Allison Transmission (ALSN) Q4 2025 earnings summary

Executive summary

• Completed acquisition of Dana's Off-Highway Drive & Motion Systems on January 1, 2026, expanding global reach and product portfolio.

• Integration efforts are underway, with a focus on synergy realization and disciplined execution.

• 2025 performance impacted by macroeconomic headwinds, but cost control and execution led to improved adjusted EBITDA margin and record net sales in Outside North America On-Highway and Defense markets.

• Defense end market revenue grew 26% year-over-year to $267 million, achieving a $100 million incremental annual revenue objective.

• Repurchased $328 million of stock in 2025, representing 4% of outstanding shares.

Financial highlights

• Full year 2025 net sales were $3,010 million, down $215 million year-over-year; Q4 net sales were $737 million, down 7% year-over-year.

• Full year 2025 net income was $623 million (down from $731 million in 2024); Q4 net income was $99 million, down 43% year-over-year, impacted by a $29 million impairment and $26 million acquisition expenses.

• Full year adjusted EBITDA was $1,130 million (37.5% margin, up 140 bps); Q4 adjusted EBITDA was $265 million (36% margin, up 210 bps).

• Net cash from operating activities in Q4 was $243 million, up $32 million year-over-year; full year was $836 million; adjusted free cash flow was $169 million for Q4 and $661 million for the year.

• Q4 gross margin improved by 110 basis points to 48% year-over-year.

Outlook and guidance

• 2026 consolidated net sales guidance: $5,575–$5,925 million; net income: $600–$750 million, including ~$70 million in one-time integration costs.

• Adjusted EBITDA guidance: $1,364–$1,515 million (25% margin midpoint); adjusted free cash flow: $655–$805 million.

• Guidance assumes continued softness in North America On-Highway and Off-Highway end markets at or near trough.

• No cost synergies from the acquisition are included in 2026 guidance; $120 million annual run rate synergies targeted for future years.

• 2026 capital expenditures expected at $295–$315 million, including $45 million in one-time integration CapEx.