Cleveland-Cliffs Q2: Revenue and EBITDA rebound, but still in the red

What happened

Cleveland-Cliffs reported Q2 2026 revenues of $5.2 billion, up $300 million sequentially, driven by higher pricing and volumes, with adjusted EBITDA surging to $286 million from $95 million in Q1. Operating cash flow turned positive at $230 million, a critical improvement from the negative $325 million in Q1, though the company still posted a GAAP net loss of $134 million (adjusted net loss of $115 million) due to legacy cost structure and interest expense. The sequential rebound validates the tariff-supported pricing environment and the benefits of exiting the unprofitable slab contract, but the absolute profit level remains insufficient to cover $7.76 billion in long-term debt quickly. While operating cash flow positive is a milestone, free cash flow likely remains just barely positive after capex, and the market will focus on whether this trajectory can sustain through Q3 and beyond, especially with USW contract negotiations looming on September 1.

Implication

Q2 results reduce near-term liquidity concerns but do not yet de-risk the leverage story. Investors should look for Q3 free cash flow to turn sustainably positive and for the USW negotiation outcome before upgrading the thesis. The sequential EBITDA improvement is encouraging, but net losses and $7.76B debt keep the margin of safety thin. Trim exposure on strength above $12.50 per the master report, and consider adding if the stock dips back toward $8.50 and Q3 confirms the cash conversion trend.

Thesis delta

Q2 operating cash flow turned positive, meeting a key checkpoint from the master report that required Q2 to show improved cash generation. This reduces the bear scenario probability slightly and suggests the tariff-driven pricing is translating into cash flow faster than expected. However, the net loss persists and debt remains high, so the attractive entry point remains at $8.50, and the WAIT rating is maintained with increased confidence in the base case.