Goldman Sachs previews 1Q26 U.S. autos and industrial technology results: autos under pressure, datacenter and industrial technology more resilient

Overview

This is a Goldman Sachs 1Q26 EPS preview for the U.S. autos and industrial technology sectors. The report focuses on the issues investors are likely to press during the 1Q26 earnings season: recent order changes, oil prices and supply-chain volatility driven by geopolitical and Middle East tensions, raw-material and DRAM cost pressure, regional divergence in auto sales, AI/hyperscale datacenter capex, and industrial-cycle recovery. The overall conclusion is that the auto chain faces greater cost and demand uncertainty, while datacenter and select industrial technology companies benefit from AI demand and improving industrial activity.

Core views

The core views are as follows: first, auto OEMs and suppliers are likely to post results that are roughly in line with or slightly below expectations this quarter because of weak 1Q auto sales in China, year-on-year declines in U.S. sales, higher oil and input costs, and supply-chain volatility. Second, traditional OEMs may be able to offset some of the cost pressure through hedging and pricing, but costs for resins, metals, semiconductors and DRAM still create an incremental headwind; tier-one suppliers are usually better able to pass through costs via contracts, negotiated pricing and mitigation measures, though with a lag. Third, global auto sales in 2026 are expected to be relatively stable but with clear regional divergence: U.S. EV sales fell year on year in 1Q, European EV growth was strong, and China BEV/PHEV sales declined. Fourth, datacenter demand remains strong; Goldman’s bottom-up aggregation of capex for key hyperscale companies points to 67% growth in 2026 and 16% growth in 2027, benefiting related names such as VRT, FLEX, JBL, APH, TEL and KEYS. Fifth, industrial end markets are experiencing a mild cyclical recovery, with strength in energy, grid hardening, aerospace and defense, and factory automation, while consumer-related applications such as appliances and HVAC remain weaker.

Analysis framework

The report uses an industry-grouping and end-market decomposition approach, analyzing autos, EVs, datacenter demand and industrial end demand separately; it then combines stock performance since the last earnings season, Street EPS revisions, regional auto sales, inventories, PMI/ISM, oil and raw-material prices, company earnings commentary and industry conference data to adjust earnings-risk, valuation-multiple and target-price assumptions across stock groups.

Methodology notes

• Industry comparisonEnd-market decomposition

  Break down demand and cost drivers across autos, datacenter and industrials

  The report does not give a single industry conclusion; instead, it separately evaluates auto sales, EV penetration, AI datacenter capex and the industrial cycle to identify the earnings elasticity and risk of different stock groups.

• Valuation and earnings forecastStreet estimates and target multiple adjustments

  Adjust 2026 expectations and target multiples based on cyclical risk and structural growth

  Goldman lowers target multiples for auto OEMs and suppliers to reflect higher cyclical risk, while raising target multiples for several datacenter-exposed names due to continued strength in datacenter demand.

• Macro and leading indicatorsAuto Leading Indicators and PMI/ISM tracking

  Use consumer confidence, Google searches, housing starts, auto purchase plans and the ISM index to gauge demand trajectory

  The report notes that auto demand has historically been correlated with indicators such as housing starts and consumer confidence, while industrial technology demand is assessed using the ISM remaining above 50 for three consecutive months and year-on-year improvement.

• Company disclosure frameworkGS Factor Profile / M&A Rank / Quantum

  Goldman-disclosed factor, M&A probability and financial database framework

  The appendix explains that GS Factor Profile compares growth, financial returns, valuation and composite factors; M&A Rank is used to assess acquisition probability; and Quantum is Goldman’s proprietary database of financial history, forecasts and ratios.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KEYS

  More positive view for the quarter; beneficiary of AI/datacenter-related orders and business momentum

  Strengths

  Strong wireline orders and an expanding AI customer base; the report says its business momentum is better and estimates were raised to reflect the positive trend.

  Weaknesses

  Still affected by the overall industrial technology cycle and the pace of capex.

  Comparison

  Compared with auto OEMs and suppliers, KEYS benefits more from datacenter and AI demand.

  Risks

  Slower AI capex, lower-than-expected order conversion, and valuation sensitivity to high-growth expectations.

