Enterprise data capture company Zebra Technologies (NASDAQ:ZBRA) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 11.3% year on year to $1.31 billion. The company expects next quarter’s revenue to be around $1.28 billion, close to analysts’ estimates. Its non-GAAP profit of $4.01 per share was 11% above analysts’ consensus estimates.
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Zebra (ZBRA) Q1 CY2025 Highlights:
- Revenue: $1.31 billion vs analyst estimates of $1.29 billion (11.3% year-on-year growth, 1.4% beat)
- Adjusted EPS: $4.01 vs analyst estimates of $3.62 (11% beat)
- Adjusted EBITDA: $292 million vs analyst estimates of $270.6 million (22.3% margin, 7.9% beat)
- Revenue Guidance for Q2 CY2025 is $1.28 billion at the midpoint, roughly in line with what analysts were expecting
- Management lowered its full-year Adjusted EPS guidance to $14.25 at the midpoint, a 5% decrease
- Operating Margin: 14.9%, up from 13.5% in the same quarter last year
- Free Cash Flow Margin: 12.1%, up from 9.4% in the same quarter last year
- Organic Revenue rose 11.9% year on year (-16.8% in the same quarter last year)
- Market Capitalization: $13.56 billion
StockStory’s Take
Zebra Technologies’ first quarter results were driven by broad-based demand recovery across major product categories and global regions, with notable strength in retail, transportation and logistics, and healthcare. CEO Bill Burns highlighted that strong retail project spending carried over into the new year, while end markets such as manufacturing also showed high single-digit growth. Burns noted, “We realized strong broad-based growth across all major product categories and regions,” underscoring the momentum entering the second quarter.
However, management’s outlook for the rest of the year is shaped by significant uncertainty around U.S. import tariffs and global trade policy. While demand remains solid, CFO Nathan Winters explained that the company is now modeling a higher gross profit impact from tariffs and is lowering its full-year adjusted EPS guidance. Burns described the current environment as one of “uncertainty from a global perspective around tariffs more than anything else,” indicating that customer sentiment is being influenced by these external factors.
Key Insights from Management’s Remarks
Zebra’s management focused on the drivers behind its Q1 outperformance and the challenges posed by evolving tariffs. The quarter’s results reflected a combination of end-market recovery, strong execution in pricing and supply chain, and ongoing product innovation.
- Retail and e-commerce momentum: Retail and e-commerce remained key growth areas, benefiting from increased demand for inventory visibility and productivity enhancements in stores, which supported higher sales in mobile computing and RFID solutions.
- Geographic recovery and EMEA strength: All regions delivered year-on-year growth, with EMEA (Europe, Middle East, and Africa) showing outsize gains due to easier prior-year comparisons and continued project wins, particularly in Northern Europe retail.
- Transportation and logistics growth: Transportation and logistics verticals experienced double-digit growth, powered by global e-commerce trends and increased adoption of RFID technology for supply chain efficiency.
- Tariff mitigation actions: Management highlighted proactive steps to lessen the impact of U.S. import tariffs, including shifting production out of China, implementing price adjustments, and working with partners on manufacturing footprint decisions.
- AI and machine vision expansion: Zebra advanced its AI and 3D machine vision capabilities through the acquisition of FotoNeo and the launch of new AI-powered solutions for mobile computing, positioning itself for long-term growth despite current challenges in the manufacturing sector.
Drivers of Future Performance
Looking ahead, Zebra’s performance will depend on its ability to manage tariff-related cost pressures, sustain demand in key verticals, and execute on product innovation and operational agility.
- Tariff and pricing dynamics: Management expects tariff impacts to weigh on margins, with further mitigation depending on policy clarity. Pricing actions are intended to offset these costs but may carry risks for future demand.
- Vertical market demand: Sustained growth in retail, logistics, and healthcare is expected to underpin revenue, while manufacturing recovery and adoption of advanced automation remain important but less predictable contributors.
- Innovation and portfolio diversification: Ongoing investment in AI, machine vision, and automation is expected to open new market opportunities and support Zebra’s competitive position if execution remains on track.
Top Analyst Questions
- Jamie Cook (Truist): Asked if recent demand strength was sustained into April and whether customers are changing purchasing behavior due to tariffs. Management responded that demand stayed strong and customers are maintaining current project plans, with no evidence of demand pull-forward.
- Piyush Avasthy (Citi): Sought details on manufacturing vertical recovery and tariff mitigation timelines. Zebra said manufacturing is growing high single digits but still lags other sectors, and supply chain shifts can take 12–18 months depending on location.
- Brad Hewitt (Wolfe Research): Questioned the assumptions behind tariff headwinds and exemptions. CFO Nathan Winters explained tariff modeling assumes current rates and exemptions, with mitigation actions ongoing and the guidance reflecting best estimates given policy uncertainty.
- Tommy Moll (Stephens): Inquired about the sustainability of price increases and improved demand visibility. Management stated confidence that price increases are in line with competitors and that overall demand visibility has improved, but uncertainty remains high due to tariffs.
- Chris Grenga (Needham): Asked about progress with AI-powered Zebra Companion deployment and whether customer supply chain shifts present growth opportunities. Management reported AI solutions are in proof-of-concept phases and that production moves by customers create additional demand for Zebra’s technologies.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) how effectively Zebra executes further tariff mitigation strategies and adjusts its supply chain, (2) the sustainability of demand across retail, logistics, and healthcare verticals, and (3) the pace of adoption for new AI and machine vision products, particularly following the FotoNeo acquisition. The company’s ability to maintain operational discipline and margin performance in a fluid trade environment will also be key.
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