AUTOLIV (ALV)·Q4 2025 Earnings Summary
Autoliv Beats on Record Sales & EPS, But Stock Drops 8% on Flat 2026 Outlook
January 30, 2026 · by Fintool AI Agent
Autoliv delivered record Q4 2025 results, beating consensus on both revenue (+1.7%) and EPS (+10.8%), but shares tumbled 8% in after-hours trading as the company guided for flat organic sales in 2026 amid a challenging light vehicle production environment.
Did Autoliv Beat Earnings?
Autoliv beat on both key metrics:
The beat was driven by record quarterly sales, with particularly strong performance in India and China. Sales to Chinese OEMs surged nearly 40% year-over-year, driven by recent product launches.
Key Q4 2025 Highlights:
- Record quarterly sales of $2.82B (+7.7% Y/Y)
- Record Q4 operating cash flow of $544M
- Record EPS from strong earnings and share buybacks
- Sales outperformed light vehicle production in all regions
Ask Fintool AI AgentHow Did the Stock React?
Despite beating estimates, ALV shares fell sharply in after-hours trading:
Why the sell-off? The market reacted negatively to Autoliv's 2026 guidance calling for flat organic sales growth, a significant deceleration from the ~3% growth achieved in 2025. Additionally, management warned that Q1 2026 will be "the weakest of the year" with margin expected to decline "significantly" year-over-year.
What Did Management Guide?
Full Year 2026 Guidance:
The guidance is based on global light vehicle production declining approximately 1% in 2026.
Q1 2026 Warning: Management explicitly called out that Q1 will be challenging, with adjusted operating margin expected to decline significantly year-over-year due to:
- Lower light vehicle production (-4% in Q1)
- Lower engineering income (timing effect)
- Higher depreciation relative to sales
- U.S. tariff impacts
What Changed From Last Quarter?
Positives:
- Adjusted operating margin improved 60 basis points to 10.3% for full year 2025
- Free operating cash flow hit a record $734M for the year
- Cash conversion reached 100% target
- Successfully recovered "nearly all" tariff-related costs in Q4
Concerns:
- Customer R&D reimbursements and out-of-period compensations declined Y/Y
- Industry order intake remained at low levels as OEMs reconsider product offerings
- Adjusted operating margin declined to 12.0% vs 13.4% in Q4 2024
Ask Fintool AI AgentFull Year 2025: A Record Year
Shareholder Returns: Autoliv returned ~$590M to shareholders in 2025, including $351M in share repurchases and $238M in dividends ($3.12 per share). The company has returned ~$2.44B to shareholders over the last 5 years and repurchased over 13M shares since 2022, representing ~15% of outstanding shares.
Segment Performance: Where Did Growth Come From?
Sales by Region (Q4 2025):
India emerged as the growth star, contributing one-third of global organic sales growth and becoming the largest contributor to the quarter's increase.
China: Sales to Chinese OEMs (domestic brands) increased by almost 40%, driven by recent launches including models from Chery, Geely, Great Wall, and NIO.
Q4 2025 Financial Detail
Why did margin decline? The adjusted operating income bridge shows:
- Raw materials: +$41M benefit
- Operations: +$7M (efficiency gains)
- Out-of-period compensation: -$1M (vs prior year benefits)
- Tariff impact: -$24M net
- R&D/SG&A: -$2M
- FX headwind: -$33M
2026 Guidance: Puts and Takes
Management quantified the key margin drivers for 2026:
Note: Raw materials is gross cost impact before customer recoveries
Q&A Highlights
On 2026 Outperformance (Only 1% vs. 3% in Q4):
"The 1% that we outperform here is consistent with the 1%-2% CPV contributor... we have faced headwinds during 2025 due to the mix effect, where lower-end vehicles with lower content have been the ones really growing. For 2026, we expect a neutral mix effect." — CEO Mikael Bratt
On Hyundai Airbag Recall (Media Reports This Week):
"At this point, there is no indication really towards our products... But we continue to work with them there to support them. Right now, at this point, no indication towards us." — CEO Mikael Bratt
On Chinese OEMs Expanding to Europe:
"We have won a very important quote with one of the Chinese customers setting up production in Europe, and we are the only external supplier to that platform." — CEO Mikael Bratt
On Customer Call-Off Volatility:
"The volatility in Q4 was very much related to some OEMs deciding, with very short notice or no notice at all, to stop production to manage inventory situations... We expect to at least get back to the 95-ish level." — CEO Mikael Bratt
On 12% Medium-Term Margin Target:
"We are very firm and committed on the 12%. Some markets have disappeared that we can't operate in any longer, and customers like BYD and SAIC have captive solutions... We are not hesitating on our ability to get there." — CEO Mikael Bratt
Ask Fintool AI AgentCapital Allocation & Balance Sheet
Balance Sheet Strength:
- Leverage ratio: 1.1x (well below 1.5x target)
- Net debt: $1,566M
- Adj. Return on Capital Employed: 32%
- Adj. Return on Equity: 37%
Q4 2025 Cash Deployment:
- Dividends: $66M ($0.87 per share)
- Share repurchases: $150M
Order Intake & Market Share
2025 Order Intake Trends:
- Industry sourcing remained at low levels as OEMs reassess product plans amid geopolitical/technological uncertainty
- About one-third of Autoliv's order intake came from new automakers (emerging mobility players)
- Chinese OEMs accounted for over 30% of global order intake
- Secured first order with a Chinese OEM for European production — Autoliv is the sole external supplier on that platform
Market Share:
- Global market share: 44% (unchanged from 2024)
- India market share: ~60% with strong CPV growth
- Chinese OEM share now represents 44% of China sales (doubled from 3 years ago)
Order Intake Dynamics — Structural vs. Temporary:
- Structural: Higher platform turnover at Chinese OEMs (shorter life cycles = lower lifetime value per program)
- Temporary: Program cancellations due to EV/driveline uncertainty — expected to normalize as OEMs finalize product roadmaps
Key Strategic Developments
- World's First Foldable Steering Wheel for autonomous driving introduced with Tensor, targeted for late 2026 production. Management noted "very positive response" and "several approaches and discussions after CES presentation."
- CATARC Partnership signed to define next-generation safety standards in China
- Second R&D Center in China (Wuhan) to support Chinese OEM growth
- HSAE Joint Venture for advanced safety electronics (ECUs, steering wheel switches)
What to Watch Going Forward
- Q1 2026 Results: Management flagged "significant" margin decline expected. Global LVP forecast to drop 4% Y/Y in Q1, with China down over 10% due to reduced EV incentives and elevated inventories.
- Raw Material Costs: Gold prices driving ~$30M gross headwind in 2026 — watch for customer recovery negotiations
- Tariff Developments: Guidance assumes no material changes to tariffs in effect as of January 23, 2026. USMCA review is a key risk.
- Chinese OEM Momentum: Can Autoliv sustain 40%+ growth with domestic Chinese brands as they expand into Europe?
- Hyundai Recall: Media reports this week linked Autoliv to an airbag recall — management says "no indication towards our products" but monitoring closely
- Order Intake Recovery: Industry sourcing at low levels as OEMs reassess EV/driveline roadmaps — expected to normalize once product plans finalize
Ask Fintool AI Agent