The 2026 Farnborough Airshow showed that aerospace and defense demand remains strong, with supply-chain and aftermarket momentum continuing

Overview

This report is Goldman Sachs’ aerospace and defense industry conference takeaways following the 2026 Farnborough Air Show. It summarizes major aircraft OEM orders, supply-chain and aftermarket trends, and key points from meetings with management teams at 16 companies. The overall conclusion is that commercial aviation demand remains strong, Boeing and Airbus production capabilities are improving, and aftermarket volumes and pricing remain robust; on the defense side, growth is driven by unmanned systems, counter-drone systems, electronic warfare, space, missiles and munitions, and Canadian and U.S. defense budgets.

Core views

Core views include: First, demand for new-aircraft orders remains strong. SMBC Aviation Capital ordered 40 737 MAX-8s and 60 737 MAX-10s from Boeing, and 35 A320neos and 65 A321neos from Airbus; Embraer also received 25 firm orders and 30 additional options. Second, although the commercial aerospace supply chain still faces destocking and production-ramp issues, there has been no structural deterioration in demand. Third, the aftermarket is supported by flight activity, parts availability, pricing, and engine MRO demand. Fourth, defense budgets, drones and counter-drone systems, electronic warfare, and space capabilities are becoming key medium- to long-term growth drivers for multiple companies. Fifth, eVTOL and hybrid-electric propulsion are making technological progress, but certification, mass production, and commercialization timelines still require validation.

Analysis framework

The report primarily uses airshow order observations, company management meeting notes, and subsidiary-level thematic synthesis, mapping macro industry demand, OEM production ramps, supply-chain inventories, aftermarket trends, defense budgets, and new technology platforms to relevant listed and uncovered companies.

Methodology notes

• Industry conference takeawaysFarnborough Air Show takeaways

  Assess aerospace and defense industry-chain momentum through airshow orders, management meetings, and event feedback.

  This approach is suited to capturing order demand, supply-chain bottlenecks, aftermarket strength, defense budget priorities, and new-technology commercialization progress, but it is not a complete valuation model for any single company.

• Company comparisonManagement meeting read-through

  Synthesize feedback from different company management teams into industry-chain themes.

  The report maps feedback from HEI, HXL, WWD, BETA, LDOF.MI, EMBJ, AVAV, CACI, JOBY, CAE, SARO, DCO, KRMN, and LOAR to aftermarket, defense, space, eVTOL, MRO, and supply-chain themes.

• Ratings and target pricesGoldman Sachs rating framework

  The report discloses Buy, Neutral, Sell, and not-covered statuses for multiple companies.

  These ratings represent stock views within the Goldman Sachs coverage framework; this report itself is more focused on conference takeaways and does not provide a single industry target price or unified industry rating.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• HEICO Corp (HEI)

  Beneficiary of PMA parts and the aviation aftermarket

  Strengths

  Scale leadership, approximately 500-700 new PMA parts launched annually, attractive pricing and availability for customers, and an active M&A pipeline.

  Weaknesses

  Private-market valuations are high, and rising transaction multiples could affect acquisition returns.

  Comparison

  Compared with OE parts suppliers, HEI gains share through lower prices and better parts availability.

  Risks

  Increased acquisition competition, scarce transactions, excessive valuation, and a decline in aviation activity.

• Hexcel Corp. (HXL)

  Composite materials and commercial aerospace supply-chain company

  Strengths

  Improving A350-related production, destocking largely complete across most platforms, and scale recovery supporting cost absorption.

  Weaknesses

  Operating margin remains approximately 200 basis points below 2019 levels, while the 737 MAX still faces inventory-clearing pressure.

  Comparison

  Compared with more aftermarket-oriented companies, HXL is more exposed to OEM production rates and inventory cycles.

  Risks

  Hiring, supply-chain timing, A350 interior issues, and unclear pricing pass-through under long-term agreements.

