Q2 2026 Zebra Technologies Corp Earnings Call

Speaker #1: Good day, and welcome to the second quarter 2026 Zebra Technologies earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal "Conference Specialist" by pressing the star key followed by 0.

Speaker #1: After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press * then 1 on your touch-tone phone.

Speaker #1: To withdraw your question, please press * then 2. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to Zebra's second 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.

Speaker #2: 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.

Speaker #1: Good day, and welcome to the second quarter 2026 ZEBRA TECHNOLOGIES earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by 0.

Operator: Good day, welcome to the Q2 2026 Zebra Technologies earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations. Please go ahead.

Speaker #2: During this call, we will reference non-GAAP financial measures as we describe business performance. With reconciliation shown at the end of this slide presentation, and in our earnings press release.

Speaker #1: After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then 1, on your touch-tone phone.

Speaker #2: 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.

Speaker #1: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with perspectives on our second quarter results, our value proposition, and strategic priorities.

Speaker #2: Good morning and welcome to ZEBRA second quarter earnings conference call. This presentation is being simulcast on our website, at investors.zebra.com, and will be archived there for at least one year.

Michael Steele: Good morning, welcome to Zebra Q2 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 reconciliation shown at the end of this 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 Chief Executive Officer, and Nathan Winters, our Chief Financial Officer.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: Now let's turn to slide 3, as I hand it over to Bill.

Speaker #2: During this call, we will reference non-GAAP financial measures as we describe business performance. With reconciliation shown at the end of this slide presentation, and in our earnings press release.

Speaker #3: Thank you, Mike. Good morning, everyone, and thank you for joining us. There are 3 key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability.

Speaker #2: 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.

Speaker #3: This strong performance—together with the continued momentum we are seeing across our business—supports our meaningful raise to the full-year outlook. Second, our results reflect Zebra's unique value proposition.

Speaker #2: This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with perspectives on our second quarter results, our value proposition, and strategic priorities.

Speaker #3: Customers are investing to digitize and automate frontline operations, and are integrated portfolio is central to their progress. Zebra's AI-powered solutions are helping customers globally, to improve outcomes, to enhance productivity, visibility, and real-time decision-making.

Michael Steele: Bill will begin with perspectives on our Q2 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. Bill and Nathan will take your questions. Let's turn to slide three as I hand it over to Bill.

Speaker #2: 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.

Speaker #3: Third, we are executing on our clear strategy to create long-term shareholder value, by driving sustainable growth. Building on our industry leadership and track record of innovation, and enhancing our financial strength and flexibility.

Speaker #2: Now, let's turn to slide 3, as I hand it over to Bill.

Speaker #3: Thank you, Mike. Good morning, everyone, and thank you for joining us. There are three key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability.

Bill Burns: Thank you, Mike. Good morning, everyone, thank you for joining us. There are three key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability. This strong performance, together with the continued momentum we are seeing across our business, supports our meaningful raise to the full year outlook. Second, our results reflect Zebra's unique value proposition. Customers are investing to digitize and automate frontline operations, and our integrated portfolio is central to their progress. Zebra's AI-powered solutions are helping customers globally to improve outcomes, to enhance productivity, visibility, and real-time decision making. Third, we are executing on our clear strategy to create long-term shareholder value by driving sustainable growth. Building on our industry leadership and track record of innovation in enhancing our financial strength and flexibility. With that, let's turn to our Q2 results.

Speaker #3: With that, let's turn to our second quarter results. Turning to slide 4. We delivered results exceeding our outlook. Driven by our team's execution and positive demand trend across our portfolio.

Speaker #3: This strong performance together with the continued momentum we are seeing across our business supports our meaningful raise to the full year outlook. Second, our results reflect ZEBRA's unique value proposition.

Speaker #3: We had strong performance across all segments and regions, with double-digit growth in our retail, manufacturing, and healthcare end markets. Eloot Touch contributed strong profitable growth, with robust customer interest in our combined portfolio of solutions, as we drive synergies with the acquisition.

Speaker #3: Customers are investing to digitize and automate frontline operations, and are integrated portfolio is central to their progress. ZEBRA's AI-powered solutions are helping customers globally to improve outcomes through enhanced productivity, visibility, and real-time decision-making.

Speaker #3: For the quarter, we generated sales of more than $1.5 billion, growing more than 20%, or a 9% on an organic basis from the prior year.

Speaker #3: Third, we are executing on our clear strategy to create long-term shareholder value by driving sustainable growth. Building on our industry leadership and track record of innovation, and enhancing our financial strength and flexibility.

Speaker #3: An adjusted EBITDA margin of $27.7%, including the benefit of $73 million, of tariff recovery, and non-GAAP diluted earnings per share of $6.35, a 76% increase over the prior year.

Speaker #3: With that, let's turn to our second quarter result. Turning to slide 4, we delivered results exceeding our outlook. Driven by our team's execution and positive demand trend across our portfolio.

Bill Burns: Turning to slide four, we delivered results exceeding our outlook, driven by our team's execution and positive demand trends across our portfolio. We had strong performance across all segments and regions, with double-digit growth in our retail, manufacturing, and healthcare end markets. Elo Touch contributed strong, profitable growth with robust customer interest in our combined portfolio of solutions as we drive synergies with the acquisition. For the quarter, we generated sales of more than $1.5 billion, growing more than 20% or 9% on an organic basis from the prior year. An adjusted EBITDA margin of 27.7%, including the benefit of $73 million of tariff recovery, and non-GAAP diluted earnings per share of $6.35, a 76% increase over the prior year.

Speaker #3: Excluding the benefits of tariff recovery, we expanded adjusted EBITDA margin by 2 points, driven by better-than-expected gross margins, as well as operating expense leverage benefiting from our productivity initiatives.

Speaker #3: We had strong performance across all segments and regions, with double-digit growth in our retail, manufacturing, and healthcare end markets. Elou touch contributed strong profitable growth, with robust customer interest in our combined portfolio of solutions as we drive synergies with the acquisition.

Speaker #3: These results demonstrate both the durability of demand for our solutions, and our ability to convert this demand into profitable growth. Our strong performance and financial position also supports our disciplined approach to capital allocation.

Speaker #3: For the quarter, we generated sales of more than $1.5 billion, growing more than 20%, or a 9% on an organic basis from the prior year.

Speaker #3: We repurchased more than 560 million dollars of shares in the first half of the year, following more than 300 million dollars in the fourth quarter.

Speaker #3: An adjusted EBITDA margin of $27.7%, including the benefit of $73 million, of tariff recovery, and non-GAAP diluted earnings per share of $6.35, a 76% increase over the prior year.

Speaker #3: This elevated level of capital return reflects our conviction in Zebra and our long-term value creation opportunity. Our business momentum and progress navigating the memory supply environment gives us confidence in raising our outlook for the full year.

Speaker #3: Excluding the benefits of tariff recovery, we expanded adjusted EBITDA margin by 2 points, driven by better-than-expected gross margins as well as operating expense leverage benefiting from our productivity initiatives.

