Donaldson's fiscal 2026 sales rose 5.3% to $3.89 billion and diluted EPS jumped 26% to $3.85, flattered by the absence of last year's $62 million impairment; replacement filters did the heavy lifting while Industrial Solutions margins fell and debt doubled to fund the $820 million Facet deal.
Revenue
$3.9B
+5.3% YoY
Net income
$454M
+23.7% YoY
Diluted EPS
$3.85
+26.2% YoY
Operating margin
15.4%
Replacement filters carried the year; the EPS jump is partly an easy comparison
Donaldson makes filters: air and fuel filters for trucks, tractors and mining equipment, dust collectors for factories, filtration for aircraft and power turbines, and specialty filters for food and beverage plants and computer hard drives. In fiscal 2026 (the year ended July 31, 2026) it sold $3,885.6 million of product, up 5.3%, and earned $453.8 million, up 23.7%. Diluted earnings per share (EPS, profit divided by the share count including options) rose 26.2% to $3.85.
That headline profit growth overstates the underlying improvement. Fiscal 2025 carried a $62.0 million write-down of intangible assets in the bioprocessing business (Univercells Technologies and Solaris), which did not repeat. On the company's own adjusted basis, which strips out that impairment plus restructuring, deal costs and a property-sale gain, EPS grew 8.2%, from $3.68 to $3.98 (per the August 26, 2026 earnings release). That is still a solid year, just not a 26% one.
The year also changed the balance sheet: on May 4, 2026 Donaldson bought Filtration Group's Facet business (aerospace/defense and power-generation fuel filters) for $820.0 million, funded almost entirely with new debt.
Key figures
Metric
FY2026
FY2025
YoY Change
Net sales
$3,885.6M
$3,690.9M
+5.3%
Gross margin
34.6%
34.8%
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-0.2 pts
Operating income
$599.9M
$495.4M
+21.1%
Operating margin
15.4%
13.4%
+2.0 pts
Net earnings
$453.8M
$367.0M
+23.7%
Diluted EPS (GAAP)
$3.85
$3.05
+26.2%
Adjusted EPS (company non-GAAP)
$3.98
$3.68
+8.2%
Aftermarket (replacement parts) sales
$1,936.6M
$1,820.9M
+6.4%
Operating cash flow
$493.7M
$418.8M
+17.9%
Total debt (year-end)
$1,324.8M
$668.3M
+98.2%
Operating margin is the share of sales left after running the business (production, selling, admin and R&D costs), before interest and tax.
Where the sales growth came from
The 10-K breaks the $194.7 million sales increase into four pieces:
Driver
Contribution
Higher prices
+$67.3M
Currency translation (weaker US dollar)
+$67.6M
Facet acquisition (May–July only)
+$30.3M
Higher sales volume
+$29.5M
The split matters. Roughly a third of the growth came simply from the dollar weakening: when overseas sales in euros or yuan are converted back into more dollars, reported revenue rises even if nothing was sold extra. Excluding currency, sales grew 3.4%. Strip out Facet as well and organic growth (price plus volume from businesses Donaldson already owned) was about 2.6%, of which price was the larger part. Actual volume grew less than 1% company-wide, and that small total hides a $46.3 million volume decline in Industrial Solutions offset by gains in Mobile and Life Sciences.
Segments
Segment
Sales FY2026
YoY
Pre-tax earnings
Margin FY2026
Margin FY2025
Mobile Solutions
$2,419.7M
+5.6%
$467.5M
19.3%
18.2%
Industrial Solutions
$1,132.7M
+2.6%
$155.6M
13.7%
17.9%
Life Sciences
$333.2M
+12.8%
$32.3M
9.7%
1.5%
Mobile Solutions is the engine. Its Aftermarket unit, which sells replacement filters for engines and equipment already in service, is now $1.94 billion, almost exactly half of total company sales, and grew 6.4%. The 10-K credits "market share gains and higher vehicle utilization rates in all regions." Replacement filters are a steadier business than selling filters for new machines, because a truck or excavator needs new filters whether or not anyone is buying new trucks. Off-Road (filters for new construction, mining and farm equipment) rose 5.6% in a "modest rebound" after the prior year's decline, while On-Road (new trucks) fell 6.6% on lower global truck production for the year, though it turned up 8.7% in the fourth quarter. Segment margin improved 1.1 points on volume leverage and favorable mix.
Industrial Solutions is the weak spot. Sales grew only because of Facet ($30.3 million) and pricing ($28.8 million); underlying volume fell $46.3 million. Pre-tax margin dropped from 17.9% to 13.7%, a loss of $42.1 million in segment earnings. The 10-K attributes this mainly to "operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support customer-specific requirements," plus plant-consolidation costs and unfavorable mix. In other words, a factory move went badly and cost money. The earnings release says fourth-quarter Industrial pre-tax margin improved 3 points versus the third quarter, which suggests the worst of it is behind them, but the full-year damage is real. Legacy Aerospace and Defense was also held back by supply-chain constraints (organic A&D sales fell 2.8% in Q4).
Life Sciences swung from barely breaking even (1.5% margin, $4.4 million pre-tax) to $32.3 million. Volume rose $29.0 million on strong Food and Beverage and Disk Drive filter sales, while pricing was slightly negative. This is the segment that took last year's impairment on its bioprocessing bets; the recovery here came from its older, more established product lines, not from bioprocessing.
