Q3 FY2026
Filed Nov 5, 2026Record Q3 2026 net revenue of $227.0 million and record 28.9% gross margin, with RPO at an all-time high of $1.3 billion and defense book-to-bill of 2.2x
Revenue, gross margin and RPO reached records and commercial aerospace drove growth. Reported net income compares against a prior-year quarter that included $99.7 million of litigation settlement and related costs. Defense revenue fell $9.2 million year over year, Structural Systems operating margin declined, and the release gives no outlook for the coming quarters.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 Net revenuesGAAP | $227M | – | 5.9% |
| Q3 2026 Cost of salesGAAP | $161.5M | – | – |
| Q3 2026 Gross profitGAAP | $65.6M | – | – |
| Q3 2026 Gross marginGAAP | 28.9% | – | 140 bps |
| Q3 2026 SG&A expensesGAAP | $39.77M | – | $5.8 million higher |
| Q3 2026 SG&A as % of revenueGAAP | 17.5% | – | – |
| Q3 2026 Restructuring chargesGAAP | $0 (shown as a dash in the table) | – | – |
| Q3 2026 Litigation settlement and related costs, netGAAP | $0 (shown as a dash in the table) | – | – |
| Q3 2026 Operating income (loss)GAAP | $25.8M | – | $101.1 million increase |
| Q3 2026 Operating marginGAAP | 11.4% | – | – |
| Q3 2026 Interest expense, netGAAP | $3.08M | – | – |
| Q3 2026 Pension plan settlement lossGAAP | $3.87M | – | – |
| Q3 2026 Income (loss) before taxesGAAP | $18.84M | – | – |
| Q3 2026 Income tax expense (benefit)GAAP | $4.95M | – | – |
| Q3 2026 Effective tax rateGAAP | 26.3% | – | – |
| Q3 2026 Net income (loss)GAAP | $13.9M | – | – |
| Q3 2026 Net income marginGAAP | 6.1% | – | – |
| Q3 2026 Diluted EPSGAAP | $0.89 | – | – |
| Q3 2026 Basic EPSGAAP | $0.92 | – | – |
| Q3 2026 Non-GAAP adjusted net incomenon-GAAP | $18.8M | – | – |
| Q3 2026 Non-GAAP adjusted diluted EPSnon-GAAP | $1.21 | – | – |
| Q3 2026 Non-GAAP adjusted operating incomenon-GAAP | $28M | – | – |
| Q3 2026 Non-GAAP adjusted operating marginnon-GAAP | 12.3% | – | – |
| Q3 2026 Adjusted EBITDAnon-GAAP | $39.7M | – | 6% |
| Q3 2026 Adjusted EBITDA marginnon-GAAP | 17.5% | – | 10 bps |
| Q3 2026 Net cash provided by operationsGAAP | $32.7M | – | – |
| Q3 2026 Total capital expendituresother | $5.60M | – | – |
| Q3 2026 Bookings, netnon-GAAP | $354.3M | – | – |
| Q3 2026 Consolidated book-to-billnon-GAAP | 1.6x | – | – |
| Q3 2026 Military and space book-to-billnon-GAAP | 2.2x | – | – |
| Q3 2026 Commercial book-to-billnon-GAAP | 0.8x | – | – |
| Q3 2026 Industrial book-to-billnon-GAAP | 0.8x | – | – |
| Remaining performance obligations at Oct 3, 2026other | $1.29B | – | – |
| Nine months 2026 Net revenuesGAAP | $660.5M | – | 8.7% |
| Nine months 2026 Gross profitGAAP | $184.7M | – | – |
| Nine months 2026 Gross marginGAAP | 28.0% | – | – |
| Nine months 2026 SG&A expensesGAAP | $114.9M | – | – |
| Nine months 2026 Operating income (loss)GAAP | $69.85M | – | – |
| Nine months 2026 Operating marginGAAP | 10.6% | – | – |
| Nine months 2026 Net income (loss)GAAP | $44.21M | – | – |
| Nine months 2026 Diluted EPSGAAP | $2.84 | – | – |
| Nine months 2026 Non-GAAP adjusted diluted EPSnon-GAAP | $3.13 | – | – |
| Nine months 2026 Non-GAAP adjusted net incomenon-GAAP | $48.75M | – | – |
| Nine months 2026 Non-GAAP adjusted operating incomenon-GAAP | $72.67M | – | – |
| Nine months 2026 Non-GAAP adjusted operating marginnon-GAAP | 11.0% | – | – |
| Nine months 2026 Adjusted EBITDAnon-GAAP | $113.5M | – | – |
| Nine months 2026 Adjusted EBITDA marginnon-GAAP | 17.2% | – | – |
