Zebra Technologies (NASDAQ:ZBRA) reported record third-quarter sales and raised its full-year outlook, citing broad-based demand for mobile computing, automation and AI-enabled frontline solutions across its end markets.
Chief Executive Officer Bill Burns said the company generated more than $1.6 billion in quarterly sales, an increase of 22.3% from a year earlier, or 11.3% organically on a constant-currency basis. Non-GAAP diluted earnings per share rose nearly 28% year over year to $4.95, while adjusted EBITDA margin was 21.6%.
“We achieved record quarterly sales and increased earnings, driven by strong execution and broad-based growth across our portfolio,” Burns said. He added that customer investments in digitizing and automating physical operations continue to support demand for Zebra’s products and software.
Segment and End-Market Performance
The Connected Frontline segment increased nearly 35%, including the Elo Touch acquisition, or 15% organically. Growth was led by mobile computing, according to Chief Financial Officer Nathan Winters. Elo Touch, acquired about a year ago, also contributed to the segment’s performance and posted high-single-digit growth in the quarter, Burns said.
The Asset Visibility & Automation segment grew 7%, driven by machine vision, printing and RFID offerings. Burns said machine vision benefited from go-to-market efforts and an enhanced product portfolio, with particular strength in automotive and chip manufacturing as well as logistics. He said Photoneo, the company’s machine vision acquisition, performed strongly and is building a pipeline of opportunities.
Across end markets, Zebra reported:
- High-single-digit retail growth, supported by e-commerce and specialty stores, along with demand for self-service technology.
- Transportation and logistics as the company’s fastest-growing end market, with customers investing in AI-enabled mobile computing to improve productivity and service levels.
- High-single-digit manufacturing growth, led by electronics and food and beverage customers seeking greater operational visibility.
- Double-digit healthcare growth, driven by clinical mobility deployments as healthcare providers equip more caregivers with enterprise-grade devices.
Regional growth was also broad-based. North America sales rose 11%, EMEA sales increased 13%, Asia-Pacific sales grew 8%, and Latin America sales advanced 9%.
Memory Costs and Pricing Actions
The company said higher memory costs remained a significant factor during the quarter. Adjusted gross margin declined 220 basis points to 46%, primarily because of memory costs and business mix, partly offset by favorable foreign exchange.
Winters said memory costs increased by more than $50 million year over year in the third quarter, largely because mobile-computing sales exceeded expectations. Pricing actions offset nearly half of that quarterly increase. The company now expects a $145 million full-year memory cost headwind, up from its prior $120 million estimate because of higher mobile-computing volumes and product mix rather than a change in component-pricing expectations.
Zebra said it expects to fully offset the full-year memory cost impact through targeted price increases, restructuring savings, operating leverage and favorable foreign exchange. Winters said an October price increase on mobile-computing products averages about 15%, though the effect varies by product portfolio and region. The action is expected to have a modest fourth-quarter effect and represent roughly 1.5 percentage points of top-line benefit in 2027.
The company increased inventory by about $90 million from the second to third quarter, entirely due to memory supply and related pricing, according to Winters. Zebra has qualified five new memory suppliers and expects two additional suppliers to be qualified in 2027. Management said it is working with suppliers to secure supply over the next 18 months and has expanded sourcing options through alternative suppliers and transitions to higher-density memory.
Outlook Raised
For the fourth quarter, Zebra forecast sales growth of 10% to 14%, including about 150 basis points from favorable foreign exchange. It expects adjusted EBITDA margin of approximately 22% and non-GAAP diluted earnings per share of $5.00 to $5.40.
The fourth-quarter outlook raised the company’s full-year sales growth expectation to approximately 17%, a two-percentage-point increase from its previous forecast. Zebra expects full-year adjusted EBITDA margin of about 23.5% and non-GAAP earnings per share of $21.20 at the midpoint of its fourth-quarter guidance, representing growth of more than 30% from the prior year.
Free cash flow is expected to be at least $1 billion for the year, representing approximately 100% conversion, the company said. Through the first nine months, Zebra generated $661 million of free cash flow and ended the quarter with debt leverage of 1.6 times and more than $1 billion in credit capacity.
AI, Capital Allocation and 2027 Commentary
Burns said Zebra’s AI strategy is centered on using data captured from physical operations and delivering actionable information to frontline workers. The company cited customer adoption of its Frontline AI Suite, including a planned rollout of Zebra AI Companion across all locations of a large North American specialty retailer.
Software currently represents a low-single-digit contribution to overall revenue, Burns said, but he described AI-enabled software, communication, collaboration and task-management offerings as future growth opportunities. Zebra said customers are increasingly refreshing devices to gain capabilities such as RFID functionality and AI processing, although management characterized frontline physical AI adoption as still being in its early stages.
The company repurchased $75 million of shares during the third quarter, bringing year-to-date repurchases to more than $640 million. Over the past four quarters, it repurchased $946 million of stock. Burns said Zebra will continue to consider acquisitions of adjacent, synergistic assets that can expand technology or go-to-market capabilities, while also returning capital to shareholders.
Looking ahead, management did not provide formal 2027 guidance but said it expects growth to be at the high end of its long-term growth range, supported by customer demand, supply availability and multiyear transportation and logistics device-refresh opportunities. Burns said those deployments are beginning globally and are expected to contribute starting in 2027.
About Zebra Technologies (NASDAQ:ZBRA)
Zebra Technologies Corp. (NASDAQ: ZBRA) develops technologies that help businesses identify, track and manage assets, inventory and operational processes. Its solutions are used by organizations in retail, manufacturing, transportation and logistics, healthcare, government and other industries to improve visibility and productivity across their operations.
The company’s portfolio includes barcode and label printers, barcode scanners, mobile computers, radio-frequency identification (RFID) readers and tags, machine-vision systems, fixed industrial scanners and related software.
