Prepared remarks
Good morning. My name is Laila, and I will be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please use the raise hand feature at the bottom of your screen. At this time, I would like to turn the call over to Maria A. Ricciardone, Chief Investor Relations Officer.
Thank you, Leila, and welcome to Ford Motor Company's second quarter 2026 earnings call. I am Maria A. Ricciardone, Ford's new Chief Investor Relations Officer. I most recently came from Lockheed Martin where I was treasurer and head of investor relations. I joined Ford because the opportunity ahead is tremendous. Few companies today are navigating a transformation of this scale and this consequence. My focus will be straightforward: clear, consistent communication with all of you and ensuring the market understands how our differentiated strategy translates into profitable growth, capital discipline, and shareholder value. With that, let's jump in. With me today are Jim Farley, President and CEO, and Sherry House, CFO. Joining us for Q&A is Andrew Frick, President of Ford Blue and Model e; Alicia S. Boler Davis, President of Ford Pro; Ashwani Kumar Galhotra, Chief Operating Officer; and Kathy O'Callaghan, CEO of Ford Credit. Jim will give a high level overview of the business and Sherry will provide added texture on the financials and guidance. We will be referencing non-GAAP measures today. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You can find the deck at shareholder.ford.com. Our discussion also includes forward-looking statements. Our actual results may differ. The most significant risk factors are included on page 20 of our deck. Unless otherwise noted, all comparisons are year over year. Company EBIT, EPS, and free cash flow are on an adjusted basis. Upcoming IR engagements include Mike Aragon, President of Integrated Services, at the Goldman Sachs Communacopia and Tech Conference in San Francisco on September 8, and the Morgan Stanley Annual Laguna Conference in Laguna Beach on September 17. Now I will turn the call over to Jim.
Thank you, Maria. I want to start by thanking our extended Ford team—our dealers and our suppliers—for their commitment to delivering on our Ford+ plan. I especially want to highlight all the Ford team members who worked so effectively through the Novelis disruption. I also want to recognize our team in Canada, along with our labor partners, Unifor, under the leadership of Lana Payne, for reaching a ratified three-year agreement covering all of our Canadian employees. Our business in Canada and our manufacturing operations in Oakville are really important to our future at Ford. This agreement also underscores how important USMCA is to our future at Ford, and the opportunity we have to build a framework that levels the playing field for North American manufacturers like Ford against mass imports from Japan and South Korea that carry a huge currency advantage. In the quarter, we delivered a strong performance, generating $48.3 billion in revenue and $2.5 billion in adjusted EBIT. We are also raising and narrowing our full-year adjusted EBIT guidance to between $10 billion and $11 billion, a $1 billion raise at the midpoint. The most important part of the quarter is the growing evidence that our strategy is working toward becoming a more profitable, more disciplined, and generally different company. Our Ford+ plan focuses on three complementary areas. First, our core automotive operations—our retail and commercial vehicles—are becoming more profitable and more dependable. Second, the software and physical services layer is growing margin-accretive and is built into everything we do at Ford. Third, adjacency businesses such as Ford Energy open all-new sources of profit for the company. We play only where we have real competitive advantage, or where we can build one, and we are ruthless about where we put our money. Every dollar must earn durable returns and drive profitable growth. So let's talk through each of these areas. On core automotive operations, our execution is underpinned by a fundamentally stronger industrial system. For more than three years, we have been relentless about building top quality, and that work is showing up. In our home market, Ford finished number one among all mainstream brands in the J.D. Power 2026 Initial Quality Study. We see this win as a first down payment on a much more consequential virtuous circle: going from initial quality to long-term durability, lowering our warranty costs even further, fewer recalls, stronger customer loyalty, more pricing power, and, for our conquest and growth, improved resale value. Ford's quality renaissance goes hand in hand with our equally intense drive to improve our cost structure. We have significantly reduced our warranty and material cost since 2024, and we continue to optimize cost as we enter a heavy new product launch period over the next three years. Turning to the products themselves, we are reinforcing our strength in our trucks, our vans, our performance utilities, and off-roaders—iconic brands and distinctive products delivering real price power. We can see it in the quarter. In Ford Blue, F-Series remains the number one truck brand, outselling the closest competitor by more than 80,000 units in the first half of this year and is on track for 50 straight years at the top. That is five decades of trust and capability with our customers, and we intend to extend our lead. But it is not just F-Series that makes our truck business strong. We continue to grow our customer base across our entire