Transmission provider Allison Transmission (NYSE: ALSN) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 92.4% year on year to $1.57 billion. The company’s full-year revenue guidance of $5.9 billion at the midpoint came in 1.6% above analysts’ estimates. Its GAAP profit of $2.15 per share was 13% below analysts’ consensus estimates.

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Company Overview

Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Allison Transmission’s sales grew at an exceptional 14.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Allison Transmission’s annualized revenue growth of 18.9% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Allison Transmission reported magnificent year-on-year revenue growth of 92.4%, and its $1.57 billion of revenue beat Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 36.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

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Operating Margin

Allison Transmission has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 27%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Allison Transmission’s operating margin decreased by 8.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Allison Transmission generated an operating margin profit margin of 18.6%, down 12.9 percentage points year on year. Since Allison Transmission’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Allison Transmission’s remarkable 13.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Allison Transmission’s two-year annual EPS declines of 9.5% were bad and lower than its 18.9% two-year revenue growth.

Diving into the nuances of Allison Transmission’s earnings can give us a better understanding of its performance. Allison Transmission’s operating margin has declined over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, Allison Transmission reported EPS of $2.15, down from $2.29 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Allison Transmission’s full-year EPS to grow 69.8% from $6.29 to $10.69.

Key Takeaways from Allison Transmission’s Q2 Results

We enjoyed seeing Allison Transmission beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its EPS missed. Overall, this print was mixed. The stock remained flat at $116.65 immediately after reporting.

Sure, Allison Transmission had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).