Garrett Motion Q2 FY26 earnings call GTX

Garrett Motion reported a strong second quarter with net sales of $976 million, up 7% reported and 5% at constant currency, driven by growth across all verticals. This performance, coupled with disciplined execution and productivity actions, led to a record adjusted EBIT of $152 million and a 15.6% adjusted EBIT margin. The company generated $122 million in adjusted free cash flow, representing an 80% conversion rate. Based on these results, Garrett raised its full-year 2026 outlook for net sales to $3.8 billion, adjusted EBIT to $580 million, and adjusted free cash flow to $430 million, reflecting confidence in its business trajectory despite a softer light vehicle market.

The company continues to build momentum across its turbo portfolio, securing multiple gasoline awards, including a significant program in North America. Notably, Garrett received its first award for the MEG 200 turbo, one of its largest turbos, for data center power generation. In zero-emission technologies, predevelopment activities for a commercial vehicle electric powertrain solution with a Japanese truck manufacturer have commenced, and the high-speed E-Powertrain for passenger vehicles is showing positive test results and OEM feedback. Growing interest from HVAC OEMs for E-Cooling applications further underscores the progress in differentiated technologies.

Garrett experienced robust growth in its commercial vehicle and industrial verticals, with sales up 10% in Q2. This increase was primarily driven by on-highway demand in China and growing demand for industrial turbo applications, particularly in power generation. The company now expects full-year industrial sales to reach approximately $200 million, significantly higher than previous estimates. The demand for genset products is global, stemming from the need for energy to support grids and data centers, with engine manufacturing concentrated in North America, Europe, and Asia.

Despite a lower light vehicle production backdrop in Q2, Garrett's growth reflects continued share of demand gains in this segment. The company's strong performance in the first half, driven by these share gains, is expected to continue into the second half, contributing to the raised full-year outlook. Management emphasized that these gains are a result of strong H1 performance and not expected to collapse, allowing them to translate demonstrated share gains into H2 performance, even with a prudent view on underlying macroeconomic conditions.

Garrett is actively pursuing a full spectrum of E-Cooling applications, from small industrial sites to large data center cooling needs, with the first production for data centers expected between late 2027 and early 2028. The company also secured its first production award for centrifugal air compressor technology, demonstrating its ability to leverage existing technological building blocks into new verticals beyond traditional turbocharging. This strategic expansion into new applications is a result of a continuous innovation process that screens technology matches against various industry needs.