ZBRA Q2 Deep Dive: Elo Acquisition, Tariff Headwinds, and Balanced Outlook

Enterprise data capture company Zebra Technologies (NASDAQ:ZBRA) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 6.2% year on year to $1.29 billion. The company expects next quarter’s revenue to be around $1.31 billion, coming in 0.7% above analysts’ estimates. Its non-GAAP profit of $3.61 per share was 8.4% above analysts’ consensus estimates.

Is now the time to buy ZBRA? Find out in our full research report (it’s free).

StockStory’s Take

Zebra ended Q2 with results that met Wall Street’s revenue expectations, but the market reacted negatively, reflecting investor concern over strategic and macro challenges. Management highlighted strong growth in North America, Latin America, and Asia Pacific, with notable traction in mobile computing, scanning, and RFID segments. CEO William Burns cited robust demand in transportation and logistics as well as retail and e-commerce, but acknowledged ongoing softness in European markets and lingering uncertainties tied to global trade policy. CFO Nathan Winters pointed to higher U.S. import tariffs compared to last year, resulting in a slight year-over-year margin impact.

Looking ahead, Zebra’s raised full-year profit outlook is underpinned by expectations for continued demand across key product segments and benefits from the recent U.S. tax legislation. Management is focused on mitigating tariff impacts through supply chain adjustments and pricing changes, while emphasizing that customer spending remains cautious due to ongoing macroeconomic uncertainty. Burns noted, “We believe our guide for the full year is balanced given our backlog, current pipeline, and the resilience in customer demand, but we remain attentive to evolving trade and geopolitical factors.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to broad-based demand recovery, focused product strength, and strategic moves such as the Elo acquisition.

• Regional growth diversification: Zebra saw robust sales growth in North America, Latin America, and Asia Pacific, with mobile computing and RFID leading the way. Europe, Middle East, and Africa markets remained soft, impacted by strong prior-year comparisons and ongoing macro challenges.
• Product segment momentum: Mobile computing, scanning, and RFID solutions outperformed, particularly within transportation, logistics, and retail verticals. Management emphasized the ongoing importance of RFID for inventory visibility and supply chain efficiency, especially in retail and logistics.
• Tariff mitigation and pricing: Higher U.S. import tariffs weighed on gross margins, but Zebra’s actions—including shifting production out of China and implementing annualized pricing adjustments—helped limit the profit impact. Further supply chain adjustments and pricing levers are being evaluated to address future tariff risks.
• Elo acquisition to expand portfolio: The pending acquisition of Elo, a provider of point-of-sale, kiosks, and touchscreen solutions, is expected to broaden Zebra’s addressable market by $8 billion. Management expects limited overlap with existing products, enabling international expansion and cross-selling opportunities, particularly in quick-serve restaurants and healthcare.
• Competitive positioning and innovation: Zebra continues to invest about 10% of sales in research and development, supporting new product launches such as wearables and next-generation devices. Management noted that recent competitor repositioning may open additional market share opportunities, while emphasizing the importance of its customer relationships and channel strategy.

Drivers of Future Performance

Zebra expects steady demand for automation and digitization, but will face margin and revenue variability from tariffs, macro trends, and integration of new acquisitions.

• Tariff and trade policy risks: Management anticipates ongoing volatility related to U.S. import tariffs and evolving global trade policy. Zebra’s mitigation strategy includes supply chain shifts, pricing adjustments, and continued monitoring of regulatory changes, but any escalation could impact gross margins and customer buying behavior.
• Elo integration and synergy realization: The Elo acquisition is expected to be immediately accretive to earnings and generate $25 million in annual EBITDA synergies by year three. Management is focused on leveraging Elo’s strengths in customer-facing solutions to expand Zebra’s footprint in new end markets and regions, while ensuring minimal product overlap and smooth channel integration.
• Customer spending patterns and macro uncertainty: While demand remains resilient in core verticals, customers are cautious with capital expenditures amid macroeconomic uncertainty. Management highlighted that recently enacted U.S. tax legislation could unlock more customer spending, but its full impact on demand will take time to materialize. European market softness and mixed sector performance remain areas for close monitoring.

Catalysts in Upcoming Quarters

In the quarters ahead, our team will monitor (1) progress on integrating Elo and realizing planned synergy targets, (2) the effectiveness of ongoing tariff mitigation strategies and the potential impact of future trade policy changes, and (3) trends in customer spending across key verticals such as retail, logistics, and healthcare—especially in Europe, where softness persists. Product innovation and expansion into new end markets will also be critical signposts for sustained growth.

Zebra currently trades at $326.95, down from $342.32 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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