Garmin Tops Q2 Earnings Estimates on Fitness Growth, Ups FY26 Guidance

GRMN's Fitness Business Drives Growth

Fitness revenues increased 25% year over year to $756.8 million, accounting for 37.4% of total sales. Growth was recorded across all product categories, led by continued strength in advanced wearables.

The segment generated operating income of $277 million, up 40% from the prior-year quarter. Operating margin reached 37%, while gross margin was 64%. Garmin launched the Forerunner 70 and Forerunner 170 running smartwatches during the quarter and recently announced the CIRQA Smart Band, its first screenless smart band.

Garmin's Outdoor Revenues Decline

Outdoor revenues fell 2% to $482.7 million, primarily due to weakness in consumer auto products and adventure watches. However, favorable product mix and disciplined execution supported improved profitability.

Operating income rose 4% to $163.6 million, while operating margin reached 34%. Garmin expects stronger Outdoor revenue performance in the second half of 2026, aided by the timing of product launches. The company also expanded its golf portfolio with the Approach Z10 laser rangefinder.

GRMN Posts Broad-Based Segment Gains

Aviation revenues advanced 8% to $268.7 million, driven by growth in both original equipment manufacturer and aftermarket categories. Operating income increased 14% to $72.2 million, with an operating margin of 27%.

Marine revenues climbed 14% to $341.4 million, reflecting growth across multiple product categories. Operating income surged 59% to $99.8 million, and operating margin was 29%. Results benefited from a tariff refund, though management noted that product margins improved even without the benefit.

Auto OEM revenues increased 1% to $172.4 million, mainly driven by domain controllers. The segment posted operating income of $2.9 million compared to a loss of $9.5 million a year earlier, supported by improved gross profit and lower research and development expenses. Management expects revenues to decline and the segment to return to an operating loss in the second half before the planned launch of a major Mercedes-Benz program in early 2027.

Garmin's Operating Profitability Expands

Gross profit increased 18% to $1.26 billion, while gross margin expanded 360 basis points to 62.4%. Consolidated operating income climbed 30% to $615.5 million, while operating margin rose 440 basis points to 30.4%.

The margin improvement primarily reflected favorable product mix and approximately $21 million in refunds of previously paid tariffs. Management said newer products carrying higher margins represented a greater portion of sales, while vertical integration and scale also supported product cost improvements.

Operating expenses increased 9% to $646.5 million. Research and development expenses rose 10% to $303.9 million, while selling, general and administrative expenses jumped 8% to $342.6 million, mainly due to personnel-related costs.

GRMN Maintains a Strong Financial Position

Garmin generated $404 million in operating cash flow and $276 million in free cash flow during the second quarter. In the first half of 2026, it generated operating and free cash flows of $940 million and $745 million, respectively.

The company ended the period with approximately $4.4 billion in cash and marketable securities. It paid $202 million in dividends and repurchased $43 million of shares during the second quarter. In the first half of 2026, it repurchased shares worth $82 million and paid $376 million in dividends. About $448 million remained under its repurchase authorization through December 2028.

Inventory reached approximately $2 billion as Garmin maintained strategic memory holdings. Management expects higher memory costs to affect second-half results, though the impact is incorporated into its updated outlook.

Garmin Raises 2026 Outlook

Garmin now expects 2026 revenues of approximately $8.05 billion, up from its prior projection of $7.9 billion. Pro forma earnings are forecast at $10 per share compared with the previous outlook of $9.35.

The company raised its gross margin forecast to 59.7% from 58.5% and its operating margin estimate to 27% from 25.5%. The projected pro forma tax rate increased to 16.5% from 16%. The revised gross margin outlook includes the tariff refund already recorded but assumes no additional tariff-related benefits.

GRMN’s Zacks Rank and Stocks to Consider

Garmin currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI, Applied Materials AMAT and Cisco Systems CSCO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Analog Devices have rallied 30.3% year to date. The Zacks Consensus Estimate for Analog Devices’ fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating a 59.4% year-over-year increase.

Shares of Applied Materials have skyrocketed 69.8% year to date. The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.14 per share, up by 3 cents over the past 30 days, calling for a rise of 28.9% year over year.

Cisco Systems shares have rallied 46% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, implying an increase of 12.3% year over year.

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