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Introduction & Market Context
Zebra Technologies Corporation (NASDAQ:ZBRA) presented its second quarter 2025 results on August 5, showcasing solid performance with organic sales growth of 6.3% year-over-year. Despite the company’s strong financial results and raised outlook, Zebra’s stock experienced significant volatility, initially rising 2.72% in pre-market trading before closing down 10.63% at $341.36 amid broader market concerns.
The enterprise asset intelligence company, which serves over 80% of the Fortune 500 across more than 100 countries, delivered results that exceeded analyst expectations, with non-GAAP diluted EPS of $3.61 compared to the forecasted $3.33. This represents an 8.41% positive surprise and continues the company’s trend of outperforming market expectations.
Quarterly Performance Highlights
Zebra reported Q2 2025 sales of $1,293 million, reflecting 6.3% organic net sales growth compared to the same period last year. The company saw strong performance across most regions, with North America growing 8%, Asia Pacific 20%, and Latin America 11%, while EMEA experienced a slight decline of 1%.
As shown in the following summary of Q2 2025 performance:
The company’s adjusted EBITDA margin reached 20.6%, a 10 basis point improvement year-over-year, while non-GAAP diluted EPS grew 13.5% to $3.61. Transportation & Logistics and Retail & E-Commerce emerged as the top-performing verticals, driving significant portions of the company’s growth.
The detailed financial breakdown reveals the company’s performance across key metrics:
While adjusted gross margin declined 70 basis points to 47.9%, primarily due to U.S. import tariffs, Zebra successfully improved its adjusted operating expenses as a percentage of sales by 80 basis points. This operational discipline helped offset margin pressures and contributed to the overall profitability improvement.
Strategic Initiatives
A major highlight of Zebra’s presentation was the announcement of its acquisition of Elo Touch Solutions, a leading provider of Point-of-Sale, Interactive Display, and Self-Service Kiosks solutions. This strategic move expands Zebra’s addressable market by approximately $8 billion and strengthens its position in retail, hospitality/restaurants, healthcare, and industrial end markets.
The acquisition details and strategic rationale are illustrated here:
With annual sales of approximately $400 million, Elo is expected to contribute meaningfully to Zebra’s growth while maintaining a similar EBITDA margin profile. The company anticipates achieving an incremental $25 million in annual EBITDA synergies from this acquisition.
Another key strategic focus has been mitigating the impact of U.S. import tariffs. Zebra has made significant progress in diversifying its global sourcing footprint, reducing U.S. imports from China to approximately 30% from 85%, with further reduction to 20% expected by year-end 2025.
The company’s tariff mitigation strategy is detailed in the following slide:
These efforts have substantially reduced the expected gross profit impact from U.S. import tariffs for FY25 to approximately $30 million, down from the previous estimate of $70 million. The annualized gross profit impact has also improved to approximately $40 million from the earlier projection of $80-90 million.
Forward-Looking Statements
Based on strong Q2 performance and improved outlook, Zebra raised its full-year guidance across multiple metrics. The company now expects FY25 sales growth between 5% and 7%, adjusted EBITDA margin between 21% and 22%, and non-GAAP diluted EPS of $15.25 to $15.75.
The detailed outlook and assumptions for both Q3 and full-year 2025 are presented here:
For Q3 2025, Zebra projects sales growth between 2% and 6%, which includes approximately 30 basis points favorable impact from the Photoneo acquisition and neutral impact from foreign exchange. The company expects an adjusted EBITDA margin of approximately 21% and non-GAAP diluted EPS between $3.60 and $3.80.
Zebra also highlighted longer-term opportunities across its end markets, focusing on technology-equipped frontline workers, reimagined point-of-sale solutions, automation to address labor constraints, and digitization of workflows across various industries:
Market Reaction & Analysis
Despite Zebra’s strong quarterly performance and raised guidance, the market reaction was notably negative, with the stock closing down 10.63% on the day of the earnings announcement. This disconnect between financial results and stock performance suggests investors may be concerned about broader economic factors, competitive pressures, or the sustainability of growth rates.
The company’s balance sheet remains strong, with $872 million in cash and cash equivalents and a net debt to adjusted EBITDA ratio of 1.2x as of Q2 2025, down from 2.4x in the prior year. Free cash flow for the first half of 2025 was $288 million, though this represented a $101 million decrease year-over-year due to higher incentive compensation payments, timing of inventory purchases, and prior year interest rate swap settlements.
CEO Bill Burns emphasized the company’s commitment to innovation and strategic acquisitions during the earnings call, stating, "Our solutions intelligently connect people, assets, and data to help our customers make business-critical decisions." He also noted strong customer interest in leveraging RFID technology across the supply chain.
While Zebra’s presentation focused on positive developments and growth opportunities, investors should also consider potential challenges including supply chain disruptions, market saturation in key regions, and ongoing macroeconomic pressures that could impact future performance. The company’s strategic initiatives, particularly the Elo acquisition and tariff mitigation efforts, appear well-positioned to address some of these concerns, but execution will be critical to realizing the projected benefits.
Full presentation:
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