安波福 (APTV) 2026年第三季度财报电话会议：营收增长2%，2027年展望谨慎

安波福（NYSE: APTV）公布2026年第三季度营收为32亿美元，按调整后基准计算增长2%。非汽车业务的增长以及北美和亚太地区的强劲表现，弥补了汽车业务营收的下滑以及来自两家德国豪华车企的持续压力。

核心要点

• 第三季度营收增长2%至32亿美元。非汽车业务营收增长11%，而汽车业务营收下降1%。
• 调整后EBITDA为5.67亿美元，利润率为18%。利润率下降了140个基点，主要是由于产品组合变化、软件营收下降以及工程进账（engineering credits）确认时点的因素。
• 安波福在本季度获得了约40亿美元的新业务订单，使今年以来的累计新签订单超过130亿美元。管理层维持全年200亿美元的目标不变。
• 公司在第三季度回购了价值超过2.3亿美元的股票，今年以来累计回购超过5.5亿美元。公司计划在年底前至少回购6.5亿美元，并在至少到2027年前将100%的自由现金流回报给股东。
• 管理层维持了2026年的损益表业绩指引，但将自由现金流指引的中位数下调了2500万美元至6.5亿美元，以反映更高的库存投资。
• 安波福初步的2027年规划框架包含了约7亿美元的半导体通胀补偿收回（主要是内存相关）。预计这些补偿收回对EBITDA影响中性，但会稀释报告的利润率。

核心财务业绩

第三季度的同比比较基于不含原电气配电系统部门的新安波福备考业绩。除非另有说明，增长率均为调整后数据。

业务与经营表现

智能系统部门

智能系统部门营收下降3%至14亿美元。传感器与计算业务营收下降2%，软件与服务业务下降11%，符合上一季度提供的预测。

该部门的汽车业务营收下降4%，反映了项目到期退出以及两家德国豪华车企对华出口下滑的影响。管理层表示，若扣除这些因素，该部门本可实现5%的增长。非汽车业务营收增长3%，其中传感器与计算业务增长15%。

调整后EBITDA利润率收缩了240个基点，主要是由于高利润率的软件与服务业务营收下降，以及工程进账的确认时点影响。

工程元件部门

工程元件部门营收增长6%至18亿美元，北美、欧洲和亚太地区均实现增长。汽车业务营收增长2%，而非汽车业务营收在多元化工业市场的带动下增长16%。

调整后EBITDA利润率下降了100个基点，主要原因是原材料大宗商品价格带来的阻力超过了出货量增加带来的部分效益。

区域表现

中国智能系统业务连续第二个季度实现增长。中国区新签订单增长30%，其中超过20%与出口项目相关。管理层表示，出口平台约占2026年中国智能系统业务营收的10%，根据现有订单情况，预计2027年这一比例将达到15%左右。

非汽车业务拓展

安波福预计2026年非汽车业务营收将超过30亿美元，其中20亿美元来自航空航天与国防、电信与数据通信以及多元化工业市场。

公司提及非汽车业务新签订单达38亿美元，较去年同期增长了一倍以上。最近获取的订单和上线项目涵盖无人机、机器人、数据中心、电池储能、医疗设备和电信基础设施。

安波福还扩大了与英伟达在物理AI和智能边缘系统方面的合作，并与三星合作，利用风河（Wind River）云平台支持韩国的AI-RAN开发。

管理层业绩指引

安波福维持了其2026年的损益表指引，中位数假设保持不变，营收区间有所收窄。公司将全年自由现金流指引的中位数下调了2500万美元至6.5亿美元。

预计因拆分成本和供应链韧性投资带来的现金流拖累从4.5亿美元增加到5亿美元。拆分成本略低于计划，但受通胀影响，库存投资有所增加。

对于2027年，管理层称其展望仍为初步预估。指引上限假设全球汽车产量持平，而更保守的情景则假设下降2%。安波福还对供应瓶颈、通胀和需求不确定性保持了额外的保守态度。

公司预计2027年半导体通胀将同比增加约7亿美元，主要来自内存。管理层计划向客户收回这些成本。这种成本转嫁将增加营收，但预计对EBITDA影响中性，并会稀释报告的EBITDA利润率。

管理层预计非汽车业务的持续增长和经营绩效举措将提供支撑，而涉及两家德国豪华车企的疲软态势预计将持续至2027年底，并在2028年大幅缓解。

风险与关注事项

• 半导体和内存通胀可能会在2027年大幅推高投入成本。
• 供应瓶颈可能会导致阶段性生产中断，并降低运营效率。
• 汽车价格和租赁利率走高可能会压抑消费者的承受能力和汽车产量。
• 关税、大宗商品通胀以及中东和乌克兰的冲突可能会进一步打乱供需状况。
• 来自两家德国豪华车企的营收压力预计将持续至2027年底。
• 就通胀补偿收回和价格转嫁展开的商业谈判可能会延长定点周期。
• 由于企业订单签发时点的因素，预计第四季度软件与服务业务营收将继续同比下降。

分析师问答要点

2027年半导体补偿收回：管理层明确指出，约7亿美元的估算值是一个同比增加的数据，主要由内存通胀构成，并包含部分其他半导体成本。安波福已与客户就此问题进行了6到9个月的沟通，并正在寻求涵盖更高价格和营运资金支持的承诺。

