ZEBRA TECHNOLOGIES CORP

Consolidated Results of Operations

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):

Operating expenses are summarized below (amounts in millions, except percentages):

Consolidated Organic Net sales growth:

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

(2)For purposes of computing Organic Net sales growth, amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

(3)Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Total Net sales increased by $76 million or 6.2% compared to the prior year quarter, reflecting growth in both of our segments. Our overall sales growth reflects improved demand trends that began in the middle of 2024 and continued in the North America, Asia-Pacific, and Latin America regions in the second quarter. Excluding the effects of currency changes and acquisitions, Consolidated Organic Net sales increased by 6.3%.

Gross margin decreased to 47.6% for the current quarter compared to 48.4% for the prior year, primarily due to unfavorable impacts of tariffs, net of mitigating actions. As compared to the prior year quarter, Gross margin was higher in our AIT segment and lower in our EVM segment.

Operating expenses for the quarters ended June 28, 2025 and June 29, 2024 were $433 million and $422 million, or 33.5% and 34.7% of Net sales, respectively. Current year Operating expenses were higher than the prior year quarter primarily due to increased employee and employee-related costs, as well as the unfavorable effects of foreign currency exchange rates.

Operating income was $183 million for the current quarter compared to $167 million in the prior year quarter. The increase was due to higher Gross profit, partially offset by higher Operating expenses.

Net income was slightly lower compared to the prior year quarter primarily due to higher Other expense, net partially offset by higher Operating income, as described above. The increase in Other expense, net was primarily due to foreign exchange losses in the current quarter.

The Company’s effective tax rates for the three months ended June 28, 2025 and June 29, 2024 were 18.8% and 16.9%, respectively. The increase in the effective tax rate year over year was primarily due to reduced benefits from share-based compensation deductions.

Diluted earnings per share increased to $2.19 as compared to $2.17 in the prior year quarter driven by the Company’s share repurchase program which reduced the number of shares outstanding.

Total Net sales increased by $209 million or 8.7% compared to the prior year period, reflecting growth in both of our segments associated with improved demand trends that began in the middle of 2024. Excluding the effects of currency changes and acquisitions, Consolidated Organic Net sales increased by 9.0%.

Gross margin increased to 48.5% for the current year compared to 48.2% for the prior year period, primarily due to favorable business mix and volume leverage, largely offset by unfavorable impacts of tariffs, net. As compared to the prior year period, Gross margin was higher in our AIT segment and lower in our EVM segment.

Operating expenses for the six months ended June 28, 2025 and June 29, 2024 were $883 million and $826 million, or 33.9% and 34.5% of Net sales, respectively. Current year Operating expenses were higher than the prior year period primarily due to increased employee and employee-related costs, including higher incentive compensation resulting from changes in share-based compensation eligibility provisions. These increases were partially offset by lower Exit and restructuring costs.

Operating income was $378 million for the current year compared to $326 million in the prior year period. The increase was due to higher Gross profit, partially offset by higher Operating expenses.

Net income increased compared to the prior year period primarily due to higher Operating income, as described above, partly offset by higher Other expense, net. The increase in Other expense, net was primarily due to non-recurring interest rate swap gains in the prior year.

The Company’s effective tax rates for the six months ended June 28, 2025 and June 29, 2024 were 18.2% and 18.0%, respectively. The increase in the effective tax rate was primarily due to higher U.S. tax credits and tax benefits related to foreign earnings subject to U.S. taxation, partly offset by reduced benefits from share-based compensation deductions.

Diluted earnings per share increased to $4.81 as compared to $4.40 in the prior year period primarily due to higher Net income.