stockrowWhat it does
Applied Industrial Technologies distributes industrial parts and provides technical services that help customers maintain, repair and improve their equipment. Its products include bearings, power transmission components, hydraulic and pneumatic equipment, flow-control products and factory automation technologies. It also sells general maintenance supplies.
Customers use these products to keep existing machinery running, build original equipment and install new systems. Applied serves industrial businesses ranging from local operations to large companies with multiple facilities. Its work includes supplying a replacement part when a machine breaks, repairing equipment, and designing and integrating systems for a customer’s operation.
The company operates through local service centers, specialized fluid power, flow control and automation facilities, repair shops and distribution centers. Its service centers hold inventory tailored to local customers and can help with urgent repair needs. Its technical teams include engineers, mechanics, technicians and product specialists who advise customers and perform shop and field work.
Founded in 1923 and headquartered in Cleveland, Applied is led by President and Chief Executive Officer Neil Schrimsher. It had approximately 580 facilities and approximately 6,900 employees at June 30, 2026. Its operations are primarily in North America, with additional operations in Australia, New Zealand and Singapore.
How it makes money
Applied buys products from manufacturers and resells them to customers, alongside repair, engineering and other services. Its business is reported in two segments: Service Center and Engineered Solutions.
Service Center is focused on maintenance and repair. Its local facilities stock bearings, motors, belts, drives, pumps, hoses and other components used in production equipment. Account managers visit customers to identify needs and help implement maintenance and storeroom programs. The segment also provides fabrication, repair and inventory management. Maintenance and break-fix work give the business ongoing opportunities to supply parts and services as customers operate their equipment.
Engineered Solutions distributes, designs, integrates and repairs fluid power, flow control and automation technologies. Its teams can build hydraulic assemblies, repair pumps, configure valves and integrate robots or machine-vision equipment. These offerings serve maintenance needs as well as original equipment manufacturers and customers investing in new systems. Applied also provides ongoing support and repair for specialized equipment.
FY2026 sales: $5.0 billion; Q1 FY2027 sales growth: 7.6% year over year.
In FY2026, Service Center generated $3.2 billion in revenue, while Engineered Solutions generated $1.8 billion. Gross profit margin was 30.3%, and operating margin was 11.1%. Applied reported that FY2026 sales growth excluding acquisitions and currency effects came from higher volumes and positive price contribution. Product pricing also contributed to year-over-year sales growth in Q1 FY2027.
| Segment | Revenue, FY2026 | Share | Change on the year |
|---|---|---|---|
| Service Center | $3.2 billion | 64.1% | 5.64% |
| Engineered Solutions | $1.8 billion | 35.9% | 15.1% |
Customers and how it sells
Applied sells to businesses in food processing, chemicals, industrial machinery, mining, oil and gas, technology, transportation and utilities, among other industries. It also serves government entities. Customers include original equipment manufacturers, engineering and construction firms, and operators that need parts or technical help for existing facilities.
The customer base ranges from small local businesses to large companies with multiple-location relationships. No single customer accounted for more than 5% of FY2026 sales. Applied says it is not significantly dependent on a single customer or group of customers whose loss would materially harm the business as a whole.
Customers can buy through local service centers and other specialized facilities, as well as through Applied’s website and electronic interfaces connected to customer technology and maintenance systems. Distribution centers replenish service centers and can ship directly to customers; customers can also collect products locally.
The United States generated $4.4 billion, or 88.3%, of FY2026 revenue. Canada contributed $300.8 million, while other countries contributed $280.5 million. Those other operations include Mexico, Australia, New Zealand, Singapore and Costa Rica. In Q1 FY2027, Applied said demand was muted in Canada and Mexico, partly reflecting the evolving trade backdrop.
| Region | Revenue, FY2026 | Share | Change on the year |
|---|---|---|---|
| United States | $4.4 billion | 88.3% | 9.61% |
| Canada | $300.8 million | 6.06% | 1.40% |
| Other Countries | $280.5 million | 5.65% | 5.54% |
Suppliers and costs
Applied purchases products from thousands of manufacturers and generally acts as a non-exclusive distributor. Supplier authorizations vary by region and product line, particularly in fluid power, flow control and automation. Suppliers can also provide product training and sales and marketing support. Applied says many supplier relationships have lasted for decades.
Manufacturers typically reserve their direct sales for large-volume transactions, mainly with large equipment manufacturers, and often refer maintenance and repair customers to distributors. Applied also fabricates, assembles and repairs products and systems for customer requirements.
