GM Earnings Call: Strong Cash, Heavy EV Headwinds

General Motors Company ((GM)) has held its Q4 earnings call. Read on for the main highlights of the call.

General Motors Balances Strong Cash Generation With EV and Tariff Headwinds in Latest Earnings Call

GM’s latest earnings call struck a distinctly mixed tone: management showcased powerful cash generation, rising structural profitability and aggressive shareholder returns, alongside solid competitive momentum in key markets and software, yet investors were also reminded of hefty near-term EV-related charges, elevated tariff costs and cost pressures that will weigh on 2025–2026 results. Executives emphasized that many of the current drags are either one-time or transitional and should ease as EV programs are reset, onshoring comes online, and software and services scale, setting up 2026 as a year of margin recovery rather than peak earnings.

Massive EV Contract Cancellations and Supplier Settlements Hit Cash

A central theme of the call was the sizable cash exposure from EV contract cancellations and supplier settlements, which are a major component of GM’s EV reset. Management highlighted that roughly $4.2 billion of the Q4 EV-related narrative was tied to contract cancellations and supplier settlements, forming a big part of the $7.6 billion aggregate EV-related charges booked across Q3 and Q4. While these actions are meant to realign EV programs with actual demand and lower long-term capital intensity, they will materially affect future cash flows, with much of the related cash outlay expected to occur in 2026. For investors, this underscores that GM is taking painful but decisive steps to right-size its EV footprint, at the cost of near-term cash deployment.

China Restructuring and a Murky EV Policy Landscape

China remains both a source of risk and opportunity. GM recorded about $600 million in its auto China equity income tied to prior restructuring actions in the region. Management stressed that the joint venture has sufficient cash and does not require additional capital from GM, limiting direct balance-sheet risk. However, executives acknowledged ongoing uncertainty around steady-state EV adoption following shifts in consumer tax incentives and the broader regulatory environment. This evolving policy backdrop makes volume and profitability planning more complex, even as GM attempts to reposition its portfolio and operations to better fit China’s increasingly NEV-focused market.

Structural Improvement in Cash Generation and 2025 Profitability

Despite the noise around charges and restructuring, GM’s underlying full-year numbers showed substantial financial strength. For 2025, the company delivered EBIT adjusted of $12.7 billion and adjusted automotive free cash flow of $10.6 billion, ending the year with $21.7 billion of cash. Over the last two years, GM has generated nearly $25 billion of free cash flow, and management argued that structural free cash flow has stepped up from roughly $3 billion annually five years ago to about $10 billion now. This structural improvement—driven by a stronger mix, better cost discipline, and more profitable product lines—underpins GM’s confidence in its ability to fund both heavy capital expenditures and significant shareholder returns.

Shareholder Payout Engine: Buybacks and Dividend Hikes

Capital returns were a highlight of the call and a clear focus for equity investors. GM returned $6 billion to shareholders via buybacks in 2025, including $2.5 billion in Q4 alone, retiring 33 million shares in the quarter. Since November 2023, total capital returned has reached $23 billion, and the company has reduced its outstanding share count by about 35%, or roughly 465 million shares. The board has approved a fresh $6 billion repurchase authorization and boosted the quarterly dividend by 20% to $0.18 per share. Management also pointed to more than 170% stock price appreciation since late November 2023 and total investor return of 54% in 2025, framing GM as a cash-return story with meaningful ongoing buyback capacity.

Commercial Momentum and Market Share Gains in the U.S.

Operationally, GM is gaining share in its core market. The company reported its highest U.S. full-year market share in a decade, with a 60 basis point gain in 2025. GM led the industry in full-size pickups and full-size SUVs, segments that are key profit engines, and posted a record year for crossovers, powered by redesigned models like the Equinox and Traverse. Retail momentum was underscored by strong reception to vehicles such as the Chevrolet Trax, which earned a spot on Car and Driver’s 10 Best list. This product and brand strength supports GM’s margin narrative and helps offset pressures elsewhere in the portfolio.

