斑馬科技 (ZBRA) 2026年第三季法說會：營收創新高並調升展望

斑馬技術 (Zebra Technologies) 2026 年第三季法說會強調創紀錄的單季銷售額、廣泛的行動運算需求以及調升的全年展望。記憶體成本上升對毛利率構成壓力，但定價策略、重組節約與營運槓桿支撐了獲利能力。

重點摘要

• 第三季銷售額突破 16 億美元，年增 22.3%，有機成長 11.3%，主要由行動運算及廣泛的區域成長所帶動。
• 調整後 EBITDA 利潤率與去年同期持平，為 21.6%，非 GAAP 稀釋後 EPS 則成長近 28% 至 4.95 美元。
• 調整後毛利率下降 220 個基點至 46%，主因是記憶體成本上升及業務組合影響。
• 斑馬技術將全年銷售成長展望調升至約 17%，較先前的展望提高 2 個百分點。在第四季財測中位數下，全年非 GAAP 稀釋後 EPS 預計將達到 21.20 美元。
• 管理層預計全年自由現金流至少達 10 億美元，並報告 2026 年前九個月已產生 6.61 億美元。
• 展望 2027 年，管理層預估成長將達到斑馬技術長期財測區間的高標，並以 2026 年第四季的獲利能力作為基準。

重要財務數據

業務與營運表現

互聯前線 (Connected Frontline) 銷售額成長近 35%（含 Elo Touch），有機成長 15%。行動運算為主要驅動因素。Elo Touch 實現高個位數成長，管理層表示該收購案仍按計畫帶來所承諾的協同效應。

資產可視化與自動化 (Asset Visibility and Automation) 成長 7%，由機器視覺、列印及 RFID 領軍。機器視覺受益於汽車、半導體製造與物流的需求，以及市場推廣 (go-to-market) 策略改善和 Photoneo 的技術。

各區域成長普遍。北美銷售額成長 11%，歐洲、中東及非洲 (EMEA) 成長 13%，亞太地區成長 8%，拉丁美洲成長 9%。

運輸與物流 (Transportation & Logistics) 是斑馬技術成長最快的終端市場。管理層提及全球設備換新專案的多年度管道，預計於 2027 年開始推出。零售業呈現高個位數成長，製造業亦錄得高個位數成長，醫療保健業則在臨床行動化帶動下實現雙位數成長。

斑馬技術的前線 AI 套件持續在早期獲得市場青睞。管理層表示，AI 功能、內建 RFID 和增強的處理能力正在影響客戶的設備升級，儘管軟體目前僅占總營收的低個位數比例。

管理層財務預測

管理層預計將完全抵消估計達 1.45 億美元的全年記憶體成本逆風，因行動運算出貨量增加和產品組合因素，該估算比先前增加了 2,500 萬美元。緩解措施包括針對性定價、重組節約、營運槓桿以及有利的匯率。

斑馬技術於 10 月對行動運算產品實施了約 15% 的價格調漲，具體幅度因產品組合和地區而異。公司預計此舉將為 2027 年營收成長貢獻約 1.5 個百分點。

風險與觀察重點

記憶體成本仍是近期的主要壓力來源。第三季記憶體成本同比增加超過 5,000 萬美元，而漲價措施抵消了近一半的增加金額。該影響導致了調整後毛利率的下降。

管理層預計記憶體價格在 2027 年上半年將繼續上漲，隨後在下半年趨於緩和。公司尚未提供 2027 年記憶體成本總影響的具體估算。

存貨從第二季到第三季增加了約 9,000 萬美元，主因是預先採購記憶體及部分價格影響。斑馬技術表示，這有助於支援第四季生產，並為 2027 年提供額外產能，但營運資金仍需在供應鏈韌性目標之間保持平衡。

公司亦在轉嫁高昂的零件成本與維繫戰略客戶關係之間進行權衡。管理層表示，已準備好調整價格並追求更高的營運效率，以保護獲利能力。

分析師問答亮點

• 記憶體成本增加：管理層表示，2026 年預估逆風金額從 1.2 億美元升至 1.45 億美元，完全是由於行動運算出貨量增加與產品組合所致，而非零件價格高於預期。
• 供應可用性：斑馬技術對未來 18 個月的記憶體供應管道具備可視性。公司已認證 5 家新供應商，並預計在 2027 年新增 2 家供應商。
• 需求品質：管理層表示，強勁的行動運算銷售反映了真實的客戶需求，而非在漲價前提前拉貨的訂單。需求被描述為跨區域、終端市場和客戶規模的廣泛成長。
• 2027 年定位：受惠於運輸與物流的換機週期、行動運算需求以及已確保的記憶體產能，斑馬技術預計成長將達到長期目標區間的高標。管理層將 2026 年第四季的獲利能力視為 2027 年的基準。
• 資本配置：斑馬技術表示，公司擁有足夠的自由現金流和資產負債表實力，能在繼續回購股票的同時，評估「互聯前線」以及「資產可視化與自動化」領域鄰近且具協同效應的收購目標。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and welcome to the Third Quarter 2026 Zebra Technologies Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Michael Steele

Good morning, and welcome to Zebra's Third Quarter Earnings Conference Call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least 1 year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the risk factors discussed in our SEC filings.

