and $0.80, with a midpoint of $5.70 reflecting lower operating earnings, partially offset by a slightly lower effective tax rate and a lower share count. This also includes the projected impact of an additional $300 million in share repurchases through the remainder of the year, as Kevin mentioned. Lastly, free cash flow is expected to be in the range of $625 million to $725 million, reflecting the reduction in EBITDA. As a reminder, this includes the one-time cash separation costs associated with the Vestigen spinoff, which have already been largely incurred year-to-date, and the continued investments in supply chain resiliency for semiconductors. For the third quarter specifically, we expect adjusted revenue growth of 1% at the midpoint, adjusted EBITDA and EBITDA margin of $560 million and 17.7% at the midpoint, and earnings per share of $1.30 at the midpoint. Turning back to our full-year guidance to discuss the key changes to revenue in further detail, We are reducing full-year revenue guidance at the midpoint by $300 million, which reflects the following. Approximately $150 million related to changes in customer production schedules. These schedule revisions are primarily related to weakness in the domestic China market, with both local China OEMs and European OEMs that export to China. Second, $100 million related to delays in program launches and ramps, specifically delayed ramp in production volumes on certain programs in China, and a launch with the European OEM where the launch is delayed by the OEM and we did not benefit from the expansion to additional car lines as we originally anticipated. And finally, approximately $50 million related to the timing of enterprise sales in software and services. While these items have impacted both business segments, the intelligent systems business is disproportionately impacted by the above factors. Now, translating this to the implied ramp in year-over-year revenue growth from the first half to the second half that we outlined last quarter. As a result of what I just described, the following have changed. First, the 150 basis points improvement in growth from lapping of previously identified headwinds, specifically the lower production with a major North American customer due to a supplier fire, and program cancellations with local China OEMs is unchanged. Second, launches and ramps are now expected to contribute 200 basis points to revenue growth in the second half of the year. This is lower by 100 basis points than initially anticipated, reflecting the programs I previously described. And beyond that, the outlook for vehicle production in the second half has turned from a tailwind to a headwind. This is further amplified by a customer and program mix due to the schedule changes I outlined earlier, which are cumulatively now a 150 basis point headwind to revenue growth in the second half. I want to wrap up with some closing comments on these revisions. First, the China domestic market, which has and continues to be a more volatile region, has clearly deteriorated relative to when we last updated you. And second, we were not conservative enough in certain assumptions, particularly around launches and ramps. To that end, we have incorporated an additional element of conservatism in the second half of this year. I'll close by noting that we continue to see long-term opportunity across a diverse set of end markets and across regions where we are delivering solid progress, as evidenced by our revenues, bookings, and commercial awards. With that, I will turn the call back to Kevin for his closing remarks. Thanks, Harun.

I'll wrap up on slide 12. In summary, remain confident in the significant long-term opportunity resulting from secular trends that are demanding solutions that can sense, think, act, and optimize, and the customer needs they introduce for high performance and cost-optimized solutions. However, we also acknowledge the more near-term challenges to our business driven by ongoing volatility in the domestic China market and the related impact on our broader automotive customer mix. To be clear, our customer mix in China has improved and dramatically move towards the local OEMs. However, this improvement has not been enough to offset the rapid shift of local OEMs business toward export platforms, as well as the reduction of European vehicle exports into the China market. Holistically, we continue to focus on improving the revenue mix of our business, both inside and outside of automotive. We also remain laser-focused on execution, delivering margin expansion, earnings growth, and strong free cash flow generation across a variety of different macro backdrops. And we're keenly aware that these efforts need to translate into increased shareholder value. Based on the significant value opportunity we see in our stock, combined with the strength of our cash flow generation and balance sheet, we intend to remain active buyers of our shares, utilizing approximately 50% of our expected free cash flow on a more regular basis over the next few years to repurchase our shares. And in 2026, our repurchases will be materially above this level. We're also committed to continually evaluating our business portfolio in light of changes in the macro environment to maximize shareholder value. We're confident that we'll continue to deliver value for our customers, drive profitable growth, and create sustainable long-term value for our shareholders. Operator, let's now open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit your question to one initial with one follow-up so that we may take as many questions as possible. Again, you can press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now go to your first question. It will come from the line of Itai McCallie with TD Cowan.

Great. Thank you. Good morning, everyone. I know it's a little bit early to talk about 2027, but I'm just curious kind of how some of the changes you're seeing in the second half of the year, kind of inform you in terms of just the prior 4% to 7% growth rate of work into 2027 and beyond, and kind of how we should think about that, just given some of these changes here in the second half.

