Zebra Technologies Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 5, 2025

Key Takeaways

  • Positive Sentiment: Our Q2 sales rose 6% year-over-year to $1.3 billion with a 20.6% adjusted EBITDA margin (up 10 bps) and non-GAAP EPS of $3.61, a 14% increase.
  • Positive Sentiment: We raised full-year outlook to 5–7% sales growth, 21–22% adjusted EBITDA margin, $15.25–$15.75 non-GAAP EPS, and at least $800 million in free cash flow, reflecting improved tariff assumptions and tax benefits.
  • Negative Sentiment: We now expect about $30 million of net gross profit impact from U.S. import tariffs in 2025 after mitigation actions, including production shifts and pricing adjustments.
  • Positive Sentiment: Announced acquisition of Elo Touch Solutions for $1.3 billion to expand into point-of-sale, self-service kiosks and interactive displays, targeting $25 million of annual EBITDA synergies by year three.
  • Neutral Sentiment: Regional performance was mixed: North America sales up 8%, Asia Pacific up 20%, Latin America up 11%, while EMEA declined 1%, with mobile computing and RFID leading growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Zebra Technologies Q2 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day, and welcome to the Zebra Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Michael Steele
Michael Steele
VP - IR at Zebra Technologies

Good morning, and welcome to Zebra's second quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially and we refer you to the factors discussed in our SEC filings. During this call, we will reference non GAAP financial measures as we describe our business performance.

Michael Steele
Michael Steele
VP - IR at Zebra Technologies

You can find reconciliations at the end of this slide presentation and in today's earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year on year on a constant currency basis and exclude results from recently acquired businesses for twelve months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer and Nathan Winters, our Chief Financial Officer. Bill will begin with a discussion of our second quarter results. Nathan will then provide additional detail and discuss our revised outlook.

Michael Steele
Michael Steele
VP - IR at Zebra Technologies

Bill will continue with progress on advancing our strategic priorities, including the pending acquisition of Elo Touch Solutions we announced this morning. Following the prepared remarks, Bill and Nathan will take your questions. Now let's turn to Slide four as I hand it over to Bill.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Thank you, Mike. Good morning and thank you for joining us. In addition to our second quarter highlights and financial results, we will discuss this morning's announcement of the exciting milestone in our journey to enhance the connected frontline experience through our acquisition of Elo. We'll also review our increased full year outlook.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Before we get into the details of the quarter, let me spend a moment on the acquisition that drives profitable growth and elevates our market leadership. Elo's solutions engage consumers, enhance self-service and deliver automation across a wide range of end markets. This combination strengthens Zebra's portfolio of solutions enables us to advance our strategic priorities. Now turning to our Q2 results. Our team executed well in the second quarter, delivering results exceeding our outlook with solid demand across the business and lower than expected U.

Bill Burns
Bill Burns
CEO at Zebra Technologies

S. Import tariffs. For the quarter, we realized sales of $1,300,000,000 a greater than 6% increase compared to the prior year and adjusted EBITDA margin of 20.6%, a 10 basis point improvement and non GAAP diluted earnings per share of $3.61 which was 14% higher than the prior year. We realized strong growth in our North America, Latin America and Asia Pacific regions and had relative outperformance in mobile computing, scanning and RFID. Transportation logistics, along with retail and e commerce were our highest growth vertical end markets with healthcare cycling a strong compare and manufacturing continuing to lag.

Bill Burns
Bill Burns
CEO at Zebra Technologies

As we enter the third quarter, demand has been resilient. However, we remain cautious as our customers navigate through uncertain trade policy. Additionally, we expect the recently passed tax legislation to be constructive for some of our U. S. Customers, although it is too early to assess the impact on demand.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I will now turn the call over to Nathan to review our Q2 financial results, tariff considerations and outlook.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Thank you, Bill. Let's start with the P and

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

L on Slide six. In Q2, total company sales grew by more than 6%, reflecting recovery in demand across our major product categories. Our services and software recurring revenue business grew slightly in the quarter. We had similar growth rates in both of our financial segments. We realized strong sales growth across most of our regions.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

In North America, sales grew 8% with double digit growth in mobile computing and RFID. Asia Pacific sales increased 20% led by Australia, New Zealand and India. Sales grew 11% in Latin America with growth across the region. In EMEA, we cycled strong comparisons, particularly in mobile computing with a sales decline of 1%. Adjusted gross margin declined 70 basis points to 47.9%, primarily due to higher U.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

S. Import tariffs than last year. Adjusted operating expenses as a percent of sales improved by 80 basis points. This resulted in second quarter adjusted EBITDA margin of 20.6%, a 10 basis point increase versus the prior year. Non GAAP diluted earnings per share were $3.61 a 14% year over year increase and above the high end of our outlook.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Turning now to the balance sheet and cash flow on Slide seven. Year to date, we generated $288,000,000 of free cash flow. We have been deploying capital consistent with our allocation priorities. We repurchased $250,000,000 of stock year to date and our recent $62,000,000 acquisition of Photo Neo as well as this morning's acquisition announcement support our continued efforts to scale in adjacent markets. Our balance sheet is in excellent shape with $872,000,000 of cash at the end of Q2, a modest 1.2 net debt to adjusted EBITDA leverage ratio and $1,500,000,000 of credit capacity, providing ample flexibility to fund the $1,300,000,000 pending acquisition of Elo later this year.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Due to the global nature of our supply chain, like many other electronic manufacturing companies, we are subject to U. S. Import tariffs. On Slide eight, we provide an update on the anticipated impact from tariffs on our products imported to The United States and our efforts to mitigate them. For the full year 2025, we are now assuming approximately $30,000,000 of gross profit impact after mitigation with a $10,000,000 net impact in the third quarter, following a $12,000,000 impact in the first half of the year.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Our forecast assumes the current effective rates remain in place, including the electronics and USMCA exemptions. This implies a $40,000,000 annualized gross profit impact, which is less than half of our previous expectation, primarily due to a lower rate on China imports. Our mitigating actions to date have included shifting additional production out of China and approximately $40,000,000 of annualized pricing adjustments. North America imports from China are now expected to represent 20% of the mix by year end. We will continue to evaluate additional opportunities to mitigate U.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

