Executive Summary

Q3 revenue of $2.237B grew 9% YoY but modestly missed consensus; adjusted EPS of $9.60 rose 7% YoY and was below Street expectations as commercial OEM sales fell short due to lower OEM build rates and inventory destocking . Q3 revenue vs estimate: $2.237B vs $2.292B (miss); adj EPS: $9.60 vs $9.90 (miss). EBITDA (company EBITDA) was $1.123B, while EBITDA As Defined was $1.217B with a 54.4% margin, +110 bps YoY . S&P Global consensus figures marked with asterisks; see Estimates Context.
Management raised FY25 midpoints for EBITDA As Defined (+$40M) and adjusted EPS (+$0.27), while trimming sales (-$60M) to reflect OEM softness; margin guide implies ~53.8% for FY25 .
After quarter-end, TDG declared a $90 special cash dividend and added $5B of new debt, reinforcing its “private equity-like returns” capital allocation framework; Q3 also included $131M in buybacks ($500M YTD) .
Commercial aftermarket and defense performed well; aftermarket growth moderated as expected, but EBITDA As Defined margin expanded on mix and cost discipline; OEM destocking and slower build rates were the primary headwinds and drivers of the top-line shortfall vs estimates .

What Went Well and What Went Wrong

What Went Well
- EBITDA As Defined margin reached 54.4% (+110 bps YoY) despite acquisition dilution, reflecting continued strength in aftermarket and disciplined cost management .
- Upward revision to FY25 EBITDA As Defined and adjusted EPS midpoints (+$40M and +$0.27 per share) signals confidence in 2H margin durability despite OEM headwinds .
- Strategic M&A momentum continued (Servotronics closed; Simmonds agreement announced), deploying >$900M expected capital into proprietary, aftermarket-rich assets aligned with TDG’s return criteria .
What Went Wrong
- Commercial OEM sales “fell short of expectations” due to lower-than-anticipated OEM build rates and inventory destocking, pressuring revenue vs consensus in Q3 .
- Revenue and adjusted EPS both missed Street consensus for Q3 (see Estimates Context), primarily on the OEM shortfall and inventory dynamics at customers .
- Higher interest expense continued to be a partial offset to profit growth in the quarter, limiting GAAP EPS upside despite operating gains .

Financial Results

Overall quarterly performance vs prior periods and prior-year quarter:

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Billions)	$2.046	$2.006	$2.150	$2.237
GAAP EPS ($)	$7.96	$7.62 (reduced by $0.83 dividend-equivalent)	$8.24	$8.47
Adjusted EPS ($)	$9.00	$7.83	$9.11	$9.60
EBITDA ($USD Billions)	$0.995	$1.087	$1.089	$1.123
EBITDA As Defined ($USD Billions)	$1.091	$1.061	$1.162	$1.217
EBITDA As Defined Margin (%)	53.3%	52.9%	54.0%	54.4%
Organic Sales Growth (%)	—	6.6%	6.9%	6.3%

Estimate comparison for Q3 2025 (S&P Global consensus vs actual):

Metric	Q3 2025 Consensus	Q3 2025 Actual
Revenue ($USD Billions)	$2.2928*	$2.237
Adjusted/Normalized EPS ($)	$9.90*	$9.60
EBITDA ($USD Billions)	$1.2270*	$1.123

Values with asterisks (*) retrieved from S&P Global.

KPIs and cash/capital actions:

KPI / Action	Q1 2025	Q2 2025	Q3 2025
Organic Sales Growth (%)	6.6%	6.9%	6.3%
EBITDA As Defined Margin (%)	52.9%	54.0%	54.4%
Share Repurchases ($)	$316M	$53M (Q2) + $131M in April	$131M during Q3; $500M YTD
Cash & Equivalents ($B)	$2.459 (12/28/24)	$2.426 (3/29/25)	$2.792 (6/28/25)
Long-term Debt ($B)	$24.302 (12/28/24)	$24.306 (3/29/25)	$24.268 (6/28/25)

Non-GAAP adjustments (Q3 2025 EPS bridge highlights):

Adjustments included: non-cash stock/deferred comp $0.67, acquisition/integration $0.20, refinancing costs $0.10, other net $0.35, tax adjustment $(0.19) → Adjusted EPS $9.60 .

Guidance Changes

FY2025 guidance (as of Aug 5, 2025) vs prior (May 6, 2025):

Metric	Period	Previous Guidance (May 6)	Current Guidance (Aug 5)	Change at Midpoint
Net Sales ($B)	FY25	$8.750–$8.950	$8.760–$8.820	−$0.060B
GAAP Net Income ($B)	FY25	$1.925–$2.037	$1.932–$1.980	−$0.025B
GAAP EPS ($)	FY25	$32.27–$34.19	$32.39–$33.21	−$0.43
EBITDA As Defined ($B)	FY25	$4.615–$4.755	$4.695–$4.755	+$0.040B
Adjusted EPS ($)	FY25	$35.51–$37.43	$36.33–$37.15	+$0.27
Wtd Avg Shares (MM)	FY25	58.150	58.175	+0.025

Market growth assumptions underpinning FY25 outlook (unchanged for aftermarket/defense; revised OEM):