OnStar, Super Cruise and the Rise of Software-Driven Revenue

GM’s software and services platform, anchored by OnStar and Super Cruise, continues to scale as a high-margin growth engine. The company reported record OnStar subscribers at 12 million and more than 120,000 Super Cruise subscribers, nearly 80% growth year over year. OnStar Fleet subscriptions reached 2 million, which GM said is double any competitor. Deferred revenue from software and services is projected to grow to about $7.5 billion by the end of 2026, roughly a 40% increase versus 2025, and management expects around $400 million of incremental high-margin revenue from OnStar and software, including Super Cruise, in 2026 alone. For investors, this underscores GM’s transition toward a more recurring, software-like revenue base that can help stabilize earnings across cycles.

China NEV Turnaround Shows Scale and Profitability

In China, GM’s New Energy Vehicle (NEV) business is emerging as a bright spot. The company sold nearly 1 million NEVs in 2025, representing more than half of its sales in the region, and management described these volumes as profitable across all price points. This mix shift not only aligns GM with China’s policy priorities but also suggests the company can compete profitably in one of the world’s most aggressive EV markets. GM expressed confidence that China and its broader international operations will be profitable in 2026, implying a meaningful turnaround from recent years of pressure.

2026 Guidance Targets Higher Earnings and Margin Recovery

GM laid out constructive 2026 guidance, positioning next year as a step-up in both earnings and cash flow despite ongoing macro and cost headwinds. The company forecast EBIT adjusted of $13–$15 billion (midpoint $14 billion), adjusted diluted EPS of $11–$13 (midpoint $12), and adjusted automotive free cash flow of $9–$11 billion (midpoint $10 billion). North America is expected to return to EBIT adjusted margins of roughly 8–10%, with the midpoint of guidance supporting that outcome. While gross tariff costs are still projected at a heavy $3–$4 billion in 2026, GM believes its mix, pricing, cost actions and growing software income can support margin resilience at these levels.

Operational and Technology Initiatives to Drive Long-Term Efficiency

Beyond the headline numbers, management highlighted a suite of operational and technology initiatives aimed at structurally lowering costs and enhancing product capabilities. GM is planning a new LMR battery chemistry for 2028 that targets lower cell and pack costs, alongside a next-generation software-defined vehicle architecture, also slated for 2028, promising 10 times the over-the-air update capacity and 1,000 times the bandwidth of current systems. The company is deploying robotics and AI to improve weld quality and worker safety, and using advanced virtual tools to achieve around 20% savings in materials and tooling during engineering. These efforts are designed to boost long-term margins while supporting more rapid and flexible product development.

EV-Related Charges and Cash Impact Weigh on Near-Term Outlook

The flip side of GM’s EV reset is a large, near-term earnings and cash drag. The company recorded $7.6 billion of aggregate EV-related charges across Q3 and Q4, with $4.6 billion expected to be settled in cash. About $400 million was paid in 2025, with the majority of the remaining cash outflows slated for 2026. As part of this cleanup, GM discontinued production of its BrightDrop electric van and wrote down certain EV assets. Management emphasized that EV-related charges should be materially smaller going forward, and that the right-sizing of EV capacity is expected to yield $1–$1.5 billion of benefit over time, but investors will still have to digest a significant cash outlay in the near term.

Tariff and Trade Costs Remain a Structural Headwind

Tariffs continue to be a major cost line for GM. Gross tariff costs were approximately $3.1 billion in 2025, somewhat better than the earlier $3.5–$4.5 billion range thanks to go-to-market, manufacturing footprint and cost actions that offset over 40% of the burden. Nonetheless, GM expects tariff exposure to remain elevated, guiding 2026 gross tariff costs to $3–$4 billion and projecting a Q1 2026 impact alone of $750 million–$1 billion. Management is pursuing onshoring and supply chain redesign to mitigate these pressures, but until those changes are fully implemented, tariffs will continue to compress margins and represent a key risk factor for investors.

