Applied Industrial Technologies reported a solid QQ2 2025 performance framed by a muted end-market backdrop and ongoing execution discipline. Consolidated revenue declined 3.4% organically, as management anticipated, driven largely by weaker Fluid Power OEM demand and softer December activity. Despite softer top-line momentum, gross margins expanded meaningfully to 30.6% (up 114 bps YoY; LIFO tailwind of +25 bps), and EBITDA margins rose to 12.6% (+45 bps YoY). The Engineered Solutions segment led margin expansion (EBITDA margin above 16% for the first time, up ~115 bps YoY) and is now a near 40% share of total sales, underscoring the company’s strategic growth vector. The Hydradyne acquisition closed at year-end and is expected to generate roughly $260 million in sales and $30 million of EBITDA in the first year, with EPS accretion of about $0.15 in the first 12 months and $5–$10 million of net synergies over the first three years. Management raised full-year guidance for FY2025 based on these dynamics: EPS guidance raised to $9.65–$10.05, with sales down 3% to up 1% organically and EBITDA margins of 12.2%–12.4%. The plan contemplates a gradual rebound in organic demand in H2 2025, acceleration in Engineered Solutions, and increased cross-selling opportunities across Hydradyne’s footprint. The company maintains a robust balance sheet and strong cash generation, including a 24% dividend increase and ongoing buybacks, supported by pro forma net leverage of about 0.5x post-Hydradyne. Overall, AIT is positioned to benefit from a more favorable growth environment as end markets recover and cross-segment opportunities mature, while continuing to optimize efficiency and capital allocation.