ZEBRA TECHNOLOGIES CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader focused on digitizing and automating operations and improving enterprise workflows on the frontline in the automatic identification and data capture industry. We design, manufacture, and sell a broad range of offerings, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our offerings include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, hospitality, public sector, and other industries. We provide our offerings globally through a direct sales force and an extensive network of channel partners.

In the fourth quarter of 2025, the Company’s reportable segments changed to Connected Frontline (“CF”) and Asset Visibility & Automation (“AVA”). This change aligns with how we are operating our business to advance our strategy and the level of detailed financial information reviewed by our chief operating decision-maker. Historical segment results have been recast to conform with the current period presentation. These changes did not have an impact on our results of operations, cash flows, or financial condition.

Management prepared these unaudited interim consolidated financial statements according to the rules and regulations of the Securities and Exchange Commission for interim financial information and notes. As permitted under Article 10 of Regulation S-X and the instructions of Form 10-Q, these consolidated financial statements do not include all the information and notes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements, although management believes that the disclosures made are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

In the opinion of the Company, these interim financial statements include all adjustments (of a normal, recurring nature) necessary to fairly present its Consolidated Balance Sheet as of October 3, 2026, the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and nine months ended October 3, 2026 and September 27, 2025, and the Consolidated Statements of Cash Flows for the nine months ended October 3, 2026 and September 27, 2025. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2026.

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting Policies within Part II, Item 8 “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2025. Other than our adoption of Accounting Standards Update (“ASU”) No. 2025-05 in the first quarter, there have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2025.

Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods, services, or software solutions to a customer at an amount that reflects the consideration which it expects to receive.

Revenues for tangible products are generally recognized upon shipment, whereas revenues for services are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending on how control is transferred to the customer. In cases where a bundle of products, services, and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments (in millions):

In addition, refer to Note 17, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations relate to services and software solutions. The aggregate transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1.14 billion and $1.17 billion, inclusive of deferred revenue, as of October 3, 2026 and December 31, 2025, respectively. On average, remaining performance obligations as of October 3, 2026 and December 31, 2025 are expected to be recognized over a period of approximatelytwo years.

Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $12 million each as of October 3, 2026 and December 31, 2025. These contract assets result from timing differences between billing and satisfying performance obligations, inclusive of any impacts from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment, and no impairment losses have been recognized during the nine months ended October 3, 2026 and September 27, 2025, respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $852 million and $842 million as of October 3, 2026 and December 31, 2025, respectively. During the three and nine months ended October 3, 2026, the Company recognized $114 million and $388 million in revenue that was previously included in the deferred revenue balance as of December 31, 2025. During the three and nine months ended September 27, 2025, the Company recognized $101 million and $359 million in revenue that was previously included in the deferred revenue balance as of December 31, 2024.

Note 4 Inventories

The categories of Inventories, net are as follows (in millions):

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Note 5 Business Acquisitions

On September 30, 2025, the Company acquired Elo Holdings, Inc. (“Elo Touch”) for $1,303 million. The Company utilized estimated fair values as of the acquisition date to allocate the purchase consideration to the identifiable assets acquired and liabilities assumed. Since the acquisition date, the Company has recorded measurement period adjustments to increase both deferred income tax liabilities and goodwill by $4 million. We consider the Elo Touch purchase price allocation to be final as of October 3, 2026.

Note 6 Investments

A rollforward of the Company’s long-term investments is as follows (in millions):

As further described in Note 7 Exit and Restructuring Activities, the Company acquired a long-term investment in the first quarter of 2026 as part of the consideration received for the sale of its robotics automation business.

The carrying value of the Company’s long-term investments is included in Other long-term assets on the Consolidated Balance Sheets. Net gains and losses are included within Other expense, net on the Consolidated Statements of Operations.

Note 7 Exit and Restructuring Activities

Robotics automation

In the first quarter of 2026, the Company completed the sale of its robotics automation business to Skild AI. The transaction resulted in a net pre-tax gain of $5 million, which was recognized in the first quarter and is included within Other expense, net, on the Consolidated Statements of Operations.

As part of the sale transaction, Zebra received total consideration of $20 million, consisting of $9 million in upfront cash, a minority ownership stake in Skild AI with a fair value of $9 million, and $2 million held in escrow.

2025 Productivity Plan

In the second quarter of 2026, the Company substantially completed its organizational design changes intended to better meet its strategic objectives and improve cost efficiency (referred to as the “2025 Productivity Plan”). One-time costs associated with the 2025 Productivity Plan, which primarily consisted of employee severance and benefits were $16 million during the nine months ended October 3, 2026.

The one-time costs associated with the 2025 Productivity Plan are classified within Exit and restructuring on the Consolidated Statements of Operations.

