Allison Transmission (ALSN -1.92%), the commercial and defense vehicle transmission manufacturer, announced its earnings results for the second quarter of fiscal 2025 on August 4, 2025. The company reported diluted earnings per share (EPS) of $2.29 (GAAP), ahead of the $2.21 analyst consensus (GAAP) and a 7.5% increase in diluted EPS compared to Q2 2024. Revenue (GAAP) reached $814 million, topping GAAP expectations by $15.41 million, though down slightly (0.2%) from the prior-year quarter. While the quarter delivered record GAAP diluted EPS of $2.29 and Adjusted EBITDA margin increased by 1.6 percentage points to 38.5% compared to Q2 2024, management also revised full-year guidance downward, expecting lower net income (GAAP) and net sales (GAAP) than previously forecast due to acquisition costs and moderating demand in key segments.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS | $2.29 | $2.21 | $2.13 | 7.5% |
| Revenue | $814 million | $798.59 million | $816 million | (0.2%) |
| Net Income | $195 million | $187 million | 4.3% | |
| Adjusted EBITDA Margin | 38.5% | 36.9% | 1.6 pp | |
| Adjusted Free Cash Flow | $153 million | $150 million | 2.0% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
What Allison Transmission Does and Where It’s Focused
Allison Transmission designs and manufactures fully automatic transmissions for medium- and heavy-duty commercial, defense, and specialty vehicles. Its product line includes transmissions for on-highway trucks, buses, motorhomes, off-highway vehicles, and military applications.
The company's main areas of focus include maintaining its market leadership in fully automatic transmissions and expanding its global reach. It is also investing in the development of electrified propulsion solutions such as the eGen Flex Electric Hybrid and eGen Power Fully Electric Propulsion systems. Key success factors include strong relationships with original equipment manufacturers (OEMs), adaptation to regulatory and environmental changes, and maintaining broad distribution through a network of over 1,600 independent dealers and distributors.
Notable Developments in the Quarter
During the period, Allison delivered better-than-expected GAAP profit and revenue, with GAAP EPS and revenue both beat consensus forecasts. The revenue figure, set at $814 million (GAAP), was nearly flat compared to the previous year. The gains came from strong performance in the Outside North America On-Highway segment, which reported $142 million in sales, a 10.9% increase compared to Q2 2024, as well as robust growth in Defense, which increased 46.5% to $63 million compared to Q2 2024.
The North America On-Highway segment, historically the company's largest market, saw an 8.6% revenue decline compared to Q2 2024 due to lower demand for medium-duty trucks. The Global Off-Highway segment also experienced a 60.9% decrease in sales compared to Q1 2024, attributed to weaker demand in energy, mining, and construction applications outside North America. By contrast, the Service Parts, Support Equipment, and Other segment saw moderate growth of 6.0% compared to Q2 2024, mainly from higher sales of service parts and price increases, partially offset by reduced demand for aluminum die-cast components.
Profitability improved, with gross profit (GAAP) rising to $402 million and net income (GAAP) climbing to $195 million, up 4.3% compared to Q2 2024. The adjusted EBITDA margin (non-GAAP) increased by 1.6 percentage points to 38.5%, reflecting a mix of favorable product pricing and operational efficiency. However, selling, general, and administrative expenses (GAAP) were up $20 million year over year, with $15 million tied to the announced acquisition of Dana Incorporated’s Off-Highway business. Research and development spending (GAAP) edged lower to $44 million from $49 million, reflecting short-term cost management measures.
Allison returned $102 million to shareholders through share repurchases and maintained robust liquidity, ending the quarter with $778 million in cash. The company also advanced its strategy to diversify end markets by announcing a $2.7 billion agreement to acquire Dana’s Off‑Highway business. Management noted costs associated with this purchase and new integration efforts would weigh on margins and net income through the rest of the year, prompting a cut to full-year profitability guidance.
Looking Ahead: Guidance and Key Themes for Investors
Leadership revised its outlook, forecasting net sales between $3,075 million and $3,175 million, and net income in the $640 million to $680 million range, both below prior projections. The cut in guidance mainly reflects anticipated acquisition and integration costs from the Dana Off-Highway deal and ongoing softness in North America medium-duty truck demand. Adjusted free cash flow (non-GAAP) is expected to reach $620 million to $660 million.
As Allison pivots toward greater global exposure and new product markets, investors will be watching the North America On-Highway segment for any signs of stabilization or further softness. Integration of the pending Dana acquisition presents execution risk but also a chance for Allison to broaden its footprint. The company’s continued investment in electrified propulsion and disciplined approach to capital allocation, including share repurchases and steady dividends, will remain important markers for future quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