lineup. This spans every price point in the U.S. truck market—from our Maverick all the way through the top end of our Super Duty. And there is much more to come soon, including an all-new F-Series and an all-new Super Duty. We also continue to see momentum with our off-road enthusiast vehicles. In fact, they now make up 25% of our U.S. sales in the second quarter. We made a huge bet on Bronco, Tremor, and Raptor, and it has paid off with higher growth and higher margins. These vehicles are bringing new customers to Ford. They are younger, more affluent, and more geographically diverse, and we are investing to grow our leadership in this space. Hybrids are another strength for Ford we plan to build on. The F-150 hybrid leads among full-size trucks, and the Maverick hybrid achieved record sales in the first half to become America's best-selling hybrid pickup. We plan to extend our hybrids across our entire lineup over the next several years. On the commercial side, Ford Pro is the cornerstone of our global business and holds commercial vehicle market share leadership in both North America and Europe. The Oakville expansion I referred to earlier is on track to launch in the fourth quarter of this year, adding up to 100,000 units of additional Super Duty capacity. We are investing in Super Duty production to increase our manufacturing flexibility, add resilience, and meet pent-up demand. These investments will help drive Pro's future financial performance. Turning to Model e, we are aggressively driving down Gen 1 costs and will become a major scaled competitor as we invest in affordable, versatile EVs. The Louisville plant changeover for the new UEV platform is well underway. You may have seen prototypes now of our first vehicles off the UEV platform testing on roads across the U.S. Customer deliveries will begin next year. The first UEV product will compete in the affordable heart of the U.S. EV market, where we will offer customers a wholly new proposition that we cannot find in the market today. It starts at around $30,000. It has more cabin room than the Toyota RAV4, plus it has a pickup truck bed. It has bidirectional charging capability, is incredibly fun to drive, and personalized technology in the experience. In fact, we just announced Apple last week will be the embedded map provider for every UEV platform vehicle, and we are very excited to show you much more about our move to be among the leaders in the EV space. In Europe, as you saw last week, we announced our agreement with Geely, which will bring speed and capital efficiency to our European operations. The second area of our Ford+ plan is software and physical services, including our parts business. These businesses have significant room to grow and are central to our 8% margin target by 2029. The idea is really simple: combine our digital services, our large dealer network, and our physical services into one seamless experience, building a flywheel across software, vehicles, and parts. On software, we are turning a one-time sale into a life relationship reset. We now have over 14 million connected vehicles—that is an enormous base to grow from. Our goal is to activate that base, drive real digital usage, and convert engagement into recurring, high-margin revenues. Our services are not just digital; they are also physical. We continue to grow our parts business. For example, we are expanding our parts catalog, growing our sales to U.S. wholesalers, and co-investing with our dealers to increase service base and our mobile fleet. Customers love our mobile service. We have over 5,000 mobile service vans and trucks on the road and we see Net Promoter Scores much higher for remote service, leading to higher loyalty. In fact, in Q2, we delivered 1.5 million remote services at Ford, 1.1 million just in the U.S. Finally, we are making progress on our adjacent businesses. Earlier this year, we launched Ford Energy, reporting through Model e. It is a strategic business for us at Ford, but one with a very short payback. Ford Energy can win because it is built on capabilities few companies can match: tariff resiliency, world-class U.S. manufacturing, leading battery technology, an iconic American brand that is already familiar to communities most in need of grid support and infrastructure upgrades, and, of course, the ability to leverage our vast auto service expertise. By late next year, we expect to reach 20 gigawatt-hours of annual capacity for Ford Energy, and we have potential to expand beyond that. We believe this will position Ford Energy among the leading energy storage manufacturers in North America. Scale matters in this business: it drives efficiency, improves the levelized cost of energy, and creates a competitive advantage that is hard to match without the scale of the global auto industry to leverage. We are building a business that can integrate further into energy and aspires to create value far beyond the sale of our DC blocks, to serve a broad and enduring customer base. We are in talks with a wide range of strategic customers and look forward to sharing more with you at the right time. As you can see, Ford is becoming a more disciplined, higher-return company. We have a strong automotive business with an increased-fit industrial system. To complement that business, we are scaling high-margin software and physical services around a seamless customer experience while leveraging Ford Credit. Adjacent to all of that, we are building new businesses like Ford Energy where we can establish a competitive advantage. Over to you, Sherry.
