Aptiv PLC (APTV) Earnings

Management highlights

- New Business Bookings: Aptiv secured $5 billion in new business awards in Q2 2026, bringing year-to-date total awards to $10 billion, putting the firm on track to hit its full year target of $20 billion. Key awards include the first Gen 8 radar contract with Volvo Cars for next-gen software-defined vehicles, an intelligent perception solution contract with Robust AI for cobots, and a $500 million lifetime revenue first commercial drone award (to be booked in Q3 2026). - Strategic Diversification into Non-Automotive Markets: Management is actively expanding beyond traditional automotive, leveraging existing automotive technologies across new end markets. The firm expects to hit ~$300 million in annual revenue from robotics and drone markets within the next few years, with higher margin profiles than automotive. Other target growth markets include energy storage, solar, aerospace and defense, data centers, and commercial vehicles. Partnership ecosystem expansion includes an extended collaboration with NVIDIA to deliver production-grade software to edge AI customers, and a partnership with Kindrel to deploy Aptiv's Wind River software for mission-critical systems. - Automotive Segment Innovation: Key progress in automotive includes launches of full-stack Gen 6 ADAS systems, next-generation digital cockpits with over-the-air update capability, 800-volt high-voltage interconnects for EV platforms, and a new AI-powered in-cabin occupancy detection system. The firm maintained strong traction with Chinese local OEMs across high-speed cable assemblies and high voltage product lines. - Operational Improvements: Aptiv enhanced supply chain resiliency via digital twin and N-tier tracking capabilities for improved customer visibility, and secured long-term raw material supply agreements; this work led to the firm being named Ford's Supplier of the Year in the supply chain category. - Capital Allocation: Aptiv repurchased $250 million of shares in Q2 2026, bringing year-to-date repurchases to $325 million. The firm expects full year 2026 repurchases to exceed $600 million, and plans to return approximately 50% of annual free cash flow to shareholders via repurchases over the next several years, while pursuing smaller bolt-on M&A to further diversify the business.

Guidance

- Aptiv revised its full year 2026 guidance downward, primarily due to production weakness in the China domestic market, delayed program ramps, and timing shifts for software enterprise sales. The midpoint of full year revenue guidance was cut by $300 million from prior guidance. - Full year 2026 expected revenue: $12.6 billion to $12.8 billion, implying 2% adjusted YoY growth at the midpoint. - Full year 2026 expected adjusted EBITDA: $2.31 billion to $2.37 billion, with an expected EBITDA margin of 18.4% at the midpoint. - Full year 2026 expected adjusted earnings per share: $5.60 to $5.80, with a $5.70 midpoint, reflecting lower operating earnings partially offset by a lower effective tax rate and reduced share count from repurchases. - Full year 2026 expected free cash flow: $625 million to $725 million, which includes already-incurred one-time separation costs for the Vestigen spinoff and ongoing semiconductor supply chain resilience investments. - Q3 2026 midpoint guidance calls for 1% adjusted YoY revenue growth, $560 million adjusted EBITDA (17.7% margin), and $1.30 adjusted EPS at the midpoint. A Q4 2026 ramp is expected driven by lapping the 2025 North American supplier fire, a rebound in delayed enterprise software sales, and engineered components growth.

Segment performance

Overall consolidated revenue for Q2 2026 was $3.3 billion, with 2% adjusted year-over-year growth. Non-automotive revenue grew 12% YoY, while automotive revenue declined 1% YoY. Adjusted EBITDA totaled $613 million, with an adjusted EBITDA margin of 18.6%, 10 basis points higher YoY. 1. Intelligent Systems: Revenue was $1.5 billion, flat YoY. Non-automotive revenue grew driven by software and services, which offset automotive revenue weakness from European OEM production cuts and lower output at a North American OEM impacted by a supplier fire. Revenue contribution: 45.5% of total consolidated Q2 2026 revenue. Adjusted EBITDA margin declined 120 basis points YoY, driven by non-automotive market investments and stranded costs post-Vestigen spinoff. Full year 2026 guidance expects ~flat YoY revenue, with full year EBITDA margin in the mid-teens range. 2. Engineered Components: Revenue was $1.8 billion, up 3% YoY. This growth was driven by double-digit non-automotive revenue growth in diversified industrials and aerospace and defense, while automotive revenue was flat. Revenue contribution: 54.5% of total consolidated Q2 2026 revenue. Adjusted EBITDA margin increased 100 basis points YoY, reflecting volume growth flow-through, favorable timing of customer recoveries and performance initiatives, partially offset by stranded costs. Full year 2026 guidance expects low to mid-single digit YoY revenue growth, with full year EBITDA margin around 22%.

