# How PACCAR makes money

CXProWealth Business Lens · PACCAR (PCAR) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-28 with the SEC (accession 0001193125-26-436124): https://www.sec.gov/Archives/edgar/data/75362/000119312526436124/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $7.9B (+19.0% on the year)
- Operating income: — (operating margin —)
- Net income: $847.5M (net margin 10.7%)
- Gross margin: 20.5%
- Free cash flow: $710.9M (9.0% of revenue)
- Cash conversion (operating cash flow / net income): 1.00x
- Capital expenditure: 1.7% of revenue

## Where the money goes (Q3 FY2026)

- Truck, Parts and Other → Revenues: $7.4B
- Financial Services → Revenues: $558.9M
- Revenues → Costs and expenses: $6.9B
- Costs and expenses → Cost of sales and revenues: $6.3B
- Costs and expenses → Research and development: $108.9M
- Costs and expenses → Interest and other borrowing expenses: $181.5M
- Costs and expenses → Depreciation and other expenses: $168.2M
- Costs and expenses → Selling, general and administrative: $167.8M
- Costs and expenses → Provision for loan lease and other losses: $28.6M
- Interest and other (income) expenses, net → Costs and expenses: $26.5M
- Revenues → Income before income taxes: $997.0M
- Income before income taxes → Total Income (Loss) Before Income Taxes: $997.0M
- Investment income → Total Income (Loss) Before Income Taxes: $84.0M
- Total Income (Loss) Before Income Taxes → Income taxes: $233.5M
- Total Income (Loss) Before Income Taxes → Net Income: $847.5M

## Where the revenue comes from

### Products and services (Consolidated Statements of Comprehensive Income (Unaudited))

| Member | Value | Share |
|---|---:|---:|
| Truck, Parts and Other | $7.4B | 93.0% |
| Financial Services | $558.9M | 7.0% |

The members sum to total revenue.

### ConsolidationItems (Segment Reporting Information by Segment (Detail))

| Member | Value | Share |
|---|---:|---:|
| Operating Segments | $8.1B | 101.5% |
| Intersegment | -$119.7M | -1.5% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Financial Services | $346.4M | 4.4% |
| Financial Services | $212.5M | 2.7% |
| **Revenues** | $7.9B | 100% |
|   Truck, Parts and Other | $7.4B | 93.0% |
|   Financial Services | $558.9M | 7.0% |
| Cost of sales and revenues | $6.3B | 79.5% |
|   Truck, Parts and Other | $6.3B | 79.5% |
| Research and development | $108.9M | 1.4% |
|   Truck, Parts and Other | $108.9M | 1.4% |
| Interest and other borrowing expenses | $181.5M | 2.3% |
|   Financial Services | $181.5M | 2.3% |
| Depreciation and other expenses | $168.2M | 2.1% |
|   Financial Services | $168.2M | 2.1% |
| Selling, general and administrative | $167.8M | 2.1% |
|   Truck, Parts and Other | $125.3M | 1.6% |
|   Financial Services | $42.5M | 0.5% |
| Financial Services | $28.6M | 0.4% |
| Interest and other (income) expenses, net | ($26.5M) | 0.3% |
|   Truck, Parts and Other | ($26.5M) | 0.3% |
| Truck, Parts and Other | $6.5B | 82.1% |
| Financial Services | $420.8M | 5.3% |
| **Income before income taxes** | $997.0M | 12.6% |
|   Truck, Parts and Other | $858.9M | 10.8% |
|   Financial Services | $138.1M | 1.7% |
| Investment income | $84.0M | 1.1% |
| **Total Income (Loss) Before Income Taxes** | $1.1B | 13.6% |
|   Truck, Parts and Other | $858.9M | 10.8% |
|   Financial Services | $138.1M | 1.7% |
| Income taxes | $233.5M | 2.9% |
| **Net Income** | $847.5M | 10.7% |
| Basic | $2 | 0.0% |
| Diluted | $2 | 0.0% |
| Basic | 527,100,000 |  |
| Diluted | 527,700,000 |  |
| Comprehensive Income | $778.3M | 9.8% |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2007 | — | — | $1.2B | $2.1B | $425.7M | $1.6B |
| FY2008 | $15.0B | — | $1.0B | $1.3B | $462.8M | $842.1M |
| FY2009 | $8.1B | — | $111.9M | $1.4B | $127.7M | $1.2B |
| FY2010 | $10.3B | — | $457.6M | $1.6B | $168.4M | $1.4B |
| FY2011 | $16.4B | — | $1.0B | $1.6B | $340.7M | $1.3B |
| FY2012 | $17.1B | — | $1.1B | $1.5B | $515.4M | $1.0B |
| FY2013 | $17.1B | — | $1.2B | $2.4B | $510.6M | $1.9B |
| FY2014 | $19.0B | — | $1.4B | $2.1B | $298.2M | $1.8B |
| FY2015 | $19.1B | — | $1.6B | $2.6B | $286.7M | $2.3B |
| FY2016 | $17.0B | — | $521.7M | $2.3B | $375.2M | $1.9B |
| FY2017 | $19.5B | — | $1.7B | $2.7B | $423.4M | $2.3B |
| FY2018 | $23.5B | — | $2.2B | $3.0B | $457.6M | $2.5B |
| FY2019 | $25.6B | — | $2.4B | $2.9B | $574.0M | $2.3B |
| FY2020 | $18.7B | — | $1.3B | $3.0B | $550.4M | $2.4B |
| FY2021 | $23.5B | — | $1.9B | $2.2B | $559.1M | $1.6B |
| FY2022 | $28.8B | — | $3.0B | $3.0B | $525.0M | $2.5B |
| FY2023 | $35.1B | — | $4.6B | $4.2B | $695.0M | $3.5B |
| FY2024 | $33.7B | — | $4.2B | $4.6B | $838.7M | $3.8B |
| FY2025 | $28.4B | — | $2.4B | $4.4B | $743.0M | $3.7B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: -15.5% (year before -4.2%): slowing
- Operating income: — (year before —): too short a history to read
- Net income: -42.9% (year before -9.5%): slowing
- Free cash flow: -3.4% (year before +8.8%): slowing