During this call, we will reference non-GAAP financial measures as we describe business performance with reconciliations shown at the end of the slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from business acquisitions and dispositions for 12 months.

This presentation will include prepared remarks from Bill Burns, our CEO; and Nathan Winters, our CFO. Bill will begin with perspective on our third quarter results, our value proposition and strategic priorities. Nathan will then provide additional detail on our financial results and discuss our outlook, followed by Bill's closing remarks. Then Bill and Nathan will take your questions.

Now let's turn to Slide 3 as I hand it over to Bill.

William Burns

Thank you, Mike. Good morning, everyone, and thank you for joining us. It was another standout quarter for Zebra. We achieved record quarterly sales and increased earnings, driven by strong execution and broad-based growth across our portfolio. These results demonstrate the durability of customer demand for our innovative solutions and the resilience of our business model, which supports our increased full year outlook. Our results also reflect the critical role Zebra plays in frontline operations.

From the factory floor to the point of sale, the supply chain is becoming more complex. More than 80% of the Fortune 500 rely on Zebra as they invest in digitizing and automating their workflows, bringing real-time intelligence and visibility to employees on the front line. Customers can now build upon the Zebra solution embedded in their critical workflows as they advance their physical AI journey. This creates a clear competitive advantage for Zebra supporting our ability to deliver sustainable, profitable growth.

With that, let's turn to Slide 4 to cover our third quarter results. We delivered sales and earnings results above our expectations with broad-based growth across segments, regions and end markets. Our Connected Frontline segment performed particularly well in the quarter, led by mobile computing and strong contribution from Elo Touch. This acquisition has performed very well in its first year, and we are on track to deliver our committed synergies.

For the quarter, we generated sales exceeding $1.6 billion, growing more than 22% or 11% on an organic basis from the prior year. And adjusted EBITDA margin of 21.6% and non-GAAP diluted earnings per share of $4.95, a 28% increase over the prior year. We saw very strong customer demand, leading to higher-than-anticipated sales volume. Our ongoing efforts to proactively strengthen memory supply, implement pricing actions and capture operating leverage enabled us to support this increased growth while maintaining adjusted EBITDA margin year-over-year.

Our strong performance and financial position also support our disciplined approach to capital allocation. We repurchased $75 million of shares in Q3, bringing the year-to-date total to more than $640 million. This reflects our confidence in the business and our long-term value creation opportunity. The strength of our results and our progress managing the supply environment gives us confidence in our full year outlook and our ability to continue to serve increasing customer demand into next year.

Moving to Slide 5. I would like to share some additional details on our key end markets. In Retail, we realized high single-digit growth with particularly strong sales in e-commerce and specialty stores, driven by customers' expectations for faster delivery and expanded fulfillment options. Elo Touch continues to be a meaningful growth driver as the industry embraces self-service. Our Zebra frontline AI suite also continues to gain traction. We are excited to be partnering with a large North American specialty retailer rolling out Zebra AI companion across all of its locations.

Transportation & Logistics was our highest growth end market in Q3 as customers invest in AI-enabled mobile computing solutions to improve productivity and service levels, and we have a robust multiyear pipeline of large opportunities.

In Manufacturing, our high single-digit growth was driven by customers' need for increased visibility across their operations. Electronics and Food and Beverage contributed meaningfully to growth. Machine Vision also outperformed as we gained traction with go-to-market initiatives and our enhanced portfolio of solutions. Health care grew double digits during the quarter, led by mobile computing as customers equip more caregivers with enterprise-grade solution. This reflects the broader opportunity to bring real-time intelligence to the front line and improve the patient care journey.

Now turning to Slide 6. We continue to build on Zebra's unique competitive positioning as the foundation for Intelligent Operations. AI solutions require access to frontline data in real time. Zebra plays at that intersection, capturing information from physical operations and providing actionable intelligence to the frontline.

