Embraer S.A. (NYSE: EMBJ) delivers strongest second quarter in company history

Embraer S.A. (NYSE: EMBJ; B3: EMBJ3) reported second-quarter 2026 net revenue of US$2.2 billion on August 10, up 23% year on year and the strongest April-to-June quarter in the Brazilian aircraft manufacturer’s 57-year history. Adjusted net income rose to US$218.6 million from US$158 million a year earlier, adjusted earnings before interest and tax reached approximately US$296 million at a 13.3% margin, and adjusted free cash flow excluding Eve came in at US$401 million. On the back of those numbers, management raised full-year 2026 adjusted EBIT margin guidance to a 10.0% to 10.6% band from a previous 8.7% to 9.3%, and lifted adjusted free cash flow guidance excluding Eve to at least US$400 million from at least US$200 million, while leaving revenue and delivery targets unchanged. The central tension is not whether the quarter was strong, it clearly was, but how much of the raise reflects sustainable execution versus a US$68 million extraordinary tax credit and a lighter-than-feared US tariff hit that together flatter the headline margin.

What did Embraer actually report for the second quarter of 2026?

The reported headline numbers are clean. Consolidated net revenue of US$2.2 billion for the quarter grew 23% year on year, taking first-half revenue to US$3.7 billion, or 44% of the midpoint of the full-year guidance range of US$8.2 billion to US$8.5 billion. Adjusted EBITDA totalled US$356 million at a 15.9% margin, and adjusted EBIT of about US$296 million represented a 13.3% margin, a step up from the more compressed prints Embraer produced earlier in this recovery cycle. Adjusted earnings per American depositary share stood at US$2.50, and adjusted net income of US$218.6 million was up 38.4% from the prior-year quarter.

The delivery mix was equally supportive. Embraer handed over 65 aircraft during the quarter, including 20 commercial jets and 45 executive jets, its highest second-quarter delivery total in 16 years. Commercial aviation deliveries rose 5% year on year, executive aviation deliveries rose 18%. The company also reported adjusted free cash flow excluding Eve of US$401 million, reflecting stronger operating performance, strong sales-related pre-delivery payments and the aforementioned tax credit. Net leverage improved to 0.2 times, an unusually clean balance-sheet position for an aerospace original equipment manufacturer at this point in a delivery ramp.

Why did management raise 2026 profitability and cash guidance while leaving revenue and deliveries unchanged?

The shape of the guidance change is worth spelling out because it is not a blanket upgrade. Revenue guidance is unchanged at US$8.2 billion to US$8.5 billion. Delivery guidance is unchanged at 80 to 85 commercial aircraft and 160 to 170 executive aircraft. What did move is profitability and cash. Adjusted EBIT margin guidance rose to 10.0% to 10.6% from 8.7% to 9.3%, an increase of roughly 130 basis points at the midpoint. Adjusted free cash flow guidance excluding Eve doubled at the floor, to at least US$400 million from at least US$200 million.

Chief Financial Officer Felipe Santana, who took the role in April 2026, attributed the roughly US$110 million midpoint EBIT uplift to three factors: an extraordinary tax credit recognised in the quarter, US import tariffs coming in lower than the company had originally assumed when it set the guidance, and a genuinely better business outlook driven by mix and operational efficiency. That framing matters. The first two items are effectively one-off or macro tailwinds; the third is the operating story investors are paying for. Separating them is not just accounting hygiene, it is central to judging whether the new range can be sustained into 2027 and beyond.

How much of the Q2 margin came from one-time items rather than underlying execution?

Embraer itself was transparent on this point in the earnings materials, disclosing that Q2 results included approximately US$8 million in US import tariffs and a US$68 million extraordinary tax credit. Excluding both items, the adjusted EBIT margin for the quarter would have been 10.6% rather than 13.3%, a difference of roughly 270 basis points. The clean underlying margin of 10.6% is still an important number. It is at the top end of the newly raised full-year guidance band and comfortably above where the company has been running in most recent quarters. But it is a meaningfully different narrative from the reported 13.3%, and it is the number investors should anchor against when modelling 2027.

