Howmet Aerospace reported a strong finish to 2025 with Q4 revenue of $2.17 billion, up 15% year-over-year, and full-year revenue increasing 11% to approximately $8.24 billion. EBITDA growth significantly outpaced revenue, rising 29% in Q4 to $653 million and 26% for the full year to $2.42 billion, driving a record EBITDA margin of 29.3% (up 350 basis points). Earnings per share surged 42% in Q4 and 40% for the full year to $3.77, supported by a 93% free cash flow conversion of net income, resulting in record free cash flow of $1.43 billion. Performance was driven by robust growth in commercial aerospace (spares up 44%), defense (up 21%), and a major inflection in gas turbines (up 32% in Q4) fueled by data center electricity demand. Looking ahead, management provided confident 2026 guidance for revenue of $9.1 billion and EPS of $4.45, representing approximately 18% EPS growth, underpinned by a record backlog and significant capital deployment into capacity expansion.
| Metric | Value | Change |
|---|---|---|
| Q4 Revenue | $2.17 billion | +15% |
| Q4 EBITDA | $653 million | +29% |
| Q4 EPS | $1.05 | +42% |
| FY 2025 Revenue | ~$8.24 billion | +11% |
| FY 2025 EBITDA | $2.42 billion | +26% |
| FY 2025 EPS | $3.77 | +40% |
| FY 2025 Free Cash Flow | $1.43 billion | Record |
| Net Debt to EBITDA | 1.0x | Record Low |
| Commercial Aero Spares Growth | N/A | +44% |
| Gas Turbine Revenue Growth (Q4) | N/A | +32% |
Management highlighted a major strategic pivot and growth inflection in the Gas Turbine segment, driven by the insatiable demand for electricity to power data centers. Revenue in this segment jumped 32% in Q4 and 25% for the full year. Plant explicitly stated that the base business of $1 billion is expected to double to $2 billion over the next 3 to 5 years. This shifts the narrative from gas turbines being a cyclical, volatile business to a secular growth story tied to AI and digital infrastructure, justifying the significant increase in capital expenditure (CapEx up ~$130M YoY) to secure capacity and new contracts with major players like GE Vernova and Siemens.
Commercial Aerospace spares emerged as a critical performance driver, growing 44% for the full year, significantly outpacing original equipment (OE) builds. Management emphasized that spares now represent 21% of total revenue (up from 17% in 2024). This shift improves the quality of revenue as spares typically carry higher margins and provide recurring revenue streams that are less sensitive to production ramp rates on the OE side. The 'record backlog' stretching into the next decade provides visibility for sustained spares growth as the global fleet ages and utilization rates recover.
Howmet is executing an aggressive 'build and buy' strategy to consolidate its dominance in aerospace fastening and engine components. The announced $1.8 billion acquisition of CAM (Consolidated Aerospace Manufacturing) and the closing of the Bruner acquisition signal a push to broaden the product portfolio into fittings, couplings, and larger diameter fasteners. Management indicated these moves open 'new markets' and allow them to sell a more complete solution to customers, potentially increasing switching costs and wallet share. The strategy is funded by a robust balance sheet with net debt/EBITDA at a record low 1.0x.
Capital allocation priorities have shifted decisively toward growth investment while maintaining shareholder returns. The company repurchased $700 million of stock in 2025 and already $150 million in early 2026, yet increased CapEx to a record $453 million. Management emphasized they can simultaneously invest in 5 new manufacturing plants, close acquisitions, and buy back shares because of the 'extraordinary' free cash flow generation (93% conversion). This signals a transition from a lean restructuring story to a growth-oriented compounder.
The Commercial Transportation (Forged Wheels) segment continues to deteriorate, with full-year revenue down 5% and volumes down 10% in Q4 and 13% for the year. While management points to 'share growth versus steel' and margin resilience (up 270 bps in Q4), the volume declines are steep. The reliance on 'pass-through of higher aluminum costs and tariffs' to prop up revenue is a weak foundation for growth, and the guidance for recovery relies on 2027 emissions regulations and a 'stabilizing' market that hasn't materialized yet.
Significant execution risk looms regarding the massive ramp in capital expenditure and headcount. Management plans to add another 1,500 net new employees in the Engine segment in 2026 on top of the 1,440 added in 2025. Plant admitted this creates a 'near-term margin drag' due to training and inefficiencies. Furthermore, the guidance implies a flat EBITDA margin (30.3%) for 2026 compared to the Q4 exit rate of 30.1%, suggesting that the heavy investment spending and startup costs could pressure margins in the near term despite the strong top-line growth.
While the guidance for 2026 looks strong, the implied sequential growth from Q1 to the full year average is relatively muted. Q1 2026 guidance implies $2.235B in revenue. Annualized, this is roughly $8.94B, slightly below the full-year guide of $9.1B. This suggests a back-end loaded growth profile. Management attributed this to the timing of new capacity coming online ('towards the back end of 2026 and into 2027'). Any delays in these capital projects or customer ramps could put the full-year numbers at risk, especially given the precision required in the 'flow style production' for gas turbines.