Zebra's products are used by millions of frontline workers every day. Our customers need a practical path to scale and augment their labor resources and they are building on Zebra's workflow expertise and installed base of solutions as AI use cases emerge. Retail customer in EMEA recently selected Zebra's premium mobile computers over a competitor's offering because of the ability to optimize AI on the device. This customer has utilized Zebra's frontline AI suite to help build precise product location functionality in their internally developed AI applications to drive productivity.

Turning to Slide 7. Our results reflect the progress we are making in executing on our strategic priorities. Customers are digitizing physical operations to improve performance and are in the early stages of putting AI to work. Across the supply chain, Zebra is able to meet our customers wherever they are in their automation journey, and we are well positioned to solve their biggest problem. We are also driving efficiency initiatives in our business to enhance profitability, which include operating expense leverage through cost discipline, accelerating our software development with new AI tools and enhancing our go-to-market model to improve market coverage and efficiency.

Our second priority is advancing innovation. We continue to see promising early customer traction with our frontline AI suite, new mobile computers with RFID and optimized AI processing capabilities as well as next-generation RFID and 3D machine vision solution. Our progress this year has highlighted the opportunity to deliver long-term profitable growth.

Finally, our strong earnings and cash flow generation continue to enhance our financial strength and flexibility. We are executing on a balanced capital allocation strategy, prioritizing investments in our business that elevate our portfolio of solutions, while consistently returning capital to shareholders.

Before I hand over to Nathan, let me step back and highlight what this quarter demonstrates about Zebra's long-term investment case. Q3 reinforces our investment thesis. We serve a $35 billion market with substantial runway as customers bring more automation and AI to physical operations. Our differentiation is meaningful. Zebra is embedded in critical workflows, and we're well positioned to be the AI leader for the frontline.

Our capital-light model and strong cash generation are giving us the flexibility to invest in growth opportunities and return capital to shareholders. Together, these strengths give Zebra a durable, profitable growth model with the financial flexibility to create long-term shareholder value.

I will now turn the call over to Nathan to review our Q3 financial results, progress in navigating memory supply our strong fourth quarter outlook.

Nathan Winters

Thank you, Bill. Let's start with the P&L on Slide 10. In Q3, total company sales increased 22.3% or 11.3% on an organic basis, driven by continued momentum across the business and pricing actions, and we exceeded the high end of our guidance range, primarily due to our ability to secure increased memory supply.

Our Connected Frontline segment grew nearly 35%, including the Elo Touch acquisition or 15% on an organic basis, led by mobile computing. Our Asset Visibility and Automation segment grew 7%, led by machine vision, printing and RFID.

Performance was broad-based across all of our regions led by mobile computing. North America sales increased 11% with strength in all end markets and outperformance in Canada. EMEA sales grew 13%, led by large transportation and logistics customers with broad-based growth across the region. Asia Pacific sales increased 8%, led by Southeast Asia, South Korea and China, and Latin America sales grew 9%, led by Mexico and Brazil.

Adjusted gross margin declined 220 basis points to 46%, primarily due to increased memory costs and business mix that was partially offset by favorable FX. Pricing actions mitigated nearly one half of the greater than $50 million year-on-year increase in memory costs, which was elevated primarily due to our higher-than-expected sales of mobile computers. Our 230 basis point improvement in operating leverage enabled us to hold EBITDA margins flat at 21.6%. Non-GAAP diluted earnings per share were $4.95, a near 28% year-over-year increase, exceeding the high end of our outlook.

Turning now to the balance sheet and cash flow on Slide 11. Year-to-date, we generated $661 million of free cash flow, ending the third quarter with a modest debt leverage ratio of 1.6x and more than $1 billion of credit capacity. We've been deploying capital consistent with our allocation priorities, repurchasing $946 million of stock during the past 4 quarters. Also note, later this month, we plan to refinance our credit facility which is scheduled to mature in May of 2027.

Turning to Slide 12. Meeting demand in this environment requires both supply and cost management. Our scale and direct supplier co-planning give us flexibility to secure the components we need, while alternate sourcing and transitions to higher density memory have expanded our options into 2027. Component pricing has been increasing generally as expected, and our position remains favorable relative to spot market rates given our direct supplier relationships. Our balance sheet reflects advanced stocking of memory to ensure we can serve the robust mobile computing demand in our pipeline into 2027, which is a top priority.

Together, these actions position us well to meet strong customer demand while protecting profitability.

Let's now turn to our outlook. We have entered the quarter with a strong backlog in pipeline that supports our sales growth guidance range of 10% to 14%, including approximately 150 basis points of contribution from favorable FX. Our fourth quarter adjusted EBITDA margin is expected to be approximately 22% and non-GAAP diluted earnings per share are expected to be in the range of $5 and $5.40.

