BorgWarner Inc. (BWA) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed
Updated Sep 22, 2026Q2 FY2026 reviewed
BorgWarner makes vehicle propulsion components and is expanding into data center power generation, storage and conversion.
Margin +100 bps
Adjusted operating margin 11.3% in Q2 2026 on roughly flat sales.
TG revenue $300M
Turbine generator first-year revenue, 2027; 2 GW capacity installed.
$1.35B buyback
$1B increase approved through 2029; ~$650M repurchased in four quarters.
Battery drag 170bps
FY26 battery sales headwind worsened from 150 to 170 basis points.
The Buildout Takeaway
BorgWarner is funding a data center power portfolio out of margin gains in a flat-to-down automotive business. The industrial lines have tested milestones and a physical plant behind them, but no sized revenue — the turbine generator's roughly 2% of current annual revenue is an estimate and arrives in 2027. The open question is whether the award book converts to organic growth before the cost actions doing the work run their course.
Analyst coverage
38 analysts·20 Buy16 Hold2 Sell
Median target$82  Range $66–$95 · 9 estimates
Management guidance
FY2026 sales $14.0B–$14.3B · adjusted operating margin 10.7%–10.9% · adjusted EPS $5.05–$5.30 · free cash flow $900M–$1.1B
Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.
Our View

The Verdict

BorgWarner supplies propulsion technology to automakers — turbochargers, drivetrain and torque-management components, and power electronics — and is building a second business selling power equipment into data centers. It sells no compute, networking gear or software. Its AI exposure is one step removed: more AI compute means more electricity demand, and BorgWarner is developing behind-the-meter turbine generators, battery energy storage and microgrid inverters to serve it, leaning on inverter and rotating-machinery competence from the automotive side.

Market Cap—
Revenue (TTM)$14.3B
Revenue Growth+2.2%
EBITDA Margin (TTM)9.8%
Net Debt$1.6B
Earnings Beats7 of 7
P/E (TTM)—
EV/EBITDA (TTM)—

What We Like

  • Adjusted operating margin rose to 11.3% in Q2 2026, up 100 basis points year over year on roughly flat sales, with every business unit expanding margin.
  • The turbine generator has 2 GW of installed capacity in North Carolina and about $300 million of first-year revenue expected in 2027; CARB-level emissions were achieved in testing.
  • Cost actions are carrying the margin: Q2 2026's 100 basis points of adjusted operating margin expansion decompose into 60 bps from foundational TTT and DMS performance, 20 bps from BES restructuring plus the charging exit, and 20 bps from cost controls, with the charging exit adding $7 million of operating income year over year.
  • Capital return runs alongside the build-out: about $650 million repurchased over four quarters and a $1.35 billion authorization through 2029, against a policy of returning over 50% of free cash flow.
  • The award book gives a 2027 revenue path: over 30 publicly announced awards, with management saying bookings should support improvement in outgrowth in 2027.

What We’re Watching

  • Core outgrowth is negative and management says it is not pleased with it; the reacceleration is a 2027 promise, with detail promised early next year.
  • Two guidance inputs moved the wrong way within one quarter: the battery sales headwind worsened from 150 to 170 basis points and the FX benefit was cut from $200M to $175M, both absorbed only by cost controls.
  • The turbine generator's remaining gates are still ahead: final UL certification with C samples later in 2026, qualification and reliability testing, and ramp quality and cycle time.
  • The 2H 2026 decision on whether to expand turbine generator capacity beyond 2 GW is pending, with management saying no decisions have been made yet.
Bottom Line

The thesis is intact on margin and execution and unproven on revenue. BorgWarner is delivering margin expansion on declining volumes through cost programs it has quantified, and it has moved the industrial portfolio from narrative to tested regulatory and physical milestones. What it has not done is size that portfolio: the battery storage and inverter lines carry no disclosed revenue, backlog or named customer, and the turbine generator's go-to-market runs through a single exclusive partner. The open question is whether the award book converts into outgrowth in 2027 and whether the industrial lines produce a second quantified revenue figure.

Next upThe nearest checkpoints are the turbine generator capacity decision in 2H 2026 and the battery awards management expects this year. Both test whether the industrial pipeline is deeper than the single $300 million figure the company has given.
Last Quarter — Q2 FY2026

Earnings Beat

Q2 2026 sales were $3,648 million, relatively flat year over year, with gross margin of 19.8%. Adjusted operating income was $413 million at an 11.3% adjusted operating margin, up 100 basis points from 10.3% a year earlier. The bridge: foreign exchange added $54 million, the battery business subtracted $62 million, and organic sales excluding battery rose $18 million, or 0.5%. Adjusted EPS rose 17% year over year and free cash flow was $490 million.

