Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported August 13, 2026 · Beat 7 of last 7 quarters
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Applied's strong quarter and raised intermediate targets reflect accelerating demand for automation, fluid power, and flow control solutions tied to data center buildout and semiconductor manufacturing. The company's technology vertical, now over 15% of Engineered Solutions, is benefiting from data center thermal management and semiconductor wafer fab equipment demand, positioning AIT as a key enabler of AI infrastructure physical buildout.
Applied reported record fourth-quarter sales and earnings, with organic sales growth of 9.7% (10% in June) and EBITDA up 16.1% to $13.1% margin. Engineered Solutions grew 12.9% organically, led by automation up over 20%, while Service Center grew 7.9% organically. Gross margin was 30.4%, down 20 bps y/y due to LIFO expense of $6.4M vs $2.9M prior year. Free cash flow was $159.7M, up 16% y/y. The company repurchased 1.2 million shares for $317M in FY26 and increased the dividend by 11%.
Management raised its intermediate financial targets, increasing the sales objective to $7 billion from $5.5 billion and the EBITDA margin objective to 14% from 13%, to be achieved over the next 5 years. For fiscal 2027, they guided sales growth of 4% to 6.5%, EBITDA margins of 12.5% to 12.8%, and EPS of $11.65 to $12.15, with first-quarter organic sales growth of 6% to 8% and EBITDA margins of 12.3% to 12.4%. They expect stronger growth in the first half, moderating in the second half due to tougher comparisons and macro/trade uncertainty. They also expect higher LIFO expense in FY27 and incremental EBITDA margins within the mid-to-high teens range. Management remains positively biased given sustained order momentum and expects M&A contribution to be more meaningful in FY27, with nearly $2 billion of balance sheet capacity.
“We levered the stronger growth very well, expanding EBITDA margins by more than 60 basis points to over 13% growing EBITDA by 16%, and EPS by 13% compared to the prior year.”
on Q4 performance
“Our ongoing evolution has positioned Applied at the intersection of exciting and powerful growth trends tied to rising technical support at customer plants, industrial system upgrades, automation adoption, including physical AI integration, and the build out of critical infrastructure across both legacy and emerging customer verticals.”
on Growth drivers
“We believe these objectives are well within the company's capability and can be achieved over the next 5 years depending on broader macro conditions, the cadence and scope of M&A, and other factors.”
on Intermediate targets
CapEx is almost 50% higher than the average the past several years. Anything particularly causing that?
David Wells noted the company is investing in organic opportunities across automation footprint and technology, with no single large project, but a step-up in CapEx to support growth and efficiency initiatives.
In automation, are there key applications standing out among vision, digitization, robotics? And any new categories?
Neil Schrimsher highlighted strength in semiconductor wafer fab equipment and data centers, plus food and beverage, robotics and autonomous mobile robots, vision systems for consumer packaging, and strategic inventory management. He also noted cross-selling momentum and opportunities in services and repair for pumps and valves.
Any impact from the recent FCC ban on foreign robotics imports? And how much of automation is exposed?
Neil Schrimsher said the assessment is that exposure is pretty low, and the automation business continues to operate well with strong orders and application work.