A global automotive supplier that makes the parts that move cars, trucks, and electric vehicles — turbochargers, transmissions, clutches, and electric-drive systems. It was born in 1928 in Chicago when four parts makers, including Borg & Beck and Warner Gear, merged and combined their names. Every turbocharger in the IndyCar Series, including the Indianapolis 500, is built at its plant in Arden, North Carolina.
BorgWarner Q2 operating income rose 28% to $370M as gross margin hit 19.8%, its highest in over two years, driven by cost savings.
reached its highest level since early 2024. was flat at $3.6 billion, but rose 28% to $370 million as purchasing savings, restructuring benefits, and lower more than offset unfavorable volume and mix. The cost story is working, even as the top line stalls.
Key takeaways
widened 2.2 points to 19.8%, the highest quarterly level since Q1 2024, driven by purchasing savings, restructuring savings, and reduced that more than offset unfavorable volume and mix.
rose 28.0% to $370 million, and widened 2.2 points to 10.1%, helped by the absence of prior-year charges for exiting the charging business and a $15 million swing in other operating income.
was nearly flat at $3,648 million, up 0.3% , as $54 million in favorable foreign currency and $11 million in tariff recoveries offset a $55 million decline from unfavorable volume, mix, and net new business.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales were flat at $3.6B, but gross margin rose 220 bps to 19.8% on cost savings and lower restructuring impacts.
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Total were flat at $3.6B, as $54M in favorable foreign currency and $11M in tariff recoveries offset a $55M decline from unfavorable volume, mix, and net new business.
PowerDrive Systems sales grew 14% on higher European volumes and customer recoveries, while Battery Energy Systems sales fell 37% due to lower battery pack sales and the completed charging business exit.
rose 23.7% to $277 million, and rose 30.1% to $1.34, as the higher flowed through despite a tax provision that was elevated relative to the prior-year period that benefited from discrete tax items.
was $586 million, up 1.2% , and was $490 million, as the company deployed $250 million for share repurchases during the first half of 2026 while maintaining $4.4 billion in total liquidity.
What changed
The Q1 2026 watch item on sustainability is answered: the 19.2% margin in Q1 was not a one-time event, as Q2 margin widened further to 19.8%, confirming that purchasing and restructuring savings are compounding rather than fading.
PowerDrive Systems sales growth, which was 21% for full-year 2025 and omitted from the Q1 2026 narrative, returned to the discussion at 14% in Q2 — slower than the 25% pace of Q2 2025 but still growing, with the company now guiding for full-year 2026 total sales to decline at the midpoint.
Battery Energy Systems reached near-breakeven in Q1 with an adjusted operating loss of $2 million, but Q2 results show the remains in restructuring mode as sales fell another 37% following the charging business exit; the path to sustained profitability is still unproven.
The $150 million in Q1 share repurchases was not a one-quarter event: the company deployed an additional $100 million in Q2, bringing the first-half total to $250 million, signaling a sustained capital-allocation priority.
What to watch
Whether the 19.8% can be sustained or expanded further in Q3, or whether the purchasing and restructuring savings that drove the improvement begin to lap tougher comparisons from the second half of 2025.
The trajectory of PowerDrive Systems sales growth in Q3 and Q4, to determine whether the deceleration from 25% in Q2 2025 to 14% in Q2 2026 reflects a normalization or a further slowdown, particularly given the company's full-year outlook for lower total sales.
Whether Battery Energy Systems can stabilize its base now that the charging business exit is complete, and whether the can reach sustained breakeven or profitability after narrowing its loss to near-zero in Q1.
The pace and total size of share repurchases in the second half of 2026, given the $250 million deployed in the first half and the $4.4 billion liquidity position.
improved to 19.8% from 17.6%, driven by purchasing savings, restructuring savings, and reduced that more than offset unfavorable volume and mix.
PowerDrive Systems sales grew 14% on higher European volumes and customer recoveries, while Battery Energy Systems sales fell 37% due to lower battery pack sales and the charging business exit.
rose to $370M from $289M, helped by the absence of prior-year charges for exiting the charging business and a $15M swing in other operating income/expense.
The company expects 2026 total sales to decline at the midpoint of its outlook, with a negative impact from the Battery Energy Systems and flat to down 3% global industry production.
remained strong at $4.4B, including $2.4B in cash and a fully undrawn $2.0B , with $250M deployed for share repurchases during the first half of 2026.
The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation. Refer to Note 20,…
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The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation. Refer to Note 20, “Contingencies,” to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for a discussion of environmental and other litigation which is incorporated herein by reference.
During the six months ended June 30, 2026, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
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During the six months ended June 30, 2026, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.