Atmus Filtration Technologies Inc. (ATMU) | The Buildout — AI Infrastructure
The Verdict
Atmus is a filtration company, not an AI company. It manufactures filters under the Fleetguard brand for on-highway and off-highway equipment, and the January 2026 Koch Filter acquisition added industrial air filtration for commercial and industrial HVAC, including data centers and healthcare. The AI-infrastructure link is indirect: data-center air filtration sits inside the small Industrial Solutions segment, which management says targets high-growth end markets.
| Market Cap | — |
| Revenue (TTM) | $1.8B |
| Revenue Growth | +10.0% |
| EBITDA Margin (TTM) | 19.2% |
| Net Debt | $850M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Power Solutions volume turned positive in Q2 at +2% after being slightly down in Q1; management sees the cycle 4–6 weeks ahead of OEM build data.
- Koch Filter integration is ahead of plan: TSA exit rose from >50% at Q1 to >95% at Q2, with full exit expected during Q3 2026.
- Aftermarket is 85% of Power Solutions revenue, so any freight recovery directly leverages the largest demand pool.
- FY2026 revenue guidance was raised to $1.975B–$2.03B; U.S. heavy-/medium-duty market assumption was raised to up 5%–15%.
- Q2 adjusted free cash flow was $67M, up from $36M a year earlier; net debt/adjusted EBITDA improved to 1.9x from 2.0x.
What We’re Watching
- Aftermarket remains flattish, and management has limited forward visibility in aftermarket orders.
- Donaldson grew mobile aftermarket 8% and won a large North American fleet contract while Atmus aftermarket was flat to slightly down.
- Industrial Solutions margin fell from 21.9% in Q1 to 18.9% in Q2; management calls the decline transitory.
- Middle East effects are now embedded in the second half: Q1 sales hit was $4M, or 1%, and management expects pressure to persist longer than first expected.
- Tariff refunds were immaterial through Q2; timing and allocation remain uncertain.
The operational core is strengthening: volume turned positive and Koch integration is nearly complete. The thesis is not fully intact until the aftermarket, the largest demand pool, shows orders following freight. The open question is whether flat aftermarket conditions and Donaldson's +8% mobile aftermarket signal a soft market or share loss.
Earnings Beat
Atmus reported record Q2 FY2026 sales of $528 million, up 16.4% from $454 million a year earlier. Gross margin was 29.2%, up from 28.9%. Adjusted EBITDA was $109 million, a 20.7% margin, and adjusted free cash flow rose to $67 million from $36 million.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $478M | $447M | $416M | +14.6% |
| Gross margin | 28.0% | 28.5% | 28.2% | -20bps |
| EBITDA | $94M | $78M | $72M | +30.4% |
| EPS | $0.59 | $0.58 | $0.54 | +9.9% |
| Industrial Solutions sales | $42M | $38M | n/a | — |
Taken together, we expect total company revenue to be in a range of $1.975 billion to $2.03 billion, an increase of approximately 13.5% at the midpoint, we are narrowing our full year adjusted EBITDA guidance and now expect to be in a range of 19.75% to 20.25%. Lastly, adjusted EPS is expected to be in a range of $2.85 to $3.— Stephanie Disher, Chief Executive Officer, 2026-08-07
Management tone: Management shifted from cautious confidence in Q1 to stronger operational confidence in Q2, while becoming more explicit about the Middle East drag. The team stayed quantitative, separating price, volume, FX, and one-time items, and narrowed the EBITDA range rather than simply raising it.
Management Guidance
Management raised FY2026 total revenue to $1.975B–$2.03B, with Power Solutions at $1.82B–$1.865B and Industrial Solutions maintained at $155M–$165M. The EBITDA margin range was narrowed to 19.75%–20.25%, adjusted EPS was raised at the low end to $2.85–$3.00, and Power Solutions volume was guided to flat to 2% with pricing of about 1.5% and FX of about 2%.
Trajectory
Reported revenue has accelerated: Q1 was $477.5 million and Q2 was $528 million, up 16.4% year over year. The mix improved as Power Solutions volume shifted from slightly down in Q1 to +2% in Q2, and Q2 gross margin was 29.2% versus 28.9% a year earlier. The source expects H2 growth to moderate as pricing fades to just over 0.5% and FX support declines.
The Model
The model locks FY+1 revenue at $2,000 million with EBITDA of $400 million, a 20.0% margin. FY+2 projects revenue of $1,875 million and EBITDA of $371 million, a 19.8% margin. The FY+1 forecast is anchored by the raised guide and Koch Filter contribution; the FY+2 step-down matches the source's expected price/FX fade and no confirmed aftermarket inflection.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.8B | $2.0B | $1.9B |
| YoY Growth | — | +13.4% | −6.2% |
| EBITDA | $329M | $400M | $371M |
| EBITDA Margin | 18.6% | 20.0% | 19.8% |
Projections are the median of 5 independent model runs. The model’s revenue sits 10.2% below analyst consensus.