Our fourth quarter outlook translates to full year sales growth of approximately 17%, a 2-point increase from our prior outlook. Our full year adjusted EBITDA margin is expected to be approximately 23.5%, and non-GAAP diluted earnings per share is expected to be $21.20 based on our Q4 guide midpoint, increasing greater than 30% year-on-year.

Our full year guide continues to reflect full mitigation of the approximately $145 million of memory cost headwind, an increase of $25 million from our prior estimate due to higher sales volumes. We have been addressing this through targeted price increases, along with net savings from our restructuring actions, volume leverage and FX favorability. Free cash flow is expected to be at least $1 billion which reflects a conversion rate of approximately 100%. We are continuing to optimize our working capital levels, balanced with our supply chain resilience objectives and elevated memory component inventory. Please reference additional modeling assumptions on Slide 13.

With that, I will turn the call back to Bill.

William Burns

Thank you, Nathan. Before we turn to your questions, let me leave you with a few takeaways.

Q3 demonstrated strong customer demand across our business, supporting our increased full year outlook. Customers are leveraging Zebra's AI-powered portfolio of solutions to improve productivity, visibility and decision-making, and we remain focused on driving long-term profitable growth and shareholder value.

With that, I will now turn the call back to Mike.

Michael Steele

Thanks, Bill. We'll now open the call for Q&A. [Operator Instructions]

Operator

[Operator Instructions] The first question comes from Andrew Buscaglia with BNP Paribas.

分析師問答

Andrew Buscaglia

So I just wanted to touch on the memory impact in the quarter. You say you're now expecting $145 million in incremental costs. I think last quarter, you said you had expected about $120 million. But you -- you're sort of indicating that things are still in line with what you're expecting. So what's the delta here? Is it more just demand picking up so you need to procure more memory and that's what sort of surprised you? Or can you just give us a little more detail on that thinking?

Nathan Winters

Yes, Andrew, this is Nathan. Again, the -- if you look at the memory impact from $145 million to $120 million in our last guide, it's entirely driven by increased mobile computing volume both with -- to drive the upside in the quarter and the overall mix within it. And I'd say there's also some mix of the memory types and requirements from our customers because that can have an impact on pricing. But as we said on the call, the component prices are in line with our expectation. The price realization coming through the P&L is generally in line. So again, the increase is really entirely driven by the incremental volume and mix within the portfolio.

Andrew Buscaglia

Okay. Got it. And you indicated you're increasing prices in early -- or you did in early October. Any way you can frame the magnitude of the increase and give us some confidence that your margins are protected into next year. How are you thinking about that?

Nathan Winters

Yes. If you look at the October price increase like any of our price increases, it varies across the different portfolios and regions. But generally, it's about a 15% increase in our mobile computing products with that intent of closing the gap on the memory cost impact, really a modest impact here we'll expect in the fourth quarter, just as those prices go throughout the market. But we expect that to drive about 1.5 point impact on the top line in 2027 in terms of the magnitude.

And again, as we go into next year, I think the first is -- we're first committed to taking any action necessary to first win in the market, but also preserve profitability, and that includes continuously looking at what prices we have to set in the market, along with driving efficiencies across the business to help mitigate the memory headwind.

Operator

The next question comes from Tommy Moll with Stephens.

Thomas Moll

One more on memory here, Nathan, I think you said in the quarter you just reported that pricing offset nearly half of 50 or maybe a little bit north of $50 million. So there's a gap there. But for the year of $145 million, do you still expect to fully offset dollar for dollar? So is the catch-up all here in Q4? Or how do you bridge us there?

Nathan Winters

That's correct. So if you look in the third quarter, it was around $50 million of cost headwind. We realized about $25 million of price. And as we said back at the beginning of the year, the mitigation for the full impact not only includes the pricing actions we've taken through the year, which is driving around 1.5 points of top line benefit but also included the restructuring actions in the beginning of the year, some tariff tailwind along with the productivity we're driving across OpEx.

So we knew going into the year that would take some time for our pricing actions to flow through the P&L relative to the cost impact. We relied on those other levers to mitigate for the full year. And now, as I mentioned earlier, the October price increase is really helping us set up to fully mitigate the impact on a dollar-for-dollar basis as we go into '27.

Thomas Moll

And as a follow-up on 2027, you're exiting this year with organic volumes well into the high single digits, I think, is the right ZIP code if we do the math on your organic guide. Last quarter, you mentioned some good visibility for 2027 on big T&L refresh opportunities. Any other big project commentary you could give us for next year? And just given the exit rate here, is there any reason why you shouldn't end up toward the high end of that typical 5% to 7% kind of range for 2027.

