 revenue of $1.2 billion and adjusted EBITDA of $232 million (19.7% margin), and full‑year 2025 revenue of $4.6 billion with adjusted EBITDA >$859 million, adjusted EPS $3.24 and adjusted free cash flow of $380 million while returning $470 million to shareholders (124% of FCF).
• 2026 guidance targets further margin expansion: Management guided full‑year adjusted EBITDA of $975 million–$1.025 billion (midpoint $1.0B), adjusted EPS $3.99–$4.27 and adjusted free cash flow $430 million–$490 million, expecting consolidated adjusted EBITDA margins around 20% and strong incremental margins (~40%).
• Demand and capacity investment driven by aerospace, defense and nickel: Engine sales grew 21% and defense revenue grew 14% (missiles +127%), and ATI is adding melt and VIM capacity (about 80% contracted) to support proprietary nickel alloys, targeting roughly $350 million of incremental nickel revenue by mid‑2028.

ATI NYSE: ATI executives struck an upbeat tone on the company’s fourth-quarter and full-year 2025 earnings call, citing stronger-than-expected profitability and cash generation, an expanding mix of aerospace and defense revenue, and a 2026 outlook that targets higher earnings and continued margin improvement.

Fourth-quarter and full-year 2025 results

President and CEO Kim Fields said the fourth quarter “capped a very successful full year,” as ATI exceeded profit and free cash flow expectations while improving operational reliability and deepening customer relationships.

For the fourth quarter, ATI reported revenue of $1.2 billion and adjusted EBITDA of $232 million, which Fields said was above the high end of the company’s guidance range. Adjusted EBITDA margin was 19.7%, up 180 basis points from the fourth quarter of 2024.

For full-year 2025, ATI reported revenue of $4.6 billion, up 5% year over year, driven by 14% growth in aerospace and defense. Adjusted EBITDA exceeded $859 million, up 18% year over year, while adjusted EPS was $3.24, up 32% from 2024. Adjusted free cash flow totaled $380 million, up 53% from 2024 and above the high end of guidance.

Retiring CFO Don Newman said 2025 marked ATI’s highest annual revenue since 2012 and highlighted improved cash generation and working capital. Full-year operating cash flow rose more than 50% to $614 million, and managed working capital improved sequentially to 32.5% of sales in the fourth quarter. Capital expenditures were $281 million for the year, with customers funding $25 million, for net capex of $256 million.

Newman also pointed to shareholder returns and balance sheet actions in 2025, including repayment of $150 million of debt in the fourth quarter and share repurchases totaling $470 million during the year. Fields added that ATI returned $470 million to shareholders in 2025, representing 124% of free cash flow.

Margin expansion and segment performance

Management emphasized progress in profitability since ATI launched its strategic transformation in 2019. Newman said adjusted EBITDA margins were 10.7% in 2019 and reached 19.7% in the fourth quarter of 2025, describing that as a 900-basis-point improvement. Full-year 2025 consolidated adjusted EBITDA margin was 18.7%, up from 16.7% in 2024.

Newman said both segments contributed to margin expansion:

• HPMC: Full-year margin of 23.6%, up 330 basis points over 2024; Q4 margin of 24%, up 400 basis points year over year.
• AA&S: Full-year margin of 16.3%, up 90 basis points over 2024; Q4 margin of 18.5%, up 220 basis points year over year.

Demand drivers: jet engines, defense, and specialty energy

Fields said ATI is entering 2026 with momentum across aerospace and defense, noting “a step-change increase in order activity” early in the year beyond what the company would typically see from seasonal first-quarter strength.

Within aerospace and defense, Fields said full-year engine sales grew 21% and highlighted increasing content per engine as fleets transition from legacy engines to next-generation platforms, alongside rising aftermarket demand. She cited isothermal forging deliveries to Pratt & Whitney as an example, saying ATI’s content grew sixfold from 2023 to 2025, largely supporting Pratt’s GTF accelerated shop visit programs. Later in the Q&A, Fields said isothermal forging lead times were “out beyond 18 months,” and ATI supports all three engine OEMs with a mix that is “close to an even” split.

