Recovery is real, but price matters
- Q1 2026 sales rose 16.8% to $228.4 million, with both Hydraulics and Electronics growing.
- Management raised 2026 guidance to $840 million to $870 million of sales and non-GAAP EPS of $2.70 to $2.95.
- Orders have grown at a double-digit rate for 12 straight months through April, even though management called markets choppy.
- Margins improved fast in Q1, with gross margin up 220 basis points and operating margin up 440 basis points.
- The main test is whether growth and margins hold up against tariffs, fuel costs, energy prices, and weak cyclical markets.
A recovery that still has to prove itself
Helios looks much better than it did in the weak part of 2025. Q1 2026 sales grew 16.8% to $228.4 million. Hydraulics grew 10.1%, and Electronics grew 29.1%. 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. Management said order intake has been up at a double-digit rate for 12 straight months through April, and backlog was also up double digits. The company raised full-year 2026 guidance to $840 million to $870 million of sales and non-GAAP EPS of $2.70 to $2.95.
Margins are the other key part of the story. Q1 gross margin rose 220 basis points to 32.8%, and operating margin rose 440 basis points to 13.1%. Management still expects adjusted EBITDA margin of 19.5% to 21.0% for 2026, which is a high bar if cost pressure returns in the second half.
The bear case is not that Helios is broken. It is that the stock may already need a lot to go right. The market is still choppy, marine remains very challenged, health and wellness is only a low-single-digit growth market, and management named tariffs, fuel costs, energy prices, labor 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, which is why margins improved in Q1.
Helios has also been simplifying itself. The company sold its Custom Fluidpower Australian services business in 2025, which management said would lower sales and earnings run rates but improve margin rates. After a $25.9 million goodwill impairment tied to i3PD in 2025, management said its acquisition approach has evolved from lessons learned.
Capital allocation is more balanced now. In Q1 2026, Helios repurchased 70,000 shares for $4.7 million, had repurchased 400,000 shares for $18.3 million in total under the program, and had $81.9 million of buyback authorization left. Management also raised the dividend by 33% and said large M&A is not imminent.
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. This area helped drive the Electronics segment's 29.1% sales growth.
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 could add another growth lane. The near-term revenue contribution in late 2026 and 2027 is still not clear.
Two segments, both growing
Segment mix is based on Q1 2026 net sales: Hydraulics was $139.2 million and Electronics was $89.2 million, out of $228.4 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 full-year outlook. Q1 margins were strong, but higher input costs can quickly eat factory leverage. Helios said it may use regional production, local sourcing, and pricing to soften tariff costs, but it cannot promise those steps will offset all costs.
Orders slow after a strong run
High impact · Medium oddsThe recovery depends on orders staying strong. Management said order intake grew at a double-digit rate for 12 straight months through April, but also called the market choppy. If orders cool, the market may treat Q1 as a temporary rebound rather than a new trend.
Electronics growth fades
Medium impact · Medium oddsElectronics grew 29.1% in Q1 2026, helped by recreational, health and wellness, and mobile end markets. 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. In Q1, Europe and Asia agriculture improved, but the U.S. agriculture market remained challenged. 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 not imminent and is focusing on internal investment, dividends, buybacks, and debt control. 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?
Management raised guidance after a strong Q1 2026 and better visibility into Q2. The company now expects $840 million to $870 million of sales and non-GAAP EPS of $2.70 to $2.95 for 2026.
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.