• FLEX

  More positive view for the quarter; beneficiary of datacenter revenue growth

  Strengths

  The company continues to expect datacenter revenue to grow at least 35% year on year this year, and strong datacenter demand is a key reason for the higher FY26 guidance.

  Weaknesses

  It may still be affected by industrial end-market conditions and supply-chain cost changes.

  Comparison

  Compared with the auto chain, FLEX has a more direct datacenter growth tailwind.

  Risks

  Hyperscale demand volatility, execution risk, and supply-chain bottlenecks.

• APH

  More positive view for the quarter; beneficiary of AI/datacenter connectors and components

  Strengths

  Total orders grew 68% year on year and 38% sequentially; IT datacom sales grew 110% organically year on year.

  Weaknesses

  After the higher growth base, the sustainability of future growth and order momentum needs to be validated.

  Comparison

  The report lists it among the more favored stocks and places it in the same datacenter-beneficiary chain as VRT, FLEX, JBL and TEL.

  Risks

  Changes in AI platform investment pace, customer concentration, and valuation multiple compression.

• TSLA

  2026 Street EPS and FCF expectations face downward revision pressure

  Strengths

  New models such as the Model Y L may support sales; autonomy and new models remain a focus for investors.

  Weaknesses

  U.S. EV sales are declining, demand is under pressure after the IRA tax credit expiration, and weak regional sales could drag on expectations.

  Comparison

  Compared with KEYS, FLEX and APH, the report is more cautious on Tesla's near-term earnings outlook.

  Risks

  EV demand weaker than expected, price competition, FCF pressure, and the pace of autonomy monetization.

• GM / F

  Traditional auto OEMs facing input-cost and sales pressure

  Strengths

  Hedging, pricing and existing guidance may offset part of the cost pressure; traditional OEMs have previously been supported by factors such as tariffs and emissions rules.

  Weaknesses

  GM previously guided that commodity inflation, DRAM and FX would create a $1.0-$1.5 bn headwind to 2026 EBIT; Ford guided that cost inflation, including DRAM, would create a $1 bn headwind to EBIT.

  Comparison

  Compared with tier-one suppliers, OEMs may be more directly exposed to sales, mix and cost pressure.

  Risks

  Higher resin, DRAM, metal and oil prices; weakening consumer confidence; weak U.S. and China sales; F-150 inventory and Novelis ramp execution risk.

• VRT / JBL / TEL

  Datacenter- and AI-infrastructure-exposed names

  Strengths

  Benefiting from hyperscale capex growth, Nvidia's Blackwell/Rubin platforms, and demand for copper cabling and optical/CPO solutions.

  Weaknesses

  Some companies are also exposed to the industrial cycle and supply-chain execution.

  Comparison

  The report raises target multiples for several datacenter-exposed names, and the view is materially better than on the auto chain.

  Risks

  Changes in the pace of AI server platform transitions, shifts in the CPO technology path, and downward revisions to capex expectations.

• BWA / LEA / MGA / VC / GNTX / MBLY

  Auto suppliers and auto technology chain

  Strengths

  Some tier-one suppliers can pass through most costs through contracts and negotiated pricing; production assumptions are mostly for a slight decline in 2026, which can support guidance if the market stabilizes.

  Weaknesses

  Auto production, regional sales and raw-material costs remain the main pressure points; some estimates and target prices have been adjusted.

  Comparison

  Compared with pure datacenter-exposed names, auto-supplier risk is more cyclical in nature.

  Risks

  Lagged cost pass-through, lower-than-expected LVP, weak China sales, and oil-price and supply-chain disruptions.

