Executive Summary

Record sales of $940.1M and record adjusted EPS of $0.99, both above Wall Street consensus; GAAP EPS was $0.48 due to a $62.0M intangible impairment tied to bioprocessing businesses .
Revenue and adjusted EPS beat Q3 S&P consensus; revenue $940.1M vs $933.4M*, EPS $0.99 vs $0.95*, while GAAP EPS reflected non-recurring charges .
Guidance raised: adjusted FY25 EPS midpoint up $0.03 to $3.64–$3.70, Aerospace & Defense growth lifted to low-teens, On-Road decline deepened to high-teens; capex cut to $75–$90M, buyback increased to 3.5%–4.0% of shares .
Catalysts: strength in Aftermarket and Aerospace & Defense, margin discipline (adjusted operating margin 16.3%), dividend increased 11% to $0.30, and accelerated repurchases (2.4% of shares in Q3) .

What Went Well and What Went Wrong

What Went Well

Adjusted operating margin expanded 80 bps YoY to 16.3% on expense leverage; adjusted EPS +7.6% YoY to $0.99 and record quarterly level .
Aerospace & Defense posted a record $51.5M (+27.1% YoY), with management citing robust end-market demand and improved supply chain execution; connected solutions and services momentum remained strong .
Aftermarket grew 3.3% YoY to $460.1M on OEM channel demand and independent channel share gains; management emphasized recurring revenue durability (75–80% of segment) and continued share wins .

What Went Wrong

Gross margin compressed to 34.2% (from 35.6%) as footprint optimization (“heavy lifting” plant moves) increased manufacturing costs; adjusted gross margin was 34.5% .
On-Road (-24.5%) and Off-Road (-8.3%) were weak on transportation and agriculture cycles; On-Road outlook cut to high-teens decline for FY25 .
Life Sciences incurred a $62.0M impairment (Univercells Technologies $46.6M; Solaris $15.4M) reflecting weaker bioprocessing capex and elongated drug development timelines .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$900.1	$870.0	$940.1
GAAP Diluted EPS ($)	$0.81	$0.79	$0.48
Adjusted Diluted EPS ($)	$0.83	$0.83	$0.99
Gross Margin (%)	35.5%	35.2%	34.2%
Adjusted Gross Margin (%)	35.6%	35.2%	34.5%
Operating Margin (%)	14.5%	14.4%	9.3%
Adjusted Operating Margin (%)	14.9%	15.2%	16.3%

Segment breakdown (Net Sales):

Segment ($USD Millions)	Q3 2024	Q2 2025	Q3 2025
Mobile Solutions Total	$585.2	$547.5	$582.6
Off-Road	$104.2	$80.2	$95.6
On-Road	$35.7	$25.3	$26.9
Aftermarket	$445.3	$442.0	$460.1
Industrial Solutions Total	$269.1	$253.7	$283.3
Industrial Filtration Solutions (IFS)	$228.6	$207.5	$231.8
Aerospace & Defense	$40.5	$46.2	$51.5
Life Sciences Total	$73.6	$68.8	$74.2
Total Company	$927.9	$870.0	$940.1

KPIs and Cash Metrics:

KPI	Q1 2025	Q2 2025	Q3 2025
Free Cash Flow ($USD Millions)	$47.9	$71.5	$73.0
EBITDA ($USD Millions)	$161.5	$155.9	$117.3
Adjusted EBITDA ($USD Millions)	$164.8	$162.5	$183.0
Effective Tax Rate (%)	24.2%	23.2%	33.6% (Adj. 22.1%)
Cash Conversion Ratio (%)	48.4%	74.4%	126.2% (Adj. 61.3%)

Capital Returns (Q3):

Dividends paid: $32.3M; Share repurchase: 2.4% of shares for $192.4M; YTD repurchase 3.3% ($273.8M) .
Dividend increased to $0.30 per share (+11.1%) payable June 30, 2025 .

Guidance Changes

Metric	Period	Previous Guidance (Q2 2025)	Current Guidance (Q3 2025)	Change
Adjusted EPS	FY 2025	$3.60–$3.68	$3.64–$3.70	Raised (midpoint +$0.03)
Total Sales YoY	FY 2025	Flat to +4%	+1% to +3%	Narrowed
Adjusted Operating Margin	FY 2025	15.6%–16.0%	15.6%–16.0%	Maintained
Interest Expense	FY 2025	≈$21M	≈$23M	Raised
Other Income	FY 2025	$18M–$20M	$18M–$20M	Maintained
Adjusted Effective Tax Rate	FY 2025	23%–25%	23%–24%	Lowered top end
Capex	FY 2025	$85M–$100M	$75M–$90M	Lowered
Adjusted FCF Conversion	FY 2025	85%–95%	80%–90%	Lowered
Share Repurchase	FY 2025	2%–3% of shares	3.5%–4.0% of shares	Raised
Mobile Solutions Sales	FY 2025	-1% to +3%	Flat to +2%	Slightly lowered
Off-Road Sales	FY 2025	Mid-single-digit decline	Mid-single-digit decline	Maintained
On-Road Sales	FY 2025	Low double-digit decline	High-teens decline	Lowered
Aftermarket Sales	FY 2025	Low single-digit growth	Low single-digit growth	Maintained
Industrial Solutions Sales	FY 2025	+1% to +5%	+2% to +4%	Narrowed
IFS Sales	FY 2025	Low single-digit growth	Low single-digit growth	Maintained
Aerospace & Defense Sales	FY 2025	High single digits	Low teens	Raised
Life Sciences Sales	FY 2025	High single digits	High single digits	Maintained
Tariffs Impact	FY 2025	Immaterial	Immaterial	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs/macro	Region-for-region footprint; U.S. net exporter; tariffs manageable	Prepared to offset with supply chain/price; ~75% region-to-region	Net impact on profit immaterial; ~USMCA qualification on MX→US; ~$35M annualized offset via surcharges	Stable/clarified offset plan
Supply chain	A&D supply chain bubbles; parts constraining shipments	Power Gen timing; A&D parts improved	A&D record quarter amid “bubbles”; on-time delivery rates high	Improving execution
Footprint optimization	Cost actions in Life Sciences; distribution investments	Ongoing footprint projects	“Heavy lifting” plant moves drove GM pressure; completion toward end CY25	Near-term margin headwind, easing
Connected solutions	Growing connected machines/facilities	+30% connected machine growth YTD; services momentum	Final stages of next-gen controllers/gateways; services performing well	Continued scaling
Aftermarket share gains	OE destocking lap; broad share wins (e.g., NAPA)	OE stronger; independent cautious; net push	Growth in OE and independent channels; recurring base 75–80%	Durable growth driver
Aerospace & Defense	Flat FY guide due to supply chain risk	Guide raised to high single digits; strong defense	Low-teens growth guide; record sales	Upward trajectory
Life Sciences/bioprocessing	Cost optimization; pipeline launches (IsoTag AAV)	Breakeven FY target; cost actions benefiting margins	Impairment; leaner structure; manufacturing-grade IsoTag available	Reset; focus on core

