Garmin stock gains outlook after record quarter despite cost risks

Garmin Ltd. delivered record operating results for the quarter ended September 26, 2026, and lifted its full-year targets ahead of the holiday selling season. The company's stock traded at 262.70 euros on Lang & Schwarz at 11:44 CET on Friday, November 13, 0.53 percent below the Xetra close of 264.10 euros on Thursday, November 12.

According to Garmin's results release carried by Morningstar, third-quarter revenue rose 12 percent from the prior-year period to 1.99 billion US dollars. Operating income increased 34 percent to 612 million US dollars, while gross margin expanded to 63.3 percent from 59.1 percent.

Core Segments Drive Record Quarter

Fitness revenue increased 16 percent to 694.3 million US dollars, led by demand for wearables. Outdoor revenue rose 20 percent to 597.3 million US dollars, supported mainly by adventure watches. Marine revenue advanced 16 percent to 309.9 million US dollars, while aviation revenue gained 5 percent to 252.7 million US dollars.

Auto OEM remained the weak spot. Revenue in that segment fell 20 percent to 131.9 million US dollars, and Garmin recorded an operating loss of 11.9 million US dollars. The contrast leaves the consumer businesses carrying much of the current growth momentum while automotive execution remains a drag.

Higher Targets, Tougher Cost Base

Garmin now expects 2026 revenue of 8.15 billion US dollars, up 100 million US dollars from its previous forecast. Pro forma diluted EPS guidance rose to 10.80 US dollars from 10.00 US dollars. The revised outlook also calls for a 61.0 percent gross margin, a 29.0 percent operating margin and a 16.5 percent pro forma tax rate.

The third-quarter margin improvement was not solely a volume effect. Garmin cited favorable segment mix, lower product costs and approximately 33 million US dollars in refunds of previously paid tariffs. Pro forma diluted EPS rose 39 percent year over year to 2.76 US dollars, while GAAP diluted EPS reached 2.80 US dollars.

The principal risk is moving into the next cost cycle. Management said higher memory and other raw-material prices will have a greater effect in the fourth quarter as lower-cost safety stock is replaced by components bought at current market prices. The revised full-year margin outlook already incorporates higher memory costs, but management expects the consolidated margin profile to move back toward a historical range in 2027.

Holiday Demand Sets Next Test

For investors, the raised targets strengthen the near-term growth case but increase the importance of holiday execution. Fitness and outdoor demand can support revenue, while memory inflation and the loss-making Auto OEM segment may limit the durability of current margins. The next major focus is Garmin's fourth-quarter performance and its update on 2027 profitability.

The wider S&P 500 market environment remains relevant for investors assessing Garmin's US-listed shares.

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