Thank you, Jim, and hello, everyone. Our second quarter results demonstrate our resiliency and intentional actions to drive profitability in a complex macroeconomic and industry environment. We generated $48.3 billion in revenue, down 4% year over year, while earning $2.5 billion in adjusted EBIT, up 17%. Revenue was impacted due to expected volume reduction stemming from lower Novelis aluminum supply and the sunsetting of certain vehicles as we refresh our portfolio. Consistent with our deliberate actions to enhance profitability, this quarter's EBIT strength was largely a result of strong mix and net pricing. We generated $2.1 billion in company adjusted free cash flow and ended the quarter with a strong balance sheet, including $22.3 billion in cash and $43.4 billion in total liquidity. We remain committed to our investment-grade rating and returning capital to shareholders. In fact, over the last five years, we have returned more than $16 billion through dividends and antidilutive share repurchases. Today, we announced a third-quarter regular dividend of 15 cents per share. Before unpacking the segment results, I want to address our $1.3 billion net loss in the quarter. As we announced in December 2025, we recognized a one-time special item charge of $3.6 billion, of which approximately $500 million was cash. This charge was related to the May disposition of the BlueOval SK Battery joint venture. We expect the vast majority of the remaining cash charges related to our December announcement, which total up to $2 billion, to be completed by the end of the year. Operationally, we are successfully navigating the Novelis aluminum supply recovery plan and we remain confident in our net $1 billion EBIT improvement, heavily weighted to the second half of the year. Year to date, we have incurred about $800 million in Novelis-related temporary costs and now expect a full-year cost impact of about $1.5 billion. The hot mill restart is on track, and contingency material is secured. U.S. inventory of 52 retail days' supply is slightly below our target of 55 to 65 days, and we expect to return to targeted levels as the recovery progresses. Turning now to the core automotive highlights: Ford Blue delivered $1.1 billion in EBIT on revenue of $26.1 billion. Our revenue and EBIT were up 17% and 2%, respectively, reflecting favorable product mix enabled by U.S. regulatory changes and higher net pricing, more than offsetting an 8% decline in wholesales. These results demonstrate that our focus on off-road vehicles and passion products is resonating. We had record sales for the Bronco family in Q2, and our three-row adventure utilities are growing, with Explorer and Expedition retail sales up 22% in the quarter. F-150 remained strong while inventories recover, with a disciplined go-to-market execution in Q2 that included the highest retail share, lowest incentive spend, and highest share of revenue, with sales focused through our most profitable channels. Ford Pro delivered a solid quarter despite significant headwinds, delivering $1.7 billion of EBIT and $17.8 billion of revenue, down 26% and 5% respectively, primarily due to temporary Novelis disruption. We continue to see growth in software and physical services, highlighting the durability of our ecosystem strategy even in periods of disruption. This resiliency positions Pro to benefit from second-half volume recovery. We are confident in the pricing power of our Pro business and, although early, 2027 model-year customer contracting in North America is off to a fast start, placing us about a month ahead of where we were last year. For Model e, we reported an EBIT loss of $919 million on revenue of $1 billion, reflecting a 31% EBIT improvement on declining revenue. This was our third consecutive quarter of year-over-year EBIT improvement. Progress was driven by structural cost reductions, right-sized Gen 1 volumes, and lower U.S. incentives following regulatory relaxation. We continue to prioritize profitability and capital efficiency on our path to breakeven. As such, we expect to improve Gen 1 EBIT by approximately 40% year over year in 2026, paving the way for our investments in UEV and Ford Energy. Our software and physical services keep getting stronger. Total paid subscriptions grew about 50% to roughly 1.6 million, including more than 900,000 Ford Pro Intelligence paid subscriptions. Customers are actively choosing to pay for these services beyond an included trial, a direct signal of value. We have also seen positive net pricing in our parts business, in line with the industry. These services carry attractive margins and create recurring customer relationships. Ford Credit delivered another solid quarter with EBT of $757 million, up $112 million. These results reflect our strong financing margin, our high-quality portfolio, and our disciplined approach to capital and risk management. We remain confident in the quality of our portfolio and our ability to continue supporting the market shift toward longer-term financing options for