European auto giants' Q1 2026 results: earnings beats and share drops

What happened: In Q1 2026, European auto giants BMW and Polestar reported disappointing results. BMW warned of slashed profit margins due to weakening demand in China and the Middle East, sending its shares down. Polestar posted a wider loss as tariffs and pricing pressure hurt margins despite record sales. BMW's profit and revenues also dropped, and it maintained its fiscal 2026 outlook.

Market impact: European auto stocks, particularly BMW, plummeted despite earnings beats. Investors reacted negatively to the profit warnings and margin cuts, impacting the broader European auto sector. The weakness in Chinese demand and Middle East conflicts affected automakers' outlooks, with BMW's revised guidance serving as a red flag for the industry.

What to watch next: BMW's FY26 earnings in late July will provide further clarity on the company's turnaround efforts. The upcoming Q2 results from other European automakers, such as Stellantis and Volkswagen, will indicate if the profit warnings are an industry-wide trend. Additionally, investors will closely monitor developments in China and the Middle East, as geopolitical risks could continue to impact automakers' outlooks.