I was reading some old threads that said it applied Sheen. Now, I see that they might actually referring to the splash damage also getting increased damage from Sheen. Can anyone confirm that this is true?
EDIT: It is not true.
There are still places that say it works with Sheen in the traditional way:
Also forgot to mention: the active on Hydra and Tiamat can also proc Sheen/Triforce/Icebourne Gauntlet. This means that you can squeeze in more burst damage by hitting with a sheen-buffed autoattack. An example is GP: I like to build Hydra on him, since it works well with IBG to clear waves quickly and get multiple kills with a parrley (with the bonus gold on each kill). In a fight, if your Q is on cooldown and you need to proc the slow from IBG, just AA-Hydra-and AA to get 3 autoattacks in less than a second, and do bonus damage with a slow on the last hit.
http://www.reignofgaming.net/forums/strategy/champions-and-gameplay/32882-how-does-hydra-work-and-who-uses-it