Yeah, sure. Thanks, Etai. Listen, our long-term view of what the business is capable of remains intact. Now, clearly, drivers of growth are constantly changing, especially in an environment that is dynamic as this environment is. You know, when you look at the automotive sector, IHS has brought down the growth outlook for future vehicle production. Um, uh, clearly material cost, uh, inflation is increasing in light of, uh, uh, various macro economic factors. Um, how, however, having said that within the automotive sector, um, uh, for the second straight year, we're running with very strong, uh, bookings across both of our businesses, with the leading automotive OEMs inside and outside of China. On the non-auto side, opportunities are materializing much faster than we had initially expected, and that's across both of our business segments. And we've had a tremendous amount of success leveraging our automotive portfolio into these new markets. So that's an area that we're very optimistic, but the environment certainly is dynamic. I won't get specifically into 2027 at this point in time. As we move later into the year, that's something that we'll certainly provide incremental information about.

Great, that's helpful, Kevin. And as a quick follow-up, good to hear a little bit more conservatism in the second-half guidance. I think the Q4 revenue guide still implies a pretty healthy uptick versus Q3. Maybe we'll talk about some of the drivers and puts and takes and degree of visibility kind of into that Q4 ramp.

Itai, hi. Good morning. It's Varun Leroy out here. Listen, yes, in terms of when you think about the year-over-year second half and also Q4 in particular, essentially it's a couple of points, right? The first is the year-over-year uptick in the production with the North America customer, which had a fire at their supplier a year ago. So that unwinds from a comp perspective. The second is growth in our software and services business. As I mentioned, the $50 million reduction in software enterprise bookings is from a timing perspective, so we expect Q3 to be softer, but again, return to high single double-digit levels in the fourth quarter, and then just growth in our engineered components business.

Thank you.

Your next question will come from the line of Mark Delaney with Goldman Sachs.

Good morning, and thank you very much for taking the questions. Kevin, you mentioned that even though Aptiv has been making good progress with its bookings for the Chinese domestic OEMs, not enough of those were on the export vehicles. Maybe you could talk a bit more on that. I mean, I would have thought Aptiv was very well positioned for exports given the global nature of Aptiv and your strength in other regions. So maybe talk a little bit more on what's happening and what Aptiv is going to do on that front going forward.

Yeah, so, Mark, that's a great question and a very fair one. So we are very well positioned. I would say over the last couple of years, the real focus was on how do we get a stronger mix with the leading local OEMs. When you take a look at our revenues today in China on export platforms, it's about 10% of total revenues, so the mix is more heavily weighted for the domestic platforms. As you look at our bookings over the last two years, that percentage has significantly increased, so the benefit of our product portfolio and our capabilities outside of the China market are certainly coming into play. But right now, our revenues don't match the bookings mix over the last two years. And that's something we're working on, and that's something, quite frankly, we've been making progress on over the last year or so.

Thank you. I also wanted to ask about the non-automotive opportunities, and nice to see the solid growth the last couple quarters there. You mentioned specific progress in drones and robotics. I think you said that business could approach $300 million of revenue in the next few years. What does that mean in terms of profitability? I know non-auto can be higher margin, but maybe there's also a number of investments you're making. So if you could speak a bit more on what you're seeing there and how to think about the profit implications.

So from a run rate standpoint, margin profile, as you can imagine, is much higher than when it's in automotive. We're investing in non-automotive capabilities today from a product and go-to-market standpoint that we talked about. There's minimal capital investment because we're using existing facilities, existing machinery and equipment. So from a capital standpoint, that's less of an upfront cost and initial drag. But it is a – both markets are much higher margin profiles than what we experience in the automotive industry.

Thank you.

Next question will come from the line of Emmanuel Rosner with WUF Research.

Thank you so much. One quick question on the change in guidance. And it seems like, so I understand some of the revenue drivers, but it seems that the EBITDA line, maybe the implied incremental would be pretty high, like around maybe 40%, which seems maybe a little bit above the normal. So can you maybe just talk about the change in the EBITDA guidance?

Yeah, Emmanuel, it's Varun Leroy out here. Listen, the specific one really is the software timing item that I mentioned. So that really is to do with product mix. So that's the one which kind of leads to, you know, the second half, the 50 million reduction that I'm talking about, that really is what impacts that.

Okay, so this is a very, very high decremental, and so, therefore, on average, the total is around that 40 percent?

Yeah, I think typically the mix would be – the decremental would be less than that. I think just given the size of the software revenue reduction was roughly $50 million in the VAT path, the flow through on that tends to be higher. Therefore, the overall decremental in that particular period is higher.

