Aptiv Q2 Earnings Call Highlights

Aptiv (NYSE:APTV) reported second-quarter results that included 2% adjusted revenue growth and 10 basis points of adjusted EBITDA margin expansion, while lowering its full-year outlook amid weaker automotive production schedules in China and delayed program launches.

Chair and CEO Kevin Clark said the company continues to see long-term opportunity in automotive technology and adjacent markets, but near-term conditions in its traditional automotive business have become more challenging. He cited prolonged weakness in China’s domestic vehicle market, lower production schedules from local Chinese manufacturers, and reduced schedules from luxury European automakers exporting vehicles to China.

“We continue to contend with challenges in our traditional automotive market,” Clark said, adding that Aptiv is working to diversify its revenue mix both within and outside automotive markets.

Second-Quarter Results

Aptiv generated second-quarter revenue of $3.3 billion, up 2% on an adjusted basis and slightly below the midpoint of its guidance. Adjusted EBITDA totaled $613 million, while adjusted EBITDA margin increased 10 basis points. Earnings per share were $1.63, up $0.12 from New Aptiv pro forma results in the second quarter of 2025.

Regional performance was mixed. North American revenue increased 10%, supported by growth in both business segments. Revenue in Europe declined 8%, largely reflecting volume pressure among select luxury OEM customers, primarily in the Intelligent Systems segment. Asia-Pacific revenue rose 6%, including 5% growth in China, where improved local-OEM mix partly offset slowing production for the domestic market.

Free cash flow was an outflow of $33 million in the quarter, including roughly $70 million in cash separation costs associated with the Versigent spinoff, according to Chief Financial Officer Varun Laroyia.

• Non-automotive revenue grew 12% during the quarter.
• Automotive revenue declined 1%, as customer-mix headwinds offset non-automotive growth.
• Intelligent Systems revenue was flat at $1.5 billion, while its adjusted EBITDA margin declined 120 basis points due to investments in non-automotive markets and stranded costs.
• Engineered Components revenue rose 3% to $1.8 billion, and its adjusted EBITDA margin increased 100 basis points.

Laroyia said Engineered Components benefited from double-digit non-automotive growth, particularly in diversified industrial, aerospace and defense markets. The segment’s margin improvement reflected volume flow-through, the timing of recoveries and performance initiatives, partially offset by stranded costs.

Guidance Cut Reflects China Schedules and Program Delays

Aptiv reduced its full-year revenue outlook by $300 million at the midpoint. The company now expects 2026 revenue of $12.6 billion to $12.8 billion, representing adjusted growth of 2% at the midpoint. It projected adjusted EBITDA of $2.31 billion to $2.37 billion, adjusted earnings per share of $5.60 to $5.80, and free cash flow of $625 million to $725 million.

The company expects third-quarter adjusted revenue growth of 1% at the midpoint, adjusted EBITDA of $560 million, an adjusted EBITDA margin of 17.7%, and earnings per share of $1.30.

Laroyia outlined three primary drivers of the full-year revenue reduction:

• About $150 million from revised customer production schedules, chiefly tied to weakness in China’s domestic market and lower schedules for European OEMs exporting to China.
• About $100 million from delayed program launches and slower production ramps, including certain China programs and a delayed European OEM launch.
• About $50 million from the timing of enterprise software and services sales.

The Intelligent Systems business was disproportionately affected by those factors. For the full year, Laroyia said Aptiv expects Intelligent Systems revenue to be approximately flat year over year, while Engineered Components revenue is expected to grow in the low- to mid-single digits. He said the company expects full-year EBITDA margins in the mid-teens for Intelligent Systems and around 22% for Engineered Components.

Clark acknowledged that the company had not been conservative enough in assumptions surrounding launches and ramps. He said Aptiv is increasing its discounting of production schedules, particularly as Chinese local OEMs become a larger share of its business. Clark said domestic retail sales in China were down 20%, describing the market as significantly weaker than it has been in several years.

Non-Automotive Expansion and Bookings

Aptiv reported $5 billion in new business awards during the second quarter, bringing year-to-date awards to $10 billion and keeping the company on track for its $20 billion full-year target.

In automotive, the company cited a Gen 8 Radar award from Volvo Cars for a next-generation software-defined vehicle platform, an award involving a large North American OEM’s next-generation vehicle architecture, and additional high-voltage bus bar business in North America and China. Aptiv also launched a next-generation digital cockpit program for a luxury European OEM and introduced an AI and machine-learning-based occupancy classification system using an in-cabin camera.

The company emphasized that its non-automotive businesses are growing faster than expected. Aptiv launched high-performance interconnect programs for utility-scale energy storage and expanded work with commercial vehicle, aerospace, defense, solar and battery-storage customers. It also extended partnerships with NVIDIA for production-grade software used by edge-AI customers and with Kyndryl for Wind River software deployments in mission-critical systems.

Clark said Aptiv has established partnerships with three robotics manufacturers, with one developing into a meaningful commercial agreement. In July, the company received its first commercial drone award from a leading manufacturer, with lifetime revenue expected to exceed $500 million over a five-year program. That award will be included in third-quarter bookings.

Aptiv expects annual revenue from robotics and drones to reach roughly $300 million over the next several years. Clark said the sectors offer faster paths to revenue than automotive, with revenue from 2026 robotics and drone awards expected to begin in 2027. He also said the margin profile in those markets is higher than in automotive and requires limited capital investment because Aptiv can use existing facilities and equipment.

Capital Allocation and Portfolio Review

Aptiv repurchased $250 million of shares during the second quarter, bringing year-to-date repurchases to $325 million. The company intends to repurchase a similar amount in the second half, targeting more than $600 million for the full year.

Clark said Aptiv plans to return approximately half of its free cash flow to shareholders through repurchases over the next several years, while continuing to pursue smaller bolt-on acquisitions intended to diversify the business. He also said the company will continue evaluating its portfolio to maximize shareholder value following the completed separation of EDS.

About Aptiv (NYSE:APTV)

Aptiv plc is a global automotive technology company that develops safer, greener and more connected solutions for the mobility industry. The company designs and supplies advanced electrical architectures, electronic systems and software that enable vehicle connectivity, active safety, advanced driver-assistance systems (ADAS) and autonomous driving capabilities. Aptiv’s customers include major automakers and mobility service providers seeking to integrate higher levels of automation, electrification and software-defined features into production vehicles and mobility platforms.

Product and service offerings span vehicle electrical systems and wiring, connectors and harnesses, high-voltage electrification components, power electronics and charging solutions, sensors and compute platforms that support ADAS and autonomous functions, and the software and services required to integrate and manage these systems.