The Defence Half, and What It Does Not EarnNarrow moat

GE Aerospace (GE) — moat facet

Platforms that fly for forty years, at twelve per cent, because the customer can see the costs.

Defense & Propulsion Technologies has almost every structural feature of the commercial business and earns less than half the margin, and the comparison is the most instructive thing about both.

Two segments, same alloys, different margins33,314CES revenue $m8,861CES profit $m10,554DPT revenue $m1,296DPT profit $mMargins of 26.6% and 12.3%. The difference is who the customer is.
A government customer with cost visibility sets a different price from an airline with no alternative.

The segment was about twenty-three per cent of revenue in 2025 at $10,554 million, with services representing fifty-one per cent of it1. It earned $1,296 million — a 12.3% margin, against Commercial Engines & Services at 26.6%2. The platforms are as entrenched as anything in aviation: the F110, F404 and F414 combat engines, the T408, T700 and T901 rotorcraft engines, and the LM2500 for mobility and marine applications3. Some have been in production for forty years.

The difference is who the customer is. Most of the revenue in Defense & Systems derives from funding that flows through the United States Department of War budget or equivalent international budgets4. A government buyer sets the price, audits the cost, and in many cases funds the development: of $2,989 million of total research and development in 2025, $1,409 million was customer and partner funded, primarily by the United States Government5.

That inverts the commercial model. In the commercial business GE Aerospace funds the engine, sells it at a loss and earns the aftermarket. In defence the customer funds the engine, buys it at an audited margin, and the aftermarket is negotiated rather than captured.

What the segment does provide is durability of a different kind. Military fleets fly for decades and are overhauled on schedule regardless of the air-travel cycle, which makes defence the counter-cyclical half of the company. It is also where the next-generation technology is paid for by somebody else — the XA102 adaptive-cycle engine passed its Assembly Readiness Review in 2026, and a contract was secured with the United States Air Force to mature the GE426 engine through preliminary design review6.

The facet is narrow, and the rating is about returns rather than durability. The measure is the margin gap: 12.3% against 26.6%7. It has been closing slowly — DPT was at 10.1% in 2023 and 11.2% in 2024 — and it is structural, not operational.

Moat trajectory: Widening

Defence margin improved from 10.1% in 2023 to 11.2% in 2024 to 12.3% in 2025 and reached 13.8% in the June 2026 quarter, orders grew forty per cent in the first half of 2026, and remaining performance obligation went from $20,742 million to $30,663 million in six months. A low-return business getting better is still a low-return business, and the direction is unambiguous.

The number that tests this moat
Reported
Defence segment margin
12.3% against the commercial segment's 26.6%

Same alloys, same factories, half the margin, because most Defense & Systems revenue flows from the US Department of War budget or equivalent international budgets. The gap has been closing slowly — 10.1% in 2023, 11.2% in 2024, 12.3% in 2025, 13.8% in the June 2026 quarter — and it is structural rather than operational.

Source: GE Aerospace Form 10-K, fiscal year 2025 ↗
Aspects of the moat
DIG DEEPER 01
Twelve Point Three Per Cent Against Twenty-Six Point Six
The same alloys, the same factories, the same engineers, and less than half the margin.
DIG DEEPER 02
Engines That Fly for Forty Years
The F110 was certified before most of the people maintaining it were born, and is still being ordered.
DIG DEEPER 03
The Five Billion Dollar Contract That Is Not an Order
A $5 billion contract vehicle is a ceiling on what may be bought, not a commitment to buy it.
DIG DEEPER 04
Additive, Avionics and the Parts Nobody Names
Four brands, one revenue line, and the components a jet engine maker would otherwise have to queue for.
⚠ Threats to the moat
⚠ THREAT 01
A Quarter of the Revenue Earns a Fifth of the Profit
A quarter of the revenue produces an eighth of the profit, and the segment definition just changed.
⚠ THREAT 02
Government Budgets Are a Political Variable
One annual political decision stands behind roughly $6.6 billion of revenue.
References
  1. ReportedThe segment was about twenty-three per cent of revenue in 2025 at $10,554 million, with services representing fifty-one per cent of it.
    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 ↗
  2. ReportedIt earned $1,296 million — a 12.3% margin, against Commercial Engines & Services at 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 ↗
  3. ReportedThe platforms are as entrenched as anything in aviation: the F110, F404 and F414 combat engines, the T408, T700 and T901 rotorcraft engines, and the LM2500 for mobility and marine applications.
    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 ↗
  4. ReportedMost of the revenue in Defense & Systems derives from funding that flows through the United States Department of War budget or equivalent international budgets.
    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. ReportedA government buyer sets the price, audits the cost, and in many cases funds the development: of $2,989 million of total research and development in 2025, $1,409 million was customer and partner funded, primarily by the United States Government.
    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 ↗
  6. ReportedIt is also where the next-generation technology is paid for by somebody else — the XA102 adaptive-cycle engine passed its Assembly Readiness Review in 2026, and a contract was secured with the United States Air Force to mature the GE426 engine through preliminary design review.
    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. ReportedThe measure is the margin gap: 12.3% against 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 ↗
Sources
Generated September 23, 2026