S. Import tariffs as we monitor global trade policy development. These potential actions include additional shifting of global production, product portfolio optimization and price adjustments. Let's now turn to our outlook. We entered the third quarter with a backlog and pipeline to support our sales guide of between 26% growth, with a 30 basis point favorable impact from the acquisition of Fotoneo and a neutral impact from FX.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Our third quarter adjusted EBITDA margin is expected to be approximately 21%, which assumes a $10,000,000 net impact from U. S. Import tariffs. And non GAAP diluted earnings per share is expected to be in the range of $3.6 to $3.8 We are raising our full year sales growth guidance range by a full point, which is now expected to be between 57%, including approximately 50 basis points of combined favorability from FX and the Fotoneo acquisition. We are now expecting a $30,000,000 gross profit impact from tariffs net of mitigations for the full year, which is $40,000,000 favorable to our prior guide. We are also raising our full year adjusted EBITDA margin by a full point to between 2122% and increasing our non GAAP diluted earnings per share to a range of $15.25 to $15.75 Additionally, we are raising our free cash flow guide for the year to at least $800,000,000 which reflects the anticipated benefit of recently enacted U. S. Tax legislation and implies free cash flow conversion of approximately 100%.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

We continue to work on further optimizing our working capital levels, balanced with our supply chain resiliency initiatives. Please reference additional modeling assumptions shown on Slide nine. With that, I'll turn the call back to Bill.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Thank you, Nathan. Zea remains well positioned to benefit from secular trends to digitize and automate workflows with our portfolio of innovative solutions, including purpose built hardware, software and services. Our solutions intelligently connect people, assets and data to help our customers make business critical decisions. As you will see on Slide 11, Zebra solution enable our customers across a broad range of end markets to drive revenue, boost productivity and efficiency and optimize the frontline, delivering improved service to their customers, shoppers and patients. The challenges of an on demand economy, e commerce growth, evolving regulations and labor constraints require increased adoption of automation.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Here are some of the recent examples of customers transforming their workflows at various stages of their automation journey. An athletic retailer in The United Kingdom recently launched the initial phase of their RFID journey to improve inventory accuracy by equipping their store associates with Zebra mobile RFID solution. This strategic investment enables better supply chain visibility given that the majority of their vendors now RFID tag at the point of manufacturer. We continue to see strong interest from customers in leveraging RFID across the supply chain. A North American logistics company is focused on moving freight more effectively by equipping their drivers and crosstalk workers with Zebra mobile computing solutions to collaborate seamlessly across their operations.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Additionally, a large North American food distributor recently began a technology upgrade of their Zebra mobile computers, tablets and mobile printers to improve the efficiency and productivity of their distribution centers. Our market leading portfolio of solutions enhances their receiving, restocking and cold chain operation. These are a few of the many examples that demonstrate how customers rely on us to navigate their technology journey, leveraging our commitment to innovation and workflow expertise. Innovation remains central to our industry leadership and we have consistently reinvested approximately 10% of our sales in the research and development to advance our portfolio of solutions. We augment our organic efforts with strategic acquisitions that advance our vision as evidenced by the recent acquisition of Photo Neo, which expanded our three d machine vision solution as well as the pending acquisition of EVO.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Turning to Slide twelve, the acquisition of EVO will enable us to expand our portfolio of solutions that help customers transform their frontline operations by digitizing and automating workflows. Elo is a leading provider of point of sale solutions, kiosk, interactive displays and touchscreen solutions with a fifty year track record of innovation and more than 400 patents operating in an $8,000,000,000 market. The company generates approximately $400,000,000 of annual revenues with a similar sales growth and EBITDA margin profile to Zebra. Hugo also has a similar go to market approach to Zebra offering a wide range of industry tailored solutions that modernize point of sale, streamline self-service and payment experiences, automate kitchen industrial workflows and optimize production and process management. Our leadership in hardware, software and services for the frontline worker will be augmented by Elo's consumer facing offerings to deliver a unified connected frontline experience.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Together, we will pursue attractive market and geographic expansion opportunities while delivering a comprehensive software differentiated portfolio that enables customers to better address emerging use cases. The continued growth of retail media networks and deployment of AI based agents on the frontline are examples of new opportunities that Zebra and Elo can pursue together. The Elo acquisition is expected to be immediately accretive to earnings once the transaction closes and we expect to generate an incremental $25,000,000 of annual EBITDA synergies by year three. In closing, our confidence in sustainable long term growth is underpinned by several key themes that drive demand for our solutions, including labor and resource constraints, track and trace requirements, increased consumer expectations, advancements in artificial intelligence and the need for real time supply chain visibility. As we move forward, we remain focused on advancing our industry leadership for innovative solutions that digitize and automate our customers' workflows, serving our customers well and driving profitable growth.

Bill Burns
Bill Burns
CEO at Zebra Technologies

We are well positioned to expand our addressable market as we add complementary solutions to our portfolio that elevate our capabilities to serve our customers. I will now hand the call back to Mike.

Michael Steele
Michael Steele
VP - IR at Zebra Technologies

Thanks, Bill. We'll now open the call to Q and A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

Operator

We will now begin the question and answer session. Our first question comes from Joe Giordano with TD Cowen. Please go ahead.

Joseph Giordano
Managing Director at TD Cowen

Hey, guys. Good

Bill Burns
Bill Burns
CEO at Zebra Technologies

morning. Good morning, Joe.

