ATI Targets $1.35B EBITDA Run Rate as Aerospace, Defense Near 70% of Sales

Key Points

• ATI has shifted heavily toward aerospace and defense, which now account for roughly 68%–70% of revenue, up from about 50% in 2019 after the company exited its Standard Stainless Sheet business.
• Operational improvements helped lift second-quarter AA&S margins to approximately 22% from 14% a year earlier, while companywide margins reached 23% and EBITDA rose 57% year over year.
• CEO Kim Fields sees an implied $1.35 billion EBITDA run rate entering 2027, supported by pricing resets, new production assets, defense demand—including a fourfold increase in missile activity—and continued investment in specialized capacity.

ATI NYSE: ATI has transformed its portfolio toward aerospace and defense markets, with those end markets now representing about 70% of total revenue, President and CEO Kim Fields said during a Morgan Stanley aerospace and defense conference panel.

Fields said the company’s shift began in 2019, when ATI focused its AA&S segment on aerospace and defense applications and exited its Standard Stainless Sheet business, which had generated about $400 million in revenue at the time. ATI has since directed resources and investment toward differentiated products, including hafnium and zirconium materials used in commercial and naval nuclear programs, hypersonics, space launch applications and jet-engine alloys.

“Overall, from a company standpoint, we’ve increased our aerospace and defense percent of revenue up to 68%, 70% of our total revenue,” Fields said, compared with about 50% in 2019. Within AA&S, aerospace and defense revenue represented 44% of the segment’s sales over the past five years, more than double its prior proportion, she said.

Margins and Operational Progress

Fields said ATI’s AA&S segment posted a roughly 22% margin in the second quarter, up from 14% a year earlier, while companywide margin reached 23%. She attributed the improvement to the company’s portfolio changes, commercial discipline and operating model, known as Elevation.

Elevation includes procurement savings, operational improvements, commercial discipline and portfolio optimization, according to Fields. The company is using the program to improve yields, productivity and flow through capacity-constrained operations before adding new capacity.

ATI reported that EBITDA rose 57% year over year in the second quarter, Fields said. She added that the company was generating approximately 50% incremental margins and expected that level to continue through the rest of the year.

Looking ahead, Fields cited an implied EBITDA run rate of $1.35 billion entering 2027. She said the company expects momentum from a full year of pricing and contractual resets, new production assets and continuing operational improvements.

Differentiated Materials and Manufacturing Capabilities

Fields identified four areas where ATI believes it is differentiated:

• Proprietary jet-engine alloys, where ATI produces five of seven alloys used in the hot section of a jet engine as a full-source supplier, while sharing supply of a sixth alloy with another producer.
• Isothermal forging, a process used to manufacture jet-engine discs. Fields said ATI is one of two companies globally with that capability.
• Premium-quality titanium used in jet engines, missiles, defense applications and specialty energy markets. ATI is qualifying a new asset in Richland, Washington.
• Hafnium and zirconium materials, for which Fields said ATI is one of three qualified Western suppliers and the only independent supplier not serving a captive commercial nuclear business first.

Fields said ATI’s materials expertise, process know-how and long-standing qualifications enable it to work with customers on performance requirements and next-generation product development.

Capacity Investments and Customer Support

ATI is prioritizing improvements to its existing asset base but is also adding capacity in coordination with customers, Fields said. The company is commissioning remelt assets for a technical superalloy nickel capital project and expects to commission new primary-melt capacity at the end of next year.

Fields said ATI expects capital expenditures of between $280 million and $300 million this year, with approximately 20% funded by customers. Customer contributions provide capacity reservations rather than ownership of the assets, she said.

According to Fields, ATI applies a 30% internal rate of return target to capital projects before considering customer contributions. She said customer participation also helps speed qualification because customers prioritize engineering resources for the projects.

Demand Across Core Markets

Fields said ATI is seeing demand across its core aerospace, defense and specialty energy markets. In aerospace, jet-engine demand includes maintenance, repair and overhaul activity that currently accounts for about 50% of ATI’s jet-engine business, in addition to original-equipment demand.

Defense revenue increased 36% in the latest quarter, she said. Naval nuclear programs, rotorcraft and fixed-wing platforms form the foundation of ATI’s defense business, while missile-related sales remain a smaller but faster-growing component. Fields said missile activity was up fourfold and cited orders and inquiries related to Tomahawk and THAAD programs.

Space remains a small market for ATI but offers growth potential, according to Fields. She said space applications use exotic alloys, including hafnium, zirconium, niobium-based alloys and titanium, in launch thrusters, propellant systems and structural applications.

Fields also pointed to demand for gas turbines and nuclear-related applications within specialty energy. She said the same assets can serve multiple markets, increasing competition for ATI’s capacity and supporting pricing, mix and share-gain opportunities.

Addressing GE’s acquisition of casting supplier CPP, Fields said ATI does not produce castings and has limited direct exposure to CPP. However, she said the transaction reflects broader industry recognition that scarce, specialized manufacturing capabilities require sustained investment to avoid supply-chain bottlenecks.

ATI’s immediate priorities are to execute for customers, improve output from existing assets, invest selectively in future capacity and capture the value created by its specialized products, Fields said.

About ATI (NYSE:ATI)

ATI Inc NYSE: ATI is a specialty materials and components manufacturer serving aerospace and defense, medical, energy, transportation, and other demanding industrial markets. The company develops and produces advanced alloys and engineered materials designed to perform in high-temperature, corrosive, and high-stress environments.

ATI's products include nickel-based superalloys, titanium and titanium-based materials, specialty stainless steels, zirconium and other specialty alloys. Its manufacturing capabilities also include precision forgings, castings, rolled products, and machined components used in aircraft engines, airframes, power-generation equipment, medical devices, and industrial applications.

The company was formed in 1996 through the combination of Allegheny Ludlum Corporation and Teledyne, Inc's specialty metals operations and adopted the name ATI Inc in 2021.

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