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GE · Forward model · Commercial Engines & Services · Bear case

What has to happen in Commercial Engines & Services

Model as of

This page changes Commercial Engines & Services inside the complete GE model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

GE forward model
Horizon
Consolidated fair value $157.93 all other verticals held in this portfolio case
Final-quarter revenue $10.95B 77% of company revenue
Explicit segment contribution $42.47B EBITDA less segment capex, before corporate items

The supply chain relapses or air traffic turns, and the mix problem the basis quarter already showed gets worse. Growth is being bought with dilutive install engines including GE9X: CES operating margin fell 160 basis points year on year even in a 27% growth quarter. Take a point a quarter off growth, two points off margin, and let a cyclical franchise held at 29x EBITDA normalise to 16x, and fair value is $157.93 - 53.0% below the traded price. This is not a demand collapse; it is the aftermarket ramp arriving slower and at lower margin than the guided year implies.

Commercial Engines & Services

Basis quarter$9.73B
Final quarter$10.95B
Implied CAGR+2%
Final revenue mix77%

Engines are sold thin and maintained fat. CES puts LEAP, GEnx, GE9X and CF6 engines on aircraft and then earns decades of shop visits and spare parts on an installed base of roughly 50,000 commercial engines. Services were $7,434m of the $9,731m segment total in the basis quarter and grew 26%, while equipment grew 30% on much lower margin - so the segment's margin moves with the equipment-to-services mix, not with demand.

Last four quarters
2026 Q1 $8.92B Reported
2026 Q2 $9.73B Reported
Internal shop visit revenueSpare partsLong-term service agreementsNew and spare engine deliveries (LEAP, GEnx, GE9X, CF6)
Sequential growth +2.0%/qtr decaying toward +1.3% Solves GE's guided 2026 CES revenue of ~+20% and the high-teens adjusted revenue guide.
Commercial Engines & Services

Latest: $10.95B (2031Q2E)

Period Value
2026Q1 $8.92B
2026Q2 $9.73B
2026Q3E $9.83B
2026Q4E $9.92B
2027Q1E $10.00B
2027Q2E $10.08B
2027Q3E $10.15B
2027Q4E $10.22B
2028Q1E $10.29B
2028Q2E $10.36B
2028Q3E $10.42B
2028Q4E $10.47B
2029Q1E $10.53B
2029Q2E $10.58B
2029Q3E $10.63B
2029Q4E $10.68B
2030Q1E $10.73B
2030Q2E $10.78B
2030Q3E $10.82B
2030Q4E $10.86B
2031Q1E $10.91B
2031Q2E $10.95B

Assumptions & reasoning

  • EBITDA margin is GE's own guided full-year 2026 CES operating margin of about 26.6% ($10.30bn midpoint on model revenue of $38.7bn; first-half actual 26.9%) plus about 2.6% of revenue for depreciation and amortisation, derived from first-half company D&A of $625m ($452m of PP&E depreciation plus $173m of intangible amortisation). It is deliberately NOT the single 27.3% second-quarter print, which was above the guided year.
  • History is two quarters, and that is a disclosure limit rather than a shortcut. Effective 2026 GE moved its Aeroderivative business from CES to DPT and recast only the quarters it has since restated: the 2025 Q2 release printed CES at $7,990m, the 2026 Q2 release prints the same quarter at $7,646m. Recast 2025 Q3 and 2025 Q4 do not exist in any filing, so the series starts where the current definition starts.
  • Margin fell 160 basis points year on year even in a 27% growth quarter, because install engine growth including GE9X is dilutive. A good quarter for volume is a bad quarter for mix, which is why the terminal margin only recovers to 30.8%.
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