Joseph Giordano
Managing Director at TD Cowen

Hey, maybe I'll start on the acquisition. Can you kind of tell me how did these how does that technology kind of tie in with yours? Like where are they doing things that you couldn't do on your own? What's the customer overlap kind of look like in terms of leveraging that?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, sure, Joe. I got it. I would say overall, first of all, we're really excited about the acquisition. It really represents the next step and we see as our journey to have a leading portfolio of solutions that digitize and automate the frontline of business where we've been focused for certainly some time. I think that what Elo brings us is a market leading portfolio of self-service and customer facing solutions that really expands our addressable market by about $8,000,000,000 So think of more customer facing use cases.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Overall, their focus is that on areas like point of sale, self serve kiosks, interactive touchscreen displays, automation in industrial place. And I think overall what we bring them is that we bring our complimentary solutions to what they do and things like point of sale and others. Our global reach allows us to expand their offerings beyond their strength in North America and what they have in EMEA today and smaller in Asia Pacific, but really take them to a global scale and reach across our go to market. And then, overall, our extensive service capabilities, our deep customer relationships, there are customer overlaps, especially in places like retail, but there's strengths that they have in things like quick serve restaurants where we're not as strong, but are putting in emerging solutions like RFID in the quick serve today, but it gives us more of an offering there. So quick serve restaurants, a good example, we believe our strength in healthcare would help them.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So there's vertical markets in geographical expansion that would bring to their portfolio overall that would allow them to expand. So think of it as more customer facing, more self-service, more automation in more fixed than mobile. And that adds significantly to our broad based portfolio today.

Joseph Giordano
Managing Director at TD Cowen

That's great. Maybe you guys have done a nice job of kind of withholding judgment on the second half in terms of volumes until you see what's going on with your typical seasonal flows. You don't want to commit to them until you have them in firm backlog. Now as we sit here in August, see the guide, but how are you feeling about the ability of your customers to kind of release budgets and kind of move forward with things? Like what do you think is kind of inherent in your guide now in the second half?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Joe, I'd say that demand has remained resilient through the first half despite the uncertainty around global trade policy and that customers have generally maintained their capital spending levels and moved ahead with the projects that they had planned for the year. So we're seeing that and we're happy with where things are out from a customer perspective. Some have spread, some of the spending out over multiple quarters, really a combination of managing their CapEx, but probably a bit of uncertainty as well. We've seen that from a increased we've increased our outlook for the full year really based on the strong second quarter results and then the backlog and pipeline that we see going into the second half that supports second half growth overall. I say that all that said, our customers still remain a bit cautious.

Bill Burns
Bill Burns
CEO at Zebra Technologies

They're still, while there's been more clarity, they're still navigating the uncertain trade policies, but clarity has been certainly helping. And there's certainly some uncertainty around macro and geopolitical. So I would say that, overall, there's some positives too. Things like The US tax legislation could be a benefit to us, but it's too early to tell. So we think overall that our guide for the full year while we're increasing it makes a lot of sense and it's pretty balanced to what we're seeing from a positive certainly from customers continue to move ahead, but also a little, a bit of uncertainty still out there overall.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So we think our guide is pretty balanced for second half.

Operator

Our next question comes from Damian Karas with UBS. Please go ahead.

Damian Karas
Damian Karas
Executive Director at UBS Group

Hey, good morning everyone. Congrats on the deal.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Thanks Damian. Appreciate it.

Damian Karas
Damian Karas
Executive Director at UBS Group

Just a follow-up question on Elo. Could you talk about how their business cyclicality has compared with Zebra historically? And I think you're moving into a little bit more of a competitive space compared to your core mobility solutions. So could you just maybe talk a little bit about Elo's market share and how that has progressed over time?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, I'd say overall that the Elo portfolio would be a bit different in the demand cycle than us where we typically see a fair amount of year end spending by our customers. They don't see quite that much. It's more balanced throughout the year. So I think that you'll see us that kind of spread some of our year out ultimately and not put as much in the fourth quarter from a cyclicality perspective. I think that's positive.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I would say yes, there's different competitors in the space as they have a broad portfolio of solutions across point of sale and kiosks, interactive displays, are different competitors than we face today in the market. It's a fairly fragmented market and their strength is really strong in North America overall, I would say, is one of the market leaders both in North America. EMEA and in Asia Pac, I would say that there's additional opportunities. So whether they've got good share, we think ultimately there's an opportunity to gain more share there by leveraging Zebra's relationship and our global reach. As the size company they are, you ultimately make decisions on where you're going to go next geography wise and us having a presence around the world will help us expand their product lines around the world.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So different competitors, Some of the same channel partners. So of the same distributors and value added resellers that we leverage around the globe are the same. Some of the customers are the same, but many are different as well. And we're excited to enter markets as well that, you know, they've got strengthened that we don't today. So we see revenue synergies as well as cost synergies as we talked about in the release and we're excited about working together as they really give us more of a consumer facing offering to add to our portfolio.

Damian Karas
Damian Karas
Executive Director at UBS Group

That's helpful. And Bill, I think you mentioned the one big beautiful bill legislation, and that should have a positive impact on North America. Just curious, is that kind of Zebra's internal assessment? Or are you maybe hearing that in your dialogue with customers? They're becoming increasingly positive and maybe even you're seeing that reflected in your funnel activity in North America?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Damian, I can jump in and address that. I think we're not hearing it directly from our customers. I think like many, including ourselves, you're digesting it and understanding what is the impact from a cash perspective, particularly around the R and D deductibility in year one as well as the ability to deduct the first year or 100% of the capital expenditure in year one. So my guess is like us, assessing what that means for your business, and that ultimately then turns into how do you wanna allocate that capital, that could lead to more, you know, capital purchases in the back half of the year, but we're not hearing it directly from customers, just more noting that that is an opportunity as we go through the back half, but I think it's going to take some time for folks to understand it, make sure they then allocate where they want to put the capital and understand when you receive the cash back in terms of less future payments here in the back half of the year, or what it might mean even as you go into '26, in terms of, capital that might be available to spend.

