Zebra Technologies — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales reached $1,614 million for the quarter, a 22.3% year-over-year increase compared to $1,320 million in Q3 2025.
• Consolidated organic net sales growth was 11.3% year-over-year.
• Net income was $164 million ($3.43 per diluted share), up 62.4% from $101 million ($1.97 per diluted share) in the prior year.
• Non-GAAP net income increased 19.7% to $237 million, or $4.95 per diluted share, compared to $198 million ($3.88 per share) in the prior year.
• Gross profit was $738 million with a gross margin of 45.7%, down 230 basis points from 48.0% in the prior year.
• Adjusted gross profit was $742 million with an adjusted gross margin of 46.0%, down 220 basis points from 48.2% in the prior year.
• Adjusted EBITDA increased 22.5% to $349 million, maintaining an adjusted EBITDA margin of 21.6% year-over-year.
• Operating expenses increased to $501 million from $451 million, primarily due to amortization of intangible assets and expenses associated with acquired businesses.
• For the first nine months of 2026, net cash provided by operating activities was $711 million, and free cash flow was $661 million.
• Total debt was $2,578 million as of October 3, 2026, with $2,077 million classified as current.
• Cash and cash equivalents were $182 million as of October 3, 2026.

Guidance and Future Outlook:

• The company raised its full-year outlook.
• Fourth quarter 2026 sales growth is expected to be between 10% and 14% year-over-year, including approximately 150 basis points of favorable foreign currency impact.
• Fourth quarter adjusted EBITDA margin is expected to be approximately 22%.
• Fourth quarter non-GAAP diluted earnings per share are expected to be in the range of $5.00 to $5.40, assuming an adjusted effective tax rate of approximately 19%.
• Full-year free cash flow for 2026 is expected to be at least $1 billion.

Business Segments and Product Lines:

• Connected Frontline (CF) segment net sales were $949 million, up from $705 million in the prior year, with organic growth of 15.0%.
• Asset Visibility & Automation (AVA) segment net sales were $665 million, up from $615 million in the prior year, with organic growth of 7.0%.
• Elo Touch contributed to the double-digit growth as customers prioritize automating frontline operations.
• The company noted increased memory component costs and business mix as factors affecting gross margins, partially offset by favorable foreign currency.

Market and Competitive Landscape:

• Demand trends reflect customer investment in automation and productivity.
• The company cites trends in automation and Physical AI as growth drivers.
• Management expressed confidence in the durability of demand and the strength of the business model.

Risks and Challenges:

• Gross margins were impacted by increased memory component costs.
• Operating expenses increased due to amortization of intangible assets and costs associated with acquired businesses.
• Forward-looking statements note risks including customer acceptance, competitor offerings, emerging technologies, global market conditions, credit availability, natural disasters, public health issues, cybersecurity incidents, supply chain constraints, manufacturing cost control, debt interest rates, foreign exchange rates, customs duties, trade policies, and integration of acquisitions.

Management Commentary and Tone:

• Bill Burns, CEO, stated the quarter was "record" and underpinned by strong execution and broad-based demand.
• Management highlighted efforts to strengthen memory supply, implement pricing actions, and capture operating leverage to support growth while maintaining adjusted EBITDA margin.
• Nathan Winters, CFO, noted the company is using strong cash generation and balance sheet strength to invest in growth and return capital to shareholders.
• The tone is confident regarding the durability of demand and long-term opportunity.

Other Key Points:

• Share repurchases totaled $75 million in the third quarter.
• Cumulative share repurchases for the first nine months of 2026 were $643 million (over $640 million mentioned in commentary).
• The company does not provide a reconciliation for forward-looking non-GAAP financial measures where reconciling items cannot be reasonably predicted or are out of the company's control.
• A conference call regarding the results was held on November 3, 2026, at 7:30 a.m. Central Time.
• The company reported a gain on sale of business of $5 million in the nine-month period.
• Capital expenditures for the first nine months were $50 million.