Executive Summary

Q2 2025: Revenue $1.54B, Adjusted EPS $0.21, Adjusted EBITDA $202.2M (13.2% margin). Company raised FY25 targets on sales, Adjusted EBITDA, and Adjusted FCF .
Against S&P Global consensus, AAM delivered a significant EPS beat ($0.21 vs $0.14*) but a slight revenue miss ($1.54B vs $1.57B*). EBITDA tracked near consensus on S&P’s definition while company-reported Adjusted EBITDA was higher; definitional differences likely explain the gap . [Values retrieved from S&P Global]*
Management cited productivity and cost control driving margin expansion and reiterated confidence in the pending Dowlais combination (shareholder approvals received; multiple regulatory approvals in hand), positioning the company for scale, diversification, and synergies .
Tariffs were a near-term headwind (~$10M in Q2), but AAM expects offsets/recoveries to start in 2H and estimates a $10–$15M net FY25 impact after mitigation .

What Went Well and What Went Wrong

What Went Well

Margin execution: Adjusted EBITDA margin expanded YoY to 13.2% (from 12.8%) despite lower sales; CEO: “year-over-year Adjusted EBITDA margin growth… driven by productivity and cost controls.”
EPS beat and guidance raise: Adjusted EPS $0.21 vs $0.19 last year; FY25 targets raised (sales to $5.75–$5.95B; Adjusted EBITDA to $695–$745M; Adjusted FCF to $175–$215M) .
Strategic progress: Dowlais deal passed both shareholder votes; regulatory approvals secured in the U.S., Korea, India, Taiwan, Turkey and UK; “one step closer” to forming a premier global driveline and metal forming supplier .

What Went Wrong

Top-line softness: Q2 sales declined to $1.54B from $1.63B YoY on lower volume/mix; operating income contracted YoY (to $55.0M from $86.5M) .
Tariff costs: ~+$10M incremental tariff costs in Q2; recovery expected to lag (offsets beginning in 2H), with a FY25 net impact of $10–$15M after mitigation .
Cash flow moderation: Operating cash flow fell to $91.9M (from $142.8M YoY) and Adjusted FCF to $48.7M (from $97.9M YoY), reflecting lower sales and spend cadence .

Financial Results

Quarter-over-Quarter Trend (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($B)	$1.38	$1.411	$1.536
Diluted EPS (GAAP)	-$0.12	$0.06	$0.32
Adjusted EPS ($)	-$0.06	$0.09	$0.21
Adjusted EBITDA ($M)	$160.8	$177.3	$202.2
Adjusted EBITDA Margin (%)	11.6%	12.6%	13.2%

Q2 Year-over-Year

Metric	Q2 2024	Q2 2025
Revenue ($B)	$1.632	$1.536
Diluted EPS (GAAP)	$0.15	$0.32
Adjusted EPS ($)	$0.19	$0.21
Adjusted EBITDA ($M)	$208.4	$202.2
Adjusted EBITDA Margin (%)	12.8%	13.2%

Q2 2025 vs S&P Global Consensus

Metric	Actual	Consensus	Surprise
Revenue ($M)	1,536.2	1,565.8*	Slight miss
Primary EPS ($)	0.21	0.14*	Beat
EBITDA ($M)	191.5*	188.5*	Modest beat (S&P definition)
Estimates (#)	—	Rev: 6; EPS: 7*	—
Values retrieved from S&P Global.*

Note: Company-reported Adjusted EBITDA = $202.2M; S&P “EBITDA” definition yields different values; use care in comparisons .

Segment Breakdown (Q2)

Segment	Q2 2024 Sales ($M)	Q2 2025 Sales ($M)	Q2 2024 Segment Adj. EBITDA ($M)	Q2 2025 Segment Adj. EBITDA ($M)
Driveline	1,124.5	1,082.1	151.8	148.9
Metal Forming	653.1	598.4	56.6	53.3
Intersegment	(145.3)	(144.3)	—	—
Net External Sales	1,632.3	1,536.2	Total Adj. EBITDA	208.4

KPIs and Balance Sheet

KPI	Q1 2025	Q2 2025
Net Cash from Ops ($M)	55.9	91.9
Capital Expenditures ($M)	68.7	52.9
Adjusted Free Cash Flow ($M)	(3.9)	48.7
Cash & Equivalents ($M)	549.2	586.5
Net Leverage (x)	2.9x (LTM Adj. EBITDA $720.9M)	2.8x (LTM Adj. EBITDA $715M)
Tariff Cost (quarter) ($M)	—	~10
R&D Expense ($M)	~36	~36
Liquidity ($B)	~1.5	>1.5

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales	FY 2025	$5.65–$5.95B	$5.75–$5.95B	Raised low end
Adjusted EBITDA	FY 2025	$665–$745M	$695–$745M	Raised low end
Adjusted Free Cash Flow	FY 2025	$165–$215M	$175–$215M	Raised low end
Capex (% Sales)	FY 2025	~5%	~5%	Maintained
Notes	FY 2025	Stand-alone, excludes Dowlais costs; assumes tariff mitigation and NA LV production 14.0–15.1M	Stand-alone, excludes Dowlais costs; assumes NA LV production 14.6–15.1M; majority tariff mitigation	Updated assumptions

