Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Results of Operations and Financial Condition
Consolidated Results of Operations
The following table summarizes key indicators of consolidated results of operations:
(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Revenues $46,777 $42,245 $24,560 $22,749
GAAP
Earnings/(loss) from operations $604 $285 $156 ($176)
Operating margins 1.3 % 0.7 % 0.6 % (0.8) %
Effective income tax rate (28.3) % (32.6) % (17.3) % (9.1) %
Net loss attributable to Boeing shareholders ($448) ($648) ($444) ($611)
Diluted loss per share ($0.79) ($1.09) ($0.67) ($0.92)
Non-GAAP (1)
Core operating earnings/(loss) $294 ($234) $1 ($433)
Core operating margins 0.6 % (0.6) % 0.0 % (1.9) %
Core loss per share ($0.97) ($1.73) ($0.76) ($1.24)
(1) These measures exclude certain components of pension and other postretirement benefit expense. See pages 49-50 for important information about these non-GAAP measures and reconciliations to the most directly comparable GAAP measures.
Revenues
The following table summarizes Revenues:
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Commercial Airplanes $20,954 $19,021 $11,751 $10,874
Defense, Space & Security 15,082 12,915 7,483 6,617
Global Services 10,714 10,344 5,344 5,281
Unallocated items, eliminations and other 27 (35) (18) (23)
Total $46,777 $42,245 $24,560 $22,749
Revenues for the six and three months ended June 30, 2026, increased by $4,532 million and $1,811 million compared with the same periods in 2025 primarily driven by higher revenues at Defense, Space & Security (BDS) and Commercial Airplanes (BCA).
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Earnings/(Loss) from Operations
The following table summarizes Earnings/(loss) from operations:
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Commercial Airplanes ($885) ($1,094) ($322) ($557)
Defense, Space & Security 218 265 (15) 110
Global Services 1,939 1,992 968 1,049
Segment operating earnings 1,272 1,163 631 602
Unallocated items, eliminations and other (978) (1,397) (630) (1,035)
Pension FAS/CAS service cost adjustment 185 390 92 197
Postretirement FAS/CAS service cost adjustment 125 129 63 60
Earnings/(loss) from operations (GAAP) $604 $285 $156 ($176)
FAS/CAS service cost adjustment * (310) (519) (155) (257)
Core operating earnings/(loss) (Non-GAAP) ** $294 ($234) $1 ($433)
* The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.
** Core operating earnings is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment. See pages 49-50.
Earnings from operations for the six months ended June 30, 2026, increased by $319 million compared with the same period in 2025, primarily driven by a decrease in loss from operations on Unallocated items, eliminations, and other ($419 million) and at BCA ($209 million), partially offset by unfavorable changes in the FAS/CAS service cost adjustment ($209 million).
Earnings from operations for the three months ended June 30, 2026, increased by $332 million compared with the same period in 2025, primarily driven by a decrease in loss from operations on Unallocated items, eliminations, and other ($405 million) and at BCA ($235 million), partially offset by lower earnings from operations at BDS ($125 million) and unfavorable changes in the FAS/CAS service cost adjustment ($102 million).
Core operating earnings for the six and three months ended June 30, 2026, increased by $528 million and $434 million compared with the same periods in 2025, primarily due to a decrease in loss from operations on Unallocated items, eliminations, and other.
For information related to Postretirement Plans, see Note 13 to our Condensed Consolidated Financial Statements.
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Unallocated Items, Eliminations and Other
The most significant items included in Unallocated items, eliminations and other (expense)/income are shown in the following table:
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Share-based plans ($52) ($51) $3 ($21)
Deferred compensation (107) (80) (124) (85)
Amortization of previously capitalized interest (45) (42) (23) (21)
Research and development expense, net (210) (183) (106) (101)
Eliminations and other unallocated items (564) (1,041) (380) (807)
Unallocated items, eliminations and other ($978) ($1,397) ($630) ($1,035)
Unallocated share-based plans expense for the six and three months ended June 30, 2026, increased by $1 million and decreased by $24 million compared with the same periods in 2025. Changes are due to the timing of when share-based plans expense was recorded compared with when it was allocated to our segments.
Deferred compensation expense for the six and three months ended June 30, 2026, increased by $27 million and $39 million compared with the same periods in 2025 due to changes in broad stock market conditions.