Operator

Our next question comes from Tommy Moll with Stephens. Please go ahead.

Tommy Moll
Managing Director at Stephens Inc

Good morning and thank you for taking my questions.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Good morning, Tommy. Good morning, Tommy.

Tommy Moll
Managing Director at Stephens Inc

Bill, I think I heard you use the term balanced for the approach to your second half outlook. And I wanted to follow on that and ask what you're assuming on large deal conversion, maybe just related what you saw in the second quarter as well would be helpful. Thank you.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yeah, I'd say that, from a second half year kind of fourth quarter perspective as it relates to kind of year end spending, I would say that the year overall is playing out better expected, and that we saw strong growth in the first half and strong results as you saw in second quarter, which allows us to increase our outlook. And we had easier comparison in the first half, bit tougher comparison in second half. So, you're kind of playing out as we expected. I would say that as we look to fourth quarter that overall that we factored in some year end spending about the same levels as we had last year, because while we don't have visibility yet to it, it's too early for that. We know there would be some, as we just talked about things like US legislation around the big beautiful bill could help with CapEx spending year end.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Certainly as customers have remained cautious through the year, we could see additional year end spending, but we factored some in, which is we think is prudent, even though we don't quite the visibility today. And that's why we're saying it's, you know, our our outlook, I would use the word balanced, as you said, really with the opportunities we see a bit of uncertainty out there, but clarity coming through on tariffs. And then, we haven't talked about it yet, but we're seeing some softness in Europe, certainly a mixed result across Europe. I would say, that's kind of weighing in as well. So we're trying to find the right balance of second half and the guide for Q3, feel good about less certainty around Q4, but we feel good that customers will spend some year end money.

Bill Burns
Bill Burns
CEO at Zebra Technologies

If they're being conservative, maybe there's some upside to that. There's some things out there like The US legislation. We'd see like to see Europe be a bit stronger as we're seeing softness there, but it's been a mixed across the region. That's why I used the word balanced.

Tommy Moll
Managing Director at Stephens Inc

Thank you, Bill. And then on Elo, you've mentioned a couple of times that there's a big market you can go after now that's more consumer facing. And I'm interested to get a little more of the strategy there. It's I don't know if it's an entirely new direction for Zebra, but it's slightly different emphasis than what you've discussed historically. So are there some things changing in that market that draw you to it? Or what's some of the thinking behind the scenes here? Thank you.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes. So maybe the easiest example is when we've talked about kind of the modern store from a Zebra perspective, powered by AI and the idea that we think of engaged associates in a retail store and then we think of inventory accuracy. And the last is kind of customer consumer facing for the retailer. This adds to that element of solutions. Today our mobile devices for instance are used for payment.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Our mobile devices are used in Europe extensively where the market leader in things like self scan. But ultimately the buying experience also includes self serve checkout, kiosks and quick serve restaurants. There's a move to serve customers not just through mobility, tablets and mobile devices with payment on them, but also in fixed touchscreens and in payment and point of sale that includes in the Elo's case, things like compute and touchscreen displays and payment all driven or focused on customer and self-service. So there's also an element within the, in retail and I'll stick to retail for a minute, but it applies to multiple other verticals is this idea of media networks within the store. Screens and touch screens and displays ultimately that are driven by Android today as well.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So both the combination of windows and Android, but Android is becoming more prevalent to drive those technologies and the platform we've used around mobile computing customers have said to us, we'd rather like to see that same Android platform used across our fixed screen technology and touch screens in the store that we use in your mobile devices. And they've actually represented some of this to us saying it'd be interesting if you could pull those two together. So think of you know, places where we work together would be point of sale. Their offerings would include self-service kiosks, which would marry with things like mobile device checkout or or self scanning. And then we think of new areas.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So as we go to, you know, at the HIMSS show for healthcare, while we're talking about mobility and healthcare, there clearly is an element around kiosk and self serve within healthcare. When we're talking about quick serve restaurants, our relationships most recently have been, you know, technologies around RFID and tracking food into quick serve restaurants. They're, controlling both the customer interface, but also the production of food and others inside the kitchen. So think of process management inside quick serve restaurants. So it's closely adjacent to what we do in manufacturing.

Bill Burns
Bill Burns
CEO at Zebra Technologies

We talk about tablets on the production floor, but there's also fixed screen elements to that and touch screens associated with the manufacturing process and process management, so automation. So we see it as another step to not only addressing the consumer, but addressing automation in a different way beyond mobility. And the two are coming together with operating systems such as Android. So that's why we see overlapping customers, overlapping markets and places where we can take their solutions globally.

Operator

Our next question comes from Andrew Buscaglia with BNP Paribas. Please go ahead.

Andrew Buscaglia
Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas

Hey, good morning everyone.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Good morning, Andrew.

Andrew Buscaglia
Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas

I wanted to ask on just to gauge how you're viewing tariffs from here. Obviously, saw some de escalation intra quarter in China, but there are still like there is still uncertainty with how this plays out. So I'm wondering, maybe number one, are you concerned or have you contemplated or what are you seeing in terms of the potential exemptions picking and or going away? And then any other, I don't know, further tariff escalations that you're aware of that you're monitoring and what can you do to offset those?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Yes. Andrew, I'd say and Bill mentioned this earlier. Obviously, has been made since our last update. But as you noted, remains a dynamic environment. I think we're looking at it as it's probably going to remain a dynamic environment for a period of time.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So it's just one of those where we continuously work with our trade and industry partners to to understand what they're hearing, what they're seeing, how are others reacting so that we can get as much intelligence as possible. And we have a dedicated team that wakes up every day keeping a pulse on where things are at. And as news breaks, making sure we have a position to react. But also, as we said, to some extent, we want to play our game in terms of continuing to have a diversified supply base that is both can react to tariffs, but also just have broader sustainable supply chain, right, so that and resilient supply chain. So we're managing we have a playbook that the team is executing to that has a bunch of different options available to us that we can execute here, particularly to get more clarity as we go through the balance of the year.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So I'd say, as it relates to exemptions or other changes in rates, we don't know anything else that you don't see in the news or that's not breaking. So we again, we're I think we just we look at that as what are the options available from pricing to other geographical moves, but ultimately making sure we have a resilient sustainable supply chain for years to come and that's where we stayed focused.