And then I understand the software revenue changes, you know, timing. Can you maybe just give a little bit more color around, you know, what's going on on the ground and just sort of like how to think about growth in software on a go-forward basis?

Yeah, so growth in software. So we've been growing kind of low double digits over the last high single digit, low high single low double digits over the last several quarters in the software business. business. Our software business is kind of twofold when you break it down. Embedded solutions, which I would say tend to be less lumpy, and then enterprise solutions that go into markets like telco and industrial markets, which tend to be larger in terms of their overall size, Emmanuel. And at times, they can shift for various reasons. And when they shift, it has a more pronounced impact on a particular quarter's growth rate.

Okay.

But on a go-forward basis, what sort of growth rate would you expect?

Yeah, I think our growth rate will continue in the double-digit sort of growth rate with a target to getting to that mid-teen sort of growth rate. We've been a bit below that over the last few quarters.

Thank you.

Next question will come from the line of Joe Spack with UBS.

Thanks. Good morning, everyone. Look, I appreciate sort of the coming clean on not being conservative enough. And, you know, you think you've built in more of a cushion going forward. But, you know, we've been here before. So maybe you could just sort of walk through you know how or what you're doing to sort of changing your plan your planning process for for some of this uncertainty because you know like i know it's schedule changes and ramps but really it's it's all sort of the same right it's all it's all one of the same it's volume so you know uh how are you thinking about you know one planning the business and two sort of communicating that on a go for it basis like what's changing from here yeah yeah i think um No, and Joe, that's a fair question.

So I think as it relates to, as China becomes a bigger part of our overall revenue base, is the China local OEMs become a bigger part of our overall mix? as, you know, as well as I do, China OEMs have a number of different nameplates or a higher mix of nameplates relative to the Western OEMs, just a more significant haircut from an overall conservatism standpoint. I think that is the major change in terms of our process, in terms of how we operate internally and how we forecast externally. So today, we've had a process where we've discounted those schedules, obviously have not discounted them enough. I would say that China domestic market is significantly weaker at this point in time than what it's been over a number of years with domestic retail sales down 20%. I think most people in our industry would have expected that the China government would have stepped in to provide some element of support as it relates to the industry. It hasn't yet. And assuming that they would provide some support, obviously near term, was a mistake.

So I think it's just an overlay of significantly more conservatism. okay um thanks for that kevin um and then maybe just some some quick hitters on some of the non-auto things um one like how quick can sort of the drone business you know come into this to sales um i noticed you said you're collaborating on 800 you know vdc can you just describe that a little more is that something you're licensing and building or are you creating your own solution and And then the optical M&A, is that a tech buy and something you need to commercialize, or is there a book of business there?

Yeah, so there's a couple layers to that. So as it relates to whether it's drone robotics or energy storage, depending on the customer, the path to market is much faster. on the robotics and drone awards this year, we'll have revenues in 2027. So I would expect typically roughly six months' path to revenue. On the energy storage slash data center side, most of our product portfolio is in and around power side, Transition to 800 volt, given our existing portfolio in 800 volt. Presents incremental opportunities. We're working with several players. We'll be talking about more commercial awards. I'm sure over the next couple months today in that space, we have under $50 million in revenues. We expect that to grow at a very rapid rate, Joe, over the next three years. And again, most of that is in and around power, both to the RAC and now with some capabilities in the RAC. And the M&A acquisition is just building out our portfolio as it relates to products that we can take, quite frankly, across multiple markets.

Your next question will come from the line of Colin Langan with Wells Fargo.

Oh, great. Thanks for taking my questions. We've talked a lot about China being weak, and I'm not sure if I'm looking at slide eight wrong, but you actually looks like you outperformed in China. According to that slide, you were up five and the market down three, and it was pretty weak in Europe. So is that really the bigger issue? Because I think you mentioned also in comments about European exports to China weakening. Is that the bigger factor that's causing a headwind here? And is that possibly why? We've seen other suppliers haven't cut guidance. Do you have higher exposure to some of those players and that's having a bigger impact?

No. So there's a couple aspects. So we talked about traction in commercial awards in China with a local OEM. So we have made significant progress. And that is what's reflected in our overall year-over-year growth. Having said that, that year-over-year growth was not as strong as we had initially forecasted and included in our guidance. So, yep, we showed strong growth, strong outgrowth, but not where we expected it to be. As it relates to the impact of China, the domestic market, the decline in the domestic market, The reduction in schedules impacted the local OEMs, impacting both our EC business as well as our IS business. Our IS business was disproportionately impacted by the number two player in the China market who we were launching several active safety programs with. From a European standpoint, it really is principally the export of vehicles into the China market from two luxury European OEMs that we saw a significant reduction in their schedules depending on the OEM late June or July. I think they're the OEMs that have been the most public about their challenges in the China market. So you can identify who those are. So that's where the biggest impact, quite frankly, is.

