Gerdau S.A. (GGB) Income Statement

The sharp deceleration in revenue growth, from double-digit to low-single-digit, suggests that volume gains are being offset by weaker steel prices. The 2026Q2 growth of 2.0% is barely positive, indicating that the company may be losing pricing power in a competitive market. Investors should monitor whether this trend persists, as it could signal a cyclical downturn.

The gross margin rebound in 2026Q2 is encouraging, but it is still below the levels seen in early 2024, suggesting that the company has not fully regained its pricing power. The wide swings in gross margin, from 10.9% to 15.8% within a year, highlight the cyclicality of the steel industry and the company's sensitivity to input costs and selling prices. This volatility may persist, making margin stability a key concern for investors.

The operating margin expansion from 5.4% to 12.8% over six quarters indicates that Gerdau's cost structure is highly leveraged to revenue changes. When revenue grows, operating income grows disproportionately, but the reverse is also true, as seen in the 2025Q4 loss. This leverage amplifies both upside and downside, making earnings highly sensitive to steel prices and demand. Investors should expect continued volatility in operating results.

SG&A has been remarkably stable, ranging from $500.9M to $586.4M, which suggests that Gerdau has kept overhead costs under control despite revenue fluctuations. However, COGS has moved in tandem with revenue, reflecting the pass-through of raw material costs. This indicates that the company's profitability is primarily driven by the spread between steel prices and input costs, rather than by cost containment. The stability in SG&A provides some cushion, but the volatility in COGS remains the primary driver of margin changes.

The 2025Q4 loss appears to be the low point of the cycle, with gross margin at 10.9% and a net loss of $1.3B. This was likely driven by a combination of weak steel prices and possibly one-time charges. The subsequent recovery in 2026Q2, with net income of $1.5B, suggests that the company has rebounded strongly, but the question is whether this recovery is sustainable or just a temporary uptick. The sharp V-shaped recovery indicates that Gerdau is highly sensitive to the steel cycle, and investors should be prepared for continued volatility.