Boeing (NYSE: BA) reported a GAAP loss per share of ($0.26) for the third quarter. That is a stark improvement from the ($7.14) loss a year ago. Revenue rose 4% to $24.2 billion. The headline number hides a split reality. Defense, Space & Security and Global Services are carrying the balance sheet. Commercial Airplanes continues to bleed red ink.
Revenue growth came from two distinct engines. Defense, Space & Security jumped 15% to $7.9 billion. Global Services climbed 4% to $5.6 billion. Commercial Airplanes revenue fell 3% to $10.7 billion on a less favorable delivery mix. Deliveries actually ticked up to 161 units from 160 a year ago. Total backlog hit a record $745 billion. That includes over 6,300 commercial airplanes valued at $612 billion.
Operating cash flow tells the quarter's real story. Boeing generated $1.5 billion in operating cash flow and $464 million in free cash flow. It did so while writing approximately $700 million in Department of Justice settlement payments. That means underlying cash generation was stronger than the headline free cash flow number suggests. The company closed the quarter with $20.7 billion in cash and marketable securities and $10 billion in undrawn credit facilities.
Defense, Space & Security operating margin improved to 6.2% from 1.7% a year ago. A $252 million gain on the sale of HRL Laboratories provided a lift. Remove that one-time item, and the segment still delivered meaningful operational improvement. The division also secured a selection by the U.S. Navy for the F/A-XX next-generation fighter contract. This order sits outside the backlog pending the source selection process. Defense backlog grew to a record $101 billion.
Commercial Airplanes remains the problem child. The segment posted a $697 million operating loss on a (6.5)% margin. That marks a massive improvement from the (48.3)% margin a year ago when the 777X program took a large charge. The underlying issue is structural. Higher projected costs associated with future production rate adjustments and elevated supply chain costs are weighing on profitability. The 737 program is progressing toward stabilized production of 47 per month. The 787 remains at 8 per month. The 777X certification flight testing continues. First delivery still targets 2027.
Certification milestones for the 737-7 and 737-10 carry strategic weight. The 737-7 received FAA amended type certification during the quarter. The 737-10 achieved certification in October. These clear the regulatory path for deliveries of the MAX 7 and MAX 10 variants, which should improve delivery mix and margins over time. Meaningful margin improvement in Commercial Airplanes, however, remains uncertain.
The core loss per share (non-GAAP) of ($0.34) beat the consensus estimate of ($0.255). The beat came from the Defense segment's one-time gain rather than operational momentum in Commercial Airplanes. Management offered no formal guidance. CEO Kelly Ortberg kept his tone measured: "We are not done." The emphasis on Lean and disciplined execution points to a long road ahead for consistent profitability.
Investors need to watch whether Defense and Services can keep offsetting Commercial Airplanes losses while production rates ramp. The record backlog provides revenue visibility. Converting that backlog into cash flow demands execution on production rate increases and cost control. The next catalyst sits in the pace of 737 production rate increases. It also hinges on whether the 777X certification timeline holds.