Andrew Buscaglia
Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas

Okay. Fair enough. And then I wanted to get your take on competition and your potential for market share gains. You're seeing one of your biggest competitor across many different business lines, somewhat get deemphasized by its current company. So I'm wondering, do you see a pathway for more share gains going forward? And what's your take on what's going on competitively?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes. I would say that, not much different overall, quite honestly, except for the announcement that you mentioned with our competitor. I think that our strong customer relationships, the vertical market expertise we have, the breadth and depth of our portfolio, commitment to our customers and continuing to invest in innovation along with them. Expanding the portfolio, I think from the acquisition perspective, clearly, it elevates our strategic position where our customer to be doing, more business with them in areas that they're focused like self serve and others. So, you know, we saw this with the enterprise acquisition, the more business we do together and the more vision we paint with our customers about what the future of retail looks like, what the future of P and L looks like, what the future of manufacturing looks like, and have a breadth and depth of the portfolio that expands our relationships. And that's one of the reasons we like this acquisition, allows us to continue to remain relevant, important, and add to the future direction of our customers and a voice that ultimately they rely on as a trusted partner.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So we feel pretty good about where we're at competitively. The portfolio is as strong as it's ever been. We continue to add to the portfolio new areas such as wearables, right, as will play a role not only today, but they'll play a role in AI in the future. If look what's being said out there around, what the future AI device looks like, it's likely a mobile device augmented with something that's wearable. So, we've got new wearable offerings for both retail and healthcare.

Bill Burns
Bill Burns
CEO at Zebra Technologies

We continue to expand the portfolio with next generation devices across TNL as we see the refreshes coming up over the next couple of years. We're really focused on that. We recently won a opportunity, large postal opportunity in Australia, which again speaks to our strength in postal and having the right device in T and L as these refreshes come up. So, we feel good competitively ultimately and what happens with our competitor happens. So, that's going to take some time to play out and we'll continue to play our game and we feel good about where we're at.

Operator

Our next question comes from Jim Ricchiuti with Needham and Company. Please go ahead.

James Ricchiuti
Senior Analyst at Needham & Company

Hi, thanks. Good morning. You noted some softness in Europe. I'm wondering what changes have you seen in the various sub sectors of the market more broadly, whether any changes in the overall retail, retail automation, e commerce, logistics areas versus say three months ago?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yeah, I would say that when we look at you to certainly strong growth across North America, Asia Pac and Latin America. So geography wise strong growth with EMEA certainly being more challenge or softness. The strength globally on a global basis, I would say TNL and retail e commerce continue to be strengths for Us. Healthcare in North America cycling some strong comparison in mobile computing. I would say, while growing mid single digits manufacturing is slower than the other, and certainly transportation logistics and retail.

Bill Burns
Bill Burns
CEO at Zebra Technologies

When I look at the regions, I would say, as you asked specifically about EMEA, I would say that cycling strong prior year comparison mobile computing. So that's clearly a factor, but I think overall we're seeing mixed performance across EMEA. So strength in places like Northern Europe and particularly in T and L, but we're seeing softness in auto manufacturing, some of the retail sectors in France is a good example where we're seeing a bit challenging. Some of the run rate, we think really driven by some of the concerns around kind of geopolitical and tariff and others. Some run rate challenge in EMEA.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So overall, I would say we'd like to see EMEA, the softness in EMEA kind of abate and get a bit stronger that's happened throughout the year. So, we started okay, but we've seen more of that kind of EMEA degrade through second quarter. North America, strong really around mobile computing data capture RFID. So broad portfolio set, Asia Pacific strengthened. We talked about Australia, New Zealand, India, some new applications around RFID in places like India around transportation, such as rail.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So we're excited about that as RFID continues to play an important role in the portfolio. So let's say the one softness point is EMEA and it's evolved probably in second quarter, we're starting to see, you know, we've began to see it and we're paying close attention to it. We're a lot of seeing a lot close to our customers and making sure that as they begin to spend we're there with them.

James Ricchiuti
Senior Analyst at Needham & Company

Got it. Thank you. Just congratulations by the way on the low announcement Is curious, the way they go to market, they working with similar channel partners that you work with? Or is this a different channel versus some of your products?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, very similar from a channel perspective and go to market meaning that they work closely with the end customer as we do and then fulfill through value added distributors and in distribution, future distribution in the marketplace that they ultimately serve. They sell direct as well. So really very much on top of what we do today. Their largest distributor in North America is our largest distributor in North America. So, in that case, right on top of each other.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So, I think that very similar go to market approaches that they have today. Now, in places they've got different relationships, meaning things like strength and quick serve restaurants or different places with the fragmentation of healthcare, they may be in different customers than we are and have strong and strengths in those areas. But we're looking forward to leveraging the customer base on both sides.

Operator

Your next question comes from Brad Hewitt with Wolfe Research. Please go ahead.

Brad Hewitt
VP - Equity Research at Wolfe Research LLC

Hey, good morning guys.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Good morning Brad.