## Operating figures stated in the filing

- New truck deliveries (quarter): 40,100 trucks (as of 2026-09-30). "Total units 40,100 31,900" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- New truck deliveries (quarter): 31,900 trucks (as of 2025-09-30). "Total units 40,100 31,900" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- U.S. and Canada heavy-duty retail market share (nine months): 29.3% (as of 2026-09-30). "The Company's heavy-duty truck retail market share was 29.3% in the first nine months of 2026 compared to 30.3% in the first nine months of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- U.S. and Canada heavy-duty retail market share (nine months): 30.3% (as of 2025-09-30). "The Company's heavy-duty truck retail market share was 29.3% in the first nine months of 2026 compared to 30.3% in the first nine months of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- U.S. and Canada medium-duty market share (nine months): 12.5% (as of 2026-09-30). "The Company's medium-duty market share was 12.5% in the first nine months of 2026 compared to 14.2% in the first nine months of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- U.S. and Canada medium-duty market share (nine months): 14.2% (as of 2025-09-30). "The Company's medium-duty market share was 12.5% in the first nine months of 2026 compared to 14.2% in the first nine months of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DAF Europe over 16-tonne market share (nine months): 13.4% (as of 2026-09-30). "DAF over 16-tonne market share was 13.4% in the first nine months of 2026 compared to 13.6% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DAF Europe over 16-tonne market share (nine months): 13.6% (as of 2025-09-30). "DAF over 16-tonne market share was 13.4% in the first nine months of 2026 compared to 13.6% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DAF Brasil over 16-tonne market share (nine months): 7.6% (as of 2026-09-30). "DAF Brasil market share for the first nine months of 2026 was 7.6% compared to 9.1% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- DAF Brasil over 16-tonne market share (nine months): 9.1% (as of 2025-09-30). "DAF Brasil market share for the first nine months of 2026 was 7.6% compared to 9.1% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- PFS finance share of new PACCAR truck sales (quarter): 27.2% (as of 2026-09-30). "In the third quarter of 2026, PFS finance market share of new PACCAR truck sales increased to 27.2% from 27.1% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- PFS finance share of new PACCAR truck sales (quarter): 27.1% (as of 2025-09-30). "In the third quarter of 2026, PFS finance market share of new PACCAR truck sales increased to 27.2% from 27.1% in the same period of 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Retail loan and lease accounts 30+ days past due: 1.9% (as of 2026-09-30). "Accounts 30+ days past due was 1.9% at September 30, 2026, a decrease compared to 2.4% at December 31, 2025 and 2.1% at September 30, 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Retail loan and lease accounts 30+ days past due: 2.1% (as of 2025-09-30). "Accounts 30+ days past due was 1.9% at September 30, 2026, a decrease compared to 2.4% at December 31, 2025 and 2.1% at September 30, 2025." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)