Commercial OEM: now flat to low single-digit growth for FY25 .
Commercial aftermarket: high single-digit to low double-digit growth .
Defense: high single-digit to low double-digit growth .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Commercial OEM production & inventory	Q1: Boeing strike impact; cost actions; OEM down YoY; watch 737 rate; inventory visibility limited . Q2: OEM flat YoY; sequential improvement; bookings mixed; cautious on MAX rate; destocking in submarkets .	OEM sales below expectations due to lower build rates and inventory destocking .	Softening (vs plan)
Commercial aftermarket	Q1: +9% YoY; engine content outperformed; distributor POS up double-digits . Q2: +13% YoY; POS and bookings strong; monitoring airline capacity but not seeing weakness .	Performed well; growth moderated as expected; supported Q3 margin expansion .	Stable to moderating
Defense	Q1: +11% YoY; healthy bookings; even OEM/AM strength . Q2: +9% YoY; raised FY defense growth to high single/low double-digit .	Performed well; FY assumptions maintained .	Improving
Tariffs/macro	Q1: Largely domestic manufacturing; de minimis impact expected . Q2: No material headwind; mitigation actions across units .	No change; not highlighted as a headwind .	Stable
M&A pipeline/discipline	Q1: Active across sizes; focus on A&D; disciplined returns . Q2: Pipeline robust; discipline on valuations; software considered if return profile fits .	Closed Servotronics; announced Simmonds agreement (aftermarket-rich, proprietary) .	Active/constructive
Capital returns	Q1: $316M buybacks . Q2: $184M cumulative (Q2+$131M Apr) .	$131M Q3 buybacks; $500M YTD; $90 special dividend declared Aug 20 .	Increasing
Regulatory (DoD/DLA, DOGE) & PMA	Q1: Collaboration with DoD/DLA; small direct gov’t exposure; PMA pressure minimal . Q2: No uptick in PMA; monitoring FAR/DFARS updates .	Not specifically updated in Q3 release.	Stable

Management Commentary

“Our commercial aftermarket and defense markets performed well this quarter… However, sales in the commercial OEM market fell short of our expectations, primarily due to lower than anticipated OEM build rates and inventory destocking.” — Kevin Stein, President & CEO .
“We are raising the mid-point of our fiscal 2025 EBITDA As Defined guidance… However, we are decreasing our sales guidance primarily due to lower than expected commercial OEM sales…” .
On acquisitions: “We… completed the acquisition of Servotronics… and… announced our agreement to acquire the Simmonds… business… These businesses fit well with our long-standing strategy…” .

Q&A Highlights

Guidance conservatism: Management acknowledged conservatism embedded in 2H margin outlook given OEM mix and normal lumpiness; no tariff headwind assumed .
Aftermarket momentum: Distributor point-of-sale remained strong; bookings outpaced sales; engine content outperformed non-engine; no evidence of pre-buy due to tariffs .
M&A discipline and scope: Will consider software assets if earnings quality fits return model; continued discipline on multiples and strategic fit .
OEM cadence: Boeing 737 rate progression varies by component; orders around implied run-rates but still recovering; inventory unwind at OEMs adds uncertainty .

Estimates Context

Q3 2025 vs S&P Global consensus: Revenue $2.237B vs $2.2928B* (miss); Adjusted/Normalized EPS $9.60 vs $9.90* (miss); EBITDA $1.123B vs $1.2270B* (note consensus likely refers to EBITDA, while company also reports “EBITDA As Defined” of $1.217B) .
Forward implications: With FY25 EBITDA As Defined and adjusted EPS midpoints raised despite lower sales, estimate revisions may nudge margins higher and revenue slightly lower; OEM trajectory and destocking pace remain the key swing factors .
Values marked with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

Mix and cost discipline are overpowering OEM softness: Q3 EBITDA As Defined margin rose to 54.4% despite OEM shortfalls; FY25 margin guidance nudged up via EBITDA As Defined midpoint raise .
Near-term stock drivers: (1) Confirmation of OEM build resumption/inventory normalization; (2) Continued aftermarket resilience; (3) Capital deployment cadence (special dividend, buybacks, and M&A closings) .
Expect Street to trim revenue but lift margin/EPS quality: FY25 midpoints now bias to margin resilience; OEM headwinds acknowledged in lower sales guide .
Aftermarket remains the cornerstone: Bookings strength and prior quarter commentary suggest sustained demand; moderation is expected but remains a support for margin .
Balance sheet and liquidity support optionality: Ongoing access to debt markets and sizable cash allow opportunistic M&A and shareholder returns without compromising flexibility .
Watch defensives: Defense bookings and raised FY growth assumption (prior quarter) support offset to OEM variability; continued stability here de-risks FY25 .
Risk checklist: OEM destocking persistence, higher interest expense, and any aftermarket slowdown tied to airline capacity cuts; none are acute in Q3 disclosure but remain monitored .

Note: We were unable to retrieve the Q3 2025 earnings call transcript due to a source inconsistency; analysis reflects the full Q3 8-K and press release, plus Q1–Q2 call transcripts for trend/context [11: (unavailable)], **[1260221_0001260221-25-000049_exhibit991tdg2025q3earning.htm:0]**, **[1260221_20250805CL43766:0]**, **[1260221_TDG_3425430_0]**, **[1260221_TDG_3414232_0]**, **[1260221_0001260221-25-000024_exhibit991tdg2025q2earning.htm:0]**, **[1260221_20250506CL79741:0]**, **[1260221_20250630CL20906:0]**, **[1260221_20250701CL21916:0]**, **[1260221_20250820CL55138:0]**.

TransDigm Group INC (TDG)·Q3 2025 Earnings Summary