MetricQ2 FY2026Q1 FY2026Q2 FY2025YoY
Revenue$3.6B$3.5B$3.6B+0.3%
Gross margin19.8%19.2%17.6%+220bps
EBITDA$519M$494M$468M+10.9%
EPS$1.34$1.16$1.03+30.1%
Adjusted operating margin11.3%10.5%10.3%+9.7%
It's a great time to be at BorgWarner.— Craig Aaron, CFO, 2026-08-05

Management tone: Tone shifted from announcement to execution across the two calls. In Q1 2026 management introduced two new product lines and reaffirmed guidance. In Q2 2026 it reported tested milestones — CARB-level emissions achieved, UL component certification expected to start in September — a quantified $10–15 million industrial R&D step-up absorbed inside maintained margin guidance, and a $1 billion increase to the buyback authorization. Management conceded its own weak spot directly, saying it is not pleased with the current outgrowth, and attributed the adjusted EPS raise to share repurchases rather than operations. It declined to give turbine generator lead times, a revenue-to-capacity ratio, or a battery contract-size framework.

Management Guidance

Management maintained FY2026 sales guidance of $14.0–$14.3 billion, adjusted operating margin of 10.7%–10.9%, and free cash flow of $900 million–$1.1 billion, and raised adjusted EPS to $5.05–$5.30 from $5.00–$5.20, attributing the increase primarily to share repurchases completed in the first half. Organic sales are guided down 3.5% to down 1.5%, with weighted end markets flat to down 3%. The battery sales decline is now about a 170 basis point headwind to year-over-year growth and the FX benefit $175 million. Incremental industrial R&D of $10–15 million in the second half is absorbed within the maintained margin range; management puts second-half margin at 10.6% including that spend and 10.8% excluding it.

Business Trajectory

Trajectory

Revenue has been flat: roughly $3.5–$3.6 billion in each of the trailing five quarters, at $3,648 million in Q2 2026. The code-computed signals show gross and operating margins expanding while EBITDA margin holds roughly stable, so the improvement sits above the EBITDA line. Management's own decomposition of the 100 basis points of Q2 adjusted operating margin expansion is 60 bps from foundational TTT and DMS performance, 20 bps from BES restructuring plus the charging exit, and 20 bps from cost controls. Working against that: the battery business was a $62 million year-over-year sales headwind in Q2, and the full-year FX benefit was cut to $175 million from $200 million.

Revenue & Margin Trajectory
RevenueGross margin$0$2.0B$4.0B$2.2B$2.3B$2.4B$2.4B$2.4B$2.6B$2.8B$2.7B$2.5B$2.6B$2.6B$2.6B$2.5B$2.6B$2.3B$1.4B$2.5B$3.9B$4.0B$3.8B$3.4B$3.7B$3.9B$3.8B$3.2B$3.3B$3.4B$3.7B$3.6B$3.5B$3.6B$3.6B$3.4B$3.4B$3.5B$3.6B$3.6B$3.6B$3.5B$3.6B21%20%Q3'16Q4Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2
RevenueGross margin$0$2.0B$4.0B$2.2B$2.3B$2.4B$2.4B$2.4B$2.6B$2.8B$2.7B$2.5B$2.6B$2.6B$2.6B$2.5B$2.6B$2.3B$1.4B$2.5B$3.9B$4.0B$3.8B$3.4B$3.7B$3.9B$3.8B$3.2B$3.3B$3.4B$3.7B$3.6B$3.5B$3.6B$3.6B$3.4B$3.4B$3.5B$3.6B$3.6B$3.6B$3.5B$3.6B21%20%Q3'16Q4Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2
Gross margin as reported.
Share Price — 12 Months
$25$50$75$052-wk high $77Sep '25DecMar '26JunSep '26
52-week range $42–$77.
Share Price — 12 Months
$25$50$75$052-wk high $77Sep '25DecMar '26JunSep '26
52-week range $42–$77.
The Numbers

The Model

The model projects FY+1 revenue of $14,200 million and EBITDA of $2,087 million, a 14.7% EBITDA margin, rising to FY+2 revenue of $14,700 million and EBITDA of $2,190 million, a 14.9% margin. FY+1 revenue sits essentially at the level of FY2026 guidance, so the near term is anchored on a flat top line with the margin lift coming from cost programs and mix. The FY+2 step rests on items the company has not quantified: the award book converting as volumes move through launch, and the first contributions from the industrial portfolio, of which the turbine generator's roughly $300 million first-year revenue is the only disclosed figure.