Bill Burns: Excluding the benefits of tariff recovery, we expanded adjusted EBITDA margin by 2 points, driven by better than expected gross margins, as well as operating expense leverage benefiting from our productivity initiatives. These results demonstrate both the durability of demand for our solutions and our ability to convert this demand into profitable growth. Our strong performance and financial position also supports our disciplined approach to capital allocation. We repurchased more than $560 million of shares in H1, following more than $300 million in Q4. This elevated level of capital return reflects our conviction in Zebra and our long-term value creation opportunity. Our business momentum and progress navigating the memory supply environment gives us confidence in raising our outlook for the full year.

Speaker #3: Moving to slide 5. I want to share some additional details on our key end markets. In retail, e-commerce, and convenience stores were bright spots.

Speaker #3: These results demonstrate both the durability of demand for our solutions and our ability to convert this demand into profitable growth. Our strong performance and financial position also support our disciplined approach to capital allocation.

Speaker #3: Driven by consumers' elevated expectations for faster delivery and expanded fulfillment options. Our recently acquired Eloot Touch Business delivered strong growth benefiting from self-service trend.

Speaker #3: We repurchased more than 560 million dollars of shares in the first half of the year, following more than 300 million dollars in the fourth quarter.

Speaker #3: We are also encouraged by customer interest in our Zebra frontline AI suite, and new devices that can best deliver these solutions. In transportation logistics, sales were flat on a strong prior year compare, with relative outperformance in third-party logistics and warehousing.

Speaker #3: This elevated level of capital return reflects our conviction in ZEBRA and our long-term value creation opportunity. Our business momentum and progress navigating the memory supply environment gives us confidence in raising our outlook for the full year.

Speaker #3: Our AI software solutions and recently launched portfolio of AI-optimized mobile computers has positioned us well with industry-leading companies who recognize Zebra's ability to bring increased productivity and service levels to their operations.

Speaker #3: Moving to slide 5, I want to share some additional details on our key end markets. In retail, e-commerce, and convenience stores were bright spots.

Bill Burns: Moving to slide five, I want to share some additional details on our key end markets. In retail, e-commerce and convenience stores were bright spots, driven by consumers' elevated expectations for faster delivery and expanded fulfillment options. Our recently acquired Elo Touch business delivered strong growth benefiting from self-service trends. We are also encouraged by customer interest in our Zebra Frontline AI Suite and new devices that can best deliver these solutions. In transportation logistics, sales were flat on a strong prior year compare, with relative outperformance in third-party logistics and warehousing. Our AI software solutions and recently launched portfolio of AI-optimized mobile computers has positioned us well with industry-leading companies who recognize Zebra's ability to bring increased productivity and service levels to their operations. As we look ahead to 2027, we have a robust multi-year pipeline of large deployments.

Speaker #3: As we look ahead to 2027, we have a robust multi-year pipeline of large deployments. In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers' need for increased visibility across their operations.

Speaker #3: Driven by consumers elevated expectations for faster delivery and expanded fulfillment options. A recently acquired Elou Touch Business delivered strong growth benefiting from self-service trend.

Speaker #3: We are also encouraged by customer interest in our ZEBRA frontline AI suite and new devices that can best deliver these solutions. In transportation logistics, sales were flat on a strong prior year compare, with relative outperformance in third-party logistics and warehousing.

Speaker #3: Electronics and pharmaceuticals were particularly strong in the quarter, machine vision has also outperformed, as our team has been executing well on growth initiatives as we invest in the business.

Speaker #3: Healthcare was our highest growth end market in Q2, where we realized particularly strong performance in mobile computing as customers equipped more caregivers with enterprise-grade solutions.

Speaker #3: Our AI software solutions and recently launched portfolio of AI-optimized mobile computers has positioned us well with industry-leading companies who recognize ZEBRA's ability to bring increased productivity and service levels to their operations.

Speaker #3: We are excited about our opportunity to 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.

Speaker #3: As we look ahead to 2027, we have a robust multi-year pipeline of large deployments. In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers' need for increased visibility across their operations.

Speaker #3: Our solutions capture data at the frontline, turn that data into insights, and enable customers to take action in real time. AI strengthened its ongoing process by enabling faster decision-making, greater automation, and continuous workflow improvement.

Bill Burns: In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers need for increased visibility across their operations. Electronics and pharmaceuticals were particularly strong in the quarter. Machine vision has also outperformed, as our team has been executing well on growth initiatives as we invest in the business. Healthcare was our highest growth end market in Q2. We realized particularly strong performance in mobile computing as customers equip more caregivers with enterprise-grade solutions. We're excited about our opportunity to improve the patient care journey. Now turning to slide six. We continue to build on Zebra's unique competitive positioning as the foundation for intelligent operation. Our solutions capture data at the frontline, turn that data into insights, and enable customers to take action in real time. AI strengthens this ongoing process by enabling faster decision-making, greater automation, and continuous workflow improvement.

Speaker #3: Electronics and pharmaceuticals were particularly strong in the quarter, machine vision has also outperformed, as our team has been executing well on growth initiatives as we invest in the business.

Speaker #3: Benefits include increased productivity, and better experiences for frontline workers, as well as consumers. We are deeply embedded in our customers' workflows and understand how work gets done on the frontline.

Speaker #3: Healthcare was our highest growth end market in Q2, we realized particularly strong performance in mobile computing as customers equipped more caregivers with enterprise-grade solutions.

Speaker #3: This allows us to serve as trusted partners to our customers, and to co-innovate with them the digitized, automate, and deploy AI. With our integrated portfolio, we meet customers where they are today in their automation journey, while also continue to expand our value as their operations evolve.

Speaker #3: We're excited about our opportunity to 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.

Speaker #3: Our solutions capture data at the frontline turn that data into insights and enable customers to take action in real time. AI strengthened its ongoing process by enabling faster decision-making, greater automation, and continuous workflow improvement.

Speaker #3: Turning to slide 7. Our results reflect the progress we are making in executing on our three strategic priorities: on our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve.

Speaker #3: Benefits include increased productivity, and better experiences for frontline workers as well as consumers. We are deeply embedded in our customers' workflows and understand how work gets done on the frontline.

Bill Burns: Benefits include increased productivity and better experiences for frontline workers as well as consumers. We are deeply embedded in our customers' workflows and understand how work gets done on the frontline. This allows us to serve as trusted partners to our customers and to co-innovate with them to digitize, automate, and deploy AI. With our integrated portfolio, we meet customers where they are today in their automation journey. We'll also continue to expand our value as their operations evolve. Turning to slide seven. Our results reflect the progress we are making in executing on our three strategic priorities. On our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve.

Speaker #3: We believe both connected frontline and asset visibility and automation have a 5 to 7 percent organic sales growth profile over a cycle, and are confident in our ability to deliver.

Speaker #3: This allows us to serve as trusted partners to our customers and to co-innovate with them to digitize, automate, and deploy AI. With our integrated portfolio, we meet customers where they are today in their automation journey, while also continuing to expand our value as their operations evolve.

Speaker #3: Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in their early stages of their automation journey.