| Nine months 2026 Total capital expendituresother | $11.92M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Electronic Systems (Q3 2026)Company explanation: higher commercial aerospace revenue of $12.4 million on higher rates on large aircraft platforms and other commercial aerospace electronics, partially offset by $8.9 million lower military and space revenue from lower rates on other military and space, selected radar and naval platforms, partly offset by higher rates on selected fixed-wing aircraft and missiles platforms. Industrial revenue rose $0.8 million, mainly due to timing of orders and production. Segment operating income was $28.7 million, or 22.2% of revenue, against $23.3 million, or 18.6%. The filing attributes the $5.5 million increase primarily to higher manufacturing volume, partially offset by higher other manufacturing costs. Non-GAAP adjusted operating income was $29.1 million, or 22.5% of revenue, against $23.7 million, or 18.9%. | $129.6M | – | 3.5% |
| Structural Systems (Q3 2026)Company explanation: higher commercial aerospace revenue of $8.6 million on higher rates on selected large aircraft, aero engines, business jets and rotary-wing aircraft platforms, partially offset by $0.4 million lower military and space revenue from lower rates on selected military rotary-wing aircraft and ground vehicle platforms, partly offset by higher rates on selected missiles platforms. Segment operating income was $11.9 million, or 12.3% of revenue, against $12.2 million, or 13.7%. The filing attributes the $0.3 million decrease primarily to unfavorable product mix, partially offset by higher manufacturing volume and stronger direct margins from facility consolidation synergy realization and strategic pricing. Non-GAAP adjusted operating income was $13.8 million, or 14.2% of revenue, against $14.6 million, or 16.4%. | $97.4M | – | 9.3% |
VISION 2032 Plan annual targets (no quarterly or annual guidance is printed in this release) outlook
- Revenue$1.6 to $1.7 billion annual revenue target
- NoteEngineered product mix of 40%
- NoteAftermarket mix of 20%
- NoteAdjusted EBITDA margin of 23%
- NoteVISION 2027 goal of 18% Adjusted EBITDA by the end of 2027, described as close to being reached
Capital returns
- The filing reports no share repurchases and no dividend payments for Q3 2026 or the nine months ended October 3, 2026.
- Weighted-average diluted shares were 15,559 thousand for Q3 2026 against 14,978 thousand GAAP diluted shares for Q3 2025, where the GAAP net loss used basic shares. Non-GAAP diluted shares were 15,361 thousand for Q3 2025.
What drove it
- The company states that net revenue growth was led by the significant ramp in commercial aerospace, partially offset by temporary weakness in defense revenues due to timing of certain programs. Commercial aerospace end-use revenue rose $21.1 million year over year, and military and space revenue fell $9.2 million.
- The company attributes the gross margin increase of 140 bps to higher manufacturing volume, stronger direct margins from facility consolidation synergy realization and strategic pricing, partially offset by unfavorable product mix.
- The company states that the $101.1 million year-over-year improvement in operating income was primarily due to litigation settlement and related costs, net, of $99.7 million in the prior-year period that did not recur, and higher gross profit, partially offset by higher SG&A expenses.
- The company states that net income compares with a net loss of $60.8 million in the prior-year quarter. It cites higher gross profit of $6.6 million and the absence of the prior-year $99.7 million litigation charge. It also cites higher income tax expense of $22.4 million, higher SG&A of $5.8 million and a $3.9 million higher pension plan settlement loss.
- The company states that CG&A fell to $14.9 million from $110.8 million, primarily because the $99.7 million prior-year litigation settlement costs did not recur. Higher compensation and benefits costs of $1.9 million, professional services fees of $1.1 million and other CG&A of $0.7 million partly offset this.
- Defense bookings were $263.5 million at a 2.2x military and space book-to-bill, against 1.5x a year earlier. Commercial book-to-bill was 0.8x against 1.8x. The consolidated book-to-bill was 1.6x in both periods.
