Ford Motor Company (NYSE: F)

Ford’s Q2 2025 results demonstrated the company’s operational resilience despite significant headwinds. Record revenue of $50.2 billion represented a 5% increase year-over-year, outpacing wholesale unit growth of 4%, indicating improved pricing and mix. However, the company reported a net loss of $36 million, primarily driven by special items including a $600 million fuel injector field service action and $300 million in expenses related to a cancelled electric vehicle program.

Adjusted EBIT of $2.1 billion declined 25% from the prior year, but this included approximately $800 million of adverse net tariff-related impacts. Excluding tariff effects, underlying operational performance remained solid, supported by Ford’s fourth consecutive quarter of year-over-year cost improvement. The company demonstrated strong cash generation with operating cash flow of $6.3 billion, up 15% year-over-year.

Adjusted free cash flow of $2.8 billion, while down 13% from the prior year, reflected Ford’s continued ability to generate substantial cash returns. The company maintained a strong balance sheet with $28.4 billion in cash and $46.6 billion in total liquidity, providing significant financial flexibility for strategic investments and shareholder returns.

Ford’s adjusted EBIT margin compressed to 4.3% from 5.8% in Q2 2024, primarily due to tariff impacts and special items. However, the underlying business showed continued improvement in cost structure and operational efficiency, with management highlighting progress on the company’s competitive cost gap closure initiative that achieved roughly $1.5 billion in material cost savings in 2024.

The company declared a third-quarter dividend of 15 cents per share, demonstrating management’s confidence in Ford’s cash flow generation capabilities and commitment to returning capital to shareholders while funding strategic growth initiatives across its three business segments.

Ford Blue generated $661 million in EBIT on $25.8 billion in revenue, reflecting a 2.6% margin. While revenue declined 3% year-over-year, the segment achieved profitable market share gains and higher net pricing. Performance was impacted by the non-recurrence of last year’s F-150 stock build following the new-model launch and tariff-related headwinds. The segment demonstrated Ford’s ability to maintain profitability in its core ICE vehicle business despite market challenges.

Ford Model e doubled revenue to $2.4 billion, up 105% year-over-year, while posting an EBIT loss of $1.3 billion. The segment’s EBIT margin improved significantly to -56.4% from -99.9% in the prior year, indicating substantial progress in operating leverage and cost reduction. Excluding tariff impacts, EBIT performance for first-generation products (Mustang Mach-E and F-150 Lightning) was essentially flat year-over-year, underscoring gains in manufacturing efficiency.

Ford Pro continued to be Ford’s most profitable segment, generating $2.3 billion in EBIT with a 12.3% margin on $18.8 billion in revenue. Revenue increased 11% year-over-year, with software and physical services contributing 17% of Ford Pro’s EBIT on a trailing 12-month basis. Paid subscriptions grew 24% year-over-year to 757,000, demonstrating the segment’s ability to create high-margin recurring revenue streams.

Ford Credit reported exceptional performance with earnings before taxes of $645 million, an 88% increase compared to the prior year. This strong performance reflected improved credit quality, favorable interest rate environment, and effective risk management. Ford Credit continues to serve as a valuable competitive advantage, enabling Ford’s vehicle sales while generating substantial returns.

The segment results highlight Ford’s successful three-segment strategy, with Ford Pro driving profitability growth, Ford Blue maintaining steady cash generation, and Ford Model e showing clear progress toward profitability as the EV market matures and manufacturing scales improve.

Ford continued executing on its Ford+ plan, demonstrating progress across key strategic priorities despite challenging market conditions:

Cost Competitiveness and Quality

• Fourth Consecutive Quarter of Cost Improvement: Excluding tariff impacts, Ford recorded year-over-year cost improvements for the fourth consecutive quarter
• Material Cost Gap: Building on 2024 progress when Ford closed roughly $1.5 billion of its competitive cost gap in material costs
• Operational Efficiency: Continued focus on quality improvements and manufacturing efficiency across all segments

Ford Pro Competitive Advantage

• Software and physical services contributed 17% of Ford Pro’s EBIT on a trailing 12-month basis, creating high-margin recurring revenue
• Paid subscriptions grew 24% year-over-year to 757,000, demonstrating strong customer adoption
• Unique competitive positioning in commercial vehicle market with integrated services approach
• Development of new high-margin revenue streams beyond traditional vehicle sales

Electric Vehicle Strategy

• Next-Generation EV Development: Strategic investments in breakthrough electric vehicles designed and built in America
• Kentucky Event Planned: August 11 event scheduled to share more details about Ford’s EV plans and manufacturing strategy
• Manufacturing Efficiency: Launch expenses related to Ford’s new battery plant in Marshall, Michigan
• Operational Improvements: First-generation EV products showing flat EBIT performance excluding tariffs, indicating manufacturing scale benefits

Capital Allocation Strategy

Ford is “remaking Ford into a higher-growth, higher-margin and more durable business” by allocating capital where the company can “compete, win and grow.” This strategic approach focuses on:

• Investing in areas of competitive strength, particularly Ford Pro
• Improving efficiency in Ford Model e business
• Maintaining profitable market share in Ford Blue
• Strengthening balance sheet to enable strategic investments

The company’s strengthened balance sheet provides enhanced flexibility to invest in growth areas while maintaining shareholder returns through consistent dividend payments and strategic capital deployment.

Ford reinstated its full-year 2025 guidance after withdrawing it in May due to tariff-related uncertainty, demonstrating increased confidence in business performance:

Financial Guidance

• Adjusted EBIT: $6.5 billion to $7.5 billion (includes ~$2 billion net tariff headwind)
• Adjusted Free Cash Flow: $3.5 billion to $4.5 billion
• Capital Expenditures: Approximately $9 billion
• Net tariff-related headwind: Approximately $2 billion

Tariff Impact Analysis

The guidance reflects a comprehensive assessment of tariff impacts:

• Gross Impact: $3 billion adverse adjusted EBIT impact from tariffs
• Recovery Actions: $1 billion in recovery actions to partially offset tariff costs
• Net Impact: $2 billion net tariff-related headwind for full-year 2025

Guidance Rationale

The updated guidance reflects several positive factors:

• Strong underlying first-half performance across Ford Blue, Ford Model e, Ford Pro, and Ford Credit
• Continued improvement in cost structure and operational efficiency
• Successful execution of recovery actions to mitigate tariff impacts
• Maintained pricing discipline and market positioning

Management’s decision to reinstate guidance signals confidence in Ford’s ability to navigate current macroeconomic challenges while continuing to execute on the Ford+ strategic plan. The company is providing only Total Company outlook for the remainder of the year, reflecting the integrated nature of its operations and cross-segment synergies.

The guidance assumes continued execution of cost improvement initiatives, stable market conditions, and successful implementation of tariff mitigation strategies. Ford’s strong balance sheet and cash generation provide flexibility to invest in strategic priorities while maintaining financial discipline.