CAE (CAE) Q3 2026 earnings summary

Executive summary

• Q3 FY26 revenue increased 2% year-over-year to $1,252.1 million, with adjusted segment operating income up 3% to $195.8 million and adjusted EPS rising 17% to $0.34; net income attributable to equity holders fell 35% to $108.9 million, and EPS declined 36% to $0.34.

• Free cash flow was stable at $411.3 million, and net debt-to-adjusted EBITDA improved to 2.30x, surpassing the year-end target.

• Transformation plan underway, focusing on portfolio optimization, capital discipline, operational excellence, divestiture of non-core assets (~8% of revenue), and rationalization of simulators.

• Leadership changes include a new CFO and CEO transition completed in August 2025, with ongoing organizational adjustments to support transformation.

Financial highlights

• Adjusted segment operating income rose 3% to $195.8 million, with a margin of 15.6%; adjusted EPS was $0.34, up from $0.29.

• Adjusted net income was $108.9 million, up from $91.9 million after excluding prior-year one-time gains; operating income declined 25% year-over-year due to the absence of a $72.6 million gain on SIMCOM remeasurement.

• Adjusted backlog stood at $19.2 billion, down 5% year-over-year, with adjusted order intake at $1,143.5 million, down 48%; book-to-sales ratio was 0.91 for the quarter.

• Free cash flow reached $411.3 million, with capital expenditures at $50.6 million, 75% for growth.

• Net debt stood at $2.8 billion, with net debt to adjusted EBITDA at 2.3x.

Outlook and guidance

• Civil adjusted segment operating income for FY26 expected to decline by mid-single digits, with margin in the 20% range, due to softer market conditions and accelerated network rationalization.

• Defense adjusted segment operating income projected to grow over 20% year-over-year, with margin around 8.5%, supported by strong backlog and rising defense budgets.

• Total capital expenditures expected to be over 10% lower than last year, with Civil capex down about 30% year-over-year.

• Cash conversion rate projected at ~150% of adjusted net income; annual effective tax rate expected at ~25%.

• Long-term fundamentals in both civil and defense remain strong, with secular growth drivers and robust OEM backlogs.