F — Q2 2026 Financial Report Analysis

A $3.6 billion battery-joint-venture exit turned a better operating quarter into a GAAP loss

Ford's second quarter of 2026 has to be read twice, because the two halves of it point in opposite directions.

The underlying business got better. Company adjusted EBIT — Ford's own preferred profit measure, meaning earnings before interest and tax with one-off items stripped out — rose 17% to $2,503 million, and the margin on it went from 4.3% to 5.2% of revenue. Adjusted earnings per share rose from $0.37 to $0.42.

The reported bottom line got much worse. Ford posted a net loss attributable to shareholders of $1,327 million, versus a $36 million loss a year earlier, and diluted loss per share of $0.33 against $0.01. The gap between the two stories is one line: $4,179 million of pre-tax "special items" (charges management excludes from segment results), of which $3,612 million came from closing out BlueOval SK, the 50/50 electric-vehicle battery joint venture Ford built with SK On.

Revenue fell 3.8% to $48,296 million. That decline is narrower than it looks at the vehicle level — sales of vehicles, parts and accessories fell 5.5% to $42,736 million — and it is a quarter-specific effect rather than a trend: over the first half, revenue was actually up 0.8% to $91,549 million, because the first quarter was strong.

All figures from Ford's Q2 2026 Form 10-Q. "Operating margin" here is the share of revenue left after cost of sales and operating expenses but before interest and tax — for Ford this GAAP figure sits far below the adjusted EBIT margin because it absorbs the special charges.

What the BlueOval SK charge actually was

BlueOval SK ("BOSK") was set up in 2022 to build one battery plant in Tennessee and two in Kentucky. Ford accounted for its half using the equity method, meaning its share of the venture's profit or loss flowed through a single income-statement line rather than being consolidated. In December 2025 the partners agreed to unwind it; the deal closed in May 2026.

On closing, Ford's stake was redeemed, its obligation to put in more capital ended, and it was released from its 50% guarantee of BOSK's US Department of Energy loan. In exchange, Ford took on assets worth $0.9 billion — two Kentucky plants and related fixed assets — received $0.1 billion of cash, and assumed a $3.8 billion promissory note payable to the DOE. Because the liabilities assumed exceeded the assets acquired, Ford booked $2.9 billion of charges in "equity in net income/(loss) of affiliated companies," plus a further $0.7 billion in cost of sales ($0.5 billion settling pre-existing claims and a $0.2 billion non-cash write-down of fixed assets).

That is what drove the equity-method line to a $2,763 million loss in the quarter, against $250 million a year earlier, and what pushed pre-tax income to a $2,033 million loss. Only about $500 million of the $3.6 billion is cash; the rest is a paper recognition of a bad investment. The offset is real balance-sheet relief: Ford's maximum exposure to unconsolidated affiliates that are variable-interest entities fell from $5.2 billion at the end of 2025 to $275 million at June 30, 2026, and the potential future guarantee draw fell from $4.9 billion to zero.

A second EV-related charge sits alongside it: $481 million in the quarter for the December 2025 decision to cancel three planned EVs and end production of the current F-150 Lightning, mostly contractual commitments. Ford now expects total charges from those cancellations of up to $2 billion pre-tax, recognised as incurred — so more of this is still to come.

A $1,152 million tax benefit from special items (including $273 million from a US Qualified Opportunity Zone incentive) softened the after-tax hit, turning what would have been a $570 million tax expense a year ago into a $711 million benefit.

The segments: Blue up sharply, Pro down on aluminum, Model e losing less by selling less

Ford reports four businesses — Ford Blue (petrol and hybrid vehicles for retail buyers), Ford Model e (electric vehicles and software), Ford Pro (commercial, government and rental customers) and Ford Credit (financing). "Wholesales" below means vehicles shipped to dealers, which is what Ford books revenue on, not retail sales to end customers.