Key data

• Coverage stock median performance-5%Since the trading day after 4Q25 earnings, the median covered stock has fallen 5% and underperformed the S&P 500 by 6%.
• Auto-related stock median performance-11%The report attributes the decline to supply-chain volatility and geopolitical uncertainty creating potential headwinds for both costs and demand.
• Early-stage tech company median performance-13%Includes companies related to lidar, autonomous driving, charging and battery technology.
• 2026 Street EPS expectation revision+3% medianSince the 4Q25 earnings season, the median 2026 Street consensus EPS for the coverage universe has been raised by 3%.
• 2027 Street EPS expectation revision+2% medianThe report believes this reflects tailwinds from traditional auto OEMs, industrial-cycle improvement and rising datacenter capex.
• China 1Q auto retail sales-17%CPCA data show China sales fell 17% year on year in 1Q, but Goldman’s China auto team expects sales to improve from 2Q onward on the back of new model launches.
• U.S. 1Q auto market-6% yoy; SAAR 15.6 mnThe U.S. market fell 6% year on year in 1Q, and the Wards SAAR averaged 15.6 million units.
• Europe auto salesYTD slightly down; selected major markets +5% in 1QEurope overall is slightly down year to date, but major regions such as the United Kingdom, France, Germany, Italy, Spain and Norway posted 5% sales growth in 1Q.
• U.S. EV sales-26% yoy in 1Q; EV share 6%U.S. EV sales fell 26% year on year in 1Q, and EVs accounted for 6% of new-vehicle sales, below Europe and China.
• Europe EV sales+32% yoy in 1QEV sales in the key markets of the United Kingdom, Germany, Norway, France, Italy and Spain rose 32% year on year in 1Q.
• China BEV and PHEV sales-21% in 1QChina BEV and PHEV sales declined 21% in 1Q.
• U.S. hyperscale capex expectation+67% in 2026; +16% in 2027This is Goldman colleagues' bottom-up growth expectation for capex at key hyperscale companies.
• Vertiv orders+252% yoy organic; +117% sequential in 4QThis reflects strong datacenter and AI demand.
• Amphenol orders and IT datacom salesorders +68% yoy; IT datacom sales +110% yoy organicAmphenol's datacenter-related business is strong, and it guided 1Q IT datacom sales to remain at a level close to 4Q on an organic basis.
• Nvidia datacenter revenue visibility> $1 trillion through 2027At GTC, Nvidia said it has visibility to more than $1 trillion of compute and networking revenue from the Blackwell and Rubin platforms through 2027.
• U.S. ISM index52.6 in March 2026The March reading rose both month on month and year on year, and the U.S. PMI has remained above 50 for the third consecutive month.

Impact & implications

The investment implication is that sector divergence is widening. For the auto chain, the key questions are whether costs can be passed through, whether regional sales will recover, whether oil prices will remain elevated, and whether consumer confidence will deteriorate; if cost pressure shows up with a lag, 2026 earnings expectations for some OEMs and suppliers may remain under pressure. By contrast, datacenter and AI infrastructure-related industrial technology companies have stronger structural growth support, and orders, capex and platform upgrades may continue to drive valuation multiple expansion. The industrial cycle is in a mild recovery phase, and investors need to watch whether ISM, PMI, energy, grid, automation and defense end demand continue to improve.

Risks

• Geopolitical and Middle East tensions could keep oil, resin, metal, semiconductor and DRAM costs rising.
• Auto OEM hedging and pricing may not be enough to offset input-cost pressure.
• China auto sales may recover less than expected, while U.S. and European demand continues to soften.
• Weakening consumer confidence, housing starts and auto purchase plans could cause the auto market to contract.
• If elevated oil prices persist for more than 4-6 months, they could change vehicle mix and affect demand for large SUVs and pickups.
• If AI/hyperscale capex falls short of expectations, orders and valuation multiples for datacenter-exposed names may come under pressure.
• Supply-chain inventory cycles and long-term contracts may delay the impact of cost pressure, increasing earnings uncertainty in subsequent quarters.

What to watch

• Management comments on order trends, cost inflation and supply-chain disruptions during 1Q26 earnings calls.
• Auto companies' ability to pass through and the lag time for resin, DRAM, metal, oil and semiconductor costs.
• Whether sales improve after new-model launches in China from 2Q onward, and whether full-year sales still decline year on year.
• U.S. SAAR, inventories, F-150 production recovery, consumer confidence, housing starts and auto purchase plans.
• The sales uplift from new EV models, including Tesla Model Y L and Rivian R2.
• The impact of hyperscale capex, CSP commentary, Nvidia's Blackwell/Rubin and future Kyber platforms on demand for connectivity, thermal management, power and CPO.
• Whether ISM/PMI remain above 50, and whether industrial end markets such as energy, grid, aerospace and defense, and factory automation continue to improve.