Allison Transmission Holdings, Inc.

What they do

Allison designs, manufactures, and sells fully automatic transmissions for on-highway vehicles (distribution, refuse, construction, fire and emergency), buses, motorhomes, and defense vehicles. It also offers drivetrain and motion solutions for off-highway equipment across construction, agriculture, mining, and material handling. The company operates through two business units: Allison Transmission and Allison Off-Highway Drive & Motion Systems, serving customers globally via approximately 1,500 independent distributor and dealer locations.

Revenue drivers

• Allison Transmission (legacy business) — Record quarterly net sales of $860 million in Q2 2026; includes on-highway truck, bus, and defense end markets, with North America generating approximately 76% of 2025 revenues.
• Allison Off-Highway Drive & Motion Systems — Added $706 million in Q2 2026 net sales from the acquired Dana off-highway business; growth driven by Construction & Material Handling and Mining end markets.
• Defense end market — Identified as a key growth initiative; contributed to record quarterly net sales in Q2 2026 for the Allison Transmission business unit.
• North America On-Highway end market — Momentum in the North American truck market contributed to record quarterly sales; expected to drive higher net sales in 2026.

Recent performance

For Q2 2026 (quarter ended June 30, 2026), Allison reported net sales of $1,566 million, up 92% year-over-year, including $706 million from the new Allison Off-Highway segment. Net income was $181 million (12% of net sales), a decrease from $195 million in Q2 2025 due to higher operating costs and interest expense. Diluted EPS was $2.15, down 6% year-over-year, while adjusted diluted EPS was $2.73, up 8%. Adjusted EBITDA was $404 million (26% of net sales), up 29% year-over-year. The company generated $312 million in operating cash flow and record adjusted free cash flow of $281 million in the quarter.

Strategy

Management's stated priorities include successful integration of the Allison Off-Highway business, capturing planned synergies, and realizing strategic benefits of combined operations. The company is executing growth initiatives in the Defense end market and leveraging the new off-highway portfolio to diversify across end markets with different demand characteristics. It also continues to focus on cash generation, as evidenced by record quarterly adjusted free cash flow in Q2 2026, and is progressing toward its leverage target by repaying debt, including the remaining $150 million on its revolving credit facility.

Risks

• Customer concentration — In 2025, sales were concentrated among top five OEM customers; loss or consolidation of any one could reduce net sales.
• Competition — Markets are competitive; actions by competitors could have a material adverse effect on business, results, and financial condition.
• Global economic disruption — Volatility and disruption in the global economic environment could materially adversely affect operations and financial results.
• Supply chain and raw material costs — Increases in cost, disruption of supply, or shortage of raw materials or components could harm profitability.

Outlook

Management expects higher 2026 net sales driven by the North America On-Highway and Defense end markets, as well as Allison Off-Highway’s Construction & Material Handling end market. In Q2 2026, the Agriculture end market showed signs of recovery but had not yet inflected positively, while Construction & Material Handling and Mining demand rebounded from trough levels. The company continues to prioritize integration and synergy capture from the acquisition and expects to maintain strong cash generation.