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General Motors (GM) is trading lower after its Q3 results. The automaker beat EPS expectations by a penny, a more modest beat than in recent quarters, while revenue increased 2.9% yr/yr to $50.0 bln, nicely above expectations. However, the reaction appears tied to guidance. GM narrowed FY26 adjusted EBIT guidance to $14.5-15.5 bln from $14.0-16.0 bln, leaving the midpoint unchanged despite strong YTD performance. It also raised the midpoint of adjusted EPS guidance to $13.25 and adjusted automotive free cash flow guidance to $11.5-12.5 bln.

• North America continued its strong performance, delivering adjusted EBIT of $3.6 bln, up 43% yr/yr, with margin improving 250 bps to 8.7%. Strength reflected higher ICE volumes and favorable mix, with U.S. light-duty full-size pickup sales up 9% and fleet sales up 10%.
• Lower warranty expenses and EV losses also supported profitability, including a $600 mln yr/yr warranty improvement in Q3. These benefits were partially offset by higher commodity and logistics costs, onshoring expenses, and pricing softness as incentives increased during the current-generation truck sell-down.
• Overall adjusted EBIT increased 22% yr/yr to $4.1 bln, with margin expanding 130 bps to 8.2%, unchanged from Q2. However, guidance implies approximately $2.7 bln in Q4 adjusted EBIT at the midpoint, amid higher inflation and roughly 35,000 fewer full-size pickups yr/yr during the model changeover.
• Looking ahead, external headwinds remain, with some intensifying as commodity and logistics costs rise. While the path forward has become more challenging, GM continues to expect 2027 to be stronger than 2026, assuming customer demand remains resilient and recent cost pressures moderate. Management warned that sustained inflation could create an additional $1.0-1.5 bln EBIT headwind in 2027.

Briefing.com Analyst Insight

Overall, this was another strong operational quarter from GM, highlighted by robust North American profitability, continued margin expansion, and strong cash generation. The company also raised its FY26 adjusted automotive free cash flow outlook and announced a new $20 bln share repurchase authorization, underscoring its confidence in its cash generation. However, the negative reaction appears tied to the implied sequential decline in Q4 adjusted EBIT and the unchanged FY26 EBIT midpoint despite strong YTD performance. While internal drivers remain favorable, including lower EV losses, improving warranty expenses, and favorable vehicle mix, intensifying commodity and logistics costs and higher launch-related expenses are creating a more challenging earnings backdrop.