Overall: Management exhibited a highly confident and assertive demeanor throughout the call, characterized by detailed operational knowledge and a clear focus on capitalizing on secular growth trends. John Plant, CEO, was particularly emphatic about the 'extraordinary' backlog in aerospace and the transformative growth in gas turbines, shifting from historical caution on the cyclical nature of turbines to aggressive investment. The tone remained consistent from prepared remarks through the Q&A, where Plant defended margins and capital allocation decisions with specificity, dismissing concerns about overextension by stating they are able to 'do it all'—invest, acquire, and return capital.
Confidence: HIGH - Management's confidence was evidenced by their willingness to guide for double-digit growth and significant margin expansion despite absorbing heavy capital expenditures and hiring costs. The specificity regarding customer contracts (e.g., '4 out of 7 customers' for gas turbines) and the declaration of a 'record low' net debt to EBITDA ratio of 1x further underscores their comfort in the financial position and business trajectory.
$2.235 billion (+/- $10 million)
$685 million (+/- $5 million)
$1.10 (+/- $0.01)
$9.1 billion (+/- $100 million)
$2.76 billion (+/- $50 million)
$4.45 (+/- $0.01)
$1.6 billion (+/- $50 million)
Hedging & Uncertainty: Management generally avoided heavy hedging regarding demand, using definitive language like 'extraordinary' and 'record' to describe the backlog. However, John Plant employed specific temporal hedges when discussing margin sustainability, stating, 'I never... willing to consider what margins are for the future because I find it always a very difficult topic.' He also used probability hedges regarding the gas turbine market, noting, 'if all of our discussions come home,' capital expenditure could rise higher. This suggests confidence in the current business but slight uncertainty regarding the precise pace of future capacity ramp-ups and margin expansion amidst heavy investment.
"The commercial truck wheel segment is stable at a low level and should begin to show signs of growth towards the latter half of 2026." - John Plant, CEO
"We guide seriously... I think predicting 30.3% EBITDA margins for the year is pretty good at this point." - John Plant, CEO
"The demand for electricity generation, especially from natural gas for data centers is extremely high." - John Plant, CEO
"We're able to -- I'll say, at this point, do it all." - John Plant, CEO
"The highest growth is seen in Asia Pacific, notably China, but also in North America and in Europe." - John Plant, CEO
Analyst Sentiment: Analysts were highly engaged, focusing heavily on the sustainability of the gas turbine growth cycle and the capacity for margin expansion. Questions were direct regarding the return on invested capital (ROIC) for the heavy gas turbine spending and the potential for the gas turbine business to eventually eclipse commercial aerospace.
Management Responses: John Plant handled the Q&A with a high degree of specificity, often correcting premises or providing granular details on plant locations and contract negotiations. He was defensive but polite regarding margin predictions, refusing to promise specific increases while reiterating the strength of the underlying cash flow. He effectively used the Q&A to reinforce the 'data center' narrative for gas turbines.
Gas Turbine Market Growth & Data Center Demand
Engine Products Margin Sustainability & Automation
Capital Allocation Strategy (M&A vs Buybacks)
Commercial Aerospace Build Rates & Backlog
Integration of Acquisitions (CAM & Bruner)
Howmet Aerospace is executing on a rare multi-year growth supercycle driven by the intersection of an aerospace upcycle and a secular boom in power generation for data centers. The company has successfully pivoted from a restructuring story to a growth platform, evidenced by record margins, 93% FCF conversion, and a 1.0x net debt/EBITDA ratio that provides ample optionality. The 2026 guidance for 18% EPS growth appears conservative given the visibility of the backlog and the spares momentum. While the Wheels segment remains a weak point and execution risks exist with the rapid CapEx ramp, the risk/reward is highly attractive. Management's confidence, backed by specific contract wins and capacity expansions, signals that the current growth rates are sustainable well beyond 2026.
Management highlighted that the demand for electricity generation from natural gas for data centers is 'extremely high,' driving a doubling of their gas turbine business over 3-5 years. This indicates a sustained capex cycle for power infrastructure that is independent of traditional economic cycles.
Air travel demand is robust globally, with 'highest growth in Asia Pacific, notably China.' The 'record backlog' stretching into the next decade suggests that OEM production rates will need to increase significantly, supporting long-term revenue visibility.
The commercial truck market remains weak, with volumes down double digits. Management believes the market is at a 'low point' and expects recovery only in the latter half of 2026, driven by 2027 emissions regulations.
Defense markets remain 'buoyant' with strong F-35 spares demand exceeding OE demand. Growth is expanding beyond traditional platforms into missiles and rocket motors, indicating a broad-based increase in defense spending.