Is Delta Air Lines Worth Buying After Strong Q4 Performance? Exploring the Investment Case Beyond Headline Numbers

Earnings Performance Exceeds Expectations

When Delta Air Lines (DAL) unveiled its fourth-quarter 2025 financial results on January 13, the airline delivered a solid earnings surprise that resonated with market participants. The carrier posted earnings of $1.55 per share, surpassing the Zacks Consensus Estimate of $1.53. Despite a 16.22% year-over-year decline attributed to elevated labor expenses, the company’s total revenues reached $16 billion, outperforming the $15.63 billion consensus projection and climbing 2.9% year-over-year.

When adjusting for third-party refinery sales, operating revenues grew 1.2% year-over-year to $14.6 billion. Notably, the government shutdown shaved approximately 2 percentage points off revenue growth, particularly within domestic operations. This marks the fourth consecutive quarter that DAL has surpassed analyst estimates, with an impressive average beat of 7.94%—a track record that underscores management’s execution capabilities and operational consistency.

Strategic Fleet Modernization and International Expansion

Delta’s long-term growth narrative centers on a landmark Boeing agreement to acquire 30 787-10 widebody aircraft, with options for an additional 30 units. This ordering wave represents a critical infrastructure investment, with deliveries commencing in 2031. The new aircraft promise substantial fuel efficiency improvements alongside enhanced operating economics, directly positioning Delta to strengthen its international presence across major regions.

The Boeing partnership extends beyond aircraft procurement. A supplementary agreement with GE Aerospace ensures comprehensive maintenance services for the GEnx engines powering these aircraft. This integrated approach reflects Delta’s commitment to maximizing asset utilization and minimizing operational disruptions.

Comparable strategic moves ripple across the sector. Alaska Air Group’s subsidiary, Alaska Airlines, simultaneously agreed to purchase 105 new 737-10 aircraft and five 787 units from Boeing, extending delivery timelines through 2035. This order, complemented by options for 35 additional 737-10s, brings Alaska’s total Boeing orderbook to 245 aircraft, alongside its already-operational 94 MAX aircraft. These narrowbody jets will support both growth initiatives and replacement of aging aircraft while maintaining operational flexibility.

Cost Architecture Pressures Create Headwinds

While revenue expansion provides positive momentum, the expense side presents mounting challenges that warrant investor scrutiny. Total operating expenses climbed 5% year-over-year to $14.5 billion in Q4 2025, defying tailwinds from lower fuel and maintenance costs. This increase signals persistent inflationary dynamics embedded throughout Delta’s cost structure.

Salary and related compensation surged 11% year-over-year to $4.59 billion, a direct consequence of the 2023 pilot contract ratification that locked in higher wage commitments. Landing fees and other airport rents jumped 14% year-over-year, while ancillary operations and refinery expenses accelerated 20% year-over-year. Management has signaled that continued pressure from labor agreements will persist, potentially constraining margin expansion going forward.

On a more favorable note, average fuel costs declined 3% year-over-year to $2.28 per gallon on an adjusted basis. However, non-fuel unit costs (adjusted CASM-Ex) inched upward 4% year-over-year to 14.27 cents, reflecting the challenging underlying cost dynamics that dominate operational economics. For investors considering delta bond instruments or equity positions, these cost pressures represent tangible risks to future profitability trajectory.

Valuation Metrics Signal Limited Upside

From a valuation perspective, DAL presents an unattractive entry point for new capital allocation. The forward 12-month price-to-sales ratio stands at 0.70X, compared with the airline industry’s 0.59X median. More concerning, this multiple sits above the company’s own five-year median of 0.53X, suggesting the market has already priced in significant expectations around Delta’s operational improvements and international expansion initiatives.

Investment Recommendation: A Cautious Stance

Delta Air Lines delivered admirable fourth-quarter earnings that validated investor optimism around international recovery and premium product demand. The company’s fleet modernization strategy and operational consistency demonstrate management capability. However, the combination of elevated valuation multiples, persistent labor cost inflation, and a challenging expense architecture creates a risk-reward asymmetry that favors patience.

Long-term investors should resist the temptation to chase recent performance and instead monitor for more attractive entry valuations. The Zacks Rank #3 (Hold) designation appropriately captures this cautious outlook—acknowledging the company’s solid fundamentals while recognizing limited near-term upside. Existing shareholders can maintain positions given Delta’s durable competitive advantages and long-term growth trajectory, but new investors would be prudent to await a more compelling risk-reward inflection point.