William Burns

Yes, Tommy. I would say that we're not providing a detailed guide to '27 at the moment. But I would say that maybe a bit of color, as you talked about, based on the pipeline of opportunities, the underlying demand we are seeing, the strength of the portfolio across all of our solutions. And as Nate just talked about with the first 2 questions here, securing additional memory supply, we would expect growth, as you suggested, for '27 to be at the high end of our long-term guidance range, and we think of profitability to be in line with kind of fourth quarter being a baseline of profitability for next year. So that's how we see it in line with what you were kind of outlining.

Operator

The next question comes from Jamie Cook with Truist Securities.

Unknown Analyst

This is actually Kevin Wilson on for Jamie. On memory, I'm wondering how much memory on hand increased in the third quarter? And how much supply for the first half of next year is already on hand or committed? And then you're talking about qualifying new suppliers, I think, with a goal of 5 to 7 qualified sources per memory type. Wondering if you could provide us an update on that effort in terms of adding useful capacity.

Nathan Winters

Yes. I mean, overall, I mean, first, I should have said the team is doing a great job. Obviously, it's a dynamic environment. It changes every day in terms of what the teams are managing through, both from a customer interaction as well as working with our suppliers. I think if you look at the supply perspective, again, actively working the supply pipeline and visibility over the next 18 months with our memory suppliers. And as Bill said, we have confidence in the outlook for supply as well as the ability to meet demand not only here for the fourth quarter, but as we go into '27.

And I think as evidence of that, if you look at our balance sheet at the end of the third quarter, inventory did increase from Q2 to Q3 by about 90 million, and that's entirely driven by memory supply and a bit of pricing. So not only that sets us up well here to deliver in the fourth quarter, but that is starting to give us some capacity as we go into 2027.

And I think the other positive note is the team has qualified 5 new suppliers. We have 2 more expected in 2027. So again, with that goal of getting multiple different suppliers qualified for each of our memory requirements that gives us that flexibility. As demand changes and increases to go and fulfill that and meet the underlying demand from our customers.

Unknown Analyst

And then for my follow-up, you mentioned outperformance in Machine Vision. Just maybe any color you can provide on where that outperformance came from in the quarter where you're winning market share, maybe how Photoneo is tracking relative to your expectations when you did that acquisition?

William Burns

Machine Vision is an integral part of our asset visibility and automation segment, really driving automation in 2 primary areas: manufacturing and logistics. And I'd say that in Q3, we saw a particularly strong strength in manufacturing across automotive and chip manufacturing were both strong, but we also saw strength in logistics as well. We've worked really hard to align our go-to-market teams and improve our focus and coordination across both manufacturing and logistics. And the value proposition we're bringing to the market along with the advancements in the portfolio, continue to drive growth.

We saw strong performance, as you asked about Photoneo. Photoneo in the quarter, and we continue to build a strong pipeline of opportunities for that advanced technology as well.

Operator

The next question comes from Joseph Giordano with TD Cowen.

Unknown Analyst

This is Chris Grenga on for Joe. Where did R&D land as a percentage of sales in the quarter? And what level is embedded in the 4Q guide? And are you still targeting that roughly 9% for next year?

Nathan Winters

Yes. If you look in the third quarter, we were just in line with about 9% with R&D as a percent of revenue. I think more broadly, the team is doing a great job of driving efficiency across the business while continuing to invest in the future, whether that's new AI capabilities. The sales coverage that's really helped play a part in driving some of the growth we're seeing in manufacturing and run rate and making sure we have a solid pipeline of new products into the market.

And if you look at it overall for the year, OpEx will be about 1.5 points improvement year-on-year. So driving meaningful productivity across the P&L. And we expect that to continue to progress into '27 as we leverage AI and other technologies to drive that efficiency. And that's including across what we're doing from an R&D perspective. So again, I think we're seeing nice momentum across every line of OpEx, including R&D, while continuing to invest in the future.

Unknown Analyst

Great. And our stronger mobile computing sales being driven more by improving memory supply or underlying demand getting better? How should we separate those 2?

William Burns

Mobile computing is part of our Connected Frontline segment. So that segment includes mobile computing, the Elo acquisition, software and AI solutions. And I would say strength in mobile computing really is what's driving it. There's -- we continue to drive innovation as you asked about R&D spending, which is allowing our mobile computing devices to continue to advance, adding functionalities such as embedded RFID and AI capabilities, which is really resonating with customers. We're seeing the refreshes of our customer devices across retail and T&L driven by this new functionality and continued innovation.

