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

——Mkt cap — · 52-wk —–— · YTD — · delayed
Updated Aug 12, 2026Q1 FY2026 reviewed
BorgWarner builds turbine generators, battery energy storage, and microgrid inverters for data center power infrastructure.
~$300M turbine revenue
First disclosed industrial revenue, expected in 2027.
Q2 margin 11.3%
Adjusted operating margin up 100 bps y/y.
Ex-battery +0.5%
Q2 ex-battery organic sales turned positive y/y.
~170bps battery drag
Full-year 2026 battery sales headwind raised from ~150 bps.
The Buildout Takeaway
BorgWarner's core automotive business is holding margin in a declining production environment, while management leans forward on a data-center power portfolio that is still largely pre-revenue. The question is whether the 2027 turbine launch and possible battery awards arrive before auto volume recovers.
Analyst coverage
38 analysts·20 Buy16 Hold2 Sell
Median target$82  Range $66–$95 · 9 estimates
Management guidance
FY2026 sales $14.0B–$14.3B · organic sales down 3.5% to down 1.5% · adj. operating margin 10.7%–10.9% · adj. EPS $5.05–$5.30 · FCF $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 designs and manufactures propulsion and power components. Its traditional business serves combustion, hybrid, and electric vehicles, and it is now extending high-voltage, rotating-machine, and thermal expertise into turbine generators, battery energy storage, and bidirectional microgrid inverters. That matters because AI data centers need behind-the-meter generation, storage, and power conversion to support rapidly rising rack-level power demand.

Market Cap—
Revenue (TTM)$14.3B
Revenue Growth+2.4%
EBITDA Margin (TTM)14.6%
Net Debt$2.0B
Earnings Beats7 of 7
P/E (TTM)—
EV/EBITDA (TTM)—

What We Like

  • Q2 2026 adjusted operating margin reached 11.3%, up 100 bps y/y, with adjusted operating income of $413M.
  • Q2 2026 free cash flow was $492M; TTM free cash flow stands at $1,225M on $362M of TTM net income.
  • The turbine generator program targets ~$300M first-year revenue in 2027 from 2 GW installed capacity; ~80% of its supply base is already a BorgWarner supplier.
  • The board raised share repurchase authorization by $1.0B, bringing total repurchase ability to $1.35B.
  • Award flow remains visible: 12 awards highlighted in Q1 2026 and 7 in Q2 2026, with production launches from Q4 2026 through 2029.

What We’re Watching

  • Battery Energy Systems continues shrinking; full-year 2026 sales headwind is roughly 170 bps, raised from ~150 bps, with no clear bottom shown.
  • Light-vehicle production is soft: 2026 weighted end markets are expected flat to down 3%.
  • Turbine generator certification and launch: UL component certification starts September 2026, final UL C-sample certification is planned later in 2026, and production is expected in 2027.
  • Industrial concentration: turbine generator go-to-market is exclusive with Endeavor/TurboCell, and BESS and inverters have no disclosed awards or revenue yet.
Bottom Line

The thesis is strengthening incrementally but not yet proven. The industrial portfolio became more concrete in 2026, core margins expanded despite soft production, and capital returns increased. But current outgrowth is unsatisfactory, battery sales are still falling, and the industrial portfolio remains pre-revenue. The open question is whether the 2027 turbine launch and core automotive outgrowth recovery materialize on schedule.

Next upThe nearest catalyst is turbine generator UL component certification, which management says starts September 2026, alongside capital equipment installation beginning Q3 2026. That will test whether the 2027 production launch stays on schedule.
Last Quarter — Q1 FY2026

Earnings Beat

BorgWarner reported Q2 2026 net sales over $3.6 billion in a relatively flat year-over-year sales environment. Adjusted operating income was $413 million, with adjusted operating margin of 11.3%, up 100 basis points y/y. Adjusted EPS rose 17% y/y, and free cash flow was $492 million.

MetricQ1 FY2026Q4 FY2025Q1 FY2025YoY
Revenue$3.5B$3.6B$3.5B+0.5%
Gross margin19.2%20.4%18.2%+100bps
EBITDA$494M$562M$481M+2.7%
EPS$1.16$-1.23$0.72+61.4%
Adjusted operating margin11.3%10.5%10.3%+9.7%
We are maintaining our full year sales, adjusted operating margin and free cash flow guidance. However, we are increasing our full year adjusted EPS guidance based on our share repurchases in the first half of 2026.— Craig Aaron, CFO, 2026-08-05

Management tone: Management's tone shifted from cautious reaffirmation in Q1 to more forward-leaning commentary in Q2 on data-center products, while the Q2 EPS raise was explicitly attributed to buybacks rather than operational over-delivery. The CEO publicly acknowledged dissatisfaction with current outgrowth and the battery decline.

