Thank you and good morning. Welcome to Boeing's Quarterly Earnings Call. With me today are Kelly Ortberg, Boeing's President and Chief Executive Officer, and Jay Malave, Boeing's Executive Vice President and Chief Financial Officer. This quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risk and uncertainties, including the ones described in our SEC filings. As always, we'll leave time at the end of the call for analyst questions. With that, I will turn the call over to Kelly Ortberg.
Thanks, Eric. Good morning, everyone. Thanks for joining in today's call. As we start this year, we've set the foundation for our turnaround with stronger performance and record-breaking backlogs across our businesses. We haven't fully turned the corner, but we're making real progress and getting back to the Boeing everyone expects of us. When we spoke a year ago, we were just in the early stages of our four-point plan to stabilize our business, execute on our development programs, change our culture, and build a new future for Boeing. Today, our customers and stakeholders are seeing the difference in how we work together to uphold our commitments and deliver high-quality products and services. Before discussing the work ahead of us and our plan to meet the 2026 goals, I'll first touch on some important accomplishments in the quarter and the year that position us well for moving forward.
In 2025, we methodically increased commercial production guided by our safety and quality plan. This enabled our team to deliver the most commercial airplanes since 2018. We delivered 600 airplanes and won more than 1,100 commercial orders for the year, making this one of our highest order totals ever, as our portfolio continues to win in the market. Earlier this month, I joined Alaska Airlines as they announced their largest order ever. This was a clear reminder that our customers place their trust in us with every order, and we must keep earning that trust by delivering safe, high-quality airplanes on time. To do this, the fundamental changes we've made this past year will serve as a base for continuous improvement as we look to increase commercial production. For example, we've simplified more than 5,100 work instruction documents.
These are the instructions that the mechanics and inspectors use each day to do their jobs. These types of activities reduce complexity, support consistent performance, and strengthen factory health. On 737, production is stabilizing at 42 airplanes per month, and we're continuing to see improvement in the program as its on-time delivery performance has improved threefold compared with the previous year. We also continue to get positive customer feedback on the quality of the airplane. As we look to move to higher rates, we'll use the same process as previous rate breaks, monitoring factory health and following our safety and quality plan. For production above 47, we'll add our new North Line in Everett, where facility and tooling investments are now complete, and we're executing a deliberate staffing plan to support production there. In Charleston, the 787 program continues to progress well and is stabilizing at rate 8.
I'm pleased with the operational metrics we're seeing in the factory. As an example, during 2025, the program reduced average rework hours nearly 30%. And going forward, as with the 737, we'll use the same discipline processes, including monitoring our KPIs to assess readiness for the next planned rate increase to 10 airplanes per month, which is targeted for later this year. As previously announced, we're also investing in the future, breaking ground on our factory expansion to support higher rates and meet the exceptional demand for the 787. We also made progress in our defense business and scored a transformational win to build the U.S. Air Force sixth-generation fighter. Over the past year, we've also focused on reducing the risk profile of our BDS development programs by driving improved performance and leveraging active management to deliver better outcomes for our customer.
In the quarter, our defense business also hit several key milestones. The U.S. Navy's MQ-25 successfully completed its inaugural engine run, moving it closer to first flight. We also delivered the first operational T-7A Red Hawk to the U.S. Air Force at Joint Base San Antonio-Randolph. These milestones are just a few where our programs are progressing and meeting our customer commitments. Importantly, we also ratified a new five-year labor agreement with our IAM representative workforce in St. Louis during this past quarter. Our team there is back to work, focusing on delivering and supporting our customers. Before the year-end, we took another important step forward, supporting our production stability by completing the acquisition of Spirit AeroSystems. Bringing together our companies reinforces our efforts to improve safety and quality throughout our factories, operations, and supply chain.
There's a lot of work ahead of us with an integration of this magnitude, and we have thoughtful, detailed plans in place to help enable a smooth transition for our new teammates while maintaining continuity for our customers and suppliers. We also successfully completed the $10.6 billion Jeppesen sale, solidifying our balance sheet while retaining essential digital capabilities for our customers. With a streamlined portfolio, our service business is well positioned to support our global commercial and defense customers. BGS secured Boeing's largest-ever commercial component services deal, and our government services business received its highest orders ever in 2025, including a contract with the U.S. government in the quarter to support C-17 modernization. BGS also launched a new unified e-commerce platform, which brings together Boeing's distribution portfolios of products and services into one streamlined digital destination, simplifying how customers and suppliers connect, transact, and grow with the company.
Across commercial, defense, and services, we've built a strong foundation for the year ahead. While I'm proud of what we accomplished in 2025, we also know expectations are rising, and we must continue to elevate the performance that we've demonstrated over this past 12 months. As important, I am pleased with the progress we're making on culture that will ensure these improvements become a critical part of our success and further strengthen trust with our stakeholders. I remain confident in our team and our plan to deliver on the opportunities and address the challenges in front of us in the year ahead, particularly on our development programs. Past delays to the certification timelines for the new 737 MAX derivatives and the 777-9 have been challenging, but we are making steady progress in performing than our revised schedules.