德国豪华车企风险敞口：管理层将2027年的逆风规模量化为约2.5亿至3亿美元。其中约三分之一反映了生产排期放缓（主要是出口平台），其余则包括项目到期退出，以及某个替换项目未能搭载在第二个车型平台上。

中国出口项目：安波福将这一进展归功于与中国车企保持着紧密的工程和商业合作关系，这使其能够清晰了解出口计划和特定市场的认证要求。管理层表示，当使用中国本土零配件和系统级芯片时，该业务的利润率特征与公司整体利润率特征基本一致。

现金流与资本支出：管理层正在审查未签约的资本支出和供应商结构，以缓解营运资金压力。在初步框架下，2026年发生的拆分相关隔离成本预计不会在2027年重复出现。

业务组合审查：安波福正根据增长性、利润率和竞争定位评估其业务与产品组合。管理层计划在2027年第一季度提供最新进展。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and welcome to the Aptiv Q3 2026 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Betsy Frank, Vice President, Investor Relations. Please go ahead.

Betsy Frank

Thank you, Jennifer. Good morning, and thank you for joining Aptiv's Third Quarter 2026 Earnings Conference Call. The press release and slide presentation can be found on the Investor Relations portion of our website at aptiv.com.

Today's review of our financials exclude amortization, restructuring and other special items, and year-over-year comparisons are based on Q3 2025 pro forma new Aptiv results, excluding the former EDS segment. The reconciliations between GAAP and non-GAAP measures are included at the back of the slide presentation and the earnings press release. Unless stated otherwise, all references to growth rates are on an adjusted year-over-year basis.

During today's call, we will be providing certain forward-looking information that reflects Aptiv's current view of future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC filings.

Joining us today are Kevin Clark, Chair and Chief Executive Officer; and Varun Laroyia, Executive Vice President and Chief Financial Officer.

With that, I'll turn the call over to Kevin.

Kevin P. Clark

Thank you, Betsy, and thank you all for joining us this morning. Starting on Slide 3. We delivered solid third quarter financial results, including revenue growth of 2%, which was consistent with the second quarter an EBITDA margin of 18%, in line with our expectations. We repurchased more than $230 million of stock in the quarter, bringing our year-to-date total to more than $550 million and we remain active in the fourth quarter and plan to repurchase at least $650 million by year-end, returning 100% of our free cash flow to shareholders during 2026.

Shifting to future business. We secured roughly $4 billion of new business awards in the third quarter, bringing our year-to-date total to more than $13 billion, which reflects progress in the following strategic areas. In China, we grew bookings by 30%, of which more than 20% are tied to export programs. In Intelligent Systems, we more than doubled European bookings, addressing the customer mix challenges we're facing in that region that are weighing on our growth. And we booked $3.8 billion of nonauto awards more than double the year ago period as we've established our presence in new end markets, including drones and robotics.

The momentum we built in nonautomotive markets has led to a significant revenue base that we're now leveraging to create incremental growth opportunities. We're on track to generate more than $3 billion in 2026 revenues including $2 billion in A&D, telecom and datacom and diversified industrials. As our revenues in these markets has scaled, so have the opportunities to further leverage the breadth of our product portfolio and the depth of our capabilities. This is best exemplified by the award we received in July from a leading drone manufacturer that we discussed on our last earnings call. And the 2 robotics awards we secured over the past 2 quarters as well as the increased amount of business we're being awarded in the energy storage and AI data center markets. I'll talk more about our individual awards this quarter on the next 2 slides.

But looking ahead, we have a large funnel of fourth quarter bookings opportunities and are on track to reach our $20 billion target. That said, award cycles may lengthen as we finalize negotiations on commercial recoveries and the pass-through of price increases which we expect to increase meaningfully in 2027. Now let's review our segments through the lens of the automotive and nonautomotive end market we serve.

Starting with the automotive market on Slide 4, we continue to expand and diversify our OE customer base, creating a more resilient revenue stream. Notable program launches in the quarter included our Next-Gen L2 ADAS smart camera for a lead Chinese OEM exports to the European market. The solution combines a Chinese SoC, Wind River Kaiwu RTOS, a vision stack from StradVision and active software features, all brought together through Aptiv's global ADAS integration, validation and safety capabilities to deliver a cost-effective ADAS solution that meets stringent 2026 European NCAP 5 star safety standards. This solution demonstrates the power of our open, flexible and modular ADAS architecture and our ability to deploy technology from China in global markets. This is just the first of other planned launches with this OEM for export into the European market.

High-speed cable solutions for the flagship SUV and truck program of a North American OEM and a Korean OEM's next-generation EV platform, multiple advanced radar programs across Korean and major Japanese OEMs, reflecting our continued growth and technology adoption across global vehicle programs. A zonal controller with up integrated functionality for multiple premium electric vehicle brands at a leading Chinese OEM and high-voltage interconnect solutions deployed across multiple leading OEMs and 5 chip EV platforms.

We also secured several important new business awards in the quarter, including 2 strategic ADAS awards with a China-based global EV market leader for deployment across its next-generation intelligent driving platforms in 2027. First, an L2 ADAS system, incorporating a localized technology stack and components and second, a next-gen radar solution, enabling L2++ functionality secured on an accelerated development time line. These awards highlight Aptiv's flexibility in delivering innovative high-performance technologies tailored to regional needs and evolving customer strategies.

