Allison Transmission Q3 Sales Jump 121%, 2026 Outlook Increases

Allison Transmission (NYSE: ALSN) reported a 121% year-over-year increase in third-quarter 2026 net sales, reflecting the addition of its acquired Off-Highway business and record revenue in the legacy transmission operation. The company also increased the midpoint of its full-year sales, adjusted EBITDA and adjusted free cash flow guidance ranges.

Net sales reached $1.53 billion for the quarter ended September 30, up from $693 million a year earlier. The Allison Off-Highway business, acquired on January 1, contributed $653 million, while Allison Transmission generated record quarterly sales of $881 million, a 27% year-over-year increase.

GAAP net income rose to $191 million, or $2.30 per diluted share, from $137 million, or $1.63 per share, in the prior-year quarter. However, net income margin declined to 12.5% from 19.8%.

Adjusted EBITDA increased 56% to $400 million, while the adjusted EBITDA margin was 26.1%, up 30 basis points sequentially but below the 36.9% reported a year earlier, when results included only the legacy Allison Transmission business. Adjusted diluted earnings rose 59% to $2.90 per share.

Net cash provided by operating activities increased to $343 million from $228 million. Adjusted free cash flow climbed 51% to $278 million after $65 million of additions to long-lived assets.

North American truck demand lifts transmission sales

North America On-Highway sales increased 41% to a quarterly record of $462 million, supported by demand for medium-duty and Class 8 vocational trucks. Allison said infrastructure spending and megaprojects were supporting vocational truck demand, while aging fleets were contributing to pent-up demand in the medium-duty market. The company cautioned that tariffs, emissions regulations, consumer spending and broader economic conditions remain sources of uncertainty.

Outside North America On-Highway revenue rose 6% to $129 million. The presentation cited automatic-transmission adoption as a long-term opportunity but noted regional economic differences in Asia-Pacific and uncertainty surrounding European economic stabilization.

Defense sales advanced 21% to $94 million, with strength among international customers, particularly in tracked vehicle programs. Service parts, support equipment and other revenue increased 14% to $181 million, reflecting older fleets, a larger population of vehicles outside warranty and transmission-related support equipment demand.

Global Off-Highway sales within the Allison Transmission segment more than doubled to $15 million. Management described mining conditions as strong because of elevated commodity prices, while the outlook for North American hydraulic fracturing remained uncertain.

Allison Transmission produced segment operating profit of $300 million, equivalent to 34.1% of sales, and adjusted EBITDA of $333 million at a 37.8% margin.

Acquired Off-Highway business adds $653 million of revenue

The Allison Off-Highway segment recorded $653 million in quarterly sales. Construction and Material Handling was its largest end market, contributing $232 million, followed by Service Parts, Specialty and Other at $146 million and Agriculture at $130 million. Industrial and Mining generated $92 million and $53 million, respectively.

Construction and Material Handling benefited from steadier global investment and demand for forklift trucks tied to warehousing and e-commerce activity. Residential construction remained constrained by its sensitivity to interest rates, while lower telehandler production weighed on the Americas. Mining demand was supported by elevated prices for gold, copper and rare-earth minerals.

Agricultural conditions were less favorable. The company said commodity prices remained low and demand for high-horsepower equipment was soft, with farm margins affecting purchasing decisions. Lower-horsepower equipment continued to grow in India.

The Off-Highway segment reported operating profit of $32 million, or 4.9% of sales, and adjusted EBITDA of $83 million, representing a 12.7% margin. Allison’s central group function recorded a $28 million operating loss and a $16 million adjusted EBITDA loss.

Allison said the combined portfolio is intended to move the company from supplying individual components toward serving as an integrated driveline and propulsion-systems provider. Management identified opportunities to increase content per vehicle, cross-sell products and combine engineering capabilities across internal-combustion, hybrid and electric propulsion technologies.

Full-year guidance updated

For 2026, Allison now expects net sales of $5.98 billion to $6.08 billion, compared with its previous range of $5.8 billion to $6.0 billion. The midpoint increased to $6.03 billion from $5.9 billion.

The company forecasts GAAP net income of $645 million to $685 million, narrowing the previous $600 million-to-$700 million range and increasing the midpoint to $665 million. Adjusted EBITDA is expected to reach $1.53 billion to $1.58 billion, compared with the prior range of $1.47 billion to $1.58 billion.

Guidance for net cash provided by operating activities increased to $1.11 billion to $1.14 billion from $1.03 billion to $1.13 billion. Allison reduced its expected capital expenditures to $240 million to $260 million from $260 million to $280 million, and raised adjusted free cash flow guidance to $850 million to $900 million from $745 million to $865 million.

During the third quarter, Allison used $100 million for a partial redemption of its 2027 notes, bringing year-to-date debt repayment above $400 million. It also spent $57 million on share repurchases and $23 million on dividends.

The outlook remains subject to purchase-price accounting for the Off-Highway acquisition, and net income guidance includes additional non-cash acquisition-related costs. Allison also identified integration expenses, the execution of expected acquisition benefits, tariffs and geopolitical developments, cyclical end markets, supply and labor disruptions, customer concentration, technology shifts and indebtedness among its principal uncertainties.