Research and development expense for the six and three months ended June 30, 2026, increased by $27 million and $5 million compared with the same periods in 2025 due to increases in enterprise investments in product development.
Eliminations and other unallocated items expense for the six and three months ended June 30, 2026, decreased by $477 million and $427 million compared with the same periods in 2025. The decrease reflects the absence of an earnings charge of $445 million recorded in the second quarter of 2025 related to an agreement with the Department of Justice.
Other Earnings Items
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Earnings/(loss) from operations $604 $285 $156 ($176)
Other income, net 273 648 79 325
Interest and debt expense (1,216) (1,418) (600) (710)
Loss before income taxes (339) (485) (365) (561)
Income tax expense (96) (158) (63) (51)
Net loss (435) (643) (428) (612)
Less: Net earnings/(loss) attributable to noncontrolling interest 13 5 16 (1)
Net loss attributable to Boeing shareholders ($448) ($648) ($444) ($611)
Other income, net for the six and three months ended June 30, 2026, decreased by $375 million and $246 million compared with the same periods in 2025, primarily due to higher non-operating pension expense.
Interest and debt expense for the six and three months ended June 30, 2026, decreased by $202 million and $110 million compared with the same periods in 2025, primarily as a result of lower debt balances.
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For a discussion related to Income Taxes, see Note 4 to our Condensed Consolidated Financial Statements.
Total Costs and Expenses (“Cost of Sales”)
Cost of sales, for both products and services, consists primarily of raw materials, parts, sub-assemblies, labor, overhead and subcontracting costs. Our BCA segment predominantly uses program accounting to account for cost of sales. Under program accounting, cost of sales for each commercial aircraft program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the estimated cost of sales percentage applicable to the total remaining program. For long-term contracts, the amount reported as cost of sales is recognized as incurred. Substantially all contracts at our BDS segment and certain contracts at our Global Services (BGS) segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Cost of sales for commercial spare parts is recorded at average cost.
The following table summarizes cost of sales:
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 Change 2026 2025 Change
Cost of sales $41,817 $37,393 $4,424 $22,146 $20,314 $1,832
Cost of sales as a % of Revenues
89.4 % 88.5 % 0.9 % 90.2 % 89.3 % 0.9 %
Cost of sales for the six and three months ended June 30, 2026, increased by $4,424 million and $1,832 million, or 12% and 9%, compared with the same periods in 2025, primarily due to higher revenues at BDS and BCA. Cost of sales as a percentage of Revenues increased during the six and three months ended June 30, 2026, compared with the same periods in 2025 due to lower margins at BGS and BDS.
Research and Development
Research and development expense, net is summarized in the following table:
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Commercial Airplanes $1,200 $1,092 $597 $558
Defense, Space & Security 366 420 192 221
Global Services 48 59 26 30
Other 210 183 106 101
Total $1,824 $1,754 $921 $910
Research and development expense increased by $70 million and $11 million during the six and three months ended June 30, 2026, compared with the same periods in 2025, primarily due to higher spending at BCA.
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Backlog
(Dollars in millions) June 30
2026 December 31
2025
Commercial Airplanes $596,724 $567,290
Defense, Space & Security 85,322 84,786
Global Services 32,840 29,720
Unallocated items, eliminations and other 375 411
Total Backlog $715,261 $682,207
Contractual backlog $674,506 $639,721
Unobligated backlog 40,755 42,486
Total Backlog $715,261 $682,207
Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, orders where customers have the unilateral right to terminate, and unobligated U.S. and non-U.S. government contract funding. The increase in contractual backlog of $34,785 million during the six months ended June 30, 2026, was primarily due to a $29,434 million increase in BCA backlog. We may experience reductions to backlog and/or significant order cancellations due to various factors including delivery delays, production disruptions and delays to entry into service of the 777X, 737-7 and/or 737-10.
Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. The decrease of $1,731 million in unobligated backlog during the six months ended June 30, 2026 was due to a decrease in BDS backlog primarily reflecting reclassifications to contractual backlog, partially offset by new awards.
