ATI raises 2025 guidance, projects adjusted EBITDA up to $858M amid record aerospace and defense momentum

Earnings Call Insights: ATI Inc. (ATI) Q3 2025

MANAGEMENT VIEW

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President and CEO Kimberly Fields stated that Q3 was "another strong quarter for ATI, delivering results ahead of our projections, advancing our long-term strategy and strengthening our leadership in aerospace and defense." Revenue was reported as up 7% year-over-year, exceeding $1.1 billion, with adjusted EPS at $0.85, $0.10 above the high end of guidance. Adjusted EBITDA totaled $225 million, with $215 million excluding approximately $10 million related to oil and gas rights sales. Adjusted EBITDA margin exceeded 20%. Both business segments delivered profitability above 17% margin, with High Performance Materials & Components (HPMC) at over 24% and Advanced Alloys & Solutions (AA&S) above 17%.

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Fields emphasized, "A&D reached an all-time high of 70% of total revenue, marking an important milestone in our strategy. Long-term agreements and differentiated materials are supporting consistent growth through 2026 and beyond." Jet engine revenue grew 19% year-over-year in Q3, now 39% of total revenue, and the order book extends into mid-2027. Defense revenue increased 51% year-over-year and 36% sequentially, with ATI being named Supplier of the Year by General Dynamics U.K. Cash generated from operations year-to-date reached $299 million, a $273 million improvement from last year. ATI returned $150 million to shareholders through share repurchases in the quarter, with $120 million remaining under the current authorization.

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Fields announced, "Given this performance and our outlook for Q4, we are raising our full year guidance across the board. Adjusted EBITDA for 2025 now forecast between $848 million and $858 million, a $28 million increase at the midpoint. Adjusted free cash flow now forecast between $330 million and $370 million, a $40 million increase at the midpoint."

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CFO Donald Newman stated, "In Q3, we once again delivered results ahead of expectations. Adjusted EBITDA was $225 million, including a $10 million gain from oil and gas rights sales. Excluding that, EBITDA of $215 million represents a 19% year-over-year and 6% sequential improvement, with margins at 20% or 19.1% excluding asset sales." Newman also confirmed his planned retirement following the Q4 call and that a search for his successor is underway.

OUTLOOK

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Fields reported that jet engine revenue growth for Q4 is expected in the "high single to low double digits," with full-year jet engine growth forecast to exceed 20%. Airframe sales are projected to finish "modestly above 2024 levels," and next year airframe revenues are anticipated to see "high single-digit growth." For 2025, adjusted EBITDA is now forecast between $848 million and $858 million, adjusted EPS between $3.15 and $3.21, and adjusted free cash flow between $330 million and $370 million. CapEx remains unchanged at $260 million to $280 million.

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Newman stated, "Q4 adjusted EBITDA is projected at $221 million to $231 million, a sequential 5% increase, excluding oil and gas gains. The midpoint of $226 million is driven by continued growth in jet engine forgings, improved price and mix and sustained strength in defense programs."

FINANCIAL RESULTS

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Revenue exceeded $1.1 billion, up 7% year-over-year. Adjusted EPS reached $0.85. Adjusted EBITDA totaled $225 million, or $215 million excluding a $10 million asset sale, representing a 19% year-over-year and 6% sequential improvement. Adjusted EBITDA margin exceeded 20%. HPMC EBITDA margins expanded to 24.2%. AA&S margins improved to 17.3%. Cash generated from operations was $299 million year-to-date. ATI returned $150 million to shareholders in share repurchases and has $120 million remaining under the current program.

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Gross capital expenditures year-to-date were $188 million. Managed working capital as a percentage of sales remains around 36%.

Q&A

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Richard Safran, Seaport Research Partners, asked about what changed to drive the revised outlook and guidance increase. Fields explained, "the guidance is reflecting that stronger-than-expected A&D performance. Particularly in defense, we had a tremendous quarter... we see the A&D growth and momentum in third quarter continuing through the rest of this year and frankly, into 2026."

