Zebra Technologies Corporation (ZBRA) Earnings & Analysis

Latest quarter

Zebra reported Q2 FY2026 revenue of $1.6 billion, compared with the consensus of $1.5 billion, and adjusted EPS of $6.35 as the consensus counts it, compared with the consensus of $4.35. The company said revenue increased 20.4% from $1.3 billion in Q2 FY2025, while diluted EPS was $4.85, compared with $2.19 a year earlier.

The filing said growth in both segments and improved demand in all regions drove the sales increase, while Connected Frontline sales benefited from Elo Touch, mobile-computer sales and foreign currency. Asset Visibility and Automation sales rose on printing and machine-vision sales and foreign currency, according to the filing. Zebra said gross margin rose to 53.0% from 47.6%, primarily reflecting IEEPA tariff recoveries and foreign currency, while price realization fully mitigated higher memory costs. Operating margin was 20.6%, compared with 14.2%, and free cash flow was $198.0 million, compared with $130.0 million. Zebra reported revenue growth of 20.4%, above its Q2 guidance range of 14.0%–17.0%.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Bill Burns said Q2 demand was broad-based across Zebra’s segments and regions, with double-digit growth in retail, manufacturing and healthcare. He said Elo Touch contributed growth as Zebra combined its portfolio with Elo’s offerings, and said the company saw customer interest in its AI-powered solutions and newer devices.

Chief Financial Officer Nathan Winters said sales exceeded the high end of Zebra’s outlook because the company secured additional memory supply, while business momentum and pricing also contributed. He said adjusted gross margin benefited from $73 million of IEEPA tariff recovery and favorable foreign exchange, while price realization offset a $20 million increase in memory costs. Winters said the company expects memory costs to increase in the second half and said Zebra may use additional pricing and operational actions as necessary.

In response to analyst questions on transportation and logistics, Burns said sales were flat against a high prior-year comparison but growth continued in third-party logistics and warehousing. He said Zebra has a multi-year pipeline of larger deployments focused on last-mile delivery beginning in 2027, and he attributed the company’s positioning to mobile devices with RFID and AI capabilities. Burns also said manufacturing demand supported electronics, pharmaceuticals and machine vision, while healthcare was Zebra’s highest-growth end market in Q2.

When analysts asked about memory availability, Burns said demand signals supported the high end of Zebra’s outlook, but the outlook factored in supply constraints. Winters said Zebra was working with suppliers on an 18-month planning horizon, alternative sources and higher-density components, with the goal of qualifying five to seven suppliers for each primary memory type. He said the company’s third-quarter sales outlook includes about two points of pricing at the midpoint, while the step-down in EBITDA margin from Q2 reflects the absence of tariff refunds and higher memory costs.

Guidance

Zebra raised its FY2026 sales-growth outlook to 14.0%–16.0% from 10.0%–14.0%. The company raised expected FY2026 non-GAAP diluted EPS to $20.75–$21.25 from $18.30–$18.70 and adjusted EBITDA margin to 23.5%–24.0% from approximately 22.0%. Zebra also increased expected FY2026 free cash flow to $1.0 billion from $900.0 million. For Q3 FY2026, Zebra expects sales growth of 17.0%–20.0%, adjusted EBITDA margin of 22.0%, and non-GAAP diluted EPS of $4.70–$4.90.