Why operating margin rose two points while gross margin slipped
Gross margin (sales minus the direct cost of making the products, as a share of sales) actually dipped to 34.6% from 34.8%, weighed down by the Power Generation production problems and $17.6 million of restructuring costs booked in cost of sales, partly offset by pricing and mix. The 2.0-point operating margin gain came almost entirely from below the gross-profit line:
No impairment: the $62.0 million charge in FY2025 alone accounts for 1.7 points of the improvement. Excluding it, FY2025 operating margin would have been about 15.1%, so the like-for-like gain is roughly 0.3 points.
R&D cut: research and development spending fell 13.3% to $76.1 million (2.0% of sales vs. 2.4%), which the 10-K attributes to "focused project prioritization." This helps near-term margin but is worth watching for a technology-led filter maker.
Property sale: a $9.3 million gain from selling land and a building freed up by the plant-consolidation program.
Offsets: SG&A rose 5.8%, including $8.9 million of Facet amortization (the accounting write-down of intangible assets acquired in the deal) and the non-repeat of a $4.0 million prior-year benefit from reducing a Purilogics earnout liability.
Below operating income, interest expense rose 48.8% to $36.0 million on the Facet debt, and the tax rate fell to 22.5% from 25.4%, which the 10-K attributes to the prior-year impairment's tax effect and larger stock-compensation tax benefits. The lower tax rate added meaningfully to the EPS jump. So did buybacks: the diluted share count fell to 117.9 million from 120.4 million after Donaldson repurchased 1.4 million shares for $108.5 million (versus 4.9 million shares for $333.6 million the year before).
Takeaway: Donaldson's core replacement-filter business had a genuinely good year, but the 26% GAAP EPS jump is mostly accounting: removing last year's $62 million impairment, a lower tax rate and fewer shares. Adjusted EPS rose 8.2% on organic sales growth of only about 2.6%, while Industrial Solutions margins fell four points on a botched production move. Fiscal 2027 now depends on that fix holding and on Facet earning its keep against an extra $19 million to $24 million of annual interest expense guided for fiscal 2027.
The Facet deal and the balance sheet
Facet (headquartered in Tulsa, Oklahoma, about 250 employees) makes fuel and fluid filtration for aerospace, defense and power generation. Donaldson paid $830.2 million in cash, of which $587.4 million was recorded as goodwill (the premium paid above the fair value of Facet's identifiable assets) and $225.6 million as intangible assets. In its first three months Facet contributed $30.3 million of revenue but only $0.1 million of pre-tax earnings, after $8.9 million of amortization. Management says Facet will dilute fiscal 2027 EPS by about $0.12.
To pay for it, total debt nearly doubled to $1,324.8 million from $668.3 million, and debt rose to 42.9% of total capital (debt plus shareholders' equity) from 31.5%. The new debt carries a floating rate (4.65% at year-end, tied to SOFR). Donaldson paid down $102 million of Facet-related debt in the fourth quarter, and it remains within its loan covenants.
Cash generation was good: operating cash flow rose to $493.7 million and capital spending fell to $67.4 million, leaving roughly $426 million of free cash flow (operating cash flow minus capital spending), comfortably covering $141.2 million of dividends and $111.2 million of buybacks. Receivables climbed $95.9 million on strong fourth-quarter sales, and the net cash cycle (how many days cash is tied up in inventory and unpaid customer bills) lengthened slightly to 87 days from 85.
Outlook
In its August 26, 2026 earnings release, management guided fiscal 2027 to:
Sales growth of 5.5% to 9.5%, including about 2 points from Facet, 2 points of pricing and 1 point of currency tailwind. That implies organic volume growth of roughly 0.5% to 4.5%.
EPS of $4.22 to $4.38, including $0.12 of Facet dilution, up 6% to 10% from fiscal 2026 adjusted EPS of $3.98.
Operating margin of 16.6% to 17.2%, versus 15.4% reported and 16.0% adjusted in fiscal 2026.
By segment: Mobile +2% to 6% (On-Road up high-single digits as truck production recovers); Industrial up mid-teens (Aerospace and Defense up over 50% with a full year of Facet, and organic A&D up mid-teens as supply chains improve); Life Sciences +7% to 11%.
Interest expense of $55 to $60 million (from $36 million) and a higher tax rate of 23.5% to 25.5%, both of which will offset part of the operating gains.
Our read: the guidance looks achievable if the fourth quarter is a guide. Q4 sales grew 8.0%, gross margin reached 36.3% (up 1.8 points), and operating margin hit 16.7%, already inside next year's target range. The biggest swing factor is Industrial Solutions: if the Power Generation production problems are truly fixed, recovering even half of the four points of margin lost this year would add meaningfully to earnings. The risks sit on the cost side (a higher interest bill and tax rate that the company has already flagged) and in the macro backdrop the 10-K highlights: tariffs on imports from Mexico, China and Europe, and the conflict involving Iran that has made commodity prices volatile. The 10-K also notes the February 2026 Supreme Court ruling that the emergency-powers law (IEEPA) did not authorize some of the tariffs it paid; Donaldson expects to recover part of what it paid, but says the amount is not material.
Source: Donaldson Company, Inc. Form 10-K for the fiscal year ended July 31, 2026, filed September 25, 2026; adjusted EPS, fourth-quarter figures and fiscal 2027 guidance from the company's August 26, 2026 earnings release (Form 8-K, Exhibit 99.1).