Allison Transmission Holdings (ALSN)·Q4 2025 Earnings Summary
Allison Transmission Q4 2025: Revenue Miss, But Dana Deal Transforms 2026 Outlook
February 23, 2026 · by Fintool AI Agent
Allison Transmission reported Q4 2025 results that missed Street expectations on revenue and earnings, but the narrative is already shifting to 2026 as the company's transformational Dana Off-Highway acquisition closed on January 1st. Net sales of $737M came in 2.3% below consensus, while GAAP EPS of $1.18 was dragged down by a $29M impairment charge on electrified products and $26M in acquisition-related expenses.
The stock traded down 1.7% to $116.84, a muted reaction given the miss—likely reflecting investor focus on the larger Dana integration story and solid margin performance despite revenue headwinds.
Did Allison Beat Earnings?
No. Allison missed across the board in Q4 2025:
The GAAP EPS miss looks severe, but it's important to note the one-time items impacting the quarter:
- $29M impairment on electrified product long-lived assets
- $26M Dana acquisition-related expenses (legal, consulting fees)
Adjusting for these items, net income was $141M with diluted EPS of $1.68—still a miss versus $1.85 consensus, but far less dramatic.
Ask Fintool AI AgentWhat Drove the Revenue Miss?
North America On-Highway—the company's largest segment at 49% of sales—declined 14% YoY to $361M, driven by lower demand for Class 8 vocational and medium-duty trucks.
Segment Performance:
The bright spots were Defense (up 26% for full year to $267M) and Outside North America On-Highway, which hit record Q4 net sales of $131M.
Margin Performance Was Actually Strong
Despite the revenue decline, Allison delivered impressive margin expansion:
For the full year, Adjusted EBITDA margin expanded 140bps to 37.5%, demonstrating the company's ability to manage costs in a challenging environment.
CEO David Graziosi emphasized this resilience: "Although 2025 presented meaningful macroeconomic challenges, we remained disciplined and focused on the factors within our control... our full year results demonstrate the resilient earnings power of our business in difficult and uncertain operating environments."
The Dana Acquisition Changes Everything
The headline story isn't Q4—it's the January 1, 2026 closing of the Dana Off-Highway acquisition, which Graziosi called "a transformational moment in Allison history."
What Allison is getting:
- Global off-highway drive and motion systems business
- ~$2.55-2.75B in expected 2026 revenue
- ~14,000 employees globally, including ~5,000 in EMEA and ~4,500 in Asia Pacific
- Manufacturing in best-cost countries
- Key capabilities in software, controls, and integrated commercial-duty propulsion
The combined company will have substantially expanded geographic reach and product portfolio across mining, energy, agriculture, construction, and industrial end markets.
Synergies and Long-Term Margin Outlook
Management reiterated confidence in capturing $120 million of annual run rate synergies over the next few years—but critically, no synergies are included in the 2026 guidance.
Focus areas for synergy capture:
- Operations
- Procurement
- Engineering
- SG&A
CEO Dave Graziosi noted the global teams are "very engaged" at a functional level, but emphasized a deliberate approach: "We're gonna do it right, and make sure that we have the outcome that we're looking for."
Long-term margin target: Once full synergies are captured and end markets see moderate improvement, management expects consolidated Adjusted EBITDA margins of 27%-29% (vs. 25% guided for 2026).
On the legacy Allison Transmission business, CFO Fred Bohley was asked whether 40% EBITDA margins (achieved in 2018-2019) are achievable again. His response was bullish: "I certainly would not rule out returning to those peak margins, 40%... we are making peak earnings on everything we send out the door."
What Did Management Guide?
FY 2026 Guidance (first full year including Dana):
Key considerations:
- Guidance includes ~$70M of one-time pre-tax integration/restructuring costs
- Despite one-time costs, the acquisition is expected to be accretive to Net Income and EPS in 2026
- CapEx guidance of $295-315M includes $45M of one-time separation/integration capital
The legacy Allison Transmission segment guidance of $3,025-3,175M suggests roughly flat to modest growth from 2025's $3,010M.
