BorgWarner Flips the Switch on Data Center Power

The Quarter Under the Hood

BorgWarner's Q2 results were, in the words of CEO Joe Fadool, “outstanding,” — Joseph Fadool, CEO · 2026-08-05 with sales of $3.6 billion, a 100 basis point expansion in adjusted operating margin to 11.3%, and adjusted EPS up 17%. The company's cost discipline more than offset flat organic sales, and free cash flow of $492 million supported $134 million returned to shareholders.

The margin story is striking. Operating margin has been on a steady upward trajectory since a deep trough in late 2024, and the latest adjusted measure of 11.3% signals strong underlying execution. CFO Craig Aaron attributed the improvement to “ongoing cost reduction actions that our teams continue to take across our business.” — Craig Aaron, CFO · 2026-08-05

The Data Center Pivot

The real news, however, is the accelerating push into industrial and data center markets. BorgWarner's turbine generator, in partnership with Endeavour/Edged, is on track for a 2027 launch. In the Q&A, Fadool highlighted significant progress: “We achieved the CARB-level emissions, which is really a differentiator for us... The UL compliance is in process. So from where I stand, we're on track to deliver.” — Joseph Fadool, CEO · 2026-08-05 The company is also moving forward on battery energy storage and microgrid inverters, with four customers already sampling inverters.

This pivot is reflected in the company's own keyword trajectory, which now features turbine generator, data centers, and Energy Storage as top themes. Notably, product readiness took the #1 spot in Q2, underscoring management's renewed focus on execution outside autos.

Capital and Confidence

To fund this push, BorgWarner is increasing its industrial R&D investment by $10 million to $15 million in the second half, while maintaining full-year margin guidance. CFO Craig Aaron framed it as a balanced approach:

We're executing in the short term. We're still expanding margins. We're still expanding EPS. We're still generating a significant amount of free cash flow. And at the same time, we're investing in our long term in a high-growth market.

The company also expanded its buyback authorization by $1 billion to $1.35 billion, roughly 10% of market cap. This confidence builds on prior commentary; in May, Fadool noted they would decide on further turbine capacity later in the year: “we will have to make a decision on whether we expand capacity further beyond the 2 gigawatts that we've installed in North Carolina, but we'll take that decision as we get closer to the second half.” — Joseph Fadool, President and CEO · 2026-05-06 He added then that for battery storage, “we are actively quoting with a number of customers.” — Joseph Fadool, President and CEO · 2026-05-06

Bottom Line

BorgWarner is executing on its core while positioning itself as a supplier to AI infrastructure. The global tape is ripe—themes like High performance computing and PCIe Gen 6 are driving a broad market rally, and BorgWarner's move into turbine generators and energy storage aligns perfectly with that demand. With a ~12% drawdown from its June peak, the stock offers a patient entry into what could be a multi-year industrial growth story.