A conquest award for high-performance cable management products, highlighting continued adoption across leading Japanese OEM platforms, another award for our modular connector portfolio for a leading European OEM next-generation modular vehicle architecture. And lastly, 2 integrated cockpit controller awards for Chinese OEM export programs, further strengthening our competitive position as these customers expand globally.

Moving to Slide 5 to discuss our product -- progress in nonautomotive markets, where new business awards further strengthen our confidence in the growth potential of these markets. We continue to deepen our network of strategic partnerships during the third quarter, including an expanded partnership with NVIDIA, which brings together NVIDIA's edge platform and active sensing, compute software and systems integration capabilities to accelerate the deployment of production-ready physical AI and intelligent edge systems and a partner with Samsung, leveraging our Wind River cloud platform solution to support the advancement of AI-RAN in Korea.

During the quarter, we also executed mobile new program launches across our portfolio, a high and low voltage interconnect products for a leading commercial vehicle manufacturer. Collectively, these launches reinforce the applicability of our portfolio across vehicle architectures. Lastly, we launched our first RADAR program for a major commercial vehicle OEM in North America.

A few notable new business awards in the third quarter included an award in China for humanoid robots incorporating high-performance compute and interconnect technologies, high-performing interconnected connectivity solutions for data center and battery energy storage applications, reinforcing our portfolio supports next-gen AI infrastructure an award in the medical device industry, providing high-performance cable assemblies for critical patient care applications where reliability performance are paramount. And lastly, a key software award was a leading telecom equipment provider supporting a range of critical network infrastructure applications.

Turning to Slide 6. I want to take a minute to talk about the setup for 2027 before Varun walks you through the numbers. Starting with the challenges, which we believe present risk to third-party vehicle production forecast, First, the industry is experiencing significant input cost inflation. For memory chips, the favorable pricing we secured for our customers in 2026 will not repeat in 2027. We're well ahead of this headwind in 2026 due to our robust supply chain strategy.

We began investing in buffer stock inventory in early '25 for select customers who are interested in the added insurance. And over the same period, we've met regularly with these customers to fight our expectations for supply constraints and material inflation, including on semiconductors and memory chips. As you'd expect, these customers are now more strategically positioned to mitigate any supply constraints, which are starting to affect OEM production schedules. On top of this broader commodity inflation and tariffs continue to increase input costs.

Second, regarding assumptions for vehicle production. We believe ongoing supply chain constraints will continue to lead to intermittent production disruption. Affordability pressures from the combination of higher MSRPs and lease rates could weigh on consumer demand and could translate to lower vehicle production. And the conflict in the Middle East and Ukraine as well as evolving global trade and tariff policies across Europe, the U.S., Mexico and China, could further increase input costs and exacerbate current supply-demand imbalances.

Our outlook for 2027 is also influenced by current revenue headwinds driven by 2 luxury German OEMs that will continue through the fourth quarter of next year and largely abate in 2028, which Varun will touch on shortly. So as we position our business, we're taking a more cautious posture. But these challenges have also presented several opportunities.

Our resilient global supply chain, which we execute on a regional basis, includes dual sourcing and validation of product alternatives and is backed by a digital twin that covers 95% of all the parts we procure, mapped down at least 4 supply tiers and covers 99% of the semiconductors we purchased, mapped down at least 5 supply tiers. And to the extent our customers face increased cost pressure, the resiliency of our supply chain enhances the value of our advanced technology solutions, which are high-performing, open architected, scalable and cost-effective.

As a proof point, last week, we received a customer award that draws on all of our strengths, resulting in significant incremental ADAS content, replacing competitors' high-cost vision, parking and surround view monitoring systems with a fully integrated Aptiv ADAS platform, built our smart camera with latest generation DDR5 memory for supply resilience that incorporates the vision solution from our partner StradVision and Aptiv's full L2+ ADAS, parking and in-cabin software in hardware tech stack.

The challenging environment is creating incremental opportunities for our high-performance, cost-effective dilutions, although the impact on revenue will be more pronounced in 2028. Outside of the automotive market, we're finding significant opportunity energy storage, data center, robotics and aerospace and defense markets by leveraging our world-class supply chain capabilities as well as our portfolio of computing perception systems and high-speed interconnects. Varun will share more on how all this is shaping our 2027 financial outlook.

So with that, I'll hand it over to Varun.

Varun Laroyia

Thanks, Kevin, and good morning, everyone. Starting on Slide 7 with our third quarter financial results. We delivered revenues of $3.2 billion, which grew at an adjusted rate of 2%, consistent with the prior quarter. The results include 11% growth in non-auto and a 1% decline in automotive. Looking at revenue growth by region. North America grew 5% driven by strength in both our Intelligence Systems and Engineered Components segments.

In Europe, revenue was down 5% and driven by a decline in the Intelligent Systems business, where revenue was impacted by weakness with 2 luxury German OEMs, which we expect to persist through the end of 2027. This was partially offset by growth in the Engineered Components segment. And in Asia Pacific, revenue increased 5%, including a 13% growth in Asia ex China, mainly driven by growth in India and 1% growth in China driven by continued momentum in Intelligent Systems, which grew for the second consecutive quarter.