customers. We also continue to execute on our multiyear certified pre-owned enterprise strategy which ultimately protects our residual values. According to third-party data, our year-to-date CPO unit sales growth in the U.S. is over 20%, now positioning us as the number two CPO brand in the market. Now I will turn to our 2026 outlook. For the full year, we now expect company adjusted EBIT of $10 billion to $11 billion, narrowing the range and increasing the midpoint by $1 billion, driven by strong pricing and mix. We expect an increase in adjusted free cash flow to $6 billion to $7 billion, which now includes flow-through of this higher EBIT and our expectation to receive in 2026 about $500 million of the $1.3 billion AIEA reimbursement we booked in Q1. Capital expenditures remain unchanged at $9.5 billion to $10.5 billion as we invest in higher-return growth opportunities. Our guidance does not include potential impacts of a significant escalation in the Middle East or a material downturn in the U.S. economy, which could have a substantial impact on industry demand. For our full-year segment outlook, we now expect an increase in Ford Blue's EBIT range to $5 billion to $5.5 billion, a narrowing of Ford Pro's EBIT range to $7 billion to $7.5 billion, and an improvement in Model e losses to about $4 billion. This includes about $1 billion in incremental investment for UEV and Ford Energy, mostly weighted towards the second half of the year. For Ford Credit, EBT is now expected to be above $2.5 billion. Our guidance continues to assume a U.S. SAAR of 16 million to 16.5 million units, commodity headwinds of just above $2 billion, and we remain on track to deliver $1 billion in material and warranty cost reductions in 2026, enabling our increased investments in UEV and Ford Energy. For U.S. industry pricing, we now expect full year to be about a half a point higher at plus 50 basis points. The accomplishments this quarter reinforce our trajectory. The investments we are making in our truck lineup, UEV platform, Ford Energy, and high-margin services will bolster our margins over time, keeping us firmly on the path to our 8% EBIT margin target by 2029. With that, let's open the line for your questions.
Questions and answers
We will now begin Q&A. To ask a question, please use the raise hand feature, which can be found at the bottom of your screen. Please limit yourself to only one question. Your first question will come from the line of Andrew Percoco with Morgan Stanley.
Great. Thanks so much for taking the questions. Can you guys hear me? Great. Well, congrats on the really strong results this quarter. I do want to start on the energy storage side of the business and just hope to get more of an update in terms of the conversations that you are having on that front. Obviously, we saw the EDF agreement, so utilities do seem like the obvious customer here, given some of your long-standing relationships there with Ford Pro. But I am just curious to what extent you are having conversations directly with hyperscalers that might want to lock up some of your domestic battery capacity. So it is really a two-part question: one, are you engaging with the hyperscalers about direct off-take? And two, what inning would you say you are in in terms of getting some incremental contracts to market? Thank you.
Sure. Just to take a step back, what we hear from our customers is that we are in the center of the market. A 20-foot containerized LFP prismatic solution DC block with a two- and a four-hour configuration is exactly the heart of the market, so that is a real positive. They also appreciate our approach to service, prognostics, digital remote monitoring—that is a big positive that Ford can bring to the product. People are excited about the talent on our team; we have specialized talent with real experience in this market building this business. The kind of conversations we are having are in real depth now. The demand signal is very strong for us. Given there is about a six-month lag between when you start and when the projects have to land, I would say we are in the first or second inning—not enough to tell you everything about the customers for 2028 capacity—but it looks really good. We are in line with our forecast inside the company, which I will not go over. We are seeing a broad group of customers; they are not just utility providers. In fact, every day we see broader application of storage batteries from broader customer bases. We have a whole process where we monitor customers as they progress through projects: initial discussions, legal and contracting phase, and then final contract. I would say we are in the third inning of selling out the 2028 capacity of 20 gigawatt-hours. To emphasize from my prepared remarks, we have the capacity to upgrade at Kentucky 1 and we are building prototype cells already in Marshall, Michigan. This is not a theoretical business—we are building cells already, and Kentucky 1 is building out a little later than Marshall. Hope that gives you some more texture.