Brad Hewitt
VP - Equity Research at Wolfe Research LLC

So it looks like your net leverage will be around two turns pro form a for the Elo deal. So as we think about capital allocation going forward, should we assume the focus is more on bolt on deals and perhaps modest buybacks in the near term until pro form a leverage comes down a little bit?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, I'd say that, look, I think that our capital allocation in general hasn't changed in the idea that we focus first on organic growth in the areas in which that we invest in our portfolio and we believe there's continued opportunities across the portfolio. M and A, we view as strategic adjacencies to what we do and we continue to be very selective in that assets, something smaller in Fotoneo, we closed and now something a bit larger certainly in Elo, we're excited about both in much differing sizes, but both in areas in which we see a strategic and closely adjacent to what we do. We'll continue to be inquisitive out there and continue to look for strategic M and A, but we want to get through this one first and get it integrated and brought into Zebra and that's our near term focus. As you've seen, we've returned $250,000,000 in capital to shareholders as well. So, I think we're trying to find the right balance between M and A, the things that are strategic for us, what's available in the market, how do we add to things like machine vision and also, in this case, what we see is an important extension of what we do today in the frontline of business with Elo.

Bill Burns
Bill Burns
CEO at Zebra Technologies

And we'll continue to look out there, but I think that the focus in the short term is going to be really integrating the Elo team.

Brad Hewitt
VP - Equity Research at Wolfe Research LLC

Okay. That's helpful. And then you mentioned in the release, the 5% to 7% revenue growth algorithms going forward for Elo. I guess curious what has been the historical organic growth profile of the business, particularly from 2019 through 2024? And then how would you describe the potential scope of revenue synergies?

Brad Hewitt
VP - Equity Research at Wolfe Research LLC

And is that incremental to the 5% to 7%? Or is that already embedded there?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Brad, I think it's very similar. If you look back over the last several years, very similar to our performance in terms of if you overlap the revenue growth of consistent growth going pre pandemic, kind of a lot of ups and downs as you went through COVID, coming out of COVID, as you saw a lot of investment around their technology, the supply chain challenges that the industry went through and then the recovery. So I'd say if you bump it up to our long term growth, it kind of overlaps pretty nicely. Looks like us. Looks a lot like us. Maybe a few of the years are a little bit different. So yes, so I think that's what we've seen long term with a lot of puts and takes, particularly around COVID and the supply chain challenges coming out of that. Yes. And if you look as part of the revenue synergies, I'd say, maybe just take us back on the total $25,000,000 we're highly confident in achieving those. There's multiple levers.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

We expect a steady ramp of those over the next few years. So maybe on the cost side, things you would expect around real estate portfolio where we have overlapping sites, consulting services and things like that as well as leveraging our supply base to drive efficiencies across our supply base will be areas of focus. And then on go to market, as Bill mentioned, it's really around, I'd say, international developed markets where we have a strong presence, the infrastructure, the channel setup, Inivo has a limited presence in some of those markets. But we think a great opportunity to, again, leverage our presence and infrastructure to grow. And then as Bill has mentioned, cross selling opportunities are significant for both sides.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So again, I think the $25,000,000 while we have kind of a bottoms up more holistically on the cost side, we do think there's synergies that could get us to that from the tier point on that top end of that 5% to 7% as we move forward.

Operator

Our next question comes from Piyush Abhishek with Citi. Please go ahead.

Piyush Avasthy
Piyush Avasthy
Equity Research Senior Associate at Citi

Good morning, guys.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Good morning.

Piyush Avasthy
Piyush Avasthy
Equity Research Senior Associate at Citi

Just thinking from the perspective of your raised sales growth guidance of 5% to 7% for 2025, is there any incremental color you can provide us on trends that you're seeing across the expansionary and adjacencies verticals? If you could break out how machine vision, mobile robots, RFID are performing, that would be helpful.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I would say that, overall, I would say from a vertical perspective, across the different vertical markets overall, I would say retail and e commerce, clearly a strength as I mentioned earlier with certainly continued strong demand both in mobility. So mobile devices and RFID technology inside retail. I would say that T and L recovery certainly is overall kind of more normalized business across T and L. I mentioned postal win earlier that really fits into transportation logistics for us and some new opportunities and things like railway, manufacturing, I would say some new areas where adjacencies that we're focused on things like machine vision inside manufacturing with, you know, the idea of inspection, and, you know, the other area machine vision would fall back to TNL. So we're seeing a continued focus on our team, while we're seeing still challenges in manufacturing and things like EV and others.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I would say that the machine vision plays an important role there. So, strength across the core portfolio in the areas in which we do business today and then RFID, machine vision and others opportunities across the different vertical markets.

Piyush Avasthy
Piyush Avasthy
Equity Research Senior Associate at Citi

Helpful. And I think you've touched on replacement cycle, like have you at least started to have discussions with your customers regarding their refresh plans? And if you have that visibility in 2026, like help us understand what that could mean for your 5% sales growth framework?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, I think everybody's on a different journey of a refresh cycle within their environments. We've seen the postal win is an example of a refresh of that postal carrier in Australia that again speaks to the fact that we continue to win in the marketplace and over time there'll be additional refreshes. Everybody's on a different schedule, both retail P and L and others. And over the next several years, we clearly have seen through COVID and today, the number of mobile devices in the marketplace has increased and that eventually will continue to be upgraded and increased along with this concept of device for all, Putting more device in the hands of more associates inside the frontline workers, whatever that's T and L or manufacturing or retail or healthcare, we're seeing that move. So even the refreshes include even more devices over time.

Bill Burns
Bill Burns
CEO at Zebra Technologies

We're not guiding to '26 at the moment, but over the next several years, we see that there'll be an accelerated refresh cycle on whether that begins in '26 and moves into '27, '28, we just don't know yet, but we are tracking with our customers and making sure that we're staying close to them so that when they are ready, as in this coastal example, that we're there for them.

Operator

Our next question comes from Keith Housum with Northcoast Research. Please go ahead.

Keith Housum
MD & Research Analyst at Northcoast Research

Great. Thanks guys.

Keith Housum
MD & Research Analyst at Northcoast Research

Appreciate it and congratulations on the quarter and the acquisition. Hey, Bill, thinking about the Elo acquisition, is the makeup of their revenue, is it primarily hardware or is there other sources of revenue that you guys will be acquiring?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes. I mean, I would say that their strength in the software, certainly around OS and what they're doing in two areas. One would be the move, as I said before, to Android that ties into touch screens and displays and others for control and be able to use the Android OS. So there's hardware and software associated with their control of those devices. Point of sale, they also have the compute associated with point of sale.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So the point of sale terminals are also a combination of hardware and OS and software associated with that. So like Zebra, the predominant sales mechanism is through hardware, but tremendous value in the software side of what they do today within their environment.