• Woodward Inc. (WWD)

  Beneficiary of aircraft-engine components, aftermarket, and defense platforms

  Strengths

  Higher content on next-generation engines; LEAP and GTF have significantly more components than older platforms, with aftermarket multiples above OE.

  Weaknesses

  OE production forecasts are highly affected by external factors, leading the company to adopt cautious forecasts.

  Comparison

  Compared with pure-play OE suppliers, WWD emphasizes higher content on new programs and aftermarket opportunities for legacy engines.

  Risks

  Uncertainty over engine retirement timing and delays in converting defense budget authorizations into spending.

• Beta Technologies Inc (BETA)

  Hybrid-electric VTOL and autonomous defense aviation platform

  Strengths

  The MV250 has defense applications, including contested-environment logistics, launch effects, and 500 kW power output; it is participating in GE high-altitude hybrid-electric propulsion testing.

  Weaknesses

  The large-aircraft model remains at an early stage, and commercialization and military procurement timing have not been validated.

  Comparison

  Compared with a pure urban air mobility narrative, BETA has clearer applications in defense hybrid-electric platforms.

  Risks

  Technology validation, conversion of military exercises into orders, certification, mass production, and funding needs.

• Leonardo SpA (LDOF.MI)

  European defense, helicopter, and systems-integration company

  Strengths

  Michelangelo Dome is progressing; demand on both military and civilian sides supports the helicopter market, and service revenue is recurring.

  Weaknesses

  The Aerostructures business remains under negotiation, including evaluation of a potential joint venture.

  Comparison

  The company views itself as one of the few European manufacturers with a complete portfolio of integrated solutions.

  Risks

  European cooperation requirements, Ukraine testing progress, State Guardian 2028-29 milestones, and uncertainty over the disposition of the structural business.

• Embraer (EMBJ)

  Regional aircraft, military transport, and business jet OEM

  Strengths

  New airshow orders, a clear KC-390 production ramp, and potential demand for business jets and a new narrowbody aircraft.

  Weaknesses

  There is no decision or timetable yet for the new product; the company must prioritize EVE certification and assess investment returns.

  Comparison

  Compared with Boeing and Airbus, Embraer has differentiated positioning in regional aircraft, business jets, and the KC-390 defense transport aircraft.

  Risks

  EVE certification, financing partners, production ramp-up, and conversion of customer demand.

• AeroVironment Inc (AVAV)

  Drone, counter-drone, and space defense opportunity

  Strengths

  The company is positive on lethal drones, non-lethal drones, C-UAS, and space; Switchblade, LOCUST, and FE1 projects are progressing.

  Weaknesses

  Some projects will contribute revenue later, with FE1 expected to become more significant in FY29.

  Comparison

  Compared with traditional defense platforms, AVAV is more concentrated in emerging unmanned and counter-unmanned systems.

  Risks

  Budget approval timing, anticipated regime changes, production ramp-up, and internal portfolio pressure from product substitution.

• CACI International (CACI)

  Electronic warfare, space subsystems, intelligence processing, and secure network services

  Strengths

  Significant EW and Space growth opportunities, long-range detection and engagement capabilities from SkyValor, and a high share of national-security revenue.

  Weaknesses

  The Digital and Network business is large, but the high-growth narrative comes mainly from EW and Space.

  Comparison

  Compared with most new entrants focused on Group 1-3 drones, SkyValor covers Groups 1-5 and provides a longer response window.

  Risks

  Government shutdowns, budget-spending timing, LRIP-to-full-production transition, and contract execution.

• Joby Aviation Inc (JOBY)

  eVTOL and defense hybrid-VTOL platform

  Strengths

  The S4 is in the late stages of Type Certification; the company is participating in five eIPP projects and developing a defense hybrid VTOL with L3Harris.

  Weaknesses

  Goldman Sachs rates it Sell; autonomous flight may still require 8-10 years, implying a lengthy commercialization timeline.

  Comparison

  Joby is one of the few manufacturers selected with a VTOL aircraft in eIPP, but its near-term revenue path remains constrained by certification.

