AerCap's Record 2025 Earnings Beat Adjusted EPS Guidance, Reinforcing Bullish Narrative Amid Cyclical Peaks

What happened

AerCap Holdings N.V. reported record full-year 2025 financial results, with net income of $3.8 billion and adjusted net income of $2.7 billion, translating to adjusted EPS of $15.37 that surpasses the ~$11.60 guidance cited in prior analyses. These figures are bolstered by Russia-related insurance recoveries and high gain-on-sale margins, which the DeepValue report notes are normalizing from peaks to more sustainable high-teens levels. Core operations remain strong, with 99% utilization and 97% lease extension rates in recent quarters, driven by tight aircraft supply and robust airline demand. However, the PR release's promotional tone mirrors the crowded market sentiment, where the stock has risen 51% over 12 months, trading at ~1.4x book and embedding high expectations. Investors must look beyond the headline numbers to assess the durability of earnings, as emerging-market exposures and potential debt creep pose risks in a cyclical industry.

Implication

The higher adjusted EPS reinforces the investment thesis of mid-teens returns through aggressive buybacks and leasing cash flows, supported by AerCap's leading scale in a supply-constrained market. However, the reliance on one-off insurance recoveries and elevated gain-on-sale margins, which are expected to normalize, underscores that core earnings power may be lower than reported, necessitating a focus on sustainable metrics like utilization and lease rates. With the stock trading near all-time highs and a P/B of ~1.4x, the margin of safety has narrowed, increasing vulnerability to any downturn in aircraft demand or funding costs, especially if adjusted debt/equity rises above the 2.5x threshold. Management's capital returns, including over $1 billion in recent buybacks, are accretive but could strain balance-sheet flexibility if not matched by organic cash generation, highlighting the need for disciplined leverage monitoring. Looking ahead, investors should track quarterly data for signs of stress in emerging-market lessees, which account for 49% of lease revenue, and any compression in gain-on-sale margins below high-teens levels to gauge the thesis's resilience.

Thesis delta

The record 2025 earnings, particularly the adjusted EPS beat, strengthen the near-term case for AerCap as a potential buy by confirming operational strength and capital return efficacy in a favorable cycle. However, this does not shift the core thesis, which already anticipated high performance but emphasized risks from normalization and cyclical peaks; it merely increases confidence in execution while highlighting the urgency of monitoring utilization and debt metrics for sustainability.