BMW Earnings: Results In Line With Guidance; Further Margin Pressure Expected in 2026

Key Morningstar Metrics for Bayerische Motoren Werke

• Fair Value Estimate
  : EUR 103
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of BMW’s Earnings

BMW’s 2025 results came within guidance, although fourth-quarter automotive EBIT margin of 3.7% fell short of the 5%-7% full-year target. Automotive free cash flow exceeded expectations at EUR 3.2 billion. Despite foreseeing stable deliveries, management expects some margin deterioration in 2026.

Why it matters: Automotive EBIT fell 21% to EUR 6.3 billion in 2025. Revenue was pressured by adverse foreign-exchange effects and pricing pressure in key markets, while volume growth stayed strong in most regions except China.

• Cost initiatives proved effective, with savings of EUR 1.7 billion in the automotive segment, including lower research and development intensity, almost fully offsetting adverse volume, mix, and pricing impacts. That said, tariffs, foreign-exchange headwinds, and other cost charges led to a 100-basis-point margin contraction to 5.3%.
• In 2026, lower R&D and capital expenditures, along with additional targeted cost measures, should support profitability, in line with our estimates. At the same time, higher depreciation and amortization from recent Neue Klasse investments, alongside tariff and foreign-exchange headwinds, should weigh on margins, which management guides to 4%-6%.

The bottom line: We maintain our fair value estimate of EUR 103 for no-moat BMW. After a 16% year-to-date decline, shares are in 4-star territory and trade at an attractive 22% discount to our valuation.

• BMW remains our quality play within our European auto coverage. We expect upcoming new model launches to support volume growth ahead of the market, while declining capital expenditure from peak levels and cost discipline will enable a faster margin recovery than its peers.
• 2026 marks the first year of the active rollout of BMW’s Neue Klasse platform, which will bring more than 40 new or updated models to market by the end of 2027. Demand for the iX3 electric vehicle, the first model launched, has exceeded management expectations, indicating early positive market reception.