Allison Transmission (NYSE:ALSN) reported second-quarter 2026 net sales of $1.566 billion, up 92% from a year earlier, as the addition of its Allison Off-Highway business unit and growth in its legacy transmission operations lifted revenue. The company raised its full-year outlook, citing second-quarter performance and improving conditions across its end markets.
Adjusted EBITDA rose by $91 million year over year to $404 million, representing a 25.8% margin, while adjusted diluted earnings per share increased 8% to $2.73. Record quarterly adjusted free cash flow grew 84% to $281 million, Chief Financial Officer and Treasurer Scott Mell said.
Legacy Transmission Sales Reach Quarterly Record
Revenue in the Allison Transmission business unit increased 6% from a year earlier to a quarterly record of $860 million. Defense was a major contributor, with revenue in that end market rising 57% year over year to nearly $100 million. North American on-highway revenue increased 3%, driven primarily by pricing as volumes rose only slightly.
Chief Operating Officer Fred Bohley said North American on-highway revenue was up 15% sequentially in the second quarter, while all end markets in the transmission business unit increased more than 10% sequentially. The company expects further sequential improvement in medium-duty and Class 8 vocational truck volumes during the second half of 2026.
Management said end-user purchasing decisions remain influenced by geopolitical conditions, tariffs and emissions regulations. Chairman, President and CEO David Graziosi said OEMs and their suppliers are still assessing the Environmental Protection Agency’s proposal related to 2027 emissions requirements. He said the availability of 2026 engines is expected to help mitigate the effects of the proposed changes.
On pricing, Bohley said Allison has secured meaningful pricing since the pandemic and expects commercial pricing in 2027 to exceed the 50- to 75-basis-point annual pricing level the company historically achieved before the pandemic. He distinguished those commercial pricing expectations from commodity pass-through mechanisms.
Off-Highway Business Sees Demand Recovery in Several Markets
The Allison Off-Highway business unit generated $706 million in second-quarter revenue. Management said construction, material handling and mining markets posted strong year-over-year growth as demand rebounded from trough levels. Mining remained supported by elevated commodity prices.
Agriculture showed signs of recovery in certain segments and regions but had not yet turned positive overall, according to Graziosi. Europe performed well year over year, particularly in construction and material handling, while Asia-Pacific and India grew across all end markets. Revenue in the Americas declined year over year, primarily because of construction, material handling and agriculture markets.
Craig Price, president and business unit leader of Allison Off-Highway, said the unit’s third quarter is typically its weakest revenue period because nearly half of its business comes from Europe, where seasonal shutdowns affect operations. The fourth quarter is expected to improve from the third quarter but remain below first-half levels because of year-end holidays.
Price said pricing was not meaningfully higher or lower year over year in the off-highway business. Mell said the business has less material-cost volatility than the transmission unit because it can pass higher costs through more quickly.
Allison said its off-highway team secured program awards during the first half representing more than $50 million of annual run-rate net new business across construction, material handling, mining and agriculture.
Defense Awards Support Long-Term Outlook
Allison highlighted three defense program wins, including selection of its 4500 Specialty Series fully automatic transmission for the French Land Forces’ PL6T tactical truck program, which is expected to support more than 7,000 vehicles over the next decade.
The company also secured a $250 million contract with BAE Systems Hägglunds to supply its new 4040MX cross-drive transmission for the CV90 Mark 4 infantry fighting vehicle. Allison described the contract as its largest tracked-defense order and the inaugural production application for the 4040MX product.
In addition, General Dynamics European Land Systems ordered Allison 2500 Specialty Series transmissions for EAGLE Series armored vehicles. Deliveries are expected to begin in 2027, with the order covering about 3,000 vehicles and including an option for up to 2,000 additional units.
Bohley said defense revenue was up about 60% year to date and that the company has strong visibility for the balance of 2026, with second-half results expected to resemble the first half. He said the company’s 2027 defense order board is largely full and described Allison’s outlook for the market as bullish.
Synergy Plan and Raised 2026 Guidance
Allison continues to target $120 million in annual run-rate synergies from integrating the off-highway business. Procurement and logistics initiatives account for 60% of the target, while manufacturing and footprint optimization represent 20%. Corporate-function integration and organizational efficiency initiatives make up the remaining 20%.
The company expects to realize about 40% of the target by the end of 2027, another 40% by the end of 2028 and the full amount by the end of 2029. Mell said no material synergies are included in the updated 2026 EBITDA outlook.
For full-year 2026, Allison now expects:
- Net sales of $5.8 billion to $6 billion.
- Net income of $600 million to $700 million, subject to completion of purchase price accounting for the off-highway acquisition.
- Adjusted EBITDA of $1.465 billion to $1.575 billion.
- Operating cash flow of $1.025 billion to $1.125 billion.
- Adjusted free cash flow of $745 million to $865 million.
The net-income outlook includes about $140 million in one-time pretax separation, integration and restructuring costs associated with the off-highway business, including roughly $75 million related to stepped-up inventory basis. Allison said it still expects the acquisition to be accretive to net income and earnings per share in 2026.
During the quarter, the company repaid the remaining $150 million outstanding on its revolving credit facility, repurchased $46 million of common stock and paid a quarterly dividend of $0.29 per share.
About Allison Transmission (NYSE:ALSN)
Allison Transmission Holdings Inc is a global designer, manufacturer and seller of fully automatic transmissions and hybrid propulsion systems for commercial duty vehicles and off-highway equipment. The company’s products are engineered to improve fuel efficiency, reduce emissions and enhance performance across a broad range of industries. Allison’s core transmission portfolio serves applications such as on-highway trucks and buses, medium- and heavy-duty commercial vehicles, and military ground vehicles.
In addition to conventional automatic transmissions, Allison offers advanced hybrid systems that integrate electric motors with mechanical transmission components.
