ATI Inc. (ATI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance and optimistic future guidance. Key highlights include record high revenue growth in jet engines and airframes, increased margins, and a confident outlook for 2027 EBITDA. The Q&A section reinforced positive sentiment with strategic capacity expansions and share gains in defense and jet engines. Although there was some lack of specificity in management responses, the overall tone was positive, with substantial growth opportunities and pricing power. This, combined with strong financial metrics and positive guidance, suggests a positive stock price movement.
Key Financial Performance
Q4 Revenue $1.2 billion, Adjusted EBITDA was $232 million, above the high end of our guidance range. Adjusted EBITDA margin was 19.7%, an increase of 180 basis points from Q4 2024, demonstrating continued progress toward our 2027 margin goals.
Full Year 2025 Revenue $4.6 billion, up 5% year-over-year, driven by 14% growth in aerospace and defense.
Adjusted EBITDA for Full Year 2025 Exceeded $859 million, up 18% year-over-year.
Adjusted EPS for Full Year 2025 $3.24, up 32% from 2024.
Adjusted Free Cash Flow for Full Year 2025 $380 million, up 53% from 2024, also exceeding the high end of our guidance.
Shareholder Returns in 2025 $470 million returned to shareholders, representing 124% of free cash flow.
Jet Engine Sales Growth 21% year-over-year, driven by transition from legacy to next-gen engines and increased content per engine.
Defense Revenue Growth 14% year-over-year, with missiles up 127%, driven by demand for alloys like C103 and titanium 64.
Specialty Energy Growth in Q4 9% year-over-year, supported by multiyear customer commitments and demand for AI-driven power infrastructure.
Full Year Adjusted EBITDA Margins 18.7%, a full year increase of 200 basis points from 16.7% in 2024.
HPMC Full Year Margin 23.6%, up 330 basis points over 2024.
AA&S Full Year Margin 16.3%, up 90 basis points over 2024.
Capital Expenditures for 2025 $281 million, with $25 million funded by customers, resulting in a net expenditure of $256 million.
Debt Repayment in Q4 2025 $150 million.
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Operating Highlights
Proprietary jet engine nickel alloys: ATI is now producing 6 of the 7 most advanced jet engine nickel alloys, with the remaining alloy produced exclusively by the OEM. These products are supported by long-term agreements that secure volume, pricing, and returns.
Specialty energy growth: Specialty energy is emerging as a meaningful growth driver, delivering 9% year-over-year growth in Q4. ATI renewed a long-term specialty energy contract, expanding its share by more than 20% and establishing itself as the majority supplier.
Aerospace and defense market expansion: Aerospace and defense represented 68% of full-year revenue in 2025, up from 62% in 2024. Jet engine sales grew 21%, and defense revenue grew 14% year-over-year. ATI's content per engine is increasing as fleets transition to next-gen engines.
Specialty energy market expansion: ATI is seeing growth in specialty energy markets, supported by multiyear customer commitments and demand for AI-driven power infrastructure in nuclear and land-based gas turbine markets.
Operational improvements: ATI achieved double-digit increases in remelt output, significant cycle time reductions in downstream heat treat, and increased equipment uptime without significant incremental capital.
Capital investment strategy: 2026 capital investment net of customer funding is projected at $220 million to $240 million, focusing on proprietary engine alloys and high-return opportunities. Investments are backed by long-term customer commitments.
Focus on differentiated products: ATI is prioritizing aerospace, defense, and specialty energy markets, reducing capacity allocations in industrial, medical, and electronics sectors.
Customer partnerships: ATI's growth is anchored in long-term agreements that expand share, improve mix, and secure enhanced pricing. Many investments include direct customer funding, ensuring durable pricing and returns.
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Risk or Challenges
Market Conditions: The company faces challenges in maintaining its competitive edge in the aerospace and defense markets, which are highly competitive and subject to fluctuations in demand. Additionally, the specialty energy market, while growing, remains a smaller portion of the portfolio and could be vulnerable to market volatility.
Operational Execution: The company’s ability to meet its 2026 guidance depends on successful operational execution, including planned maintenance and incremental operational improvements. Any delays or inefficiencies in these areas could impact margins and profitability.
Supply Chain Constraints: The company highlighted its ability to deliver on-time and meet ramp-up requirements, particularly in areas where other suppliers have constraints. However, any disruptions in its own supply chain could adversely affect its ability to meet customer demands.