So we're seeing a strong pipeline of wins and opportunities moving forward. But mobile computing is really essential to frontline workers as our customers continue to digitize and automate their environment, and that they're just at the beginnings of deployment of AI. So I'd say strength in mobile computing, really driven by investment by our customers in putting mobile devices in the hands of more associates across each of our vertical markets.

Nathan Winters

The only thing I'd add is we've seen that demand there. If you go back to the last call, we talked about the high end of our guidance range really reflecting where we saw demand and the constraint was around the confidence in the memory supply. So I think the -- the good news is now able to fulfill that demand for our customers by increasing the supply of memory and giving us that confidence here as we go into the fourth quarter as well.

Operator

The next question comes from Piyush Avasthy with Citi.

Piyush Avasthy

Nathan, like one on Elo, like you highlighted strong growth contribution from the business, which is good to see. It would be helpful if you could provide more context around it. Is it just the change in the underlying customer preference that is helping growth? Or have you started to see some benefits on selling Elo under the Zebra umbrella as a more comprehensive solution? And based on the demand activity you're seeing, would you say Elo can grow above your long-term growth framework in '27?

William Burns

Yes, we're just coming -- just actually crossed our 1-year anniversary, and we continue to be excited about the combined capabilities across both our portfolios. And as you suggest, it's really around the strength of Elo's portfolio overall, but the combination of both our portfolios together and our customer engagements. Elo realized high single-digit growth in Q3. So up towards the top end of our long-term guidance range, and we continue to see momentum into the fourth quarter. I'd say, the first year in line with our expectations overall. So the commercial pipeline that we're continuing to build.

So we believe that the biggest opportunities in revenue synergies, where we're really driving across our sales teams and around the world, the opportunity to leverage Zebra's strength and customer relationships in places where Elo may not have as stronger relationships and also bring the portfolios together as things like point-of-sale and customer engagement is moving more and more to Android, and our engineering teams are working closely together.

So I'd say that overall, we're seeing that the combination of the 2 companies together is creating growth opportunities for us, and we would see Elo positioned to deliver results at the high end of our guidance range.

Piyush Avasthy

That's great to hear. And then one on margins. I understand the higher memory cost headwind, but for your asset visibility and automation segment, margins did surprise me a bit as I was associating most of the memory challenges with connected frontline segment. Not sure if it's relatively high investments that's kind of going into the segment that's kind of moving the margins a bit. But if you could elaborate on that, that would be helpful. And I appreciate all the color.

Nathan Winters

Yes, absolutely. So if you look at the asset visibility and automation segment, in gross margin just under 50% for the year -- or for the quarter, excuse me. Memory does have an impact in the business unit, to a lesser degree than mobile computing, but you still have flash memory and other types of memory in our Machine Vision business. So that did have about a 2.5 point drag in the quarter, but that was offset by actually favorable mix and productivity across kind of the rest of the operations. So you do see a bit of memory headwinds in the asset visibility segment, which is having an impact on margins within the quarter. I'd say similar dynamics as we talked about overall, but it does flow into our asset visibility segment.

Operator

The next question comes from Guy Hardwick with Barclays.

Guy Drummond Hardwick

Nathan, by my math, it seems that the $145 million memory headwind is offset by, I think you said, 1.5 points of price, which implies about $90 million. And therefore, $55 million from all the other actions that you mentioned. Is that correct?

Nathan Winters

That's correct.

Guy Drummond Hardwick

Okay. And just as a follow-up for Bill. On Slide 5, talk about multiyear pipeline and transportation logistics. Can you maybe a little bit expand on that a bit about what kind of customers, how international that pipeline is? And how material could that be to top line growth going forward?

William Burns

Given our installed base as the market leader, refreshes represent attractive opportunity across each of our vertical markets, and I think it's important to point out that every customer truly refreshes on kind of their own cycle. The drivers for refresh are things like processing power and memory required for things like AI on the front line, new features and functionality that our customers want to deploy like RFID or just the age of the device with things like operating system and security life cycle.

Our customers are deploying our new devices in both retail and T&L with RFID functionality and capabilities for AI that's driving their upgrades of handhelds and wearable devices.

If you talk about specific segments, I would say retail and e-commerce refreshes are ongoing, and we're continuing to see additional demand driven by these new capabilities like RFID and AI, wanting to put more devices in the hands of more associates to have more connectivity, collaboration and others across retail.