Ford Blue was the quarter's engine. EBIT rose 72% to $1,135 million and margin went from 2.6% to 4.4%, even though wholesales fell 8% to 639,000 units on the end of Escape production in North America and Focus in Europe plus the impact of the Middle East conflict. Revenue still edged up 1% to $26,068 million because what it did sell was richer: management attributes the gain to favourable mix, exchange rates and net pricing. Ford's own causal breakdown of the $474 million EBIT improvement is volume/mix +$269 million, net pricing +$162 million, exchange +$209 million and other +$224 million (lower regulatory compliance expense and higher parts and accessories profit), against cost of -$390 million. Note the shape of that: almost all of the improvement is price, mix and currency rather than lower cost — the cost line went the wrong way, on higher commodity prices and temporary sourcing costs from the aluminum disruption, partly offset by lower tariffs.

Ford Pro is the reverse case and the more concerning one, because it is Ford's profit centre. EBIT fell $600 million to $1,718 million and margin compressed from 12.3% to 9.7%. Wholesales dropped 13% to 372,000 and revenue fell 5% to $17,790 million. The causal split is volume/mix -$507 million and cost -$194 million against net pricing +$52 million and other +$61 million. Management ties the volume loss to the end of Escape fleet production, lower Ranger wholesales in Europe, and lost output from the aluminum supply disruption — and the cost hit to higher commodity prices and the temporary sourcing costs of replacing that aluminum. So most of Pro's damage is supply-side and stated by management to be temporary, not a loss of pricing power: pricing was still positive.

Ford Model e lost $919 million, $410 million less than a year ago — but it got there by shrinking. Wholesales fell 53% to 28,000 units and revenue fell 56% to $1,026 million as Ford right-sized Mustang Mach-E output to demand and discontinued the F-150 Lightning. The loss per dollar of revenue therefore got much worse, with segment margin at negative 89.6% versus negative 56.4%. Management credits lower losses on "Gen-1" products, including a favourable one-time adjustment on a multi-year supply agreement, partly offset by higher warranty expenses. Read plainly: the EV loss is narrowing because Ford is selling fewer loss-making EVs while it waits for its next-generation platform, not because the current ones became profitable.

Ford Credit earned $757 million before tax, up $112 million, with return on equity of 29.1% against 14.9%. Improved financing margin (+$54 million) did most of it, helped by the non-recurrence of a UK commissions-redress charge, offset partly by smaller favourable derivative valuation swings and a $34 million credit-loss headwind. Credit quality is drifting mildly worse but not alarmingly: the US retail loss-to-receivables ratio — net write-offs as a share of the loan book — rose from 48 to 52 basis points on more repossessions and higher severity per repossession, while used-vehicle auction values, which set what Ford recovers on returned leases, were flat year over year at $32,365. Net receivables were $143.2 billion, down 0.3%.

Aluminum, tariffs and warranty

Three items outside the segment tables matter for how the rest of 2026 goes.

The Novelis aluminum disruption — fires at a New York plant of a major Ford aluminum supplier in September and November 2025 — is still working through the numbers, showing up as both lost production (Ford Pro's volume) and temporary sourcing costs (both auto segments' cost lines). Ford expects to partially recover the lost production in the second half.

On tariffs, Ford expects to receive about $3 billion of reimbursements from the federal government and suppliers, and as offsets to what it owes suppliers. About $1.3 billion of that relates to the IEEPA tariff rulings from the Supreme Court and Court of International Trade in Q1 2026, of which roughly $500 million is expected in cash in the second half. Timing is explicitly uncertain and dependent on trade policy. Meanwhile, underlying tariff costs are falling: both Ford Blue and Ford Pro cite lower tariffs as a partial cost offset this quarter.