Additional Considerations
U.S. Government Funding Considerable uncertainty exists regarding how future U.S. government budget and program decisions will unfold, including the spending priorities of the Administration and Congress. As of June 30, 2026, government departments and agencies, including the Department of War (DoW), the National Aeronautics and Space Administration (NASA), and the Department of Transportation are funded through September 30, 2026.
Global Trade The global trade landscape continues to evolve.
Following the February 20, 2026, Supreme Court ruling regarding the imposition of tariffs under the International Emergency Economic Powers Act (IEEPA), U.S. Customs and Border Protection defined processes for submitting claims for tariffs previously paid under IEEPA. Tariffs did not have a material impact on our financial position, results of operations and cash flows during the first half of 2026.
The current state of U.S.-China trade relations remains an ongoing watch item. China is a significant market for commercial aircraft, and we have long-standing relationships with our Chinese customers. Overall, the U.S.-China trade relationship remains challenged due to tariffs, sanctions, and export restrictions, as well as other economic and national security concerns.
We seek to comply with all U.S. and other government import requirements, export control requirements and sanctions. We continually monitor the global trade environment for new and/or changing tariffs, retaliatory actions, trade agreements, export restrictions, sanctions or other restrictions that may impact us or our supply chain or customers, and work to mitigate impacts to our business.
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Supply Chain We and our suppliers are experiencing inflationary pressures, as well as supply chain disruptions as a result of global supply chain constraints and labor instability. Our supply chain is also being impacted by the tariffs and export restrictions discussed above. Certain of our suppliers are also experiencing financial difficulties. We continue to monitor the health and stability of the supply chain. These factors have reduced overall productivity and adversely impacted our financial position, results of operations and cash flows. During 2024, we recorded a reach-forward loss of $1,770 million on the T-7A Red Hawk program that was primarily driven by projected increases in supplier cost estimates. In addition, we recorded losses on the KC-46A Tanker and Commercial Crew programs during 2024 that were partially attributable to higher supplier costs. We recorded a reach-forward loss on the 777X program during 2025 that was partially attributable to higher estimated supplier costs.
Human Capital Some of our and our suppliers' workforces are represented by labor unions. Work stoppages and instability in our and our suppliers' union relationships have in the past and could in the future disrupt and/or delay the production, delivery and/or development of our products and services, which could strain relationships with customers and result in lower revenues, earnings and cash flows. If we are unable to successfully negotiate successor agreements with our unions that our employees will ratify, we may experience additional work stoppages in the future and/or higher than anticipated costs, which could materially adversely affect our business, financial position, results of operations and cash flows. We have two contracts with the Society of Professional Engineering Employees in Aerospace expiring October 6, 2026, and we are currently in negotiations working toward reaching new agreements in the third quarter of 2026.
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Segment Results of Operations and Financial Condition
Commercial Airplanes
Results of Operations
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Revenues $20,954 $19,021 $11,751 $10,874
Loss from operations ($885) ($1,094) ($322) ($557)
Operating margins (4.2)% (5.8)% (2.7) % (5.1) %
Revenues
BCA revenues increased by $1,933 million for the six months ended June 30, 2026, compared with the same period in 2025 primarily due to higher deliveries on 737 and 787 programs partially offset by lower deliveries on 777 program. BCA revenues increased by $877 million for the three months ended June 30, 2026, compared with the same period in 2025 primarily due to higher deliveries on 737 program partially offset by lower deliveries on 777 program.
Commercial airplane deliveries, including intercompany deliveries, were as follows:
737 * 767 * 777 787 Total
Deliveries during the first six months of 2026 243 (3) 16 (9) 15 40 314
Deliveries during the first six months of 2025 209 (3) 14 (7) 20 37 280
Deliveries during the second quarter of 2026 129 (2) 10 (6) 7 25 171
Deliveries during the second quarter of 2025 104 (2) 9 (4) 13 24 150
Cumulative deliveries as of 6/30/2026 9,483 1,367 1,791 1,289
Cumulative deliveries as of 12/31/2025 9,240 1,351 1,776 1,249
* Intercompany deliveries identified by parentheses.
Loss From Operations
BCA loss from operations was $885 million for the six months ended June 30, 2026, compared with $1,094 million in the same period in 2025 primarily reflecting higher deliveries, partially offset by higher spending on research and development. BCA loss from operations was $322 million for the three months ended June 30, 2026, compared with $557 million in the same period in 2025 primarily reflecting higher revenues and a lower reach-forward loss on the 767 program, partially offset by higher spending on research and development.