Speaker #3: Our growth prospects are augmented by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers. We're also driving efficiency initiatives in our business to enhance profitability which include operating a French leverage through cost discipline, including our previously announced restructuring actions that were substantially completed in the second quarter.

Speaker #3: Turning to slide 7, our results reflect the progress we are making in executing on our three strategic priorities. On our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve.

Speaker #3: We believe both Connected Frontline and Asset Visibility and Automation have a 5% to 7% organic sales growth profile over a cycle, and are confident in our ability to deliver.

Bill Burns: We believe both Connected Frontline and Asset Visibility & Automation have a 5% to 7% organic sales growth profile over a cycle and are confident in our ability to deliver. Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in the early stages of their automation journey. Our growth prospects are augmented by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers. We're also driving efficiency initiatives in our business to enhance profitability, which include operating expense leverage through cost discipline, including our previously announced restructuring actions that were substantially completed in Q2, accelerating software development by deploying new AI tools, and enhancing our go-to-market model to improve market coverage and efficiency.

Speaker #3: Accelerating software development by deploying new AI tools and enhancing our go-to-market model to improve market coverage and efficiency. We also continue to make progress on our second priority, building on our market leadership by advancing innovation.

Speaker #3: Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in their early stages of their automation journey.

Speaker #3: We are seeing early traction in our new line of enterprise mobile computers and wearables, that embed RFID and optimized AI processing capabilities. As well as new RFID and 3D machine vision solutions.

Speaker #3: Our growth prospects are augmented by investments in RFID, machine vision, and AI, which enhance our differentiation and expand our relevance with customers. We're also driving efficiency initiatives in our business to enhance profitability, which include operating expense leverage through cost discipline—including our previously announced restructuring actions that were substantially completed in the second quarter.

Speaker #3: 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.

Speaker #3: Accelerating software development by deploying new AI tools and enhancing our go-to-market model to improve market coverage and efficiency. We also continue to make progress on our second priority, building on our market leadership by advancing innovation.

Speaker #3: Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a 35 billion dollar serve market.

Bill Burns: We also continue to make progress on our second priority, building on our market leadership by advancing innovation. We're seeing early traction in our new line of enterprise mobile computers and wearables that embed RFID and optimized AI processing capabilities, as well as new RFID and 3D machine vision solutions. 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 solutions while consistently returning capital to shareholders. Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a $35 billion served market.

Speaker #3: Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow. Not just a single use case, creating a meaningful competitive advantage.

Speaker #3: We're seeing early traction in our new line of enterprise mobile computers and wearables that embed RFID and optimized AI processing capabilities. As well as new RFID and 3D machine vision solutions.

Speaker #3: Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. And we have a resilient financial model with strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value.

Speaker #3: 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.

Speaker #3: I will now turn the call over to results progress in navigating memory supply and our improved 2026 outlook.

Speaker #3: Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition supported by trends in automation, digitization, and AI across a 35 billion dollar serve market.

Speaker #2: Thank you, Bill. Let's start with the P&L on slide 10. In Q2, total company sales increased 20.4% or 9.2% on an organic basis. We exceeded the high end of our guidance range primarily due to our ability to secure increased memory supply as well as continued momentum across the business in favorable pricing.

Speaker #3: Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow—not just a single use case—creating a meaningful competitive advantage.

Bill Burns: Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow, not just a single use case, creating a meaningful competitive advantage. Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. We have a resilient financial model with strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value. I will now turn the call over to Nathan to review our Q2 financial results, progress in navigating memory supply, and our improved 2026 outlook.

Speaker #2: Our connected frontline segment grew nearly 26%, including the recent ELO acquisition or 7.5% on an organic basis, led by mobile computing. Our asset visibility and automation segment grew 11.4%, led by printing and machine vision.

Speaker #3: Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. And we have a resilient financial model which strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value.

Speaker #2: We realized solid performance across all our regions, North America sales increased 9%, led by our retail, manufacturing, and healthcare end markets. The Mia sales grew 7%, with broad-based growth across Europe.

Speaker #3: I will now turn the call over to Nathan to review our Q2 financial results progress in navigating memory supply and our improved 2026 outlook.

Speaker #2: Partially offset by continued softness in the Middle East. Asia-Pacific sales increased 13%, led by China, Korea, and Southeast Asia. In Latin America sales grew 15%, led by Mexico and Brazil.

Speaker #1: Thank you, Bill. Let's start with the P&L on slide 10. In Q2, total company sales increased 20.4% or 9.2% on an organic basis. We exceeded the high end of our guidance range primarily due to our ability to secure increased memory supply as well as continued momentum across the business in favorable pricing.

Nathan Winters: Thank you, Bill. Let's start with the P&L on slide 10. In Q2, total company sales increased 20.4%, or 9.2% on an organic basis. We exceeded the high end of our guidance range, primarily due to our ability to secure increased memory supply, as well as continued momentum across the business and favorable pricing. Our Connected Frontline segment grew nearly 26%, including the recent Elo acquisition, or 7.5% on an organic basis, led by mobile computing. Our Asset Visibility & Automation segment grew 11.4%, led by printing and machine vision. We realized solid performance across all our regions. North America sales increased 9%, led by our retail, manufacturing, and healthcare end markets. EMEA sales grew 7%, with broad-based growth across Europe, partially offset by continued softness in the Middle East. Asia Pacific sales increased 13%, led by China, Korea, and Southeast Asia.

Speaker #2: Adjusted gross margin improved 540 basis points to 53.3%, largely due to the 73 million dollar IEPA tariff recovery that was not included in our outlook.

Speaker #1: Our connected frontline segment through nearly 26% including the recent ELO acquisition or 7.5% on an organic basis led by mobile computing. Our asset visibility and automation segment grew 11.4% led by printing and machine vision.

Speaker #2: As well as favorable foreign currency exchange. Additionally, we fully mitigated a 20 million dollar increase in memory costs through strong price realization. Gross margin outperformance, along with 170 basis point improvement in operating expense leverage enabled us to expand adjusted EBITDA margin by 7.1 points to 27.7%.

Speaker #1: We realized solid performance across all our regions. North America sales increased 9% led by our retail, manufacturing, and healthcare end markets. EMEA sales grew 7% with broad-based growth across Europe.

Speaker #2: Non-GAAP diluted earnings per share were $6.35, a 76% year-over-year increase, significantly exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 11.

Speaker #1: Partially offset by continued softness in the Middle East. Asia Pacific sales increased 13%, led by China, Korea, and Southeast Asia. Latin America sales grew 15%, led by Mexico and Brazil.

Nathan Winters: Latin America sales grew 15%, led by Mexico and Brazil. Adjusted gross margin improved 540 basis points to 53.3%, largely due to the $73 million IEEPA tariff recovery that was not included in our outlook, as well as favorable foreign currency exchange. Additionally, we fully mitigated a $20 million increase in memory costs through strong price realization. Gross margin outperformance, along with 170 basis point improvement in operating expense leverage, enabled us to expand adjusted EBITDA margin by 7.1 points to 27.7%. Non-GAAP diluted earnings per share were $6.35, a 76% year-over-year increase, significantly exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 11. Year to date, we generated $361 million of free cash flow, ending the Q2 with a modest debt leverage ratio of 1.9 times and $925 million of credit capacity.