## Key insights

### Truck and parts profit grew far faster than sales

Truck, Parts and Other pretax income rose to $858.9M from $526.6M on revenue up 19.0%, so price and lower costs, not volume alone, drove the quarter.

Truck, Parts and Other earned $858.9M before tax against $526.6M a year earlier. Company revenue rose 19.0% to $7.94B, and new truck deliveries rose to 40,100 from 31,900. Pretax income was 13.6% of revenue against 11.1%, and net margin was 10.7% against 8.8%. _(from the filing)_
The filing says Truck segment income rose "primarily due to higher price realization and lower tariff costs". Overheads helped: selling, general and administrative expense was $167.8M against $180.2M, 2.1% of revenue against 2.7%, and research and development was $108.9M against $111.0M while volume rose. _(from the filing)_
Analysis: this is operating leverage. Factory, engineering and selling costs are largely fixed in the short run, so each extra truck delivered at a higher price adds more to profit than to revenue. The same leverage works in reverse when deliveries fall. _(analysis)_
A gross margin of 20.5% computed on total revenue overstates the manufacturing margin, because total revenue includes Financial Services revenue whose costs sit outside cost of sales. Against Truck, Parts and Other revenue alone, cost of sales was 85.5%. _(from the filing)_

### PACCAR took price as its market share slipped

Pretax return on revenues rose to 13.6% from 11.1% while U.S. and Canada heavy-duty share fell to 29.3% from 30.3%, consistent with holding price over chasing volume.

Over the first nine months of 2026, the company's U.S. and Canada heavy-duty retail share was 29.3% against 30.3% a year earlier, and its medium-duty share 12.5% against 14.2%. DAF's heavy truck share was 13.4% in Europe against 13.6%, and 7.6% in Brasil against 9.1%. _(from the filing)_
In the same filing, Truck segment income rose "primarily due to higher price realization and lower tariff costs", and company pretax return on revenues was 13.6% in the quarter against 11.1%. The filing notes that market share data come from third-party sources, measured by retail sales or registrations. _(from the filing)_
Analysis: read together, the figures fit a premium maker holding price rather than discounting for units. That protects margin and the resale values its finance arm lends against, at the cost of some volume when rivals discount. Share is a nine-month measure and margin a quarterly one, so the link is a reading, not a figure the filing states. _(analysis)_

### Cash flow only matched profit as build rates rose

Operating cash flow of $847.7M matched net income of $847.5M, against $1.53B on $590.0M a year earlier, which the filing ties to cash going into inventory and receivables.

Operating cash flow was $847.7M against net income of $847.5M. A year earlier it was $1.53B against $590.0M. Free cash flow was $710.9M, 52% of the year-earlier $1.36B, even though net income was higher. Capital spending of $136.8M took 16.1% of operating cash flow. _(from the filing)_
For the nine months, the filing attributes lower operating cash to cash going into wholesale receivables on new trucks, inventory and trade receivables, partly offset by higher payables and accruals, as truck build rates rose. Earlier in 2026, operating cash was $971.8M against net income of $605.3M in the first quarter, and $700.8M against $752.0M in the second. _(from the filing)_
Analysis: weaker cash conversion during a production ramp is a timing effect rather than a sign of weaker earnings, provided receivables are collected and inventory turns. If build rates keep climbing, operating cash would keep trailing profit; if deliveries settle, the cash tied up would come back. _(analysis)_

### The finance arm earns 12.8% of profit on 7.0% of revenue

Financial Services earned $138.1M before tax on $558.9M of revenue, more than a year earlier even as revenue slipped 1.1%, helped by lower borrowing costs.