Yeah, that is great. If I could just sneak a quick follow-up there: what are some of the things you are looking at specifically in terms of whether or not you decide to add additional capacity? Is it simply booking out the first 80% of that 20 gigawatt-hours over a multiyear period, or are there other things that you are kind of looking at, whether it is legislative, tax credit related, in terms of your decision to go ahead and move and add more capacity?
I think your list is pretty good. It is basically three areas. Obviously, the tax treatment is very important for customers. We are also looking very carefully at strategic choices for the company, and we are looking at the customer flows. I would say the list you have is a good working list. I do not want to get into more specifics than that.
As a reminder, please limit yourself to one question today. Our next question will come from Alexander Perry with Bank of America.
Congrats on a strong quarter. I just wanted to ask a bit more on the mix opportunity. Off-road performance trends and other higher-margin trends such as your V8 series continue to increase as a percent of sales. Maybe just talk to us what are the key drivers of the strong trim mix and how we should be thinking about the mix benefit throughout the balance of the year? Thanks.
Yeah, thank you, Alexander. This is Andrew Frick. We have certainly seen product and series mix as a position of strength for us right now. A couple of the key drivers are that it is a direct reflection of the choices we have made in our brand positioning as well as some of the regulatory environment changes that help us match customer demand. Jim made some comments in his opening remarks, and I will add a little context. We have seen growth in our product portfolio mix in large utilities and the Bronco family. In fact, the Bronco family had our best first-half sales ever. You mentioned off-road mix—we grew that by over 3.5 points in the first half and actually in the second quarter it was up over four points year over year. Series mixes like Tremor are now 15% of our Expedition sales, and Raptor is really strong across our portfolio. We have grown our Raptor sales by 9% so far this year. You mentioned V8, so we are increasing our V8 mix as well. Bottom line: we expect that level of product mix and series mix to continue through the balance of the year.
Perfect. That is incredibly helpful. Best of luck going forward.
Thank you.
Thank you, Alexander. Our next question will come from Joseph Spak with UBS.
Thank you. Good afternoon, everyone. Jim, maybe you could talk—I heard in the prepared comments that the Novelis ramp is proceeding as expected. Could you just talk a little bit about what you see for F-Series here in the back half? Because in your guidance you do factor in a lower volume recovery, so that is a little bit more measured, and it does not sound like it relates to Novelis. Is that just some prudence because of what you are seeing in terms of the competitive dynamics in that segment and you want to remain pretty vigilant there to protect price?
Yeah, thanks. I would like Andrew to comment, but we are seeing F-Series at around 45-day supply, which for us is very lean, so we have a lot of upside on the wholesale side, not just retail side. Andrew, anything you want to highlight?
Yeah, I would just add the overall truck demand right now across from Maverick all the way up to Super Duty is really strong. We are seeing strength across the lineup. Maverick Hybrid achieved a record in the first half. For F-Series specifically, we are really confident in the strength of our F-Series business right now. Jim mentioned we are on our way to 50 years of leadership, and we lead the competition right now in key go-to-market metrics. We have significantly lower incentives, higher share, higher share of revenue with really strong turn rates, which is an indication of strong demand, and we are being really disciplined on our channel mix with the limited production we have. In fact, we have had really low rental volume where a lot of our competitors have increased theirs year over year. As Jim just mentioned, our day supplies are in good shape at 45. That gives us upside coming out and the demand continues to look really strong.
What drives the lower volume recovery? Can you repeat that? We did not hear you.
Alright.
You mentioned in the guidance that the lower aluminum headwind is offset by a lower volume recovery, so that is a little unclear. Just curious what changed there.
It is just mix. As I said, we are planning to be able to still have a year-over-year improvement of $1 billion. So you had roughly $2.5 billion on the top line. $1.5 billion due to Novelis cost now lower than what we had originally thought before—we thought $1.5 to $2 billion but now it is tracking at the lower end. So the results are going to be the same in terms of what we guided, and it is a mix change.
