General Motors delivered a 30% profit jump in the second quarter, prompting major Wall Street analysts to raise their price targets and earnings forecasts despite ongoing industry headwinds
General Motors shares surged this week as the automaker posted second-quarter results that exceeded Wall Street expectations and raised its full-year outlook. Despite facing higher tariffs and rising fuel costs, GM reported a 30% year-over-year profit increase, with second-quarter earnings before interest and taxes (EBIT) reaching $3.94 billion, up from $3 billion a year earlier. Earnings per share came in at $3.57, well above the consensus estimate of $3.20.
GM attributed its strong performance to robust demand for pickups and SUVs in North America, stable pricing, and record sales of vehicles equipped with its Super Cruise driver-assist technology. The company also reported improved EBIT margins in its core North American market, lower warranty expenses, reduced electric vehicle losses, and greater operating efficiency. GM now expects full-year earnings per share between $12 and $14, up from its previous range of $11.50 to $13.50, and raised its adjusted EBIT forecast to $14 billion to $16 billion.
Analyst Upgrades
Following the earnings release, Deutsche Bank raised its price target for GM stock to $100 from $90, representing an 18% premium to the stock's closing price on July 22. The bank also increased its full-year earnings per share estimate to $13.64 from $12.82 and lifted its revenue forecast to $168.9 billion. Deutsche Bank analysts highlighted GM's ability to outperform internal EBIT expectations, citing $300 million in lower warranty costs and $5.03 billion in adjusted free cash flow, which benefited from working capital improvements and capital expenditure timing.
Morgan Stanley, which had already set a $100 price target, nudged its target up to $101 after the results. The firm pointed to GM's strong North American performance and improved guidance, but also emphasized the growing contribution of software and digital services. Morgan Stanley expects GM's digital subscriptions to reach 1 million in 2026, generating more than $3 billion in recognized revenue, with deferred revenue from these services up 50% year over year in the second quarter. The bank sees high-margin software and services as a key driver of future earnings growth and a potential catalyst for a higher stock valuation.
Industry Context
GM's results and analyst upgrades come at a time when automakers are navigating a challenging macroeconomic environment, including persistent inflation, volatile commodity prices, and shifting consumer preferences. The company's ability to expand margins and reduce costs stands out in a sector where many competitors are struggling to maintain profitability. For comparison, Ford and Stellantis have both reported margin pressure in recent quarters, while Volkswagen is reportedly considering major job cuts to address cost challenges.
According to reporting by TheStreet, GM's $3.94 billion EBIT for the quarter surpassed Deutsche Bank's internal forecast of $3.83 billion, with much of the outperformance attributed to lower warranty costs. The company's $5.03 billion in adjusted free cash flow also reflects significant contributions from working capital management and the timing of capital expenditures. These operational improvements have helped GM weather industry headwinds and support its raised guidance.
For investors tracking analyst sentiment and price target changes, it's worth noting that similar moves have occurred in other sectors. For example, Apple recently saw its price target raised by HSBC on the back of strong product momentum and AI initiatives, highlighting a broader trend of analysts rewarding companies that deliver on growth and operational efficiency.
Key Figures
In the second quarter of 2026, GM reported $3.94 billion in EBIT and $3.57 in earnings per share, both above analyst expectations. The company raised its full-year EPS guidance to $12-$14 and its adjusted EBIT outlook to $14-$16 billion. Deutsche Bank now expects GM to generate $168.9 billion in revenue for the year, while Morgan Stanley projects digital services revenue to exceed $3 billion in 2026. GM's deferred revenue from digital subscriptions reached $6.3 billion in the second quarter, up 50% from the prior year, and is expected to hit $7.5 billion by year-end.
As GM continues to invest in electric vehicles, software, and digital services, the company is positioning itself for long-term growth while maintaining capital discipline. Investors should monitor how these strategic shifts affect GM's profitability and valuation, especially as the competitive landscape evolves and consumer preferences change.
Automakers like GM are increasingly relying on high-margin software and subscription services to supplement traditional vehicle sales. This shift reflects a broader industry trend toward recurring revenue models, which can provide more stable cash flow and higher margins than hardware alone. For investors, understanding how these new business lines contribute to overall profitability-and how they are valued by the market-will be critical in assessing the long-term prospects of legacy carmakers in a rapidly changing industry.
