Zebra Technologies: Riding the Automation Wave to Profits

Key Points

• Zebra Technologies' beat-and-raise quarter set it up for a stock market rally in the back half of 2025.
• Analysts' optimism was affirmed, and upgrades and price target increases are likely to follow.
• Guidance is likely to be cautious due to automation trends and acquisitions.

Zebra Technologies' NASDAQ: ZBRA stock price advanced following the Q2 earnings release to confirm a market reversal and increase the odds it will set a fresh high soon. The company is well-positioned to benefit from automation and AI, and the results reflect it. The company’s remote and data-capture products assist front-line workers, improving efficiency and accuracy to drive revenue and profits for their users.

The expansion of 5G networks and the rise of AI-powered computing align with its success, enabling improved functions and aiding the increase in demand. 

Zebra Technologies' Beat and Raise Quarter Affirms Analysts' Confidence

The analysts' activity in June and July was bullish, including numerous price target increases and several upgrades that foreshadowed the Q2 strength. The company’s results affirmed the confidence, which included $1.29 billion in revenue and $3.61 in adjusted EPS, both above the analyst forecasts.

The revenue is worth a 6.2% gain compared to last year and 6.3% organically, with growth present in both operating segments. The EVM or Enterprise Visibility and Mobility segment grew by 6.5%, while AIT or Asset Intelligence Tracking grew by a slightly cooler 5.8%.  

The margin news is better. Tariffs impacted the company’s gross margin, but far less than anticipated, and improved adjusted operating leverage compounded the effect on the bottom line. The adjusted EBITDA margin improved by 10 basis points, a slim improvement to be sure, but sufficient to leave the adjusted EPS at $3.61 or more than 25 cents better than analysts' consensus had forecast and up 13.5% compared to last year.

The critical details include the cash flow and free cash flow, which are sufficient to maintain balance sheet health while the company reinvests in growth, and the guidance. 

Zebra Technologies' guidance is central to the stock price advance. The company improved its outlook for the year, raising the forecasts for revenue and earnings to above the consensus reported by MarketBeat.

That alone is sufficient to keep the analysts happy, and the guidance may be cautious. Not only is there a recent acquisition to aid with cost-efficiency, revenue growth, and cross-selling opportunities, but others are in the works.

The company announced its intention to buy Elo Touch Solutions. Elo provides touch screens, software, and services globally and is a natural fit for Zebra’s portfolio. 

Zebra Technologies Builds Value for Investors

Zebra Technologies is primarily self-funding its acquisitions and can continue doing so. At the end of Q2, the balance sheet highlights include a slight reduction in cash and an increase in debt offset by steady assets, reduced total liability, low leverage, and a nearly 1% increase in equity.

The Elo Touch solution deal is worth $1.3 billion and will be paid with cash on hand and the revolving credit facility, a debt that will be quickly repaid. Other pertinent details include the company’s ability to repurchase shares while investing in growth.

The buybacks aren’t robust, but they reduce the count incrementally each quarter to provide additional leverage for shareholders. 

The technical action in ZBRA stock is promising. The market exhibited some volatility over the preceding 18 months but appears to have a solid bottom and is in rebound mode in early August.

The Q2 results and guidance update sent the market up by more than 5%, extending the rebound with a high-conviction move that set a multi-month high.

Assuming the market follows through on the signal, Zebra's stock price should advance to the $400 level by year’s end and potentially move higher in early 2026. The consensus in early August assumes the stock was fairly valued ahead of the release, but the trends are leading to the high-end range and a move above $400.