Backlog
Our total backlog represents the estimated transaction prices on unsatisfied and partially satisfied performance obligations to our customers where we believe it is probable that we will collect the consideration due and where no contingencies remain before we and the customer are required to perform. Backlog does not include prospective orders where customer-controlled contingencies remain, such as the customer receiving approval from its board of directors, shareholders or government or completing financing arrangements. All such contingencies must be satisfied or have expired prior to recording a new firm order even if satisfying such conditions is highly probable. Backlog excludes options and customer financing orders as well as orders where customers have the unilateral right to terminate. A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date. We address customer claims and requests for other contractual relief as they arise. The value of orders in backlog is
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adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of Accounting Standards Codification (ASC) 606.
BCA total backlog increased from $567,290 million as of December 31, 2025, to $596,724 million at June 30, 2026, reflecting new orders in excess of deliveries. Aircraft order cancellations during the six months ended June 30, 2026, totaled $2,777 million and primarily relate to 737 aircraft. Net ASC 606 adjustments during the six months ended June 30, 2026, totaled $2,089 million and primarily relate to 737 and 777X aircraft. ASC 606 adjustments include consideration of aircraft orders where a customer-controlled contingency may exist, as well as an assessment of whether the customer is committed to perform, impacts of geopolitical events or related sanctions, or whether it is probable that the customer will pay the full amount of consideration when it is due. We may experience reductions to backlog and/or significant order cancellations due to various factors including delivery delays, production disruptions and delays to entry into service of the 777X, 737-7 and/or 737-10.
Accounting Quantity
The following table provides details of the accounting quantities and firm orders by program. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders. Firm orders include certain military derivative aircraft that are not included in program accounting quantities. All revenues and costs associated with military derivative aircraft production are reported in the BDS segment.
Program
As of 6/30/2026 737 767 777 777X 787 †
Program accounting quantities 12,800 1,263 1,828 650 2,000
Undelivered units under firm orders 4,397 * 84 35 591 1,095 (2)
Cumulative firm orders 13,880 1,451 1,826 591 2,384
As of 12/31/2025 737 767 777 777X 787 †
Program accounting quantities 12,400 1,263 1,828 650 1,900
Undelivered units under firm orders 4,404 *
94 46 560 1,026 (2)
Cumulative firm orders 13,644 1,445 1,822 560 2,275
† Customer financing aircraft orders are identified in parentheses.
* Approximate undelivered orders by minor model for June 30, 2026 and December 31, 2025: 737-7 (6%, 6%), 737-8 (58%, 60%), 737-9 (5%, 5%) and 737-10 (31%, 29%).
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Program Highlights
737 Program We increased the accounting quantity by 400 units during the six months ended June 30, 2026, due to the program's normal progress of obtaining additional orders and delivering airplanes. During the first half of 2026, the 737 program began to transition from a production rate of 42 to 47 per month with the concurrence of the Federal Aviation Administration (FAA). We are also planning for additional production rate increases beyond 47 per month and began low-rate production on a new 737 production line in July 2026. The new production line must be production-certified by the FAA prior to first delivery.
We continue to expect certification of the 737-7 and 737-10 in 2026, including the final certification of the engine anti-ice solution. As of June 30, 2026, we had approximately 40 737-7 and 737-10 aircraft in inventory. We are following the lead of the FAA as we work through the certification process and the ultimate timing will be determined by the regulators.
If we are unable to deliver aircraft and/or increase production rates or certify the 737-7 and 737-10 models consistent with our assumptions, our financial position, results of operations and cash flows will be adversely affected.
See further discussion of the 737 MAX in Note 6 and Note 10 to our Condensed Consolidated Financial Statements .
767 Program The 767 assembly line includes the commercial program and a derivative to support the KC-46A Tanker program. We are targeting a production rate of approximately three aircraft per month. We expect to complete production of the 767 commercial program by 2027. This program recorded a reach-forward loss of $40 million during the first half of 2026 and $191 million in the same period in 2025.
See further discussion of the KC-46A Tanker program in Note 10 to our Condensed Consolidated Financial Statements.