Financial Services brought in $558.9M, 7.0% of company revenue, and earned $138.1M before tax: 12.8% of total pretax income of $1.08B and 24.7% of its own revenue. A year earlier it earned $126.2M. _(from the filing)_
Interest and other borrowing expenses fell to $181.5M from $201.0M, and were 32.5% of segment revenue. The filing cites "a higher lease margin and a lower provision for losses, partially offset by a lower finance margin", and puts the small revenue decline mainly on a smaller dealer wholesale book. _(from the filing)_
The arm financed 27.2% of new PACCAR truck sales in the quarter, against 27.1% a year earlier, and the share of retail loan and lease accounts past due was 1.9% against 2.1%. _(from the filing)_
Analysis: a captive lender lets PACCAR close truck sales and keep dealers stocked, then earns a spread on top. The cost is that credit risk and used truck values sit on its own balance sheet. _(analysis)_

### Competitive edge

- **Every truck delivered seeds years of parts sales** Parts sell through the same dealers as trucks and follow each delivery for years, so the quarter's 40,100 deliveries widen the base that buys parts later.
- **Profitable and cash-generative through the last downturn** In FY2020, as revenue fell to $18.73B from $25.60B, PACCAR still earned $1.30B, a 6.9% net margin, and produced $2.44B of free cash flow.

### What to watch

- **Part of the margin gain was tariff relief** The filing credits lower tariff costs and recovered payments after the IEEPA ruling for part of the truck gain, and recovered amounts are not a recurring benefit.
- **Fewer past dues, but more loans modified for hardship** Past dues fell to 1.9% from 2.1%, yet the filing shows more contracts modified for customers in financial difficulty, and higher charge-offs in Brasil.
- **A pending emissions rule could reshape order timing** The EPA's proposal keeps the coming NOx limits with revised warranty and useful-life terms, and a final decision is expected in the fourth quarter of 2026.

## Investor view

**Price and lower tariff costs lifted PACCAR's pretax return on revenues to 13.6% as truck deliveries recovered**

### How it makes money

PACCAR runs three businesses. It designs and builds light-, medium- and heavy-duty trucks sold as Kenworth, Peterbilt and DAF, distributes aftermarket parts "through the same network of independent dealers", and finances or leases its own products through PACCAR Financial Services. Truck, Parts and Other brought in $7.38B of the quarter's $7.94B of revenue, 93.0%. Financial Services brought in $558.9M, 7.0%. _(from the filing)_
Most of the profit comes from making and supporting trucks. Truck, Parts and Other earned $858.9M before tax, 79.5% of total pretax income of $1.08B. Financial Services added $138.1M, 12.8%, and investment income on the company's cash and securities added $84.0M, 7.8%. Income taxes took $233.5M, 21.6% of pretax income, leaving net income of $847.5M. _(from the filing)_
The filing explains why parts follow trucks: "The sale of new trucks provides the Parts segment with the basis for parts sales that may continue over the life of the truck, but are generally concentrated in the first five years after truck delivery." PACCAR charges part of the Truck segment's factory overhead, engineering and selling costs to Parts to reflect that benefit, so the Parts result already carries a share of the cost of building the base. _(from the filing)_
Financial Services earns a spread. It lends to truck buyers and dealers and leases trucks, then funds that book in the debt markets. Against $558.9M of segment revenue, interest and other borrowing expenses were $181.5M, 32.5%, and depreciation and other costs of the leased fleet were $168.2M. What remained before tax was $138.1M, 24.7% of the segment's revenue. _(from the filing)_

