Goodyear Tire & Rubber (GT 3.22%), a global tire manufacturer serving automotive, commercial, and industrial clients, released its latest earnings report for Q2 2025 on August 7, 2025. The most noteworthy news was a sharp drop in core profitability, with adjusted net income swung to a loss, despite GAAP revenue slightly exceeded analyst expectations. The company posted non-GAAP losses per share of $0.17, missing the analyst estimate of $0.02 by nearly $0.19 per share (non-GAAP). GAAP net income surged to $254 million, but this included a sizeable one-time gain from the sale of the Dunlop brand. On an adjusted basis, net income was negative, reflecting operational weaknesses. Overall, the quarter exposed headwinds in core financials and raised questions about the pace of the company's ongoing transformation.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | ($0.17) | $0.02 | $0.17 | ($0.34) |
| Revenue (GAAP) | $4.47 billion | N/A | $4.57 billion | (2.2%) |
| Segment Operating Income | $159 million | $334 million | (52.4%) | |
| Net Income (GAAP) | $254 million | $79 million | $175 million | |
| Total Segment Operating Margin | 3.6% | 7.3% | (3.7 pp) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
Goodyear Tire & Rubber manufactures and sells tires for cars, trucks, airplanes, and other vehicles, serving customers worldwide. The company operates with well-known brands such as Goodyear, Dunlop, and Cooper, and it holds a significant presence with 53 plants in 20 countries. Its products reach end users through original equipment (vehicles sold with Goodyear tires installed) and through replacement tire channels.
Recently, Goodyear has been focused on a sweeping transformation initiative called "Goodyear Forward." This plan aims to streamline its portfolio, improve profitability, and reduce debt. It includes major asset sales, cost-saving measures, and a shift toward making higher-margin products. Goodyear's success hinges on managing raw material costs, adapting to global trade dynamics, and executing premium product strategies in a fiercely competitive tire market.
Quarter in Review: Key Developments and Data
During the quarter, Goodyear's core profitability weakened sharply. Non-GAAP earnings per share dropped to a loss of $0.17, adjusted (non-GAAP) EPS missed expectations, and was down from an adjusted profit of $0.17 per share in Q2 2024. GAAP revenue of $4.5 billion exceeded consensus, but fell 2.3% from the prior year, reflecting soft replacement tire volumes outside the U.S. and a moderate decline in overall tire units sold.
Segment operating income, which measures the profitability of the company's primary business activities, fell to $159 million from $334 million the previous year. This led to a shrinking total segment operating margin to 3.6%, well below Goodyear's stated transformation target of a 10% segment operating margin by Q4 2025. Primary drivers included higher raw material costs and inflation. In the Americas segment, replacement unit volume dipped 2.0%, while original equipment (OE) volume was down 5.0%. However, Goodyear reported OE market share gains in the U.S. and EMEA (Europe, Middle East, and Africa).
By region, the Americas segment saw net sales drop 1.3%, with segment operating income for Americas fell by $100 million to $141 million due to cost pressure. EMEA net sales grew 5.1%, but a swing to a $25 million segment operating loss marked a steep drop from the previous year's $30 million segment operating profit in Q2 2024, as channel destocking and raw material costs weighed heavily. The Asia Pacific segment posted a 22.7% sales decline and a 15.6% drop in tire units in Asia Pacific, reflecting exited low-margin business and weakness in Chinese demand. Despite this, margins improved in Asia Pacific by 1.5 percentage points after adjusting for the sale of the off-the-road (OTR) tire business.
Net income according to generally accepted accounting principles (GAAP) rose to $254 million, driven by a $385 million pre-tax gain from the Dunlop brand sale. When excluding the impact of this and other one-off items, adjusted net income (non-GAAP) showed a substantial loss, marking a reversal from the previous year's adjusted net income. This highlights that headline profits were due to non-recurring gains rather than ongoing operations. The company also recognized $195 million in cost savings from Goodyear Forward activities, with $395 million in Goodyear Forward benefits year-to-date.
Other notable factors included a continued commitment to portfolio optimization, as seen in the sale of the OTR tire business for $905 million in Q1 2025 and the completion of the Dunlop brand transaction for $735 million in gross cash proceeds on May 7, 2025. The sale of the chemicals business remains pending. Cash and cash equivalents at the end of the quarter stood at $785 million, and Goodyear reduced net debt by almost $1 billion in Q1 2025.
Goodyear continued to pursue product innovations and focused on higher-value tire segments, including premium, luxury, and electric vehicle (EV) fitments. The company carried out significant SKU (stock keeping unit) rationalization, trimming its product lineup to focus on higher-profit items and greater manufacturing efficiency. A planned 10 million unit increase in high-value tire capacity, especially at its Lawton plant in the U.S, is scheduled for late 2025 and 2026. The company also continued its sustainability initiatives, launching new tires with an emphasis on high recycled content and renewable materials.
Management flagged that raw material headwinds continued to erode margins. Total price/mix impacts versus raw material costs were negative $83 million. Tariffs remained an additional cost, with annual impacts projected at approximately $300 million, most of which affect the U.S. market. Goodyear's larger U.S. plant footprint reduces its tariff exposure compared to many competitors, offering a potential future advantage as post-tariff inventory works through the supply chain. Segment operating margin expansion remains a key metric to watch, as performance (non-GAAP) was well below targets.
A material one-time event during the quarter was the Dunlop sale, which provided a significant gain but does not represent ongoing business earnings. These proceeds boosted net income and allowed for further deleveraging but do not improve the underlying business results. The company is still working to close the chemical business sale, which would provide both cash and a further shift in business mix.
Looking Ahead: Outlook and Forward Factors
Management reaffirmed its goal of achieving a 10% segment operating income margin and reducing net leverage to under 2.5x by the end of FY2025. The company projects that the second half of 2025 will benefit from greater pricing realization, stabilizing volumes, and ongoing cost savings from Goodyear Forward activities. Price/mix benefits are expected to average about $150 million per quarter in Q3 and Q4 2025, with
Despite these plans, Investors should continue to monitor several critical factors in upcoming quarters: the pace of margin recovery, ability to pass through raw material and tariff costs, completion of the chemical business sale, and realization of pricing gains as U.S. inventory normalizes. The timing and magnitude of volume stabilization, especially in China and EMEA, will be important for segment recovery. Any sustained progress toward the 10% segment operating margin target and net leverage reduction by Q4 2025 will depend on execution across these areas and improvements in underlying business demand.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