Capital Investment Risks: The company plans significant capital investments in 2026, including a new primary melt VIM furnace and remelt equipment. These projects are dependent on customer co-funding and long-term commitments. Any delays or cost overruns could impact financial performance.
Economic Uncertainties: The company’s growth is tied to defense spending and aerospace demand, both of which could be impacted by broader economic uncertainties or changes in government budgets.
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Guidance & Outlook
Revenue Expectations: Guiding to $1 billion of adjusted EBITDA at the midpoint of the guidance range for 2026, a 16% increase year-over-year. Full-year revenue for 2026 is expected to grow, with aerospace and defense representing more than 70% of sales.
Aerospace and Defense Growth: Commercial aerospace demand is accelerating across narrow-body and wide-body platforms. Next-generation engines are gaining share, and ATI's content per engine is increasing. Defense demand remains strong and diversified, with projected double-digit growth in jet engines and mid-teens growth in defense for 2026.
Specialty Energy Growth: Specialty energy is emerging as a meaningful growth driver, targeting double-digit growth in 2026, supported by long-term contracts and demand for AI-driven power infrastructure.
Capital Expenditures: Capital investment net of customer funding will range from $220 million to $240 million in 2026, focusing on proprietary engine alloys and high-return opportunities. New capacity will come online in the second half of 2027, targeting $350 million of incremental nickel revenue by mid-2028.
Margin Projections: Full-year consolidated adjusted EBITDA margins are expected to be around 20% in 2026, with margins tracking to the upper teens in the first half and above 20% in the second half. Segment-level margins for HPMC will be around 25%, and AA&S in the upper teens.
Free Cash Flow: Adjusted free cash flow for 2026 is targeted at $430 million to $490 million, a 21% year-over-year increase. Managed working capital as a percentage of sales is expected to reduce to 31% or lower.
Operational Improvements: Incremental operational improvements are underway, with opportunities to streamline processes, reduce costs, and expand margins. These include productivity enhancements, yield improvements, and equipment reliability.
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Shareholder Return Plan
Dividend Payout: No specific mention of a dividend payout program or increase in dividends was discussed in the transcript.
Share Repurchase Program: ATI repurchased a total of $470 million of its shares during 2025. Since 2022, the company has repurchased about $1 billion of shares at an average price of $51 per share. The company has $120 million remaining under its existing share repurchase authorization, which is expected to be completed in 2026. ATI also intends to seek Board approval for additional share repurchase authorization after completing the current program.
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Key Q&A
Q:How should we think about the allocation of new capacity between customer support and other customers, and its impact on ROI?
A:The new capacity is structured to ensure security of access to highly constrained differentiated materials. Customers have the right of first refusal for a negotiated amount, but ATI can flexibly allocate capacity to other businesses as needed. The alignment with customer demand and abbreviated qualification processes enhance returns. The threshold for project returns is 30%+, and customer-contributed capital further boosts returns.
Q:Can you provide an update on airframe growth and inventory alignment?
A:Airframe inventories are nearing alignment and are expected to normalize by 2026. Modest improvement in order rates and demand is anticipated in the second half of 2026, supported by Boeing's progress in ramping up build rates.
Q:Can you parse out the pieces of defense revenue and growth drivers?
A:Defense revenue is expected to grow from 14% in 2025 to mid-teens in 2026. Naval nuclear accounts for 35-40% of defense revenue, while missiles represent around 20%. Growth is driven by new content on programs like PAC-3 and FAD, utilizing specialized materials like C103 and titanium 64. Missile program spending is up 3-4x due to stockpile replenishment.
Q:Are you still confident in the 2027 guidance of $1 billion to $1.2 billion in EBITDA?
A:Management is confident in achieving the 2027 guidance. They will review and update the outlook in due course but currently lean towards the top end of the EBITDA margin percent.
Q:What are the opportunities for share gains in 2026?
A:Opportunities for share gains exist in defense, jet engine, and specialty energy markets. ATI has already won significant new share positions in these areas, driven by proprietary materials and the ability to meet OEM requirements.
Q:Does the new VIM capacity add around 9,000 tons of annual nickel melt capacity?
A:The capacity addition is mix-dependent and difficult to quantify in tonnage. The $350 million revenue target for 2028 reflects the complexity and value of the products. Melt times for exotic alloys can be 3-4x longer than standard alloys.
Q:What is the pricing outlook for exotic alloys in 2026?