777 and 777X Programs The accounting quantity for the 777 program extends through year-end 2027 and reflects the number of units we expect to produce and deliver by 2027.
Through the end of 2025, we obtained approval from the FAA to begin the first three phases of certification flight testing. In the first half of 2026, we received approval to begin the fourth phase of certification flight testing. We expect approval on the final phases of flight testing during the second half of 2026. We continue to work with our supplier and the FAA to incorporate and certify their solution related to the engine durability issue identified in 2025.
We continue to expect first delivery of the 777-9 to occur in 2027. 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 follow the lead of the FAA as we work through the certification process and the ultimate timing will be determined by the regulators.
The level of profitability on the 777X program will be subject to several factors. These factors include aircraft certification requirements and timing, resolution of the engine durability issue, flight test discoveries, design changes, change incorporation on completed aircraft, supply chain shortages, production disruption due to labor instability and supply chain disruption, customer considerations, delivery timing and negotiations, further production rate adjustments for the 777X or other commercial aircraft programs, and any change in the accounting quantity. One or more of these factors could result in additional reach-forward losses in future periods.
787 Program We increased the accounting quantity by 100 units during the three months ended March 31, 2026, due to the program's normal progress of obtaining additional orders and delivering airplanes. The accounting quantity was unchanged during the three months ended June 30, 2026. During the fourth quarter of 2025, we began increasing the production rate to eight per month. We continued to work toward stabilizing production during the first quarter of 2026. We briefly slowed the factory in April 2026
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due to supply chain shortages. The factory recovered in May, and we have now stabilized at eight per month enabled by continued supply chain and factory recovery.
Additional Considerations
On December 8, 2025, we completed the acquisition of Spirit AeroSystems Holdings, Inc. (Spirit). See Note 2 to our Condensed Consolidated Financial Statements.
Defense, Space & Security
Overview
On February 3, 2026, H.R. 7148, the Consolidated Appropriations Act, 2026, provided $839 billion in fiscal year 2026 (FY26) funding for the DoW, excluding military construction. The President’s Budget request for fiscal year 2027 (FY27) requests $1,450 billion for the DoW. The FY27 budget request for NASA is $19 billion, a $6 billion decrease from the NASA funding appropriated for FY26.
There is ongoing uncertainty with respect to final program-level spending for the DoW, NASA and other government agencies for FY26 and beyond. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on our financial position, results of operations and/or cash flows.
The non-U.S. market continues to be driven by complex and evolving security challenges and the need to modernize aging equipment and inventories. BDS expects that it will continue to have a wide range of opportunities across Asia, Europe and the Middle East given the diverse regional threats. At June 30, 2026, 27% of BDS backlog was attributable to non-U.S. customers.
Results of Operations
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Revenues $15,082 $12,915 $7,483 $6,617
Earnings/(loss) from operations $218 $265 ($15) $110
Operating margins 1.4 % 2.1 % (0.2) % 1.7 %
Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.
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Deliveries of new-build production units, including remanufactures and modifications, were as follows:
Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
F/A-18 Models 5 9 3 4
F-15 Models 4 4 3 3
CH-47 Chinook (New) 5 1 4
CH-47 Chinook (Renewed) 3 7 2 5
AH-64 Apache (New) 8 6 6 2
AH-64 Apache (Remanufactured) 24 21 9 10
MH-139 Grey Wolf 5 5 3 4
P-8 Models 2 2 1 1
KC-46 Tanker 8 5 4 5
Commercial Satellites 1 2 2
Total 65 62 35 36
Revenues
BDS revenues for the six months ended June 30, 2026, increased by $2,167 million compared with the same period in 2025. The increase was primarily due to increased revenues on proprietary and weapons programs, higher KC-46 volume and Foreign Military Sales to Israel and Japan, and the acquisition of Spirit's defense business. Revenue was further increased by $135 million lower net unfavorable cumulative contract catch-up adjustments compared to the prior year comparable period.
BDS revenues for the three months ended June 30, 2026, increased by $866 million compared with the same period in 2025. The increase was primarily due to increased revenues on proprietary and weapons programs, higher KC-46 volume and the acquisition of Spirit's defense business. The net cumulative contract catch-up adjustments were $11 million less unfavorable than the comparable period in the prior year.
