Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 7 of last 7 quarters
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Woodward's strong power generation growth, driven by data center demand, underscores the accelerating buildout of AI infrastructure. The company's capacity expansion in Glatten and ongoing discussions with customers about further capacity investments signal sustained demand for backup and prime power solutions. Additionally, the HAECO partnership expands LEAP MRO capacity in Asia, supporting the growing fleet of aircraft that power global logistics and data center supply chains.
Woodward delivered record Q3 sales of $1.1B, up 21% YoY, with adjusted EPS of $2.52, up 43%. Aerospace sales grew 19% driven by commercial OEM (+34%) and services (+24%), while defense OEM declined 6% due to a one-time revenue recognition adjustment. Industrial sales grew 26% with strength across marine, oil & gas, and power generation (data center demand). Margins expanded significantly in both segments, aided by price realization and volume leverage, though Aerospace included a one-time retroactive pricing adjustment (~100 bps). Free cash flow was $87M in the quarter, and the company returned $608M to shareholders YTD.
Management raised FY2026 adjusted EPS guidance to $9.30-$9.50 (from prior range) and raised Aerospace sales growth to 21%-23% with margins ~23.5% (top of prior range), and Industrial sales growth to 19%-21% with margins ~19%. They expect price to moderate going forward, with margin expansion increasingly driven by productivity and automation. They are targeting ~1,000 fewer incremental hires by 2029 through automation, and are evaluating capacity expansions for power generation demand, with more detail expected at the Investor Day.
“In the many years I've attended the show, I can't remember another time when the industry remained so calm and collected during a period of such significant growth for current generation products and services.”
on Farnborough Airshow and industry demand
“We are targeting a reduction of approximately 1,000 incremental hires by 2029, in many cases, by automating repetitive, less desirable work.”
on Automation and workforce
“We've really made it through the – all of our LTA agreements for the first round that we closed out sort of post 2022. So from now forward, it should moderate.”
on Pricing outlook
What were the clean incremental Aero margin this quarter, backing out the one-time pricing item?
Bill Lacey noted that backing out the pricing item, Aero margins would be 23% (vs 24% reported), and the clean incremental margin is approximately 31%.
Is the strong Industrial margin (21% core) sustainable, or is there anything one-time?
Bill Lacey said the margin was operational but benefited from favorable product mix; he expects core Industrial margins to revert to first-half levels (~17%) next quarter as a lower-margin business line returns.
How should we think about Aerospace aftermarket growth over the next 4-8 quarters versus the past?
Chip Blankenship reiterated confidence in the long-term story, citing strong LEAP/GTF inputs and the new HAECO licensee. He noted quarterly lumpiness but expects to update the growth chart at Investor Day.