Detailed narrative
Strong Q1 Financial Performance
Garrett Motion delivered a very strong first quarter with net sales of $985 million, marking a 6% increase at constant currency and 12% on a reported basis. This growth was achieved across all verticals, including commercial vehicles and industrial, and reflects share of demand gains in passenger vehicles despite a decline in light vehicle production.
The company translated this growth into a solid operating performance, achieving $151 million in adjusted EBIT and a 15.3% adjusted EBIT margin, a 40 basis point improvement year-over-year. Adjusted free cash flow for the quarter was $49 million, aligning with full-year expectations.
Strategic Wins in Differentiated Technologies
The company continues to secure significant wins across its turbo portfolio, including multiple gasoline awards for VNT turbos in hybrid and range-extended electric vehicle applications. Additionally, Garrett expanded its industrial segment success with new awards for large power generation applications. These wins underscore customer adoption of Garrett's differentiated technologies, supporting both portfolio expansion and continued growth.
Progress in Zero-Emission Technologies
Garrett made solid progress in its zero-emission technologies during Q1 FY26. The company secured its second commercial vehicle E-Powertrain production award in China, with start-up production planned for 2027, targeting medium-duty trucks. Furthermore, a major production award was won for its industrial cooling compressor with TONFY in China, a leading supplier for battery energy storage system cooling solutions.
These achievements validate the long-term potential and broad applicability of Garrett's zero-emission offerings.
Capital Allocation and Shareholder Returns
In line with its capital allocation framework, Garrett Motion maintained its commitment to returning capital to shareholders. During the first quarter, the company repurchased $87 million of common stock under its $250 million share repurchase program and paid $16 million in quarterly dividends, totaling over $100 million returned to shareholders.
The company targets returning approximately 75% of its adjusted free cash flow to shareholders over time⏳ through dividends and share repurchases.
Updated 2026 Outlook and Macroeconomic Considerations
Following the strong Q1 performance, Garrett increased the upper range and midpoint of its 2026 full-year outlook across all metrics. The updated midpoints include net sales of $3.75 billion (2% constant currency growth), adjusted EBIT of $560 million (14.9% margin), and adjusted free cash flow of $415 million.
However, the low end of the outlook range was maintained due to ongoing macroeconomic uncertainties and geopolitical events, such as the war in the Middle East, despite no material impact observed to date.
Industrial and Commercial Vehicle Market Dynamics
Industrial sales are expected to grow significantly at low double-digits for the full year. Commercial vehicle growth is driven by a recovery in off-highway applications and on-highway gains in China, which are linked to share of demand gains and new product introductions. Management expressed optimism for continued recovery in these segments, noting that the industry is still at low points reached in 2024.
China Market as a Growth Driver
China is highlighted as a key market, particularly for electric mobility applications like E-Powertrain for trucks and cooling compressors for buses, due to its commitment to electrification and the presence of major battery manufacturers. The pace of technology adoption in China is noted as faster than in other regions, although Garrett also works with numerous non-Chinese customers for its E-Powertrain and cooling system technologies.