VALUATION HIGHLIGHTS
- Aluminum constitutes 53% of the Trefis price estimate for Alcoa's stock.
- Alumina constitutes 47% of the Trefis price estimate for Alcoa's stock.
WHAT HAS CHANGED?
- Alcoa's Recent Earnings
- For the full year ended December 31, 2025, Alcoa delivered solid top-line growth and significantly stronger earnings compared with the prior year. Revenue increased about 8% to roughly $12.8 billion, driven by higher aluminum shipments and pricing. Net income surged to approximately $1.17 billion, or $4.42 per diluted share, compared with a much smaller profit in 2024. Adjusted net income, stripping out special items, came in at around $1.0 billion (about $3.77 per share), while adjusted EBITDA excluding special items rose to about $2.0 billion
- Impact of tariffs
- Tariff costs on imported aluminum remained an ongoing headwind, raising costs and pressuring adjusted EBITDA despite elevated U.S. pricing that helped partially offset the impact.
- Operational Highlights
- The company saw increased aluminum production (about +5%) as previously curtailed smelters were brought back online, though alumina production declined slightly due primarily to the full curtailment of the Kwinana alumina refinery. Alcoa also set annual production records at multiple aluminum smelters and at least one alumina refinery. Strategic actions were an important part of the year’s results, including the sale of its interest in the Ma’aden joint venture (boosting earnings), a favorable Australian tax decision, the formation of a joint venture to support San Ciprián operations in Spain, and the permanent closure of the Kwinana refinery in Australia.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Alcoa's value that present opportunities for upside or downside to the current Trefis price estimate for Alcoa:
Aluminum Division
- Average Price of Aluminum: Aluminum prices rose from $1,710 per ton in 2020 to about $2,800 in 2022, although they declined a bit to $2400 in 2023 and further to about $2,340 in 2024, due to economic headwinds. Prices have increased sharply to $2,467 in 2025, driven by tighter global supply from production curtailments, elevated energy costs that raised the marginal cost of production, and improving demand from autos, aerospace, and energy-transition sectors such as EVs and renewables. We expect prices to remain range-bound through the end of our review period.
- Aluminum EBITDA Margin: EBITDA margins for the Aluminum division are expected to stabilize at 20% by the end of the forecast period, driven by expectations of improved pricing environment in the medium term and the company's efforts to boost the productivity of its operations. However, for a scenario where margins decline to about 10%, there could be a downside of almost 10%.
BUSINESS SUMMARY
Alcoa is the leader in the production of aluminum products such as primary aluminum, fabricated aluminum, and alumina. The company is involved in every aspect of the industry, including mining, refining, smelting, and recycling.
Aluminum products account for over 51% of Alcoa's revenues; accordingly, the company is heavily impacted by aluminum prices.
Alcoa operates in around 10 countries worldwide, including Australia, Brazil, the U.S., and European countries.
Bauxite is the primary ore used in alumina production, whereas alumina is the primary ore used in aluminum production. The company also sells bauxite and alumina to third parties.
SOURCES OF VALUE
Alumina division is most valuable for Alcoa
Despite the Aluminum segment contributing maximum revenue to Alcoa, the alumina division has become the most valuable division for the company. This was largely due to the higher margins in the segment, favorable price and product mix, and higher prices due to supply constraints.
The Alumina segment represents the company's worldwide refining system, which processes bauxite into alumina. About two-thirds of the alumina produced is sold under supply contracts to third parties worldwide, while the remainder is used internally by Alcoa's aluminum segment.