In defense, Fields said demand remained diversified across naval, air, missile, and ground systems. She said ATI’s annual defense revenue grew 14% year over year in 2025, with missiles up 127%, driven by demand for alloys including C103 and titanium 6-4. In the Q&A, Fields described naval and nuclear as roughly 35% to 40% of ATI’s defense revenue, with missiles around 20%, and said the company expects defense growth to accelerate to the mid-teens in 2026.

Fields also highlighted specialty energy as an emerging growth driver, with 9% year-over-year growth in the fourth quarter and multi-year customer commitments tied to “AI-driven power infrastructure” in nuclear and land-based gas turbine markets. She said ATI renewed a long-term specialty energy contract that expanded its share by more than 20%, making ATI the customer’s “majority supplier.”

2026 guidance and capital priorities

New CFO Rob Foster outlined ATI’s 2026 outlook, saying he sees top- and bottom-line growth and margin expansion each quarter, driven by price capture under long-term agreements (LTAs), volume increases, improved mix, and operating efficiencies.

ATI guided to first-quarter 2026 adjusted EBITDA of $216 million to $226 million and adjusted EPS of $0.83 to $0.89. Foster said the first-quarter outlook reflects seasonality and planned maintenance in HPMC.

For full-year 2026, ATI set initial guidance for adjusted EBITDA of $975 million to $1.025 billion, with a midpoint of $1 billion, which management characterized as a 16% increase over 2025. Adjusted EPS guidance was $3.99 to $4.27. Adjusted free cash flow is expected to be $430 million to $490 million, with a midpoint of $460 million, or $80 million higher than 2025.

Foster said the company’s 2026 free cash flow outlook includes gross capex of $280 million to $300 million, partially offset by about $60 million of customer funding, resulting in net capex of $220 million to $240 million. Fields said capex will focus on proprietary engine alloys and includes investment in the nickel melt system, including a new primary melt VIM furnace and previously announced remelt equipment. Management said the new capacity is expected to come online in the second half of 2027, targeting a run rate of about $350 million in incremental nickel revenue by mid-2028, and that the projects are supported by customer co-funding and long-term commitments.

In the Q&A, Fields said ATI currently has four VIMs and that the new VIM would be its fifth, while cautioning that output depends on product mix and that newer equipment should also improve productivity. She said ATI was “about 80% contracted” for the new capacity. Discussing complexity, Fields said melt times for certain proprietary nickel alloys can be “up to 3x-4x longer” than for a more standard alloy such as 718.

On margins, Foster said ATI expects full-year consolidated adjusted EBITDA margins around 20% in 2026, with margins in the upper teens in the first half and above 20% in the second half due to LTA price increases. He also said the company expects consolidated incremental margins to average about 40% for 2026, with the second half above 40%.

Backlog, airframe visibility, and capital returns

On airframes, management said growth is expected to be weighted to the second half of 2026 as OEM production rates increase and inventory balances normalize. In response to analyst questions, Fields said ATI’s airframe outlook is built on customer production schedules and contractual commitments rather than headline build-rate targets, describing the forecast as a “measured ramp.” She also said airframe inventory alignment progressed through 2025 and should be largely right-sized by 2026.

Fields said ATI’s backlog remains “just under one year of revenue,” which she described as about where the company wants it, and noted lead times are extending for several product categories, including proprietary titanium, specialized nickel alloys, and exotic alloys such as hafnium and zirconium. She added that backlog was up about 3%.

On capital deployment, Foster said ATI has no meaningful debt maturities until December 2027 and no significant planned debt repayments in 2026. He said ATI has $120 million remaining under its current share repurchase authorization to be completed in 2026 and intends to seek board approval for additional authorization after completion. Foster also noted that since 2022, ATI has repurchased about $1 billion of shares at an average price of $51 per share.

Leadership changes were also noted on the call. Fields welcomed Foster as ATI’s new CFO and thanked Newman for his six-year tenure, during which she said ATI expanded margins, strengthened cash flow, and sharpened its focus on differentiated aerospace and defense markets.

About ATI NYSE: ATI

Allegheny Technologies Incorporated (ATI) is a global manufacturer of specialty materials and complex components, serving aerospace, defense, oil and gas, chemical processing, medical and other industrial end markets. The company operates through two main segments: High Performance Materials & Components, which produces titanium and nickel-based alloys, stainless and specialty steels, and precision forgings; and Flat-Rolled Products, which supplies stainless steel, nickel and specialty alloy sheet, strip and precision-rolled plate.

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