Zebra Technologies Corporation Q4 2025 Earnings Call Summary

ZBRA -3.48%

Strategic Execution and Portfolio Optimization

• Performance in Q4 was driven by strong execution in Asia Pacific and Latin America, alongside a return to growth in EMEA and key end markets like healthcare and retail.

• Management is sharpening strategic focus by exiting the robotics business to prioritize higher-growth opportunities in RFID, machine vision, and AI-powered solutions.

• The acquisition of Elo Touch is being leveraged to enhance the 'modern store' offering, integrating self-service kiosks and digital media with frontline mobility.

• Operational leverage was achieved by fully mitigating existing tariffs through supply chain moves, product portfolio rationalization, and price execution; however, adjusted gross margin still declined 50 basis points due to lower services and software margins.

• The company is positioning itself as a critical enabler of AI by providing the 'digital voice' for physical assets through its visibility and automation segments.

• Strategic capital allocation remains balanced between internal investments, accretive M&A like Fotoneo, and returning value via a new $1 billion share repurchase authorization.

2026 Outlook and Mitigation Framework

• Full-year 2026 sales growth guidance of 9%–13% assumes a strong pipeline in machine vision and continued momentum in RFID adoption across the supply chain.

• Management expects to fully mitigate a two-point gross margin headwind from industry-wide memory price increases starting in Q2 through targeted price hikes and vendor collaboration.

• The guidance framework incorporates approximately seven points of favorable impact from acquisitions and foreign exchange, balanced against macro uncertainty.

• Machine vision is projected to return to growth in 2026, supported by a diversified pipeline in transportation, logistics, and automotive manufacturing.

• Free cash flow conversion is targeted at approximately 100%, with plans to optimize working capital while maintaining supply chain resilience.

Structural Changes and Risk Callouts

• Recognized $76 million in restructuring charges during Q4 related to the robotics business exit and ongoing productivity initiatives.

• Industry-wide memory component shortages and price escalations represent a significant dynamic risk beginning in the second quarter of 2026.

• Service and software margins were pressured by higher repair costs due to the aging of the installed base, though management expects this to level out in 2026.

• The company successfully mitigated previous tariff impacts earlier than expected through product portfolio rationalization and manufacturing moves.

Q&A Session Insights

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here.

• Management is implementing global price increases effective in March and transitioning to higher-density memory to secure supply.

• The two-point gross margin hit will be partially offset by robotics exit savings, lower tariff rates, and foreign exchange favorability.

• Large project discussions are occurring earlier than usual as partners seek to secure supply amid component uncertainty.

• Refresh activity in 2026 is expected to mirror 2025 levels, with multi-year deployments for large T&L customers likely beginning in 2027.

• High double-digit growth is expected to continue as RFID expands from apparel into fresh food, parcel tracking, and quick-serve restaurants.

• Zebra is embedding RFID reading capabilities into the majority of its next-generation mobile devices to capitalize on this trend.

One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.