Zebra Technologies’ Earnings Call: Strong Growth Amid Tariff Challenges

Zebra Technologies ((ZBRA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Zebra Technologies’ recent earnings call painted a picture of robust financial health, marked by significant revenue and earnings growth. The company demonstrated strong operational execution, with broad-based demand across regions and strategic acquisitions driving positive results. However, the optimism was somewhat tempered by challenges related to tariffs, which are impacting profitability and leading to a cautious full-year guidance. External factors such as tariffs and manufacturing sector challenges present near-term risks, despite the company’s strong performance.

Strong Q1 Performance

Zebra Technologies reported impressive sales exceeding $1.3 billion in Q1 2025, marking a 12% increase compared to the prior year. The company achieved an adjusted EBITDA margin of 22.3%, representing a 240 basis point increase. This strong performance underscores the company’s effective operational strategies and market demand.

Record Non-GAAP Earnings

The company reported non-GAAP diluted earnings per share of $4.02, which was 42% higher than the previous year. This record-breaking performance highlights Zebra’s ability to enhance shareholder value through strategic financial management.

Broad-Based Growth Across Regions

Zebra experienced significant growth across various regions, with EMEA sales up 18%, Asia Pacific sales increasing by 13%, and Latin America sales growing 18%, particularly strong in Mexico. This broad-based regional growth reflects the company’s successful global market penetration.

Successful Strategic Acquisition

Zebra’s acquisition of FotoNeuf, a leading 3D machine vision company, for $62 million is expected to contribute approximately 30 basis points to overall sales growth in 2025. This strategic acquisition is poised to enhance Zebra’s technological capabilities and market reach.

Strong Free Cash Flow

The company generated $158 million of free cash flow in Q1, with expectations of at least $700 million for the year. This strong cash flow position provides Zebra with the financial flexibility to invest in growth opportunities and navigate market challenges.

Impact of Tariffs

Zebra is facing significant challenges due to tariffs, with an $80 million to $90 million annualized gross profit impact expected. Specifically, a $25 million to $30 million impact is anticipated in Q2, highlighting the external pressures affecting the company’s profitability.

Reduced Full-Year Margin Guidance

Due to increased direct costs from tariffs, Zebra has reduced its adjusted EBITDA margin outlook for the full year by 100 basis points to between 20% and 21%. This cautious guidance reflects the company’s prudent approach in navigating cost pressures.

Challenging Manufacturing Sector

The manufacturing sector’s growth lagged behind other sectors, with high single-digit growth compared to double-digit growth in other verticals. This disparity underscores the challenges Zebra faces in certain market segments.

Flat Services and Software Revenue

Services and software revenue saw slight growth, impacted by lower mobile computing volume in 2023. This flat performance indicates areas where Zebra may need to focus on driving future growth.

Forward-Looking Guidance

Looking ahead, Zebra Technologies maintains a full-year sales growth expectation of 3% to 7%, despite the increased tariff impact. The company anticipates a $70 million gross profit impact from tariffs for the full year, a $50 million increase from prior guidance. These forecasts reflect Zebra’s cautious optimism in navigating external challenges while continuing to drive growth.

In conclusion, Zebra Technologies’ earnings call highlighted a strong financial performance, driven by strategic acquisitions and regional growth. However, challenges such as tariffs and sector-specific issues present near-term risks, leading to cautious guidance. Overall, the company’s robust operational execution and strategic initiatives position it well for future growth, despite external pressures.