Earnings/(Loss) From Operations
BDS earnings from operations for the six months ended June 30, 2026, was $218 million, compared with earnings from operations of $265 million in the same period in 2025. The $47 million decrease in earnings is primarily due to higher net unfavorable cumulative catch-up adjustments of $107 million compared to the prior year comparable period and higher general and administrative expense, partially offset by higher net volume and mix. The higher net unfavorable cumulative catch-up adjustments were primarily driven by the 2026 reach-forward loss on VC-25B ($280 million). See Note 10.
BDS loss from operations for the three months ended June 30, 2026, was $15 million compared with earnings from operations of $110 million in the same period in 2025. The $125 million decrease in earnings is primarily due to higher net unfavorable cumulative catch-up adjustments of $186 million compared to the prior year comparable period and higher general and administrative expense, partially offset by higher volume. The higher net unfavorable cumulative catch-up adjustments were primarily driven by the 2026 reach-forward loss on VC-25B ($280 million). See Note 10.
BDS earnings/(loss) from operations includes our share of earnings from equity method investments of $4 million and $8 million for the six and three months ended June 30, 2026, compared with $20 million and $14 million for the same periods in 2025.
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Backlog
BDS backlog was $85,322 million at June 30, 2026 compared with $84,786 million as of December 31, 2025. The increase reflects the timing of awards, partially offset by revenue recognized on contracts awarded in prior periods.
Additional Considerations
Our BDS business includes a variety of development programs which have complex design and technical challenges. Some of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily reduced award or incentive fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.
Some of our development programs are contracted on a fixed-price basis. Examples of significant fixed-price development programs include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B, and commercial and military satellites. A number of our ongoing fixed-price development programs have reach-forward losses. New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance. Many development programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and 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.
Global Services
Results of Operations
(Dollars in millions) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Revenues $10,714 $10,344 $5,344 $5,281
Earnings from operations $1,939 $1,992 $968 $1,049
Operating margins 18.1 % 19.3 % 18.1 % 19.9 %
Revenues
BGS revenues for the six months ended June 30, 2026 increased by $370 million compared with the same period in 2025, primarily due to higher commercial and government services revenue, partially offset by the absence of $632 million of revenue as a result of the Digital Aviation Solutions Divestiture. The net favorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2026, was $51 million higher than the net unfavorable impact in the prior year comparable period.
BGS revenues for the three months ended June 30, 2026 increased by $63 million compared with the same period in 2025, primarily due to higher commercial and government services revenue, partially offset by the absence of $327 million of revenue as a result of the Digital Aviation Solutions Divestiture. The net favorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2026 was $13 million higher than the net favorable impact in the prior year comparable period.
Earnings From Operations
BGS earnings from operations for the six months ended June 30, 2026 decreased by $53 million compared with the same period in 2025 primarily due to the absence of $145 million of earnings as a
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result of the Digital Aviation Solutions Divestiture, partially offset by higher government services revenue. A 2026 gain on asset disposition offset a similar gain on asset disposition in 2025. The net unfavorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2026, was $57 million lower than the net unfavorable impact in the prior year comparable period. The Digital Aviation Solutions Divestiture and ongoing disruption in one of our distribution businesses resulting from the transition to a new enterprise resource planning system in late 2025 contributed to the year-over-year reduction in operating margins.
BGS earnings from operations for the three months ended June 30, 2026 decreased by $81 million compared with the same period in 2025 primarily due to the absence of $78 million of earnings as a result of the Digital Aviation Solutions Divestiture. A 2026 gain on asset disposition offset a similar gain on asset disposition in 2025. The net unfavorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2026 was $16 million lower than the net unfavorable impact in the prior year comparable period. The year-over-year reduction in operating margins reflects the Digital Aviation Solutions Divestiture and ongoing disruption in one of our distribution businesses resulting from the transition to a new enterprise resource planning system in late 2025.
Backlog
BGS total backlog increased from $29,720 million at December 31, 2025 to $32,840 million at June 30, 2026, primarily due to the timing of awards, partially offset by revenue recognized on contracts awarded in prior years.