A rollforward of the liability associated with the Company’s Exit and restructuring activities, which are reflected within Accrued liabilities on the Consolidated Balance Sheets, is as follows (in millions):

Note 8 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

•Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).

•Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs. In addition, the Company considers counterparty credit risk in the assessment of fair value.

The Company’s financial assets and liabilities carried at fair value as of October 3, 2026, are classified below (in millions):

The Company’s financial assets and liabilities carried at fair value as of December 31, 2025, are classified below (in millions):

(1)The fair value of the foreign exchange contracts is calculated as follows:

•Fair value of forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points (Level 2).

•Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points (Level 2). However, if the hedge has matured but not yet settled as of period end, then the fair value is calculated at the amount at which the hedge is being settled (Level 1).

Note 9 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company commonly uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging(“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):

Activities related to derivative instruments are reflected within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.

Interest Rate Risk Management

The Company is exposed to market risk associated with interest rate payments on its borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. The Company manages its exposure to changes in interest rates by issuing both fixed and variable rate borrowings as well as periodically utilizing interest rate swaps to economically hedge interest rate exposure based on current and projected market conditions. The Company had no active interest rate swap agreements during the nine months ended October 3, 2026 or the year ended December 31, 2025.

Foreign Currency Exchange Risk Management

The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $6 million of gains and $20 million of losses for the three months ended October 3, 2026 and September 27, 2025, respectively. Realized amounts reclassified to Net sales were $1 million of gainsand $24 million of losses for the nine months ended October 3, 2026 and September 27, 2025, respectively. As of October 3, 2026 and December 31, 2025, the notional amounts of the Company’s foreign exchange cash flow hedges were €648 million and €582 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature withinone month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. Net amounts recognized within Foreign exchange (loss) gain were$4 million of gainsand $1 million of losses for the three months ended October 3, 2026 and September 27, 2025, respectively. Net amounts recognized within Foreign exchange (loss) gain were $4 million of gains and $24 million of losses for the nine months ended October 3, 2026 and September 27, 2025, respectively. The notional values and the net fair values of these outstanding contracts were as follows (in millions):

Credit and Market Risk Management

Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would not have been significantly different as of October 3, 2026 or December 31, 2025.

Note 10 Long-Term Debt

The following table shows the carrying value of the Company’s debt (in millions):

As of October 3, 2026, the future maturities of debt are as follows (in millions):

All borrowings as of October 3, 2026 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $2.6 billion and $2.5 billion as of October 3, 2026 and December 31, 2025, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the fourth quarter of 2026 and the majority due upon maturity on May 25, 2027. The Company has made and may make prepayments in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. As of October 3, 2026, the Term Loan A interest rate was 5.25%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Senior Notes

The Company’s senior unsecured notes (the “Senior Notes”) have a 6.5% fixed interest rate. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year. The Company has the option to or could be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

Revolving Credit Facility

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of October 3, 2026, in addition to the outstanding borrowings, the Company had letters of credit totaling $10 million, which reduced remaining funds available for borrowings under the Revolving Credit Facility to $1,045 million. As of October 3, 2026, the Revolving Credit Facility had an average interest rate of 5.26%. Interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facility

The Company has a Receivables Financing Facility with a borrowing limit of up to $180 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under this facility as secured borrowings. The receivables financing facility matures on March 19, 2027.

As of October 3, 2026, the Company’s Consolidated Balance Sheets included $868 million of gross receivables that were pledged under the facility. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of October 3, 2026, the facility had an average interest rate of 4.96%. Interest is paid monthly on these borrowings.

The Company’s borrowings described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

As of October 3, 2026, the Company was in compliance with all debt covenants.

Note 11 Leases

During the nine months ended October 3, 2026, the Company recorded $44 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations related to extensions of existing leases and commencements of new leases.

Future minimum lease payments under non-cancellable leases as of October 3, 2026 were as follows (in millions):

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Note 12 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

The components of Accrued liabilities are as follows (in millions):

Warranties

The following table is a summary of the Company’s warranty obligations (in millions):

The current and long-term portions of our warranty obligations are included on the Consolidated Balance Sheets within Accrued liabilities and Other long-term liabilities, respectively.

Contingencies

The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

On February 20, 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the executive branch of government to impose tariffs, which invalidated certain import tariffs enacted in 2025. The matter was remanded to the Court of International Trade and the U.S. Customs and Border Protection (“CBP”) for administration of refunds. The Company has sought refunds in accordance with the process prescribed by CBP and has evaluated potential refunds of previously paid IEEPA tariffs under a loss recovery model consistent with the principles of ASC 410‑30, Asset Retirement and Environmental Obligations — Environmental Obligations. In the second quarter of 2026, the Company deemed the refund of all previously paid import tariffs to be probable and recognized a benefit of approximately $73 million within Cost of Sales on the Consolidated Statements of Operations, including $46 million attributed to the CF segment and $27 million attributed to the AVA segment. As of October 3, 2026, the Company received $46 million in cash and $27 million is reflected within Accounts Receivable, net on the Consolidated Balance Sheets.