Keith Housum
MD & Research Analyst at Northcoast Research

Great. Is there a particular like competitive note that EVO has versus other competitors in the space that you may have looked at?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yeah, I would say the breadth and depth of the portfolio like us, the relationships they have with their customers to really understand the places at which they serve their customers today. I think that is probably one of the biggest strengths, the technology as well. So they clearly are, you know, the leader in touchscreen displays and others. They, you know, or had been doing this for about fifty years, significant patent protection around it. And that's a strength they have as well.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So customers clearly recognize them as one of the leaders within this market and they remain focused on it. Well, others are moving away from this market. They remain focused. And I think that matters. That We talked about what's happening on our competitor on the mobile device side.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I think we've seen others kind of exit this market and it creates an opportunity for them, now us.

Operator

Our next question comes from Rob Mason with Baird. Please go ahead.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Yes, good morning. Maybe just one more question on Elo, Bill. As you think about this is largely complementary. I know you've introduced some kiosks recently. They do have some mobile computing products, I guess as well.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

But as you think about this, is part of the strategy to keep the Elo brand or does this give you additional ability to tier your product, any of your products?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes, would say that the overlap is relatively small. I mean, as you said, we've recently announced the kiosk. We've been happy with the success in the market, but it's a whole lot different to have a single kiosk offering and have a portfolio as we know. And it's the same on their side, their mobile device has been focused more on payment, which by the way is one of their strengths that we expect to continue to leverage on the mobile device side of things. So their mobile device has been used more in the payment applications and again, small levels of revenue compared to the portfolio that we have.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So the overlap is very minimal overall. And we see that being kind of a strength of the acquisition. The fact that little overlap ultimately strengthened customers go to market and others is what we saw with the enterprise acquisition. And the idea that we believe we can accelerate in the market from a revenue perspective by not having a lot of debate about which product, which area to go focus on or overlapping products or different go to market motions, all that helps you be successful from an acquisition perspective. We've also worked with them for some time.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So, we've they've been an OEM customer of ours. We know the team there well for many years. We have like cultures, right? Product portfolios that ultimately are high quality respected in the market as being high quality hardware and software. I think that helps as well certainly with us having conviction and certainly when customers are saying to us, hey, that'd great, the two of you could get together. That also helps.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Yeah. Makes a lot of sense. Nathan, real quick, just your third quarter EBITDA margin guidance is a little bit down year over year. But if I adjust for the tariff impact that you've outlined, it kind of equates to about a 30% incremental margin year over year. As you think about tariffs, hopefully we get to some normalized place with pricing and mitigation, etcetera.

Robert Mason
Senior Research Analyst at Robert W. Baird & Co

Are there any other besides tariffs, are there any other major kind of puts and takes on the margins right now, FX or anything else that you would call out?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

No. As you said, the 30% incrementals excluding tariffs is about what you'd expect and we've historically delivered. So I think we've largely worked over the last year's supply chain challenges and everything else so that I think we're back to where we as we grow, we can drive great leverage on top of our supply base as well as our fixed infrastructure. So to point, I'll say that FX in the short term is actually a bit of a headwind at the bottom line just because of the from a cost standpoint, it's a pretty big impact on OpEx. And just with the hedges we have in place, you're not seeing the full kind of revenue upside that you would expect where the rates are, especially the euro is at today, but those will come through as we roll through the hedges we have in place.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So I'd say FX in the short term is a bit of a headwind in EBITDA, but that'll if rates stay where they're at, that'll turn into a tailwind as we get into Q4 and the early part of next year, just again as our forward rates mature. So no, I think those are the key dynamics. And for us, it's really, again, how do you drive the incremental volume and leverage our scale to drive that margin expansion.

Operator

Our next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Meta Marshall
Meta Marshall
MD & VP at Morgan Stanley

Great. Thanks. A couple of questions for me. One, in the past couple of quarters, had mentioned that you didn't expect customers to necessarily that they would absorb the price, but maybe adjust the volumes. I just wanted to see, as you guys have been putting in price increases for tariffs or contemplating them, does that expectation still stand where you would expect kind of volume to offset kind of price increases?

Meta Marshall
Meta Marshall
MD & VP at Morgan Stanley

And then the second question, just on Elo, any 10% customers or kind of customer concentration on their part to be mindful of? Thanks.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Amit, I'll take the first one. On the price increase, I'd say it's a we're seeing, I'd say, two dynamics. So they're on the where we've raised it on some of the transactional business, we've seen pretty good flow through, maybe a little bit of impact on volume, but I'd say volumes have held up pretty well on on the run rate business where we've increased price. You will notice that we took down the the amount of price we expected from the raise in April between our last guide and today, and that's primarily in mobile computing where we're realizing a bit less than what we had anticipated. And that's primarily because of the electronic exemption that so for us and our competitors that have the electronics exemption, you're not paying the higher tariff.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Our customers know we're not paying the higher tariffs, so you're not seeing the market price increase, and it's remained obviously a competitive market. So, but that's one where we've maintained the higher list price. We're managing that through concessions. The teams are still driving it because obviously we still have more to go to fully mitigate the impact of tariffs. But I think we're, again, outside of mobile computing, we're seeing pretty much how expected, which is a bit of volume trade off, but the pricing is coming through in large part.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I think from an ELO perspective, diverse customer base. So I think that similar to Zebra overall, their largest customer would be distribution, right, as you see with us. But from an end customer perspective, certainly larger customers that you'd expect in retail and quick serve and others are larger customers for them, but no 10% concentration and overall pretty diverse customer mix across retail, quick serve restaurants, hospitality, healthcare, industrial applications as a markets they serve overall, but some higher concentrated customers just as we see with Zebra larger customers buy more from us.

