Revenue: Sales exceeded $1.3 billion, a 12% increase compared to the prior year. Adjusted EBITDA Margin: 22.3%, a 240 basis point increase from the previous year. Non-GAAP Diluted Earnings Per Share: $4.02, a 42% increase year-over-year. Gross Margin: Increased 150 basis points to 49.6%. Free Cash Flow: $158 million generated in the first quarter. Net Debt to Adjusted EBITDA Leverage Ratio: 1.2x at the end of Q1. Stock Repurchase: $125 million repurchased in Q1 and an additional $75 million in April. Asset Intelligence and Tracking Segment Sales: Increased 18%. Enterprise Visibility and Mobility Segment Sales: Grew 9%. Regional Sales Growth: North America 7%, EMEA 18%, Asia Pacific 13%, Latin America 18%. Tariff Impact: $70 million gross profit impact expected for the full year 2025. Full Year Sales Guidance: 3% to 7% growth, net neutral impact from FX and recent acquisitions. Full Year Free Cash Flow Expectation: At least $700 million.

Warning! GuruFocus has detected 6 Warning Signs with ZBRA.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Zebra Technologies Corp (NASDAQ:ZBRA) reported a 12% year-over-year increase in sales, exceeding $1.3 billion for the quarter. The company achieved an adjusted EBITDA margin of 22.3%, marking a 240 basis point increase from the previous year. Non-GAAP diluted earnings per share rose by 42% to $4.02, surpassing the high end of their outlook. Zebra Technologies Corp (NASDAQ:ZBRA) experienced strong broad-based growth across all major product categories and regions. The company has made significant progress in diversifying its supply chain beyond China, enhancing its agility and resilience.

Negative Points

Zebra Technologies Corp (NASDAQ:ZBRA) is facing a $70 million gross profit impact from tariffs for the full year, which is $50 million higher than prior guidance. The manufacturing vertical continues to lag behind other sectors, showing only high single-digit growth. The company is experiencing macroeconomic uncertainty, particularly related to global trade policies and tariffs. Despite strong demand, the Services and Software recurring revenue business grew only slightly in the quarter. Zebra Technologies Corp (NASDAQ:ZBRA) has not raised its full-year sales guidance due to the fluid global trade environment and related uncertainties.

Q & A Highlights

Q: Did you see any change in demand throughout the quarter or going into April, and what actions are you planning to mitigate tariff risks? A: William Burns, CEO, stated that demand remained strong through April, supported by strong retail year-end spending. Despite global trade uncertainty, customers have maintained positive capital budgets. Zebra is monitoring the global trade environment and has a dedicated team assessing potential impacts and designing mitigation strategies, including diversifying the supply chain and adjusting manufacturing footprints.

Story Continues

Q: Can you elaborate on the manufacturing end markets and the visibility for sustained improvement in demand? A: William Burns, CEO, noted that manufacturing is still somewhat lagging but showed high single-digit growth. The global trade environment is impacting manufacturing, but other verticals like retail, e-commerce, transportation, logistics, and healthcare are experiencing strong growth. Zebra is cautious about second-half sales growth due to the environment but remains optimistic about the manufacturing sector's potential.

Q: How are you addressing the tariff headwinds, and what are the assumptions for tariff rates and exemptions? A: Nathan Winters, CFO, explained that Zebra's guidance includes current effective rates without assuming changes. The company is mitigating impacts through shifting production, pricing adjustments, and leveraging exemptions like the USMCA. The $70 million gross profit impact from tariffs is a $50 million increase from prior guidance, and Zebra is actively seeking further mitigation opportunities.

Q: Can you provide details on the price increases and their impact on demand? A: Nathan Winters, CFO, stated that Zebra is leaving its full-year outlook unchanged, with positive demand trends into the second quarter. The company is taking a cautious view of second-half sales growth due to the environment. Price increases are expected to be realized across the run-rate business, with adjustments for larger customers. The impact of tariffs is being offset by pricing and operational actions.

Q: How is Zebra positioned to gain market share amid uncertainties, and what role does AI play in this strategy? A: William Burns, CEO, emphasized Zebra's strong customer relationships, vertical market expertise, and portfolio breadth as competitive advantages. The company is leveraging AI technologies, such as the AI suite for mobile computing and the Zebra Companion, to differentiate itself and capture market share. Zebra is focused on innovation and strategic acquisitions to enhance its competitive position.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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