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Garrett Motion Inc. (GTX)·Q3 2025 Earnings Summary

Executive Summary

  • Beat on revenue and EPS with margin expansion and strong cash generation: Net sales $0.902B (+9% reported, +6% cc), diluted EPS $0.38, Adjusted EBIT $133M (14.7% margin), Adjusted FCF $107M; raised FY25 midpoint outlook . Versus S&P Global consensus, revenue $902M vs $866.8M*, Primary EPS $0.392 vs $0.319* (beat) (company-reported diluted EPS $0.38) .
  • Capital returns and balance sheet: Announced 33% quarterly dividend increase to $0.08 (payable Dec 15, 2025), repurchased $84M of stock in Q3, and made a $50M voluntary term loan prepayment .
  • Mix dynamics: Gasoline outperformance and tariff recoveries supported results; aftermarket softness and unfavorable mix were partial headwinds; tariffs diluted margin ~20 bps net of recoveries .
  • Multi-year growth vectors intact: New turbo program wins (incl. hybrids/range-extended EVs), proof-of-concept wins in E-Powertrain, and growing stationary power/genset opportunity (> $40M lifetime awards; >$100M 2025 sales expected in stationary power) .

Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Gasoline and diesel growth with industry outperformance; Adjusted EBIT margin expanded to 14.7% (up 50 bps YoY) as productivity and volume gains offset mix headwinds. “Garrett delivered another strong quarter… expanding our Adjusted EBIT margin to 14.7% and generating $107 million of adjusted free cash flow” .
  • Capital allocation: $84M Q3 buybacks; dividend raised 33% to $0.08; FY25 midpoint raised across key metrics (sales, NI, Adj. EBIT/EBITDA, CFO, FCF) .
  • Structural growth opportunities progress: Additional turbo awards (incl. range-extended EV), E-Powertrain proof-of-concepts with two OEMs, and industrial E-Cooling traction; management reiterated its “two-leg strategy” (turbo leadership + high-speed electrification/zero-emission tech) .

What Went Wrong

  • Unfavorable product mix and aftermarket weakness weighed on margins; management flagged aftermarket softness (notably commercial off-highway) tied to destocking, and mix drag from gasoline product/geography .
  • Tariffs headwind: Newly implemented tariffs diluted margin by ~20 bps in Q3 despite recoveries .
  • Diesel remains in secular decline (though more moderate); management expects diesel to remain strong in LCV/light commercial segments but long-term penetration trends remain lower vs prior years .

Financial Results

Core actuals across periods

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Billions)$0.826 $0.913 $0.902
Diluted EPS ($)$0.24 $0.42 $0.38
Gross Margin (%)20.1% 19.8% 20.6%
Adjusted EBIT ($USD Millions)$117 $124 $133
Adjusted EBIT Margin (%)14.2% 13.6% 14.7%
Adjusted EBITDA ($USD Millions)$144 $154 $164
Adjusted EBITDA Margin (%)17.4% 16.9% 18.2%
Net Income ($USD Millions)$52 $87 $77
Net Income Margin (%)6.3% 9.5% 8.5%
Net Cash from Operations ($USD Millions)$67 $158 $100
Adjusted Free Cash Flow ($USD Millions)$71 $121 $107

Q3 2025 vs S&P Global consensus

MetricConsensusActual
Revenue ($USD Millions)866.8*902
Primary EPS (S&P measure)0.319*0.392*
EBITDA (S&P measure, $USD Millions)150.3*155.0*

Notes: Company-reported Adjusted EBITDA was $164M in Q3 2025 (definition differs from S&P EBITDA) .

Values marked with * are retrieved from S&P Global.

Product/category trends (YoY constant-currency growth)

CategoryQ2 2025Q3 2025
Garrett total0% 6%
Gasoline4% 10%
Diesel-5% 7%
Commercial vehicles4% 4%
Aftermarket-10% -4%
Other Sales26% 10%

KPIs and capital allocation

KPIQ1 2025Q2 2025Q3 2025
Net Cash from Ops ($M)56 158 100
Adjusted FCF ($M)36 121 107
Liquidity ($M)760 862 860
Total Debt Principal ($M)1,494 1,491 1,490
Share Repurchases ($M)30 22 84
Dividend per share ($)0.06 declared/paid 0.06 declared/paid 0.08 declared for Q4 payment

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (GAAP)FY 2025$3.4B–$3.6B $3.5B–$3.6B Raised (low end)
Net Sales Growth at ccFY 2025-3% to +2% -1% to +2% Raised
Net Income (GAAP)FY 2025$233M–$278M $265M–$295M Raised
Adjusted EBITDA (Non-GAAP)FY 2025$590M–$650M $610M–$650M Raised (low end)
Adjusted EBIT (Non-GAAP)FY 2025$470M–$530M $490M–$530M Raised (low end)
Net Cash from Ops (GAAP)FY 2025$370M–$450M $380M–$450M Raised (low end)
Adjusted Free Cash FlowFY 2025$330M–$410M $350M–$420M Raised (both ends)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/data centers / stationary powerWon several industrial power gen awards; “Other Sales” growth; highlighted awards for industrial/gensets >$40M lifetime genset awards; stationary power expected >$100M sales in 2025; momentum building; industrial E‑Cooling tests show efficiency gains Accelerating opportunity
Zero-emission technologies (E‑Powertrain, E‑Cooling, Fuel Cell)First major series production award for high-speed e-motor; milestones in E‑Powertrain/E‑Cooling/Fuel Cell Two new OEM PoCs for E‑Powertrain; strong E‑Cooling industrial interest; margin profile targeted at least in-line with turbo material margins Building pipeline; positive margin outlook
Tariffs and recoveriesQ2: tariff recoveries contributed; 1M gross profit timing effect $12M tariff recoveries in Q3 sales; ~20 bps margin dilution net of recoveries Managed but still a headwind
Mix and aftermarketQ1: diesel/aftermarket softness; Q2: unfavorable product mix, aftermarket down Gasoline strength (10% cc) but mix unfavorable; aftermarket weakness (CV off‑highway destock) Mixed: core mix headwind; aftermarket soft
Capital returns / leverageInitiated dividend $0.06; buybacks $30M (Q1), $22M (Q2) Dividend raised to $0.08; $84M buybacks; $50M early term‑loan repayment; target 75%+ Adj. FCF to shareholders over time More shareholder-friendly
Credit profile—Fitch & S&P upgrades; term loan repriced in Aug (SOFR+200, -25 bps) Improving