Speaker #2: Year to date, we generated 361 million dollars of free cash flow, ending the second quarter with a modest debt leverage ratio of 1.9 times and 925 million dollars of credit capacity.

Speaker #1: Adjusted gross margin improved 540 basis points to 53.3% largely due to the 73 million dollar AIPA tariff recovery that was not included in our outlook.

Speaker #2: We have been deploying capital consistent with our allocation priorities repurchasing 568 million dollars of stock in the first half of the year. Turning to slide 12.

Speaker #1: As well as favorable foreign currency exchange. Additionally, we fully mitigated a $20 million increase in memory costs through strong price realization. Gross margin outperformance, along with a 170 basis point improvement in operating expense leverage, enabled us to expand adjusted EBITDA margin by 7.1 points to 27.7%.

Speaker #2: Our team has a track record of managing through disruptions by being proactive, maintaining close supplier partnerships, and using our scale to create flexibility in the supply chain.

Speaker #2: We are successfully navigating the current memory cost and supply environment and have line of sight what we need to support our outlook. Suppliers are delivering on their commitments enabling our strong sales growth.

Speaker #1: Non-GAAP diluted earnings per share were $6.35, a 76% year over year increase, significantly exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 11.

Speaker #2: We continue to work proactively across multiple fronts including direct supplier co-planning, alternative sourcing options, and transitions to higher density memory components where capacity is expected to increase into 2027.

Speaker #1: Year to date, we generated 361 million dollars of free cash flow ending the second quarter with a modest debt leverage ratio of 1.9 times and 925 million dollars of credit capacity.

Speaker #2: Additionally, the component pricing trajectory for the year is tracking in line with our expectations. Our cost position remains favorable, relative to spot market rates given our direct supplier relationships.

Speaker #1: We have been deploying capital consistent with our allocation priorities, repurchasing $568 million of stock in the first half of the year. Turning to slide 12, our team has a track record of managing through disruptions by being proactive, maintaining close supplier partnerships, and using our scale to create flexibility in the supply chain.

Nathan Winters: We have been deploying capital consistent with our allocation priorities, repurchasing $568 million of stock in the H1 of the year. Turning to slide 12. Our team has a track record of managing through disruptions by being proactive, maintaining close supplier partnerships, and using our scale to create flexibility in the supply chain. We are successfully navigating the current memory cost and supply environment and have line of sight to what we need to support our outlook. Suppliers are delivering on their commitments, enabling our strong sales growth. We continue to work proactively across multiple fronts, including direct supplier co-planning, alternative sourcing options, and transitions to higher density memory components, where capacity is expected to increase into 2027. Additionally, the component pricing trajectory for the year is tracking in line with our expectations. Our cost position remains favorable relative to spot market rates, given our direct supplier relationships.

Speaker #2: Looking ahead, we are committed to protecting profitability by taking additional price and other operational actions as necessary. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 17 to 20 percent.

Speaker #1: We are successfully navigating the current memory cost and supply environment and have line of sight into what we need to support our outlook. Suppliers are delivering on their commitments, enabling our strong sales growth.

Speaker #2: Including approximately 10 and a half points of contribution from business acquisitions and favorable effects. Our third 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 $4.70 and $4.90.

Speaker #1: We continue to work proactively across multiple fronts, including direct supplier co-planning, alternative sourcing options, and transitions to higher-density memory components, where capacity is expected to increase into 2027.

Speaker #1: Additionally, the component pricing trajectory for the year is tracking in line with our expectations. Our cost position remains favorable relative to spot market rates, given our direct supplier relationships.

Speaker #2: For between 14 and 16 percent. Reflecting a three-point increase at the midpoint from our prior outlook. Our guide factors in year-to-date outperformance, momentum across the business including manufacturing and machine vision, previously announced price increases related to memory, and an eight-point favorable impact from acquisitions and effects.

Speaker #1: Looking ahead, we are committed to protecting profitability by taking additional price and other operational actions as necessary. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 17 to 20 percent.

Nathan Winters: Looking ahead, we are committed to protecting profitability by taking additional price and other operational actions as necessary. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 17% to 20%, including approximately 10 and a half points of contribution from business acquisitions and favorable FX. Our Q3 adjusted EBITDA margin is expected to be approximately 22%, and non-GAAP diluted earnings per share are expected to be in the range of $4.70 and $4.90. For the full year, we expect sales growth between 14% and 16%, reflecting a 3-point increase at the midpoint from our prior outlook. Our guide factors in year-to-date outperformance, momentum across the business, including manufacturing and machine vision, previously announced price increases related to memory, and an 8-point favorable impact from acquisitions and FX.

Speaker #2: Our full year adjusted EBITDA margin is now expected to be between 23.5% and 24%. And non-GAAP diluted earnings per share is expected to be between $20.75 and $21.25.

Speaker #1: Including approximately 10 and a half points of contribution from business acquisitions and favorable effects. Our third 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 $4.70 and $4.90.

Speaker #2: Our full year guide continues to reflect full mitigation of the approximately 120 million dollar memory cost headwind. We've been driving this through targeted price increases and other direct memory initiatives.

Speaker #2: As well as net savings from our restructuring actions volume leverage and effects favorability. Free cash flow for the year is now expected to be at least $1 billion.

Speaker #1: For the full year, we expect sales growth between 14 and 16 percent, reflecting a 3-point increase at the midpoint from our prior outlook. Our guidance factors in year-to-date outperformance, momentum across the business, including manufacturing and machine vision, previously announced price increases related to memory, and an 8-point favorable impact from acquisitions and FX.

Speaker #2: Which reflects a conversion rate of approximately 100%. We are continuing to optimize our working capital levels balanced with our supply chain resilience objectives. Please reference additional modeling assumptions on slide 13.

Speaker #2: With that, I will turn the call back to Bill.

Speaker #1: Our full year adjusted EBITDA margin is now expected to be between 23.5% and 24%. And non-GAAP diluted earnings per share is expected to be between $20.75 and $21.25.

Speaker #1: Thank you, Nathan. Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full year.

Nathan Winters: Our full-year adjusted EBITDA margin is now expected to be between 23.5% and 24%, and non-GAAP diluted earnings per share is expected to be between $20.75 and $21.25. Our full-year guide continues to reflect full mitigation of the approximately $120 million memory cost headwind. We've been driving this through targeted price increases and other direct memory initiatives, as well as net savings from our restructuring actions, volume leverage, and FX favorability. Free cash flow for the year is now 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. Please reference additional modeling assumptions on slide 13. With that, I will turn the call back to Bill.

Speaker #1: Customers are leveraging Zebra's AI-powered portfolio solutions to improve productivity, visibility, and decision-making. And remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.

Speaker #1: Our full year guide continues to reflect full mitigation of the approximately 120 million dollar memory cost headwind. We've been driving this through targeted price increases and other direct memory initiatives.

Speaker #1: As well as net savings from our restructuring actions volume leverage and effects favorability. Free cash flow for the year is now expected to be at least $1 billion.

