Transcript: Aptiv Q2 2026 Earnings Conference Call

Aptiv (NYSE: APTV ) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

Access the full call at Summary Aptiv reported 2% revenue growth in Q2 2026 with a 10 basis point increase in EBITDA margin, driven by double-digit growth in non-automotive sectors. The company lowered its 2026 guidance due to prolonged sales weakness in China, affecting both domestic and European OEMs exporting to China. Aptiv secured $5 billion in new business awards in Q2, with a year-to-date total of $10 billion, targeting $20 billion for the year. The company repurchased $250 million in shares in Q2 and plans to repurchase a similar amount in the second half, aiming for over $600 million for the year.

Revenue from non-automotive markets grew 12%, with significant progress in robotics and drones, expecting $300 million in annual revenue from these sectors in the future. 63. Free cash flow was an outflow of $33 million due to spinoff costs. 80.

Management plans to continue investing in non-automotive markets and pursue strategic M&A to diversify the business and enhance shareholder value. Full Transcript OPERATOR Good day, and welcome to the Aptiv Q2 2026 earnings call. Today's conference is being recorded at this time. I would like to turn the conference over to Betsy Frank, Vice President, Investor Relations.

Please go ahead. Betsy Frank, Vice President, Investor Relations Thank you. Good morning, and thank you for joining Aptiv's second quarter 2026 earnings conference call. com.

Today's review of our financials excludes amortization, restructuring, and other special items and reflects the continuing operations of Aptiv as of June 30, reflecting the treatment of our EDS segment as a discontinued operation for the second quarter 2025. The reconciliations between GAAP and non-GAAP measures are included at the back of the slide presentation and the earnings press. Unless stated otherwise, all references to growth rates are on a pro forma adjusted year-over-year basis.

During today's call, we will be providing certain forward-looking information that reflects Aptiv's current view of future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC filings. Joining us today are Kevin Clark, Chair and Chief Executive Officer, and Varun Laroyia, Executive Vice President and Chief Financial Officer. With that, I'll turn the call over to Kevin. Kevin Clark, Chairman and CEO Thank you, Betsy, and thanks, everyone, for joining us this morning.

Starting on slide 3, during the second quarter we generated 2% revenue growth and 10 basis points of EBITDA margin expansion, and we continue to demonstrate progress diversifying our business, evidenced by double-digit non-automotive revenue growth in the quarter and new business awards in attractive high-growth markets that present expansion opportunities for Aptiv.

And while we're increasingly optimistic about the long-term opportunities presented in these areas, in the near term we continue to contend with challenges in our traditional automotive market, which are leading us to lower our 2026 guidance, including prolonged sales weakness in the domestic China market which is causing local OEMs to reduce second-half production on vehicle platforms for the domestic market and also leading to a further reduction in schedules from luxury European OEMs for vehicles exported to the China market.

Varun is going to walk you through how these dynamics and other factors are impacting our guidance for the remainder of the year and what specifically has changed since we last spoke to you, and I'll spend a bit more time discussing the actions we're taking, including how we're working to evolve our business mix in and outside of the automotive market to mitigate the challenges we're experiencing today. And now that the separation of EDS is complete, we'll continue to evaluate additional opportunities to maximize value for shareholders over the long term. Now let's begin by reviewing our second quarter progress against our strategic priorities.

During the second quarter we continued the momentum we'd established, leveraging our product portfolio and operating capabilities across diverse end markets, including product innovations where we secured our first Gen8 radar award, an important component of our ADAS platform; penetration into new end markets where the products we've developed for automotive have applications in other markets, reflected in the award from Robust AI, which I'll talk more about later; and expansion of our software partnership ecosystem with leading-edge AI players, including most recently with Nvidia.

This list represents a small portion of the $5 billion of new business awards during the second quarter, bringing our year-to-date total to $10 billion, putting us on track for our $20 billion year target. We also continue to increase the resiliency of our business model by leveraging our digital twin and end-tier tracking capabilities to provide our automotive and adjacent market customers with a step change in supply chain visibility and reaching long-term supply agreements as part of our supply chain resiliency efforts.

