LG Energy Solution flags 25.7% profit growth, with credits and compensation in focus

LG Energy Solution released preliminary third-quarter 2026 results on October 8, estimating operating profit of KRW 756 billion, up 25.7% year on year, and revenue and other income of KRW 9.6434 trillion, up 59.0%. The figures show a marked quarterly improvement, but include KRW 416.9 billion in North American production tax credits and have not undergone an external audit. Assessing the battery business’s recovery requires attention to those credits, revenue presentation and the earnings components still awaiting disclosure.¹

AI-generated illustration: generic batteries, a calculator and papers represent battery manufacturing and profit analysis; these are not LG Energy Solution products or an actual factory.

Credits affect revenue as well as profit

The company’s release puts production tax credits at KRW 416.9 billion. Without them, revenue is KRW 9.2265 trillion and operating profit is KRW 339.1 billion, giving an operating margin of 3.7%. Calculated from the disclosed figures, the credits are equivalent to roughly 55% of reported operating profit. That clarifies the significance of policy support for the quarter, but does not make the remaining KRW 339.1 billion a measure of recurring earnings.¹

A presentation change also matters. From the first quarter of 2026, the company changed its accounting presentation of North American production subsidies, including them under “sales and other income” in its financial statements. The previous-quarter and year-earlier figures in this release have been restated on the same basis. The 59.0% year-on-year rise therefore uses comparable figures, but the entire KRW 9.6434 trillion should not be read as revenue earned by selling batteries to customers.¹

The earnings surprise still needs explanation

Reuters cited an LSEG SmartEstimate operating-profit expectation of KRW 309 billion, well below the preliminary result. That measure gives greater weight to analysts with more accurate forecasting records. Analysts quoted in the report attributed part of the surprise to one-off compensation from a North American automaker that had fallen short of minimum purchase commitments.²

That explanation has a clear evidentiary limit. The characterization of compensation comes from analysts; its amount was not separately disclosed in the preliminary release. It cannot support an independently calculated “core profit” figure. Removing production credits excludes one identified source of support, not every non-recurring item. If compensation contributed to profit, it could reflect contractual protection against insufficient orders rather than a corresponding improvement in end-customer demand.

Storage growth and profitability move at different speeds

Reuters reported that LG Energy Solution was expanding energy-storage systems to address persistently weak electric-vehicle demand, with rising electricity needs at AI data centres supporting the storage market. Analysts cited in the report nevertheless said the company’s storage business remained loss-making and that its expected turnaround had been delayed. These are analysts’ assessments reported by Reuters, not segment financial results disclosed by the company.²

For battery manufacturers, rising demand, capacity adjustments and profitability can occur at different times. Storage creates order opportunities, but does not automatically establish that production-conversion costs have been absorbed or that the new business has reached a scale sufficient to cover costs. The preliminary release provides too little segment detail to allocate the quarter’s profit growth reliably between EV batteries and storage.

One strong quarter has not erased the year-to-date decline

The company reported a 27.6% sequential increase in third-quarter revenue and a 567.3% rise in operating profit. Yet cumulative operating profit for the first three quarters was KRW 661.6 billion, still down 54.9% year on year. A sharp quarterly rebound and pressure on cumulative results can coexist; one quarter cannot substitute for the full-year operating trend.¹

The company plans to release detailed quarterly results on November 3, according to Reuters. The earnings mix, segment performance and compensation’s specific effect will be more informative at that stage. For now, the preliminary improvement and the scale of credits are established. The extent of an EV-demand recovery and the timing of sustainable storage profitability still require further disclosure.²

Source notes

1. 2026-10-08 · Announcement of preliminary results for the third quarter of 2026 · LG Energy Solution via LG’s corporate website; original title: “2026년 3분기 잠정실적 발표”. Prepared under Korean-adopted IFRS and not externally audited. ↩ ↩² ↩³ ↩⁴

2. 2026-10-08 · LG Energy Solution flags 26% rise in Q3 operating profit · Reuters via CNA. ↩ ↩² ↩³