Commercial aerospace revenue grew 13% in the fourth quarter of 2025 and 12% for the full year, according to Patrick Winterlich, signaling sustained demand for aircraft components and maintenance services. Defense aerospace revenue climbed 20% in Q4, driven by military modernization programs across NATO countries and increased defense budgets.
Gas turbine revenue surged 32% in Q4 and 25% for the full year, reflecting power generation upgrades and industrial expansion. The triple-digit growth across aerospace segments positions component suppliers for multi-year revenue expansion as airlines renew aging fleets and governments fund defense upgrades.
Component cost inflation has stabilized, with suppliers reporting no incremental price pressures in raw materials or parts, according to Andrew Vuono. Pricing increases implemented earlier in 2025 have held, allowing aerospace manufacturers to maintain margins while meeting elevated order volumes.
The aerospace rally stems from two demand drivers: commercial airlines replacing pre-pandemic aircraft to improve fuel efficiency, and defense contractors restocking depleted inventories after increased military aid to conflict zones. Boeing and Airbus delivery schedules through 2026 remain fully booked, creating visibility for tier-one and tier-two suppliers.
Aerospace stocks have outperformed broader industrial indices by 18 percentage points over the past 12 months, though valuations now exceed 25x forward earnings for leading component makers. Investors are paying premiums based on expectations that defense spending will remain elevated and commercial aviation demand will strengthen as business travel recovers to pre-pandemic levels.
The Q1 2026 order book will test whether aerospace growth can sustain current valuations. Key metrics include new defense contract awards, Airbus A320 production rates, and Boeing 737 MAX delivery timelines. Supply chain analysts expect aerospace revenue growth to moderate to 8-10% in 2026 as comparisons toughen, but order backlogs extending into 2027 provide earnings visibility that justifies sector premiums for investors focused on corporate capital expenditure trends.