General Motors (GM) released its Q2 2026 earnings yesterday, July 21, before the markets opened. The legacy automaker beat estimates and raised its 2026 guidance for the second time this year. Notably, the strong results are coming at a time when the automotive industry is battling some serious headwinds in the form of tariffs, higher gas prices, and an increase in input costs, particularly memory prices.
GM, meanwhile, defied the pessimism and reported a stellar set of numbers for Q2. However, while the strong Q2 performance led to a spike in GM shares yesterday, the stock is still in the red for the year. Let's analyze GM’s outlook and examine whether the stock is a “bargain” as CFO Paul Jacobson said in an interview with CNBC.
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www.barchart.com GM's Q2 Earnings
Let’s begin with a snapshot of GM’s Q2 earnings. The Detroit giant posted revenues of $48.03 billion in Q2, up 1.9% from the corresponding quarter last year and ahead of the $47.01 billion that analysts were modeling. Its adjusted earnings before interest and taxes (EBIT) rose 29.8% over the period to $3.94 billion, with the margin coming in at a healthy 8.2%. The adjusted earnings per share (EPS) came in at $3.57, a 41.3% year-over-year (YoY) increase and ahead of the $3.20 that analysts expected.
GM’s capital allocation policy is weighted towards buybacks, unlike Ford (F), which has been spending generously on dividends. GM repurchased $2 billion worth of its shares in Q2 and ended the quarter with a diluted share count of 893 million, which, for context, is 35% below Q2 2023. Strong earnings coupled with aggressive share repurchases helped GM post record first-half diluted EPS.
The company raised its automotive free cash flow guidance by $500 million and now expects it to land between $9.5 billion and $11.5 billion this year. It also raised the adjusted EBIT guidance by a similar amount.
While the hard numbers get all the limelight, there is a lot more to cheer in GM’s Q2 earnings. The company is gaining market share in the full-size pickup market, which is among the most profitable segments in the U.S. automotive industry, even though it lost overall market share due to discontinued models, lower dealer inventory, and a slowdown in electric vehicle (EV) sales. GM's North America adjusted EBIT margin is also back in the 8%-10% range that the company targets. Its international operations, including China, which has otherwise been a problem child for the company, were also profitable in the quarter.
The company’s EV losses are narrowing even though sales have also plummeted. GM expects realized services and subscription revenues to surpass $3 billion this year, which is positive for its margins as the business inherently has high margins compared to the core automotive business.
GM Stock Is a Bargain
I would agree with Jacobson and find GM stock a bargain here at a forward price-to-earnings (P/E) multiple of under 6x. Legacy automakers, GM included, have been in the penalty box amid concerns over internal combustion engine (ICE) vehicle sales. However, it is now amply clear that vehicle electrification, at least in the U.S., is not happening anywhere near the levels analysts were forecasting a couple of years back, and gasoline cars are not moving to museums anytime soon.
Meanwhile, GM is making merry selling profitable ICE models while maintaining the optionality of pivoting to EVs if that market sees a rebound. The company has fared much better on execution than most other Western automakers, which is reflected in its price action, with shares more than doubling over the last three years. No other major legacy automaker in the Western hemisphere has come even remotely close.
www.barchart.com Key Growth Drivers for GM
GM expects to launch several new models, including pickups, over the next year, which should further help in increasing its market share. The tariff burden should also ease in the coming years as GM ramps up onshore production. Insurance and defense could be among the other growth drivers in the coming years, even if the businesses are growing on a much lower base.
GM has transformed into a much more efficient company over the last couple of years. Among others, it has restructured its China business, which has now started contributing to its bottom line through positive equity income. The company exited the loss-making Cruise robotaxi business. It has also lowered warranty costs while reducing EV losses, which are a structural tailwind for the business. I continue to maintain a bullish bias towards GM and see the stock going higher in the second half of the year on tepid valuations, impressive execution, and a strong near-term growth outlook.
On the date of publication, Mohit Oberoi had a position in: GM , F . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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