Global Air Travel And Defence Trends Will Drive Expansion

Key Takeaways

• Accelerated restructuring, partnerships, and innovation in Defence, Commercial Aircraft, and digital services could drive margins, earnings, and cash flows materially above current forecasts.
  
• Airbus's leadership in next-generation aviation technologies and expanded production lines position it for long-term growth, stronger pricing, and dominant global market access.
  
• Supply chain disruptions, regulatory and geopolitical challenges, cost pressures, and intensifying competition threaten Airbus's margins, growth prospects, and reliability of its order backlog.

Catalysts

Engages in the design, manufacture, and delivery of aeronautics and aerospace products, services, and solutions worldwide.

• Analyst consensus expects operational improvements in Defence and Space from restructuring and partnerships, but the magnitude could be far greater: the combination of increased NATO budgets, rapid progress on transformation, and consolidation with Thales and Leonardo could propel margin expansion well beyond current forecasts and drive EBIT for the division above targets as early as 2027, meaning group operating earnings could inflect materially higher.
  
• While analysts broadly agree Airbus's ramp-up in Commercial Aircraft will lift revenue and earnings, the true upside is understated-Airbus's rapidly expanding A320 family production (with three new final assembly lines coming online and resilient demand from low-cost carriers in emerging markets) could unlock sustained double-digit production growth through 2030, pulling forward billions in cash flows and raising both top-line and operating leverage faster than expected.
  
• The recent return to a tariff-free environment between the EU and US, following new trade agreements, provides Airbus with enhanced visibility and stability for global deliveries-this sets the stage for uninterrupted access to major export markets, reduces risk premia, and supports structurally higher long-term free cash flow conversion.
  
• Airbus is poised to be the primary beneficiary of the accelerated global aircraft replacement cycle as airlines retire aging, less fuel-efficient fleets: the combination of strong narrow
• and widebody backlogs and airlines' need to decarbonize will likely drive structural revenue outperformance and strengthen pricing power, supporting sustained growth in net margins.
  
• The company's aggressive expansion into drones, uncrewed aerial vehicles, and integrated digital services is creating entirely new, higher-margin business lines; these initiatives, coupled with first-mover advantages in hydrogen-powered and hybrid-electric aircraft, position Airbus for leadership in both next-generation mobility and value-added aftermarket revenues, potentially boosting recurring earnings and expanding group-level margins well ahead of current expectations.

Airbus Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Airbus compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Airbus's revenue will grow by 16.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.0% today to 8.4% in 3 years time.
• The bullish analysts expect earnings to reach €9.4 billion (and earnings per share of €11.94) by about August 2028, up from €4.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 24.5x on those 2028 earnings, down from 28.5x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 34.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.2%, as per the Simply Wall St company report.

Airbus Future Earnings Per Share Growth

Risks

• Persistent and worsening supply chain disruptions, especially with engine manufacturers like CFM and Pratt & Whitney, have led to a significant number of undelivered glider aircraft, causing inventory buildup and negative free cash flow, which could constrain future revenue growth and erode gross and net margins if not fully resolved.
  
• Ongoing and potentially escalating geopolitical risks, including the need for regulatory approvals tied to complex, cross-continental transactions such as the Spirit AeroSystems acquisition, as well as exposure to future global protectionism and tariff disputes, may disrupt Airbus's access to key markets or delay strategic initiatives, impacting international sales mix and margins.
  
• Structural fragility in airline profitability, combined with demographic changes and potentially lower long-term air travel demand due to shifts such as remote work and aging populations, may reduce the quality and sustainability of Airbus's record order backlog, undermining long-term revenue visibility and growth.
  
• Cost pressures tied to both regulatory compliance with climate targets (such as increased R&D spend for fuel efficiency and sustainable aviation) and restructuring efforts (including legal and compliance costs following past scandals) are likely to weigh on operating margins and may delay break-even for innovation programs, affecting net earnings over the long term.
  
• Intensifying competition from state-backed or emerging aerospace manufacturers (notably China's COMAC) and new technological entrants increases the risk of lost market share, price pressure, and erosion of margins in Airbus's core commercial aircraft business, threatening sustained growth in revenue and profit.

Valuation

• The assumed bullish price target for Airbus is €244.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Airbus's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €244.0, and the most bearish reporting a price target of just €140.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €111.8 billion, earnings will come to €9.4 billion, and it would be trading on a PE ratio of 24.5x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of €177.4, the bullish analyst price target of €244.0 is 27.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.