Note 13 Income Taxes

The Company’s effective tax rate for the three and nine months ended October 3, 2026 was 17.2% and 18.2%, respectively, compared to 36.5% and 24.5% for the three and nine months ended September 27, 2025, respectively. In the current year, the variance from the 21% U.S. federal statutory rate was primarily attributable to U.S. tax credits and tax benefits related to foreign earnings subject to U.S. taxation, partially offset by U.S. state income taxes. In the prior year, the variance from the 21% U.S. federal statutory rate was primarily attributable to taxes related to foreign earnings subject to U.S. taxation resulting from federal tax legislation and U.S. state income taxes, partially offset by the generation of U.S. tax credits and the release of certain Canadian valuation allowance reserves.

Note 14 Earnings Per Share

Basic net earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of diluted common shares outstanding. Diluted common shares outstanding is computed using the Treasury Stock method and, in periods of income, reflects the additional shares that would be outstanding if dilutive share-based compensation awards were converted into common shares during the period.

Earnings per share (in millions, except share data):

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were 2,499 and 138,222 shares that were anti-dilutive for the three and nine months ended October 3, 2026. There were 1,473 and 84,605 shares that were anti-dilutive for the three and nine months ended September 27, 2025, respectively.

Note 15 Accumulated Other Comprehensive (Loss) Income

Stockholders’ equity includes certain items classified as AOCI, including:

•Unrealized gain (loss) on sales hedging which relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note 9, Derivative Instruments for more details.

•Foreign currency translation adjustments which relates to the Company’s non-U.S. subsidiary companies that have designated a functional currency other than the U.S. Dollar. The Company translates the subsidiary functional currency financial statements to U.S. Dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of AOCI.

The changes in each component of AOCI during the nine months ended October 3, 2026 and September 27, 2025 were as follows (in millions):

(1) See Note 9, Derivative Instruments regarding the timing of reclassifications to operating results.

Note 16 Accounts Receivable Factoring

The Company has a Receivables Factoring arrangement, pursuant to which certain receivables originated from the EMEA and Asia-Pacific regions up to a maximum of €150 million are sold to a bank without recourse in exchange for cash. Such transfers are accounted for as sales and the related receivables are removed from the Company’s balance sheet. The Company does not maintain any beneficial interest in the receivables sold. The Company services the receivables on behalf of the bank, but otherwise maintains no significant continuing involvement with respect to the receivables. Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.

During the nine months ended October 3, 2026 and September 27, 2025, the Company received cash proceeds of $388 million and $374 million, respectively, from the sales of accounts receivables under its factoring arrangement. As of October 3, 2026 and December 31, 2025, there were a total of $22 million and $10 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $63 million and $84 million of obligations that were not yet remitted to the bank as of October 3, 2026 and December 31, 2025, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Cash flows from financing activities on the Consolidated Statements of Cash Flows.

Note 17 Segment Information & Geographic Data

The Company’s operations consist oftwo reportable segments that provide complementary offerings to our customers: Connected Frontline (“CF”), which includes mobile computing and related services and software-based offerings; and Asset Visibility & Automation (“AVA”), which includes barcode and card printing and related supplies and sensors, RFID and RTLS offerings, data capture, machine vision offerings, and related services.

The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews operating income to assess segment profitability monthly as well as part of the Company’s budget and forecasting process. The CODM assesses the profitability of each segment relative to its long-term growth objectives in evaluating resource allocation priorities. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Financial information by segment is presented as follows (in millions):

(1)CF and AVA segment operating expenses include Selling and marketing, Research and development, and General and administrative expenses, excluding the amounts classified within Corporate.

(2)CF and AVA segment operating income includes depreciation expense proportionate to each segment’s Net sales.

(3)To the extent applicable, amounts included in Corporate consist of Share-based compensation, Amortization of intangible assets, Acquisition and integration costs, Exit and restructuring costs, as well as certain other non-recurring costs (impairment of goodwill and other intangible assets, and business acquisition purchase accounting adjustments).

Information regarding the Company’s operations by geographic area is contained in the following tables. Net sales amounts are attributed to geographic area based on customer location.

Net sales by region were as follows (in millions)(1):

(1)Certain prior period net sales have been recast to appropriately reflect customer location, with no impact to Zebra’s consolidated net sales.