The 737-10 recently gained Type Inspection Authorization 2, or TIA 2, to expand flight testing. This final TIA opens up the majority of the certification flight testing, which is focused on validating the airplane's avionics, propulsion, autoflight capabilities, and other airplane functions. In addition, as we've previously shared, we have a final set of design changes to permanently address the engine anti-ice issues on the 737-7 and -10. We're following the lead of the FAA as we work to certify the suite of design changes. We still anticipate certification for both the 737-7 and -10 in 2026. On 777-9 in the quarter, we received approval for TIA 3 and continue to perform certification flight testing. TIA 3 is a major phase of testing focused on avionics, environmental control systems, and the auxiliary power unit. As I've said before, overall, the aircraft and engine continue to perform well.
We have identified a potential durability issue during a recent inspection on the 777X engine, and we're working with GE to better understand that issue and finalize root cause and corrective action. Importantly, as we work through this issue, we continue our certification flight testing, and we don't expect this to impact our delivery in 2027. Demand for the airplane remains strong, and we remain confident that the 777X will be the next flagship airplane for our global customers. Moving now to KC-46 tanker. As we came through our quarterly process, we revised cost estimates for elements including the production support and supply chain, which Jay will cover in more detail.
While it's disappointing to recognize another impact on this program, we are seeing encouraging operational performance trends, which, if sustained, should enable us to meet our customer delivery commitments and set us up well for the next tanker order beyond the current program of record. You've heard me say you're never done until you're done on any of the development programs, but across defense and commercial, we are making progress, clear-eyed on the work remaining, and committed to delivering better performance in the year ahead. As I finish my prepared remarks this morning, I want to thank all of our employees, including our newest teammates from the former Spirit AeroSystems. From our frontline mechanics to our engineers and our management team, we're all committed to continuous improvement guided by our culture with a sharp focus on safety, quality, and performance to deliver for our customers and other stakeholders.
We know there's more work ahead in 2026, but the strong foundation we're building by stabilizing the business, executing these development programs, building our future, and changing our culture will position us to put our recovery behind us and restore Boeing to the company we all know it can be. With that, I'll now turn it over to Jay to discuss the results in more detail.
Thanks, Kelly. Good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $23.9 billion, the highest quarterly total reported since 2018. Revenue was up 57%, primarily driven by improved operational performance across the business, including higher commercial deliveries and defense volume. Core earnings per share of $9.92 primarily reflects the $11.83 gain associated with closing the Digital Aviation Solutions divestiture. Free cash flow was positive $375 million, slightly higher than the expectations I shared last month, driven by higher commercial deliveries and working capital that improved compared to both the prior year and the prior quarter. Turning to BCA on the next page, BCA delivered 160 airplanes in the quarter and 600 for the year, the highest annual total since 2018.
Revenue of $11.4 billion and operating margin of negative 5.6% both improved materially and primarily reflect better operational performance and higher deliveries compared to last year's results that were impacted by the work stoppage. Results also include impacts associated with acquiring Spirit AeroSystems, which impacted segment margins by roughly 1.5 points in the quarter. BCA booked 336 net orders in the quarter, including 105 737-10 and 5 787-9 airplanes for Alaska Airlines and 65 777-9 airplanes for Emirates. Importantly, BCA booked 1,173 net orders for the year, and backlog ended at a record-setting $567 billion that includes over 6,100 airplanes, with the 737 and 787 both sold firm into the next decade. Let's click down to the commercial programs. Starting with the 737 program, BCA delivered 117 airplanes in the quarter and 447 for the year, in line with expectations shared last month.
The factory increased the production rate to 42 per month in the quarter, and the program is on course to increase production to 47 later this year. The year ended with one 737-8 built prior to 2023, down five from the prior quarter, and we expect to deliver this final shadow factory airplane in the first quarter. On the -7 and -10, inventory levels were stable at approximately 35 airplanes. As Kelly said, we received approval from the FAA in the quarter to begin the final phase of 737-10 certification flight testing and continue to partner closely on a certification path for these programs, including the engine anti-ice solution set. On the 787, we delivered 27 airplanes in the quarter and 88 for the year.
During the quarter, the program completed a successful capstone review and is continuing to make good progress, stabilizing at the new production rate of eight per month. The year ended with approximately five airplanes in inventory that were built prior to 2023, down five from last quarter. We still expect to deliver the remaining airplanes in 2026, which is aligned with our customers' fleet plans. Importantly, the 787 recorded 395 net orders in 2025, the program's highest annual order total, which highlights the market-leading capabilities that the Dreamliner will continue to deliver to our customers for decades to come. Finally, on the 777X, as Kelly mentioned, we continue to make progress on 777-9 certification flight testing. 777X inventory spend in 2025 finished at nearly $3.5 billion, in line with expectations.
