GM Earnings: 2026 Guidance and Cash to Shareholders Are All Good News

Key Morningstar Metrics for General Motors

• Fair Value Estimate: $78.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of General Motors’ Earnings

General Motors GM stock rose over 9% during Jan. 27 trading on fourth-quarter diluted adjusted EPS of $2.51, beating the $2.20 LSEG consensus, as the company announced a new $6 billion share repurchase program and raised its quarterly dividend by 20% to $0.18 per share.

Why it matters: Despite no expectation of significant 2026 US industry light vehicle sales growth and consumers’ continued struggles with vehicle affordability, GM has right-sized its cost base, enabling it to reinvest in the business while generating around $10 billion in annual auto free cash flow.

• GM North America adjusted EBIT margin for 2025 was 6.8% on $5.1 billion in higher costs for warranty, tariffs, and materials. A $1.0 billion warranty tailwind for 2026, as much as $1.5 billion less in electric vehicle losses, and other benefits enable 2026 GMNA guidance to return to the 8%-10% level.
• Pricing is also a positive contributor in 2026, with an expected increase of 0.5% solely from 2026 model-year increases done in 2025. Second-half 2026 should also see a mix benefit from the new generation pickups not yet launched, but volumes will suffer for retooling truck plants.

The bottom line: We are not changing our $78 fair value estimate or no-moat rating on GM; however, we will reassess all modeling inputs when we roll out our model shortly after the 10-K is filed.

• Tariff headwinds remain, and 2025’s EBIT hit, net of mitigation efforts, was about $1.9 billion on $3.1 billion gross impact. Meanwhile, 2026’s gross exposure is guided at $3 billion-$4 billion on a full year of tariffs versus about nine months’ worth last year. The possibility of US tariffs on Korea rising to 25% is a risk.

Key stats: Deferred software revenue is guided to end 2026 at $7.5 billion, up from $5.4 billion at year-end 2025. GM expects to realize an additional $400 million in software revenue in 2026. This revenue is typically at about a 70% gross margin, far higher than traditional vehicle revenue.