ZEBRA TECHNOLOGIES CORP

Results of Operations

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 $65 million or 5.2% compared to the prior year quarter, reflecting growth in both of our segments. Our overall sales growth reflects improved demand in the North America, Asia-Pacific, and Latin America regions. Excluding the effects of currency changes and acquisitions, Consolidated Organic Net sales increased by 4.8%.

Gross margin decreased to 48.0% for the current quarter compared to 48.8% for the prior year, primarily due to unfavorable impacts of tariffs, net of mitigating actions, along with lower services and software margins. As compared to the prior year quarter, Gross margin improved in our AIT segment and declined in our EVM segment.

Operating expenses for the quarters ended September 27, 2025 and September 28, 2024 were $451 million and $422 million, or 34.2% and 33.6% of Net sales, respectively. Current quarter Operating expenses increased compared to the prior year quarter primarily due to higher share-based compensation expense related to improved expected attainment associated with performance-based share-based compensation awards.

Operating income was $183 million for the current quarter compared to $191 million in the prior year quarter. The decrease was due to higher Operating expenses, partly offset by higher Gross profit.

Total other expense, net decreased primarily due to foreign exchange losses in the prior year quarter and lower net interest costs associated with the company’s borrowings driven by rate favorability in the current year quarter.

The Company’s effective tax rates for the three months ended September 27, 2025 and September 28, 2024 were 36.5% and 8.1%, respectively. The increase in the effective tax rate was primarily due to increased taxes related to foreign earnings subject to U.S. taxation as a result of recently enacted U.S. tax legislation and U.S. state income taxes, partly offset by the release of certain Canadian valuation allowance reserves.

Net income and diluted earnings per share each decreased in the current quarter due to a higher income tax provision and lower Operating income, partly offset by lower Total other expense, net.

Total Net sales increased by $274 million or 7.5% 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 7.6%.

Gross margin slightly decreased to 48.3% compared to 48.4% for the prior year period, primarily due to unfavorable impacts of tariffs, net of mitigating actions, along with lower services and software margins, largely offset by volume leverage and favorable business mix. As compared to the prior year period, Gross margin improved in our AIT segment and declined in our EVM segment.

Operating expenses for the nine months ended September 27, 2025 and September 28, 2024 were $1,334 million and $1,248 million, or 34.0% and 34.2% of Net sales, respectively. Current year Operating expenses increased compared to the prior year period primarily due to higher employee and employee-related costs, including higher incentive compensation, part of which related to changes in share-based compensation eligibility provisions in the first quarter. These increases were partly offset by lower Exit and restructuring costs.

Operating income was $561 million for the current year period compared to $517 million in the prior year period. The increase was due to higher Gross profit, partially offset by higher Operating expenses.

Total other expense, net increased primarily due to non-recurring interest rate swap gains in the prior year and higher foreign exchange transaction losses in the current year, partly offset by lower net interest costs associated with the Company’s borrowings driven by rate favorability and higher interest income on cash equivalents in the current year.

The Company’s effective tax rates for the nine months ended September 27, 2025 and September 28, 2024 were 24.5% and 14.5%, respectively. The increase in the effective tax rate was primarily due to increased taxes related to foreign earnings subject to U.S. taxation as a result of recently enacted U.S. tax legislation and U.S. state income taxes, partly offset by the release of certain Canadian valuation allowance reserves.

Net income and diluted earnings per share each decreased compared to the prior year period due to a higher income tax provision, lower Operating income, and higher Total other expense, net in the current year.