  Risks

  FAA certification, stressed-environment testing, premature capacity investment, UAM demand realization, and regulatory constraints.

• CAE Inc. (CAE)

  Aviation simulators, flight training, and defense training

  Strengths

  Approximately two-thirds of training revenue is recurring, pilots require recurrent training every six months, and higher Canadian defense spending creates long-term opportunities.

  Weaknesses

  The commercial network was previously overbuilt, requiring loss-making sites to close and the simulator network to be optimized.

  Comparison

  Compared with equipment sales, CAE’s training business is more recurring; defense revenue conversion may be delayed until after 2030.

  Risks

  Boeing and Airbus deliveries affecting simulator sales, a long conversion timeline for Canadian defense investment into revenue, and margin pressure from legacy programs.

• StandardAero (SARO)

  Engine MRO and component repair

  Strengths

  The outsourced aftermarket share for LEAP is expected to rise; LEAP capacity is booked through 2032, CF34 through 2030, and CFM-56 has a 12-18-month backlog.

  Weaknesses

  The LEAP program margin is not expected to turn positive until 2Q26 for the first time.

  Comparison

  Compared with CFM-56, which has many authorized service providers, LEAP has fewer authorized service providers, benefiting SARO’s share.

  Risks

  Engine aftermarket outsourcing pace, GE authorization policy, MRO capacity, and margin delivery.

• Ducommun Inc. (DCO)

  Aerospace engineering products and defense components supplier

  Strengths

  Vision 2027 is progressing well; engineering products account for approximately 23% of revenue, with long-term opportunities in defense missile and munitions programs.

  Weaknesses

  Commercial aerospace remains affected by destocking, and 2H momentum could adjust after 1Q pull-forward.

  Comparison

  Engineering products have higher margins than the company’s other revenue sources, supporting portfolio quality improvement.

  Risks

  OE pull-forward timing, continued destocking, delivery of the Vision 2032 outlook, and customer program execution.

• Karman Holdings Inc (KRMN)

  High-end space and defense components, structures, and supply-chain bottleneck resolver

  Strengths

  2026 revenue growth guidance of +56%, with organic and inorganic growth each accounting for approximately half, and adjusted EBITDA margin of approximately 30%.

  Weaknesses

  The company is not covered, so investors must independently assess valuation and liquidity.

  Comparison

  The company positions itself as a prime-contractor partner rather than a direct competitor, focusing on supply-chain and critical-component bottlenecks.

  Risks

  Fixed-price contracts, M&A integration, closing of Walker Precision Engineering, and defense-program timing.

• Loar Holdings Inc (LOAR)

  Platform acquirer in aerospace and defense components

  Strengths

  Approximately $700mn of organic revenue opportunity over the next five years, expected to add 1-3% annual organic revenue growth and double EBITDA over the same period.

  Weaknesses

  Private-market acquisition multiples are already high, with some transactions at 20x or above.

  Comparison

  Compared with other active acquirers such as HEI and KRMN, LOAR emphasizes discipline and selection of high-quality niche assets.

  Risks

  Acquisition valuations, transaction competition, integration execution, and valuation risk from high Conviction List expectations.