Management raised FY2026 total revenue to $1.975B–$2.03B, with Power Solutions at $1.82B–$1.865B and Industrial Solutions maintained at $155M–$165M. The EBITDA margin range was narrowed to 19.75%–20.25%, adjusted EPS was raised at the low end to $2.85–$3.00, and Power Solutions volume was guided to flat to 2% with pricing of about 1.5% and FX of about 2%.
What Could Go Right — and Wrong
- Freight spot-rate improvement converts into aftermarket orders, moving the 85%-of-Power-Solutions demand pool from flat to growth.
- Industrial Solutions exceeds the $155M–$165M FY2026 guide through data-center/healthcare wins or bolt-on M&A.
- First-fit volume extends beyond H2 2026, confirming the late-Q2 upturn is more than a single-quarter move.
- Tariff refunds materialize, resolving a cash and policy overhang.
- Middle East cost pressure eases, lifting H2 margins and India JV income.
- Aftermarket stays flat or loses share while Donaldson continues to show stronger aftermarket growth.
- H2 pricing fades to just over 0.5% as FX support moderates, leaving flat-to-2% volume to carry Power Solutions.
- Industrial Solutions' 18.9% Q2 margin is not transitory, diluting profitability from the new segment.
- The EPA 2027 nonconformance penalty eases prebuy demand, weakening the first-fit recovery catalyst.
- A shift at Cummins, PACCAR, or Traton directly affects nearly half of 2025 revenue.
Looking Ahead
The next 12 months hinge on completing Koch Filter integration in Q3 2026, sustaining the first-fit upturn through H2, and seeing freight spot-rate strength turn into aftermarket revenue. The 2027 U.S. emissions transition is a developing catalyst, with the EPA nonconformance penalty proposal potentially easing prebuy pressure. Management also continues evaluating industrial air bolt-ons and an industrial water/liquid anchor investment, with no targets or dates disclosed.
- Q3 2026Koch Filter integration full exit — Tests if TSA exit completes and integration costs land within $3M–$6M.
- H2 2026First-fit recovery confirmation — Q3/Q4 orders test whether late-Q2 Power Solutions volume upturn continues.
- FY2026Aftermarket order conversion — Spot-rate strength must become revenue; management assumes a flat aftermarket.
- OngoingTariff refund resolution — Refunds were immaterial through Q2; amount and timing remain uncertain.
- 2026–2027EPA 2027 prebuy behavior — Nonconformance penalty proposal may reduce prebuy pressure on filtration demand.
- UndatedIndustrial bolt-on M&A — Management is evaluating industrial air bolt-ons and a water/liquid anchor.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.7B | $1.8B | $1.8B | +5.7% |
| Gross Margin | 27.9% | 28.9% | 28.8% | +98bps |
| EBITDA | $291M | $329M | $1.3B | +12.9% |
| EBITDA Margin | 17.4% | 18.6% | 19.2% | +120bps |
| Net Income | $186M | $207M | $211M | +11.7% |
| Free Cash Flow | $57M | $149M | $542M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)28.8%
- EBITDA Margin (TTM)19.2%
- Net Margin (TTM)11.6%
- ROIC19.9%
- FCF Conversion45.1%
- SBC / Revenue0.7%
The Company
Atmus Filtration Technologies is a global filtration company headquartered in Nashville, Tennessee. It designs and manufactures fuel, lube, air, crankcase ventilation, and hydraulic filters plus coolants and chemicals, principally under the Fleetguard brand, for on-highway commercial vehicles and off-highway agriculture, construction, mining, and power-generation equipment. FY2025 net sales were $1,764.3 million, with adjusted EBITDA of $353.5 million, and the 10-K describes the company as 'one of the global leaders of filtration products.'
The 2026 segment structure separates Power Solutions, the legacy engine-filtration business, from Industrial Solutions, the acquired Koch Filter industrial air business. Manufacturing and technology sites span North America, South America, Europe, Africa, and Asia; the largest is San Luis Potosí, Mexico at 472,000 square feet, leased. The company operates an Atmus controlled distribution network and has launched a lean production system, with Mexico the first certified site.
Business Segments
Competitive Landscape
The 10-K names MANN+HUMMEL, Donaldson, Parker, and MAHLE as key global participants. The clearest competitive tension is aftermarket, where Donaldson grew mobile aftermarket 8% and won a large North American fleet contract while Atmus was flattish.
- MANN+HUMMELNamed in the 10-K as a key global participant.
- DonaldsonNamed competitor; grew mobile aftermarket 8% and won a large North American fleet contract.
- ParkerNamed in the 10-K as a key global participant.
- MAHLENamed in the 10-K as a key global participant.
Supply Chain
Atmus sits between filter media and large commercial-vehicle OEMs and aftermarket distributors. No direct supplier names are disclosed; neighbor signals are inferred, not confirmed.
More on ATMU: Earnings recap