Aviation and defense services provider AAR CORP (NYSE: AIR) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 15.9% year on year to $795.3 million. On top of that, next quarter’s revenue guidance ($820.6 million at the midpoint) was surprisingly good and 3.9% above what analysts were expecting. Its non-GAAP profit of $1.18 per share was 14.2% above analysts’ consensus estimates.

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"AAR delivered another outstanding quarter, achieving solid results throughout all segments of our business and advancing our strategic objectives through our recent acquisitions," stated John M. Holmes, AAR's Chairman, President and CEO.

Company Overview

The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, AAR’s sales grew at an impressive 10.8% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AAR’s annualized revenue growth of 17% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Parts Supply, Repair & Engineering, and Integrated Solutions, which are 44.5%, 30.7%, and 22.1% of revenue. Over the last two years, AAR’s revenues in all three segments increased. Its Parts Supply revenue (engine and airframe parts) averaged year-on-year growth of 15.9% while its Repair & Engineering (maintenance, repair, and overhaul services) and Integrated Solutions (fleet management) revenues averaged 29.8% and 9.5%.

This quarter, AAR reported year-on-year revenue growth of 15.9%, and its $795.3 million of revenue exceeded Wall Street’s estimates by 4.4%. Company management is currently guiding for a 21% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and implies the market is forecasting success for its products and services.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

AAR was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.6% was weak for an industrials business.

On the plus side, AAR’s operating margin rose by 3.2 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q4, AAR generated an operating margin profit margin of 8.4%, up 8.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

AAR’s EPS grew at an astounding 25.6% compounded annual growth rate over the last five years, higher than its 10.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into AAR’s earnings to better understand the drivers of its performance. As we mentioned earlier, AAR’s operating margin expanded by 3.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For AAR, its two-year annual EPS growth of 17.9% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, AAR reported adjusted EPS of $1.18, up from $0.90 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects AAR’s full-year EPS of $4.41 to grow 9.9%.

Key Takeaways from AAR’s Q4 Results

We were impressed by how significantly AAR blew past analysts’ revenue expectations this quarter. We were also glad its Parts Supply revenue topped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock remained flat at $91.18 immediately following the results.

AAR had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.