Pricing outlook for 2026:
- Allison Transmission segment: 250-400 basis points of year-over-year pricing expected from LTA negotiations
- Off-Highway segment: Pricing expected to be relatively neutral, except for tariff pass-through
- Tariffs: Management expects to recover "a meaningful amount" through pricing, but tariffs will be a net drag on margins year-over-year
Q&A Highlights
On end market assumptions (Fred Bohley): "We are seeing very, very soft medium-duty activity. A lot of that's driven by the large lease rental players. They have really not reentered the market." Class 8 straight truck is "steady," but no pre-buy is modeled for the second half.
On defense momentum: Specific programs driving growth include Korea's K9 Thunder, Poland's Borsuk, and Turkey's Korkut. Management expects defense to "continue to accelerate" in 2026.
On Off-Highway end markets (Dave Graziosi): Construction and material handling is the largest segment, followed by service parts, agriculture, and industrial/mining. Residential construction remains weak due to rate sensitivity. Agriculture faces "bifurcation in equipment sizing" and commodity price challenges. Mining expected to see "some growth" tied to gold, copper, and rare minerals.
On seasonality: Sales expected to be relatively even throughout 2026—no substantial swings quarter-to-quarter for the combined entity.
On segment reporting: Starting Q1 2026, Allison will provide two-segment reporting with detail from net sales through operating profit, plus depreciation/amortization to calculate segment EBITDA.
Ask Fintool AI AgentHow Did the Stock React?
ALSN closed at $116.84, down 1.7% on the day the earnings were released.
The muted reaction—despite the revenue and EPS miss—likely reflects:
- Forward focus: Investors are looking past Q4 to the Dana integration story
- Margin resilience: Strong EBITDA margin performance despite revenue headwinds
- Stock already ran: ALSN up ~54% from 52-week lows, near 52-week highs
- Buyback support: Company repurchased $328M (4% of shares) in 2025
What Changed From Last Quarter?
The $29M impairment on electrified products is notable—it signals Allison is scaling back EV transmission investments after seeing slower adoption.
Full Year 2025 Summary
India Expansion Highlights
Management highlighted India as a key growth market with strategic investments across defense, mining, and export:
- Defense MOU: Signed memorandum of understanding with Armored Vehicles Nigam Limited to establish maintenance, repair, and overhaul center for cross-drive transmissions
- Mining penetration: End users expanding wide-body dump truck fleets with Allison 4800 Series transmissions
- Export hub: Daimler India shipping Fuso medium-duty trucks with Allison 3000 Series transmissions to South Africa
- Chennai facility: State-of-the-art expansion operational, full capacity by 2027
- Off-Highway footprint: 4 manufacturing plants and ~4,000 employees joined from Dana acquisition
Key Risks to Watch
- Integration execution: Dana is a large, complex acquisition requiring significant management attention
- NA truck cycle: Class 8 vocational and medium-duty weakness may persist
- Tariff exposure: International operations face increased trade protectionism risks
- Customer concentration: Top 5 customers represent significant revenue share
- EV transition uncertainty: Impairment signals challenges in electrification strategy
Bottom Line
Allison's Q4 was a miss, but the story has shifted to execution on the Dana integration. The legacy transmission business delivered solid margin performance despite macro headwinds, and management has a track record of cost discipline. The FY26 guidance—showing ~85% revenue growth from the combined entity—sets up a materially different company going forward.
Key investor takeaways from the call:
- No synergies in 2026 guide: The $120M annual run rate target is still 2+ years out
- 40% margins still achievable: Management bullish on legacy business margin potential
- Medium-duty very weak: Lease/rental players haven't returned; no pre-buy modeled
- Defense accelerating: Specific programs (K9 Thunder, Borsuk, Korkut) driving revenue
- Even seasonality: Sales expected relatively flat quarter-to-quarter in 2026
Watch for: Q1 2026 results (first quarter with Dana included), integration milestones, synergy capture updates, and medium-duty demand recovery.
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