BOEING CO

Overview

On February 3, 2026, H.R. 7148, the Consolidated Appropriations Act, 2026, provided $839 billion in fiscal year 2026 (FY26) funding for the DoW, excluding military construction. The President’s Budget request for fiscal year 2027 (FY27) requests $1,450 billion for the DoW. The FY27 budget request for NASA is $19 billion, a $6 billion decrease from the NASA funding appropriated for FY26.

There is ongoing uncertainty with respect to final program-level spending for the DoW, NASA and other government agencies for FY26 and beyond. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on our financial position, results of operations and/or cash flows.

The non-U.S. market continues to be driven by complex and evolving security challenges and the need to modernize aging equipment and inventories. BDS expects that it will continue to have a wide range of opportunities across Asia, Europe and the Middle East given the diverse regional threats. At June 30, 2026, 27% of BDS backlog was attributable to non-U.S. customers.

Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.

Deliveries of new-build production units, including remanufactures and modifications, were as follows:

BDS revenues for the six months ended June 30, 2026, increased by $2,167 million compared with the same period in 2025. The increase was primarily due to increased revenues on proprietary and weapons programs, higher KC-46 volume and Foreign Military Sales to Israel and Japan, and the acquisition of Spirit's defense business. Revenue was further increased by $135 million lower net unfavorable cumulative contract catch-up adjustments compared to the prior year comparable period.

BDS revenues for the three months ended June 30, 2026, increased by $866 million compared with the same period in 2025. The increase was primarily due to increased revenues on proprietary and weapons programs, higher KC-46 volume and the acquisition of Spirit's defense business. The net cumulative contract catch-up adjustments were $11 million less unfavorable than the comparable period in the prior year.

Earnings/(Loss) From Operations

BDS earnings from operations for the six months ended June 30, 2026, was $218 million, compared with earnings from operations of $265 million in the same period in 2025. The $47 million decrease in earnings is primarily due to higher net unfavorable cumulative catch-up adjustments of $107 million compared to the prior year comparable period and higher general and administrative expense, partially offset by higher net volume and mix. The higher net unfavorable cumulative catch-up adjustments were primarily driven by the 2026 reach-forward loss on VC-25B ($280 million). See Note 10.

BDS loss from operations for the three months ended June 30, 2026, was $15 million compared with earnings from operations of $110 million in the same period in 2025. The $125 million decrease in earnings is primarily due to higher net unfavorable cumulative catch-up adjustments of $186 million compared to the prior year comparable period and higher general and administrative expense, partially offset by higher volume. The higher net unfavorable cumulative catch-up adjustments were primarily driven by the 2026 reach-forward loss on VC-25B ($280 million). See Note 10.

BDS earnings/(loss) from operations includes our share of earnings from equity method investments of $4 million and $8 million for the six and three months ended June 30, 2026, compared with $20 million and $14 million for the same periods in 2025.

Backlog

BDS backlog was $85,322 million at June 30, 2026 compared with $84,786 million as of December 31, 2025. The increase reflects the timing of awards, partially offset by revenue recognized on contracts awarded in prior periods.

Our BDS business includes a variety of development programs which have complex design and technical challenges. Some of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily reduced award or incentive fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.

Some of our development programs are contracted on a fixed-price basis. Examples of significant fixed-price development programs include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B, and commercial and military satellites. A number of our ongoing fixed-price development programs have reach-forward losses. New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance. Many development programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions or other financially significant exposure. Risk remains that we may be required to record additional reach-forward losses in future periods.