Aerospace and defense company Woodward (NASDAQ: WWD) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 8% year on year to $915.4 million. The company’s full-year revenue guidance of $3.49 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $1.76 per share was 7.2% above analysts’ consensus estimates.

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StockStory’s Take

Woodward’s second quarter results reflected strong momentum in its core Aerospace segment, with management citing robust aftermarket demand, continued growth in smart defense programs, and disciplined execution across the business. CEO Chip Blankenship highlighted that aftermarket service activity for newer engine platforms like LEAP and GTF is now approaching legacy volumes, which has meaningfully boosted Aero services revenue. In the Industrial segment, ongoing strength in gas turbine and marine applications offset anticipated declines in China on-highway truck demand, while operational improvements drove core margin expansion. Blankenship emphasized, “LEAP and GTF revenue is now approaching that of legacy products and is delivering a meaningful impact to our Aero services growth profile.”

Looking forward, Woodward’s updated guidance is shaped by anticipated sustained growth in Aerospace, new commercial wins, and strategic investments in production capabilities. Management is prioritizing automation, facility expansion for the Airbus A350 spoiler actuator program, and integration of the Safran electromechanical actuation business. CFO Bill Lacey noted that increased working capital is being deployed to support higher sales and mitigate supply chain uncertainties, while capital expenditures will rise in the next two years to enable new program launches. Blankenship emphasized, “We’re investing in ourselves for the highest return, and these developments strengthen our core capabilities ahead of the next single aisle competition.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong aftermarket activity in Aerospace, steady defense demand, and operational improvements in Industrial, while new program wins and acquisitions positioned Woodward for longer-term growth.

• Aerospace aftermarket momentum: Rapid growth in aftermarket services for LEAP and GTF engine platforms drove significant revenue gains in commercial Aero, with volumes now approaching legacy engine levels. Management expects this trend to continue as airlines extend the life of legacy fleets amidst slower new aircraft deliveries.

• Smart defense programs: Defense OEM sales surged, led by “smart defense” programs like JDAM, contributing to higher segment growth but shifting the revenue mix toward lower-margin products. Management sees strong demand persisting through at least mid-2026 but remains cautious beyond that horizon.

• Industrial margin resilience: Despite a decline in reported Industrial sales due to lower China on-highway truck demand and the combustion business divestiture, core Industrial sales grew and margins expanded, reflecting pricing discipline and operational gains in gas turbines, marine, and power generation.

• Airbus A350 spoiler actuator win: The company was selected to provide spoiler control actuators for the Airbus A350, marking its first primary flight control win on a major commercial platform. This expands Woodward’s Tier 1 presence with Airbus and is expected to generate long-term service and hardware opportunities.

• Safran electromechanical acquisition: Woodward completed its acquisition of Safran’s North American electromechanical actuation business, strengthening its technology portfolio and positioning the company for additional commercial and business jet content on platforms such as the A350, Embraer E175/E190-E2, and Gulfstream 650/700/800.

Drivers of Future Performance

Woodward’s outlook is driven by continued Aerospace aftermarket strength, facility investments for new programs, and execution on recently acquired platforms, though rising costs and supply chain risks remain key factors.

• Aftermarket and OEM growth: Management expects sustained growth in commercial Aerospace services, driven by continued utilization of legacy aircraft and increasing LEAP/GTF engine cycles. New orders for Airbus and defense programs are projected to support stable OEM demand.

• Facility and automation investments: Capital expenditures will rise in 2026 and 2027 as Woodward builds a new vertically integrated, automated facility for the Airbus A350 spoiler actuator program. These investments are designed to enhance productivity, support future growth, and improve supply chain resilience, but will temporarily pressure free cash flow.

• Integration and cost discipline: The integration of Safran’s business and ongoing lean initiatives in Industrial are expected to drive incremental margin improvement, though management cautions that inflation, working capital needs, and supply chain volatility could impact earnings and cash flow in the near term.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the ramp-up of the Airbus A350 spoiler actuator program and progress on the new U.S. manufacturing facility, (2) the pace of integration and operational improvements from the Safran electromechanical acquisition, and (3) sustained aftermarket demand for both legacy and LEAP/GTF engine platforms. Execution on capital allocation and managing inflationary headwinds will also be key signposts for Woodward’s performance trajectory.

Woodward currently trades at $252.99, down from $258.50 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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