Embraer-Empresa Brasileira de Aeronautica Q2 Earnings Call Highlights

Key Points

• Record quarterly performance: Embraer’s Q2 revenue rose 23% year over year to $2.2 billion, supported by 65 aircraft deliveries and growth across all business units. Adjusted free cash flow reached $401 million, while net leverage improved to 0.2 times.
• Backlog reached a new high: Total backlog increased 16% year over year to $34.5 billion, bolstered by major commercial and defense orders, including 10 C-390 aircraft for the United Arab Emirates and additional E2 jet commitments.
• 2026 outlook improved: Embraer maintained its delivery and revenue forecasts but raised adjusted EBIT margin guidance to 10%–10.6% and free-cash-flow guidance to at least $400 million. The company also said Eve’s eVTOL remains on track to enter service by the end of 2028.

Embraer-Empresa Brasileira de Aeronautica NYSE: EMBJ said its second-quarter 2026 revenue was the highest for a second quarter in the company’s history, supported by higher aircraft deliveries, growth across its business units and continued expansion of its backlog.

President and CEO Francisco Gomes Neto said Embraer delivered 65 aircraft during the quarter, including 20 commercial jets and 45 executive jets. Total deliveries rose nearly 7% from a year earlier, with commercial aviation deliveries up 5% and executive aviation deliveries up 18%.

“We delivered the strongest second quarter revenue in our history,” Gomes Neto said, adding that the company reached its highest second-quarter delivery total in 16 years and a record backlog for the seventh consecutive quarter.

Revenue, Profitability and Cash Flow

Consolidated second-quarter net revenue increased 23% year over year to $2.2 billion. Revenue for the first half reached $3.7 billion, or 44% of the midpoint of Embraer’s full-year revenue guidance.

Adjusted EBITDA totaled $356 million in the quarter, representing a 15.9% margin, while adjusted EBIT was $297 million, or a 13.3% margin. The company said results included approximately $8 million in U.S. import tariffs and a $68 million extraordinary tax credit. Excluding both items, adjusted EBIT margin would have been 10.6%.

Adjusted net income was $290 million, with an adjusted net income margin of 9.8%. Earnings per American depositary share stood at $2.50 on a trailing 12-month basis.

Adjusted free cash flow, excluding Eve, was $401 million in the quarter. Chief Financial Officer Felipe Santana said cash generation reflected stronger operating results, sales-related pre-delivery payments and the extraordinary tax credit. Quarterly investments totaled $121 million, including $42 million in capital expenditures and $36 million in research.

Embraer’s net debt-to-adjusted EBITDA ratio, excluding Eve, improved to 0.2 times from 0.7 times a year earlier. The company said its liability-management actions extended average debt maturity to 9.3 years and lowered average debt cost to 5.1%.

The company also declared 200 million Brazilian reais in interest on equity, equivalent to BRL0.28 per share, or approximately $0.22 per ADS.

Business Unit Performance

• Commercial Aviation: Revenue rose 8% to $625 million, driven by higher volume. Adjusted EBIT was $18 million, for a 2.9% margin. Santana said the year-over-year margin decline primarily reflected customer mix and legacy contracts.
• Executive Aviation: Revenue increased 32% to $725 million, aided by volume and product mix. Adjusted EBIT reached $170 million, or a 23.4% margin. Excluding tariff effects and the tax credit, the segment’s adjusted EBIT margin would have been 16.1%.
• Defense and Security: Revenue increased 38% to $304 million, while adjusted EBIT was $36 million, for an 11.9% margin. Embraer cited stronger KC-390 revenue recognition and operating leverage.
• Service and Support: Revenue rose 24% to $565 million, and adjusted EBIT was $106 million, or an 18.7% margin. Excluding tariffs and the extraordinary tax credit, the margin would have been 17.6%.

Management attributed gains in executive aviation partly to production-leveling initiatives. Gomes Neto said certain suppliers are still delivering parts late, requiring aircraft to be moved late in the production line, but he expects improved production leveling, productivity and efficiency in 2027.

During the investor Q&A, Santana said a $4 million improvement in the company’s business outlook was spread across all business units and was recurring, with a larger benefit in executive aviation from production leveling and efficiency efforts. Gomes Neto said Embraer is pursuing continuous lean-operation initiatives across the organization rather than relying on a single cost-saving measure.

Record Backlog and New Orders

Embraer’s total backlog reached $34.5 billion, up 16% from a year earlier and a new company record. Commercial Aviation backlog rose 15%, supported by a 1.8 book-to-bill ratio over the past 12 months. Defense and Security backlog grew 42%, with a 2.6 book-to-bill ratio.

Executive Aviation backlog increased 5%, while Service and Support backlog rose 12%. Both segments had book-to-bill ratios above one. Embraer also held approximately $21 billion in options that could lift backlog above $55 billion if exercised.

Among notable commercial wins, Azorra ordered 15 E195-E2 aircraft and retained purchase rights for another 15. The E2 program surpassed 500 firm orders during the quarter. In defense, the United Arab Emirates ordered 10 C-390 aircraft and secured options for an additional 10, marking the aircraft’s first selection in the Middle East and its largest international order to date.

After the quarter closed, Embraer announced 28 additional E2 orders and said Colombia became the 13th country to select the KC-390.

Raised Margin and Cash-Flow Outlook

Embraer maintained its 2026 delivery outlook of 80 to 85 commercial aircraft and 160 to 170 executive aircraft. Revenue guidance also remained unchanged at $8.2 billion to $8.5 billion.

However, the company raised adjusted EBIT margin guidance to a range of 10% to 10.6%. At the midpoint, management said the increase represents approximately $110 million, or 130 basis points, and reflects the extraordinary tax credit, lower U.S. tariffs and improved business conditions.

Adjusted free cash flow guidance was raised to $400 million or more, reflecting operational performance, progress in production leveling and strong first-half cash generation.

On tariffs, Santana said most of the tax-credit benefit was related to refunds of tariffs paid in the prior year and during the first half of 2026. While Embraer no longer expects direct tariffs affecting the company, it expects indirect tariffs of about $12 million on an annual basis, particularly affecting Service and Support.

Gomes Neto also said Eve’s flight-test program is advancing toward certification, with more than 60 vertical flights completed and partial transition to horizontal flight recently achieved. Embraer expects Eve’s eVTOL to enter service by the end of 2028.

About Embraer-Empresa Brasileira de Aeronautica (NYSE:EMBJ)

Embraer SA NYSE: EMBJ, legally known as Embraer – Empresa Brasileira de Aeronáutica SA, is a global aerospace company headquartered in São José dos Campos, Brazil. The company designs, develops, manufactures and sells commercial, executive, defence and agricultural aircraft. Embraer’s product portfolio includes the popular E-Jets family for regional and short-haul carriers, the advanced E2 series, a range of business jets under the Phenom, Legacy and Praetor brands, the A-29 Super Tucano military trainer and light attack aircraft, the C-390 Millennium multi-mission transport platform, and the Ipanema agricultural aircraft.

Embraer’s commercial aviation segment focuses on regional airlines and air taxi operators, offering aircraft that seat between 70 and 150 passengers.

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