Risks & headwinds

- Prolonged sales weakness in the China domestic auto market has led to deeper-than-expected production cuts from both local Chinese OEMs and luxury European OEMs that export vehicles to China, creating near-term revenue headwinds. As of Q2 2026, Chinese domestic retail auto sales are down 20% YoY, and expected government stimulus to support the market has not materialized. - Disproportionate revenue impact from the China slowdown falls on the Intelligent Systems segment, which has higher exposure to impacted local and European OEM programs. - Program launch and ramp delays in China and Europe have created larger-than-expected near-term revenue headwinds, after management's prior forecasting assumptions were not conservative enough for the high volatility of Chinese local OEM production schedules. - Lumpy demand for enterprise software solutions creates quarterly revenue variability, as large deals can shift timing between quarters and impact near-term results even as long-term growth remains on track. - Continued macroeconomic volatility and changing automotive production outlooks create uncertainty for near-term financial performance, even as long-term growth trends remain intact.

Analyst Q&A

• Q: How have current 2026 H2 changes impacted Aptiv's prior long-term 2027 growth framework, and what is driving the expected Q4 2026 ramp? /

  A: Management confirmed that its long-term view of the business's growth potential remains intact, even as IHS has cut global vehicle production growth outlooks and material cost inflation has risen. Strong automotive bookings and faster-than-expected non-automotive opportunity development offset these headwinds. No specific 2027 guidance will be provided until later in 2026. The Q4 ramp is driven by three factors: lapping the 2025 supplier fire that hit North American production, timing-delayed enterprise software sales shifting from Q3 to Q4, and ongoing growth in the engineered components segment.

• Q: Despite progress with Chinese local OEM bookings, why has export platform growth not offset domestic market weakness, and what is the profitability outlook for new non-automotive markets? /

  A: Currently, only ~10% of Aptiv's China revenue comes from export platforms, as the higher export mix from recent bookings has not yet flowed through to revenue. Management is actively working to shift the mix and leverage its global position to capture more export platform business. Non-automotive markets like robotics and drones have much higher margin profiles than automotive. Minimal upfront capital is required, as Aptiv uses existing facilities and equipment, so investment drag is limited even in early growth stages.

• Q: How is Aptiv changing its forecasting process to account for elevated China market uncertainty, after prior guidance was not conservative enough? /

  A: The core change is adding a much larger conservatism haircut to Chinese local OEM production schedules, as Chinese OEMs have a more fragmented nameplate base and higher volatility than Western OEMs. Management acknowledged that its prior assumption that the Chinese government would introduce stimulus to support the domestic auto market in 2026 was incorrect near-term, and has updated forecasting to reflect the current weaker demand environment.

• Q: What is the mix of ADAS bookings in Intelligent Systems, and how has OEM insourcing trends impacted this business? /

  A: The majority of 2026 Intelligent Systems ADAS bookings are for full-stack Gen 6 ADAS solutions that include both Aptiv hardware and software. The broader industry trend is toward increased separation of software and hardware, with more opportunities for standalone software work, including middleware development for software-defined vehicles. While insourcing varies by OEM, management has not seen broad-based insourcing reduce its opportunity, and in fact has seen some OEMs that attempted large-scale in-house software development shift back to relying on supplier partners like Aptiv.