Thanks, Sherry.
Yep.
Your next question will come from Mark Delaney with Goldman Sachs. Maria, you may now unmute your line and ask your question.
Good afternoon. Thank you for taking the question, which is on the tariff and trade environment. I think on tariff you left your outlook unchanged, but under the current policy rules maybe talk about the ability to further mitigate that going forward. You also spoke a bit on USMCA, and Jim, curious if you have any early thoughts around how the discussions are going. Based on some of the proposals to potentially require more U.S.-specific content, how might that affect Ford's operations and supply chain? Thank you.
Sure. Let me just comment on USMCA because it is very critical. Ford is an unusual company in a way: we build the most in the U.S., we have the best ratio between imports and our local production, and we also export the most. Even for us, improved USMCA could be a great opportunity for the industry and for Ford. We have had really good conversations with the U.S. administration and USTR, and also with Mexico and Canada. Because of Ford's footprint, we have good access to everyone. I think at the top of the house we all have the same principle, which is building a stronger U.S. industrial base. Our orientation for USMCA is that we want to make it easier for Ford and other U.S. makers to compete with Japan and South Korea. They have incredibly strong local supply chains like steel and aluminum, much weaker currencies in some cases, and modest tariffs. Even some foreign competitors import from those locations and have huge advantages. We are prepared to support revising USMCA so long as it allows the promotion of a more competitive U.S. auto sector. That is our lens for this negotiation: put Ford and companies like Ford that committed to U.S. manufacturing in a better position to compete with these foreign competitors. We are in the early days of engaging, so it is very early, but that will be our orientation. In terms of tariffs, there has been some recent news, but as a whole, Ford has done a good job with our exposure to tariffs. We have worked with the administration and adjusted our strategy to manage through this in a way that advantages the company. I do not want to get into specifics because those are documented by the team.
Your next question will come from Dan Levy with Barclays.
Okay, great. Thank you for taking the questions. About a month ago you put out the headline that you ranked number one in this J.D. Power Initial Quality Study. I know warranty and quality has been sort of the journey for you, and you reiterated some of the cost benefits this year. Maybe you can give us a sense of what this headline potentially means on incremental cost outs in the future on the warranty side? Any reads factoring as well for 2027 and beyond?
Okay. I think, Sherry, it would be great to get your view from a financial standpoint, but the essence of this is the lag between initial quality and recalls. I would emphasize that recalls are not all the same—software recalls and powertrain recalls are quite different. Kumar, if you want to comment about the kind of cost variance you are seeing?
We do see continued improvement on a year-over-year basis in warranty as well as material cost, and that is what comprises the $1 billion year-over-year improvement that we are looking to see. It does plan to be reinvested in UEV and Ford Energy. In terms of where that is coming from, it is coming from improvements in initial quality, which is directly related to the number one mainstream brand award. That is one of the best indicators; I will let Kumar talk about the recall financials which will also follow suit shortly.
The initial quality improvement is great, but this focus is permanent. We are focused on long-term durability and lowering warranty costs, which will turn into lower recall costs as well. This year we have recalled about 12 million vehicles, but the number of recalls is down very substantially from last year, down about 40%. This reflects our intensive strategy to quickly find and fix any hardware or software issues and go the extra mile to protect our customers. We are seeing substantial improvements in our newer model years, both in numbers of recalls and recall volumes and, of course, warranty. It is a virtuous cycle starting to form: initial quality improvements will translate into long-term quality and recall improvements over time.
Can you just remind us the cost gap? This is one of the most important roadmaps to our 8% margin: continue to close the cost gap. We are seeing good initial indications. We want to do what is right for the customer. What I am most excited about is the work I am seeing in the next generation products and powertrains. The team is absolutely obsessed with these next-generation products being engineered with the right supply chain to make a massive move forward in our cost of quality.
Great. Thank you.
Our next question will come from Gautam Narayan with RBC.
Thanks for taking the question, and welcome, Maria. One of the big learnings recently has been how automakers are benefiting from software. We already know about how great this is for you guys at Pro, but I wanted to ask about BlueCruise specifically. Could you comment about how BlueCruise might be contributing to Ford financials? And then, an add-on: the Apple Maps integration—could this expand beyond the UEV platform to other Ford vehicles? Thanks.
