10-Q: Cleveland-Cliffs Q2 2026 Earnings: Revenue Up, Net Loss Widens

Cleveland-Cliffs Inc. reported a revenue increase for the second quarter of 2026, driven by higher steel prices, but also experienced a wider net loss compared to the previous year.

Summary

• Cleveland-Cliffs Inc. reported revenues of $5.226 billion for the three months ended June 30, 2026, an increase from $4.934 billion in the same period of 2025.
• The company experienced a net loss of $134 million for the three months ended June 30, 2026, compared to a net loss of $473 million in the prior year period.
• For the six months ended June 30, 2026, revenues were $10.148 billion, up from $9.563 billion in the same period of 2025.
• The net loss for the six months ended June 30, 2026, was $363 million, an improvement from a net loss of $959 million in the prior year period.
• Total assets were $20.115 billion as of June 30, 2026, compared to $20.012 billion as of December 31, 2025.
• Total liabilities increased to $14.297 billion as of June 30, 2026, from $13.689 billion as of December 31, 2025.
• Total equity decreased to $5.818 billion as of June 30, 2026, from $6.323 billion as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the widening net loss despite revenue growth and a decrease in shipment volumes, indicating underlying operational challenges or cost pressures.

Positives

• Revenues increased by 6% to $5.226 billion for the three months ended June 30, 2026, compared to the prior year period.
• Steel pricing, particularly for hot-rolled steel, increased, leading to a higher average selling price of $1,124 per net ton.
• A favorable sales mix shift occurred as the contract for semi-finished steel slabs concluded, allowing a focus on higher-margin hot-rolled steel sales.
• Non-steel product revenue increased by approximately $110 million, driven by higher revenue in the scrap business.
• Gross margin increased by $341 million for the three months ended June 30, 2026, due to higher pricing and lower cost of goods sold.
• Adjusted EBITDA for the Steelmaking segment increased by $190 million for the three months ended June 30, 2026, compared to the prior year.
• The company maintained strong liquidity with $3.1 billion in cash and ABL Facility availability as of June 30, 2026.
• The company's commitment to environmental sustainability is highlighted by achieving GHG emissions reduction targets ahead of schedule.

Negatives

• The company reported a net loss of $134 million for the three months ended June 30, 2026, compared to a net loss of $473 million in the prior year period.
• Steel product shipment volumes decreased by 6% for the three months ended June 30, 2026.
• Cost of goods sold increased by $60 million for the three months ended June 30, 2026, partially offset by lower idle charges.
• Selling, general and administrative expenses increased by $17 million for the three months ended June 30, 2026, primarily due to higher incentive-based compensation.
• The company's total liabilities increased to $14.297 billion as of June 30, 2026.
• Total equity decreased to $5.818 billion as of June 30, 2026.
• Net cash used by operating activities was $95 million for the six months ended June 30, 2026, compared to $306 million used in the prior year period.
• Cash used for capital expenditures increased by $45 million to $309 million for the six months ended June 30, 2026.

Risks

• Continued volatility of steel, scrap metal, and iron ore market prices.
• Uncertainties in the highly competitive and cyclical steel industry, and reliance on automotive industry demand.
• Potential weaknesses in global economic conditions, excess global steelmaking capacity, and prevalence of steel imports.
• Risks related to U.S. and Canadian government actions regarding trade agreements, tariffs, and anti-dumping measures.
• Impacts of extensive governmental regulation, including environmental regulations related to climate change and carbon emissions.
• Supply chain disruptions or changes in the cost, quality, or availability of energy sources, raw materials, and critical manufacturing equipment.
• Cybersecurity incidents and emerging risks related to the adoption and regulation of AI.
• Challenges in meeting customer and supplier decarbonization goals and reducing the company's own emissions.

