Howmet's IGT Supercycle: Turbine Blades Meet Data Center Power
Strong Q2 with 46% incremental margins, all 7 gas turbine customers now signed, and aerospace wide-body recovery — Howmet raises guidance and teases 2027 growth.
HWM · Earnings Call · 2026-08-06
Engineered for the Electric Age
Howmet Aerospace entered Q2 2026 with momentum, delivering “headline revenues up 24% year-over-year with strong incremental margins of 46%” — John Plant, Executive Chairman and Chief Executive Officer · 2026-08-06 and raising its full-year outlook across revenue, EBITDA, EPS, and free cash flow. The most striking change is the unmistakable acceleration of the industrial gas turbine (IGT) market — now a true growth engine driven by the build-out of electricity infrastructure for data centers and AI. CEO John Plant noted that “gas turbine growth is driven by the increased demand for electricity generation, especially from natural gas for data centers.” — Patrick Winterlich, Executive Vice President and Chief Financial Officer · 2026-08-06 Demand increases are so robust that Howmet has completed negotiations with the last of its seven major gas turbine customers, and some customers are already revisiting their demand outlooks. This is a decisive shift from the company's historical focus on aerospace casting volatility.
Clearly, conceptually, the opportunity of getting more direct access and using solar arrays is possible. And it's a big solution to solve what may be a permitting problem at the moment. But there's a lot of technical things which have to be overcome... I think we're looking at really sometime in the 2040s or maybe in 2050s to consider this as a likely outcome.
Plant's dismissal of space-based data centers underscores the near-term reality: terrestrial gas turbines are the only viable bridge to meet surging power demand. Howmet holds >50% global share in IGT turbine blades, and the company is investing heavily — CapEx will exceed $500M in 2026, with another step-up planned for 2027 — to build out new capacity in Japan, Europe, and the U.S. The company is also moving product mix toward more sophisticated cored blades, leveraging its expertise in large castings to outgrow the market.
Aerospace Spares and Wide-Body Ramp
Beyond IGT, commercial aerospace delivered 28% growth (26% organic), and spares revenue jumped 37% to roughly $460M, now representing ~22% of total revenue. Spares demand across legacy and next-generation engines continues to strengthen, a direct result of engine durability issues and a still-young fleet needing replacement parts. On wide-bodies, Plant confirmed the anticipated ramp: “We do feel as though wide-body will increase over the next, I'll say, a couple of years. And there are demand increases signaled at both Boeing for the 787 up to Rate 10... and then also Airbus, which has probably struggled on the A350 over the last 2 or 3 years, and now seem to be entering a period where there's some confidence that their, let's say, Rate 5 or 6 will move to 8 or 9 over the next year.” — John Plant, Executive Chairman and Chief Executive Officer · 2026-08-06 This broad-based demand, along with the pending LEAP-1B and GTF Advantage cutovers, positions Howmet for sustained growth in the second half and into 2027.
The company has also been aggressive on capital deployment: $600M of buybacks in H1, an additional $200M in July, a 17% dividend increase, and $186M of debt retired. The balance sheet remains resilient, with net debt-to-EBITDA at 1.4x post the CAM acquisition, and management expects to return to ~1x by year-end.Operating margin hit 32.6% in Q1 2026, up 7.1pp year-over-year, and the company is on track to expand EBITDA margins further.
What Changed and What Matters
The most significant change is the confidence in the multi-year IGT demand picture. Unlike previous cycles where gas turbines were treated as cyclical, Howmet has now signed long-term agreements with all major customers, converting order books into contracted visibility. As Plant remarked on the prior call: “So it's a pretty exciting time for us to be able to build out this business to be a very significant contributor for the company.” — John Plant, Executive Chairman and Chief Executive Officer · 2025-10-30 That build-out will drive CapEx higher for several years, but management maintains its 90% free cash flow conversion target, and 2027 revenue is already expected to increase again — with first guidance coming in November. The combination of aerospace recovery, IGT supercycle, and disciplined capital allocation makes Howmet a standout in the industrial power supply chain. The stock is near all-time highs, reflecting this optimism, and the question now is whether execution can keep pace with the extraordinary demand.