Key Highlights

  • ZBRA shares were trading down 8.86% at $329.14 from a prior close of $361.13.
  • Adjusted gross Margin fell 220 basis points to 46% on higher memory costs.
  • Full-year memory headwind is now about $145 million.

Zebra Technologies (NASDAQ:ZBRA) was trading down 8.86% at $329.14 in today's regular session, a decline of $32.00 from the prior close of $361.13, on Volume well above average. The stock had run up about 49% year to date before the report. Weakness in technology and Apple's (NASDAQ:AAPL) memory-cost margin warning add to the backdrop.

Memory Costs Move to the Center of the Story

Third-quarter sales were a record above $1.6 billion, up 22.3% and 11.3% organically, above the high end of guidance, and non-GAAP EPS was $4.95, up 28%. Adjusted EBITDA margin was flat at 21.6%. Adjusted gross margin fell 220 basis points to 46% on memory costs and mix.

Memory headwinds were over $50 million in the quarter, with pricing offsetting about half. The full-year memory headwind is now about $145 million, up from $120 million, on higher mobile computing volume and mix, and management still expects to fully mitigate it. Pricing contributes about 1.5 points of top-line benefit, and the remaining roughly $55 million is covered by restructuring savings, Tariff tailwinds, operating productivity, volume Leverage and foreign exchange.

Guidance for the Fourth Quarter, 2026 and 2027

Fourth-quarter guidance is sales growth of 10% to 14%, including about 150 basis points of foreign exchange, adjusted EBITDA margin of about 22% and non-GAAP EPS of $5.00 to $5.40, a midpoint roughly in line with the $5.18 expected. Full-year guidance is sales growth of about 17%, adjusted EBITDA margin of about 23.5%, EPS of about $21.20 at the fourth-quarter midpoint and free Cash Flow of at least $1 billion.

For 2027, management expects growth at the high end of the long-term 5% to 7% range. An October price increase of up to 15% on mobile computers should add about 1.5 points to 2027 sales. Memory costs are still rising but moderating, with increases expected in the first half of 2027. Inventory rose about $90 million on memory purchases, five new memory suppliers are qualified and two more are expected in 2027.

Demand, Buybacks and Analyst View

Retail grew high single digits, transportation and logistics was the fastest-growing end market, Manufacturing grew high single digits and healthcare grew double digits. Elo grew high single digits. Zebra repurchased $75 million of stock in the quarter, over $640 million year to date, ended with leverage of 1.6x and plans to refinance its Credit Facility later this month. Management said it has seen no pull-forward of Demand ahead of the price increases.

The analyst consensus is Moderate Buy with an average target of $385.83. The stock has a forward price-to-earnings ratio of 15.22, trailing Earnings of $19.31 per share and a 52-week range of $199.05 to $392.78.

The Credit Facility Refinancing and Memory Cost Trends Are the Next Markers

Zebra is trading lower after record third-quarter sales, driven by margin and memory-cost questions. The next items to follow are the credit facility refinancing planned this month, fourth-quarter results against the 10% to 14% sales growth guide and memory pricing through the first half of 2027.