Garmin Ltd.
Analysis
Garmin has become a wearables-first company: Fitness grew 25% in Q2 FY2026, is now the largest segment, and company operating margin reached 62% at the gross line. Whether that holds depends on 2027, when the cheap chips it stockpiled finally run out.How much of that Fitness growth is new customers, not upgrades?
- Wearables are now the growth engine, not one of five equal segments.
Fitness passed $2 billion last year and grew 25% again in Q2 FY2026; management calls it the biggest contributor to 2026 growth. The gains come from selling more units, not charging more, so Garmin is taking customers from rivals.
- Margins hit a record, but the memory bill is only deferred.
Q2 FY2026 gross margin hit 62.4% on richer product mix and a $21 million tariff refund, and management raised full-year guidance. But higher memory prices only start hitting results in the second half, with the real bite in 2027.How much of the second-half cost rise is memory, versus tariffs?
- Auto is entering an air gap between two big contracts.
BMW volumes have peaked and older programs are ending, so auto revenue falls this year and the segment slips back to a loss. Mercedes-Benz replaces it but does not ramp until early 2027.How big is the Mercedes program versus BMW at peak?
- Wearable share gainsGarmin is selling more watches and fitness devices to both new and existing customers, and management says the gains come from volume rather than price.
- Outdoor product refreshThe company says a heavy slate of Outdoor launches in the second half should lift that segment back to growth after several quarters of difficult comparisons.
- Recurring service revenueSubscriptions for satellite messaging, connected features and coaching platforms grow faster than device sales and carry higher margins than hardware does.
- Memory component costsMemory prices are rising as data-center buyers absorb supply, and Garmin says those higher costs reach its income statement late this year and next.
- Outdoor launch timingOutdoor has shrunk for several quarters, and its recovery rests on product launches the company has described only in general terms and dated to the back half.
- Auto OEM contract gapThe automotive unit sits between large programs, with BMW volumes past their peak and the Mercedes-Benz ramp not starting until 2027.
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How Garmin Ltd. turned $7.2B of revenue into $1.9B of operating income.
| Revenue | ||
|---|---|---|
| Fitness | $2.4B | ▲ 32.83% YoY |
| Outdoor | $2.1B | ▲ 4.69% YoY |
| Marine Segment | $1.2B | ▲ 10.20% YoY |
| Aviation | $987.2M | ▲ 12.61% YoY |
| Automotive Mobile | $664.7M | ▲ 8.85% YoY |
| Total revenue | $7.2B | |
| Gross profit | $4.3B | 58.7% |
| Operating income | $1.9B | 25.9% |