The corollary is that if the extraordinary tax credit does not repeat and if US tariffs on Brazilian aerospace components run at more normal levels in the second half, the reported quarterly margin will look lower even if the operating business is doing exactly what management expects. Management’s decision to raise guidance to 10.0% to 10.6% suggests confidence that the underlying 10.6% figure is broadly the run rate, not a one-off, and that the tax credit and tariff relief effectively created a buffer for the year rather than a permanent step-up. Investors will want to watch the third-quarter print for confirmation, because Q3 is the first period without the Q2 tax credit and the first that will show whether the operating margin holds without the extraordinary help.

What does the record US$34.5 billion backlog say about demand across commercial, defence and executive aviation?

The order book is the strongest single argument for the guidance raise. Total backlog reached US$34.5 billion at the end of the quarter, up 16% year on year and marking the seventh consecutive quarterly record. Executive aviation backlog rose 5% and services and support backlog rose 12%, with both segments showing book-to-bill ratios above one. Embraer also disclosed that it held approximately US$21 billion in customer options that, if exercised, could lift total backlog above US$55 billion. That option pool is not booked revenue, but it is a leading indicator of how deep the current demand cycle runs.

Backlog quality matters as much as headline size. The commercial book is now dominated by the E2 family, defence is anchored by a rapidly expanding C-390 Millennium customer base, and executive jets are running at high production rates for the Phenom 300 and Praetor 500E and 600E lines. Services and support, historically the least cyclical revenue stream, is expanding faster than the overall book. That mix argues for margin resilience even if any single segment stumbles, and it reduces the risk that a delivery miss in one line takes the whole guidance down with it.

How does the UAE C-390 order and Colombia’s July selection reshape Embraer’s defence positioning?

Defence and security is where the strategic narrative has shifted most visibly in 2026. During the second quarter, the United Arab Emirates placed a firm order for 10 C-390 Millennium multi-mission transports plus options for another 10. That contract is the C-390’s largest international order to date and its first customer selection in the Middle East. In early August, Colombia became the 13th country to select the KC-390, further extending a customer roster that already includes Brazil, Portugal, Hungary, the Netherlands, Austria, the Czech Republic, South Korea, Sweden, Slovakia, Lithuania and others.

The strategic value of these wins is not just contract revenue, it is the shift in perception. The C-390 is increasingly being positioned as the credible medium-airlift alternative to the Lockheed Martin C-130J in NATO and NATO-adjacent procurements, and each incremental country selection adds gravitational pull to the next tender. Embraer’s decision earlier this year to partner with Mahindra Group and Adani Defence and Aerospace for potential India localisation, and with Saab on Gripen production, extends the same logic into large domestic markets. The commercial ceiling for the programme is a function of how many additional national air forces sign in the next two to three years.

What does the E2 program crossing 500 firm orders mean for the commercial aviation ramp?

Commercial aviation had a headline-making quarter of its own. The E2 programme, comprising the E190-E2 and E195-E2, crossed 500 firm orders during Q2. Azorra ordered a further 15 E195-E2 aircraft during the quarter and retained purchase rights for another 15. After the quarter closed, Embraer disclosed 28 additional E2 orders, largely announced during Farnborough. That order pace matters because the E2 has spent most of its life competing for a share of the narrow-body regional segment against the Airbus A220 while carrying the weight of a slow certification and market-entry ramp.

Reaching 500 firm orders is a credibility threshold. It signals that the E2 has moved past the phase where investors could reasonably question whether the aircraft would find enough customers to justify its development spend. It also gives Embraer a stronger negotiating position with tier-one suppliers and lessors, both of which now have to plan for a larger long-term production base than they were modelling two years ago. The immediate financial read-through is that the commercial aviation segment can absorb any executive-jet-cycle softness without dragging the group ramp off course.

