The second quarter of 2026 was the moment Garmin's fitness wearables franchise took the wheel. The fitness segment, the consumer line of GPS watches and bike computers sold to runners and cyclists, delivered 37% of consolidated revenue. Fitness revenue reached $756.8 million in the quarter, up 25% from a year earlier. That made fitness the largest single contributor to an 11% consolidated revenue gain. Total net sales reached $2.02 billion, with fitness as the largest piece. Garmin, a Swiss-domiciled foreign private issuer that files 10-Qs and reports in U.S. currency, has spent several years positioning its Forerunner and Fenix advanced-wearable lines, and the latest print suggests that positioning is converting at retail. The share price sits near $275, leaving the stock well off its high but well above its trough in a year the wearables franchise is carrying.
The more important number is the gross margin, defined as revenue minus the cost of goods sold, divided by revenue. Consolidated gross margin reached 62.4% in the quarter, expanding 360 basis points year over year. Management explicitly attributed a meaningful slice of that pickup to refunds of previously paid tariffs. Strip out that one-time windfall, and the operating leverage story still holds, but the underlying expansion is meaningfully smaller than the headline 360. The picture is the same at the operating line. Operating income reached $615.5 million, up 30% year over year. Operating margin moved from 26.0% to 30.4% on the back of the gross-margin pickup plus modest expense leverage. Net income also grew by a third year over year, reaching $541.9 million in the quarter. The Q2 print reinforced that Garmin is funding growth and shareholder returns from operations, not from one-time items.
The strongest counterargument is also straightforward. Outdoor, Garmin's segment of handheld GPS units and two-way communicators, posted a 2% revenue decline, the only segment to fall, with management attributing the drop to weakness in consumer auto and adventure watches. The IEEPA-related tariff refunds are a one-time benefit, not a recurring earnings stream, and outdoor softness suggests the wearables halo has not yet reached Garmin's broader adventure-watch customer. Memory chip supply constraints, called out in the filing as a likely drag on future gross margin, and rapidly changing global trade policy further complicate the cost outlook for the back half. The investment case still rests on whether fitness can keep compounding near 25% and whether outdoor stabilizes before the holiday quarter. At roughly 28x trailing earnings, the market is paying for that story to continue.