It has been about a month since the last earnings report for Garmin (GRMN Quick QuoteGRMN - Free Report) . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Garmin due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Garmin Ltd. before we dive into how investors and analysts have reacted as of late.

Garmin's Q2 Earnings Beat Estimates, Revenues Increase Y/Y

Garmin reported second-quarter 2026 pro forma earnings of $2.81 per share, beating the Zacks Consensus Estimate by 23.79%. The bottom line increased 29% year over year.

Net sales rose 11% to $2.02 billion and surpassed the consensus estimate by 4.73%. Strong demand for advanced wearables led the growth.

GRMN's Fitness Business Drives Growth

Fitness revenues increased 25% year over year to $756.8 million, accounting for 37.4% of total sales. Growth was recorded across all product categories, led by continued strength in advanced wearables.

The segment generated operating income of $277 million, up 40% from the prior-year quarter. Operating margin reached 37%, while gross margin was 64%. Garmin launched the Forerunner 70 and Forerunner 170 running smartwatches during the quarter and recently announced the CIRQA Smart Band, its first screenless smart band.

Garmin's Outdoor Revenues Decline

Outdoor revenues fell 2% to $482.7 million, primarily due to weakness in consumer auto products and adventure watches. However, favorable product mix and disciplined execution supported improved profitability.

Operating income rose 4% to $163.6 million, while operating margin reached 34%. Garmin expects stronger Outdoor revenue performance in the second half of 2026, aided by the timing of product launches. The company also expanded its golf portfolio with the Approach Z10 laser rangefinder.

GRMN Posts Broad-Based Segment Gains

Aviation revenues advanced 8% to $268.7 million, driven by growth in both original equipment manufacturer and aftermarket categories. Operating income increased 14% to $72.2 million, with an operating margin of 27%.
Marine revenues climbed 14% to $341.4 million, reflecting growth across multiple product categories. Operating income surged 59% to $99.8 million, and operating margin was 29%. Results benefited from a tariff refund, though management noted that product margins improved even without the benefit.

Auto OEM revenues increased 1% to $172.4 million, mainly driven by domain controllers. The segment posted operating income of $2.9 million compared to a loss of $9.5 million a year earlier, supported by improved gross profit and lower research and development expenses. Management expects revenues to decline and the segment to return to an operating loss in the second half before the planned launch of a major Mercedes-Benz program in early 2027.

Garmin's Operating Profitability Expands

Gross profit increased 18% to $1.26 billion, while gross margin expanded 360 basis points to 62.4%. Consolidated operating income climbed 30% to $615.5 million, while operating margin rose 440 basis points to 30.4%.

The margin improvement primarily reflected favorable product mix and approximately $21 million in refunds of previously paid tariffs. Management said newer products carrying higher margins represented a greater portion of sales, while vertical integration and scale also supported product cost improvements.

Operating expenses increased 9% to $646.5 million. Research and development expenses rose 10% to $303.9 million, while selling, general and administrative expenses jumped 8% to $342.6 million, mainly due to personnel-related costs.

GRMN Maintains a Strong Financial Position

Garmin generated $404 million in operating cash flow and $276 million in free cash flow during the second quarter. In the first half of 2026, it generated operating and free cash flows of $940 million and $745 million, respectively.

The company ended the period with approximately $4.4 billion in cash and marketable securities. It paid $202 million in dividends and repurchased $43 million of shares during the second quarter. In the first half of 2026, it repurchased shares worth $82 million and paid $376 million in dividends. About $448 million remained under its repurchase authorization through December 2028.

Inventory reached approximately $2 billion as Garmin maintained strategic memory holdings. Management expects higher memory costs to affect second-half results, though the impact is incorporated into its updated outlook.

Garmin Raises 2026 Outlook

Garmin now expects 2026 revenues of approximately $8.05 billion, up from its prior projection of $7.9 billion. Pro forma earnings are forecast at $10 per share compared with the previous outlook of $9.35.

The company raised its gross margin forecast to 59.7% from 58.5% and its operating margin estimate to 27% from 25.5%. The projected pro forma tax rate increased to 16.5% from 16%. The revised gross margin outlook includes the tariff refund already recorded but assumes no additional tariff-related benefits.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Garmin has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Garmin has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Garmin is part of the Zacks Electronics - Miscellaneous Products industry. Over the past month, KLA (KLAC Quick QuoteKLAC - Free Report) , a stock from the same industry, has gained 1.9%. The company reported its results for the quarter ended June 2026 more than a month ago.

KLA reported revenues of $3.66 billion in the last reported quarter, representing a year-over-year change of +15.2%. EPS of $1.05 for the same period compares with $0.94 a year ago.

KLA is expected to post earnings of $1.17 per share for the current quarter, representing a year-over-year change of +33%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.6%.

KLA has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.