Operator

Our next question comes from Ken Newman with KeyBanc Capital Markets. Please go ahead.

Ken Newman
Ken Newman
VP & Equity Research Analyst at KeyBanc Capital Markets

Hey, good morning guys.

Ken Newman
Ken Newman
VP & Equity Research Analyst at KeyBanc Capital Markets

Thanks for squeezing me in. Maybe first Nathan, just going back on the $40,000,000 of annualized price that you expect to realize this year, is there a way to just talk about how much pricing you were able to drive in 2Q, just given that I think the headwinds you were expecting last quarter were a lot higher. I just didn't know if maybe we saw a potential opportunity for better price cost than you were expecting and if we should expect that to kind of normalize out in the back half?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Yes. So, it was a little less than $10,000,000 in price gain in second quarter. So, again, a bit less than we had anticipated, but for the same reasons I mentioned on the full year dynamic, where, again, with we had raised the prices across the board, in anticipation to give ourselves the ability to react quickly. And I think we still have that optionality, particularly on things like mobile computing, where we still have a higher list price, and we can manage you know, and again, that price differentiation through, you know, concessions and approvals. So, that's where we just have extra eyes, making sure we're making those right decisions on a deal by deal basis.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So, look, I think similar to what we said last time, I'd like to see a bit more stability and see if the rates kind of hold here through the next month or two and then obviously come back with a plan with the goal is to fully mitigate, you know, as we at some point in 2026. I think we're a lot closer to getting that certainty, but we'd like to see maybe how the next couple of weeks play out. And if anything changes from the rates by country or the electronics exemption or what happens from a semiconductor. So still a lot at play, that we're monitoring. But once we have that clarity again, like I mentioned time, the goal is to fully mitigate, through all the levers that we have, available.

Ken Newman
Ken Newman
VP & Equity Research Analyst at KeyBanc Capital Markets

Got it. Okay.

Ken Newman
Ken Newman
VP & Equity Research Analyst at KeyBanc Capital Markets

And for the follow-up, Phil, anything of note as we think about ELO's supply chain? Just any idea or color on how much of their manufacturing is international? And then how to think about potential tariff exposure there?

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yes. Dan, you want take it?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Yes. Dan, I can take that. I think it's very similar to our supply chain. The one difference, they do own a manufacturing facility in China that does a lot of their primary production for touchscreens, touch panel modules as well as their monitors. And we actually made a great opportunity for leveraging their expertise in that market, the local knowledge they have around the supply base for areas like our tablets.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

So we're excited to see what opportunities are there by leveraging that facility that's really world class. And then similar to us, they use contract manufacturers for final assembly across Southeast Asia. So they have a plan in place very similar to ours, which is to mitigate tariffs by year end through price increases they did in the early part of second quarter as well as production moves that they are currently executing on. So we spent a lot of time with the team understanding their plans. But I'd say at a macro view, very similar supply chain with the use of contract manufacturers across Southeast Asia.

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

The one difference being an owned facility in China, which is but holds some key technology and something we're excited to learn of how we can further leverage across our portfolio.

Operator

Our last question comes from Brian Drab with William Blair. Please go ahead.

Brian Drab
Co-Group Head - Industrials at William Blair

At the buzzer, sorry, I had to join late. Did you say if gross margin up or down sequentially in the third quarter, second half and any specifics around trajectory for gross margin?

Nathan Winters
Nathan Winters
Chief Financial Officer at Zebra Technologies

Yes. So gross margin for the third quarter operationally is, I'd say, relatively flat both in terms of implied as well as so again, the tariff impact is fairly similar between Q2 and Q3. Volume is pretty similar, mix is pretty similar. So I'd say similar expectations as we go from Q2 to Q3 on a gross margin basis.

Brian Drab
Co-Group Head - Industrials at William Blair

Okay. And then just on government and healthcare, can you comment on those end markets? I know you said healthcare, tough comps in the second quarter, but second half, what are you seeing in those end markets? And that's it for me. Thanks.

Bill Burns
Bill Burns
CEO at Zebra Technologies

Yeah, thanks, Brian. I think we feel good about healthcare overall. I think the cycling year on year compares to mobile computing, still clearly an opportunity for us. I mean, some would say that the bar code literally is the unsung hero of that makes healthcare work, right? Think of all the track and trace, the idea of identifying patients specimens, the information input into electronical medical records that we take for granted here in The U.

Bill Burns
Bill Burns
CEO at Zebra Technologies

S, but it still has extensive growth around the world is, no one, not many countries around the world have quite the extensive use of electronic medical records that we have in The US. I think things like clinical mobility playing a role, the Elo acquisition plays a role in self-service and healthcare. So we feel good about the healthcare market. We have some new devices out, wearable device in the idea of voice devices for healthcare that we're excited about that released at the HIMSS show earlier this year. Government continues to be a focus for us around things like inventory, large RFID win earlier this tracking inventory within government opportunities around inventory tracking.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So we feel good about that. Public safety in Europe, we see as an opportunity. We have some new devices we're releasing as public safety is moving in Europe to more, five gs type networks, right. And specialized networks and moving off of specialized networks to more five gs type networks. And we've got some new devices to meet the needs of European customers inside public safety.

Bill Burns
Bill Burns
CEO at Zebra Technologies

So government smallest vertical, overall, but an opportunity for us, especially as public safety evolves in Europe and as inventory becomes more important, healthcare has been our fastest growing vertical. It just so happens that tough compares this quarter, but we feel good about that market.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Bill Burns for any closing remarks.

Bill Burns
Bill Burns
CEO at Zebra Technologies

I'd like to thank our employees and partners for their support as we delivered strong Q2 results. Certainly look forward to welcoming the Elo team as the acquisition closes. Have a great day everyone.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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