We continue to progress T&L is the big refresh cycle that we've been talking about upcoming here, and we're winning those opportunities. We're in active planning deployments with T&L customers, I would say, around the globe, you asked about internationally. Internationally, I would say, around the globe really, which gives us confidence in what we would see across T&L as multiyear rollouts with those customers beginning in '27. So again, that gives us confidence at the high end of our guidance range for '27, as I talked about earlier, as this refresh cycle begins, and we're winning those opportunities.

Operator

The next question comes from Rob Jamieson with Needham & Co.

Robert Jamieson

So you guys highlighted momentum in like the Zebra AI suite and some of the software things. Can you help quantify the revenue contribution from software today? And is that kind of what we're seeing in like clinical mobility, like you're seeing strong double-digit growth there in health care. Is like the device in every hand type trend that we're seeing in retail now effectively translating to that end market?

William Burns

Yes, I'd say on the software side, low single-digit contribution overall. From an AI perspective, I would say that Zebra overall, our entire portfolio plays an important part in AI, not just the software suite, but we are seeing that the frontline AI suite is a clear differentiator as our customers are making buying decisions. But we think AI across the portfolio, both in hardware and software is critical, asset visibility really providing data into AI models, the connectivity that our mobile devices and our software offerings give to be able to take the output from AI models and to be able to ultimately provide guidance or direction to frontline workers driven by software offerings like our task management offerings, our communication and collaboration offerings as well as our AI suite creates the opportunities for software growth well into the future.

So we feel good about where we're at from a software perspective, the communication, collaboration, task management and this AI suite of offerings, which it really allows our customers to us to meet our customers wherever they're at in the automation journey. If our customers want to develop the entire application themselves, there's hooks onto our mobile devices that allow them to easily deploy AI in those devices. If they want us to do parts of that application or that AI agent for them and wrap it into their own application, we'll do that. Or if they want us to build the entire application ourselves, we'll also provide that.

So marrying of our software offerings and our AI offerings together and leveraging what Zebra represents, which is really a collection of data to feed AI models into to drive the connected frontline workers to be able to get that work done is really what we see the opportunity for us. It's hardware and software and the fact that we have an opportunity in a physical AI world to really be the leaders in AI for the front line.

Robert Jamieson

That's great. And then just on capital allocation, I mean, strong free cash flow in the quarter, you guys are still buying back stock. Should we expect to pivot back towards M&A? And if so, are there any specific areas that you're looking at, whether that's software or hardware?

William Burns

We really use M&A to advance our vision and strategy overall is to deliver on our vision. And we continue to look for closely adjacent and synergistic assets to the portfolio we have today across connected frontline and asset visibility and automation. We look for things that are going to enhance our strategic capabilities, either in go-to-market or in technology advancements. And it really truly is focused on accelerating our growth or -- and at the same time, being accretive to earnings and an attractive ROI for both us and our investors.

I would say, overall, we're excited about the business we have today. And -- but we view disciplined M&A is really an opportunity to drive further long-term growth. As you said, in the short term, we've been buying back stock. And -- but we have the strong enough balance sheet and the free cash flow to really do both is that to continue to return capital to shareholders and at the same time, continue to explore M&A opportunities.

Operator

The next question comes from Meta Marshall with Morgan Stanley.

Meta Marshall

Maybe just to come at the question in a different way. Is any of the strength that you saw in mobile computers? Like do you assess that as pull forward to get ahead of price increases? Or are there any particularly large contracts that were within the windows of kind of granting old pricing? Just trying to get a sense of kind of the impact of demand you think there is from those price increases and any kind of commentary around price realization.

William Burns

We really haven't seen any impact on our revenue associated with pull forward. What we see is strong broad-based demand across all regions, all verticals, both segments, right? So I think it's really broad-based. Our customers continue to invest in their businesses and technology across each of the vertical markets we serve across retail, e-commerce, transportation logistics, manufacturing, health care, all have been investing, and we really haven't seen a pull forward. Demand has been strong, and we're seeing that really broad-based both globally and across the verticals.

Operator

The next question comes from Keith Housum with Northcoast Research.

Keith Housum

Guys, in terms of like the memory costs here, thinking about what you're buying today is really the impact more of 2027 numbers. But how is the pricing of memory trended over the past several months? Are we hitting a point where we're plateauing or is it still climbing?

Nathan Winters

Yes, Keith, it's still increasing, not to the same degree we saw maybe through the middle part of the year. And the expectation is that it will increase as we go into the first half, but start to moderate in the back half of 2027. So I think it's still quarter-to-quarter. We have seen increases as we expected in those component costs, but to a lesser degree here, as we've kind of exited the year and the expectations as we go through the first half of the year.

