Allison Transmission (ALSN) Financials

Allison Transmission (NYSE: ALSN) has shown a mixed but still fundamentally profitable trend over the last several years. Revenue has been relatively stable to slightly higher overall, margins have remained solid, and operating cash flow has generally been strong. However, the company’s balance sheet changed dramatically in 2026 after a large acquisition and debt-funded financing, which materially increased leverage and reduced equity.

• Operating profitability remains healthy. In Q1 2026, Allison generated $195 million of operating income on $1.406 billion of revenue, showing the business is still converting sales into meaningful profit.
• Free cash generation is still a strength. Q1 2026 operating cash flow was $156 million, and the company has repeatedly produced strong operating cash flow across prior quarters as well.
• Gross margins have been fairly resilient. Gross profit in Q1 2026 was $406 million, up from $354 million in Q4 2025 and $378 million in Q1 2025, suggesting the core business remains efficient.
• Revenue has trended higher versus early 2025. Q1 2026 revenue of $1.406 billion was well above the roughly $766 million to $814 million range seen in early 2025, reflecting a major step-up in scale.
• The company continues to return capital to shareholders. Allison has paid dividends throughout the period and also repurchased stock in multiple quarters, indicating ongoing shareholder-return discipline.
• Capital spending has remained moderate. Quarterly PP&E purchases have generally been modest relative to operating cash flow, leaving room for reinvestment and capital returns.
• EPS has been supported by stable share counts. Diluted shares outstanding have moved only modestly over time, so earnings changes have mainly reflected business performance rather than major dilution.
• Operating expenses have generally stayed controlled as a percentage of revenue. SG&A and R&D have grown, but the company has still maintained solid operating margins.
• The 2026 acquisition may improve long-term growth, but it adds integration risk. Q1 2026 cash flow shows $2.563 billion in acquisitions, which could expand the business but also brings execution uncertainty.
• Leverage increased sharply in Q1 2026. Long-term debt jumped to $4.247 billion from $2.394 billion in Q2 2025, a major increase in financial risk.
• Balance sheet equity was pressured by the acquisition and debt load. Total common equity fell to $1.903 billion in Q1 2026 from $1.753 billion in Q2 2025, while liabilities surged to $6.8 billion.
• Interest expense is becoming more important. Q1 2026 interest expense was $61 million, up from $25 million in Q4 2025 and $21 million in Q1 2025, reflecting the heavier debt burden.
• Cash declined sharply in Q1 2026. Cash and equivalents fell to $311 million from $902 million in Q3 2025, largely due to the acquisition and financing activity.
• Working capital swings have been volatile. Operating capital changes were negative in several quarters, including Q1 2026, which can create pressure on short-term liquidity.
• Retained earnings have been weak relative to the scale of the business. Despite solid recent earnings, retained earnings were only $29 million in Q1 2026, reflecting the effects of prior distributions and balance sheet changes.

Bottom line: Allison Transmission still looks like a profitable cash-generating industrial company, but the 2026 acquisition significantly altered the risk profile. Investors should focus on whether the company can integrate the deal successfully, keep cash flow strong, and manage its much higher debt load without eroding profitability.