Management Commentary

“We reported record sales and record adjusted earnings per share, raised full-year adjusted earnings per share guidance, accelerated share repurchase... and announced an 11% increase to our quarterly dividend.” — CEO Tod Carpenter .
“Operating margin in the quarter improved 80 basis points over 2024, driven by expense leverage. Adjusted EPS was $0.99, up approximately 8% versus prior year.” — Management remarks .
“The impact of tariffs on this quarter's net results was immaterial… we expect the net impact on our profit to remain immaterial.” — CFO Brad Pogalz .
“We took another important step towards scaling and commercializing [IsoTag] manufacturing grade product… to streamline purification and bring certain gene therapies to patients.” — CEO .

Q&A Highlights

Gross margin decline was primarily footprint optimization costs; price/cost neutral stance maintained; plant rationalizations underway (US, UK→Eastern Europe), heavier impact near-term .
Industrial Solutions: IFS equipment pressured, aftermarket and stationary hydraulics offset; A&D record quarter; power generation projects visibility multi-year into FY2028 .
Aftermarket dynamics: OE and independent channel growth; typical Q3–Q4 seasonality; continued share gains underpin resilience .
Life Sciences: ~$6M earn-out reserve reversal (Purilogics) aided margins; segment pretax margin improved to 7.8% on cost optimization; bioprocessing headwinds persist .
Capex lowered and focused; inventory elevated to support customers amid supply chain/tariff dynamics; cash conversion expected to strengthen in Q4 .

Estimates Context

Results vs S&P Global consensus:

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue Consensus ($USD)	892.4M*	908.3M*	933.4M*
Revenue Actual ($USD)	$900.1	$870.0	$940.1
EPS Consensus ($)	0.821*	0.848*	0.947*
EPS Actual ($)	0.83 (Adj)	0.83 (Adj)	0.99 (Adj)

Values retrieved from S&P Global. Asterisks denote S&P Global consensus values.

Q3: Revenue and adjusted EPS beat; Q2: revenue missed, adjusted EPS modestly below consensus; Q1: revenue and adjusted EPS beat. Expect upward estimate revisions in A&D and Aftermarket; Life Sciences likely sees lower near-term expectations given impairment commentary .

Key Takeaways for Investors

Quality beat: Adjusted EPS and revenue exceeded consensus, with expense discipline driving 80 bps YoY adjusted operating margin expansion to 16.3% despite gross margin pressure from footprint moves .
Mix resilience: Aftermarket and services continue to offset cyclical first-fit weakness; recurring aftermarket base (75–80% of Mobile) supports cash generation and defensive profile .
A&D upswing: Guidance raised to low-teens growth; record quarterly sales, improved supplier performance, and multi-quarter visibility offer upside to segment profitability .
Life Sciences reset: $62.0M impairment acknowledges upstream bioprocessing softness; leaner cost base and targeted product launches aim to stabilize margins while broader recovery remains uncertain .
Capital allocation: Dividend lifted to $0.30; buybacks accelerated (2.4% in Q3; 3.5%–4.0% FY target), supporting EPS growth amid modest sales trajectory .
2025 guide tilt: EPS midpoint raised, capex trimmed ($75–$90M), tax rate narrowed (23%–24%), sales band narrowed to +1%–+3%; On-Road outlook lowered while A&D raised — net supportive for margin and EPS leverage .
Tariffs: Structural hedges (region-to-region manufacturing, USMCA qualification) and surcharges underpin management view of immaterial net profit impact, reducing macro risk to margins .

Additional Data and Notes

Non-GAAP adjustments in Q3: Impairment $62.0M, restructuring $4.2M, business development $0.8M, gain on sale $(1.2)M; adjusted metrics reported accordingly .
Geographic mix: Mobile total sales flat overall; notable China Off-Road momentum and EMEA/APAC variability; A&D strongest in U.S. .
Balance sheet: Long-term debt increased to $638.8M; total assets $2,996.5M; equity $1,464.2M .

Citations: Press release and 8‑K Q3 ; Earnings call Q3 ; Q2 materials ; Q1 materials ; Dividend PR .

S&P Global disclaimer: Consensus estimates values marked with asterisks were retrieved from S&P Global.

DONALDSON Co INC (DCI)·Q3 2025 Earnings Summary