Adjusted EBITDA totaled $567 million, and adjusted EBITDA margin decreased 140 basis points due to product mix, including lower software revenues and the timing of engineering credits. Favorable commodities partially offset by favorable FX and investment in both segments directed towards organic growth initiatives. Earnings per share was $1.42, a decrease of $0.06, reflecting lower operating income, offset by the benefit of share repurchases and lower tax expense.

Free cash flow for the quarter was $194 million, which brings our year-to-date pro forma free cash flow to $44 million. I'll talk more in a moment about full year expectations though our pacing through Q3 is consistent with our outlook for the full year, given the separation costs incurred in the first half of the year related to the spin of our Electrical Distribution Systems business, inventory investments to ensure supply chain resiliency and seasonality.

Moving to Slide 8 to cover segment level financials. In Intelligence Systems, revenue of $1.4 billion was down 3%, mainly driven by Europe and partially offset by growth in North America and Asia Pacific. Sensors and compute revenues were lower by 2%, owing to softness in automotive. Software and Services declined 11%, in line with our forecast that we updated last quarter. Automotive revenues were down 4% driven by program roll-offs and lower exports to China with 2 German luxury OEMs and excluding these would have resulted in growth of 5% for the segment.

Nonautomotive revenues grew 3%, reflecting 15% growth in Sensors and compute, partially offset by weakness in software and services. Intelligent Systems adjusted EBITDA margin contracted by 240 basis points, driven primarily by the lower revenues and higher margin software and services and the timing of engineering credits partially offset by performance initiatives.

Moving to Engineered Components. Revenue of $1.8 billion grew 6% versus the prior year with growth across North America, Europe and Asia Pacific. Automotive revenues grew 2%, while non-auto markets grew 16%, mainly driven by growth in diversified industrials. Adjusted EBITDA margin decreased 100 basis points, reflecting commodity headwinds, partially offset by flow-through on higher volume.

Turning to Slide 9 for our 2026 financial guidance. As a reminder, our guidance is based on pro forma numbers, which are available on the Investor Relations website under the quarterly financial section. And for the full year, we are maintaining our income statement guidance from last quarter with the key metrics unchanged at the midpoint and the revenue range narrowed. On free cash flow, we are narrowing the range for the full year and lowering the midpoint by $25 million to $650 million. The initial $450 million drag on free cash flow associated with spin-related costs and supply chain resiliency is now $500 million with separation costs slightly lower than planned and inventory investments higher going to inflation.

For the fourth quarter, we forecast revenue of $3.2 billion at the midpoint, representing adjusted growth of 3%. The sequential step-up in revenue growth of 1% reflects production recovery at a North American OEM and higher commercial vehicle revenues offset by lower vehicle production. And I would also note that software and services revenues are forecast to be lower year-on-year in line with the third quarter decline owing to the timing of enterprise awards. We expect adjusted EBITDA of $612 million and margin of 19.4% at the midpoint. The sequential gap up in margin is driven by customer recoveries engineering performance benefits, including credits and manufacturing performance. For earnings per share, our guidance implies $1.45 at the midpoint.

I'd like to conclude by sharing our initial thoughts on the 2027 financial outlook. As Kevin shared, we are planning for changes to vehicle production. Third-party forecast as of September are calling for flat vehicle production globally. In our framework for production assumptions, we've anchored the top end of our range to this flat scenario which we think is optimistic given our expectations for supply constraints and significant input cost inflation related to semiconductors, including memory chips, broader commodity inflation and overall affordability pressures.

Our results will be impacted by 2 further items. First, pricing and recoveries were higher semiconductor prices will create a revenue benefit. Currently, we are estimating approximately $700 million in inflation related to semiconductor prices, primarily memory. The second impact relates to our Intelligent Systems business, which will continue to be impacted by weakness with the 2 German luxury OEMs going to net program roll-offs that concluded the end of 2027. and lower production assumptions for exports to China. Beyond these items, our resumptions for revenue growth incorporate an incremental element of conservatism, which we believe is appropriate at this stage.

Regarding bottom line impact, the recoveries will be neutral to EBITDA but create margin dilution given the lack of margin on higher prices being passed through. We will provide more details when we issue formal guidance next quarter. Outside of the points I mentioned, we expect it will be a flat to slightly positive year, driven by the combined impact of revenues ex recoveries, continued growth in nonautomotive markets, investments supporting organic growth and performance initiatives.

With that, I will turn the call back to Kevin for his closing remarks.

Kevin P. Clark

Thanks, Varun. I'll wrap up on Slide 11. I want to close by underscoring that regardless of the near-term challenges, we continue to see significant long-term opportunity in our business, supported by our differentiated portfolio of advanced technologies. We're confident that the strategy we've built serving the automotive market positions us well as the industry adapts and evolves. We're also confident in our opportunity beyond automotive, where we continue to make organic investments across both business segments to accelerate our penetration, building on the momentum we've already established.

The opportunities in the auto and industrial markets underpins our expectations that our revenue growth reaccelerates in 2028. This confidence, combined with what we believe is a disconnect between the intrinsic value of our stock and its current trading value is leading us to prioritize share repurchases in our capital allocation strategy. which means we plan to return 100% of our free cash flow to shareholders through at least the end of 2027, consistent with what we're doing in 2026.