Speaker #3: Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

Speaker #1: Which reflects a conversion rate of approximately 100%. We are continuing to optimize our working capital levels balanced with our supply chain resilience objectives. Please reference additional modeling assumptions on slide 13.

Speaker #4: We will now begin the question and answer session. To ask a question, you may press star then one on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker #4: To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. And our first question comes from Keith Hosum from North Coast Research.

Speaker #1: With that, I will turn the call back to Bill.

Speaker #2: Thank you, Nathan. Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full year.

Bill Burns: Thank you, Nathan. Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full year. Customers are leveraging Zebra's AI-powered portfolio solutions to improve productivity, visibility, and decision-making. We remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.

Speaker #4: Please go ahead.

Speaker #1: Great. Thanks, guys. Appreciate it and good morning. Congratulations on this great quarter. Hey, hey, Bill, as we're kind of thinking about, you know, the rest of the year into 2027, now the past two quarters, this quarter and last quarter, you referenced some successful deployments expected in 2027 in the TNL segment.

Speaker #2: Customers are leveraging ZEBRA's AI-powered portfolio solutions to improve productivity, visibility, and decision making. And remain focused on driving long-term profitable growth and shareholder value.

Speaker #1: Can you give us a little bit more color on that? Again, I'm asking for 2027 guidance, but it sounds like you're confident in 2027's growing based on some of the bookings that you have for just a little any color you can provide on that would be great.

Speaker #2: I will now turn the call back to Mike.

Speaker #1: Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

Michael Steele: Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

Speaker #3: We will now begin the question and answer session. To ask a question, you may press star then one on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker #5: Yeah, Keith, I would say that the, you know, excellent results certainly in the quarter overall with great execution, you know, by the team. So I'll start there.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Keith Housum from Northcoast Research. Please go ahead.

Speaker #5: When we look at the, you know, vertical markets, clearly, you know, we saw that TNL cycling, you know, difficult comparison from last year, just high comparis.

Speaker #3: To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Keith Hosum from North Coast Research.

Speaker #5: But, you know, we still saw solid performance, you know, across that vertical market with, you know, growth across third-party logistics and warehousing in the segment.

Speaker #3: Please go ahead.

Speaker #2: Great. Thanks, guys. Appreciate it and good morning. Congratulations on this great quarter. Hey, Bill, as we're kind of thinking about the rest of the year into 2027, now the past two quarters this quarter and last quarter you referenced some successful deployments expected in 2027 in the TNL segment.

Keith Housum: Great. Thanks, guys, appreciate it, and good morning. Congratulations on this great quarter. Hey, Bill, as we're kind of thinking about the rest of the year into 2027, now the past two quarters, this quarter, last quarter, you referenced some successful deployments expected in 2027 in the T&L segment. Can you give us a little bit more color on that? Again, I'm not asking for 2027 guidance, it sounds like your confidence in 2027 is growing based on some of the bookings that you have for that. Just any color you can provide on that would be great.

Speaker #5: So we feel good about transportation logistics and the investments they're making in technology despite the compare from a year ago. I'd say that as you referenced, really a robust multi-year pipeline of large deployments coming across TNL really focused on last mile delivery and, you know, our customers and our differentiation coming from our new mobile devices, which add RFID and AI, you know, capabilities to those devices are, you know, clearly giving us a competitive advantage in the market.

Speaker #2: Can you give us a little bit more color on that? Again, I'm not asking for 2027 guidance, but it sounds like your confidence in 2027 is growing based on some of the bookings that you have for that.

Speaker #2: Just any color you can provide on that would be great.

Speaker #4: Yeah, Keith, I would say that the excellent results, certainly in the quarter overall, were due to great execution by the team. So I'll start there. When we look at the vertical markets, clearly we saw that TNL is cycling a difficult comparison to last year—just high compares.

Bill Burns: Yeah, Keith, I would say that the excellent results certainly in the quarter, overall with great execution by the team. I'll start there. When we look at the vertical markets, clearly, saw that T&L cycling, difficult comparison last year, just high compares. Still saw solid performance across that vertical market with growth across third-party logistics and warehousing in the segment. We feel good about transportation and logistics and the investments they're making in technology, despite the compare from a year ago. I'd say that, as you referenced, really a robust multi-year pipeline of large deployments coming across T&L, really focused on last mile delivery and our customers and our differentiation coming from our new mobile devices, which add RFID and AI capabilities to those devices are clearly giving us a competitive advantage in the market.

Speaker #5: The deployment of RFID continues across transportation logistics as we see that investment, you know, continuing. And I'd say that, you know, their focus really on worker productivity, how do they drive operational efficiency, how do they increase visibility of parcels across, their network.

Speaker #4: But it still saw solid performance across that vertical market with growth across third-party logistics and warehousing in the segment. So we feel good about transportation logistics and the investments they're making in technology despite the compare from a year ago.

Speaker #5: But we see over, you know, starting in '27, you know, a strong pipeline of opportunities for, you know, refreshes within transportation logistics. And we continue the conversation with customers and are ever confident in that happening.

Speaker #4: I'd say that as you referenced, really a robust multi-year pipeline of large deployments coming across TNL really focused on last mile delivery and our customers and our differentiation coming from our new mobile devices which add RFID and AI capabilities to those devices are clearly giving us a competitive advantage in the market.

Speaker #1: Great. I appreciate that. And then, en, you know, you made some positive commentary in terms of machine vision this quarter. Any color you can comment on in terms of the progress that you've made over the past year and a half in that and how you're thinking about that for the rest of the year?

Speaker #5: Yeah, I think just like TNL, you know, we saw strength in manufacturing, you know, so the while TNL's been a strong segment, you know, manufacturing continues strength as well.

Speaker #4: The deployment of RFID continues across transportation logistics, as we see that investment continuing. And I'd say that they're focused really on worker productivity—how do they drive operational efficiency, how do they increase visibility of parcels across their network.

Bill Burns: The deployment of RFID continues across transportation logistics, as we see that investment continuing. I'd say that they're focused really on worker productivity, how do they drive operational efficiency, how do they increase visibility of parcels across their network. We see over, starting in 2027, a strong pipeline of opportunities for refreshes within transportation logistics, and we continue those conversation with customers and are ever confident in that happening.

Speaker #5: So we're seeing, you know, the drive again for increased visibility across the supply chain. electronics and pharmaceuticals certainly a strength in the quarter in manufacturing that that driving really outperformance in machine vision with, you know, the team executing well within machine vision really we've aligned, our business unit, our go-to-market teams to really focus on, you know, specific opportunities within manufacturing.

Speaker #4: But we see over starting in '27 a strong pipeline of opportunities for refreshes within transportation logistics. And we continue those conversation with customers and are ever confident in that happening.

Speaker #5: We've talked about our increased focus on manufacturing over the last couple of quarters and that alignment with our regional sales teams is really driving, you know, our value proposition into the marketplace, which is resonating with, you know, not just, our sales teams but our partners and our customers as well.

Speaker #2: Great, I appreciate that. And then, you made some positive commentary in terms of machine vision this quarter. Any color you can comment on in terms of the progress that you've made over the past year and a half in that, and how you're thinking about that for the rest of the year?