Revenue & EBITDA Projections
REVENUE$14.3B$14.2B$14.7BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.3B$2.1B$2.2B14.9%FY25FY+1 (E)FY+2 (E)
REVENUE$14.3B$14.2B$14.7BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.3B$2.1B$2.2B14.9%FY25FY+1 (E)FY+2 (E)
Solid bars are reported actuals; outlined bars are model projections — not company guidance.
MetricFY2025Next FY (E)Following FY (E)
Revenue$14.3B$14.2B$14.7B
YoY Growth—−0.8%+3.5%
EBITDA$1.3B$2.1B$2.2B
EBITDA Margin8.8%14.7%14.9%

Projections are the median of 5 independent model runs. The model’s revenue sits 1.1% below analyst consensus.

Management maintained FY2026 sales guidance of $14.0–$14.3 billion, adjusted operating margin of 10.7%–10.9%, and free cash flow of $900 million–$1.1 billion, and raised adjusted EPS to $5.05–$5.30 from $5.00–$5.20, attributing the increase primarily to share repurchases completed in the first half. Organic sales are guided down 3.5% to down 1.5%, with weighted end markets flat to down 3%. The battery sales decline is now about a 170 basis point headwind to year-over-year growth and the FX benefit $175 million. Incremental industrial R&D of $10–15 million in the second half is absorbed within the maintained margin range; management puts second-half margin at 10.6% including that spend and 10.8% excluding it.

What Could Go Right — and Wrong

What good looks like
  • The turbine generator launches on the 2027 schedule at or above the roughly $300 million first-year figure, with capacity expanded beyond 2 GW.
  • Battery awards arrive in 2026 as management expects, converting the energy storage line from quoting to contracted revenue.
  • Inverter quoting later in 2026 converts into awards from the four customers already holding samples, across the 400–1,500 volt portfolio.
  • The award book converts on schedule and turns outgrowth positive in 2027, as management says bookings should support.
  • Cost programs deliver against their dated targets, giving the industrial build-out internal funding without disturbing the margin guide.
What could go wrong
  • The turbine generator launch slips out of 2027 on final UL certification, qualification testing, reliability testing, or ramp quality and cycle time.
  • Core automotive outgrowth stays negative and the award book converts later or at lower volumes than implied, leaving a cost-program story with finite savings windows.
  • The battery business declines further; the headwind already widened from 150 to 170 basis points and management guides a mid-teens decremental into the second half.
  • The single exclusive partner channel for the turbine generator is disrupted, or partner funding and data center project timing push the ramp out.
  • Supply-chain or input cost pressure — dependence on fewer sources of supply for certain components, prolonged shortages of critical components, or tariff exposure — delays a launch or compresses margin into the industrial ramp.
What’s Next

Looking Ahead

The next twelve months are dominated by turbine generator gating items and commercial conversion. UL component certification is expected to start in September 2026, with final certification alongside C samples later that year; capital equipment installation begins in the third quarter; and a capacity-expansion decision is pending in the second half. On the commercial side, management expects some battery awards this year, promises additional battery storage updates later in 2026, and targets inverter quoting toward the end of the year. FY2026 guidance — sales, margin and free cash flow maintained, adjusted EPS raised — is delivered through the next two quarters.

Catalysts
  • September 2026UL component certification — Certification starts for the turbine generator; evidence books submitted.
  • Q3 2026Final assembly equipment install — Capital equipment installation begins at the turbine generator plant.
  • 2H 2026TG capacity decision — Management decides whether to expand beyond 2 GW and where.
  • Q4 2026Torque-on-demand SOP — Production start for a Chinese OEM full-size SUV drivetrain program.
  • Later in 2026Battery awards expected — Management expects some battery energy storage awards this year.
  • 2027TG production launch — Launch gates the roughly $300 million first-year revenue expectation.
Numbers

Financials

Annual Summary

MetricFY2024FY2025TTMYoY
Revenue$14.1B$14.3B$14.3B+1.7%
Gross Margin18.7%18.7%19.5%+0bps
EBITDA$1.9B$1.3B$1.4B-35.4%
EBITDA Margin13.8%8.8%9.8%504bps
Net Income$338M$277M$415M-18.0%
Free Cash Flow$702M$1.2B$1.2B—
Net Cash————

Key Ratios (Trailing)

Valuation
  • P/E TTM—
  • EV/EBITDA TTM—
  • EV/Revenue TTM—
  • Price/FCF TTM—
Profitability
  • Gross Margin (TTM)19.5%
  • EBITDA Margin (TTM)9.8%
  • Net Margin (TTM)2.9%
  • ROIC8.0%
  • FCF Conversion88.2%
  • SBC / Revenue0.4%
Reference

The Company

BorgWarner makes components for combustion, hybrid and electric vehicles and sells them to automakers worldwide. The FY2025 10-K describes four segments: turbos and thermal products that improve fuel economy and reduce emissions, drivetrain and torque-management products, power electronics for electric and hybrid vehicles, and lithium-ion battery systems for electrified bus, truck and off-highway applications. Light vehicles are over 80% of sales, and light-vehicle turbochargers alone were about 21% of net sales in FY2025. Its relevance to AI infrastructure is indirect: it is building behind-the-meter power generation, battery storage and power conversion for data centers, drawing on competence from those automotive lines.