As we focus on unlocking shareholder value, we're evaluating the composition of our business and product portfolio, and we will provide an update in the first quarter 2027. In summary, we're focused on shareholder value creation through strong operating execution, disciplined capital allocation and portfolio optimization.

Operator, let's now open the line for questions.

Operator

[Operator Instructions] We'll take our first question from Dan Levy with Barclays.

分析师问答

Dan Levy

I wanted to start first with the growth outlook. And if you back out, obviously, the $700 million, it implies growth is roughly flat. Maybe you can just help for '27. Maybe you could just help us understand some of the moving pieces. I know you said that's being weighed down by the reduced export business from Europe to China, what are the offsets that you're seeing there in terms of maybe some of your non-auto business doing well and perhaps other pieces of the backlog or bookings that may be launching. So just some puts and takes within the growth to help us understand what's otherwise sort of a flat growth outlook ex the recoveries?

Varun Laroyia

Certainly, Dan. It's Varun Laroyia here. Thanks for the question. Listen, with regards to 2027, this is a preliminary outlook. And I do want to state, given the points that Kevin and I raised with regards to the base case being at the top end of our range. we think is optimistic, specifically given supply constraints, input cost inflation, broader commodity inflation, affordability pressures, right? So that's kind of point number one.

But as we think about the overall mix of our businesses, listen, we remain confident in our growth outlook for nonautomotive that, as you've seen now for the past several quarters is performing well. We expect that to continue, and that's backed up also by the bookings that we've seen which have essentially doubled up on a year-over-year basis. So we feel good about that.

The automotive business, which accounts for 3/4 of our revenues at this point of time, that essentially is the challenge with regards to what the vehicle production outlook is for the points that I just mentioned. As we think about areas where we are making progress, North America and also Asia Pacific, China, Intelligent Systems in China now for the second quarter has delivered a second consecutive quarter of growth, given a weak domestic environment and our bookings on export platforms continue to increase.

The final point I'll share from a growth algorithm is essentially our European business and Intelligent Systems specifically where we've talked about the fact that we've been impacted by net new programs. This includes the roll-offs and then also the 2 German luxury OEMs which have exports from the EU into Europe being impacted. We expect that to persist through the end of 2027 before returning to growth in '28.

Kevin P. Clark

Yes. Maybe, Dan, it's Kevin. I'll just add to Varun's comments, that's what [indiscernible]. Listen, high level -- as we look at the market today, it's certainly dynamic, and Varun talked about the base line off of IHS then downside of vehicle production down 2%. In addition to that, we're concerned with respect to supply chain constraints that we're going to see some intermittent supply chain disruption, actually an increase in supply chain disruption, and that will have an impact both on vehicle production revenue growth as well as just overall operating efficiency. So that's something that we're watching very, very closely.

Now we're in a very good position to manage through that. However, we don't have the same visibility across the supply base and the OEM base to fully understand how well their position. Varun mentioned the headwind from the European OEM. That headwind will continue through the end of 2027. So I would say those are the overall kind of negatives that look at positives.

Look, bookings are strong. The mix of bookings with -- as Varun touched on China local OEMs, both for export out of China into Europe and elsewhere, specific programs we're working on now with European OEMs with respect to some of the China-based solutions or technologies that they plan on implementing in the European and other global markets. Those are significant opportunities. And again, the strength we're getting out of nonautomotive is very strong. Underneath all of that, though, we just overlaid an incremental level of conservatism above and beyond the range of down to -- flat to down 2% from a vehicle production standpoint just to ensure that we captured anything that we could reasonably envision occurring in a market as dynamic as this market.

So I think there is an element of a reconciling item that I would just characterize as a fairly significant level of conservatism as it relates to our outlook, just given the environment.

Operator

We'll take our next question from Joe Spak with UBS.

Joseph Spak

Just -- first question, I just want to start back on the $700 million of recoveries that you're talking about for '27. And I understand it's preliminary, but like how set is that number in terms of the conversations you've been having with your customers? And you made it seem like that's equal to your cost headwind because I think you said the margin impact is just sort of dilution. So I want to make sure you don't think there's going to be any leakage, so to speak, from the commodities? Or is some of that leakage embedded in that other 30 basis points impact you talked about from commodities and FX.

Kevin P. Clark

Yes. I would answer it this way, Joe, it's Kevin. Listen, just given the order of magnitude of the inflation one; two, we've been having discussions with our customers for the last, I would say, 6 to 9 months with respect to sizing the potential risk or issue. And the negotiations we're having with respect to, obviously, we can't absorb this cost. And if our own customers want parts they need to sign up for the increased prices related to semiconductors. So that's certainly our posture with our customers. That's the position that we're taking and our commercial organization is executing on that plan.

Joseph Spak

Okay. Second question, Varun. Just if you look at the preliminary '27, it looks like EBITDA is fairly flat year-over-year. You're talking about 100% of free cash flow being returned next year. Any guidance or commentary on CapEx plans, should that be pretty flat? And what about working capital? Because I can imagine that being a little bit more of a headwind given the higher cost inventory and maybe some timing issues with the receivables and the recoveries. But any color there would be helpful so we can calibrate the potential free cash flow return.

