Motorola Solutions — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total sales reached $3.4 billion, a 12% increase year-over-year, driven by growth in North America and International markets.
• Products and Systems Integration sales grew 12% to $2.1 billion; Software and Services sales grew 13% to $1.3 billion.
• GAAP operating earnings were $777 million (23.0% of sales), compared to $770 million (25.6% of sales) in the prior year quarter.
• Non-GAAP operating earnings were $1.1 billion (32.5% of sales), a 19% increase from $918 million (30.5% of sales) in the prior year quarter.
• GAAP diluted EPS was $3.06, down 8% from $3.33 in the prior year quarter.
• Non-GAAP diluted EPS was $4.69, up 16% from $4.06 in the prior year quarter.
• Operating cash flow was $662 million, down from $799 million in the prior year quarter; free cash flow was $589 million, down from $733 million.
• GAAP effective tax rate was 24.2% (vs. 22.2% prior year); Non-GAAP effective tax rate was 21.8% (vs. 20.7% prior year).
• Inventory levels increased to $1.5 billion from $983 million at the end of the prior year, reflecting elevated inventory to mitigate supply chain volatility.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance raised to approximately $13.05 billion (from $12.975 billion).
• Full-year 2026 non-GAAP EPS guidance raised to a range of $17.94 to $17.99 (from $17.62 to $17.72).
• Full-year 2026 operating cash flow expectations increased to $3.05 billion.
• Fourth quarter 2026 revenue growth guidance is approximately 13% year-over-year.
• Fourth quarter 2026 non-GAAP EPS guidance is between $5.47 and $5.52 per share.

Business Segments and Product Lines:

• Products and Systems Integration segment backlog increased $635 million (18%) to a record level, driven by strong demand in Mission Critical Networks (MCN) and Video Security and Access Control.
• Software and Services segment backlog increased $1.4 billion (13%), driven by strong demand across all three technologies.
• Record ending backlog for the company reached $16.6 billion, up 14% year-over-year, driven by record Q3 orders.
• Acquired D-Fend Solutions, an industry leader in counter-drone technology, for $1.3 billion.
• Acquired DeepNeuronic, an AI software provider, for $29 million.
• Notable wins included a $140 million P25 systems and device order with the Federal Bureau of Prisons and a $139 million ten-year order for the State of Louisiana.

Market and Competitive Landscape:

• Revenue growth related to acquisitions was $211 million; foreign currency tailwinds were $11 million.
• The company operates in a shifting global trade landscape with evolving tariffs, import/export regulations, and restrictions on rare earth minerals.
• The company recognized a favorable adjustment of approximately $70 million related to the recovery of IEEPA tariff refunds.
• Elevated volatility and uncertainty exist in the global supply chain, specifically regarding memory costs driven by AI demand.

Risks and Challenges:

• Higher supply chain costs and elevated material/component costs are impacting margins.
• The company expects inventory levels to remain elevated as it mitigates dynamic supply chain environments.
• Risks include the impact of global economic and political conditions, increased competition, and challenges related to AI product integration.
• Potential risks involve the inability to purchase sufficient materials at acceptable prices, disruptions to suppliers, and the effectiveness of strategic acquisitions.

Management Commentary and Tone:

• CEO Greg Brown described Q3 as "another outstanding quarter" with double-digit revenue growth across both segments and all three technologies.
• Management cited "exceptionally strong demand" across safety and security solutions as the driver for record orders and backlog.
• The tone was confident, leading to the decision to raise revenue, earnings, and cash flow outlooks again.

Other Key Points:

• Announced a $2 billion increase to the share repurchase authorization.
• Paid $200 million in cash dividends during the quarter.
• Repurchased $94 million of common stock at an average price of $457.07.
• Closed the D-Fend acquisition funded primarily through $950 million of new long-term senior notes.
• Issued a new $300 million 364-day term loan and repaid a $300 million term loan issued for the Silvus acquisition.
• GAAP operating margin decreased due to an increase in the contingent Silvus earnout; Non-GAAP operating margin increased 200 basis points driven by higher sales and operating leverage.