Liquidity and Capital Resources
Cash Flow Summary
(Dollars in millions) Six months ended June 30
2026 2025
Net loss ($435) ($643)
Non-cash items 2,376 2,101
Changes in assets and liabilities (756) (2,847)
Net cash provided/(used) by operating activities 1,185 (1,389)
Net cash provided/(used) by investing activities 3,629 (3,946)
Net cash used by financing activities (8,513) (725)
Effect of exchange rate changes on cash and cash equivalents 2 34
Net decrease in cash & cash equivalents, including restricted (3,697) (6,026)
Cash & cash equivalents, including restricted, at beginning of year 11,663 13,822
Cash & cash equivalents, including restricted, at end of period $7,966 $7,796
Operating Activities Net cash provided by operating activities was $1.2 billion during the six months ended June 30, 2026, compared with cash used of $1.4 billion during the same period in 2025, primarily driven by favorable changes in working capital.
Changes in assets and liabilities during the six months ended June 30, 2026, improved by $2.1 billion compared with the same period in 2025, primarily driven by favorable changes in Advances and progress billings ($5.3 billion) and Accounts payable ($1.4 billion), partially offset by unfavorable changes in Inventories ($3.5 billion), Other current assets ($0.9 billion), and Accrued liabilities ($0.8 billion). The change in Advances and progress billings was primarily driven by higher advances and progress billings at BCA and BDS. The changes in Accounts payable and Inventories reflect increased production in our commercial airplanes business.
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Payables related to suppliers who elected to participate in supply chain financing programs were largely unchanged during the six months ended June 30, 2026 and decreased by $1.1 billion during the same period in 2025. At June 30, 2026 and December 31, 2025, payables related to suppliers who elected to participate in supply chain programs were $2.0 billion.
Investing Activities Net cash provided by investing activities during the six months ended June 30, 2026, was $3.6 billion, compared with net cash used of $3.9 billion during the same period in 2025. The increase in cash provided was primarily due to net proceeds from investments of $5.6 billion in 2026 compared with net contributions to investments of $2.7 billion in 2025. During the six months ended June 30, 2026 and 2025, capital expenditures were $2.0 billion and $1.1 billion. We continue to expect capital expenditures in 2026 to be higher than in 2025.
Financing Activities Net cash used by financing activities was $8.5 billion during the six months ended June 30, 2026, compared with net cash used of $0.7 billion during the same period in 2025, primarily due to $7.8 billion higher net repayments.
As of June 30, 2026, the total debt balance was $45.9 billion, down from $54.1 billion at December 31, 2025. At June 30, 2026, $4.6 billion of debt was classified as short-term.
Capital Resources
At June 30, 2026, we had $7.2 billion of cash, $12.8 billion of short-term investments, and $10.0 billion of unused borrowing capacity on revolving credit line agreements. Our $3.0 billion, 364-day revolving credit agreement expiring in August 2026, $3.0 billion, five-year revolving credit agreement expiring in August 2028 and $4.0 billion, five-year revolving credit agreement expiring in May 2029 each remain in effect. The 364-day credit facility has a one-year term out option which allows us to extend the maturity of any borrowings until August 2027. We anticipate that these credit lines will primarily serve as back-up liquidity to support our general corporate borrowing needs. We continue to be in compliance with all covenants contained in our debt and credit facility agreements.
We currently maintain investment grade credit ratings across all three credit rating agencies. In June 2026, Fitch affirmed the BBB- credit rating and revised the outlook to positive from stable. At S&P, we are rated BBB- with a stable outlook, and at Moody’s, we are rated Baa3 with a stable outlook.
We may, from time to time, purchase, redeem or retire any of our outstanding debt securities in open market or privately negotiated transactions, by tender offer or otherwise, after consideration of market conditions, our liquidity needs and other factors.
We expect to be able to access capital markets when we require additional funding to support our operations, pay off existing debt, address impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements; however, a number of factors could increase the cost of borrowing, jeopardize our ability to incur debt on terms acceptable to us, and negatively impact our access to the capital and financial markets and our ability to fund our operations and commitments. These factors include downgrades in our credit ratings, disruptions or declines in the global capital markets, a decline in our financial performance or outlook, a delay in our ability to ramp up production and deliveries, and changes in demand for our products and services. The occurrence of any or all of these events may adversely affect our ability to fund our operations and financing or contractual commitments. See “Risks Related to Financing and Liquidity” under “Item 1A. Risk Factors” of our 2025 Annual Report on Form 10-K.
