GTES Q2 Deep Dive: Personal Mobility and Data Center Growth Offset Margin Pressures

August 12, 2025 at 23:27 PM EDT

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Power transmission and fluid power solutions provider Gates Corporation (NYSE: GTES) reported Q2 CY2025 results topping the market’s revenue expectations, but sales were flat year on year at $883.7 million. Its non-GAAP profit of $0.39 per share was 3% above analysts’ consensus estimates.

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Gates Industrial Corporation (GTES) Q2 CY2025 Highlights:

Revenue: $883.7 million vs analyst estimates of $875.3 million (flat year on year, 1% beat)
Adjusted EPS: $0.39 vs analyst estimates of $0.38 (3% beat)
Adjusted EBITDA: $199.2 million vs analyst estimates of $197.7 million (22.5% margin, 0.8% beat)
Management raised its full-year Adjusted EPS guidance to $1.48 at the midpoint, a 2.8% increase
EBITDA guidance for the full year is $780 million at the midpoint, above analyst estimates of $761.9 million
Operating Margin: 13.1%, down from 15.1% in the same quarter last year
Organic Revenue was flat year on year vs analyst estimates of flat growth (76.4 basis point miss)
Market Capitalization: $6.30 billion

StockStory’s Take

Gates Industrial Corporation’s second quarter results were largely in line with Wall Street expectations, with flat year-over-year sales and a slight beat on adjusted earnings per share. Management attributed the company’s steady performance to resilience in the personal mobility business, strength in the replacement channel, and ongoing progress in margin improvement initiatives. CEO Ivo Jurek highlighted the “continued ramp-up of new design wins” in personal mobility and noted, “Our replacement channels were constructive, posting low single-digit growth.” Margins were pressured by a combination of higher research and development spending and the absence of a one-time gain recognized last year, but the company emphasized ongoing cost-saving measures and operational efficiencies.

Looking ahead, Gates Industrial’s updated guidance reflects optimism around accelerating growth in personal mobility and the expanding data center market. Management raised its full-year adjusted EPS and EBITDA targets, citing favorable currency trends and a pipeline of new product wins. Jurek told investors, “We anticipate growth to inflect higher in the second half of the year,” pointing to both personal mobility and data center liquid cooling as key opportunities. While tariffs remain a headwind, CFO Brooks Mallard said the company expects to offset most of the impact through price adjustments and operational actions, aiming to remain neutral on a dollar basis for the year.

Key Insights from Management’s Remarks

Management attributed Q2 performance to robust demand in personal mobility, growth in the replacement channels, and early traction in data center products, while ongoing investments and external pressures shaped margins.

Personal mobility momentum: The personal mobility segment, which includes components for e-bikes and similar vehicles, delivered double-digit growth as new design wins ramped up. Management emphasized this segment’s rebound following a prolonged destocking cycle in previous years, with Jurek stating these wins are “fueling outgrowth as the 2-wheeler market has stabilized.”
Replacement channel stability: Both automotive and industrial replacement channels posted low single-digit growth, providing a steady revenue base despite mixed performance from original equipment manufacturer (OEM) channels. Mallard noted improved service levels and supply chain investments as contributing factors to this resilience.
Data center pipeline expansion: Gates made progress in the data center liquid cooling market, launching new products such as the Data Master Hose and a universal quick disconnect fitting. Jurek highlighted negotiations with a major hyperscaler and a significant design win with an Asian-based supplier, projecting the data center opportunity pipeline could reach $150 million in the coming years.
OEM market softness: While personal mobility and replacement channels performed well, industrial and automotive OEM demand lagged due to weak construction and on-highway sectors, particularly in Europe. Management reiterated its selective approach to OEM participation, aiming to further reduce its revenue mix from these segments.
Margin management and investments: Adjusted EBITDA margin was affected by increased R&D spending for new product development and the absence of a prior-year real estate gain. However, operational initiatives, including supply chain optimization and material cost savings, continued to support gross margin progress.

Drivers of Future Performance

Gates Industrial’s outlook is driven by accelerating growth in personal mobility, continued momentum in data center products, and disciplined margin management amid ongoing external pressures.

Personal mobility and design wins: Management expects continued strong growth in personal mobility, underpinned by substantial recent design wins and new product introductions for e-mobility applications. The company believes its pipeline could support a compound annual growth rate of around 30% in this segment through 2028.
Data center liquid cooling expansion: The data center end market is expected to contribute meaningfully, with new product launches and expanding relationships with large technology infrastructure providers. Jurek described the current environment as a “feeding frenzy,” forecasting that preproduction revenues will ramp up late this year and larger contributions will follow in 2026.
Tariff and cost management: While tariffs are anticipated to have a material impact in the second half of the year, CFO Mallard said the company plans to cover most of the impact through price adjustments and operational actions, aiming to maintain overall profitability. Investments in supply chain and manufacturing efficiency are expected to help offset external headwinds.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will closely watch (1) the pace of revenue acceleration in personal mobility and data center products, (2) how effectively Gates manages tariff-related cost pressures and executes on pricing strategies, and (3) progress in gross margin expansion through ongoing operational improvements. The scale and timing of new product wins in growth markets will also be key to tracking execution against strategic goals.

Gates Industrial Corporation currently trades at $24.45, down from $24.73 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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