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Tariffs/Macro	Buy/build local; commodity pass-through ≥80% protects margins	90% USMCA-compliant in NA; mapping exposure; initial tariff framework assumptions	~$10M Q2 tariff costs; recoveries/offsets expected 2H; FY25 net $10–$15M after mitigation	Improving mitigation; near-term cost lag
Dowlais combination	Announced; targets ~$300M synergies; leverage ~2.5x incl. synergies	Financing and antitrust milestones progressed; shareholder votes planned	Both shareholder approvals; multi-country regulatory approvals secured; close expected 2025	Advancing toward close
Powertrain mix	Focus on core ICE/hybrid, selective EV; capex discipline	Backlog/quoting swung from EV-heavy to ICE/hybrid-heavy; ICE extensions positive	“ICE and ICE hybrid vehicles will have longevity”; selective e-drive investments (Scout win)	ICE/hybrid resilience; targeted EV
Working capital/FCF	FY24 Adj. FCF $230M; inventory opportunities	Seasonal use Q1; inventory and AR/AP opportunities	2H FCF step-up driven by WC; capex ~5% sales	FCF cadence intact
R&D optimization	FY25 R&D down ~$20M YoY	R&D trending down; aligns with market requirements	Q2 R&D ~ $36M; FY25 book ETR ~50% (pre any legislation benefits)	Cost discipline sustained

Management Commentary

“AAM posted year-over-year Adjusted EBITDA margin growth in the second quarter driven by productivity and cost controls.” — David C. Dauch, CEO
“We are very excited about our upcoming combination with Dowlais… approval from both sets of shareholders… bringing… significant size, scale, and robust value creation potential.” — CEO
“90% of the products that we produce in North America are already USMCA compliant… nearly all of our steel and aluminum buy is from U.S. sources.” — CEO
“Our Metal Forming Group has now tallied five consecutive quarters of year over year margin expansion.” — CEO
“Adjusted free cash flow was $48.7 million in the [second] quarter.” — CFO

Q&A Highlights

Tariffs: ~+$10M Q2 hit; majority of incremental costs expected to be mitigated with customer recoveries starting in 2H; FY25 net impact ~$10–$15M .
Production cadence: GM T1 platform assumed 1.3–1.4M units in 2025; typical seasonality with some extra downtime already largely behind in Q3; bullish on HD/SUV mix .
Launch/opex cadence: 2H launch costs +$5–$10M vs 1H; capex remains ~5% of sales .
Balance sheet/leverage: Net leverage 2.8x at 6/30; combined entity targeted approximately leverage-neutral at close, then delever to ~2.5x before broadening capital allocation .
Strategic wins: Award with Scout Motors (front EDU and rear eBeam axles; SOP 2027) underscores targeted electrification strategy using proprietary tech .

Estimates Context

Q2 2025 vs S&P Global consensus: EPS $0.21 vs $0.14* (beat), Revenue $1,536M vs $1,566M* (slight miss), EBITDA 191.5M* vs 188.5M* (near/in-line depending on definition). Revenue estimates (n=6), EPS estimates (n=7) . [Values retrieved from S&P Global]*
Forward context: Q3 2025 consensus EPS ~$0.12*, revenue ~$1,526M*, and FY25 EPS ~$0.39*, revenue ~$5,852M* imply modest 2H weighting and room for estimate revisions post guide raise. [Values retrieved from S&P Global]*
Implications: Given raised FY25 low-ends for sales/EBITDA/FCF and tariff recovery outlook, street models likely need to lift EBITDA margins modestly for 2H and increase FCF, while revenue may remain conservative given downtime and launch cost commentary .

Key Takeaways for Investors

Execution on margins continues: three straight quarters of margin expansion; Adjusted EBITDA up sequentially to 13.2% despite softer volumes .
Mixed print but net positive: EPS beat on S&P consensus; slight revenue miss; company-raised FY25 outlook is the key bull catalyst . [Values retrieved from S&P Global]*
Dowlais combination de-risks concentration and adds scale/synergies; regulatory path is progressing; shareholder approvals complete — closing remains a 2025 event .
Tariff headwinds are being actively mitigated; expect recovery timing to improve in 2H; FY25 net tariff impact modest at ~$10–$15M after mitigation .
FCF cadence remains back-half weighted; watch working capital release and capex discipline (≈5% of sales) to support deleveraging .
Product-cycle positioning is favorable: ICE/hybrid longevity benefits core franchises; targeted EV awards (Scout) add optionality without overspending .
Near-term trading: Positive skew from guidance raise and deal progress; monitor Q3 production downtime, tariff recovery timing, and any incremental clarity on regulatory approvals to gauge follow-through .

Disclosures on Non-GAAP

Adjusted EPS excludes restructuring/acquisition costs, debt refinancing/redemption, gains/losses on the Dowlais combination derivative, equity securities, pension items, impairments, and non-recurring items (tax-effected). Adjusted EBITDA excludes the same non-core items. Q2 included a $46.3M gain on the Business Combination Derivative, inflating GAAP EPS vs Adjusted EPS .

Additional Detail (for reference)

Condensed income statement, balance sheet, cash flow statements, and reconciliation schedules provided in the 8-K/press release exhibits .
FY25 reconciliation frameworks for Adjusted EBITDA and Adjusted FCF included in supplemental data .

AMERICAN AXLE & MANUFACTURING HOLDINGS INC (AXL)·Q2 2025 Earnings Summary