These are both great examples of the actions we've taken to enhance the robustness of our operating model that are enabling us to keep our customers connected in this dynamic environment and is one of the reasons we were recently recognized as Supplier of the Year by Ford in the supply chain category. On capital allocation, we repurchased $250 million of our shares in the second quarter, bringing our year-to-date total to $325 million, with an intention to repurchase a similar amount in the second half of the year and bring the full-year total to over $600 million.

And over the next few years we're committed to returning approximately half of our free cash flow to shareholders through share repurchases while simultaneously pursuing smaller bolt-on M&A transactions to diversify the business and better position us for the long term. Turning to review our business segments through the lens of the automotive and non-automotive end markets we serve.

Starting with the automotive market, highlights during the quarter: we made some meaningful progress expanding our business with leading OEMs in Asia Pacific and driving growth in new business bookings across next-generation technology areas including our full-stack Gen 6 ADAS system and in-cabin solutions like driver and cabin monitoring.

Notable program launches in the quarter included, within the Intelligent Systems segment, a full tech stack ADAS award across additional vehicle lines of a large European OEM, demonstrating the flexibility and scalability of our solutions and continued strength of our technology partnership, and the launch of our next-generation digital cockpit for a luxury European OEM incorporating software-enabled functionality via over-the-air updates and lifecycle management capabilities; and within the Engineered Components segment, the integration of our high-voltage interconnects on a European OEM's next-gen high-powered 800-volt architecture program.

We also continue to innovate across our product portfolio, evidenced by the introduction of our Advanced Occupancy Classification system, which is the industry's first occupant detection system that utilizes AI/ML-based computer vision software and is powered entirely by an in-cabin camera, streamlining vehicle systems architecture as well as lowering cost. We also secured several important new business awards in the quarter.

Within Intelligent Systems, these include a Gen8 radar award by Volvo Cars for its next-gen Software Defined Vehicle platform where we will enable robust perception across increasingly complex environments and driving scenarios, as well as an award from a large North American OEM's next-generation Software Defined Vehicle architecture, a critical milestone in the transition to more centralized vehicle architectures.

And within Engineered Components, these include high-voltage bus bars across the North America and China markets for battery pack and charging applications, demonstrating continued penetration of both existing and new OEM customers on their next-generation EV platforms, and the continued expansion of our business with the leading China local OEMs across our key product lines including high-speed cable assemblies and high-voltage inlets across platforms for both the domestic and the overseas markets.

Moving to slide 6 to discuss our progress in non-automotive markets, which reflects the applicability of our technologies across a diverse set of end markets and the strong operating execution by our team. Starting with program launches during the quarter, in Engineered Components we launched a new program providing high-performance interconnects for a utility-scale energy storage provider that leverages the same technology we're already delivering in automotive, and in Intelligent Systems we launched our integrated cockpit controller for one of the industry-leading commercial vehicle OEMs.

In terms of product development in the second quarter, this included expanding our high-performance interconnect product lines for complex aerospace and defense platforms where space-efficient, high-density solutions are critical for customers; collaborating on an optimized power solution for 800-volt DC architectures with a leading developer of power electronics for next-generation infrastructures including data centers, a market where we experience strong commercial momentum and see very meaningful growth opportunities over the next few years that will further accelerate with the transition to 800-volt architectures; and lastly achieving a key software milestone in cybersecurity rating for our Enterprise Linux operating system, which will expand our potential opportunities in the government and the defense markets.

S. market. Lastly, we continue to expand our commercial presence in non-auto markets through our partnership ecosystem. First, with Nvidia, where we extended our partnership to provide Aptiv's production-grade software to edge AI customers using Nvidia compute.

Second, with Kyndryl, which is an important extension of our enterprise partner ecosystem, where Kyndryl will deploy our Wind River software as part of its Mission Critical Solutions portfolio. Together they enable customers to more easily deploy and operate mission-critical systems while accelerating adoption through joint go-to-market initiatives and integrated offerings. Turning to slide 7, I want to spend a few minutes providing an overview of our progress capturing opportunities in new end markets, which we're confident will meaningfully diversify our non-automotive revenue mix over the next few years.

The robotics and drone markets are higher-growth, higher-margin sectors where opportunity has materialized much faster than we previously anticipated, driven by the same demand for autonomous solutions that have been transforming automotive over the past decade.

