10-Q: Garrett Motion Reports Strong Q2 2026 Results

Garrett Motion Inc. announced a 7% increase in net sales for Q2 2026, driven by growth across all verticals and strong operational performance.

Summary

• Garrett Motion Inc. reported a 7% increase in net sales for the second quarter of 2026, reaching $976 million, compared to $913 million in the prior year period.
• Net income for the quarter was $101 million, an increase from $87 million in Q2 2025.
• Adjusted EBIT increased by $28 million to $152 million for the quarter, driven by higher volumes, productivity gains, and favorable pricing.
• The company repurchased $28 million of Common Stock during the quarter, with $135 million remaining under its share repurchase program.
• The company expects to have adequate liquidity to support operations and strategic growth opportunities through at least the next 12 months.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a positive report, with strong top-line growth, improved profitability, and positive operational commentary, indicating solid performance and a stable outlook.

Positives

• Net sales increased by 7% to $976 million for the three months ended June 30, 2026.
• Net income rose to $101 million for the quarter, up from $87 million in the prior year.
• Gross profit percentage improved to 21.7% from 19.8% in the prior year's quarter.
• Adjusted EBIT increased by $28 million to $152 million, driven by volume growth, productivity, and pricing.
• Strong demand was noted across gasoline, diesel, commercial vehicle/industrial, and aftermarket segments.
• The company secured new business awards, including turbo technology for data centers and commercial vehicle E-powertrain development.
• Shareholder returns through dividends and share repurchases continue, with $0.08 per share dividend declared and $115 million in shares repurchased year-to-date.

Negatives

• Commodity, transportation, and energy inflation contributed to a $8 million increase in cost of goods sold for the quarter.
• Unfavorable foreign currency impacts, despite overall favorable translation, resulted in a $5 million decrease in Adjusted EBIT for the quarter.
• Lower customer recoveries on import tariffs partially offset net sales growth.

Risks

• The ongoing evolution of the automotive industry.
• Highly competitive markets.
• Reliance on sales to major customers.
• Changing industry and economic conditions.
• Pricing pressures from OEM customers.
• Volatility in the cost of raw materials, components, energy, and transportation.
• Supply shortages or supplier distress.
• Economic, political, regulatory, foreign exchange, and other risks of international operations.

Future Outlook

The company expects to continue investing in facilities for manufacturing capacity expansion for new product launches and new technologies, particularly in zero-emission technologies. They believe their current liquidity sources, including expected cash flows, term loan borrowings, senior notes, and revolving facility, will be adequate to support operations and strategic growth opportunities for at least the next 12 months. Opportunistic access to debt or equity markets may also be pursued.

Management Comments

• During the second quarter of 2026, we outperformed the light vehicle industry and saw growth across all verticals.
• We continue to have success across our differentiated technologies by winning business in both turbo and zero emission offerings.
• We have also received favorable feedback from mobility and industrial customers related to expected efficiency gains from our E-Cooling oil-free compressor over existing recognized technologies.
• We continue to actively monitor developments and their potential impacts on the industry and our operations as broader macroeconomic and geopolitical conditions evolve.

Industry Context

StockSavvy.ai notes that Garrett Motion's performance in Q2 2026 aligns with broader industry trends towards emission reduction and energy efficiency, with particular emphasis on growth in electric and hybrid vehicle technologies, as well as industrial applications like data center cooling.

Comparison to Industry Standards

• Garrett Motion's Q2 2026 net sales growth of 7% outpaced the light vehicle industry, indicating strong market penetration and product demand.
• The company's focus on turbocharging and electric propulsion technologies positions it favorably against competitors like BorgWarner and Honeywell in the evolving automotive landscape.
• The reported Adjusted EBIT margin of approximately 15.6% ($152M / $976M) is a key performance indicator within the automotive supplier sector, though direct comparison requires detailed segment data from peers.

Legal Proceedings

• The company is involved in various lawsuits, claims, and proceedings related to government contracts, product liability, prior acquisitions/divestitures, product safety, environmental, safety and health, intellectual property, employment, and commercial/contractual matters.
• A Brazilian tax matter challenges the use of certain tax credits, with an estimated loss contingency of $29 million, though the company believes it has meritorious arguments and no accrual is currently required.

Related Party Transactions

• During the six months ended June 30, 2026, the company repurchased 2,500,000 shares from funds affiliated with Oaktree Capital Management, L.P. for $50 million.

Stakeholder Impact

• Shareholders benefit from increased net income, dividends, and ongoing share repurchases.
• Customers are expected to benefit from efficiency gains from new technologies like the E-Cooling oil-free compressor.
• Suppliers may be impacted by supplier financing arrangements and potential supply chain dynamics.

Next Steps

• Continue investing in facilities for manufacturing capacity expansion for new product launches.
• Invest in new technologies and strategic growth opportunities, particularly in zero-emission technologies.
• Monitor macroeconomic and geopolitical developments and their potential impacts on operations.
• Continue to win business in both turbo and zero-emission offerings.
• Execute on share repurchase program and dividend payments.

Key Dates

Recommendation

The company demonstrates solid operational performance and growth, with improved profitability and a positive outlook. However, the inherent cyclicality of the automotive industry, competitive pressures, and ongoing macroeconomic uncertainties warrant a 'hold' recommendation, suggesting investors monitor future performance and strategic execution.

Keywords

turbocharging, emission reduction, electric vehicle technology, automotive components, mobility technology, industrial applications, compressor technology, financial results