General Motors Company GM shares have risen 13.1% in a month amid the company’s continued restructuring efforts in China, growth in software and digital business and expansion of its business beyond traditional vehicle manufacturing.
In the second quarter of 2026, General Motors’ adjusted earnings beat the Zacks Consensus Estimate. The automaker raised its full-year 2026 adjusted EBIT guidance, citing strong operating performance, better pricing and warranty assumptions and a modestly improved commodity outlook.
GM outperformed the broader Zacks Auto, Tires and Trucks sector and the Zacks Automotive – Domestic industry’s decline of 8% and 12.6%, respectively. It also outperformed its peers, Ford Motor Company F and Stellantis N.V. STLA. Shares of Ford and Stellantis have lost 0.1% and 3.9%, respectively, during the same period.
One Month Stock Performance
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General Motors Continues to Benefit From Core Businesses
GM’s biggest strength remains its North American truck and SUV business. The company continues to lead the U.S. market, benefiting from strong demand for full-size pickups, SUVs and commercial fleet vehicles. The company has maintained pricing discipline instead of relying on heavy discounts, with incentives remaining below the industry average for over three years. This has supported healthy margins despite tariffs and inflation. GMNA EBIT-adjusted margin rose to 8.6%, returning to its 8-10% target range, and reached 9.3% for the first half. The upcoming next-generation Chevrolet Silverado and GMC Sierra should further strengthen GM’s competitive position. Further, increased full-size SUV capacity and U.S. onshoring are intended to support revenues and margin growth in 2027. The company raised 2026 adjusted EPS guidance to $12-$14 and expects 2027 results to exceed 2026.
GM Expects China Business to Remain Profitable
General Motors’ restructuring efforts in China are paying off well. China equity income improved to $83 million in the second quarter and $248 million in the first half of 2026, up from $71 million and $116 million, respectively, a year earlier. Improvements in cost efficiencies, disciplined operations and a better product mix resulted in the improvement despite the highly competitive market. GM expects the China business to remain profitable as it refreshes its product lineup and continues streamlining operations.
General Motors’ Software and Digital Business Aid Growth
GM is steadily transforming its software business into a meaningful profit driver. OnStar subscriptions continue to grow, while Super Cruise adoption is increasing across more vehicle models. The company expects more than $3 billion of recognized revenues and deferred revenues approaching $7.5 billion in 2026. It plans to add about one million subscribers and exceed 850,000 Super Cruise subscribers by year-end, with broader availability on next-generation pickups supporting growth in 2027. Unlike vehicle sales, software revenues carry much higher margins and generate recurring cash flows. As the installed base expands, digital services should become an increasingly important contributor to earnings and improve GM’s overall profitability.
Diversification Creates New Opportunities for GM
General Motors is steadily expanding into businesses beyond traditional vehicle manufacturing. GM Energy is growing its commercial charging and battery storage solutions, creating opportunities to generate revenues from customers even after a vehicle is sold. Meanwhile, GM Defense continues to win government contracts, and GM Insurance is expanding into additional U.S. states, strengthening customer relationships through recurring premium income. While these businesses contribute only a small share of earnings today, they diversify GM’s revenue streams and create multiple long-term growth opportunities beyond vehicle sales.
Tariffs & Cost Inflation to Impact General Motors’ Margins
GM continues to face elevated costs from commodities, logistics and DRAM components. It expects commodity inflation, including logistics, to total $1.2-$1.7 billion in 2026, an improvement from its previous outlook but still a meaningful drag on profitability. The company also maintained its estimate for gross tariff exposure of $2.5-$3.5 billion this year, although lower gross costs and potential IEEPA refunds could partially offset the impact. In addition, onshoring expenses are expected to increase as GM shifts more production to the United States, with the largest fourth-quarter impact coming from the transfer of Escalade production to the Orion Assembly plant. Together, these cost pressures are likely to weigh on margins in the near term.
Launch Risks Cloud GM’s Prospects
GM is preparing for several major product launches, including its next-generation Silverado and Sierra pickups. While these launches create long-term opportunities, they also bring short-term risks. The company expects fourth-quarter results to be weaker than normal seasonal trends due to higher launch-related costs and an anticipated year-over-year production headwind of roughly 35,000 units during the transition.
General Motors’ Valuation and Estimates
From a valuation perspective, GM appears undervalued to the industry while it appears overvalued compared to its peers. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.4, lower than the industry’s 3.1. Ford is trading at 0.31 while STLA is trading at 0.11.
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The Zacks Consensus Estimate for GM’s 2026 EPS has moved up 47 cents in the past 30 days, while for 2027, it moved up a penny in the past seven days.
Image Source: Zacks Investment Research
Conclusion
GM continues to demonstrate solid operating momentum and improving earnings prospects. Its strong North American truck and SUV business, pricing discipline and improving margins provide a solid earnings foundation, while restructuring efforts are helping stabilize the China business. Growth in software, digital services, GM Energy, GM Defense and GM Insurance offers additional diversification and recurring revenue opportunities. The stock also appears attractively valued, while upward revisions to earnings estimates reinforce the outlook.
Although tariffs, inflation and product-launch costs may pressure near-term margins, these challenges appear manageable against GM’s stronger core operations and growth initiatives. Investors who currently hold this Zacks Rank #3 (Hold) stock may be better off retaining their positions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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