Allison Transmission Holdings Inc (ALSN) Q4 2025 Earnings Call Highlights: Navigating …

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Tue, February 24, 2026 at 2:01 PM GMT+9 4 min read

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**Revenue:** Q4 2025 net sales of $737 million, down 7% year over year.

**Adjusted EBITDA Margin:** Increased over 200 basis points to 36% for Q4 2025.

**Net Income:** Q4 2025 net income of $99 million, a decrease of $76 million from the same period in 2024.

**Defense End Market Revenue:** Q4 2025 net sales of $73 million, up 7% year over year.

**Adjusted Free Cash Flow:** $169 million in Q4 2025.

**2026 Revenue Guidance:** Consolidated net sales expected in the range of $5,575 million to $5,925 million.

**2026 Net Income Guidance:** Expected in the range of $600 to $750 million.

**2026 Adjusted EBITDA Guidance:** Expected in the range of $1,364 million to $1,515 million.

**2026 Cash Flow Guidance:** Net cash provided by operating activities expected in the range of $970 million to $1,100 million.

**2026 Capital Expenditures:** Expected in the range of $295 to $315 million.

**2026 Adjusted Free Cash Flow Guidance:** Expected in the range of $655 to $805 million.

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Release Date: February 23, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Allison Transmission Holdings Inc (NYSE:ALSN) completed the acquisition of Dana's Off-highway business, expanding its global footprint and product portfolio.

The company achieved a 140 basis point increase in full-year adjusted EBITDA margin to 37.5%, despite a 7% decline in revenue.

The defense end market saw a 26% revenue increase, reaching $267 million, driven by global defense spending commitments.

Allison Transmission Holdings Inc (NYSE:ALSN) repurchased $328 million of common stock, representing 4% of outstanding shares, and increased its quarterly dividend.

The company is confident in capturing $120 million in annual run-rate synergies from the acquisition over the next few years.

Negative Points

Full-year revenue for 2025 was down 7% year over year, impacted by macroeconomic factors and sluggish economic growth.

Net income for Q4 2025 decreased by $76 million year over year, affected by a $29 million impairment related to electrification and $26 million in acquisition-related expenses.

The North America on-highway market remains soft, with no meaningful recovery expected for Class 8 vocational trucks.

The company faces substantial inflationary pressures, including increased costs for materials and labor.

No synergies from the Dana acquisition are included in the 2026 guidance, indicating potential delays in realizing cost benefits.

 






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Q & A Highlights

Q: Could you talk about your price expectations for 2026, including inflation and tariffs? A: Scott Mell, CFO, explained that they expect meaningful year-over-year pricing increases, though not as high as in previous years, estimating between 250 and 400 basis points. Inflationary pressures are significant, affecting both people and material costs. They anticipate recovering a substantial amount of tariffs through pricing actions, but tariffs will still be a net drag on margins.

Q: Regarding the acquisition, how should we think about synergies and their impact on guidance? A: David Graziosi, CEO, stated that they are targeting $120 million in annual run-rate synergies over the next few years. Currently, no synergies are assumed in the 2026 guidance. The focus areas for synergies include operations, procurement, engineering, and SG&A.

Q: Are the 40% EBITDA margins seen in 2018-2019 feasible in this cycle for the legacy Allison business? A: Frederick Bohley, COO, indicated that while achieving 40% margins is possible, the focus is on absolute EBIT and cash conversion. Despite cost pressures, they have been able to pass on price increases and maintain a strong value proposition.

Q: How should we model the seasonality and gross margin for 2026? A: David Graziosi noted that the sales for the first and second halves of the year are expected to be similar, with no substantial swings in margins. Scott Mell added that they are cautiously optimistic about potential improvements in medium-duty demand in the second half of the year.

Q: Can you provide more detail on market guidance, particularly for Class A trucks and off-highway markets? A: Frederick Bohley explained that they are seeing soft conditions in the medium-duty market, with uncertainty around a potential pre-buy in Class A trucks. Defense and international markets are expected to grow. David Graziosi added that off-highway markets are at or near trough levels, with cautious assumptions for recovery.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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