ZBRA Q3 Deep Dive: Mixed Regional Trends, RFID and AI Initiatives Take Center Stage

Enterprise data capture company Zebra Technologies (NASDAQ:ZBRA) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 5.2% year on year to $1.32 billion. The company expects next quarter’s revenue to be around $1.46 billion, coming in 2.4% above analysts’ estimates. Its non-GAAP profit of $3.88 per share was 3.4% above analysts’ consensus estimates.

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

StockStory’s Take

Zebra’s third quarter results met Wall Street’s revenue expectations but were followed by a significant negative market reaction. Management pointed to uneven demand across key regions and verticals as a central challenge, with strength in North America, Asia Pacific, and Latin America offset by continued softness in EMEA and manufacturing. CEO William Burns highlighted, “Our retail and e-commerce end market was a bright spot,” while noting that macro uncertainty and trade policies contributed to uneven demand. The company also faced declining operating margins, attributed in part to higher U.S. import tariffs, despite operational efficiencies and selective pricing actions.

Looking forward, Zebra’s guidance assumes continued cautious customer sentiment and macroeconomic headwinds, but management sees growth driven by AI-enabled products, RFID adoption, and the integration of Elo Touch Solutions. Burns stated, “We are starting this journey with our Zebra companion offerings,” referencing pilot projects for AI agents and next-generation hardware. CFO Nathan Winters added that substantial tariff mitigation and ongoing supply chain adjustments are expected to support margins into next year, while pilots for AI and software offerings are anticipated to generate their first revenues in 2026 and beyond.

Key Insights from Management’s Remarks

Management attributed third quarter performance to regional growth, strong RFID adoption, and continued success in retail and e-commerce, while also noting the impact of tariffs and mixed results in manufacturing.

• RFID momentum: Zebra’s RFID solutions saw double-digit growth, with adoption expanding not only in retail and e-commerce but also in transportation, logistics, and manufacturing. Management cited broader use cases and improved business outcomes, such as inventory accuracy and reduced waste, as key factors behind rising demand.
• Regional divergence: While North America, Asia Pacific, and Latin America delivered solid growth—driven by mobile computing and printing—EMEA lagged due to persistent softness in Germany and mixed results across other European markets. Asia Pacific benefited from strategic investments in Japan and India, including new postal service deployments.
• Operational efficiency and tariff management: Although adjusted operating margin declined year over year, Zebra improved operating expense leverage and implemented pricing actions to offset tariff costs. The company has reduced its U.S. imports from China to below 20%, with further supply chain diversification planned.
• Retail and e-commerce strength: The retail and e-commerce sector remained a growth engine, supported by ongoing device deployments for peak demand periods. However, management noted that refresh cycles and demand timing varied significantly by customer and geography, limiting predictability.
• Acquisition of Elo Touch Solutions: The acquisition of Elo expands Zebra’s portfolio into self-service kiosks and point-of-sale systems, enhancing its connected frontline strategy and increasing its addressable market. Early integration efforts are focused on operational synergies and new cross-selling opportunities across retail, hospitality, and healthcare.

Drivers of Future Performance

Management expects future performance to hinge on AI-driven product innovation, RFID expansion, and continued tariff mitigation, while remaining cautious about uneven demand and macroeconomic uncertainty.

• AI and software pilots: Zebra is piloting AI companion agents and next-generation hardware with customers in retail and transportation, aiming for initial revenues in 2026. Management sees these solutions as enhancing frontline productivity and driving future hardware and software refresh cycles.
• Tariff mitigation and supply chain resilience: The company anticipates full mitigation of U.S. import tariffs entering next year through pricing actions, supply chain diversification, and reduced exposure to China-based imports. These efforts are expected to stabilize gross margins, particularly in the Asset Intelligence & Tracking segment.
• Ongoing regional and vertical variability: While retail and e-commerce are expected to remain strong, management remains cautious about demand visibility in EMEA and manufacturing. They note that customer investment cycles are now more staggered, and macro uncertainty—especially around trade policy—may delay new project acceleration.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) the pace of AI solution adoption and pilot-to-revenue conversion in frontline applications, (2) successful integration and cross-selling of Elo Touch Solutions’ products into Zebra’s existing customer base, and (3) progress on tariff mitigation and supply chain resilience. The trajectory of RFID growth and recovery in EMEA and manufacturing verticals will also be key indicators of sustained momentum.

Zebra currently trades at $274.48, down from $310.18 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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