Boeing investors got a mixed picture last week.
The plane maker is delivering more jets than it has in years. But a familiar problem, its presidential aircraft contract, is still eating into profits.
The company’s second-quarter results showed notable progress in production. At the same time, one troubled defense program added a massive $280 million charge to the books.
This combination has traders watching Boeing (BA) shares closely, as the stock has slid since reporting its Q2 results.
Here’s why the Air Force One program keeps showing up in Boeing’s earnings, concerning investors.
Boeing deliveries hit a 2018 high
Boeing reported second-quarter revenue of $24.6 billion, up 8% from a year earlier. Top-line growth was driven largely by commercial airplane deliveries, which reached 171 for the quarter, its highest quarterly delivery total since 2018.
Despite the higher revenue, Boeing still posted a GAAP loss per share of $0.67 and a core loss per share, a non-GAAP measure, of $0.76. Free cash flow came in positive at $631 million, which was better than the company had previously guided.
Boeing chief executive Kelly Ortberg struck an upbeat tone on the company’s earnings call, stating:
“I’m very pleased with our progress as we execute on our 2026 plan. With the continued focus on safety and quality, our teams are increasing production and delivering at levels we have not seen since 2018.”
Related: Boeing CEO signals massive new FAA move for 737 jets
Boeing is finally ramping production again.
- The 737 program moved to 47 airplanes a month during the quarter, and Boeing began low-rate production on a new assembly line in Everett, Washington, to eventually reach 52 a month.
- The 787 program stabilized at eight airplanes a month in Charleston, South Carolina.
- Total company backlog also grew to a record $715 billion, including more than 6,200 commercial airplanes.
Bloomberg/Getty Images
Air Force One charge adds up
The bigger headline for investors involves Boeing’s Defense, Space, and Security division, and specifically the VC-25B program. VC-25B is the official name for the two heavily modified 747 aircraft being built to serve as the next Air Force One.
Boeing disclosed a $280 million charge on the program during the quarter, saying the charge reflects a decision to add significant resources to the build-and-test schedule. It has also agreed with the Air Force to shift the plane’s certification from the FAA to the military.
Because the VC-25B program is already operating under what is known as a reach-forward loss position, meaning Boeing previously acknowledged it will lose money on the fixed-price contract overall, any new costs flow straight through as an additional charge.
More Airlines:
- Airline shuts down, all flights grounded after accident
- Another global airline cuts US flights due to low demand
- Another low-cost airline files for Chapter 11 bankruptcy
This has led to repeated VC-25B writedowns in past quarters.
Ortberg addressed the charge directly on the call.
“While the charge is disappointing, we recognize how critical schedule performance is to our customer, and we are investing accordingly to maintain our commitment to deliver this airplane in 2028,” Ortberg said.
The charge helped push Defense, Space and Security operating margin to negative 0.2% for the quarter.
Boeing noted that excluding the VC-25B impact, the segment’s operating margin would have been 3.5%, which management described as in line with its expectations for steady improvement.
What it means for Boeing stock
For investors, the quarter is something of a tale of two Boeings.
Commercial Airplanes revenue rose 8% to $11.8 billion, and the FAA authorized Boeing earlier in the month to resume issuing airworthiness certificates for all 737 MAX and 787 airplanes, a sign of rebuilding regulatory trust.
The 777X program also passed 55% completion on its certification flight testing, keeping it on track for a 2027 first delivery.
But the defense segment remains a drag. Chief Financial Officer Jay Malave told analysts on the call that Boeing still expects full-year Defense, Space and Security operating margin near 2.5%, including the VC-25B charge, with gradual improvement expected in future years as fixed-price development programs are completed.
Boeing also flagged one more near-term cash headwind. A $700 million payment tied to the company’s Department of Justice settlement, originally planned for later in 2026, is now expected to be paid in the third quarter.
Malave said that will make third-quarter free cash flow positive but modest, in the low hundreds of millions of dollars, before a stronger fourth quarter driven by rising delivery rates and typical seasonal defense advances.
Boeing reiterated that it still expects full-year free cash flow of $1 billion to $3 billion, and that it views $10 billion in annual free cash flow as achievable over the medium term as production rates climb and defense margins recover.
For now, the Air Force One program remains the one line item complicating an otherwise improving story for Boeing shareholders.
Related: Boeing hits a stealth milestone investors overlooked
