Zebra (NASDAQ: ZBRA) sales jump 22.3% but memory costs squeeze gross margin

Posted by Andrew Walz on Nov 4th, 2026

What happened

Zebra Technologies Corporation (NASDAQ: ZBRA) lifted third-quarter net sales 22.3% to $1.61 billion and raised its full-year outlook. The company's reconciliation backs out 8.9 percentage points for acquisitions and dispositions and 2.1 for currency to reach organic growth of 11.3%, the cleaner read on demand.

Net income rose to $164 million, or $3.43 per diluted share, from $101 million, or $1.97, a year earlier. Non-GAAP diluted earnings per share rose to $4.95 from $3.88. Adjusted EBITDA reached $349 million, up from $285 million, and the adjusted EBITDA margin held at 21.6%.

Chief Executive Officer Bill Burns credited Elo Touch with contributing to the double-digit growth. Burns said work on memory supply, pricing and operating leverage let Zebra support growth while keeping the adjusted EBITDA margin flat. Zebra repurchased $75 million of shares in the quarter.

Key numbers

Metric	Latest	Change	Source
Third-quarter net sales	$1.61 billion	from $1.32 billion, +22.3%	SEC 8-K Exhibit 99.1
Connected Frontline net sales	$949 million	from $705 million, +34.6%	SEC 8-K Exhibit 99.1
Gross margin	45.7%	from 48.0%, -2.3 percentage points	SEC 8-K Exhibit 99.1
Net income per diluted share	$3.43	from $1.97, +74.1%	SEC 8-K Exhibit 99.1
Non-GAAP diluted EPS	$4.95	from $3.88, +27.6%	SEC 8-K Exhibit 99.1
Free cash flow, first nine months	$661 million	from $504 million, +31.2%	Calculated from SEC 8-K Exhibit 99.1

Where the growth came from

Connected Frontline did most of the lifting. Its sales reached $949 million against $705 million a year earlier, a gain of $244 million. That one segment supplied most of the company's $294 million increase.

Asset Visibility Automation grew more slowly, to $665 million from $615 million. Organic growth was 15.0% in Connected Frontline and 7.0% in Asset Visibility Automation. Reported Connected Frontline growth was 34.6%. To reach organic growth, the reconciliation removes 17.2 percentage points for acquisitions and dispositions and 2.4 for currency.

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Why it matters

OptimistFi has argued that Zebra is a durable franchise if enterprises keep standardizing on its devices and systems. Double-digit organic growth and a raised outlook support the durability half of that view.

The caveat is what each dollar of sales earns. Gross margin fell to 45.7% from 48.0%. The release blames mainly higher memory component costs and business mix, partly offset by favorable foreign currency. Operating expenses rose to $501 million from $451 million, mainly because of acquired businesses, including amortization of intangible assets.

Taxes also helped GAAP earnings. Pretax income rose to $198 million from $159 million, while income tax expense fell to $34 million from $58 million. That is why net income grew 62.4%. Non-GAAP net income rose 19.7%, slower than sales.

Cash, buybacks and debt

Free cash flow for the first nine months was $661 million, up from $504 million a year earlier. Operating cash flow was $711 million and capital spending was $50 million. Zebra expects at least $1 billion for the full year. By OptimistFi's arithmetic, that implies at least $339 million in the fourth quarter.

Buybacks are absorbing most of that cash. Zebra bought back $643 million of stock in the nine months, against $284 million a year earlier. By OptimistFi's calculation, that is 97.3% of nine-month free cash flow.

Cash stood at $182 million on Oct. 3 and total debt at $2.58 billion. The balance sheet now lists $2.08 billion of long-term debt as current, up from $141 million at Dec. 31, 2025. Long-term debt fell to $494 million from $2.36 billion.

What's next

Zebra expects fourth-quarter sales growth of 10% to 14%, including approximately 150 basis points of favorable foreign currency. It also expects an adjusted EBITDA margin of approximately 22% and non-GAAP diluted earnings per share of $5.00 to $5.40, assuming an adjusted tax rate of approximately 19%.

The fourth-quarter report will test those targets and the free cash flow floor. A gross margin that stops falling while sales growth stays in range would strengthen the case. A further decline tied to memory costs would weaken it.