Allison Transmission Holdings, Inc.

Second-quarter 2026 net sales were $1.566 billion, up 92% year over year. Consolidated adjusted EBITDA was $404 million, up $91 million year over year, with a 25.8% margin. Adjusted diluted EPS was $2.73, up 8% year over year, and adjusted free cash flow was a record $281 million, up 84% year over year. By segment, Allison Transmission revenue rose 6% year over year to a quarterly record $860 million, while Allison Off-Highway contributed $706 million of revenue. For 2026, management raised guidance to revenue of $5.8 billion to $6 billion, net income of $600 million to $700 million, adjusted EBITDA of $1.465 billion to $1.575 billion, operating cash flow of $1.025 billion to $1.125 billion, capital expenditures of $260 million to $280 million, and adjusted free cash flow of $745 million to $865 million. At the midpoint, the EBITDA guide implies about a 26% margin. Management said the full-year EBITDA guide does not meaningfully include synergies, and the higher outlook is mainly from incremental volume and operating-cost control.

Dave Graziosi emphasized that the company is building momentum through both its legacy products and next-generation offerings. He highlighted new customer-facing communications via Allison in Action, then focused on the defense business, saying the recent wins validate investment in innovation and expand the company’s opportunity in tracked and wheeled defense markets. He also said the integration teams are finding the combined organization more capable and more agile than expected, especially in reacting to geopolitical developments and regional customer needs.

Scott Mell said second-quarter performance was strong despite headwinds from higher steel and aluminum costs and broader inflation. He noted mid-teens year-over-year material-cost pressure in the legacy business and said those costs are recovered with a 6- to 12-month lag. On capital allocation, he reiterated the priorities of funding growth, reducing debt toward a near-term 2x leverage target, and returning excess cash through dividends and buybacks; during the quarter the company repaid the remaining $150 million on its revolver, repurchased $46 million of stock, and paid a $0.29 dividend. He also said the company’s $120 million annual run-rate synergy target is expected to be realized 40% by end-2027, 40% by end-2028, and fully by end-2029.

Analysts pressed on margin pressure, pricing, and whether more inflation would require additional price actions. Management said the legacy business saw margin compression from aluminum and steel, but pricing recovery mechanisms are in place and long-term agreements support higher pricing than pre-pandemic levels; Fred Bohley added that price increases above the old 50 to 75 basis point range are expected in 2027. Questions on the raised revenue guide were answered with a split between a stronger outlook for Transmission in the second half and normal seasonality in Off-Highway, especially the third quarter European shutdown. Analysts also asked about EPA 2027 and defense demand; management said OEMs are still assessing the EPA proposal, but current build schedules and full order books suggest limited second-half disruption, while defense visibility remains very strong with H2 expected to look like H1.