Keith Housum: Great. I appreciate that. You made some positive commentary in terms of machine vision this quarter. Any color you can comment on in terms of the progress that you've made over the past year and a half in that, and how you think about that for the rest of the year?

Speaker #4: Yeah, I think just like TNL, we saw a strength in manufacturing. So the while TNL has been a strong segment, manufacturing continues strength as well.

Bill Burns: Yeah, I think just like T&L, we saw strength in manufacturing. While T&L's been a strong segment, manufacturing continues strength as well. We're seeing the drive again for increased visibility across the supply chain. Electronics and pharmaceuticals certainly a strength in the quarter in manufacturing, and then that driving really outperformance in machine vision with the team executing well within machine vision. Really, we've aligned our business unit, our go-to-market teams to really focus on specific opportunities within manufacturing. We've talked about our increased focus on manufacturing over the last couple of quarters, and that alignment with our regional sales teams is really driving our value proposition into the marketplace, which is resonating with not just our sales teams, but our partners and our customers as well.

Speaker #5: We continue to enhance the portfolio of solutions and machine vision and, you know, we're seeing, an excitement by the team and then, you know, strong, growth.

Speaker #4: So we're seeing the drive again for increased visibility across the supply chain. Electronics and pharmaceuticals certainly a strength in the quarter in manufacturing. And then that driving really outperformance in machine vision with the team executing well within machine vision really we've aligned our business unit, our go-to-market teams to really focus on specific opportunities within manufacturing.

Speaker #5: I mean, you know, there's lots of examples, you know, using AI for optical character recognition, for instance, in places like outside of manufacturing logistics and inside of manufacturing.

Speaker #5: You know, things like food and beverage. So there's lots of examples of places where we're focused and we're winning. we've seen strong performance from Photo Neo.

Speaker #5: So, you know, acquisition in the space to continue to, you know, enhance our offerings, both organically and inorganically in machine vision. So we like this space.

Speaker #4: We've talked about our increased focus on manufacturing over the last couple of quarters. And that alignment with our regional sales teams is really driving our value proposition into the marketplace which is resonating with not just our sales teams but our partners and our customers as well.

Speaker #5: we're seeing growth across the business in manufacturing. We're seeing it, diversifying the business and our team's focus is, is playing out as we'd expect a driving growth for us.

Speaker #4: The next question comes from Tommy Mall from Stevens. Please go ahead.

Speaker #4: We continue to enhance the portfolio of solutions and machine vision. And we're seeing an excitement by the team and then strong growth. I mean, there's lots of examples.

Bill Burns: We continue to enhance the portfolio of solutions and machine vision, and we're seeing an excitement by the team and then strong growth. There's lots of examples, using AI for optical character recognition, for instance, in places like outside of manufacturing, logistics, and inside of manufacturing, things like food and beverage. There's lots of examples of places where we're focused and we're winning. We've seen strong performance from Photoneo, so acquisition in the space to continue to enhance our offerings both organically and inorganically in machine vision. We like this space. We're seeing growth across the business in manufacturing. We're seeing it diversifying the business, and our team's focus is playing out as we'd expect, to driving growth for us.

Speaker #6: Good morning and thank you for taking my questions.

Speaker #1: Hey, Tommy. Good morning.

Speaker #6: Bill, it sounds like in second quarter part of the, part of the reason you exceeded the top line expectation was the memory supply was a little better than expected.

Speaker #4: Using AI for optical character recognition, for instance, in places like outside of manufacturing logistics and inside of manufacturing, things like food and beverage. So there's lots of examples of places where we're focused and we're winning.

Speaker #6: So my question is, to what extent is your guidance for 3Q and, and the second half still constrained by that memory supply? And to what extent do you have visibility into 2027 on that improving?

Speaker #4: We've seen strong performance from photo neo. So acquisition in the space to continue to enhance our offerings both organically and inorganically in machine vision.

Speaker #6: Thank you.

Speaker #4: So, we like this space. We're seeing growth across the business in manufacturing. We're seeing it diversifying the business, and our team's focus is playing out as we'd expect and driving growth for us.

Speaker #1: Yeah, I'll start and then maybe hand over to Nathan. I would say that, you know, memory continues to be a, a dynamic, and challenging environment.

Speaker #1: I'd say that our team's executed really well both, you know, through the first half year and, and especially. Quarter here. So we're closely with our suppliers to secure the, the memory we needed to get, you know, above the top end of our guide.

Speaker #3: The next question comes from Tommy Mull from Stevens. Please go ahead.

Operator: The next question comes from Tommy Moll from Stephens. Please go ahead.

Speaker #5: Good morning and thank you for taking my questions.

Tommy Moll: Good morning, and thank you for taking my questions.

Speaker #1: we had told you that our demand was at that level and that really it, it was, you know, being gated by, memory constraints. We're confident, you know, in mitigating the memory challenges, you know, to achieve our, second half outlook.

Speaker #2: Hey, Tommy. Good morning.

Bill Burns: Hey, Tommy. Morning.

Speaker #5: Bill, it sounds like in the second quarter, part of the reason you exceeded the top-line expectation was that memory supply was a little better than expected.

Tommy Moll: Bill, it sounds like in Q2, part of the reason you exceeded the top-line expectation was the memory supply was a little better than expected. My question is, to what extent is your guidance for 3Q and H2 still constrained by that memory supply? To what extent do you have visibility into 2027 on that improving? Thank you.

Speaker #5: So my question is to what extent is your guidance for 3Q and the second half still constrained by that memory supply? And to what extent do you have visibility into 2027 on that improving?

Speaker #1: So, you know, demand signals in the demand we're seeing from our customers is above what we're, you know, guiding to and, you know, there is still constraints out there, but the team has done you know, an amazing job of, of really secure memory and I'll let Nate take you through the details, but they're doing a lot to make sure that we can deliver for our customers, you know, not just in second quarter, but, you know, through the second half of year and, and into 2027.

Speaker #5: Thank you.

Speaker #2: Yeah, I'll start and then maybe hand over to Nathan. I would say that memory continues to be a dynamic and challenging environment. I'd say that our teams executed really well both through the first half year and especially in second quarter here.

Bill Burns: Yeah, I'll start and then maybe hand over to Nathan. I would say that memory continues to be a dynamic and challenging environment. I'd say that our teams executed really well both through H1 of the year and especially in Q2 here, to work closely with our suppliers to secure the memory we needed to get above the top end of our guide. We had told you that our demand was at that level and that really it was being gated by memory constraints. We're confident in mitigating the memory challenges to achieve our H2 outlook. Demand signals and the demand we're seeing from our customers is above what we're guiding to. There is still constraints out there, but the team has done an amazing job of really securing memory.

Speaker #3: Yeah, Tom, we just had a few things, you know, we talked about this before in terms of the, the different mitigation strategies and actions that teams are taking.

Speaker #3: and we do expect. As, as Bill mentioned, a modest increase in memory, in the second half, and but the team's really working hard to meet the unconstrained demand, which again is near the high end of our, our guidance range.