### What shifted

Revenue rose 19.0% to $7.94B from $6.67B a year earlier, carried by trucks: new deliveries rose to 40,100 from 31,900. The filing attributes the gain to "higher retail demand primarily in the U.S. and Canada and Mexico". Truck, Parts and Other revenue grew 20.8%, faster than the company as a whole, and made up 93.0% of revenue. _(from the filing)_
Profit grew much faster than revenue. Pretax income was $1.08B against $743.6M, and the pretax return on revenues rose to 13.6% from 11.1%. Net margin was 10.7% against 8.8%. The filing says Truck segment income rose "primarily due to higher price realization and lower tariff costs", the second helped by the Supreme Court ruling against IEEPA tariffs, which brought "tariff relief and recovery of certain amounts previously paid". _(from the filing)_
Overheads fell while volume rose. Selling, general and administrative expense was $167.8M against $180.2M, 2.1% of revenue against 2.7%, and research and development was $108.9M against $111.0M. For the Truck segment the filing names "lower salaries and related expenses as well as lower sales and marketing expenses". _(from the filing)_
Financial Services earned more on slightly less revenue. Segment revenue slipped 1.1% to $558.9M, mainly from a smaller dealer wholesale book, while pretax income rose to $138.1M from $126.2M. Interest and other borrowing expenses fell to $181.5M from $201.0M on lower debt balances and lower rates. The filing cites a "higher lease margin and a lower provision for losses, partially offset by a lower finance margin". _(from the filing)_
Cash lagged profit. Operating cash flow was $847.7M against $1.53B a year earlier, and free cash flow was $710.9M against $1.36B, even as net income rose to $847.5M from $590.0M. For the nine months, the filing points to cash going into wholesale receivables on new trucks, inventory and trade receivables as build rates rose. _(from the filing)_

### Risks in the filing

The company says its risk factors are unchanged from its last annual report: "There have been no material changes in the Company’s risk factors". The first group is demand: a significant decline in industry sales, competitive pressures, reduced market share, changes affecting the profitability of truck owners and operators, and shortages of commercial truck drivers. _(from the filing)_
Policy and cost. The filing names higher costs or sales restrictions from safety, emissions or other regulations and tariffs, currency and commodity swings, supplier interruptions, limited access to components including semiconductors, labor disruptions and higher warranty costs. Its outlook adds that results could be affected by "further changes in tariff policy, geopolitical uncertainty, emissions regulations and improving freight fundamentals". _(from the filing)_
The finance book. Lower used truck prices hit residual values and lease results, and interest rates and capital market liquidity set funding costs. The filing states: "If freight transportation conditions decline due to a weaker economy, then past due accounts, truck repossessions and credit losses would likely increase from the current levels". A credit rating cut or market disruption could also limit refinancing of maturing debt. _(from the filing)_
Other named risks: cyberattacks on the company's information systems, the use of artificial intelligence and machine learning in business processes, pandemics, climate-related risks, global conflicts, and litigation, including "EC settlement-related claims", the European civil litigation that brought a charge in the first quarter of the prior year. _(from the filing)_
Two of these risks already show in the numbers. Reduced market share is visible in the heavy-duty, medium-duty and Brasil share figures, all lower than a year earlier. Credit stress is visible in Brasil, where the filing ties higher charge-offs to higher interest rates and slowing freight, and in the rise in credit modifications. The demand risk ran the other way this quarter: deliveries recovered. _(analysis)_

## Founder view: mechanisms

### Every truck sold seeds years of parts demand

Each truck delivered becomes a customer for replacement parts, sold through the same dealers that sold the truck. The truck sale carries the engineering, factory and selling cost; the parts that follow ride on that cost and on the dealer relationship. PACCAR makes the link explicit by charging part of truck overhead to Parts. The result is a stream of revenue that lags the truck cycle, so it keeps flowing when new truck sales fall. _(analysis)_

### Captive finance closes the sale and earns the spread

PACCAR Financial Services lends to buyers of PACCAR trucks, finances dealer inventory and leases trucks. It removes the financing obstacle at the point of sale, keeps dealers stocked, and earns the spread between portfolio yield and the company's borrowing cost. In Europe it also resells used trucks returned under buyback guarantees. The cost is that credit risk and used truck values sit on PACCAR's own balance sheet. _(analysis)_

### Price discipline over market share

Kenworth, Peterbilt and DAF are sold as premium trucks to buyers who weigh uptime, fuel use and resale value over sticker price. This quarter PACCAR took price rather than chasing units: margins rose while its share of heavy-duty and medium-duty retail sales slipped. Holding price through a cycle protects margin and resale values, at the cost of some volume when rivals discount. _(analysis)_

### Cash moves against the cycle

When orders fall, a manufacturer builds less, runs down inventory and collects receivables, so cash flow runs ahead of profit. When orders recover, build rates rise and inventory and receivables absorb cash, so profit runs ahead of cash. PACCAR's large cash and securities balance lets it ride both phases without changing its investment plans. _(analysis)_

## Member research

Signed-in members read, on the page: what PACCAR's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- PACCAR 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/75362/000119312526436124/ (2026-10-28)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02