The company operated 81 manufacturing, assembly and technical facilities as of the FY2025 10-K — 22 in the Americas, 26 in Europe and 33 in Asia. The battery business has the smallest footprint, four facilities and no site in Asia. China is about 20% of global sales. For the data center build-out, BorgWarner is putting in a greenfield final assembly plant in North Carolina for the turbine generator while leveraging four existing auto plants for components and subassemblies, and it plans to lean first on existing battery technology and capacity at its Seneca plant for energy storage.

Business Segments

Turbos & Thermal Technologies (TTT)
$1,433M net sales, Q1 2026
Turbochargers, eBoosters, eTurbos, emissions and thermal systems for fuel economy and lower emissions.
Growth driver: Turbine generator draws on TTT rotating-machinery skill
PowerDrive Systems (PDS)
$587M net sales, Q1 2026
Inverters, onboard chargers, DC/DC converters, eMotors and integrated drive modules for EVs and hybrids.
Growth driver: Inverter franchise bridges automotive to data center power
Battery Energy Systems (BES)
$102M net sales, Q1 2026
Lithium-ion battery packs and management systems for electrified bus, truck and off-highway vehicles.
Growth driver: Battery awards expected 2026; production-ready targeted 2027

Competitive Landscape

BorgWarner describes itself as an original equipment supplier to nearly every major automotive OEM in the world, and it names its non-OEM competitors in the 10-K: Robert Bosch, Denso, Garrett Motion, Hitachi, Magna Powertrain, Valeo, Schaeffler and CATL. Management did not address the competitive set for the new data center power lines on either call. The intel file's inferred wiring map places the company against Cummins, GE Vernova and Generac in data-center power, with Cummins and Generac also appearing as inferred BorgWarner customers — a dual relationship the calls do not discuss.

  • Robert Bosch GmbH
    Named in filings; not discussed.
  • Denso Corporation
    Named in filings; not discussed.
  • Garrett Motion
    Named in filings; not discussed on BorgWarner's calls. Garrett's own results report about $200 million of full-year industrial turbo sales and a first award for a turbo used in data center power generation.
  • Cummins
    Placed in the same data-center power segment by the intel file's inferred wiring map; management did not address it on either call. Cummins also appears as an inferred BorgWarner customer.
  • GE Vernova
    Placed in the same data-center power segment by the intel file's inferred wiring map; not addressed by management.
Names come from the FY2025 10-K competitor list and the intel file's inferred wiring map; only the 10-K names are filing-disclosed, and the industrial-segment competitive set is not addressed by management.

Supply Chain

BorgWarner buys battery cells and specialty components and sells to automakers, with Volkswagen and Ford its largest customers. Its turbine generator goes to market exclusively through Endeavour's TurboCell. No neighbor in the evidence set names BorgWarner.

Supplier
FinDreams
Battery cells; documented supplier, BYD-linked
Supplier
ATI
Superalloys for turbine components (inferred, no documented quote)
Supplier
Infineon
IGBTs and power semiconductors for inverters and battery management (inferred)
Supplier
ON Semiconductor
Automotive power semiconductors (inferred)
→
Automotive launch and inverter scale
BWA
81 manufacturing, assembly and technical facilities across four segments.
→
Volkswagen
~13% of FY2025 net sales
Disclosed concentration rose from 10% in FY2024
Ford
~12% of FY2025 net sales
Disclosed concentration fell from 13% in FY2024
Endeavour / TurboCell
Master supply agreement for the turbine generator; exclusive go-to-market

Related companies

Likely customers
CAT · Caterpillar
Likely suppliers
ATI · ATICRS · Carpenter TechnologyON · ON SemiconductorWOLF · WolfspeedAVT · Avnet
Competitors
CMI · CumminsGTX · Garrett Motion

See all Power Systems companies → · How this layer works: Chapter 6, Power Inside →

Analysis updated Sep 22, 2026, reviewing Q2 FY2026. Prices delayed. Built with The Buildout’s published methodology. Not investment advice. No positions held. © The Buildout 2026.

More on BWA: Earnings recap