- The company reports Adjusted EBITDA of $39.7 million, up 6% year over year, with a margin of 17.5%, up 10 bps. The company describes this as close to its VISION 2027 goal of 18% by the end of 2027.
Concerns
- Military and space end-use revenue fell $9.2 million year over year. The company attributes this to lower rates on selected ground vehicle, rotary-wing aircraft and radar platforms, and other military and space electronics.
- Structural Systems operating margin was 12.3% against 13.7%, and non-GAAP adjusted operating margin was 14.2% against 16.4%. The company attributes the GAAP decline to unfavorable product mix.
- Commercial book-to-bill was 0.8x against 1.8x a year earlier, and Structural Systems commercial aerospace RPO fell from $352,639 thousand at December 31, 2025 to $329,948 thousand at October 3, 2026.
- The company cites higher contract assets and higher accounts receivable as partial offsets to operating cash flow. Accounts receivable rose from $124,442 thousand to $163,158 thousand, and contract assets from $249,845 thousand to $275,737 thousand.
- The forward-looking statements cite potential losses from third-party subrogation claims related to the Guaymas performance center fire that may become material. The release gives no quantification.
- The release gives no quarterly or annual outlook for revenue, margins or EPS, so the next quarter cannot be measured against company guidance.
- The release states that Q3 2026 revenue was reported as restated in the company's Form 10-K/A filed May 8, 2026 (footnote: As restated). The restatement itself is not described in this filing.
What to watch
- Whether defense revenue recovers as the company expects. The filing says defense momentum should continue in 2027, after a $9.2 million year-over-year decline in Q3 2026 and a 2.2x defense book-to-bill.
- Conversion of the record $1.3 billion RPO into revenue, given the book-to-bill split between military and space (2.2x) and commercial (0.8x).
- Structural Systems margin trajectory, given the product mix commentary and the decline from 13.7% to 12.3% GAAP operating margin.
- Progress toward the VISION 2027 Adjusted EBITDA goal of 18% by the end of 2027, against the 17.5% reported in Q3 2026, and the VISION 2032 targets of $1.6 to $1.7 billion revenue and a 23% Adjusted EBITDA margin.
- Working capital, specifically accounts receivable and contract assets relative to contract liabilities, and the balance of long-term debt, which declined to $245,242 thousand.
- Any change in the Guaymas performance center fire subrogation exposure that the company says may become material.
Balance sheet and cash flow
- Cash and cash equivalents: $39,212 thousand at October 3, 2026 against $45,289 thousand at December 31, 2025.
- Accounts receivable, net: $163,158 thousand at October 3, 2026 against $124,442 thousand at December 31, 2025.
- Contract assets: $275,737 thousand at October 3, 2026 against $249,845 thousand at December 31, 2025.
- Contract liabilities: $81,591 thousand at October 3, 2026 against $40,694 thousand at December 31, 2025.
- Current portion of long-term debt: $5,000 thousand at October 3, 2026 and $5,000 thousand at December 31, 2025. Long-term debt, less current portion: $245,242 thousand at October 3, 2026 against $298,790 thousand at December 31, 2025.
- Total assets: $1,254,307 thousand at October 3, 2026 against $1,186,415 thousand at December 31, 2025. Total liabilities: $541,272 thousand against $524,934 thousand.
- Total shareholders' equity: $713,035 thousand at October 3, 2026 against $661,481 thousand at December 31, 2025.
- Assets held for sale: $5,690 thousand at October 3, 2026 (nil at December 31, 2025).
- Net cash provided by operations: $32.7 million in Q3 2026 against $18.1 million in Q3 2025. The company attributes the increase primarily to higher net income, higher contract liabilities and higher accrued and other liabilities, partially offset by higher contract assets and higher accounts receivable.
- Remaining performance obligations: $1,286,183 thousand at October 3, 2026 against $1,106,040 thousand at December 31, 2025. The release describes this as another all-time high. Military and space RPO was $867,595 thousand and commercial aerospace RPO $404,484 thousand.
Analysis
Ducommun reported record third-quarter 2026 net revenue of $227.0 million, up 5.9% from $214.4 million in the table. The release's headline shows 6%, and the footnote says the prior-year figure is as restated in the Form 10-K/A filed May 8, 2026. Commercial aerospace drove the increase: the company cites $21.1 million higher commercial aerospace end-use revenue, led by higher rates on large aircraft, business jets and rotary-wing platforms. Military and space revenue fell $9.2 million, which the company attributes to lower rates on ground vehicle, rotary-wing and radar platforms, partly offset by missiles and fixed-wing aircraft. Electronic Systems revenue rose 3.5% to $129.6 million and Structural Systems rose 9.3% to $97.4 million.