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Safran asked about nickel melt capacity and being the #1 source of flat-rolled titanium for Airbus. Fields responded, "We're seeing demand across all of those market segments. Meeting that demand this year has really been focused around that productivity and reliability, higher melt yields, more downstream processing, the increased testing capacity in our Forged Products business... we're managing it in the short term, both from a productivity standpoint to continue to improve our output from our current asset base and then in the long term, selectively investing purpose-built assets for those hot section alloys where we have those sole-source and long-term agreements." On Airbus, she said being the #1 supplier means "we're the majority supplier today... starting next year, doubling our Airbus revenue and expanding those margins."

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Myles Walton, Wolfe Research, inquired about the engine mix and MRO. Fields indicated most MRO is on next-gen engines, and growth "is in line with how we're thinking about it" for next year, echoing OEMs' mid-teens growth guidance.

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Philip Gibbs, KeyBanc, asked about the split between operational and defense drivers of EBITDA. Fields replied, "We've done work across all of our assets. Defense... was really a bright spot."

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Gibbs asked about working capital improvement. Newman explained, "Part of the improvement... was tied to our management of accounts receivable. We put in place a securitization facility... that benefited some of our working capital efficiencies in Q3."

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Gautam Khanna, TD Cowen, asked for 2026 color on end-markets. Fields expects steady airframe growth and continued strong demand for jet engines. Newman highlighted incremental margins nearing 50% year-to-date but guided to use a 30%-40% range for modeling.

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Andre Madrid, BTIG, asked about the zirconium supply chain. Fields stated, "from the supply chain side on the zirc product, it's been very stable... we have almost 2 years... of finished products inventory."

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Seth Seifman, JPMorgan, asked about a contract shift in HPMC to conversion-only. Newman clarified, "It's not unusual in our business to have conversion contracts. We don't see a trend that the material contracts will transition to conversion contracts."

SENTIMENT ANALYSIS

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Analyst sentiment was slightly positive, with questions focused on the drivers of raised guidance, sustainability of defense growth, supply chain stability, and margin sustainability. Analysts congratulated management on performance and the CFO on his retirement, indicating a constructive tone.

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Management expressed confidence, frequently citing operational excellence, strong demand, and "momentum" into 2026. Fields stated, "the momentum that we see going into the fourth quarter and frankly, into 2026." Responses were direct and detailed, with no notable defensiveness or hesitation.

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Compared to the previous quarter, analyst tone shifted from cautious optimism to greater focus on the sustainability of recent outperformance and future margin expansion. Management's tone became more assertive, highlighting record margins and confidence in future growth.

QUARTER-OVER-QUARTER COMPARISON

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Full-year adjusted EBITDA guidance was raised from a prior range of $810 million to $840 million in Q2 to $848 million to $858 million in Q3. Adjusted free cash flow guidance midpoint increased by $40 million. Adjusted EPS guidance rose to $3.15-$3.21, up from $2.90-$3.07.

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Revenue growth accelerated from 4% year-over-year in Q2 to 7% in Q3. Adjusted EBITDA margin expanded to over 20%, up from 18.2% in Q2. Operational cash generation and margin improvements were more pronounced.

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Management’s tone shifted from discussing capacity investments and contract wins to emphasizing record market share and operational productivity gains. Analyst focus shifted to the drivers of higher guidance and sustainability of defense and jet engine growth. There was more emphasis on margin expansion and working capital efficiency in Q3.

RISKS AND CONCERNS

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Fields addressed investor questions about the potential impact of nickel melt capacity investments on pricing, emphasizing that "our focus is on our most differentiated products" and that the expansion is "about expanding the competitive moat while supporting the engine ramp and our customers' ambitious growth targets."

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Analysts raised questions about the sustainability of defense growth, margin sustainability, and supply chain security, particularly regarding zirconium. Fields stated, "from the supply chain side on the zirc product, it's been very stable... we have almost 2 years... of finished products inventory."

FINAL TAKEAWAY

ATI management underscored a quarter of record momentum, driven by strong aerospace and defense demand, operational excellence, and a disciplined strategy. The company raised full-year guidance for adjusted EBITDA, EPS, and free cash flow, citing robust order books, particularly in jet engines and defense, and continued market share gains. Management sees this performance as validation of ATI's transformation, with confidence in sustaining margin expansion and profitable growth through 2026 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ati/earnings/transcripts]

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