Varun Laroyia

Yes, Joe, I think that's a great question. Given the recoveries aspect of it, as Kevin mentioned, good conversations taking place with our customers. And it's not just the point about recovering the cost inflation but also the net working capital impact. I will not be giving a cash number here, but what I will share with you are a few elements within the framework. So for example, when you think about 2026, and the EDS spend-related separation costs, we do not expect those to reoccur in 2027 in this preliminary view at this point of time.

With that being said, with the inflation moving up, that essentially is what we are working through with our customers without getting their support and commitments, we cannot ship parts. So we need those commitments coming through, including from a funding perspective. Beyond that, as you can imagine, we are taking a fine wire brush working through CapEx plans and other elements to ensure wherever we can be more judicious about noncontracted capital expenditures. We are working through that piece, including working with our supplier communities and looking at structures whereby we could mitigate some of that net working capital impact.

Kevin P. Clark

I would say, Joe, maybe again, getting back to the comment -- the question that was asked earlier. Listen, operationally, we have plans to address any of these words of headwinds whether it's inflation, whether it's investment in inventory, which you're right, given the inflation that would be a natural outcome. However, we have offset in CapEx and expense in payables, in other areas of inventory that we're -- we have in place to drive that investment down. And then on top of that, although our plans and our intentions are our customers compensate us for all of these investments.

I mentioned we've incorporated an incremental level of conservatism into our outlook as it relates to 2027 to contemplate things that we don't have perfect line of sight to us sitting here in early November at this point in time.

Operator

We'll go next to Andrew Percoco with Morgan Stanley.

Andrew Percoco

I just want to stick to 2027 here for one more second. When we think about the revenue preliminary revenue outlook. I just want to make sure I understand the moving pieces here. It sounds like you're assuming you're taking essentially market growth and assuming growth under market. Is that a fair way to kind of interpret the preliminary revenue guidance for 2027, and that's essentially offset by non-auto growth. I just want to make sure I understand kind of the consortium and the moving piece baked into the revenue guidance specifically for 2027 as it relates to the auto business.

Varun Laroyia

Andrew, yes, it's Varun Laroyia. Yes, if you think about kind of the range, we start off with the base assumption that's how -- that these are the September third-party forecasters starting with that, that's at the top end of our range. And then below that is essentially where we are ranging it given the various elements from a macro perspective, but also supply constraints among other things. So that is correct.

Andrew Percoco

Okay. That's helpful. And then maybe if you could just talk a little bit about the incremental margin that you're assuming before some of the recoveries, obviously, pretty strong relative to what you've seen this year. So can you just maybe talk through what some of the assumptions are there in terms of what's the driver of the improvement in the incremental margins as we go into 2027?

Varun Laroyia

Yes. Listen, so let me start and then Kevin, you can certainly add if you have any additional comments. So putting aside the point of dilution from recoveries related to material inflation, our overall incremental margin algorithm of the '26 to '27 points on revenue growth ex recoveries, that remains, right? So starting off with that, given the broader inflation on commodities, oil, copper, gold, silver and obviously the impact into resin, that's some of the FX and commodities and other commodity inflation that we're seeing, which essentially we plan to offset through performance initiatives.

But that's really how you should think of it. The overall growth algorithm for incremental revenue has not changed, but we're just highlighting the fact that there will be a margin dilution effect associated with the recoveries that we anticipate coming through the top line.

Operator

We'll go next to Mark Delaney with Goldman Sachs.

Mark Delaney

I wanted to better understand what's happening China. And with bookings on China exports at over 20% of the mix year-to-date, can you help us better understand what that means for revenue for China exports next year compared to what I think was about 10% this year? And maybe more importantly, if you could also touch on the margins on that business, are you -- that you're winning? Are there different margins associated with the recent bookings?

Kevin P. Clark

Yes. No, Mark, it's Kevin. So it's a good question. The China team has done a great job as it relates to commercial pursuits quite frankly, across both business segments portfolio. A lot of our discussion recently has obviously been with respect to the Intelligence Systems segment and their impact as it relates to exports out of China and the platforms they're on. This year, I believe it's roughly 10% of our revenues are on export platforms. from China into Europe and elsewhere, again, within the Intelligence Systems segment next year based on bookings that increases to mid-teens.

So we've made significant progress. There are more commercial opportunities that they'll execute on the balance of the year that will likely increase that particular mix of business. And then we're working with 3 of the China local OEMs on their current activities as it relates to manufacturing in Europe and South America that will provide incremental benefit as well.

As it relates to margin profile, it's roughly in line with our overall margin profile that is dependent on using China-based materials inputs, including China-based SoCs. To the extent one of our customers is interested in a Western-based SoC. Obviously, that's a more expensive solution for that particular customer. But to date, as I mentioned in my example, we've had a lot of success, especially in Europe and Southeast Asia, leveraging the China-based cost structure and design capabilities to meet the needs of Europe and other markets.

Mark Delaney

My other question was about the program loss that you mentioned with the 2 German luxury OEMs. Maybe how many can size that headwind quantitatively? And then just the reason for that occurring? Is this a situation where Aptiv didn't win the follow-on business and maybe needs to adjust its strategy in the future? Or is this more about those German OEMs just having some challenges internationally, I think you're thinking about China and maybe those vehicle models just aren't being continued in the future.