Management Guidance

Management maintained full-year 2026 sales guidance, organic sales down 3.5% to down 1.5%, adjusted operating margin of 10.7%–10.9%, and free cash flow of $900M–$1.1B. Adjusted EPS guidance was raised to $5.05–$5.30 from $5.00–$5.20, primarily due to first-half 2026 share repurchases. The FX sales benefit was lowered to about $175M, and the battery sales headwind was increased to roughly 170 bps.

Business Trajectory

Trajectory

Revenue has been nearly flat: from $3,638M in Q2 2025 to $3,533M in Q1 2026, with Q2 2026 again over $3.6B. Gross margin improved from 18.2% in Q1 2025 to 19.2% in Q1 2026, and adjusted operating margin reached 11.3% in Q2 2026. Cost controls, restructuring, and the charging-business exit are driving margin expansion while battery declines and soft light-vehicle production keep revenue stable.

Revenue & Margin Trajectory
RevenueGross margin$0$2.0B$4.0B$2.3B$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$3.5B21%19%Q2'16Q3Q4Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26
RevenueGross margin$0$2.0B$4.0B$2.3B$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$3.5B21%19%Q2'16Q3Q4Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26
Gross margin as reported.
Share Price — 12 Months
$25$50$75$052-wk high $75Aug '25NovFeb '26MayAug '26
52-week range $42–$75.
Share Price — 12 Months
$25$50$75$052-wk high $75Aug '25NovFeb '26MayAug '26
52-week range $42–$75.
The Numbers

The Model

The model projects FY+1 revenue of $14,300M and EBITDA of $2,188M (15.3% margin), then FY+2 revenue of $15,040M and EBITDA of $2,346M (15.6% margin). The FY+1 estimate sits at the top of management's 2026 sales guidance; FY+2 assumes volume recovery and the first industrial contribution.

Revenue & EBITDA Projections
REVENUE$14.3B$14.3B$15.0BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$2.1B$2.2B$2.3B15.6%FY25FY+1 (E)FY+2 (E)
REVENUE$14.3B$14.3B$15.0BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$2.1B$2.2B$2.3B15.6%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$14.3B$15.0B
YoY Growth—−0.1%+5.2%
EBITDA$2.1B$2.2B$2.3B
EBITDA Margin14.6%15.3%15.6%

Projections are the median of 5 independent model runs. The model’s revenue sits 1.2% above analyst consensus.

Management maintained full-year 2026 sales guidance, organic sales down 3.5% to down 1.5%, adjusted operating margin of 10.7%–10.9%, and free cash flow of $900M–$1.1B. Adjusted EPS guidance was raised to $5.05–$5.30 from $5.00–$5.20, primarily due to first-half 2026 share repurchases. The FX sales benefit was lowered to about $175M, and the battery sales headwind was increased to roughly 170 bps.

What Could Go Right — and Wrong

What good looks like
  • Turbine generator reaches 2027 production and ~$300M first-year revenue on schedule.
  • Battery energy storage and microgrid inverters win disclosed awards during 2026/2027, broadening industrial revenue.
  • Core automotive outgrowth recovers in 2027 as recent awards move toward start of production.
  • Battery Energy Systems finds a bottom and stationary storage optionality begins to materialize.
  • The turbine capacity expansion decision in 2H 2026 signals demand beyond the initial 2 GW.
What could go wrong
  • Turbine generator UL certification, plant commissioning, or production ramp slips.
  • Battery sales continue shrinking and the full-year 2026 headwind grows beyond ~170 bps.
  • Light-vehicle production comes in weaker than flat to down 3%.
  • Industrial revenue remains concentrated with Endeavor/TurboCell and third-party adoption fails to develop.
  • Core auto outgrowth remains depressed by legacy EV program losses.
What’s Next

Looking Ahead

The next 12 months center on turbine generator execution: UL component certification starts September 2026, capital equipment installation begins Q3 2026, final UL C-sample certification is planned later in 2026, and a capacity expansion decision is expected in 2H 2026. Management also expects possible first battery awards during 2026 and will share more on 2027 expectations early next year.

