BorgWarner (NYSE:BWA) executives highlighted margin expansion, strong free cash flow generation, and a push into the data center power market during the company’s fourth-quarter and full-year 2025 results call. Management also outlined a 2026 outlook that assumes lower organic sales tied to end-market softness and a decline in the company’s battery business, while still targeting modest earnings growth and stable-to-slightly higher margins.
2025 results: margin expansion and higher free cash flow
CEO Joe commented that BorgWarner delivered about $14.3 billion in 2025 net sales, up roughly $200 million year over year, supported by a 23% increase in light vehicle e-product sales. He said the company achieved modest organic growth despite challenges in its battery business, noting that excluding the decline in battery and charging systems, organic sales rose about 1.6%.
CFO Craig provided additional detail, stating full-year 2025 adjusted operating margin was 10.7% and said the company achieved margin expansion across all business units while reducing corporate overhead. He said the company returned approximately $630 million to shareholders in 2025 through share repurchases and dividends, representing about 52% of free cash flow.
Fourth quarter: customer recoveries lift profitability
Craig said fourth-quarter sales were just under $3.6 billion, up from just over $3.4 billion a year earlier. He attributed the year-over-year increase partly to stronger foreign currencies (a $104 million benefit) and modest organic growth driven primarily by turbocharger outgrowth and customer recoveries in North America, partially offset by foundational production headwinds in Europe and China.
Adjusted operating income in Q4 was $427 million, for a 12.0% adjusted operating margin, up from $352 million and a 10.2% adjusted operating margin a year ago. On a comparable basis, Craig said adjusted operating income increased $67 million on $29 million of higher sales. He cited:
- More than 100 basis points of customer recoveries, primarily tied to a North American e-product program that had faced significant volume shortfalls.
- $11 million of positive net tariff recoveries.
Craig also said adjusted EPS from continuing operations rose $0.34 versus the prior year, driven by higher adjusted operating income and the impact of more than $500 million in share repurchases during 2025. Fourth-quarter free cash flow from continuing operations was $470 million.
New awards and product pipeline
Joe said BorgWarner ended 2025 with a record number of new product awards across both its foundational and e-product portfolios, with contributions from all business units. On the call, he highlighted several wins, including:
- A conquest award with a major European OEM to supply a Variable Turbine Geometry turbocharger for a hybrid electric vehicle platform intended to be that OEM’s first hybrid offering in North America.
- A contract with a major North American OEM to provide an 800-volt secondary integrated drive module and a generator module incorporating a dual inverter for range-extended electric vehicle trucks and large-frame SUVs.
- An award with a premium European OEM to supply an integrated drive module for a hybrid range-extended architecture using a single motor designed to handle both power generation and driving functions.
- An expanded program for BorgWarner’s battery management system with a global OEM supporting additional B- and C-segment passenger cars and light commercial vehicles for BEV and PHEV applications.
- A new Electric Cross-Differential program with a leading Chinese OEM for a 48-volt system, which management described as BorgWarner’s first 48-volt EXD application.
Data center expansion: turbine generator system supply agreement
A major theme of the call was BorgWarner’s entry into data center and microgrid power generation. Joe said BorgWarner signed a master supply agreement with TurboCell, a subsidiary of data center infrastructure developer Endeavour, to supply a modular turbine generator system. He said the product leverages BorgWarner competencies in turbocharging, thermal management, power electronics, advanced software controls, and high-speed rotating electric capabilities, along with its manufacturing footprint.
Joe said BorgWarner expects production to begin ramping in 2027, with sales expected to exceed $300 million during the first year of production. In Q&A, Craig said investors should assume a mid-teens incremental conversion on the additional $300 million of sales, consistent with BorgWarner’s automotive business, and said the program is expected to be EPS accretive immediately with a strong return on invested capital.
Management also emphasized product attributes including modularity, fast transient response for data center load changes, and fuel flexibility (natural gas, propane, diesel, and hydrogen). Joe said BorgWarner expects to control about 65% of the content through vertical integration. Executives also described a manufacturing approach that includes a new greenfield final assembly, test, and packout facility in Hendersonville, North Carolina, while leveraging existing plants globally for subcomponents.
2026 outlook: sales headwinds, stable margins, continued EPS growth
Craig guided 2026 sales to $14.0 billion to $14.3 billion, compared to $14.3 billion in 2025. The outlook assumes a $200 million sales benefit from FX, while end markets are expected to be flat to down 3%. He said the company expects a sales decline in the battery business due to a lack of North American incentives and weaker European demand, representing a 150 basis point headwind to year-over-year sales growth. Overall, BorgWarner expects 2026 organic sales to be down 3.5% to 1.5%.
For profitability, Craig guided 2026 adjusted operating margin to 10.7% to 10.9%, compared with 10.7% in 2025. He said the exit of the charging business is expected to contribute about 10 basis points of margin improvement. The company guided adjusted EPS to $5.00 to $5.20, representing about 4% growth at the midpoint, and free cash flow of $900 million to $1.1 billion. Craig said the lower free cash flow midpoint versus 2025 reflects higher capital spending to support the turbine generator system launch and other light vehicle launches.
During Q&A, management reiterated expectations for low double-digit growth in light vehicle e-products in 2026 and said PowerDrive Systems is expected to convert in the mid-teens off the 2025 base, inclusive of the fourth-quarter customer recovery benefit. Executives also said they are applying machine learning and generative AI across pilots in plants, back office, and R&D, including visual inspection, cost reduction, and automating portions of engineering requirements processing.
On the battery business, management said near-term sales trends are difficult to predict, but emphasized actions taken to minimize losses and adjust the cost structure, while maintaining optimism about future opportunities in commercial vehicle battery packs and potential battery storage applications outside commercial vehicles.
About BorgWarner (NYSE:BWA)
BorgWarner Inc is a global automotive supplier specializing in propulsion and drivetrain solutions for combustion, hybrid and electric vehicles. The company’s product portfolio includes turbochargers, thermal management systems, transmission components, e-Propulsion modules and advanced fuel-efficiency technologies. BorgWarner serves original equipment manufacturers (OEMs) across passenger cars, light trucks and commercial vehicles, supporting both legacy internal-combustion engines and emerging electrification trends.
Founded in 1928 through the merger of several driveline companies, BorgWarner has grown through strategic acquisitions and continuous investment in research and development.