Management Commentary

  • Strategic framing: “These developments further validate our two-leg strategy of: reinforcing our turbocharging leadership while scaling differentiated high-speed electrification and zero-emission technologies” (CEO Olivier Rabiller) .
  • On Q3 performance and capital returns: “Garrett delivered another strong quarter… Adjusted EBIT margin 14.7%… $107 million of adjusted free cash flow… $84 million in share repurchases… 33% increase in our quarterly dividend” .
  • On mix and aftermarket: “Mix… is much more coming by… commercial vehicle versus growth on gasoline… and some weakness… in the aftermarket… commercial vehicle off-highway… destocking” .
  • On E‑Powertrain/E‑Cooling trajectory: “We secured additional proof-of-concepts… our high-speed three-in-one e-power train… eco‑link [oil-free] compressor… customer testing demonstrating significant efficiency gains” .
  • Capital return philosophy: “We continue to target distribution of 75% of our adjusted free cash flow to shareholders over time” .

Q&A Highlights

  • Mix headwinds and aftermarket: Management detailed that gasoline growth (esp. China) and aftermarket destocking (CV off-highway) drove unfavorable mix, while commercial vehicle demand is stabilizing at low levels; they expect recovery over time .
  • Commercial vehicle “green shoots”: Stabilization signs in China and off-highway (ag/construction) noted; industrial turbo (largest turbos) performing comparatively well .
  • Zero-emission path and margins: Three pillars (Fuel Cell compressors, E‑Powertrain, eco‑link compressor). E‑Powertrain ramp expected starting 2027; material margin expected in-line or accretive to turbo over time .
  • Data center/gensets opportunity: Stationary power for data center backup already ~>$100M 2025 sales; expanding MEG turbo range; not starting from scratch—already supplying gensets in China/Europe/US .
  • Capital allocation cadence: Dividend increased to $0.08; buybacks ~$84M in Q3; management reiterated long-term 75%+ of Adj. FCF to shareholders, with pacing depending on conditions .

Estimates Context

  • Q3 2025 results exceeded S&P Global consensus on revenue and EPS: $902M vs $866.8M* revenue; Primary EPS $0.392 vs $0.319*; company-reported diluted EPS $0.38 .
  • S&P Global EBITDA (definition differs from company Adj. EBITDA): actual 155.0* vs 150.3* consensus; company-reported Adj. EBITDA $164M .
  • Given the broad-based FY25 guidance raises (sales, NI, Adj. EBIT/EBITDA, CFO, FCF), sell-side models will likely lift FY25 revenue, EPS, EBITDA and FCF trajectories to reflect higher low-end ranges and stronger H2 auto production assumptions .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with margin expansion: Strong execution lifted Gross margin to 20.6% and Adj. EBIT margin to 14.7%; “beat and raise” quarter supports multiple expansion narratives in cyclical auto tech .
  • Positive estimate revision setup: FY25 low-ends raised across metrics; expect upward revisions to revenue/EPS/FCF, especially with improved H2 production outlook and FX tailwinds .
  • Capital returns accelerating: Dividend up 33% to $0.08, $84M buybacks, 75%+ of Adj. FCF targeted to shareholders over time; plus $50M early debt repayment and a lower term-loan spread (-25 bps) should modestly reduce interest expense .
  • Watch the mix: Gasoline-led growth and aftermarket softness are near-term mix headwinds; management is offsetting via productivity and tariff recoveries, but aftermarket normalization timing remains a swing factor .
  • Secular growth vectors building: Stationary power/data centers now a meaningful revenue stream; E‑Powertrain and eco‑link compressor programs moving from PoC to awards, with 2027 SOPs supporting medium-term diversification .
  • Risk monitor: Tariff regime and pass-through timing; aftermarket destocking duration; diesel secular decline vs LCV resilience; macro/production volatility .
  • Trading implications: Near-term catalysts include dividend record date (Dec 1) and payment (Dec 15), continued buybacks, and potential additional ZET program milestones; setup favors positive sentiment into Q4 given raised outlook and cash return cadence .

Additional Data and Disclosures

  • Company Q3 2025 8‑K and press release detail financials, Non‑GAAP reconciliations, liquidity, debt, and FY25 outlook .
  • Prior quarters for trend: Q2 2025 and Q1 2025 press releases provide baseline comps, constant-currency bridges, and outlook evolution .
  • Earnings call transcript provided details on tariff recoveries’ ~20 bps margin impact, capital returns framework (75%+ Adj. FCF), ratings upgrades, and growth vectors across E‑Powertrain/E‑Cooling .