Speaker #2: So we worked closely with our suppliers to secure the memory we needed to get above the top end of our guide. We had told you that our demand was at that level, and that really it was being gated by memory constraints.

Speaker #3: I think that the work we're doing with the direct supplier co-planning, is really paying out, working on the supply pipeline, not just for the next three to six, but, but actually the next 18 months.

Speaker #2: We're confident in mitigating the memory challenges to achieve our second half outlook. The demand signals we're seeing from our customers are above what we're guiding to.

Speaker #3: and then a lot of work with our product teams on qualifying, new suppliers, new different chip types. we have 10 we're working with 10 different, new suppliers.

Speaker #2: And there is still constraints out there, but the team has done an amazing job of really secure memory. And I'll let Nate take you through the details, but they're doing a lot to make sure that we can deliver for our customers not just in second quarter, but through the second half of year and into 2027.

Speaker #3: and the goal is to have five to seven, qualified suppliers for each of our primary memory types. So I think, you know, all those actions we're taking, you know, gives us confidence that we'll be able to, continue to, secure the volume we need to support our customers into 20 2027.

Bill Burns: I'll let Nate take you through the details, but they're doing a lot to make sure that we can deliver for our customers, not just in Q2, but through H2 of the year and into 2027.

Speaker #3: and the growth that's required.

Speaker #1: Yeah, Tom, we just had a few things we talked about this before in terms of the different mitigation strategies and actions that teams are taking and we do expect as Bill mentioned a modest increase in memory in the second half and but the teams really working hard to meet the unconstrained demand which again is near the high end of our guidance range.

Nathan Winters: Yeah, Tommy, just to add a few things. We talked about this before in terms of the different mitigation strategies and actions that teams are taking. We do expect, as Bill mentioned, a modest increase in memory in H2. The team's really working hard to meet the unconstrained demand, which again, is near the high end of our guidance range. I think that the work we're doing with the direct supplier co-planning is really paying out, working on the supply pipeline, not just for the next three to six months, but actually the next 18 months. A lot of work with our product teams on qualifying new suppliers, new different chip types. We're working with 10 different new suppliers, and the goal is to have five to seven qualified suppliers for each of our primary memory types.

Speaker #6: Nathan, a follow-up for you on the share repurchase activity. pretty robust through the first half. what can you tell us about any plans to continue to deploy capital there in second half of this year?

Speaker #6: Thank you.

Speaker #3: Yeah, you know, if you just start with the overall capital allocation. I mean, we ended the quarter, at one, 1.9, debt leverage. strong cash flow expected for the year at a billion dollars.

Speaker #1: I think that the work we're doing with the direct supplier co-planning is really paying out working on the supply pipeline not just for the next three to six months but actually the next 18 months and then a lot of work with our product teams on qualifying new suppliers new different chip types.

Speaker #3: the balance sheet's in great shape. as we mentioned on the call, we repurchased 568 million dollars through the second quarter. but we've continued to be active here, in the early part of the third quarter given what we believe is still an attractive stock valuation.

Speaker #1: We have 10 we're working with 10 different new suppliers and the goal is to have five to seven qualified suppliers for each of our primary memory types.

Speaker #3: Our full year EPS guide assumes that we'll do an additional 150 million of share repurchase, in the back half. So it's called, you know, 700 million, for the year.

Speaker #1: So I think all those actions we’re taking give us confidence that we’ll be able to continue to secure the volume we need to support our customers into 2027 and the growth that’s required.

Nathan Winters: I think all those actions we're taking gives us confidence that we'll be able to continue to secure the volume we need to support our customers into 2027 and the growth that's required.

Speaker #3: I think we plan to take a bit more of a balanced approach here in the second half. To maintain some flexibility, but again, have the option to continue to purchase more if we think it's the stock still remains in an attractive price.

Speaker #5: Nathan, a follow-up for you on the share repurchase activity. Pretty robust through the first half. What can you tell us about any plans to continue to deploy capital there in second half of this year?

Tommy Moll: Nathan, a follow-up for you on the share repurchase activity. Pretty robust through H1. What can you tell us about any plans to continue to deploy capital there in H2 of this year? Thank you.

Speaker #4: Our next question comes from Quinn Frederickson from Baird. Please go ahead.

Speaker #1: Hey, good morning, guys.

Speaker #3: Morning, Quinn.

Speaker #5: Thank you.

Speaker #1: Just, just on, memory, you talked about supply. I'm wondering, when you might get visibility into next year's, component costs from your key suppliers. I know you're on contract, not spot pricing.

Speaker #1: Yeah, if you just start with the overall capital allocation. I mean, we ended the quarter at 1.9 debt leverage. Strong cash flow expected for the year at a billion dollars.

Nathan Winters: Yeah. If you just start with the overall capital allocation, we ended the quarter at 1.9 debt leverage. Strong cash flow expected for the year at $1 billion. The balance sheet's in great shape. As we mentioned on the call, we repurchased $568 million through Q2. We've continued to be active here in the early part of Q3, given what we believe is still an attractive stock valuation. Our full-year EPS guide assumes that we'll do an additional $150 million of share repurchase in H2, so call it $700 million for the year. I think we plan to take a bit more of a balanced approach here in H2 to maintain some flexibility. Again, have the option to continue to purchase more if we think the stock still remains at an attractive price.

Speaker #1: The balance sheet's in great shape. As we mentioned on the call, we repurchased $568 million through the second quarter. But we've continued to be active here in the early part of the third quarter, given what we believe is still an attractive stock valuation.

Speaker #1: So when, when do you typically get some visibility, int-into, memory costs for next year?

Speaker #3: Yeah, Quinn, I'll take that. You know, you know, one, from a cost, I think just to start with this year, the, the market pricing is in line with our, our prior guide.

Speaker #1: Our full year EPS guide assumes that we'll do an additional 150 million of share repurchase in the back half. So it's called 700 million for the year.

Speaker #3: So, you know, as we kind of laid out the, the year and the guidance, the, the price price increases that we had planned at the beginning of the year are largely playing out as expected.

Speaker #1: I think we plan to take a bit more of a balanced approach here in the second half. To maintain some flexibility. But again, have the option to continue to purchase more if we think it's the stock still remains in an attractive price.

Speaker #3: And as you would expect, there's a quite a variability across the different memory types. And the, the, the direct purchasing with those memory suppliers is, is really playing, is a really big benefit in terms of avoiding the spot market as much as we can.

Speaker #3: Our next question comes from Quinn Frederickson from Baird. Please go ahead.

Operator: Our next question comes from Quinn Fredrickson from Baird. Please go ahead.

Speaker #3: We typically get pricing, you know, at the beginning, you know, three months in advance. Or every three months. but I'd say up to this point, you know, our key suppliers have been pretty transparent around where they expect the price to go, out into the future while it's not set.

Speaker #2: Hey, good morning, guys.

Quinn Fredrickson: Hey, good morning, guys.

Speaker #6: Morning, Quinn.

Bill Burns: Morning, Quinn.

Speaker #2: Just on memory, you talked about supply. I'm wondering when you might get visibility into next year's component costs from your key suppliers. I know you're on contract, not spot pricing.

