Valeo Fires the Cash Engine and Pivots to the Data Center
Valeo's half-year results delivered exactly what the market hoped: the profitability and cash engines of Elevate 2028 are turning. Operating margin hit 5.0% — 50bps up year-on-year — and free cash flow doubled to €242 million. But the real news is the company's parallel push beyond automotive. Data centers and humanoid are now explicit growth vectors, powered by the same liquid cooling and power electronics expertise that drives the auto business.
The Cash Engine Turns
The cash engine is unmistakably on. “With a free cash flow of EUR 242 million for the semester, more than double last year's figures, we are confirming that the second pillar of Elevate 2028 the cash engine is also clearly on.” — Edouard de Pirey, CFO · 2026-07-22 This was not a flash in the pan. CFO Edouard de Pirey pointed to structural improvements: tangible CapEx down 12% to 3.6% of sales, capitalized R&D down 5%, and a disciplined approach to spending. The result is unprecedented for the company:
Net debt fell by €194 million in the first six months to €3.8 billion, and the leverage ratio improved to 1.2x adjusted EBITDA.It's the first time in 10 years that net debt decreases in H1, thanks to free cash generated by operations.
Pivoting to the Data Center
The most striking development is the company's ambition beyond automotive. On the earnings call, the CEO detailed how liquid cooling — a core automotive thermal-management competency — is being repurposed for data centers. “As you know, we handled an expert call a few weeks ago, and we explained that the data centers are going from air cooling to liquid cooling and we have a lot of expertise in liquid cooling, as you said, because that's what we do in automotive.” — Christophe Perillat-Piratoine, CEO · 2026-07-22 The same applies to power electronics, as data centers move to 800-volt and 48-volt architectures. Beyond cooling, Valeo is actively developing actuators and motors for humanoids, having showcased components at the Beijing Auto Show. These opportunities are low-CapEx and high-upside. “These opportunities do not incur any important investment or costs to us, they stem from our existing technologies and expertise.” — Christophe Perillat-Piratoine, CEO · 2026-07-22 That makes them a natural extension of the cost-conscious, cash-generating model Valeo has been building.
The broader market is already trading on data center intensity. Our tape shows "HPC data centers" and "AI data centers" among the top decliners over the last 30 days, as the AI infrastructure trade cools after a massive run. Valeo is positioning itself as a pure-play liquid cooling and power electronics supplier to those same data centers, albeit from an automotive heritage. That could be a contrarian move or a smart diversification. The company's "beyond automotive" opportunities are not currently factored into Elevate 2028 financials, but they offer an option value that the market historically has not given to auto suppliers.
China and the Road Ahead
Order intake also sent a clear signal. At €12.1 billion, it represents 1.4x OEM sales and, critically, 25% of orders now come from Chinese OEMs — matching their share of the global industry. “For the first time, we are matching in terms of order intake the share of the Chinese OEM in the world.” — Christophe Perillat-Piratoine, CEO · 2026-07-22 CEO Christophe Perillat-Piratoine made the strategic point explicit: Valeo wants to be strong in China not just for that market but for the learning it exports globally.
The H1 results also confirmed the turnaround in the POWER division. Operating margin there surged 1.3 points to 4.8%, with eTech gross margins now matching traditional technologies. As the CEO noted, “The recovery of POWER is remarkable.” — Christophe Perillat-Piratoine, CEO · 2026-07-22 This is the product of the restructuring plan and disciplined order selection.
Yet not everything is rosy. The effective tax rate jumped to 48% due to restructuring in Europe and dividend repatriation, and the company expects elevated rates into 2027. There is also the unresolved question of European auto demand. Valeo reaffirmed its guidance, but the market will watch whether the return to growth in 2027 materializes as forecast. For now, the investment case rests on two pillars: a structurally improving cash engine and a strategic pivot into markets where Valeo's thermal and power electronics skill set has far higher margin potential than automotive. That dual narrative is what makes this quarter more than just another "in line" print.