MONTREAL, Quebec — February 12, 2026 — Leads & Copy — CAE Inc. (NYSE: CAE) (TSX: CAE) has released its financial results for the third quarter of fiscal 2026, which ended December 31, 2025.
The company reported revenue of $1,252.1 million, up from $1,223.4 million in the prior year. Earnings per share (EPS) were $0.34, compared to $0.53 in the prior year. Adjusted EPS was $0.34, up from $0.29 in the prior year.
Net debt-to-adjusted EBITDA was 2.30x, ahead of the fiscal year-end target of 2.50x. Transformation actions are currently underway. A lower Civil outlook for fiscal 2026 is largely offset by a stronger outlook in Defense.
Matthew Bromberg, CAE’s President and Chief Executive Officer, said that the quarter reflects continued progress as the company implements its transformation plan. He noted that while Civil performance was lower year-over-year, CAE generated strong cash flow, exceeded its deleveraging target ahead of schedule, and delivered a meaningful step-up in Defense performance, including achieving an adjusted segment operating income margin above 10 percent for the first time in over six years. He added that near‑term softness in Civil and strength in Defense largely offset each other, leaving the company in the range of where it expected to be overall.
Bromberg also stated that the company is making good progress with its transformation plan, with a clear focus on its portfolio, capital base, and operating model. CAE has completed its portfolio review and identified several non-core assets, representing approximately 8% of revenue, and will pursue divestitures where economics, structure, and timing support value creation for CAE. In parallel, the company has begun optimizing its Civil training network, including a reduction in capital expenditures. CAE intends to remove approximately 10% of deployed commercial airline simulators and relocate additional devices to improve utilization and returns. These actions will have a short-term revenue impact, but they are expected to enhance returns and resilience over time.
CAE expects to provide specific longer-range targets when it reports its fiscal year-end results in May, outlining how these actions position CAE for higher returns, stronger cash flow, and more resilient performance over time.
Third quarter fiscal 2026 revenue was $1,252.1 million, compared to $1,223.4 million in the third quarter last year. Third quarter EPS was $0.34 compared to $0.53 last year. Adjusted EPS in the third quarter was $0.34, compared to $0.29 last year. Adjusted EPS this quarter includes approximately $0.02 of transformation-related expenses.
Operating income this quarter was $195.8 million (15.6% of revenue). This compares to $262.6 million (21.5% of revenue) last year, which included a gain on fair value remeasurement of SIMCOM of $72.6 million. Third quarter adjusted segment operating income was $195.8 million (15.6% of revenue) compared to $190.0 million (15.5% of revenue) last year. All financial information is in Canadian dollars unless otherwise indicated.
In Civil Aviation, third quarter revenue was $717.2 million vs. $752.6 million in the third quarter last year. Operating income was $141.8 million (19.8% of revenue) compared to $223.4 million (29.7% of revenue) in the same quarter last year. Adjusted segment operating income was $141.8 million (19.8% of revenue) compared to $150.8 million (20.0% of revenue) in the third quarter last year. Civil adjusted segment operating income this quarter includes $4.9 million of transformation-related expenses, impacting the adjusted segment operating income margin by approximately 70 basis points. During the quarter, Civil delivered 15 full-flight simulators (FFSs) to customers and third quarter Civil training centre utilization was 71%.
During the quarter, Civil signed training solutions contracts valued at $572.4 million for a range of long-term commercial and business aviation training agreements, including 10 FFS sales.
The Civil book-to-sales ratio was 0.80 times for the quarter and 0.89 times for the last 12 months. The Civil adjusted backlog at the end of the quarter was $8.2 billion.
In Defense and Security, third quarter revenue was $534.9 million vs. $470.8 million in the third quarter last year. Operating income was $54.0 million (10.1% of revenue) compared to $39.2 million (8.3% of revenue) in the same quarter last year. Adjusted segment operating income was also $54.0 million (10.1% of revenue), compared to $39.2 million (8.3% of revenue) in the third quarter last year. Defense adjusted segment operating income this quarter includes $2.4 million of transformation-related expenses, impacting the adjusted segment operating income margin by approximately 40 basis points.