Got it. And just to follow up on earlier questions, the margins seem to kind of – the quarterly cadence here is a little odd. It's like there's a pretty negative decremental sequentially and then a big incremental into Q4. Or is this all recovery-driven? Is there some cost headwinds in Q3?

So there are three things. So here's how I would look at it. One is just volume flow through Q2 to Q3. The incremental impact of a piece of that being software, so higher margins, going from Q3 to Q4. bounce back in software, higher margin, volume pickup, just underlying volume and flow through on that volume. And third, as you know, engineering credits, recoveries, things like that tend to be stronger in the fourth quarter than they are in other quarters. So that's the walk. There is an element of Q3 margin that's impacted by, Varen mentioned in his comments, timing on recovery. So normally that would have shown up in Q3. So Q3 is a little bit, let's call it artificially lower than what we would have expected. That has some general impact. But my comments about the walk as it relates to volume software recoveries, that's the biggest piece.

Thanks for taking my questions.

Your next question will come from the line of James Piccarello with BNP Paribas.

Hi, everyone.

Kevin, can you share some thoughts behind the portfolio changes you had indicated at the tail end of your prepared remarks?

Listen, I don't have any specific comments I would make at this point in time. Clearly, we're operating in a very dynamic market, right? And that's across regions and across technologies. um and as we always do we're we're about that mix of product and um how we optimize um and drive shareholder value so i i would just i would just leave it yeah understood and then just can you share segment level color on the updated guide here for the full year what's embedded for each segments, non-auto growth in the outlook? Yeah, I think non-auto growth for both for the full year are relatively strong. Third quarter in the intelligence system segment, it'll be weaker given that software, but we see a strong bounce back in the fourth quarter. Non-automotive revenue growth across both of the businesses has been very strong and in line with our 8% to 10% sort of framework that we've provided previously.

And then just like revenue core growth and in margins by segment or just directionally would be great.

Yeah, just to be sure, are you asking that for the full year or?

Yeah. Yeah.

Listen, in terms of both businesses, based on the latest updates that we've mentioned, as I mentioned, the revision in guidance is largely impacting the intelligence systems business, right? And we kind of gave you the puts and takes associated with that. So from an intelligent systems perspective, time to be approximately flat on a year-over-year basis, on a revenue basis, with engineered components growing in the low to mid single digits. So that's point number one. And then with regards to margins, margins, essentially what we've kind of talked about previously, you know, solid margins coming through both businesses with EBITDA margins in intelligent systems, call it at the mid-teens level. and then with regards to on a full-year basis and then on our engineered components business in the, call it, low 20s. So call it roughly about 22 points of margin for the full-year.

Thank you.

Your next question will come from the line of Tom Narayan with RBC.

Good morning, Kevin, Beru, and Betsy. Just one more question on this three buckets of exchange. that's okay um so it it looks like yeah look the schedule change you have the i think the european oems the chinese market the delayed programs and the timing one coming back in q4 the timing one's fairly obvious but just curious on the on the other two i guess do you have any level of confidence that those other two buckets you clearly gave those buckets distinct you know distinctly for a reason. Potentially coming back in 2027, is this what's reliant on the Chinese government coming back with stimulus? Or are some of those, like, you know you're getting back? And then I have a follow-up.

And Tom, your talk, you're speaking to all three buckets, or are you speaking to the reduction in H2 customer schedules?

Just the non, the timing one, we already know. It's going back in Q4, but then you had two other items, right? Scheduled changing and delayed program. So, just curious of those two buckets potentially coming back in 27.

Yeah. So, it's – there's two aspects to the China local market. Aspect one is domestic China market with domestic local OEMs and how that plays out during 2027. It's, at least for us, difficult to envision another year where the China local market is down 20% and production schedules are therefore adjusted to that point. So it's difficult to envision that, But those are some of the things that we're working through. There's a second piece as it relates to within that. So the bulk of that 150 that Barron talked about is China local OEMs. And then there's a part that is effectively European exports into China. I think it's possible that those European exports into China, we don't see a bounce back during 2027 in light of the competitiveness of the China market. As it relates to the program delays and launch ramps, listen, the local China OEMs, I'm confident that you'll continue to see their launches ramp at a lower slope than what was originally forecasted. There's one program from BYD that we're confident will be launched, just was shifted, and that's an export vehicle program. And then there is the program that Varen talked about that was a European OEM that was a delayed launch from a European OEM that had initially the view was it was going to be rolled across multiple programs. That program is launching as we speak, so that will be a tailwind from a revenue standpoint as we head into 2027.

