Ford's 'Second Inning' in Energy and Software Powers a Guidance Raise
Quality gains, high-margin services, and a new BESS adjacency lift Ford's EBIT outlook as it navigates Novelis and USMCA.
F · Earnings Call · 2026-07-28
Strong Quarter, Higher Confidence
Ford reported a strong Q2 2026, with revenue of $48.3B and adjusted EBIT of $2.5B, up 17% year-over-year. Management raised full-year adjusted EBIT guidance by $1B at the midpoint to $10–11B, driven by "strong mix and net pricing" (Sherry House). The quarter also included a $1.3B special item related to the BlueOval SK divestiture, but core operations showed clear momentum. “For the full year, we now expect company adjusted EBIT of $10 billion to $11 billion, narrowing the range and increasing the midpoint by $1 billion.” — Sherry House, Chief Financial Officer · 2026-07-28 paid subscriptions grew about 50% to 1.6M, underscoring the shift to higher-margin recurring revenue.
Ford Energy: A New Play on the Grid
Perhaps the most intriguing development is gigawatt hours of stationary storage. Jim Farley described Ford Energy as a "strategic business" with a short payback, targeting 20 GWh of annual capacity by late next year. He noted the company is already "in the third inning of selling out the 2028 capacity."
We have the capacity to upgrade at Kentucky 1 and that we are building prototype cells already in Marshall, Michigan. So this is not a theoretical business.
This adjacency builds on Ford's manufacturing scale and relationships, and the market is paying attention — the stock is up 18.8% over the last 90 days.
Quality Renaissance Meets Cost Discipline
Ford's J.D. Power #1 initial quality ranking is translating into lower warranty costs. Management is targeting $1B in material and warranty cost reductions in 2026, with Warranty costs declining and a 40% reduction in recall numbers year-over-year. The Novelis aluminum disruption is temporary — full-year cost now estimated at $1.5B, but volume recovery in H2 should support strong performance. Andrew Frick highlighted the Bronco family and off-road trims as mix stars, with off-road vehicles now 25% of US sales.
USMCA and the Global Trade Chessboard
The trade environment remains central. Ford, as the most American automaker, is lobbying for a USMCA that levels the playing field against imports from Japan and South Korea. “We are prepared to support revising the USMCA so long as it allows the promotion of more competitive US auto sector.” — James D. Farley Jr., President and Chief Executive Officer · 2026-07-28 This is a continuation of prior calls, but the stakes are higher given tariff volatility. In the prior quarter, Ford's leadership was already framing this as a long-term structural shift: “We are in daily contact with them. And at this point, I would say they're very productive conversations.” — James Duncan Farley, President and CEO · 2025-07-30 The company also remains disciplined on supply chain recovery, as noted earlier: “We have contingency plan to secure sufficient supply for various scenarios no matter where we end up with the start date.” — Kumar Galhotra, President, Ford Blue and Model e · 2026-02-10
Ford's Ford energy theme is a true differentiator — absent from the global keyword set, it marks a company-specific pivot. Meanwhile, the operating margin in the latest quarter rose to 6.7% (Q1 2026), the highest since 2021, reinforcing the narrative of a "fitter core" poised to compound through software and energy.