Allison Transmission Holdings reported third quarter net sales of $1,534 million with an adjusted EBITDA margin of 26.1% and net cash provided by operating activities of $343 million and raised full year 2026 guidance.
David S. Graziosi, chair, president and chief executive officer of Allison, commented, “Allison’s third quarter results reflect continued strength across the majority of our end markets, supported by disciplined execution that maximized the benefits of higher volumes. Within the Allison Transmission business unit, demand accelerated for medium-duty and Class 8 vocational trucks, driving record quarterly revenue of $462 million in the North America On-Highway end market. Within the Allison Off-Highway business unit, momentum in the Mining end market remained robust, while the Construction & Material Handling end market delivered year over year growth across all regions, exceeding our expectations entering 2026. As anticipated, third quarter performance reflects customary seasonality for the business unit, including the impact of European holidays and represents the softest quarter of the year. Conversely, demand within the Industrial and Agriculture end markets remained subdued, as ongoing geopolitical developments continue to temper customer purchasing activity.”
Graziosi continued, “Favorable end markets demand conditions and operational execution drove strong cash generation in the third quarter, resulting in adjusted free cash flow of $278 million, up 51% year over year. Year to date, this cash generation has supported the repayment of over $400 million of debt, advancing the company toward our leverage target. In addition to debt reduction, Allison remains committed to returning capital to shareholders through our quarterly dividend and share repurchase program. During the third quarter, Allison paid $23 million for its quarterly dividend and repurchased $57 million of common stock.”
Third quarter results include segment reporting for Allison Transmission, the company’s legacy business, excluding certain costs now accounted for within the Allison Central Group, and Allison Off-Highway, the business acquired from Dana Incorporated on Jan. 1. The Allison Central Group is a centralized cost center which includes certain functional costs that support the company’s global operations.
Allison Consolidated Third Quarter Financial Results
Net sales for the quarter were $1,534 million, including the addition of $653 million in net sales for the Allison Off-Highway business unit.
Gross profit for the quarter was $505 million, an increase of $175 million from $330 million for the same period in 2025. The increase was principally driven by the addition of the Allison Off-Highway business unit and a $77 million increase in the Allison Transmission business unit. Gross margin for the quarter was 33%.
Selling, general and administrative expenses for the quarter were $142 million, an increase of $59 million from $83 million for the same period in 2025. The increase was principally driven by the addition of the Allison Off-Highway business unit. Selling general and administrative expenses for the third quarter include $4 million of one-time acquisition-related expenses.
Engineering – research and development expenses for the quarter were $59 million, an increase of $16 million from $43 million for the same period in 2025. The increase was principally driven by the addition of the Allison Off-Highway business unit.
Net income for the quarter was $191 million, an increase of $54 million from $137 million for the same period in 2025. The increase was principally driven by increased gross profit from the addition of the Allison Off-Highway business unit, higher gross profit in the Allison Transmission business unit and lower acquisition-related expenses. The year over year increase in net income was partially offset by higher interest expense, net, a $17 million charge attributable to optimization activities within the Allison Off-Highway business unit and higher income tax expense.
Diluted EPS for the third quarter was $2.30, a year-over-year increase of 41%.
Excluding the effect of certain non-cash, non-recurring, infrequent or unusual items, including the costs associated with the acquisition of the Allison Off-Highway business unit, adjusted net income, a non-GAAP financial measure, was $241 million for the third quarter and adjusted diluted EPS was $2.90, a year over year increase of 59%.
Adjusted EBITDA, a non-GAAP financial measure, was $400 million for the third quarter, an increase of $144 million from $256 million for the same period in 2025. Adjusted EBITDA margin for the quarter was 26.1%.
Net cash provided by operating activities for the quarter was $343 million, a year over year increase of 50%. Adjusted free cash flow, a non-GAAP financial measure, for the quarter was $278 million, a year over year increase of 51%.
Allison ended the third quarter with nearly $500 million of cash and cash equivalents and $996 million of available borrowing capacity under its revolving credit facility. Allison ended the third quarter with total debt of $4,012 million and net debt of $3,515 million.
During the third quarter, Allison paid a quarterly dividend of $0.29 per share and repurchased $57 million of its common stock, with $1,068 million of authorization remaining under its stock repurchase program.
Full Year 2026 Guidance Update
Given Allison Transmission’s third quarter results and improved conditions across the majority of its key end markets, the company is increasing its full year 2026 guidance provided to the market on August 3, 2026. Allison expects:
- Consolidated net sales in the range of $5,975 to $6,075 million
- Consolidated net income in the range of $645 to $685 million, subject to the completion of purchase price accounting associated with the acquisition of the Allison Off-Highway business unit
- Net income guidance includes approximately $125 million of one-time, pre-tax expenses associated with the separation, integration and restructuring of the Allison Off-Highway business unit. This includes restructuring charges related to manufacturing footprint optimization in its European operations and approximately $65 million of expenses related to the stepped-up basis in inventory. Including one-time costs, the Allison Off-Highway acquisition is expected to be accretive to net income and diluted EPS in 2026
- Consolidated adjusted EBITDA in the range of $1,530 to $1,580 million
- Consolidated net cash provided by operating activities in the range of $1,110 to $1,140 million, including approximately $60 million of one-time cash outlays associated with the acquisition of the Allison Off-Highway business unit
- Consolidated capital expenditures in the range of $240 to $260 million, including one-time separation and integration capital expenditures of approximately $20 million
- Consolidated adjusted free cash flow in the range of $850 to $900 million
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