Warranty is the quiet good news. Ford's biggest recurring cost problem in recent years has been having to raise reserves on vehicles it already sold. In the first half of 2026, the charge for revising estimates on pre-existing warranties was $475 million, down from $1,586 million a year earlier — the revisions are far smaller. The total warranty and field service reserve still stands at $17,571 million, and Ford flags up to about $2 billion of reasonably possible costs beyond what it has accrued, so this is improved rather than fixed.

Cash: the balance sheet cushion thinned

Operating cash flow was $4.3 billion in the quarter, $2.0 billion below last year, on lower net income and lower Ford Credit operating cash flow. Company adjusted free cash flow was $2.1 billion, down $0.7 billion. Capital spending rose $0.3 billion to $2.4 billion, and Ford still expects $9.5–$10.5 billion for the full year.

The half-year picture is the one to watch. Company cash (excluding Ford Credit) fell from $28.7 billion at the end of 2025 to $22.3 billion, and liquidity from $49.8 billion to $43.4 billion. Because Ford also assumed BOSK's $3.8 billion DOE loan, cash net of debt swung from +$7.7 billion to -$0.3 billion in six months. Ford targets a company cash balance at or above $20 billion, so it is still inside its own stated policy — but with only $2.3 billion of headroom, against $7.7 billion of net cash at the start of the year. The quarterly dividend cost $0.6 billion and was maintained.

Takeaway: Strip out the BlueOval SK write-off and Ford's quarter was its best operating performance in a while — adjusted EBIT up 17%, margin up nearly a point, warranty revisions a third of last year's. But the quality of that improvement is thinner than the headline: Ford Blue's gain came almost entirely from price, mix and currency rather than cost, Ford Pro (the profit centre) gave back $600 million to an aluminum supply shock, and Model e's smaller loss is the arithmetic of selling 53% fewer EVs, not of making them profitably. The BOSK exit removed $4.9 billion of guarantee exposure and, with it, most of Ford's stranded-EV-capacity risk — at the price of taking $3.8 billion of debt onto the balance sheet and turning $7.7 billion of net cash into a small net debt position.

Outlook

Ford's guidance, given with its July 28, 2026 earnings release and repeated in the 10-Q, is full-year 2026 adjusted EBIT of $10.0–$11.0 billion and adjusted free cash flow of $6.0–$7.0 billion. By segment: Ford Pro $7.0–$7.5 billion, Ford Blue $5.0–$5.5 billion, Ford Model e a loss of about $4.0 billion, Ford Credit above $2.5 billion.

The assumptions behind it are unusually specific and worth holding management to: US industry sales of 16.0–16.5 million vehicles at an annualised rate, industry pricing up about 0.5%, a net $1.0 billion improvement from the Novelis recovery (which itself embeds about $1.5 billion of temporary costs including tariffs), commodity headwinds of just above $2.0 billion driven mainly by aluminum prices, a $1.0 billion improvement from lower material costs and warranty coverages, about $1.0 billion of incremental Model e spending for the Universal EV platform and Ford Energy, and about $0.5 billion of IEEPA cash recovery.

The arithmetic implies a large second half. Ford did $5,991 million of adjusted EBIT in the first six months, so the midpoint of guidance requires roughly $4.5 billion more in the back half — a slower run-rate than the first half, which is consistent with the $1.0 billion of extra Model e investment and the commodity headwind landing later in the year. The swing factors are the ones Ford itself names as uncertain: whether the Novelis production actually comes back, whether aluminum prices ease, and whether the tariff reimbursements arrive on the assumed timetable. Two of those three are outside management's control.

Our own read: Ford Pro's guidance of $7.0–$7.5 billion for the year against $3,403 million booked in the first half is the tightest part of the plan — it needs the aluminum problem to be genuinely behind it, and Pro's margin has already fallen 2.7 points year over year. The Model e loss of about $4.0 billion, against $1,696 million in the first half, is guided to widen in the second half precisely because Ford is spending into the next EV platform; investors should expect that line to look worse before the new products arrive, and the December 2025 cancellations still carry up to $2 billion of charges yet to be recognised.