AZM After the First Quarter: The Tariff Reset Was Not Enough Without Deliveries and S.K. Profitability
The first quarter weakened the repeatability test for AZM: segment revenue was almost flat, but adjusted operating profit was cut by more than half. SteerLinq is adding orders, but without a recovery in deliveries and without a smaller loss at S.K., the 2025 profit base is still unproven.
The first quarter gives an uncomfortable first answer to the question left open by the prior AZM article: the 2025 improvement still does not look like a profit base that repeats on its own. In the vehicle body adaptation and repair segment, revenue rose by only 1.8%, but operating profit fell from NIS 4.7 million to NIS 1.6 million, and adjusted operating profit fell from NIS 5.4 million to NIS 2.4 million. That gap is too large to dismiss as ordinary seasonality or a random weak quarter, especially after AZM’s tariff was already reset in 2025. SteerLinq did move forward, with a NIS 5.2 million order in March and another NIS 3 million order after the quarter, but that progress still did not carry segment profitability. The problem sits in the combination of lower AZM vehicle deliveries, a smaller contribution from the working-capital settlement with AZM’s former controlling shareholders, and a roughly NIS 1 million loss at S.K. Electric Vehicles. The current read is therefore clear: the tariff reset was necessary to stop margin erosion, but the first quarter shows it was not enough without deliveries, actual SteerLinq revenue recognition, and better S.K. profitability. The next quarters need to show whether this was a one-quarter timing drop or evidence that 2025 profit was above the representative run rate.
A Higher Tariff Was Not Enough When Deliveries Fell
A continuation of the AZM tariff-quality article has to start with the number that decides the issue: revenue in the vehicle body adaptation and repair segment was almost unchanged, while operating profit collapsed. Shagrir Vehicle Services reported segment revenue of NIS 52.4 million in the first quarter, compared with NIS 51.4 million in the prior-year quarter. On the surface, that looks stable. Economically, it is lower-quality stability, because operating profit fell by 65.6% and the operating margin fell from 9.1% to 3.1%.
The adjusted metric, which excludes amortization of excess purchase costs, does not rescue the picture. Adjusted operating profit in the segment fell by 55.9%, from NIS 5.4 million to NIS 2.4 million. This was exactly the proof point missing after 2025: if the tariff reset had created a new profit base, it should have held up better even as the one-off settlement contribution faded. In the first quarter, it did not.
The issue is not only an accounting profit line. Segment revenue increased mainly because of vehicle sales at S.K. Electric Vehicles and higher SteerLinq activity, while AZM disability-vehicle deliveries declined. That is not the same revenue at the same quality. Revenue from vehicle sales at S.K. that comes with a loss does not replace profitable deliveries in AZM’s core activity.
SteerLinq Advanced, But Did Not Yet Carry the Segment
The positive point in the quarter is that SteerLinq is no longer just a promise. In March 2026, AZM received a NIS 5.2 million order to supply robotic systems for dozens of vehicles as part of a cooperation with a leading defense company. After the quarter, it also received orders from the Ministry of Defense as prime supplier, for about NIS 3 million. That sequence matters, and it changes the quality of the SteerLinq story: these are orders, not just development language.
Still, an order sequence is not the same as recurring segment profit. The orders need to become deliveries, recognized revenue, and profit that is not absorbed by losses elsewhere in the same segment. The company expects AZM may receive additional orders in the near term, but it also keeps that expectation outside the certain base. SteerLinq is therefore a near-term proof point, not a complete answer to the repeatability question.
The implication for the next quarters is straightforward. If the March and April orders convert into deliveries at a reasonable pace by the end of the third quarter, they can help rebuild AZM profitability and improve segment revenue quality. If they remain mainly in backlog, or if their margin does not offset weaker disability-vehicle deliveries, the market will receive another demand signal, but not proof of profit.
S.K. Added Sales and Pulled Profit Down
S.K. Electric Vehicles is why the segment’s revenue growth is somewhat misleading. It contributed to sales, but lost about NIS 1 million in the quarter, after first being consolidated only in the fourth quarter of 2025. In other words, part of the new segment revenue came from a layer that still consumes profit, not from a layer that strengthens it.
That matters because the prior AZM article was about the quality of the 2025 improvement. The question then was how much of the profit jump came from the tariff reset, and how much came from less repeatable items such as the working-capital settlement and amortization effects. The first quarter adds a new layer: even if the tariff is better, the segment can still look weak if the activity mix shifts toward loss-making sales or lower deliveries in the core activity.
S.K. is therefore not a footnote. It could become an activity channel that broadens AZM over time, but right now it raises revenue and reduces profit. Until that activity shows profitability or at least stops subtracting from segment profit, it is hard to use it as evidence that AZM has returned to a higher base run rate.
2025 Is Still Not a Base Run Rate
The first quarter does not erase the 2025 improvement, but it lowers confidence that the improvement has already become recurring. The counterpoint is still valid: deliveries may have been delayed, SteerLinq may recognize revenue later in the year, and S.K. may still be in an early stage where a quarterly loss is not representative. But the burden has shifted to the company. AZM needs to show three things together in the second and third quarters of 2026: better deliveries, conversion of SteerLinq orders into revenue and profit, and a smaller S.K. loss. Without those three, the 2025 tariff reset will look less like a new profit base and more like a necessary correction that did not solve all of the segment’s profitability problem.
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