GM Q3 Deep Dive: Restructuring Drives Guidance Hike Amid Margin Pressure and EV Reset

Automotive manufacturer General Motors (NYSE:GM) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $48.59 billion. Its non-GAAP profit of $2.80 per share was 20.5% above analysts’ consensus estimates.

Is now the time to buy GM? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

General Motors’ third quarter results were met with a positive market reaction, as the company surpassed Wall Street’s revenue and adjusted profit expectations despite flat year-over-year sales. Management attributed the quarter’s performance to disciplined inventory and pricing strategies, as well as resilient demand for both internal combustion engine (ICE) and electric vehicles (EVs) in the U.S. CEO Mary Barra emphasized the company’s ability to navigate regulatory shifts and supply chain disruptions, specifically noting, “We delivered another very strong quarter of earnings and free cash flow.”

Looking ahead, General Motors raised its full-year adjusted earnings guidance, driven by expectations of improved tariff mitigation, rigorous cost management, and ongoing investments in both ICE and EV platforms. Management plans to restore North American margins to historical levels through a combination of footprint optimization, warranty cost reduction, and expanding software and services revenue. CFO Paul Jacobson stated, “We see a clear path back to our historical 8% to 10% EBIT margins in North America over time,” highlighting the company’s confidence in maintaining disciplined production and capital allocation despite evolving policy and demand environments.

Key Insights from Management’s Remarks

Management connected this quarter’s outperformance to strategic moves in cost discipline, manufacturing shifts, and adapting to regulatory change while highlighting ongoing challenges in EV adoption and margin pressure.

• Tariff mitigation efforts: Expanded use of the MSRP offset program and supply chain adjustments reduced the gross tariff impact, helping offset headwinds from global trade disputes and supporting U.S. vehicle production competitiveness.
• Production realignment: GM announced a shift of the Orion Assembly plant from EV to ICE production and increased Chevrolet Equinox output in Kansas, responding to slower-than-expected EV demand and changes in regulatory incentives.
• EV market recalibration: Management addressed higher-than-anticipated variable costs due to lower near-term EV adoption and recognized a $1.6 billion special item charge tied to reduced EV and battery capacity, as well as discontinuing next-gen hydrogen fuel cell development.
• Ongoing warranty expense challenge: Elevated warranty costs weighed on profitability, but management outlined efforts to lower these through improved supplier quality validation, AI-enabled diagnostics, and refined repair processes.
• Growth in software and services: Revenue from OnStar, Super Cruise, and related software nearly doubled year-over-year, with management targeting robust double-digit growth and high margins from this segment through the end of the decade.

Drivers of Future Performance

General Motors expects future performance to be shaped by regulatory policy, product mix, and accelerated software-driven revenue growth, balanced by ongoing cost-reduction and supply chain initiatives.

• Margin restoration focus: Management’s priority is returning North America to historical EBIT margins of 8–10% by lowering EV losses, controlling warranty expenses, and leveraging tariff offsets and cost discipline, even as ICE vehicles remain in strong demand.
• EV adoption uncertainty: The company anticipates choppy EV demand as federal incentives phase out and plans to build to market demand, investing in cost-reducing battery technologies and maintaining discipline on incentives to improve EV profitability.
• Software and services expansion: GM is scaling its OnStar and Super Cruise platforms, aiming for double-digit revenue growth and gross margins near 70%, with management viewing these high-margin services as increasingly central to long-term profitability.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will track (1) the impact of GM’s production realignment and progress toward restoring North American margins, (2) further developments in tariff mitigation and regulatory policy shifts, and (3) the pace of revenue expansion in software and services such as OnStar and Super Cruise. Additional attention will be given to how management balances near-term EV adoption trends against ongoing investments in battery and software innovation.

General Motors currently trades at $67.56, up from $58.02 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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