Since initially outlining our addressable market opportunity and growth targets for non-automotive markets, we've achieved the following: in robotics, we secured partnerships with three leading robotics manufacturers, and one of those partnerships has advanced to a meaningful commercial agreement, and we expect to be making additional commercial announcements during the balance of the year; in drones, in July, we secured our first commercial award from a leading drone manufacturer with total lifetime revenues of over $500 million over a five-year program. This award will be included in our third quarter bookings numbers.

We're actively engaged in discussions with several drone manufacturers that we expect to translate into commercial agreements during the balance of the year. The content-per-device opportunity in the robotics and drone markets is significant, and our initial awards represent a large portion of that total content opportunity, and both of these markets present time-to-market advantages versus our experience in automotive. In summary, we're increasingly confident in the broad relevance of our product portfolio across multiple end markets, which will significantly change our business mix.

We have a high degree of confidence in achieving annual revenues from the robotics and drone markets of about $300 million over the next few years. We believe we're also uniquely positioned to benefit from growth opportunities in the space, energy storage, and data center markets, which we'll talk more about in the future. I'll now turn the call over to Varun to go through our financial results and guidance in more detail. Varun Laroyia, EVP & CFO Thanks Kevin, and good morning everyone.

3 billion, which grew at an adjusted rate of 2% and were just shy of the midpoint of our guidance. Looking at revenue growth by region, North America grew 10%, driven by strength across both segments. In Europe, revenue was down 8%, primarily reflecting volume pressures with select luxury OEMs, predominantly in Intelligent Systems, and in Asia Pacific, revenue increased 6%, including 5% growth in China, driven by improved mix with local OEMs, partially offset by a slowdown in production for the domestic market. Adjusted EBITDA totaled $613 million, and adjusted EBITDA margin increased 10 basis points.

This came in ahead of our guidance due to the timing of recoveries and operating performance. FX and commodities amounted to a 30 basis point headwind to margin, in line with our expectations. 12 from the new Aptiv pro forma results in Q2 2025, reflecting higher operating income, the benefit of share repurchases, and interest/other income, partially offset by higher tax expense. Free cash flow for the quarter was an outflow of $33 million and included approximately $70 million in cash separation costs associated with the Versigen spinoff, which we highlighted last quarter.

Moving to slide nine and starting with highlights on the consolidated business, we generated strong results in strategically important non-automotive revenues with 12% growth, while absorbing some customer mix headwinds in our automotive business. In the second quarter where revenues declined 1%, adjusted EBITDA margin increased 10 basis points, driven by flow-through on revenue growth, strong performance across material and manufacturing, and a benefit in timing of certain recoveries, more than offsetting the impact of stranded costs following the Versigen spin, which we are aggressively working to eliminate.

5 billion was flat versus the prior year, which reflects strength in the non-auto, which was driven by software and services, and this was offset by automotive revenues, which were impacted by weakness with certain European OEMs and lower production at a North American OEM impacted by a supplier fire in Intelligent Systems. Adjusted EBITDA margin declined 120 basis points, primarily driven by investments in non-auto markets and the impact of stranded costs. 8 billion grew 3% versus the prior year, driven by double-digit growth in non-auto markets, and more specifically in diversified industrials and aerospace and defense.

While automotive revenues were essentially flat, adjusted EBITDA margin increased 100 basis points and reflects flow-through on volume growth, favorable timing of the previously mentioned recoveries, and performance initiatives, partially offset by stranded costs. Turning to our full year 2026 financial guidance on slide 10, as a reminder, historical new Aptiv pro forma financials are on the Investor Relations website under the Quarterly Financial section, and those correspond to our guidance that treats Q1 as new Aptiv pro forma. 8 billion, which implies adjusted growth of 2% at the midpoint. I'll discuss the changes here in detail on the next slide.

4% at the midpoint, reflecting the impact of lower revenue growth, which is partially offset by performance. 70, reflecting lower operating earnings partially offset by a slightly lower effective tax rate and a lower share count. This also includes the projected impact of an additional $300 million in share repurchases through the remainder of the year, as Kevin mentioned. Lastly, free cash flow is expected to be in the range of $625 million to $725 million, reflecting the reduction in EBITDA.