Why This Matters to Distributors: Applied’s update shows how industrial distributors are shifting toward higher-value services, automation, and integrated solutions. At the same time, improving maintenance demand and early signs of a recovery are creating momentum, even as tariffs, trade policy and uneven markets continue to create uncertainty.
Applied Industrial Technologies is entering a more active growth phase, with rising demand for automation, stronger maintenance spending and a growing acquisition pipeline signaling an early-stage industrial recovery, executives said on the company’s latest earnings call.
CEO Neil A. Schrimsher said orders, backlog and sales trends are improving after a prolonged period of delayed maintenance and capital spending.
“The trajectory of our sales and broader industrial macro indicators year to date … are currently more indicative of an early end-market recovery beginning to take shape,” Schrimsher said.
Demand for automation and engineered solutions is a central driver of Applied’s strategy as manufacturers invest to improve productivity and address labor constraints.
The company’s Engineered Solutions segment delivered more than 9% organic sales growth in the quarter, with double-digit gains in automation and fluid power. Orders rose by a double-digit percentage for the second straight quarter, and backlog increased.
Schrimsher said customers are moving faster on automation projects, particularly upgrades to existing facilities, as they focus on efficiency and production flexibility.
Applied is also expanding in higher-growth technology markets. Its technology vertical — including semiconductor and data center-related business — now represents more than 15% of the Engineered Solutions segment and contributed more than 300 basis points to growth in the quarter.
The company provides fluid handling, cooling and automation systems used in semiconductor manufacturing and data centers. Its Hydrodyne acquisition has expanded capabilities in liquid cooling systems tied to data center infrastructure.
Applied continues to execute its “One Applied” strategy, integrating distribution, engineering, repair, and automation capabilities into a unified offering.
That approach is driving incremental growth. Cross-selling between business units contributed more than 100 basis points to organic growth in the Service Center segment during the quarter, up from earlier in the fiscal year.
The company has invested in sales tools, analytics, and talent to deepen customer relationships and expand its ability to deliver more complex solutions.
Maintenance, repair, and operations spending is improving, particularly in the U.S., as higher factory utilization drives demand for repairs and upkeep of aging equipment.
Applied reported about 4% organic sales growth in its Service Center segment, with trends strengthening through the quarter. Thirteen of its top 15 U.S. industry verticals posted year-over-year growth, up from 10 in the prior quarter.
Both local and national accounts showed stronger demand. Local accounts grew about 5% year over year, while national accounts increased about 7%, according to manage.
Demand is strengthening across several industrial sectors but remains uneven.
Applied cited growth in metals, technology, machinery, aggregates, utilities and energy, mining, and construction. Weaker areas included chemicals, lumber and wood, transportation, rubber and plastics, and refining, though trends in some of those markets are improving.
Executives said chemicals and refining could see better conditions in the second half of 2026.
The company said it has not seen a significant direct impact from recent tariff and trade policy changes, though conditions remain fluid.
Supplier price increases have normalized compared with last year but Applied said it continues to work closely with suppliers to manage pricing and cost pressures.
Mergers and acquisitions remain a key part of Applied’s strategy, with activity expected to accelerate.
The company targets smaller and mid-size deals across both its Engineered Solutions and Service Center businesses, focusing on automation, fluid power, and flow control, as well as geographic expansion.
Since 2018, Applied has completed 18 acquisitions representing more than $1 billion in acquired sales.
“We are actively evaluating various targets across both our segments,” Schrimsher said, adding that the next 12 to 18 months are expected to be more active for dealmaking.
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