Revenue Decline and Production Constraints Reflect Disciplined Capacity Management

On the top line, GM reported Q4 revenue of $45 billion, down about 5% year over year. The decline reflected a mix of strategic and operational decisions: a disciplined production and inventory stance, deliberate alignment of EV production with demand, and production constraints on the highly successful Chevrolet Trax. The company also pointed to the strategic discontinuation of the Chevrolet Malibu and Cadillac XT4 programs. Looking ahead, planned retooling for full-size trucks—one of GM’s most profitable segments—will create downtime and weigh on 2026 volumes. Management framed these moves as necessary to support long-term product competitiveness and profitability, even at the cost of near-term revenue growth.

Commodity, Supply and Chip Costs Add to 2026 Headwinds

Cost inflation and supply chain friction are another layer of pressure. GM expects headwinds of roughly $1.0–$1.5 billion in 2026 tied to higher commodity costs—particularly aluminum and copper—along with rising DRAM prices and unfavorable foreign exchange. The company also cited incremental chip sourcing costs related to a supplier issue with Nexperia, which added about $100 million of expense in Q4, with another $100 million anticipated in Q1 2026. While these items are not unique to GM, they compound the tariff and EV charges, narrowing the margin for error on achieving the company’s 2026 profit targets.

Onshoring and Software Investments Create Short-Term Pain for Long-Term Gain

GM is accelerating investment in onshoring production, supply chain resiliency and software capabilities, which will create near-term earnings drag but are intended to support higher, more secure profitability over time. Management guided to roughly $1.0–$1.5 billion of headwinds in 2026 from these initiatives alone, in addition to $1.0–$1.5 billion of headwinds from commodities, DRAM and FX. The company expects onshoring and supply chain investments to enhance profitable capacity and meaningfully mitigate tariff exposure beginning in 2027, aligning with its broader push toward a more U.S.-centric manufacturing base and a more software-driven business model.

Forward-Looking Guidance: 2026 as a Transition Year to Higher Quality Earnings

Looking ahead, GM’s guidance paints 2026 as a transition year where one-off EV and restructuring costs roll through, while structural earnings power improves. The company is targeting EBIT adjusted of $13–$15 billion, adjusted diluted EPS of $11–$13 and adjusted automotive free cash flow of $9–$11 billion, supported by an expected $1–$1.5 billion benefit from right-sized EV capacity and about $1 billion of warranty improvement versus 2025. Annual capex is planned at a hefty $10–$12 billion in 2026–27, including roughly $5 billion to expand U.S. capacity, underscoring GM’s commitment to onshoring and next-generation products. High-margin software is set to become more meaningful, with about $400 million of incremental OnStar/Super Cruise revenue expected and deferred software and services revenue forecast to climb to about $7.5 billion from $5.4 billion. Against this, GM flagged $1–$1.5 billion of near-term headwinds from onshoring and software investments and another $1–$1.5 billion from commodities, DRAM and FX, while still expecting GM Financial to contribute $2.5–$3 billion of EBT adjusted. The board’s new $6 billion buyback authorization and 20% dividend increase were presented as evidence that management sees this investment phase as compatible with ongoing robust capital returns.

GM’s latest earnings call ultimately portrayed a company in the midst of a deliberate, sometimes costly repositioning: resetting its EV portfolio, absorbing heavy tariff and cost pressures, and investing in onshoring and software, while still delivering strong cash flows, market share gains and generous shareholder payouts. For investors, the key takeaway is that near-term earnings and cash will be burdened by EV and cost-related headwinds, but management is betting that by 2026–2027 these pressures will give way to higher-quality, more diversified earnings driven by profitable trucks and SUVs, a growing NEV footprint in China, and an expanding stream of high-margin software and services revenue.