That's very helpful.

It won't sound as bad as – then the non-automotive question I have. You mentioned this is coming in ahead of expectations, and I know you discussed this at the Investor Day, and these are all very different verticals but just curious what you're seeing on the competitive side here that you're able to win so much here i would have thought that there'd be incumbents in these verticals um or is this simply just lack of competitors and like kind of a rising tide lifts all boats just how have you guys been so successful in capturing these new new business Yeah, so I think, so I would put them into two buckets.

I would put the drone and robotics buckets where we're playing. And our principal focus on the drone and robotics here is in and around autonomy. so robotics it tends to be AMRs although we have commercial opportunities with a few of the humanoid players our view on significant volume will be more is likely to more come from players like AMRs it tends to be more of a nascent industry I know there's a lot of talk about the size and growth but it's a bit more nascent and it's not only our technology where we bring opportunity, but it's also our capability as it relates to systems, systems engineering, bill of material, supply chain, and manufacturing that is differentiated from the typical players in a nascent industry. On the drone side, that's even more so the case. There's significant demand for reasons that you're aware of. There is a requirement of a non-China supply chain, a number of different technologies. That's something that we have visibility to and we can provide. our perception systems and compute and ability to take bill of material costs out is unique relative to what their current supply base, which isn't very mature and isn't quite as organized as what we're accustomed to. So I would say it's a mix of bringing our technical capabilities, but there's an equal part of what we do day in and day out from an automotive standpoint, so that there aren't really the traditional competitors, if I could say. It's an area that we're moving very fast in. We've invested in capabilities, as Farron talked about. We're going to continue to invest and actually ramp up our investment in this area because the potential opportunity near term is is significant. And as I said, the margin profile pricing here is more value-based than cost-based. So the nature of those two markets are very good. I should now go to, if I can, just to the energy storage slash data center. Listen, our sweet spot is power. That's what it is. Um, um, uh, we've put a very, a team very focused on those two specific markets based on our, um, backgrounds, uh, backgrounds in power distribution. Um, we are working with players who are well-known in the automotive space, uh, um, uh, for, uh, energy storage, including, uh, uh, now Texas-based global OEM, um, as well as a, uh, the leading China OEM as it relates to leveraging our automotive relationship. And then we're working with several players that I alluded to who support those markets today for incremental opportunities. And today, again, our revenues are relatively small, but the size of the commercial pursuits and bookings, we're confident we'll ramp up revenues certainly much faster than what we experience in the automotive market.

Thanks a lot.

Your next question will come from the line of Rajat Gupta with J.P. Morgan.

Great. Thanks for getting the question. I just wanted to start with one clarification on, you know, the first quarter lease statement. You know, if I look at the press release and take the six-month EBITDA number, where it implies a lower 1Q than what was provided in the 1Q deck and like those financials on the website. Just want to make sure like if that is just an accounting nuance that we need to be aware of. Hey, Rajat.

Rajat, it's Varun out here. Listen, that's all CODO associated with the Vestigen SPIN. So what you need to look at is the Q1 pro forma on our investor relations portal.

Understood, so that's the right number. Okay, got it. Yeah, and just to follow up, just in the bookings mix, within the Intelligent Systems year-to-date bookings or just a second quarter bookings, are you able to share any more detail in terms of how much is like full-stack ADAS, including software versus modular? And I'm curious if that mix has changed at all over the last few months, And, you know, a lot of manufacturers, you know, try to build more internal capability.

The trend that we're seeing, and I want to make sure I think you're talking about the intelligence systems and tech stack, is more of a separation of software and hardware and, quite frankly, more software opportunities. And I referenced the full TechStack award from a Gen 6 ADAS standpoint. We're seeing or experience a significant portion of our bookings in 2026 will be ADAS, Gen 6, ADAS solutions, the bulk of which will include our hardware and our software. So we're seeing more momentum there. We're seeing more OEMs come to us as they work on their path to software-defined vehicles, asking us to do some of that software development in and around areas like Middleware and other portions of their software tech stack. So I know we often get asked that question about insourcing from an OEM standpoint, and it varies a bit by OEM, But we would tell you our experience has been the overall trend. We've not seen that. And, in fact, we've seen several OEMs who have attempted to do broad-based software that have decided to go down a different path and be more reliant on suppliers.

Got it. That's helpful.

Thanks for that, Dollar. And good luck.

And that was our last question. This will now conclude today's question and answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Thank you, everyone, for joining us today.

Have a great day.

This call is now complete, and thank you so much for joining.