Applied Industrial Technologies (AIT) Q3 2026 earnings summary

Executive summary

• Net sales for Q3 2026 rose 7.3% year-over-year to $1.25 billion–$1.3 billion, with organic growth of 6.0%, the strongest in over two years, and record quarterly EBITDA at $153.9 million, up 6.2% year-over-year.

• Growth was broad-based, led by Engineered Solutions with over 9% organic growth, driven by automation and fluid power, and strong demand across metals, technology, machinery, aggregates, utilities, energy, mining, and construction.

• Service Center segment saw 4.2% organic sales growth, with both local and national accounts contributing and cross-selling initiatives adding over 100 basis points to growth.

• Orders, backlog, and business funnel activity showed positive momentum, with improving demand and positive sales trends in both segments.

• Net income was $99.8 million, with EPS of $2.65, up 3.1% year-over-year, aided by a lower share count.

Financial highlights

• Consolidated sales increased 7.3% year-over-year to $1,251M–$1.3B; organic sales up 6.0%, with acquisitions and currency contributing 1.3%.

• Gross margin held steady at 30.4%, despite a $5.6 million LIFO expense, which negatively impacted margins by 27 basis points.

• EBITDA margin was 12.3%, down 13 basis points year-over-year, with EBITDA up 6.2% to $153.9 million.

• EPS for the quarter was $2.65, up 3.1% from last year; free cash flow was $95.4 million, down 8% year-over-year due to higher working capital needs.

• Operating income for the quarter was $137.9 million; net income for the nine months ended March 31, 2026, was $295.9 million.

Outlook and guidance

• FY26 EPS guidance raised and tightened to $10.64–$10.75, with total sales growth of 7.2%–7.7% and organic growth of 3.8%–4.2%.

• Q4 EPS expected at $2.85–$2.96, organic sales growth of 4%–5.5%, and EBITDA margins of 12.6%–12.8%.

• Guidance reflects tougher year-over-year comparisons, macro uncertainty from geopolitical, trade, and inflationary factors, and an effective tax rate of 23.0%–24.0%.

• Management expects sufficient liquidity from cash, credit facilities, and operations to fund working capital, dividends, acquisitions, and share repurchases.