Any future borrowings may affect our credit ratings and are subject to various debt covenants. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined in the credit agreements). When considering debt covenants, we continue to have substantial borrowing capacity.
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Off-Balance Sheet Arrangements
We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 11 to our Condensed Consolidated Financial Statements.
Contingent Obligations
We have significant contingent obligations that arise in the ordinary course of business, which include the following:
Legal Various legal proceedings, claims and investigations are pending against us. Legal contingencies are discussed in Note 18 to our Condensed Consolidated Financial Statements.
Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $971 million at June 30, 2026. For additional information, see Note 10 to our Condensed Consolidated Financial Statements.
Non-GAAP Measures
Core Operating Earnings/(Loss), Core Operating Margins and Core Earnings/(Loss) Per Share
Our unaudited condensed consolidated interim financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings/(loss), Core operating margins and Core earnings/(loss) per share exclude the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core earnings/(loss) per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement income. Non-operating pension and postretirement income represents the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to BCA and certain BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.
The Pension FAS/CAS service cost adjustments recognized in Earnings/(loss) from operations were benefits of $185 million and $92 million for the six and three months ended June 30, 2026, compared with benefits of $390 million and $197 million for the same periods in 2025 . The lower benefits in 2026 were primarily due to reductions in allocated pension cost year over year. The non-operating pension expense included in Other income, net was $147 million and $73 million for the six and three months ended June 30, 2026, compared with income of $85 million and $42 million for the same periods in 2025 . The higher expense in 2026 was primarily due to higher amortization of net actuarial losses and lower expected return on plan assets, partially offset by lower interest costs. For further discussion of pension and other postretirement costs see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" on pages 28 and 29 of our 2025 Annual Report on Form 10-K.
Management uses Core operating earnings/(loss), Core operating margins and Core earnings/(loss) per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as unallocated pension and other postretirement benefit costs primarily represent costs driven by market factors and costs not allocable to U.S. government contracts.
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Reconciliation of Non-GAAP Measures to GAAP Measures
The table below reconciles the non-GAAP financial measures of Core operating earnings/(loss), Core operating margins and Core loss per share with the most directly comparable GAAP financial measures of Earnings/(loss) from operations, Operating margins and Diluted loss per share.
(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30
2026 2025 2026 2025
Revenues $46,777 $42,245 $24,560 $22,749
Earnings/(loss) from operations, as reported $604 $285 $156 ($176)
Operating margins 1.3 % 0.7 % 0.6 % (0.8) %
Pension FAS/CAS service cost adjustment (1)
($185) ($390) ($92) ($197)
Postretirement FAS/CAS service cost adjustment (1)
(125) (129) (63) (60)
FAS/CAS service cost adjustment (1)
($310) ($519) ($155) ($257)
Core operating earnings/(loss) (non-GAAP) $294 ($234) $1 ($433)
Core operating margins (non-GAAP) 0.6 % (0.6) % 0.0 % (1.9) %
Diluted loss per share, as reported ($0.79) ($1.09) ($0.67) ($0.92)
Pension FAS/CAS service cost adjustment (1)
(0.23) (0.52) (0.12) (0.26)
Postretirement FAS/CAS service cost adjustment (1)
(0.16) (0.17) (0.08) (0.08)
Non-operating pension expense/(income) (2)
0.18 (0.11) 0.10 (0.05)
Non-operating postretirement income (2)
(0.02) (0.01) (0.01) (0.01)
Provision for deferred income taxes on adjustments (3)
0.05 0.17 0.02 0.08
Core loss per share (non-GAAP) ($0.97) ($1.73) ($0.76) ($1.24)
Diluted weighted average common shares outstanding (in millions) 789.2 755.0 790.6 756.6
(1) FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. This adjustment is excluded from Core operating earnings/(loss) (non-GAAP).
(2) Non-operating pension and postretirement expense/(income) represents the components of net periodic benefit costs/(income) other than service cost. This expense/(income) is included in Other income, net and is excluded from Core operating earnings/(loss) (non-GAAP).
(3) The income tax impact is calculated using the U.S. corporate statutory tax rate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes to our market risk since December 31, 2025.
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