GM Reports Strong Q2 Results But Market Reacts Negatively
General Motors (GM) delivered better-than-expected second-quarter earnings in 2025. But despite the solid performance, the company’s stock fell sharply after revealing the $1.1 billion impact of tariffs on its bottom line.
On Tuesday, GM announced:
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Operating profit: $3 billion
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Earnings per share (EPS): $2.53
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Revenue: $47.1 billion
These numbers exceeded Wall Street estimates, which projected:
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Operating profit of $2.9 billion
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EPS of $2.33
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Revenue of $46.3 billion
However, investors were not impressed. GM shares dropped 8.1%, closing at $48.89, even as the S&P 500 and Dow Jones Industrial Average saw small gains of 0.1% and 0.4%, respectively.
Tariffs Take a Toll on GM’s Profitability
Compared to Q2 2024—when GM earned $4.4 billion in profit and $3.06 per share—this year’s results show a decline. One major reason: U.S. tariffs on imported vehicles.
In 2024, 45% of GM’s domestic car sales were imported, primarily from Mexico and South Korea. The resulting tariff burden hit $1.1 billion in the latest quarter alone.
Full-Year Outlook: No Change Despite Challenges
GM kept its 2025 full-year operating profit guidance steady at $10 billion to $12.5 billion, despite ongoing economic headwinds.
The company expects:
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Gross tariff impact: $4 to $5 billion
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At least 30% of that offset through cost cuts, manufacturing shifts, and pricing strategies
This guidance implies a second-half operating profit between $3.5 billion and $6 billion, while Wall Street expects $5.1 billion.
Why the Stock Fell Despite Strong Numbers
Several factors likely contributed to the negative market reaction:
1. Investors Wanted a Guidance Upgrade
Analysts like Garrett Nelson at CFRA noted that GM didn’t raise its guidance, which disappointed many investors.
2. Paused Share Buybacks
GM paused its stock repurchase program in Q2, though it resumed in July. This pause may have signaled caution, further unsettling shareholders.
3. Stock Already Up Before Earnings
GM shares had already climbed 20% over the past three months, creating high expectations going into earnings day.
More Challenges Ahead for GM
The road ahead doesn’t look any easier:
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The $7,500 federal EV tax credit will begin phasing out in September 2025 due to President Donald Trump’s new tax-and-spending law.
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This could boost Q3 electric vehicle (EV) sales, but also create a demand drop in Q4.
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Vehicle affordability is under pressure, with tariffs and tax changes pushing prices higher.
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According to Cars.com, inventory for new vehicles under $30,000 has declined for three straight months. Notably, 92% of cars in this price range are imported.
Strong First-Half Sales – But Can It Continue?
Despite these challenges, GM saw a 12% increase in U.S. sales year-over-year during the first half of 2025. But analysts warn some of this demand may have been pulled forward due to policy changes, which could affect future quarters.
Volatility Expected
Before earnings, options markets predicted a 5% stock swing—but GM shares moved more than 8%, continuing a trend of big post-earnings moves seen over the past year.
Bottom Line:
GM posted strong Q2 results, but tariff costs, policy uncertainty, and investor expectations led to a sharp stock drop. As the company moves through the rest of 2025, its ability to manage costs and maintain demand will be key to regaining investor confidence