For sure, it could. We have not made any announcements, but we are really impressed with the progress that Apple's made in their map product and see the benefit for customers to have a great integrated solution. The big story for Ford is the transformation of our electric architectures. UEV has a fully zoned electric architecture with our own software, and our new-generation products will come with a massive upgrade to our architectures with a lot of software coming from Ford. The ADAS solution and the integration of Apple Maps are going to be mostly Ford efforts. That is a major step forward for our customers. We continue to see great revenue growth with BlueCruise; it is probably on the retail side our best proof point for software. Paid subscriptions in Q2 grew by 20%, which is great, and BlueCruise made up 50% of our retail integrated services revenue. To give a sense of scale, we have now more than 12 million hours used since launch and are approaching a billion miles—about 840 million. We are getting better at selling it and at packaging it tied to our series mix. UEV will have a ramp to an upgradable Level 2 capability, which no one in that segment at that price point has anything close to. So BlueCruise is an important, growing revenue and margin driver for us.
Got it. Thank you.
Next question will come from Mike Ward with Citigroup.
Thank you very much. Good afternoon, everybody, and thanks for doing this. One clarification: Jim, you mentioned Super Duty is an extra 100,000. Did you specify where that was coming from? My question is a follow-on on the subscription side. You mentioned Ford Pro at 900,000—Sherry, you talked about 1.6 million subscriptions. Is the remaining portion of that BlueCruise? And how do you think about the financial contribution—could these subscription revenues add a half point to margin at Ford Pro and overall Ford automotive margin in the next two years? Is that the direction we are looking at?
That is a long question; thank you. Maybe Alicia can comment on Ford Pro software and Sherry can touch on subscription numbers. Companies measure subscriptions differently; philosophically we focus on paid subscription even though we have many trial subscriptions. So you'll hear us emphasize paid subscriptions. Alicia?
I can comment first, Mike. On the first point around the 100,000 additional Super Duties: we are launching the Oakville facility later this year and will have capacity to produce up to 100,000 additional Super Duties. Regarding software and Pro, we are continuing to drive profitable growth by expanding software services and parts to increase our share of wallet. We focus on paid subscriptions—we are over 900,000 for Pro, which is over 20% year-over-year growth, and we expect that to continue through the balance of the year. It will continue to contribute from a margin perspective; software has a higher margin and is contributing to the business.
To add: yes, the remaining portion of the 1.6 million paid subscriptions primarily includes BlueCruise. We could absolutely see the integrated services business being a half point of margin for the company; it is very profitable and we have not really seen the margins come down. To clarify the paid subscriptions: 1.6 million paid subscriptions includes retail plus Pro—the 900,000 was the Pro Intelligence number. The remaining 700,000 of paid subscriptions are retail and other Pro services, and that includes BlueCruise.
Thank you very much.
Next question will come from Itay Michaeli with TD Cowen.
Great. Thanks. Good afternoon, everybody. Just a quick question on the updated guidance: I was hoping we could do a bit of a second-half versus first-half bridge for Blue and Pro. It seems like the second-half outlook for Pro is improved, but Blue seems a little bit lower ex-AIEA. I'm curious on the puts and takes between those two trajectories for those segments.
So first on the enterprise-level guidance, the increase is really simple: mix and pricing. When talking about the second half, if you are looking at the EBIT bridge between second half and first half, you would have increased volume—Super Duty and F-Series coming back in full force for the second half. You will also have commodity impacts: we had a $500 million year-over-year improvement impact earlier and in the second half you will see another roughly $900 million impact. The second half will also have higher investment in UEV and Ford Energy. What you are seeing in terms of improvement is driven by volume, mix, and pricing.
To give more context on Pro: we expect to make up our postponed Super Duty fleet orders in H2 that were primarily affected by Novelis. We expect to end the year with our full recovery to Ford Pro's 2025 revenue run rate, and Super Duty availability aligned with demand. If you look at the first half, from a Pro EBIT perspective, it was $3.4 billion. For the second half, our guidance implies $3.6 billion to $4.1 billion, largely driven by the additional capacity from Oakville and Super Duty production ramp.
