American motorcycle manufacturing company Harley-Davidson (NYSE:HOG) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 19.3% year on year to $1.31 billion. Its non-GAAP profit of $0.88 per share was 5.4% below analysts’ consensus estimates.
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Harley-Davidson (HOG) Q2 CY2025 Highlights:
- Revenue: $1.31 billion vs analyst estimates of $1.37 billion (19.3% year-on-year decline, 4.6% miss)
- Adjusted EPS: $0.88 vs analyst expectations of $0.93 (5.4% miss)
- Adjusted EBITDA: $141.8 million vs analyst estimates of $176 million (10.8% margin, 19.4% miss)
- Operating Margin: 8.6%, down from 14.9% in the same quarter last year
- Motorcycles Sold: 35,837, down 13,823 year on year
- Market Capitalization: $2.94 billion
StockStory’s Take
Harley-Davidson’s second quarter saw sales and profitability fall short of Wall Street expectations, yet the market responded positively, reflecting investor focus on management’s proactive steps. CEO Jochen Zeitz attributed the quarter’s performance to a planned reduction in motorcycle shipments and ongoing softness in discretionary spending, especially in North America. Management cited elevated interest rates, global tariff uncertainty, and softer customer demand as key factors impacting retail sales and operating margins. Zeitz highlighted, “We remained disciplined in promotions, even as competitors leaned heavily on promotional activity,” emphasizing Harley-Davidson’s approach to maintaining brand value over volume.
Looking forward, Harley-Davidson’s outlook centers on the recently announced strategic partnership for its financial services business and a renewed push to improve efficiency. Management expects the capital-light HDFS model, new product launches—including an entry-level motorcycle targeting broader demographics—and potential tariff relief to drive future performance. Zeitz noted, “We believe this will have a positive effect and stimulate demand as the tax incentive takes hold,” referencing recent legislative changes. The company is also focused on leveraging technology and process improvements, with Zeitz stating that advancements, including the use of AI, are expected to deliver substantial cost savings and productivity gains.
Key Insights from Management’s Remarks
Management attributed the quarter’s results to lower shipment volumes, inventory-rightsizing efforts, and continued economic uncertainty, while highlighting significant steps to unlock value and reposition for future growth.
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HDFS transaction unlocks value: Harley-Davidson entered a partnership with KKR and PIMCO for its financial services arm (HDFS), selling minority stakes at 1.75x book value and unlocking $1.25 billion in distributable cash, representing a major capital infusion for debt reduction, share buybacks, and growth investments.
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Inventory reductions prioritized: The company executed a planned decrease in dealer inventory, reducing global levels by 28% year-over-year. This move was designed to better align supply with demand and support healthier channel dynamics during a period of softer retail sales.
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Product performance mixed: The newly refreshed Softail lineup outperformed within the Cruiser segment, while Touring models faced persistent headwinds. Adventure Touring and Sportster models saw 16% year-over-year growth in North America, aided by strategic repricing and targeted marketing.
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Tariff and regulatory headwinds: Management reported $13 million in incremental costs from new or increased tariffs and maintained cautious optimism regarding future trade agreements and recent U.S. tax legislation, which may aid demand for U.S.-built motorcycles.
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Efficiency and technology focus: Harley-Davidson is launching a new cost efficiency program leveraging technology, including artificial intelligence, aimed at driving further productivity gains and streamlining operations beyond previously announced targets.
Drivers of Future Performance
Harley-Davidson’s forward guidance is shaped by strategic capital redeployment, new product launches, and evolving consumer demand patterns, with management acknowledging ongoing macroeconomic and regulatory headwinds.
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Capital-light HDFS model: Management expects the transition to a capital-light financial services model to boost HDFS operating income in the short term and improve return on equity. The partnership structure allows Harley-Davidson to retain control while benefiting from new fee streams and reduced funding costs.
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New product launches: The upcoming introduction of an entry-level motorcycle priced below $6,000 and an iconic Cruiser is expected to open new segments and improve access for value-conscious buyers. Management believes these launches will be both accessible and profitable, addressing affordability challenges in its core demographic.
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Continued margin pressures: Harley-Davidson anticipates ongoing challenges from elevated interest rates, tariff-related costs, and competitive promotional activity. The company is prioritizing cost management and efficiency programs to mitigate these pressures, with a particular focus on leveraging technology for operational improvements.
Catalysts in Upcoming Quarters
Looking ahead, our analysts are closely monitoring (1) the pace of adoption for Harley-Davidson’s new entry-level and Cruiser motorcycles, (2) execution and impact of the capital-light HDFS partnership on operating income and cash allocation, and (3) further progress on inventory reductions and dealer channel health. Changes in the tariff environment and the effectiveness of new efficiency measures will also be critical to future performance.
Harley-Davidson currently trades at $24.03, up from $22.96 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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