Garrett Motion Inc. (GTX) | The Buildout — AI Infrastructure
The Verdict
Garrett Motion designs and manufactures turbochargers, air and fluid compression systems, and high-speed electric motors for automakers and industrial customers. Its large-frame MEG turbo and E-Cooling oil-free centrifugal compressors connect it to data-center power and cooling, but the AI exposure is indirect and concentrated in the industrial and new-product portfolio.
| Market Cap | — |
| Revenue (TTM) | $3.8B |
| Revenue Growth | +8.5% |
| EBITDA Margin (TTM) | 13.4% |
| Net Debt | $1.2B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Gasoline turbo adoption rose from ~14% in 2013 to ~51% in 2025, expanding the core market.
- Q1 2026 sales grew 6% constant currency while light-vehicle production was down; management calls it share-of-demand gains.
- Adjusted EBIT margin reached 15.6% in Q2 2026, up from 15.3% in Q1 2026.
- 2026 midpoints raised to $3.75B sales, $560M adjusted EBIT, and $415M adjusted free cash flow.
- Industrial cooling is expected to scale to more than 5% of revenue by the end of the decade from near zero.
What We’re Watching
- China concentration: the 10-K flags mainland China supply-chain risk, and new E-Powertrain/TONFY wins are China-based.
- No disclosed backlog or order book, so award momentum cannot be independently verified in dollars.
- 2027 launch execution: Trane E-Cooling and two China E-Powertrain awards all target 2027 start of production.
- BorgWarner's Euro VII heavy-duty turbo conquest from end-2028 contests the next commercial-vehicle cycle.
The thesis is strengthening on the disclosed facts: guidance has been raised twice, adjusted margins are up, and award cadence in E-Cooling and E-Powertrain is converting qualitative wins into 2027 production programs. The open question is whether those 2027 programs convert into visible revenue without a disclosed backlog or order book.
Earnings Beat
Q2 2026 revenue was $976M, and reported gross margin fell to 6.4% from 24.0% in Q1 2026. Net income was $101M, and free cash flow was $128M.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $976M | $985M | $913M | +6.9% |
| Gross margin | 6.4% | 24.0% | 24.8% | -1840bps |
| EBITDA | $22M | $178M | $146M | −84.9% |
| EPS | $0.53 | $0.49 | $0.42 | +25.0% |
Management tone: No earnings call on record for the latest period.
Management Guidance
The Q2 2026 press release states that the company increased its full-year outlook, but the revised figures are not included in the provided source material. The prior Q1 update set midpoints of $3.75B net sales, $560M adjusted EBIT, and $415M adjusted free cash flow, with the low end held unchanged because of macroeconomic and geopolitical uncertainty.
Trajectory
Revenue has turned higher year over year: Q1 2026 grew 6% constant currency and Q2 grew 5%, after Q4 2025 and Q3 2025 printed $891M and $902M. Reported margins compressed sharply in Q2 2026, with gross margin down from 24.0% in Q1 to 6.4% and reported EBITDA down from $178M to $22M; the source set does not provide a detailed explanation for the Q2 gross-margin decline.
The Model
The model projects FY+1 revenue of $3,880M and EBITDA of $691M (17.8% margin), rising to $4,100M revenue and $742M EBITDA (18.1% margin) in FY+2. Near-term revenue is anchored by the raised guidance path, while FY+2 embeds the 2027 production starts in E-Cooling and E-Powertrain.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.6B | $3.9B | $4.1B |
| YoY Growth | — | +8.3% | +5.7% |
| EBITDA | $600M | $691M | $742M |
| EBITDA Margin | 16.7% | 17.8% | 18.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.5% above analyst consensus.
The Q2 2026 press release states that the company increased its full-year outlook, but the revised figures are not included in the provided source material. The prior Q1 update set midpoints of $3.75B net sales, $560M adjusted EBIT, and $415M adjusted free cash flow, with the low end held unchanged because of macroeconomic and geopolitical uncertainty.
What Could Go Right — and Wrong
- Trane E-Cooling is claimed by the company to deliver more than 10% real-world energy savings and reaches series production in 2027.
- Industrial cooling scales to more than 5% of revenue by the end of the decade.
- Power-generation turbos grow from roughly $100M in 2025 as data-center genset awards convert.
- Two China E-Powertrain awards begin production in 2027.
- Core win rate of about 50% keeps revenue outgrowing a light-vehicle market down 1-3% in 2026.
- China policy or regulatory disruption hits both supply chain and China-heavy new wins.
- 2027 E-Cooling and E-Powertrain launches slip.
- BorgWarner's Euro VII turbo conquest from end-2028 signals contested future platforms.
- Tariff and pricing pressure persists; Q1 pricing net of inflation pass-through was an $11M gross-profit headwind.
- Aftermarket volatility swings back after its Q1 rebound.
Looking Ahead
The next twelve months are defined by H2 2026 productivity execution, Trane E-Cooling test validation, and the build toward 2027 series production for E-Cooling and two China E-Powertrain awards. The source material also points to a second 2026 guidance raise and continued power-generation turbo growth, but the second raise amount is not disclosed.
- H2 2026Productivity turns positive — Management expects operating performance to turn positive through year-end after a slightly negative Q1.
- 2027Trane E-Cooling series production — Tests start weeks after Apr 30; production ramp from 2027.
- 2027Two E-Powertrain start-ups — HanDe heavy-duty and unnamed medium-duty programs start production in 2027.
- End of decadeIndustrial cooling exceeds 5% revenue — Target set from near zero as industrial cooling programs ramp.
- 2030$1B zero-emission revenue ambition — Referenced as still relevant; update deferred to May 20 Investor Day.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $3.5B | $3.6B | $3.8B | +3.1% |
| Gross Margin | 25.6% | 24.5% | 19.5% | 115bps |
| EBITDA | $553M | $600M | $5.1B | +8.5% |
| EBITDA Margin | 15.9% | 16.7% | 13.4% | +83bps |
| Net Income | $282M | $310M | $357M | +9.9% |
| Free Cash Flow | $317M | $341M | $1.5B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)19.5%
- EBITDA Margin (TTM)13.4%
- Net Margin (TTM)9.5%
- ROIC59.0%
- FCF Conversion72.7%
- SBC / Revenue0.5%
The Company
Garrett Motion designs and manufactures turbochargers, air and fluid compression systems, and high-speed electric motors for OEMs and aftermarket distributors. Its products span gasoline and diesel turbos, E-Turbo and E-Compressor technologies, fuel-cell air compressors, E-Powertrain, and E-Cooling oil-free centrifugal compressors.
In 2025, more than 89% of products were manufactured in low-cost countries across seven facilities in China, India, Mexico, Brazil, Romania, and Slovakia. The company operates as a single reportable segment.
Business Segments
Competitive Landscape
The 10-K describes competitors as independent regional and multi-regional suppliers, vertically integrated internal business units of major automotive OEMs, and start-ups. In third-party filings, BorgWarner and Cummins both name Garrett Motion among competitors.
- BorgWarnerNamed in third-party filings as a competitor; disclosed a Euro VII heavy-duty turbocharger conquest for production from end-2028.
- CumminsNamed in third-party filings as a competitor; the source material does not detail GTX's view of Cummins beyond this.
Supply Chain
GTX supplies highly engineered turbochargers into OEM vehicle platforms and is preparing electric compressors for commercial HVAC and industrial compression; its first Trane test unit was shipping in the coming weeks as of Apr 30, 2026, with series production in 2027. Trane, TONFY, HanDe, and Ingersoll Rand are named partners; upstream supplier names are not disclosed.