Future Outlook

The company expects domestic steel demand to grow, supported by implemented tariffs, subdued imports, and improving end-user demand. Global tensions are expected to increase steel costs and freight rates, making imports less attractive and supporting domestic demand and pricing. The company anticipates benefiting from a pro-manufacturing agenda and Section 232 tariffs. Light vehicle production is expected to improve, and the 25% tariff on imported automobiles is expected to increase demand for domestically produced vehicles. Rising domestic steel demand and lower imports are expected to support higher steel prices, mitigating inflationary cost increases. The company expects its Toledo direct reduction plant to continue supporting operational efficiency. The company intends to utilize healthy free cash flow to deleverage its balance sheet and maintain healthy liquidity.

Management Comments

• The company expects to benefit for years to come from President Trump's pro-manufacturing and America-first agenda, along with the implemented Section 232 tariffs.
• The company expects rising domestic steel demand, along with lower imports, to support higher steel prices, which should mitigate any inflationary costs.
• As a leading supplier of automotive-grade steel in the U.S., the company expects to benefit from improved domestic vehicle production over the coming years.
• The company believes it offers the most comprehensive flat-rolled steel product selection in the industry.
• The company's strong and productive labor relationships are key to its long-term success and allow it to work together in achieving its goals.
• The company expects to generate healthy free cash flow in the coming years and intends to utilize it to deleverage its balance sheet.

Industry Context

StockSavvy.ai notes that Cleveland-Cliffs' performance is closely tied to the cyclical nature of the steel industry, influenced by global economic conditions, trade policies (like Section 232 tariffs), and demand from key sectors such as automotive. The company's vertically integrated model and focus on value-added products, particularly for the automotive sector, position it to navigate these dynamics. The increasing demand for AI infrastructure is also noted as a potential driver for electrical steel demand.

Comparison to Industry Standards

• Cleveland-Cliffs' Scope 1 and 2 emissions intensity of integrated mills has decreased from 1.82 to 1.64 metric tons of CO2e per metric ton of crude steel produced in 2025, which is significantly lower than the global industry average.
• The average age of light vehicles on the road in the U.S. is at an all-time high of 12.8 years, indicating a potential increase in demand for automotive steel as older vehicles require replacement, a trend that benefits steel producers like Cleveland-Cliffs.
• Domestic HRC pricing averaged $1,079 per net ton in Q2 2026, a 19% increase from Q2 2025, and the highest quarterly average since Q2 2022, indicating a strong domestic market environment compared to recent years.
• Finished steel import levels remained significantly below historical levels in Q2 2026, supporting domestic pricing, a trend that contrasts with periods of higher import penetration seen in the global steel market.

Legal Proceedings

• The company is subject to various claims and legal proceedings incidental to its current and historical operations, but does not believe any pending claims or legal proceedings will result in a material adverse effect.

Stakeholder Impact

• Shareholders: The widening net loss and decrease in total equity may negatively impact shareholder value.
• Employees: Incentive-based compensation increases contributed to higher SG&A expenses.
• Suppliers: The company has agreements for raw materials and energy, with some having minimum purchase quantities that could pose a risk under adverse economic conditions.
• Creditors: The company's debt levels increased, and while liquidity remains strong, the net loss could be a concern for creditors.

Next Steps

• Continue to optimize the fully-integrated steelmaking footprint.
• Utilize artificial intelligence to improve operational efficiency through a partnership with Palantir Technologies.
• Explore strategic opportunities, including potential partnerships and rare earth mineral extraction.
• Enhance environmental sustainability with new GHG emissions reduction targets.
• Improve financial flexibility by managing liquidity and deleveraging the balance sheet.
• Anticipate total cash used for capital expenditures of approximately $900 million in the next 12 months, including a major reline project.

Key Dates

Recommendation

While revenues are up due to higher steel prices, the significant widening of the net loss and decrease in shipment volumes are concerning. The company's strong liquidity and strategic initiatives provide some support, but the current financial performance suggests a cautious 'hold' approach until operational improvements and profitability trends become clearer.

Keywords

steel production, automotive steel, hot-rolled steel, revenue growth, net loss, adjusted EBITDA, steel market, Cleveland-Cliffs