That is very helpful. Thank you.
Our next question will come from Emmanuel Rosner with Wolfe Research.
Great. Thank you so much. It's good to see the operational traction this year. Do you expect further improvement in EBIT next year in 2027? If so, could you speak to the puts and takes and the drivers of further improvement?
Emmanuel, good to have you on. I knew I would not get out of this call without talking about 2027, but it is a bit early to talk about it in detail. Let me give some of the puts and takes. First, you will see the non-repeat of the temporary aluminum source costs associated with Novelis; we now expect that number to be about $1.5 billion, which starts you out positively as you look into 2027. The core business is fitter and has momentum; I do expect continued reductions in costs, especially material costs and warranty, and also structural costs. We are seeing continued software and physical services growth. We do have launches in 2027, so you will have launch costs, especially related to Ford Energy and the universal EV platform, both launching in 2027. We are also starting to invest and prepare for an all-new U.S. truck lineup we have started talking about. On the headwinds, you will have the non-repeat of the AIEA tariff EBIT benefit of $1.3 billion booked in Q1; you will also see commodity exposure and planning for four quarters of impact versus three quarters of impact in 2026. Any improvement in commodities would be a tailwind. In short: a company more efficient, more durable, fitter, and better able to absorb headwinds.
Thank you. So overall, would that net to higher EBIT in your math, or is it too early to say?
It is too early to say at this point.
Our next question will come from Colin Langan with Wells Fargo.
Great. Thanks for taking my question. You mentioned $2 billion of raw commodity impact—did you say $500 million is already incurred? Is the other $1.5 billion the headwind in the second half? You also said the $1 billion improvement in material and warranty costs is already impacting the first half. Any color on how much of Novelis cost hit was in the first half versus second half and why the second-half EBIT rate steps down? Especially with Novelis improvement, I would have thought the second half could annualize better. What is unusual in the second half that we should not annualize?
Okay, Colin, let's take those in turn. For commodities, we are expecting a bit over $2 billion for the year, and about $1.5 billion of that will be in the second half—so roughly $900 million additional beyond what we have already had. For Novelis, at this point we have had about $800 million hit to the company; I am expecting the total cost to be about $1.5 billion, so the balance of roughly $700 million would be in the second half. On first-half versus second-half bridges, you had strong volume and mix in the first half. If I annualize the second half it would imply a slowdown, particularly as Novelis recovers; you would expect pickup volumes to be back up. The reason we are not simply annualizing the first half is that the second half will have unfavorable commodity pricing impacts, plus accelerated investments in Ford Energy, the universal EV platform, and the Oakville launch. So while there is strength from recovered volumes, those other factors are headwinds—but on a net basis we are very close to where we were the first half when you take out the non-repeat of the AIEA one-time refund of $1.3 billion.
Colin, we can follow up offline and go through the detail of the model if that would be helpful.
I think we can take one last question. We are almost at the top of the hour.
Your last question will come from Edison Yu with Deutsche Bank.
Great. Thanks for taking our question. I want to ask about Ford Defense. Jim, you had mentioned on the last earnings call that you were contemplating work on the component side. I think the other day you confirmed working on a contract for the ISV. How should we think about this effort going forward and any sense on how big this could be in the next couple of years?
Sure. Ford always answers the call to duty—that is our principle as a company. We did sign a contract with the U.S. federal government to produce three prototypes they are considering based on Super Duty for military use. We are excited to build those. We already dominate that market in the commercial world and want to offer the U.S. government the same advantages that our commercial customers get, including great parts availability and the other benefits of leadership. It is a great opportunity for us. We continue to discuss additional defense-related projects with the U.S. government, but we have nothing else to add at this point. We believe we have a lot to offer, but we will evaluate each opportunity as an adjacency. It has to be a strong business with good returns and capital efficiency. When you look at scale and returns, opportunities like BESS have a very short payback, so these adjacencies are asymmetric. Ford Energy is a great immediate opportunity and we are excited to get going with the U.S. government on these prototypes. Stay tuned; nothing else to add at this point.
Thank you. This concludes the Ford Motor Company second quarter 2026 earnings conference call. Thank you for your participation. You may now disconnect.