Key data

• Number of companies covered in meetings16 companiesThe report states that it met with 16 companies within the Global Aerospace & Defense universe.
• Largest Boeing order40 737 MAX-8s, 60 737 MAX-10sThe orders came from SMBC Aviation Capital and were all firm orders.
• Largest Airbus order35 A320neos, 65 A321neosThese orders also came from SMBC Aviation Capital and were all firm orders.
• New Embraer orders25 firm orders, 30 additional optionsThis reflects continued resilience in demand for regional jets and related products.
• HEICO new PMA partsApproximately 500-700 new parts annuallyHEI emphasized its PMA scale, price advantage, and parts-availability advantage.
• Hexcel hiring planApproximately 200 hires in 1H and another approximately 200 expected in 2HHXL is focused on workforce levels and production-ramp timing for platforms such as the A350.
• Hexcel margin targetTargeting a return to an 18% marginAt the current equivalent revenue run rate, operating margin is approximately 200 basis points below 2019 levels.
• BETA MV250 performance target2,000 lbs payload, >170 knots cruise speed, 250 nautical miles fully loaded rangeThe MV250 is an autonomous hybrid-electric VTOL defense platform being developed with GE.
• Leonardo helicopter revenue mixApproximately 70% military and 30% non-military, with services accounting for approximately 40% of segment revenueThe company said military helicopter demand is particularly strong.
• Embraer KC-390 production path6 aircraft this year, reaching 10 aircraft per year by 2030; plant designed for a maximum of 18 aircraft per yearThe company said the KC aircraft backlog is 42 aircraft.
• AVAV 2027 budget request$1.1bnThe company sees opportunities in lethal drones, non-lethal drones, counter-drone systems, and space.
• CACI FY26 revenue guidance$9.5bn-$9.6bnMore than $1bn is related to space, while Processing accounts for less than half.
• SkyValor capability>75km detection, 35km engagementCACI said this provides a longer response window than some new entrants focused on 1-3km detection.
• CAE network optimizationClosing 5-6 loss-making sites, involving approximately 25 simulatorsCAE plans to optimize the bottom approximately 10% of simulators on the commercial passenger side.
• StandardAero LEAP outsourcing rateIncreasing from approximately 15% to approximately 30% by 2030The company expects LEAP program revenue of approximately $1bn at that time, with a mid-teens margin.
• Ducommun engineering products revenue shareApproximately 23%This was a mid-single-digit percentage in 2019; the company plans to refresh its Vision 2032 outlook in September.
• Karman 2026 revenue growth guidance+56%The company said organic and inorganic growth are roughly evenly split, with a long-term organic growth target of 20-25% through 2030.
• Loar organic revenue opportunity$700mn over the next 5 yearsThe company expects to contribute 1-3% annual organic revenue growth and double EBITDA over the same period.

Impact & implications

For investment implications, the report reinforces multiple positive aerospace and defense industry-chain themes: commercial aviation OEM production ramps and aftermarket demand support parts and MRO companies; defense budgets, C-UAS, electronic warfare, space, and the missile and munitions supply chain support defense electronics and high-end components companies; eVTOL and hybrid-electric propulsion offer long-term optionality but remain constrained in the near term by certification, capacity, and business-model validation.

Risks

• If Boeing and Airbus production ramps fall short of expectations, supplier revenue recognition and inventory digestion could be adversely affected.
• A deterioration in fuel prices, geopolitical conflicts, or airline financial pressure could change aviation activity levels and aftermarket demand.
• Conversion of defense budgets from authorization to actual spending is subject to delays; spending cuts and government workforce attrition could affect contract execution.
• eVTOL, hybrid-electric propulsion, and autonomous-flight projects face certification, testing, mass-production, funding, and commercialization timing risks.
• High M&A activity and rising private-market valuations could compress future returns for acquisition-driven companies such as HEI, KRMN, and LOAR.
• Supply-chain destocking, hiring, material availability, and capacity mismatches could still cause quarterly volatility.

What to watch

• Actual production-ramp timing for the Boeing 737 MAX, Airbus A320neo/A321neo, and A350.
• Changes in flight cycles, parts prices, MRO outsourcing rates, and engine-repair backlogs in the aviation aftermarket.
• U.S. 2027 defense budgets, Canadian defense-spending targets, and the speed of conversion from budget authorization to actual spending.
• Contract, LRIP, and production progress for C-UAS, EW, Space, Switchblade, LOCUST, SkyValor, Spectral, and other programs.
• Joby S4 FAA Type Certification, eIPP project contracts, BETA MV250 military exercises, and subsequent validation of GE hybrid-electric propulsion.
• Acquisition multiples, transaction supply, and integration results for HEI, KRMN, LOAR, SARO, and DCO.
• Embraer KC-390 production ramp-up, EVE certification priorities, and decisions on potential new narrowbody aircraft or large business-jet programs.