Gross margin reached a record 28.9%, up 140 bps from 27.5%. The company attributes this to higher manufacturing volume, facility consolidation synergies and strategic pricing, partly offset by unfavorable product mix. Adjusted EBITDA was $39.7 million, up 6%, with a 17.5% margin, up 10 bps. Non-GAAP adjusted operating income was $28.0 million at a 12.3% margin, against $27.2 million and 12.7%. The margin declined because the Structural Systems segment's margin fell, while Electronic Systems' margin rose from 18.9% to 22.5% on a non-GAAP basis.
GAAP results compare with a prior-year quarter that carried a $99.7 million litigation settlement and related charge. Operating income moved from a $75.3 million loss to $25.8 million, and net income from a $60.8 million loss to $13.9 million, or $0.89 per diluted share. Income tax expense rose to $4.9 million at a 26.3% effective rate, and a $3.9 million pension plan settlement loss was recorded. Non-GAAP adjusted diluted EPS was $1.21, against $1.22 in the prior-year quarter on a non-GAAP basis. The release does not explain the fall in this figure beyond the line items shown.
Bookings were $354.3 million, a 1.6x consolidated book-to-bill, the same as a year earlier. Defense book-to-bill was 2.2x against 1.5x, and commercial was 0.8x against 1.8x. RPO reached $1,286,183 thousand, up from $1,106,040 thousand at December 31, 2025. Operating cash flow was $32.7 million against $18.1 million, which the company attributes mainly to higher net income and higher contract liabilities, partly offset by higher contract assets and receivables. Cash was $39,212 thousand, and long-term debt fell to $245,242 thousand from $298,790 thousand at December 31, 2025.
The release gives no quarterly or annual outlook. Its only forward figures are the VISION 2032 targets of $1.6 to $1.7 billion revenue, 40% engineered product mix, 20% aftermarket mix and a 23% Adjusted EBITDA margin. The company also says Adjusted EBITDA is close to its VISION 2027 goal of 18% by the end of 2027. Attention should go to the defense revenue shortfall, the Structural Systems margin decline, and the Guaymas fire subrogation exposure the company says may become material.
Management, verbatim
Net revenue grew, led by the significant ramp in commercial aerospace, partially offset by temporary weakness in defense revenues due to timing of certain programs.
Stephen G. Oswald, Chairman, President and Chief Executive Officer
Gross margin expansion is an important story for DCO and its investors and was once again very strong in the quarter expanding 140 bps year-over-year to another all-time record of 28.9%.
Stephen G. Oswald, Chairman, President and Chief Executive Officer
Defense bookings were very strong during the quarter with a book-to-bill of 2.2x and we expect to see momentum continue in our defense business in 2027,
Stephen G. Oswald, Chairman, President and Chief Executive Officer
Not in the filing
stated, not guessed- No prior-period outlook was provided, so no guidance comparison is possible. The release gives no quarterly or annual revenue, gross margin, operating expense, tax rate or EPS guidance.
- Year-over-year percentage change for cost of sales, gross profit, SG&A, operating income, net income and diluted EPS is not printed.
- Sequential (prior-quarter) figures are not printed, so all qoq_change fields are null.
- Revenue levels by end-use market (commercial aerospace, military and space, industrial) are not printed. Only the dollar changes are given.
- Non-GAAP adjusted net income and adjusted operating income year-over-year percentage changes are not printed.
- Nine-month net cash provided by operations and nine-month book-to-bill or bookings are not printed.
- Free cash flow is not printed.
- Share repurchases, dividends and other capital returns are not reported.
- The prior-period RPO comparison is to December 31, 2025, not to the prior-year quarter, so no prior-year RPO figure is shown.
- The nature and amount of the restatement referenced in the 10-K/A are not described in this filing.
- Analyst consensus, price targets and the share price reaction are not in the document.
- Quarter-end total debt is not printed as a single figure. The current portion ($5,000 thousand) and long-term portion ($245,242 thousand) are reported separately.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.