Recovery broadens as acquisitions return to the priority list
- Q2 2026 sales rose 16% to $232 million on a pro forma basis, with both segments growing.
- Management raised 2026 guidance again, now expecting $880 million to $900 million in full-year sales.
- Net leverage dropped to 1.4x, prompting a return to strategic acquisitions as a growth priority.
- Gross margin expanded for the fourth straight quarter, showing operating leverage across the business.
- The main test is whether growth and margins hold up against tariffs, fuel costs, and weak cyclical markets.
A recovery that continues to prove itself
Helios looks much better than it did in the weak part of 2025. Q2 2026 sales grew 16% year-over-year to $232 million on a pro forma basis. Hydraulics grew 14%, and Electronics grew 19%. That matters because this is not a one-segment bounce.
The bull case is that new products and a better sales approach are helping Helios grow faster than its end markets. The company raised full-year 2026 guidance to $880 million to $900 million of sales. Management also noted that data center thermal management products represent their single largest opportunity, with initial sales expected in 2027.
Margins are the other key part of the story. The company reported its fourth consecutive quarter of gross margin expansion. Operating leverage continues to shine through with footprint optimization, such as the Faster consolidation in Toledo. Net leverage dropped to 1.4x, giving the company dry powder for acquisitions.
The bear case is not that Helios is broken. It is that the stock may already need a lot to go right. The marine market remains very challenged, industrial markets are flat, and management named tariffs, fuel costs, energy prices, shift costs, geopolitics, and cyclical markets as second-half risks.
Small parts inside expensive machines
Helios sells parts and systems that help machines move, sense, display, and control what they are doing. Its products include hydraulic cartridge valves, manifolds, quick-release couplings, displays, controls, wire harnesses, and software. Many go into equipment made by original equipment manufacturers, known as OEMs, which are companies that build the final machine.
The company makes money through direct sales to OEMs and through distributors. The model works best when customers keep building equipment in markets like construction, agriculture, recreational vehicles, health and wellness, and industrial machinery. Higher volumes help factories spread fixed costs over more sales.
Helios has also been simplifying itself. The company sold its Custom Fluidpower Australian services business in 2025, which lowered sales and earnings run rates but improved margin rates. After a goodwill impairment tied to i3PD in 2025, management said its acquisition approach evolved.
Capital allocation has shifted. With leverage down to 1.4x in Q2 2026, management explicitly added strategic acquisitions back to their priorities. The company maintains a disciplined approach learned from past integrations, balancing M&A with organic investments and shareholder returns.
Hydraulics plus brains and screens
Hydraulic cartridge valves and manifolds
These products control fluid flow inside machines. They are core to Helios and tend to benefit when construction, mobile equipment, and agriculture demand improve.
Quick-release couplings and fluid conveyance
The Faster brand sells parts that connect and move hydraulic fluid. The line supports the Hydraulics segment and is tied to equipment build rates.
Electronic displays and controls
Enovation Controls had a record quarter in Q1 2026 and helped drive the Electronics segment's 19% sales growth in Q2.
Health and wellness systems
Balboa Water Group serves spas and related health and wellness markets. Management described this market as growing at a low-single-digit rate.
Software and connected device support
Helios is building software tools such as Cygnus Reach for remote support of IoT devices. The open question is how much software can add to hardware sales.
Thermal management for data centers
New thermal management products represent a massive opportunity. The near-term revenue contribution is expected to begin in 2027.
Two segments, both growing
Segment mix is based on Q2 2026 net sales: Hydraulics was $146 million and Electronics was $86 million, out of $232 million total. The mix can swing with cyclical demand in agriculture, construction, recreational, and health and wellness markets.
What could break the recovery
Second-half cost shock
High impact · Medium oddsManagement named tariffs, fuel costs, energy prices, shift cost dynamics, geopolitics, and weak cyclical markets as risks to the second half. Higher input costs can quickly eat factory leverage. Helios said it may use regional production, local sourcing, and pricing to soften tariff costs.
Orders slow after a strong run
High impact · Medium oddsThe recovery depends on orders staying strong. If orders cool, the market may treat the first half of 2026 as a temporary rebound rather than a new trend.
Electronics growth fades
Medium impact · Medium oddsElectronics grew 19% in Q2 2026. That pace may be hard to repeat. Marine remains very challenged, and health and wellness is a low-single-digit growth market.
Cyclical end markets turn down
High impact · Medium oddsHelios sells into agriculture, construction, industrial, marine, recreational, and other markets that move with the economy. The marine market remains depressed, and the industrial market is essentially flat. A downturn in equipment builds would hit sales and factory use.
Capital allocation trust slips
Medium impact · Low oddsHelios has a history of acquisitions, and the 2025 i3PD impairment raised questions about past deal discipline. Management now says M&A is back as a priority. If the company returns to large deals too quickly, investors may question whether the lessons stuck.
In one breath
What does Helios Technologies do?
Helios makes engineered hydraulics and electronic controls used inside machines. Its parts help equipment move, connect, display information, and control functions.
Why did Helios raise 2026 guidance again?
Management raised guidance after a strong Q2 2026. The company now expects $880 million to $900 million of sales for 2026, driven by broad-based growth.
What are the main growth drivers for Helios?
The main drivers are stronger orders, new products, and better go-to-market execution. Electronics is growing fast right now, while Hydraulics is recovering with help from mobile, construction, and agriculture demand.
What is the biggest risk for HLIO stock?
The biggest risk is that the recovery slows while costs rise. Tariffs, energy, fuel, and weak cyclical markets could pressure margins and make the valuation harder to support.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 23, 2026
- Score data
- September 6, 2026
- Reviewed by
- Shivam Bharuka
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