Aviation and defense services provider AAR CORP (NYSE: AIR) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 26.1% year on year to $928 million. On top of that, next quarter’s revenue guidance ($902.3 million at the midpoint) was surprisingly good and 4.4% above what analysts were expecting. Its non-GAAP profit of $1.53 per share was 10.5% above analysts’ consensus estimates.

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Company Overview

The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, AAR’s 14.9% annualized revenue growth over the last five years was exceptional. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AAR’s annualized revenue growth of 19.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Parts Supply, Repair & Engineering, and Integrated Solutions, which are 45.7%, 33.9%, and 14% of revenue. Over the last two years, AAR’s revenues in all three segments increased. Its Parts Supply revenue (engine and airframe parts) averaged year-on-year growth of 28.2% while its Repair & Engineering (maintenance, repair, and overhaul services) and Integrated Solutions (fleet management) revenues averaged 21% and 1%.

This quarter, AAR reported robust year-on-year revenue growth of 26.1%, and its $928 million of revenue topped Wall Street estimates by 3.9%. Company management is currently guiding for a 22% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and implies the market is forecasting success for its products and services.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

AAR was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.8% was weak for an industrials business.

On the plus side, AAR’s operating margin rose by 2.5 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, AAR generated an operating margin profit margin of 8.6%, down 1.3 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

AAR’s EPS grew at 30.7% compounded annual growth rate over the last five years, higher than its 14.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into AAR’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, AAR’s operating margin declined this quarter but expanded by 2.5 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For AAR, its two-year annual EPS growth of 23.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q2, AAR reported adjusted EPS of $1.53, up from $1.16 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects AAR’s full-year EPS to grow 9.7% from $5.04 to $5.53.

Key Takeaways from AAR’s Q2 Results

We were impressed by how significantly AAR blew past analysts’ revenue expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. Investors were likely hoping for more, and shares traded down 4.8% to $135.35 immediately after reporting.

So should you invest in AAR right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).