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AAR Reports Solid Growth in First Quarter of FY2026

AAR Reports Solid Growth in First Quarter of FY2026
AAR CORP. delivered robust financial results for the first quarter of fiscal year 2026, ending August 31, 2025, despite facing a challenging logistics environment. The company reported consolidated sales of $739.6 million, marking a 12% increase from $661.7 million in the same period last year. This growth was primarily driven by the Parts Supply segment, where commercial customer sales rose 11%, an increase of $50.4 million. This uplift was supported by double-digit expansion in both aftermarket parts trading and new parts distribution. Government sales also experienced a 15% rise, propelled by higher order volumes in new parts distribution activities. Commercial customers continued to represent 71% of total sales, maintaining the previous year’s proportion.
Financial Performance and Profitability
Net income surged to $34.4 million, or $0.95 per diluted share, compared to $18.0 million, or $0.50 per diluted share, in the prior year. Adjusted diluted earnings per share increased to $1.08 from $0.85. Operating margins improved significantly to 8.8% from 6.6%, while the adjusted operating margin rose to 9.7% from 9.1%. These gains reflected higher volumes and enhanced profitability within new parts distribution. The company also achieved a reduction in selling, general, and administrative expenses, which decreased to $71.2 million from $75.9 million. Acquisition, amortization, and integration costs declined to $4.4 million from $7.1 million, while net interest expense remained steady at $18.5 million. The average diluted share count increased slightly to 35.9 million shares.
Cash flow used in operating activities amounted to $44.9 million, compared with $18.6 million in the first quarter of the previous fiscal year. As of August 31, 2025, AAR’s net debt stood at $950.0 million, with a net leverage ratio of 2.82 times.
Industry Context and Market Dynamics
AAR’s solid performance occurred amid broader industry headwinds. The Cass Freight Index reported declines in freight shipments and expenditures in August, indicating softness in the logistics sector. Competitors are responding with strategic initiatives: Veho is expanding its operations in Southern California, while Blue Yonder is upgrading its transportation platform with artificial intelligence enhancements. Market sentiment is further influenced by FedEx’s recent fiscal first quarter earnings gains and ongoing declines in U.S. rail carload and intermodal volumes, as tracked by the Association of American Railroads.
Despite these external pressures, AAR’s first-quarter results highlight the company’s resilience and its capacity to capitalize on growth opportunities across both commercial and government markets.

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