Catalysts
  • Q3 2026Turbine capital equipment installation — Begins at Hendersonville final assembly site per management.
  • September 2026UL component certification starts — First regulatory milestone for turbine generator certification.
  • 2H 2026Turbine capacity expansion decision — Tests whether management expands beyond 2 GW installed base.
  • Later 2026Final UL C-sample certification — Required before turbine generator production launch.
  • 2026First battery storage awards — Management expects some battery awards this year.
  • Q4 2026Chinese OEM torque-on-demand SOP — First production from Q2 2026 highlighted awards.
Numbers

Financials

Annual Summary

MetricFY2024FY2025TTMYoY
Revenue$14.1B$14.3B$14.3B+1.7%
Gross Margin18.7%18.7%18.9%2bps
EBITDA$1.9B$2.1B$17.9B+7.2%
EBITDA Margin13.8%14.6%14.6%+75bps
Net Income$338M$277M$362M-18.0%
Free Cash Flow$681M$1.2B$7.0B—
Net Cash————

Key Ratios (Trailing)

Valuation
  • P/E TTM—
  • EV/EBITDA TTM—
  • EV/Revenue TTM—
  • Price/FCF TTM—
Profitability
  • Gross Margin (TTM)18.9%
  • EBITDA Margin (TTM)14.6%
  • Net Margin (TTM)2.5%
  • ROIC14.7%
  • FCF Conversion58.4%
  • SBC / Revenue0.0%
Reference

The Company

BorgWarner makes propulsion and energy technology. Its traditional business supplies turbochargers, thermal systems, drivetrain components, power electronics, eMotors, and battery systems, mostly to light-vehicle OEMs. The company is now extending the same high-voltage and rotating-machine expertise into turbine generators, battery energy storage, and bidirectional microgrid/grid-tie inverters for data centers.

It operates through four reportable segments: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems, and Battery Energy Systems, formerly Battery & Charging Systems. FY2025 sales were $14.3B, with light vehicles over 80% and China about 20%. Manufacturing includes 26 Turbos & Thermal, 28 Drivetrain & Morse, 23 PowerDrive, and 4 Battery facilities. For the turbine generator, final assembly is in Hendersonville, NC, with four existing auto plants supplying components and about 80% of the supply base already a BorgWarner supplier.

Business Segments

Turbos & Thermal Technologies
Light-vehicle turbochargers were ~21% of FY2025 net sales
Turbochargers, eBoosters, eTurbos, emissions, thermal and ignition technology for light vehicles.
Growth driver: Turbocharger conquest and extension awards with European OEMs.
PowerDrive Systems
Q1 2026 sales $587M
Inverters, onboard chargers, DC/DC converters, eMotors, integrated drive modules, and controllers.
Growth driver: Electric vehicle and industrial power conversion applications.
Battery Energy Systems
Q1 2026 sales $102M; organic sales down 36% y/y
Lithium-ion packs for bus, truck and off-highway; being repositioned into stationary storage.
Growth driver: Stationary BESS production-ready targeted for 2027.

Competitive Landscape

The FY2025 10-K names major non-OEM competitors including Robert Bosch, Denso, Garrett Motion, Hitachi, Magna Powertrain, Valeo, Schaeffler, and CATL. Management describes the company's automotive inverter competence as a bridge to industrial power conversion.

  • Robert Bosch GmbH
    Named in FY2025 10-K as a non-OEM competitor; not discussed further in supplied material.
  • Denso Corporation
    Named in FY2025 10-K as a non-OEM competitor; not discussed further in supplied material.
  • Garrett Motion
    Named in FY2025 10-K as a non-OEM competitor; not discussed further in supplied material.
  • Hitachi, Ltd.
    Named in FY2025 10-K as a non-OEM competitor; not discussed further in supplied material.
  • Magna Powertrain
    Named in FY2025 10-K as a non-OEM competitor; not discussed further in supplied material.
Competitor list draws from the FY2025 10-K.

Supply Chain

BorgWarner sits between component suppliers and power users: disclosed supply relationships include FinDreams for battery cells and four existing BorgWarner auto plants for turbine-generator components, and its customers span light-vehicle OEMs plus emerging data-center power buyers.

Supplier
FinDreams
Battery cell supplier / partner
Supplier
Four existing BorgWarner auto plants
Turbine generator components and subassemblies
→
automotive-scale supply chain speed
BWA
In-house inverter competence, four automotive plants feeding turbine assembly, and battery capacity leverage via the Seneca plant.
→
Volkswagen
13% of FY2025 net sales
Disclosed automotive customer
Ford
12% of FY2025 net sales
Disclosed automotive customer
China (total sales)
20% of global sales
Local vs export split not disclosed
Endeavor / TurboCell
Turbine generator master supply agreement; can sell to third parties

Analysis updated Aug 12, 2026, reviewing Q1 FY2026. Prices delayed. Built with The Buildout’s published methodology. Not investment advice. No positions held. © The Buildout 2026.

More on BWA: Earnings recap