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, with organic growth of 6.0%, the strongest in over two years, and record quarterly EBITDA of $153.9 million at the high end of expectations.

• Growth was broad-based across segments and end markets, led by Engineered Solutions and strong demand in metals, technology, machinery, aggregates, utilities, energy, mining, and construction.

• Service Center and Engineered Solutions segments both delivered strong organic growth, with cross-selling initiatives and technology verticals contributing significantly.

• Orders, backlog, and business funnel activity showed positive momentum, with favorable trends in semiconductor, data center, and automation markets.

• Positive sales trends continued into early Q4, with organic sales up high single digits year-over-year in April.

Financial highlights

• Consolidated sales increased 7.3% year-over-year to $1,251M; organic sales up 6.0%, with gross margin steady at 30.4% despite a 27 basis point LIFO headwind.

• EBITDA increased 6.2% year-over-year to $153.9 million, with reported EBITDA margin at 12.3%, down 13 basis points due to LIFO headwinds.

• EPS for the quarter was $2.65, up 3.1% from $2.57 last year, impacted by higher tax rate and net interest expense.

• Free cash flow was $95.4 million for the quarter and $300.8 million for the nine months, down 8% year-over-year due to higher working capital investment.

• Operating income for the quarter was $137.9 million, with net income at $99.8 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 in the range of $2.85–$2.96, with organic sales growth of 4%–5.5% and EBITDA margins of 12.6%–12.8%.

• Guidance reflects more difficult prior year comparisons in May and June and ongoing macro, geopolitical, and trade policy uncertainty.

• Full-year effective tax rate expected between 23.0% and 24.0%.

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