Kevin P. Clark

Yes, it's -- there's an element of both, quite frankly. So it's 2 luxury German OEMs. It's a significant part of our I would say in Europe, we are overweight German OEM revenue mix. About 1/3 of the headwind in 2027 comes from just softer schedules, principally on export platforms. So I think you probably can guess who they are based on historical dependence upon the China market for the premium brands as a place of business. So that's about 1/3 of it.

The bounce is a mix of legacy program that we won some replacement business. We alluded to it in our last quarter earnings call. that replacement business initially was going to be run across another vehicle brand. So the runoff of that particular program would be partially offset by the launch that actually started last quarter on one of the luxury brands, but did not end up launching on the second vehicle platform.

And we alluded to it in the last quarter earnings call, that had an impact as well. So that would account for roughly a little over 1/3 of the balance. And I think the total value is kind of a couple of hundred million dollars, $250 million to $300 million of headwind.

Operator

We'll go next to Emmanuel Rosner with Wolfe Research.

Emmanuel Rosner

First, starting with the expected $700 million in inflation recovery in 2027, I think in the past, you've quantified your memory by at around $175 million. So $700 million would potentially be 4x that. Can you just maybe just clarify what's in that $700 million? Is that -- it's really sort of like a 4x inflation? Or are there other pieces that are going into it?

Kevin P. Clark

Yes. It includes -- it's mostly memory, Emmanuel, it's mostly memory the conductor some semiconductor as well that's in that number. That's where those 2 areas are the areas where we're seeing the significant inflation. I think depending on node price increases on a year-over-year basis are significant. It varies a bit by what technology, quite frankly, not what technology that you're actually using. Some are actually the year-over-year price increases are actually higher, some lower than that, 4x that you're talking about.

Emmanuel Rosner

Got it. And then you -- Kevin, you concluded your remarks with saying we're evaluating the composition of our business and product portfolio, and we will provide an update in the first quarter of 2027. Can you just talk to that a little bit more. Obviously, the update is in the first quarter of 2027, but what's -- what are you looking at?

Kevin P. Clark

We're looking at our portfolio of businesses, our portfolio of products with the backdrop in context of current market challenges and market opportunities, our outlook for revenue growth and margin profile and the competitive position that those businesses are in. I would say, what you would expect, Emmanuel, because it's just a deep dive in on a very detailed valuation just given the current environment.

Operator

We'll go next to Itay Michaeli with TD Cowen.

Itay Michaeli

Maybe a first question on the 2027 outlook. Can you share what you're assuming for China export versus domestic next year. Now this year, it's been a significant drag on overall outgrowth relative to LVP. Maybe just help us with what you're kind of preliminarily assuming for next year on those fronts?

Kevin P. Clark

Yes. Our preliminary estimate is down slightly, Itay, which I think is the expectation of most people given some of what we're hearing out of Europe. China market flat is kind of our baseline outlook. We have the downside with the China market or China vehicle production actually declining. Listen, I think there is a scenario that is out there that exports don't decline. They just move to different markets. So African continent and elsewhere.

But for now, our overall view has been fairly muted vehicle production across, quite frankly, every region at the top end that Varun walked through. And then as I said, down 2% in the more conservative scenario.

Itay Michaeli

That's helpful. And as a quick follow-up. Maybe just talk more about the human or robot award, I think you mentioned with the Chinese OEM. I'm curious whether that opens up additional awards for humanoid for you.

Kevin P. Clark

Yes. So yes, it does. So we're active in the robotics space across all regions, obviously, including China. In China, they're very much China-based solutions in Europe and North America. They're very much Western solution from an input standpoint. We talked about where we bring value perception systems high-speed cable assemblies, advanced compute. Those are the principal areas that we're focused on. We see significant opportunity there.

I think as we've talked about in the past, we think a more likely high-volume use cases with AMRs versus humanoid at this point in time. Our view is that's a more challenging technical challenge. We are working with a few of the humanoid developers, both in the U.S. as well as in Europe and in China, but most of our robotics focused in and around EMRs.

Operator

We'll go next to James Picariello with BNP Paribas.

James Picariello

Just to first revisit Emmanuel's question regarding the 2027 revenue bridge. Is the $700 million in recoveries purely a year-over-year figure? Or is it relative to the base of $175 million in memory recoveries for 2025, which I believe is incurring a low double-digit percent increase this year, so is the year-over-year recovery $500 million or $700 million?

Kevin P. Clark

Yes, it's $700 million. So the year-over-year is $700 million. 2026, just -- and I don't know if it was a part of your question, as I mentioned in my prepared comments, Jim, we -- the team did a very good job in terms of in mid-2025 locking up both supply as well as price on memory. So 2026, as we've talked about in the past, impact on Aptiv as well as our customers was actually relatively minimal from an inflation standpoint, given the nature of the contracts we've had, as we had 26 into 2027, given what seems to be the continued tightness in the memory market, obviously, prices have increased, again, depending upon the technology and the particular supplier of memory.

James Picariello

Got it. That's clear. And then can you just share any 2026 guidance color by segment in terms of how you're thinking about core growth and EBITDA profitability for the fourth quarter here for Engineered Performance and Intelligent Systems?