777X booked 202 orders in 2025, the second highest annual total since the program's launch, underscoring the trust that our customers have placed in this game-changing wide-body family, as well as our team that's building it. All right, let's shift over to BDS on the next page. BDS delivered 37 aircraft in the quarter, and revenue grew 37% to $7.4 billion on improved operational performance and higher volume. Operating margin of negative 6.8% improved significantly compared to last year and also reflects the better operating performance across the business. This improvement was tempered by a $565 million loss on the KC-46A tanker, which I'll address further in a moment. BDS booked $15 billion in orders during the quarter, including awards for 15 KC-46A tankers from the U.S. Air Force and 96 Apaches from Poland, both contributing to backlog that grew to a record $85 billion.
Overall, we continue to make progress stabilizing our fixed-price development programs, even with the cost updates on a few programs this quarter, including the tanker adjustment. As Kelly mentioned, the tanker adjustment was driven by higher BCA production support and other allocated costs in the Everett facility, as well as higher estimated supply chain costs, including Spirit. The added production support costs include keeping higher levels of quality and engineering support in the factory, which are a key part of driving improvement. For example, as compared to the first half of the year, we saw average factory rework levels decrease by 20% in the fourth quarter. So while these investments are starting to evidence progress, we need to sustain them for longer than previously planned to promote stability.
Across these fixed-price development programs, we continue to see benefits from our active management approach in retiring risk and developing win-win opportunities with our customers. We remain focused on delivering these important capabilities and achieved several important milestones in the quarter. In addition to the highlights Kelly referenced on T-7A and MQ-25, we also partnered with NASA to modify the Commercial Crew contract to better align our long-term objectives. The remainder of the portfolio continues to benefit from increased demand supported by the global threat environment. Performance on these programs continued to reflect the operational improvement that began earlier this year. For example, on the PAC-3 Seeker program, over the course of 2025, the team was able to increase output by 33%, enabled by prior investments in capacity and a focus on lean to drive more efficient production.
Overall, the defense portfolio is well-positioned for the future, as evidenced by our record backlog, and we still expect the business to return to historical performance levels as we continue to drive execution and transition to new contracts with tighter underwriting standards. Moving to global services on the next page, BGS continued to perform well, again delivering strong financial results in the quarter. Revenue was up 2% to $5.2 billion, primarily reflecting improved government volume. Operating margin was abnormally high due to the Digital Aviation Solutions gain. Adjusting the fourth quarter of 2025 and 2024 for Digital Aviation Solutions, BGS adjusted revenue of $5.1 billion grew 6%, and adjusted operating margin was 18.6%. On the same basis, both our commercial and government businesses again delivered double-digit margins in the quarter. BGS is driving a keen focus on continuous improvement.
For example, on the C-17 sustainment program, the team achieved an 18% flow reduction over the course of 2025 as a result of nearly 200 discrete projects generated by the team, a key enabler of improved customer satisfaction. BGS also received $10 billion of orders in the quarter and an annual high of $28 billion in 2025, and the business ended the year with a record backlog of $30 billion. Shifting over to cash and debt, cash and marketable securities grew to $29.4 billion, primarily due to $10.6 billion in proceeds associated with closing the Digital Aviation Solutions transaction, partially offset by debt repayment of $3 billion associated with the acquisition of Spirit AeroSystems. The debt balance ended at $54.1 billion, slightly up from last quarter, primarily reflecting the retained Spirit debt.
The company also maintains access to $10 billion of revolving credit facilities, all of which remain undrawn, and we remain committed to strengthening the balance sheet and supporting our investment-grade rating. Okay, let's shift to full-year performance on the next page. Full-year revenue was up 34% to $89.5 billion, primarily reflecting the improved operational performance across the business. Core Earnings Per Share of $1.19 was up significantly, primarily driven by the $12.47 gain on the Digital Aviation Solutions sale and improved performance. Excluding the impact of the gain, EPS was up $9.10 year-over-year. Free cash flow was at $1.9 billion usage for the year. This was slightly better than expectations shared last month and improved significantly year-over-year, primarily driven by higher commercial deliveries and improved working capital. Our improving cash flow performance in 2025 provides a solid setup to deliver positive free cash flow for the full year in 2026.
Let me provide some additional context on our free cash flow outlook. As we continue turning the corner in 2026, we expect positive free cash flow of $1-$3 billion, aligned with the expectations I shared last month. For clarity, this outlook contemplates an unfavorable impact of roughly $1 billion in 2026 associated with incorporating Spirit. Consistent with the profile we have discussed previously, cash flow is expected to grow year-over-year, primarily on higher commercial deliveries, better performance at BDS as that business continues to stabilize, and continued steady growth at BGS. This outlook continues to assume significant capital expenditures for future products and growth, particularly in St. Louis and Charleston. CapEx ramped up over the second half, as we expected, with nearly $3 billion invested in the business in 2025.
These higher investment levels will continue into 2026, and we expect to spend closer to $4 billion this year, including the incorporation of Spirit. Within 2026, we expect first quarter free cash flow will be a usage similar to first quarter of 2025, driven by normal seasonality. We expect the first half of 2026 to be a use of cash, with the second half turning positive and accelerating sequentially. As we have discussed, there are a number of impacts to 2026 free cash flow that we expect to be temporary in nature and improve over time. Let me add a bit of color on each category and highlight the actions required to work through them. As I just covered, we expect 2026 free cash flow to be between $1-$3 billion.