By Brazil Stock Guide – Embraer (B3: EMBJ3; NYSE: EMBJ) doubled the floor of its 2026 free cash flow guidance and raised its profitability outlook after posting record second-quarter revenue and strong cash generation. Most of the upgrade, however, reflects a one-off tax credit and relief from U.S. tariffs.
The Brazilian planemaker now expects adjusted free cash flow, excluding Eve, of at least US$400 million this year, up from its previous forecast of US$200 million or more. Its adjusted EBIT margin guidance was raised to between 10.0% and 10.6%, from 8.7% to 9.3%.
Revenue and delivery guidance were left unchanged. Embraer continues to expect consolidated revenue of US$8.2 billion to US$8.5 billion, 80 to 85 commercial aircraft deliveries and 160 to 170 executive jet deliveries in 2026.
The midpoint of the adjusted EBIT margin forecast increased by 130 basis points to 10.3%, equivalent to approximately US$110 million. Of that amount, 80 basis points, or US$68 million, came from a one-off tax credit, while another 45 basis points, or US$38 million, reflect an exemption from U.S. tariffs in the second half. An improved underlying business outlook accounts for only five basis points, or US$4 million.
In other words, tax and tariff-related factors explain 125 of the 130 basis points in the guidance upgrade. Embraer said it will still face approximately US$12 million a year in indirect U.S. import tariffs.
Net revenue reached R$11.34 billion in the second quarter, up 10% from a year earlier and the highest ever reported by the company for the period. In U.S. dollar terms, revenue rose 23% to US$2.24 billion.
Adjusted EBIT increased 39% to R$1.51 billion, with the margin expanding to 13.4% from 10.6% in the second quarter of 2025. Adjusted EBITDA rose 30% to R$1.81 billion, while the margin improved to 16.0% from 13.5%.
The underlying profitability picture was more restrained. Excluding the effects of U.S. tariffs and tax credits in both periods, Embraer’s adjusted EBIT margin would have been 10.6%, down from 11.1% a year earlier.
Adjusted net income reached R$1.11 billion, a 25% year-on-year increase. Net income attributable to Embraer shareholders more than doubled to R$1.08 billion from R$448.9 million, supported by stronger operating performance and lower net financial expenses, partly offset by higher taxes.
Cash generation takes center stage
Adjusted free cash flow at Embraer, excluding Eve, was positive by R$2.03 billion, reversing an outflow of R$989 million a year earlier. In U.S. dollar terms, the company generated US$401 million, compared with an outflow of US$162 million in the second quarter of 2025.
In addition to operating performance and the tax credit, cash generation benefited from customer advances. Contract liabilities increased by R$1.4 billion during the quarter, primarily in Defense & Security, producing a working-capital benefit of approximately R$918 million.
Net debt at Embraer, excluding Eve, declined to R$1.11 billion from R$2.77 billion at the end of March. Net leverage ended the period at 0.2 times adjusted EBITDA, down from 0.6 times a year earlier.
The annual guidance excludes Eve, which posted a free cash flow outflow of R$248 million during the quarter. The electric aircraft subsidiary ended June with R$2.09 billion in cash and a net cash position of R$472 million.
Executive Aviation drives earnings
Embraer delivered 65 aircraft during the quarter, its highest second-quarter total in 16 years and 7% more than a year earlier. Deliveries included 20 commercial aircraft and 45 executive jets. The company recorded no defense aircraft deliveries during the period.
Executive Aviation revenue rose 19% to R$3.68 billion, while its adjusted EBIT margin jumped to 23.6% from 14.6%. The division, however, accounted for US$60 million of the tax credit. Excluding tariffs and the tax benefit, its margin would have been 16.1%, broadly unchanged from 16.2% a year earlier.
Defense & Security revenue increased 22% to R$1.54 billion, driven by greater revenue recognition related to the C-390 program. The division’s adjusted EBIT margin rose to 12.0% from 9.3%, supported by operating leverage.
Services & Support revenue climbed 11% to R$2.85 billion, with its adjusted EBIT margin rising to 18.8% from 15.6%. Even after excluding tariff and tax-related effects, the margin would have improved to 17.6%.
Commercial Aviation was the weakest division. Revenue declined 2% to R$3.18 billion despite higher deliveries, as the appreciation of the Brazilian real more than offset the increase in volume. Adjusted EBIT margin fell to 2.9% from 4.2%, mainly because of the customer mix and aircraft sold under older contracts.
Embraer’s firm order backlog reached a record US$34.5 billion, up 16% from a year earlier and marking the company’s seventh consecutive quarterly record. Backlog increased across all business units, led by a 42% gain in Defense & Security, followed by increases of 15% in Commercial Aviation, 12% in Services & Support and 5% in Executive Aviation.
To meet its full-year targets, Embraer will need to deliver another 50 to 55 commercial aircraft and 86 to 96 executive jets during the second half. The company said it will remain focused on sales, efficiency and increasing production rates.
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