Zebra Technologies Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Sales rose 20.4% year over year to more than $1.5 billion, while adjusted EBITDA margin reached 27.7% and non-GAAP EPS increased 76% to $6.35. Growth was broad-based across retail, manufacturing, healthcare and most regions.
• Supply constraints remain: Memory-component availability continues to limit some sales opportunities, though Zebra has secured enough supply for its updated outlook and is diversifying suppliers. The company offset higher memory costs through pricing and benefited from a $73 million tariff recovery.
• Outlook raised: Zebra now expects full-year sales growth of 14%–16%, adjusted EBITDA margin of 23.5%–24% and non-GAAP EPS of $20.75–$21.25, alongside at least $1 billion in free cash flow.

Zebra Technologies NASDAQ: ZBRA reported record second-quarter results, with sales growth across its major segments and regions, stronger profitability and a higher full-year outlook. Management said demand for the company’s portfolio of frontline automation, data capture, mobile computing, RFID, machine vision and AI-enabled solutions remained broad-based, although memory-component availability continued to constrain some potential sales.

Second-quarter sales exceeded $1.5 billion, up 20.4% from a year earlier, or 9.2% on an organic constant-currency basis. Adjusted EBITDA margin reached 27.7%, while non-GAAP diluted earnings per share rose 76% year over year to $6.35.

CEO Bill Burns said the company’s results reflected “broad-based growth and significantly increased profitability,” as customers continue investing in digitization and automation of frontline operations. He said Zebra’s integrated hardware and software portfolio is intended to help customers improve productivity, visibility and real-time decision-making.

Growth Across End Markets and Regions

Zebra said retail, manufacturing and healthcare each posted double-digit growth during the quarter. In retail, e-commerce and convenience-store activity benefited from demand for faster delivery and expanded fulfillment options. The recently acquired Elo Touch business also delivered strong growth, supported by self-service trends and customer interest in the combined offering.

Transportation and logistics sales were flat against a strong prior-year comparison, though Zebra reported relative strength in third-party logistics and warehousing. Burns said the company has a “robust multi-year pipeline” of large transportation and logistics deployments expected to begin in 2027, particularly involving last-mile delivery, RFID and AI-capable mobile devices.

Manufacturing posted strong double-digit growth, led by electronics and pharmaceutical customers seeking increased operational visibility. Machine vision also outperformed as Zebra aligned its business and go-to-market teams around targeted manufacturing opportunities. Burns cited applications including AI-based optical character recognition in manufacturing, logistics, food and beverage operations.

Healthcare was Zebra’s fastest-growing end market in the quarter. The company said mobile computing demand was particularly strong as healthcare providers equipped more caregivers with enterprise-grade devices designed for communication, collaboration, patient safety and operational efficiency.

• North America sales rose 9%, led by retail, manufacturing and healthcare.
• EMEA sales increased 7%, with broad-based European growth partly offset by Middle East softness.
• Asia-Pacific sales grew 13%, led by China, Korea and Southeast Asia.
• Latin America sales rose 15%, driven by Mexico and Brazil.

Margins Boosted by Tariff Recovery and Cost Actions

CFO Nathan Winters said second-quarter performance exceeded the high end of Zebra’s guidance, aided by increased memory supply, continued commercial momentum and favorable pricing. Connected Frontline sales grew nearly 26%, including the Elo acquisition, or 7.5% organically. Asset Visibility & Automation sales increased 11.4%, led by printing and machine vision.

Adjusted gross margin improved 540 basis points to 53.3%. The result included a $73 million recovery of tariffs under the International Emergency Economic Powers Act that had not been included in the company’s outlook, as well as favorable foreign exchange. Zebra also said it fully offset a $20 million increase in memory costs during the quarter through price realization.

Excluding the tariff recovery, Burns said adjusted EBITDA margin expanded by about two percentage points, supported by better-than-expected gross margins, productivity efforts and operating-expense leverage. Winters said the company improved operating-expense leverage by 170 basis points, helping adjusted EBITDA margin rise 7.1 percentage points year over year.

Memory Supply Remains a Constraint

Management said Zebra has secured sufficient memory supply to support its updated outlook but continues to operate in a dynamic supply environment. Winters said suppliers have been meeting commitments and the company has visibility into the components needed to support its forecasts.

Zebra is using direct supplier co-planning, alternative sourcing and transitions to higher-density memory components. The company is working with 10 potential new suppliers and aims to qualify five to seven suppliers for each primary memory type, Winters said. He added that the company’s product portfolio is largely based on low-power LPDDR5 memory, an area where capacity is expected to expand into 2027.

While customer demand signals point toward the high end of Zebra’s guidance ranges, management said its outlook assumes potential memory-related supply constraints. Burns said the company would take additional pricing or operational actions if necessary to protect profitability, though he said management would prefer not to raise prices further.

Full-Year Outlook Raised

Zebra raised its full-year sales growth forecast to 14% to 16%, representing a three-percentage-point increase at the midpoint of its previous outlook. The forecast includes an estimated eight percentage points of contribution from acquisitions and foreign exchange, while organic growth guidance includes the effects of previously announced memory-related price increases.

The company now expects full-year adjusted EBITDA margin of 23.5% to 24% and non-GAAP diluted EPS of $20.75 to $21.25. Free cash flow is expected to be at least $1 billion, representing approximately 100% conversion.

For the third quarter, Zebra forecast sales growth of 17% to 20%, including approximately 10.5 percentage points from acquisitions and favorable foreign exchange. Adjusted EBITDA margin is expected to be about 22%, and non-GAAP diluted EPS is projected between $4.70 and $4.90.

Zebra generated $361 million in year-to-date free cash flow and ended the quarter with a debt leverage ratio of 1.9 times and $925 million of credit capacity. The company repurchased $568 million of stock in the first half and said its full-year EPS outlook assumes an additional $150 million of repurchases in the second half.

About Zebra Technologies (NASDAQ:ZBRA)

Zebra Technologies Corporation is a global technology company specializing in marking, tracking and computer printing solutions. The company produces a wide range of hardware and software products designed to enable real-time visibility of assets, inventory and personnel across diverse industries. Its offerings help businesses automate data capture and streamline operations in environments such as retail, healthcare, manufacturing, transportation and logistics.

The company's product portfolio includes barcode and RFID printers, mobile computing devices, barcode scanners, RFID readers and related supplies such as labels and tags.

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