After the cost of products sold, labor is Applied’s largest expense. Other costs include warehousing, freight, vehicles, facilities, technology and administration. Manufacturers can change product prices in response to their own material, energy, labor and tariff costs. Applied’s ability to pass on higher costs depends on its pricing execution, market conditions and contracts.
In FY2026, gross profit margin was 30.3%. Higher last-in, first-out inventory expense weighed on that margin, offset by price contribution, channel execution and the effect of growth in Engineered Solutions. In Q1 FY2027, Applied also experienced higher-than-expected employee health benefit costs under its self-insured plan.
- Revenue$5.0B
- Cost of revenue−$3.5B
- Selling, general and administrative−$957.3M
- Operating income$549.5M
Competitive position
Applied competes primarily in North America in a fragmented industrial distribution market. Its competitors include specialist and general-line distributors of bearings, power transmission, fluid power, flow control and automation products. It also competes with original equipment manufacturers and integrators. Competitors operate locally, regionally, nationally and internationally, and can include catalog and e-commerce businesses. No individual competitor is named in the available company information.
Competition is generally local and centers on product breadth, availability, service capabilities and price. Applied stocks service centers according to local demand and uses distribution centers to replenish them. Its employees provide product advice, engineering, repair and other technical services, while supplier authorizations give it access to particular product lines.
Our reading: Local inventory and repair capabilities provide a meaningful service advantage in urgent breakdowns, although other distributors can compete on availability and price. Our reading: Technical knowledge and customer relationships can make Applied useful on complex equipment and projects, but competing distributors, manufacturers and integrators also offer services. Our reading: Supplier relationships support product access, although their non-exclusive nature and the possibility of lost authorizations limit their defensiveness.
Growth opportunities
Applied’s growth strategy includes selling more of its fluid power, flow control, automation and consumables offerings to customers already served by its local service centers. The company sizes its addressable market at over $80 billion and sees opportunities to expand with strategic accounts and in industries including food and beverage, semiconductors, data centers and life sciences.
Applied expects acquisitions to remain an important part of its growth. Its priorities include expanding Engineered Solutions and making selected Service Center acquisitions that add capabilities. It is also investing in digital channels, technology, sales productivity and its service network.
The company sees opportunities from equipment maintenance and modernization, factory automation, skilled labor shortages and the localization of supply chains. It also sees fluid conveyance and robotics applications in data center and semiconductor infrastructure. Applied expects demand for automation to benefit from customers’ focus on labor, safety and quality.
In FY2026, sales rose 8.8%, including a contribution from acquisitions. In Q1 FY2027, Engineered Solutions organic sales increased 14.1% year over year, with growth in automation and fluid power and improving flow control demand. Applied is investing in additional automation capacity. The company maintained its FY2027 sales guidance of up 4 to 6.5%, while noting uncertainty around geopolitical events, interest rates and trade policy.
- $3.8BFY2022
- $4.4BFY2023
- $4.5BFY2024
- $4.6BFY2025
- $5.0BFY2026
Structural risks
- Industrial demand: Applied depends on customers’ operating levels. Reduced production can lower demand for its products, pressure prices, make inventory harder to manage and increase customer credit losses.
- Supplier access and disruption: Key supplier relationships can be terminated, and lost authorizations or product shortages could put Applied at a competitive disadvantage. Transport, labor, raw material or other supply disruptions could also raise costs or cause lost sales.
- Costs and pricing: Changes in product, freight, energy and labor costs can affect profitability. Applied may be unable to pass increases to customers promptly, while deflation or shifts in customer and product mix can reduce gross margins.
- Competition and consolidation: Competitors may use aggressive pricing or have stronger supplier relationships. Consolidation among customers and suppliers can also weaken Applied’s ability to negotiate favorable terms.
- Acquisitions and execution: Applied may be unable to complete suitable acquisitions, integrate them effectively or achieve anticipated benefits. Growth and operational initiatives can also require resources without delivering their objectives.
- Systems and people: A systems disruption or cyberattack could impair orders, inventory management and deliveries. Difficulty hiring or retaining qualified technical, sales and service employees could also disrupt operations.
Bottom line
Our reading
Our reading: Applied combines recurring industrial maintenance demand with more specialized engineering and automation work, supported by local inventory and technical staff (item1). Its growth depends partly on extending those capabilities through cross-selling and acquisitions, while customer production levels, supplier access and cost changes remain important exposures (item1; item1a). Recent Engineered Solutions growth shows the contribution that specialized offerings can make, but its pace remains tied to customer demand and project activity (call_prepared).