Applied Industrial Technologies (AIT) – the Cleveland, Ohio headquartered distributor of bearings, power transmission products, engineered fluid power components and systems, specialty flow control products, and other industrial supplies, as well as engineering, design and system integration for industrial and fluid power applications, and customized mechanical, fabricated rubber, fluid power, and flow control shop services, announced fiscal Q4 2025 and full year 2025 earnings last month.
AIT delivered strong Q4 2025 earnings, beating analyst expectations with $1.22 billion in sales, up 5.5% year-over-year and for the full year 2025 a record of $4.6 billion, up 1.9% . Gross margins surpassed 30% for the first time, expanding nearly 50 basis points.
Management noted that organic daily sales returned to positive YoY growth for the first time in over a year, with underlying trends improving each month of the quarter and into early FY26.
Sales were strongest across technology, pulp and paper, fabricated metals, food and beverage, and oil and gas, offsetting declines primarily in utilities and energy, primary metals, aggregates, chemicals, and rubber and plastic.
The Applied team highlighted that end-market demand remains mixed, given the ongoing macro/tariff uncertainty, but is showing some incremental positive signs including slightly stronger capital maintenance and project activity. Price contribution was over 100 bps in F4Q25 and is expected to slowly increase in FY26 as recent supplier price increases take effect and continue to evolve with the fluid tariff backdrop,
AIT Organic growth drivers were split into three buckets:
· Secular: Reshoring, industrial system modernization, automation adoption, energy efficiency focus
· Structural: Customer technical labor shortages, supply-chain hardening, industry consolidation
· Co-specific: Sales force investments, ancillary product & cross-selling initiatives, Engineering Solutions expansion
AIT Engineered Solutions led growth (+1.8% organic in Q4), with automation (+ mid single-digits), flow control (+ low single-digits), and parts of fluid power (tech vertical + double-digits), plus easier comparison to prior year results, partially offset by ongoing weakness across fluid power mobile OEM markets. Segment order trends remain positive (organic up high single-digits YoY in F4Q25), though customers continue to take a measured approach to capital deployment and project/install phasing.
The Service Center-Based Distribution was down slightly due to soft end-market demand. The organic decline was driven by muted end-market demand early in the quarter, including weaker international sales; but trends improved through the quarter with average daily sales above normal seasonal patterns for the second straight quarter reflecting incremental capital maintenance spending and firming technical break-fix activity. Muted end-market demand balanced by continued benefits from ongoing sales force productivity initiatives, technology investments, and new business opportunities, as well as cross-selling momentum.
The Service Center business represents 66% of fiscal 2025 sales and includes the core distribution operations including ~400 local service centers across North America, Australia, and New Zealand, primarily focused on AIT technical bearings, power transmission, and fluid power MRO product and solution offerings, as well as other industrial supplies for scheduled maintenance and repairs of customers’ machinery, equipment, and facilities.
The Engineered Solutions business represents 34% of fiscal 2025 sales and consists of AIT’s Fluid Power network specializing in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic technologies and related systems across off-highway mobile, industrial, and technology verticals; AIT’s specialty flow control products and engineered solutions supporting mission-critical process infrastructure, and AIT’s advanced automation products and solutions focused on machine vision, robotics, motion, & digital technologies.
Stakeholder concerns include organic growth challenges, segment disparities, and margin trends, despite the strong headline results. Fiscal 2025 organic daily sales declined 2.3%, offset by 6.5% acquisition-driven growth. While Q4 showed a modest recovery with organic daily sales rising 0.2%, this was split between 1.8% growth in Engineered Solutions and a 0.4% decline in Service Center-Based Distribution, highlighting uneven end-market demand and reflecting muted industrial demand trends.
Stakeholders questioned whether the “green shoots” in higher-margin solutions are enough to compensate for persistent core distribution weakness. Concerns persisted about end-market softness, especially in cyclical sectors, which could affect recovery in the Service Center side of the business. While gross margins reached record highs (above 30%), stakeholders are watching whether cost discipline and operational efficiency can sustain margins in a lower-growth environment.
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