CAE (CAE) Q2 2026 earnings summary

Executive summary

• Q2 FY26 revenue rose 9% year-over-year to $1,236.6 million, with operating income up 31% to $155.3 million and adjusted segment operating income up 4%.

• Net income attributable to equity holders increased 41% to $73.9 million, and EPS grew 44% to $0.23, with adjusted EPS at $0.23, slightly below last year’s $0.24.

• Free cash flow surged 44% to $201.0 million, and net cash from operating activities rose to $214 million.

• A comprehensive transformation plan is underway, focusing on portfolio optimization, disciplined capital management, operational excellence, and leadership restructuring to drive long-term shareholder value.

• Organizational changes include consolidating business units, eliminating the COO role, and new appointments to streamline operations and improve accountability.

Financial highlights

• Adjusted segment operating income was $155.3 million, up 4% year-over-year, with an operating margin of 12.6%.

• Adjusted EPS was $0.23, slightly down from $0.24 last year; net finance expense increased to $56.9 million due to acquisition and lease costs.

• Net cash from operating activities increased 32% to $214.0 million; free cash flow increased 44% to $201.0 million.

• Capital expenditures totaled $87.6 million, with 85% for growth, and a 10% year-over-year CapEx reduction expected for FY26.

• Net debt was $3.2 billion, with a net debt-to-adjusted EBITDA ratio of 2.66x, targeting 2.5x by year-end.

Outlook and guidance

• Strong free cash flow is expected for the year, with a conversion of adjusted net income of approximately 150%.

• Civil segment annual adjusted operating income expected roughly in line with prior year, with margin in the 20% range; more pronounced recovery benefits anticipated in FY27 and beyond.

• Defense segment maintains a robust outlook, with low double-digit annual adjusted operating income growth and margin of 8–8.5%, supported by a strong backlog and ongoing modernization programs.

• Capital expenditures expected to be about 10% lower than fiscal 2025, mainly due to a 25% reduction in Civil capex.

• A detailed transformation blueprint with financial and operational targets will be shared by fiscal year-end.