BOEING CO

Overview

The Full-Year Continuing Appropriations and Extensions Act, 2025, enacted on March 15, 2025, provided FY25 appropriations for government departments and agencies, including $856 billion for the U.S. Department of Defense (U.S. DoD) and $25 billion for the National Aeronautics and Space Administration (NASA). This bill has been deemed to be a full-year appropriations bill in respect to satisfying the requirements of the Fiscal Responsibility Act, avoiding a sequester of defense and non-defense spending in FY25.

There is ongoing uncertainty with respect to program-level spending for the U.S. DoD, NASA and other government agencies for FY25 and beyond. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on our results of operations, financing position, and/or cash flows.

The non-U.S. market continues to be driven by complex and evolving security challenges and the need to modernize aging equipment and inventories. BDS expects that it will continue to have a wide range of opportunities across Asia, Europe and the Middle East given the diverse regional threats. At March 31, 2025, 29% of BDS backlog was attributable to non-U.S. customers.

Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.

Deliveries of new-build production units, including remanufactures and modifications, were as follows:

BDS revenues for the three months ended March 31, 2025, decreased by $652 million compared with the same period in 2024. The decrease is primarily due to lower volume on P-8, KC-46 Tanker, ground-based missile defense, proprietary, and E-7 programs, as well as the absence of a favorable MQ-25 contract modification that was awarded during the first quarter of 2024. The decrease in revenue was partially offset by $70 million lower net unfavorable cumulative catch-up adjustments compared to the prior year comparable period.

Earnings From Operations

BDS earnings from operations for the three months ended March 31, 2025, was $155 million, compared with $151 million in the same period in 2024. The increase in earnings is primarily due to lower net unfavorable cumulative catch-up adjustments of $213 million compared to the comparable period in the prior year. The lower net unfavorable cumulative catch-up adjustments were largely offset by lower earnings from equity method investments and lower volume and mix on P-8, F-15, E-7, and ground-based missile defense programs. During the three months ended March 31, 2025, losses incurred on the five major fixed-price development programs totaled $0 million compared to $222 million in the same period in 2024.

See further discussion of fixed-price contracts in Note 10 to our Condensed Consolidated Financial Statements.

BDS earnings from operations includes our share of earnings from equity method investments of $6 million for the three months ended March 31, 2025, compared with $75 million for the three months ended March 31, 2024.

Backlog

BDS backlog of $61,567 million at March 31, 2025 compared with $64,023 million as of December 31, 2024, reflects revenue recognized on contracts awarded in prior periods and the timing of awards. In March 2025, the U.S. Air Force announced that Boeing has been awarded a contract to design, build and deliver the F-47, its next-generation fighter aircraft. This order is not included in backlog at March 31, 2025, pending completion of the source selection and evaluation review process.

Our BDS business includes a variety of development programs which have complex design and technical challenges. Some of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily reduced award or incentive fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.

Some of our development programs are contracted on a fixed-price basis. Examples of significant fixed-price development programs include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B, and commercial and military satellites. A number of our ongoing fixed-price development programs have reach-forward losses. New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance. Many development programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions or other financially significant exposure. Risk remains that we may be required to record additional reach-forward losses in future periods.