Goldman Sachs analysts, under the leadership of Noah Poponak, have released their earnings preview for the Aerospace & Defense sector’s third quarter of 2025, highlighting selective opportunities while noting potential risks in certain subsectors.
The analysis points to ongoing robust performance in commercial aerospace, spanning both original equipment manufacturing and aftermarket services, along with positive momentum in defense technology. However, the report expresses caution regarding government IT services, particularly due to DOGE-related initiatives, and certain defense hardware companies.
Within their coverage universe, Goldman’s team expresses optimism for TransDigm, Huntington Ingalls, Woodward, and AeroVironment heading into earnings season. Conversely, they flag potential earnings risks for Booz Allen, General Dynamics, and Lockheed Martin.
In the commercial aerospace segment, Boeing’s 737 MAX production has maintained a steady rate of 38 units per month since May, with quality improvements holding steady. The company is expected to seek FAA approval for increasing production to 42 units monthly by year-end. The 787 program currently produces seven aircraft monthly, with plans to increase to ten units monthly next year. However, the 777X program faces delays until 2027 due to extended certification processes.
The business jet market continues to show favorable conditions, supported by above-pre-pandemic flight activity and controlled new aircraft supply. While forward indicators remain positive and book-to-bill ratios are solid, recent quarters have shown some deceleration in improvement metrics.
In defense technology, the Department of Defense continues its shift toward more agile and commercial suppliers. Companies in this subsector are demonstrating clearer growth potential through detailed program win announcements. The analysts expect ongoing momentum driven by structural tailwinds and potential program wins as catalysts.
For defense hardware, Goldman maintains a selective approach, favoring companies aligned with high-growth areas within the DoD’s $1 trillion FY26 budget request. Priority areas include domestic shipbuilding, munitions production, and missile defense systems.
Government IT services face challenges due to efficiency initiatives and DOGE directives affecting federal civilian agencies and DoD contracts. The ongoing government shutdown that began October 1, 2025, may impact new contract awards and payment processing.
Among specific companies, TransDigm is expected to show accelerated growth in aerospace aftermarket and OE organic revenue. Huntington Ingalls could benefit from improved hiring and retention metrics, while Woodward maintains a robust medium-to-long term outlook. AeroVironment is anticipated to continue securing large awards with significant estimate revision potential.
On the cautionary side, Booz Allen Hamilton faces challenges from DOGE-related cancellations and funding environment pressures. General Dynamics may encounter Gulfstream margin challenges below market expectations, while Lockheed Martin, despite recent stock
appreciation, faces potential fundamental challenges affecting growth, margins, and free cash flow.
The analysis reflects a complex landscape where sector-specific dynamics, government initiatives, and company-specific factors create a varied opportunity set across the aerospace and defense industry. The ongoing shift in Defense Department priorities, combined with efficiency initiatives and market conditions, continues to shape the competitive environment for industry participants.