AAR CORP Reports Stellar First Quarter Fiscal Results for 2026

AAR CORP Reports First Quarter Fiscal Results for 2026

AAR CORP (NYSE: AIR), a leader in aviation services for both commercial and governmental sectors, has released impressive financial results for the first quarter of fiscal year 2026, which concluded on August 31, 2025. The company reported significant growth across various facets of its operations, reinforcing its robust market presence.

Q1 Highlights

For the first quarter, AAR achieved sales of $740 million, representing a 12% increase compared to the same period last year. Notably, the company recorded a GAAP EPS of $0.95, alongside an adjusted diluted EPS of $1.08, marking a remarkable 27% increase. Furthermore, AAR’s net income reached $34 million and adjusted EBITDA climbed to $87 million, reflecting an 18% growth. The adjusted EBITDA margin also improved, rising to 11.7% from 11.3% in the previous year.

According to John M. Holmes, AAR's Chairman, President, and CEO, "Our first quarter was a strong start to the fiscal year as we drove significant growth across all of our segments. Adjusted sales were up 17% organically largely driven by Parts Supply which was up 27% in the quarter." Holmes emphasized the exceptional performance of their new parts distribution activities, highlighting the increase in business and market share.

Strategic Investments and Growth Initiatives

During this quarter, AAR made strategic investments aimed at sustaining the rapid growth in its Parts Supply segment. The acquisition of Aerostrat, a company specializing in long-range maintenance planning software, will augment AAR's Trax software capabilities, paving the way for enhanced operational efficiency. Holmes expressed optimism as he remarked, "As we convert these investments into profitable growth, we expect to generate positive operating cash flows over the remainder of the fiscal year."

Key business developments during this quarter involved the expansion of Trax's agreement with JetBlue Airways, now incorporating eMobility and cloud hosting solutions. Additionally, AAR secured a multi-year exclusive defense agreement with AmSafe Bridport to distribute their products across military platforms. They were also awarded a contract worth up to $85 million from the Defense Logistics Agency Troop Support for specialized shipping solutions. These endeavors signal AAR's commitment to client expansion and its capacity to meet growing market demands.

Financial Performance Summary

Analyzing the overall financials, AAR's sales from commercial customers increased by 11%, while those from government customers surged by 15%, underlining the company's successful market penetration on both fronts. Consolidated sales reached $739.6 million, a marked improvement from last year's $661.7 million.

The operational performance was notable, with selling, general and administrative expenses reduced from $75.9 million to $71.2 million. Adjusted operating margins also improved from 9.1% to 9.7%. The company has managed to keep its net interest expenses relatively stable, signaling a solid financial footing as it continues to expand.

However, AAR did report cash flow used in operating activities of $44.9 million, which was a jump from $18.6 million in the prior year. As of the end of August 2025, net debt stood at $950 million, with a net leverage ratio of 2.82x.

Future Outlook

Looking ahead, AAR shows strong anticipation for continued sales growth across all segments, especially in Parts Supply, where demand remains exceptionally high. Holmes also noted that current hangars have a multi-year backlog, indicating solid future revenues. New capacities in Oklahoma City and Miami are also set to come online in 2026 and have already secured orders.

Further investment in inventory to support Parts Supply demand was mentioned, indicating AAR’s proactive approach in preparing for market expansions. With ongoing government contracts and enhanced solutions through Trax, the company is well-positioned for sustained growth in a competitive marketplace.

As noted by Holmes, "We remain focused on our strategic objectives, and our financial position is strong." AAR CORP's strategic initiatives and robust financial results portray a company resilient in navigating the complexities of the aviation services sector, poised for future growth.