✦ XA102, GE426 and the Next Generation of DefenceNarrow moat

GE Aerospace (GE) — the future bets

Two engines in development, both largely funded by the customer who will decide whether to buy them.

The defence segment's future is being decided now, in programmes where the customer pays for the development and then chooses whether to buy the result.

Next-generation defence propulsionXA102adaptive cycle,Assembly ReadinessReview passedGE426USAF contractto preliminarydesign reviewT901first flight on aBlack Hawk in 2025$1,409mof researchfunded by thecustomer in 2025Both new programmes are competitive, and the segment they sit in earns 12.3%.
Customer-funded development is the cheapest way to hold an option, and the customer decides whether to buy.

In the second quarter of 2026 GE Aerospace completed the Assembly Readiness Review of the XA102 engine and secured a contract with the United States Air Force to mature the GE426 engine through preliminary design review, supporting a medium-thrust-class Autonomous Collaborative Platform1. In 2025 it achieved development and testing milestones on two advanced engines and first flight of the T901 on a Black Hawk helicopter2.

The XA102 is an adaptive-cycle engine — one that can change its bypass ratio in flight, trading thrust for efficiency according to the mission. It is the propulsion technology intended for next-generation combat aircraft, and it is being developed in competition.

The GE426 is aimed at a different and newer market: autonomous collaborative aircraft, the uncrewed aircraft intended to fly alongside manned fighters. That market did not exist five years ago and its eventual size is unknown, which is exactly the sort of bet a customer-funded development programme is for.

The economics are unlike the commercial business in every respect. Development is largely funded by the customer — $1,409 million of 2025 research and development came from customers and partners, primarily the United States Government3 — the margin on production is audited, and the aftermarket is negotiated. Defense & Propulsion Technologies earned 12.3% in 2025 against the commercial segment's 26.6%4.

What a win buys is duration rather than margin: the F110 and T700 have been in service for four decades and are still being ordered5.

Defence orders lead revenue by years: $10,312 million in the first half of 2026, up forty per cent6, with remaining performance obligation rising from $20,742 million at end-2025 to $30,663 million by June 20267.

Moat trajectory: Widening

The XA102 completed its Assembly Readiness Review and the GE426 secured a US Air Force contract to reach preliminary design review in 2026, on top of first flight of the T901 in 2025. The programmes are advancing and are largely customer funded, which is the cheapest way to hold an option.

The number that tests this moat
Reported
Defense & Propulsion Technologies revenue, latest quarter
$3,443M in Q2 2026, up 16%

Next-generation military engines are largely paid for by the customer during development. Today's defence revenue is what funds the business while those programmes mature.

Source: GE Aerospace Q2 2026 earnings release ↗
References
  1. ReportedIn the second quarter of 2026 GE Aerospace completed the Assembly Readiness Review of the XA102 engine and secured a contract with the United States Air Force to mature the GE426 engine through preliminary design review, supporting a medium-thrust-class Autonomous Collaborative Platform.
    GE Aerospace second-quarter 2026 earnings release (Exhibit 99.1 to Form 8-K of July 16, 2026) — total company GAAP and non-GAAP results, segment revenue, orders and operating profit, free cash flow, the raised full-year 2026 guidance for adjusted revenue growth, operating profit, adjusted earnings per share and free cash flow, the LEAP-1B durability kit certification, the XA102 and GE426 defence programmes, the NASA hybrid-electric ground tests, and the chief executive's commentary. — Q2 2026 · publ. 16 July 2026 · source ↗
  2. ReportedIn 2025 it achieved development and testing milestones on two advanced engines and first flight of the T901 on a Black Hawk helicopter.
    GE Aerospace Form 10-K, FY2025 - Item 1 Business — segment descriptions for Commercial Engines & Services and Defense & Propulsion Technologies, the CFM International 50-50 non-consolidated joint venture with Safran Aircraft Engines, the commercial engine platforms (LEAP, CFM56, GEnx, GE9X, CF6, GE90), the defence platforms (F110, F404, F414, T408, T700, T901, LM2500), the Propulsion & Additive Technologies brands, the CFM RISE programme, the customer description including airframers and sole-source positions, and the segment revenue and services shares. — FY2025 · publ. January 2026 · source ↗
  3. ReportedDevelopment is largely funded by the customer — $1,409 million of 2025 research and development came from customers and partners, primarily the United States Government — the margin on production is audited, and the aftermarket is negotiated.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
  4. ReportedDefense & Propulsion Technologies earned 12.3% in 2025 against the commercial segment's 26.6%.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  5. ReportedWhat a win buys is duration rather than margin: the F110 and T700 have been in service for four decades and are still being ordered.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  6. ReportedDefence orders lead revenue by years: $10,312 million in the first half of 2026, up forty per cent, with remaining performance obligation rising from $20,742 million at end-2025 to $30,663 million by June 2026.
    GE Aerospace second-quarter 2026 earnings release (Exhibit 99.1 to Form 8-K of July 16, 2026) — total company GAAP and non-GAAP results, segment revenue, orders and operating profit, free cash flow, the raised full-year 2026 guidance for adjusted revenue growth, operating profit, adjusted earnings per share and free cash flow, the LEAP-1B durability kit certification, the XA102 and GE426 defence programmes, the NASA hybrid-electric ground tests, and the chief executive's commentary. — Q2 2026 · publ. 16 July 2026 · source ↗
  7. ReportedDefence orders lead revenue by years: $10,312 million in the first half of 2026, up forty per cent, with remaining performance obligation rising from $20,742 million at end-2025 to $30,663 million by June 2026.
    GE Aerospace Form 10-Q for the quarter ended June 30, 2026, Management's Discussion and Analysis — consolidated revenue, profit and earnings per share, the segment results for Commercial Engines & Services and Defense & Propulsion Technologies, commercial engine and LEAP unit deliveries, internal shop visit revenue growth, the remaining performance obligation and its equipment and services split, the supply chain, tariff and Middle East discussions, and the planned $1 billion US manufacturing investment and 5,000 US hires. — Q2 2026 · publ. July 2026 · source ↗
Sources
Generated September 23, 2026