A:Pricing assumptions for 2026 are aligned with current market information. Approximately 50% of the 2026 EBITDA growth is attributed to pricing and mix, with the remainder from volume.
Q:Why is airframe growth projected at mid- to high single digits for 2026?
A:The projection is based on executed customer production schedules and contractual commitments, not headline build rate targets. Growth is expected to be modest in the first half and accelerate in the second half of 2026.
Q:What is the expected mix of MRO and OEM in jet engine growth for 2026?
A:Jet engine growth in 2026 is expected to maintain a mix of 50% MRO and 50% OEM.
Q:What is driving the nonseasonal uptick in order activity at the start of the year?
A:The uptick is attributed to supply chain readiness moves in response to Boeing's progress on rate increases. Backlog remains stable at just under one year of revenue.
Q:What is the capacity increase from the new VIM investment?
A:The new VIM adds approximately 8-10% capacity, depending on product mix. The investment is 80% contracted and focuses on next-gen alloy platforms.
Q:What is the pricing outlook for 2027 and beyond?
A:Substantial price and mix opportunities are expected to continue throughout the decade, supported by proprietary materials and long-term agreements. Half of the 2026 EBITDA growth is attributed to price and mix.
Q:What are the staffing plans for 2026?
A:Headcount is expected to remain stable, with some hiring for new capacity. Experienced operators will be prioritized to accelerate qualification of new equipment.
Q:Will isothermal forgings grow beyond the mid-teens jet engine growth in 2026?
A:Yes, isothermal forgings are expected to grow due to high demand and share gains across all three engine OEMs. Lead times are beyond 18 months, and productivity improvements are being implemented to meet demand.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the total capacity addition from the new VIM investment, stating that it is mix-dependent and difficult to quantify. They also did not disclose detailed pricing assumptions for exotic alloys in 2026, only stating that they align with current market information.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD jet
ATI CFO
ATI Chief
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Chief Financial
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Foster
LTAs
capability
commitment demand
confidence ATI
customer funding
debt
defense demand
deployment
electronics sale
end market
engine ATI
expansion
generation
increase basis
increase mix
jet engine
margin basis
mid teen
midpoint increase
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pricing
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tenure ATI
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ATI Transcript
ATI Inc. (ATI) Q4 2025 Earnings Call Transcript
Positive2-3
The earnings call summary and Q&A indicate strong financial performance and optimistic future guidance. Key highlights include record high revenue growth in jet engines and airframes, increased margins, and a confident outlook for 2027 EBITDA. The Q&A section reinforced positive sentiment with strategic capacity expansions and share gains in defense and jet engines. Although there was some lack of specificity in management responses, the overall tone was positive, with substantial growth opportunities and pricing power. This, combined with strong financial metrics and positive guidance, suggests a positive stock price movement.
ATI Inc. (ATI) Q3 2025 Earnings Call Transcript
Positive10-28
The earnings call summary reveals strong financial performance with significant year-over-year growth in key segments like defense and jet engines. The company also increased its full-year guidance for adjusted EBITDA and free cash flow, indicating confidence in future performance. Despite management's reluctance to provide specific 2026 guidance, the Q&A highlighted operational improvements and strategic investments in high-margin products. These factors, combined with a positive outlook for the A&D market and stable supply chains, suggest a positive stock price movement over the next two weeks.
ATI Inc. (ATI) Q2 2025 Earnings Call Transcript
Positive7-31
The earnings call presents a strong performance with revenue and EBITDA growth, strategic contract extensions, and positive guidance adjustments. The Q&A section highlights robust demand in aerospace, defense, and jet engines, with promising new contracts with Airbus and Boeing. While some uncertainties exist regarding industrial markets and tariff impacts, the company's strong position in high-value materials and capacity expansions suggest positive momentum. The shareholder return plan, including share repurchases, further supports a positive outlook. Overall, the sentiment is positive, expecting a stock price increase of 2% to 8%.
ATI Inc. (ATI) Q1 2025 Earnings Call Transcript
Positive5-1
The earnings call highlights strong financial performance with revenue and EPS exceeding guidance, a significant share repurchase plan, and optimistic guidance. Despite some uncertainties in industrial sales, the company's strategic focus on aerospace and defense, along with strong demand in MRO and OEM markets, suggests positive momentum. The Q&A session reinforced this with insights into growth areas and manageable risks. The sentiment is positive due to the robust financial metrics, strategic initiatives, and shareholder-friendly actions, indicating a likely stock price increase in the short term.
ATI Slides
ATI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
