AAR's cash conversion swung from -1.31x to 1.39x. That is the oddest number in a three-month report otherwise defined by strong growth: operating cash flow moved from negative $44.9 million to positive $55.8 million.
The surface reading is straightforward. Revenue rose 24.1% to $918.0 million, gross profit climbed 31.9%, and gross margin widened to 19.2% from 18.1%. AAR sold more parts, reported higher sales in its Repair Engineering and Software segment, and generated cash during the period.
The less tidy part is per-share growth. Net income increased 16.6% to $40.1 million, but diluted EPS rose only 5.3% to $1.00 as diluted shares increased 11.1% to 39.9 million. The business expanded faster than the slice belonging to each share.
AAR highlighted growth in its Parts Supply operation, where sales rose 30.5%. Management tied that increase to new distribution activity and expanded agreements.
"Consolidated sales to commercial customers increased $147.5 million, or 28.2%, over the prior year quarter primarily due to strong demand and volume growth in our new parts Distribution activities, including from our recent ADI acquisition, which contributed sales of $35.3 million."
AAR, Form 10-Q, September 29, 2026
That commercial growth did more than add revenue. Government sales rose only 3.7%, while its operating margin improved to 13.8% from 9.5%, and the smaller Legacy Commercial Programs line also produced a sharper operating result.
The pressure showed up below gross profit. AAR said lower profitability in Airframe MRO and $4.9 million of compensation expense tied to Trax contingent consideration contributed to declines in the relevant operating results.
"These decreases were primarily due to lower profitability in our Airframe MRO activities and the recognition of compensation expense of $4.9 million related to the Trax contingent consideration."
AAR, Form 10-Q, September 29, 2026
The filing therefore leaves two operating signals in view. Gross profit grew faster than sales, and cash generation improved sharply. Net margin still slipped to 4.4% from 4.7%, while inventory rose 17.1% to $1.0 billion. The cash improvement is real in the period, but the balance sheet still carries more inventory and the share count is doing more work than EPS suggests.
AAR's annual history gives that share-count issue some context without settling it. Revenue reached $3.3B in fiscal 2026 after rising 19.0%, while diluted shares increased 7.3% over the year. Growth has been recurring; so has the expansion of the denominator.
At the latest close, AAR shares were $115.03, down 1.7% on September 28. The stock trades at 23.5x earnings, while the company carries $809.9M of net debt. Those figures frame the question without answering it: how much of the next dollar of operating progress reaches each share?
AAR's next quarterly report will put the current cash swing and the commercial growth beside the diluted share count of 39.9 million, the specific number that will show whether per-share expansion is catching up with the business.
Source: AAR's September 29, 2026 Form 10-Q; current diluted shares: 39.9 million.