Varun Laroyia

Yes, James, it's Varun Laroyia here. Listen, overall, we feel good about the guide we've given from an enterprise perspective for the fourth quarter. So that's going to put that detail there. From a revenue perspective, I'll share with you, as I mentioned in some of my prepared comments, it's production recovery in North American OEM that was impacted by a supplier fire a year ago.

Our commercial vehicle revenues are robust. And as Kevin mentioned also earlier, in his prepared comments, we've been winning some good business with next-gen high-voltage and low-voltage programs. So that's going to continue to come through strongly. It is offset by lower vehicle production more generally. I think that's out there in the market in any case and then obviously, the software and services piece also that I called out.

Within the 2 businesses, Engineered Components business will -- is expected to grow in line to maybe slightly higher than what they have been tracking to. And then our engineered -- our Intelligent Systems business, more specifically continues to be impacted by the net program roll-offs that we talked about, but also the exports going from Europe into China. As I mentioned, excluding some of those declines, that segment would have grown. So that continues to impact the Intelligent Systems business.

With regards to margin, as you would have seen, Q3 was still a net price decline for us. And as I mentioned, it's customer recoveries, engineering performance benefits, but also engineering credits that typically occur in the fourth quarter and then some incremental manufacturing and performance initiatives which is going to drive the margin. And that obviously is across both segments.

Kevin P. Clark

Yes. So maybe just -- so Q4 revenue growth increasing. Part of that is a year-over-year comp benefit. So revenue growth is increasing. When you look at EBITDA margin and operating margins, as is typical, Q4 is typically our strongest quarter just given timing of engineering rebuilds and customer credits, items like that. So that should translate into the highest EBITDA and operating income margin profile for the quarter. current outlook and as both segments growing from an overall growth standpoint.

And as is typical, the fourth quarter tends to be a stronger margin profile for both businesses. especially the Intelligent Systems business in Q2. Just given the nature of engineering credits and recoveries there.

Operator

We'll go next to Tom Narayan with RBC.

Gautam Narayan

The first one on a follow-up to Mark's question. Kevin, I think you said of Chinese revenues you guys have around export platforms and intelligent systems. And next year, you'd get to mid-teens and they are making significant progress. Just curious how you're able to do this. Other Tier 1s we talk to, say, it's up to the Chinese OEMs to determine what gets exported and what's used for domestic. Is this something specific to Intelligent Systems where you can impact the Chinese OEM decisions?

Kevin P. Clark

Well, I think what's important -- I think what's important, Tom, is that your engineering organizations, your commercial organizations are deeply embedded with those OEMs that they understand what their product plans are, what specific programs will have will be for export, which as you can imagine, they need to be homologated differently, right? They need to meet different standards. So there's an element of a different system, different features, different, maybe some calibration of technologies. So if you have a strategic relationship with the OEM or you're fostering one, you will get visibility to what their product plans are and then you need to be competitive, right?

So it isn't a matter of 1 day a vehicle as a domestic platform and then the next day it's being exported, right? Just the homologation requirements, the regulation of quite frankly, every country requires a certain amount of unique items or unique standards that you need to meet, therefore, it needs to be contemplated or planned for in advance.

Gautam Narayan

Got it. No, that makes sense. And then as a follow-up to I think Itay's question on the '27 China production forecast, your own forecast. It looks the EU finally has some teeth with some policy changes on Chinese exports. I think I heard you say you expect exports flat from China. And then flat to down on total China production. I know S&P has exports down in '27, but then domestic sales up with overall China production. Just curious if -- are you guys just being conservative here? Or is this what you're kind of -- what you're seeing and you expect?

Kevin P. Clark

Yes. Listen, I think there's a little bit of -- so at a high level, our general view is exports will be down in China. The domestic market will be flat to up slightly. That's our -- there's some of that one could argue is -- and that's our base, that baseline assumption that Varun talked about, the starting point. So that is our baseline assumption. We have a second scenario that we referred to where vehicle production is done 2%. That's comparable for the China market. I think there's a question of how does that -- how much do those export volumes or the potential site and export volumes impact that down 2%.

So I would say, at this point in time, we're not that precise. We would also say, though, there discussions with our Chinese OEM and the Chinese governments exports may be down in Europe, but I think their base plans today are they will make up those declining exports in those markets with exports elsewhere. So we'll see how that plays out. As it relates to vehicle production, we try to give investors a range. The baseline is off of IHS so that from a comparability standpoint, it's easy to what we're seeing to what others are saying.

Overlay on top of that was an incremental level of conservatism as it relates to revenue, earnings and cash flow that we overlaid on top of that contemplating some of the challenges that could arise in the market. And then our second scenario is vehicle production down 2%, which, again, we overlaid an additional element of conservatism as relates to revenue, earnings and cash flow again, to contemplate all of the challenges and uncertainty that's currently going on in -- so that's how we've bracketed the 2. And as I mentioned, we've included an incremental amount of conservatism to make sure that we could capture everything that we could reasonably contemplate from an outcome in 2027 or an environment in 2027.

Gautam Narayan

Got it. Thanks for providing the '27 guidance.

Operator

That will conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Kevin P. Clark

Thank you, everyone, for your time this morning. We look forward to following up with you following this earnings call. So take care, and have a nice day.

Operator

The call is now complete, and thank you for joining.