Keith Housum

Great. And then if I just turn to demand, the question over to the AI devices. You guys have been showing AI at the NRF for several years now. And it sounds like you have your first retail national retail customer adopting AI. But perhaps talk about the conversations you're having with retailers and customers now in terms of adopting AI, your AI mobile devices and where we are in that in terms of your prospects going forward?

William Burns

I would say, overall, we continue to win in the marketplace because of our innovation and the idea that our devices truly are enabled for AI and the use of AI models both in the cloud and on the device. And our AI suite is part of that offering, right? The idea that as I said earlier, we can meet our customers where they're at in their journey, meaning that some of our customers, we just -- the one we talked about was really around using a complete companion offering from Zebra, where we've developed the entire agent for them to use in retail.

Other customers around the world are using our blueprint, which is where we combine multiple functionality on the device and provide it to them in an AI agent, but they put it into my retail store, my company application on their own, but they wrap it in their own application. Other places they're using our individual functionality or individual elements and putting it all together themselves. But we clearly are winning the device upgrades and the new opportunities with our customers and seeing our customers begin to upgrade devices because they want to leverage AI on those devices.

All of this is still in the early stages. So physical AI, AI for the front line super early days, but we're winning from a hardware perspective to position our customers to deploy AI, and we're seeing the early wins in software and others and deployments within our customers, either them deploying themselves, Keith, or us helping them deploy it. All these are great conversations we're having with our customers.

Operator

The next question comes from Rob Mason with RW Baird.

Robert Mason

A lot of my questions have been answered. But Nathan, I may have missed it, but did you actually state what you expect the memory impact to be in '27 just based on where you'll be exiting the year?

Nathan Winters

No, we haven't. I'd say -- I think as we think about '27, I think what's important is, one, we're confident in our ability to secure the volume needed to support growth in the business. I think that's really important. And the current I talked about earlier is -- includes some of that capacity, which helps give that confidence. And again, I'd say, ultimately, we're committed to taking the actions necessary to not only win in the market, preserve profitability whether it's additional price increases or driving efficiency. But I think too early to give exact guidance on where things will land.

So many factors at play in terms of mix and obviously the volume consideration. But I think, again, we have the opportunity to build upon as Bill mentioned, where we're at in Q4 from a profitability perspective and leverage all the levers we have across the business to continue to drive growth.

William Burns

Rob, maybe I'll jump in and just add to what hasn't been set of memory yet. Is that -- what we're doing is working very closely with our customers to really strike the right balance. And that balance really is balancing increased component costs with our own pricing actions, right, to protect our profitability, but also ensuring that we continue to win these largest opportunities, and we maintain the long-term strategic relationships with our customers. That's the critical part that really hasn't been talked about that we're seeing continued demand and momentum in the business. We're working closely with our customers that -- difficult conversations with them to strike this right balance. And I think what we've been able to do is really maintain margins across the business. So we feel really good about where we're at, the conversations we've had with those customers and striking the right balance and continue to win in the marketplace, which is strategic for the long term.

Robert Mason

Yes. Well, that kind of feeds into my follow-up question, Bill. You talked about broad-based demand across verticals, across geographies. I'm just -- it sounds like the larger project business would be healthy. I was just curious if you can shed light on just color on the run rate business and how smaller customers are dealing with the higher pricing? Is this -- does it reflect the change in the mix or the models that they're purchasing?

William Burns

Yes. I mean I think our as you know, our largest customers get our best pricing, right? So I think the run rate has actually been strong as well. And I think maybe add a little color to the verticals, both run rate and large deals. Retail e-commerce continues to be driven by e-commerce demand, omnichannel, driving inventory visibility customers continue to equip more associates with more devices for productivity, communication collaboration, the things I talked about before.

P&L, we're beginning to continue to talk about the refresh cycle with customers around the globe, as I talked about, really around the upgrade to the refresh of last mile deployments and RFID and the AI functionality that was asked about before is really playing a role in us winning those opportunities to enhance worker productivity. I'd say manufacturing, again, driven by broad-based manufacturing, but electronics, food and beverage, broad-based manufacturing demand, health care has been up, again, another double-digit quarter for health care, driven by clinical mobility.

So I'd say both large, medium and small customers are continuing to buy. And I think that -- look, I think our customers don't like the price increases, but they've continued to know they have to invest in technology, and they're having these same conversations with lots of vendors across all electronic equipments that leverage memory and they understand.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Bill Burns for any closing remarks.

William Burns

I'd like to thank our employees, partners and suppliers as we delivered record sales volume in the quarter, and we continue to position ourselves for sustainable growth. We're making excellent progress in our 2026 priorities, and we're excited about the opportunities ahead to continue our market leadership. Have a great day, everyone.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.