Zebra Q3 2026 Earnings: Revenue Rises 22% While EBITDA Margin Holds Steady

Zebra Technologies (NASDAQ: ZBRA) reported Q3 2026 net sales of $1.614 billion, up 22.3% from $1.320 billion a year earlier, while diluted EPS rose to $3.43 from $1.97. For the quarter ended October 3, organic sales increased 11.3% and adjusted EBITDA rose 22.5%, although GAAP gross margin contracted because of higher memory costs and business mix. Connected Frontline led the growth, and Zebra raised its outlook.

Core Performance Data

Reported sales increased by $294 million. Zebra’s reconciliation removed 8.9 percentage points of acquisition and disposition effects and 2.1 points of foreign-currency effects to arrive at 11.3% organic growth, showing that underlying sales still expanded at a double-digit rate.

Profitability varied by measure. Gross profit grew more slowly than revenue, but operating income and net income increased faster as operating expenses rose less than sales and quarterly income tax expense fell to $34 million from $58 million.

Adjusted EBITDA, adjusted margin and non-GAAP EPS are non-GAAP measures.

Business and Segment Performance

Connected Frontline was the primary growth driver, helped by Elo Touch and customer spending on frontline automation. Asset Visibility & Automation also grew, but at a slower rate and with a smaller gap between reported and organic growth.

Connected Frontline’s reconciliation removed 17.2 percentage points of acquisition and disposition effects and 2.4 points of currency effects. The segment therefore accounted for most of the difference between Zebra’s reported and organic growth rates.

Growth was also concentrated in tangible products. Product revenue rose about 26.7% to $1.370 billion, while services and software revenue increased about 2.1% to $244 million.

Higher Memory Costs Compressed Gross Margin, but Scale Preserved EBITDA Margin

GAAP gross margin fell to 45.7% from 48.0%, while adjusted gross margin declined to 46.0% from 48.2%. Zebra attributed the pressure mainly to higher memory-component costs and business mix, partly offset by favorable foreign currency.

Operating expenses increased to $501 million from $451 million, primarily because of acquired-business expenses, including intangible-asset amortization. However, expenses grew more slowly than revenue. Adjusted operating expenses rose to $413 million from $368 million, while adjusted EBITDA increased at roughly the same rate as sales and its margin remained at 21.6%.

Management said pricing actions, stronger memory-supply efforts and operating leverage helped offset the gross-margin pressure. Pricing did not prevent the gross-margin decline, but scale and expense leverage allowed Zebra to preserve its adjusted EBITDA margin.

Cash Flow and Balance Sheet

Cash-flow figures cover the first nine months of 2026 rather than the quarter alone. Operating cash flow increased about 27% to $711 million from $560 million, and $50 million of capital expenditures resulted in free cash flow of $661 million.

Working capital remained a use of cash in some areas. Accounts receivable reduced nine-month operating cash flow by $229 million and inventory used $125 million, partly offset by a $194 million contribution from accounts payable.

Zebra ended the quarter with $182 million of cash and cash equivalents and cited total debt of $2.578 billion. The balance sheet classified $2.077 billion as the current portion of long-term debt, making debt maturity and refinancing management an important area to monitor. Quarterly net interest expense also rose to $35 million from $23 million.

The company repurchased $643 million of shares during the first nine months, including $75 million in Q3. That nine-month repurchase total nearly matched the $661 million of free cash flow generated over the same period.

Guidance

Zebra described its outlook as increased, although the release did not provide the previous targets needed to measure the size of the revision. The latest outlook calls for double-digit Q4 sales growth, a modestly higher adjusted EBITDA margin and at least $1 billion of full-year free cash flow.

Reaching the full-year free-cash-flow floor would require about $339 million in the fourth quarter. Zebra did not provide GAAP reconciliations for the forward-looking non-GAAP measures because it could not reasonably forecast the necessary reconciling items.

Recent Insider Transactions

The supplied insider data categorized 26,613 shares across 15 transactions as purchases during the latest six-month period, compared with 7,500 shares sold through four transactions. That produced net purchases of 19,113 shares, or 5.00% on the page’s reported measure, while total insider holdings were 403.09 thousand shares.

Among the latest 10 records, three were sales and seven were director stock awards. The seven identical May 19 awards are consolidated below to avoid repetition; stock awards are compensation-related grants rather than open-market purchases.

The seven directors receiving May 19 awards were Frank Blaise Modruson, Kenneth Bradley Miller, Satish Dhanasekaran, Linda Connly, Per Anders Gustafsson, Michael A. Smith and Ross Wayne Manire. All listed transactions were reported as direct holdings, and the data alone do not establish the insiders’ views on Zebra’s outlook.

Risks Investors Should Monitor

• Memory and mix pressure: Higher memory-component costs and business mix reduced GAAP gross margin by 230 basis points. Continued pressure could make it harder to preserve EBITDA margin through pricing and operating leverage alone.
• Acquisition-dependent reported growth: Connected Frontline grew 34.6% on a reported basis but 15.0% organically. Acquisitions, including Elo Touch, contributed materially to the headline rate and also increased amortization and other operating expenses.
• Debt and interest costs: Zebra reported $2.578 billion of total debt, with $2.077 billion classified as the current portion of long-term debt. Net interest expense increased from $23 million to $35 million.
• Working-capital requirements: Receivables and inventory used a combined $354 million of operating cash during the first nine months, which could affect free cash flow if those balances continue rising.
• Currency sensitivity: Foreign exchange contributed to reported Q3 growth, and the Q4 sales outlook includes an estimated 150-basis-point currency benefit.

Summary

Zebra’s Q3 2026 results combined double-digit organic growth with substantial acquisition-supported expansion in Connected Frontline. Higher memory costs and business mix weakened gross margin, but pricing, scale and operating leverage kept adjusted EBITDA margin stable. The next areas to watch are execution against the Q4 growth range, delivery of at least $1 billion in full-year free cash flow, memory-cost trends and management of the company’s current debt balance.