Embraer's Q2: Tariff Refund and Lean Production Push Margins to a Record
Strongest Q2 revenue and a raised EBIT margin guidance as a $68M tax credit and production leveling converge.
EMBJ · Earnings Call · 2026-08-10
First, the number that changed the story
Embraer's Q2 2026 was defined by a single, company-unique event: a $68 million extraordinary extraordinary tax credit that flowed through the income statement. The credit stems from the refund of U.S. import tariffs that Embraer had paid over the previous year, and it arrived just as the direct tariff on the company's aircraft was eliminated. CFO Felipe Santana explained: “This impact, we have both, right? We have both on cash and also on EBIT. Most of it is refund of the tariffs that we impact the company last year in the first quarter and the second quarter of this year.” — Felipe Santana, Executive, likely CFO or similar financial/operations role · 2026-08-10 The result: consolidated adjusted EBIT margin reached 13.3%, and management raised its full-year EBIT margin guidance to 10%–10.6%, a 130-basis-point increase at the midpoint. The market was quick to probe the nature of this credit, asking whether it was cash-backed and whether any further reversals might come. The answer was clear: the remaining direct tariff exposure is gone, with only a $12 million annual indirect impact in services. This is a strategic inflection point for the company, one that resets the baseline for margin expectations.The operational engine keeps humming
Beyond the one-time credit, the second quarter showcased genuine operational strength. Revenue hit $2.2 billion, the highest Q2 in company history, and executive aviation delivered a stunning 23.4% EBIT margin. CEO Francisco Gomes Neto attributed much of this to the production leveling initiative: “We have seen our executive jets production progressing very well with the production leveling initiative.” — Francisco Gomes Neto, CEO · 2026-08-10 This has been a multi-year effort, and the payoff is now visible in delivery cadence and margin mix. The company also highlighted customer mix as a variable in commercial aviation, where margins dipped slightly due to legacy contracts. But the overall trajectory is upward: the new sales pipeline, particularly for the E2 family, remains robust, and the book-to-bill ratio across the company stands at 1.8 for commercial aviation over the last twelve months.Defense and Eve add optionality
Defense was another standout. The UAE ordered 10 C-390s, the platform's largest international order, and Colombia joined the customer list. The KC 390 backlog grew 42% year-over-year, and the CEO noted in the Q&A: “We are working in other campaigns as well that I cannot disclose at this point of time.” — Francisco Gomes Neto, CEO · 2026-08-10 The geopolitical environment is clearly accelerating defense demand. Meanwhile, Eve's eVTOL program moved from hover to transition flights, bringing certification—and commercial operations—closer to the 2028 target. While this remains a long-term bet, it adds a meaningful call option to Embraer's story.That record backlog, with optionality of $21 billion more, is the foundation for the company's planned growth through 2030.Our company-wide backlog reached $34.5 billion, an increase of 16% year-over-year and another all-time record for Embraer.