Zebra Technologies Beats Q3 Estimates but Stock Falls 10% on Margin and Guidance Concerns

Zebra Technologies posted record third-quarter sales of $1.614 billion, up 22.3% year-over-year and ahead of the $1.56 billion Wall Street consensus. Adjusted EPS rose 27.6% to $4.95, topping the $4.90 estimate, while GAAP EPS jumped 74.1% to $3.43. Adjusted EBITDA came in at $349 million, up 22.5% and roughly in line with the $348 million estimate. Organic sales growth for the quarter was 11.3%, and free cash flow reached $661 million. The company repurchased $75 million in shares during the period.

Segment results were mixed. Connected Frontline revenue surged 35% year-over-year to $949 million, well above the $881 million estimate, driven by memory supply improvements, pricing actions, and contributions from Elo Touch. Asset Visibility and Automation revenue grew a more modest 8% to $665 million, missing the $689 million estimate. Gross margin contracted 230 basis points year-over-year to 45.7%.

For the full year, Zebra raised its free cash flow outlook to at least $1 billion, above the prior $964 million consensus. Fourth-quarter guidance called for adjusted EPS of $5.00 to $5.40 against a $5.18 estimate, sales growth of 10% to 14%, and an adjusted EBITDA margin of 22%. CEO Bill Burns cited strengthened memory supply, pricing actions, and operating leverage as drivers, adding that trends in automation and Physical AI position the company for sustainable profitable growth.

Despite the beats, ZBRA shares fell roughly 10.5% in premarket trading, gapping down alongside broader earnings-driven moves in the market. Nasdaq data noted the stock had reached oversold RSI territory by Tuesday's close. Analysts flagged the mixed segment performance, gross margin compression, and the wide range in fourth-quarter EPS guidance as likely sources of investor concern.