How does Eve Air Mobility fit into the parent group’s cash-flow picture with 2028 eVTOL service entry ahead?

Eve Air Mobility, the Embraer-controlled electric vertical take-off and landing subsidiary, remains a strategic call option rather than a near-term earnings contributor. Management reiterated during the Q2 update that Eve’s eVTOL programme is on track to enter service by the end of 2028, and Eve achieved its first transition flight milestone in early August, an important step toward wing-borne flight. Embraer continues to report adjusted free cash flow excluding Eve as its primary cash metric precisely because Eve remains a cash-consuming development-stage business.

The presentational choice is defensible but investors should not lose sight of the underlying reality: total group investment during Q2, including Eve, reached US$151 million against US$120 million at the parent level. Eve raised US$230 million in equity in August 2025 and has drawn additional BNDES facilities, but any material delay to the 2028 service-entry target or any need for further equity from Embraer itself would compress the cash story management is now selling. For now, the market is willing to treat Eve as a separately funded venture; that treatment is not automatic.

What has strengthened and what remains unresolved after Embraer’s raised 2026 targets?

What has strengthened is straightforward. Embraer has printed its best-ever second quarter for revenue, its highest Q2 delivery volume in 16 years, its seventh consecutive record backlog and a clean net-leverage position of 0.2 times. The 2026 EBIT margin band now starts at a double-digit floor for the first time in years, and free cash flow guidance has been effectively doubled at the low end. Commercial aviation has passed the 500-firm-order mark on E2, defence has closed its largest-ever international C-390 sale, and executive jets are running at a delivery pace last seen in the pre-2010 cycle.

What remains unresolved is whether the 10.0% to 10.6% adjusted EBIT band holds without the second-quarter tax credit and without further tariff relief. The third-quarter results will be the first clean read on the underlying operating margin. The other open items are the pace at which the US$21 billion option pool converts into firm orders, the H2 delivery cadence needed to hit the 80 to 85 commercial and 160 to 170 executive full-year targets, and Eve’s ability to hold its end-2028 service-entry date without further parent funding. The next measurable proof point is the Q3 print, likely in early November 2026, which will show whether the underlying 10.6% margin repeats and whether cash conversion holds through the seasonally heavier delivery quarter.

Key takeaways for investors tracking Embraer’s raised 2026 outlook

• Embraer reported record second-quarter 2026 revenue of US$2.2 billion, up 23% year on year, its strongest April-to-June quarter in a 57-year history.
• Adjusted net income rose 38.4% to US$218.6 million, adjusted EBIT reached approximately US$296 million at a 13.3% margin, and adjusted free cash flow excluding Eve was US$401 million.
• Management raised 2026 adjusted EBIT margin guidance to 10.0% to 10.6% from 8.7% to 9.3%, and lifted adjusted free cash flow guidance excluding Eve to at least US$400 million from at least US$200 million.
• Revenue guidance of US$8.2 billion to US$8.5 billion and delivery guidance of 80 to 85 commercial and 160 to 170 executive aircraft are unchanged, so the raise is a margin and cash story.
• Q2 results included a US$68 million extraordinary tax credit and only about US$8 million in US import tariffs; excluding both items, the adjusted EBIT margin would have been 10.6%, the top of the new full-year band.
• Total backlog reached a record US$34.5 billion, up 16% year on year, with an additional US$21 billion in customer options that could lift backlog above US$55 billion if exercised.
• The C-390 Millennium secured its largest international order to date from the United Arab Emirates during the quarter, and Colombia in early August became the 13th country to select the KC-390.
• The E2 programme crossed 500 firm orders in Q2, with a further 28 E2 orders disclosed after quarter-close, reinforcing the commercial ramp thesis.
• Eve Air Mobility remains on track for end-2028 eVTOL service entry, but continues to consume cash, which is why management reports free cash flow excluding Eve as its primary metric.
• The Q3 2026 print is the first clean look at underlying margin without the extraordinary tax credit, making it the near-term proof point for whether the raised guidance is sustainable.