Defense booked orders for $571.1 million this quarter for a book-to-sales ratio of 1.07 times. The ratio for the last 12 months was 1.09 times. The Defense adjusted backlog, including unfunded contract awards and CAE’s interest in joint ventures, at the end of the quarter was $11.0 billion. Notably for the Defense segment overall, the pipeline continues to reflect a strong demand environment with some $6.2 billion of bids and proposals pending.
Net finance expense this quarter was $54.1 million, down from $56.9 million in the previous quarter and down from $56.6 million in the third quarter last year. The year-over-year decrease was mainly due to lower finance expense on long-term debt due to a decreased level of borrowings during the period, partially offset by higher expense on lease liabilities in support of training network expansions.
Income tax expense this quarter amounted to $29.6 million, representing an effective tax rate of 21%, compared to 17% for the third quarter last year. The adjusted effective tax rate, which is the income tax rate used to determine adjusted net income and adjusted EPS, was 21% this quarter compared to 29% in the third quarter of last year. The decrease in the adjusted effective tax rate was mainly attributable to the mix of income from various jurisdictions.
Net cash provided by operating activities was $407.6 million for the quarter, compared to $424.6 million in the third quarter last year. Free cash flow was $411.3 million for the quarter compared to $409.8 million in the third quarter last year. Free cash flow was stable mainly due to higher dividends received from equity accounted investees, partially offset by a lower contribution from non-cash working capital.
Growth and maintenance capital expenditures totaled $50.6 million this quarter.
Net debt at the end of the quarter was $2,782.3 million for a net debt-to-adjusted EBITDA of 2.30 times, ahead of the Company’s fiscal year-end target of 2.50 times. This compares to net debt of $3,186.5 million and a net debt‑to-adjusted EBITDA of 2.66 times at the end of the preceding quarter.
Adjusted return on capital employed was 7.0% this quarter compared to 6.8% last quarter and 5.7% in the third quarter last year.
During the quarter, CAE repurchased and cancelled a total of 44,100 common shares under its normal course issuer bid (NCIB), at a weighted average price of $36.50 per common share for a total consideration of $1.6 million.
Management now expects total capital expenditures to be more than 10% lower than in fiscal 2025. The decrease is driven primarily by an approximate 30% reduction in Civil capital expenditures, reflecting the slower near-term pace of demand recovery and greater capital discipline. A significant portion of this year’s capital expenditures is being directed toward the execution of a large U.S. defence contract, and the remainder focused on organic growth investments in simulator deployments across CAE’s global network of aviation training centres under multi-year customer contracts.
Management’s fiscal 2026 annual outlook remains unchanged for free cash flow, finance expense, tax expense, and capital allocation priorities.
Management believes CAE is well positioned for long-term growth and enhanced profitability in Defense, supported by an adjusted backlog of $11.0 billion and a prolonged up-cycle driven by rising defence budgets across NATO and allied nations, many of which are now targeting spending levels approaching 5% of GDP.
Given stronger-than-expected performance year to date, management is increasing its fiscal 2026 outlook for Defense to greater than 20% aSOI growth, with an annual aSOI margin expected to be approximately 8.5%.
CAE’s Civil business continues to benefit from strong and durable fundamentals in a secular growth market for aviation training solutions. Management continues to expect the fourth quarter of fiscal 2026 to be the strongest of the year. However, for the full year, Civil adjusted segment operating income (aSOI) is now expected to decline by a mid-single digit percentage versus the prior year, while the aSOI margin is still expected to be in the 20% range. Its revised outlook is driven by three factors: softer than expected market conditions; U.S. dollar currency translation impacts; and the rationalization of CAE’s commercial simulator network, which is being accelerated to rightsize the business for the current and expected demand. These actions are expected to improve utilization, returns, and resilience over time.
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Source: CAE Inc.