Quinn Fredrickson: Just on memory, you talked about supply. I'm wondering when you might get visibility into next year's component costs from your key suppliers. I know you're on contract, not spot pricing. When do you typically get some visibility into memory costs for next year?

Speaker #3: So I think the team has a pretty good handle on not only what we expect for the next three to six months, but where that trajectory is expected to be as we go out into 2027.

Speaker #2: So when do you typically get some visibility into memory costs for next year?

Speaker #3: And, and that's what we're going to continue to monitor. And I'd say our commitment, just like it was this year, is to continue to take the necessary actions to, to mitigate that exposure in the P&L, whether that's through our own increased pricing actions, or other productivity initiatives to offset and continue to ensure we expand margins as we go into '27.

Speaker #1: Yeah, Quinn, I'll take that. One, from a cost, I think just to start with this year, the market pricing is in line with our prior guide.

Nathan Winters: Hey, Quinn. I'll take that. One, from a cost, I think just to start with this year, the market pricing is in line with our prior guides. As we laid out the year and the guidance, the pricing and the price increases that we had planned at the beginning of the year are largely playing out as expected. As you would expect, there's quite a variability across the different memory types, and the direct purchasing with those memory suppliers is a really big benefit in terms of avoiding the spot market as much as we can. We typically get pricing at the beginning of three months in advance, or every three months. I'd say up to this point, our key suppliers have been pretty transparent around where they expect the price to go out into the future, while it's not set.

Speaker #1: So, as we kind of laid out the year and the guidance, the pricing and the price increases that we have planned at the beginning of the year are largely playing out as expected.

Speaker #1: Thanks, Nathan. And then, you, you gave guidance for third quarter and the full year here. So it looks like organic growth for fourth quarter is implied in, about the 8% range.

Speaker #1: And as you would expect, there's quite a variability across the different memory types. And the direct purchasing with those memory suppliers is really playing is a really big benefit in terms of avoiding the spot market as much as we can.

Speaker #1: Can you just discuss how you think about what's embedded around year-end customer budget flush or large deals at this stage based on your conversations with customers?

Speaker #1: We typically get pricing at the beginning of three months in advance. Or every three months. But I'd say up to this point, our key suppliers have been pretty transparent around where they expect the price to go out into the future while it's not set.

Speaker #3: Yeah, I'd say if you look, you know, again, we have a robust pipeline here as we go into the second half. So I think the conversations have continued to be productive.

Speaker #1: So I think the team has a pretty good handle on not only what we expect for the next three to six months, but where that trajectory is expected to be as we go out into 2027.

Speaker #3: you know, similar to what they are in prior years. We don't t-typically get that full indication until we get to later part of the third quarter and, and early part of the fourth quarter.

Nathan Winters: I think the team has a pretty good handle on not only what we expect for the next three to six months, where that trajectory is expected to be as we go out into 2027, and that's what we're going to continue to monitor. I'd say our commitment, just like it was this year, is to continue to take the necessary actions to mitigate that exposure in the P&L, whether that's through our own increased pricing actions or other productivity initiatives to offset and continue to ensure we expand margins as we go into 2027.

Speaker #3: So, we feel good about the position we have for the fourth quarter in terms of the overall pipeline. And, and today, somewhat, Q4's capped by just on, the memory supply we expect or have confidence in achieving here in the fourth quarter.

Speaker #1: And that's what we're going to continue to monitor. And I'd say our commitment, just like it was this year, is to continue to take the necessary actions to mitigate that exposure in the P&L, whether that's through our own increased pricing actions or other productivity initiatives to offset and continue to ensure we expand margins as we go into '27.

Speaker #3: So, again, but the, the team's actively working to secure that pipeline, get the visibility we need back to the supply chain team so we can work, with our suppliers to, to meet that demand, which, again, we were able to do here in the second quarter.

Speaker #2: Thanks, Nathan. And then you gave guidance for third quarter and the full year here. So it looks like organic growth for fourth quarter is implied in about the 8% range.

Quinn Fredrickson: Thanks, Nathan. You gave guidance for Q3 and the full year here. Looks like organic growth for Q4 is implied in about the 8% range. Can you just discuss how you think about what's embedded around year-end customer budget flush or large deals at this stage based on your conversations with customers?

Speaker #4: And our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead.

Speaker #2: Can you just discuss how you think about what's embedded around year-end customer budget flush or large deals at this stage based on your conversations with customers?

Speaker #6: Hey, good morning, everyone. Thanks for taking my question. Why don't it good morning. Hey, why don't I check on, you know, your, your sales have just picked up nicely in Q2.

Speaker #1: Yeah, I'd say, if you look again, we have a robust pipeline here as we go into the second half. So I think the conversations have continued to be productive.

Nathan Winters: Yeah. If you look, again, we have a robust pipeline here as we go into the H2. I think the conversations have continued to be productive, similar to what they are in prior years. We don't typically get that full indication till we get to later part of Q3 and earlier part of Q4. We feel good about the position we have for Q4 in terms of the overall pipeline. Today, somewhat, Q4 is capped by just on the memory supply we expect or have confidence in achieving here in Q4. The team's actively working to secure that pipeline, get the visibility we need back to the supply chain team so we can work with our suppliers to meet that demand, which again, we were able to do here in Q2.

Speaker #6: but your Q, Q3 guidance implies some slight deceleration. I mean, still very strong, but, wondering what's informing that guidance. And then similar for similarly for Q3 margins, you had a nice, seeded expectations by quite a bit, even ex tariff refunds.

Speaker #1: Similar to what they are in prior years, we don't typically get that full indication until we get to later part of the third quarter and early part of the fourth quarter.

Speaker #1: So we feel good about the position we have for the fourth quarter in terms of the overall pipeline. And today, somewhat, Q4 is capped by just the memory supply we expect or have confidence in achieving here in the fourth quarter.

Speaker #6: But then your Q3 margins, imply a slight step down. So I'm just wondering if there's something going on with Nick's or timing of, of demand or timing of, of orders coming through or, or how do you how would you characterize that?

Speaker #1: So again, the team's actively working to secure that pipeline and get the visibility we need back to the supply chain team, so we can work with our suppliers to meet that demand—which, again, we were able to do here in the second quarter.

Speaker #3: Yeah, look, I'd maybe just start with the, you know, kind of the overall outlook. I think we have obviously confidence in the guide given the first half performance, you know, a lot of the, the back half is still somewhat predicated around the memory capacity, that we expect.

Speaker #3: And our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead.

Operator: Our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead.

Speaker #5: Hey, good morning, everyone. Thanks for taking my question. Good morning. I wanted to check on your sales—they've just picked up nicely in Q2.

Speaker #3: So to a certain degree, the, the growth rates are somewhat, you know, just somewhat based on just prior year compares and where we expect the, the supply to play out and gives us confidence in, in that guide.

Andrew Buscaglia: Hey, good morning, everyone. Thanks for taking my question.

Nathan Winters: Morning, Andrew.

Andrew Buscaglia: Good morning. Hey. Wanted to check on, your sales have just picked up nicely in Q2. Your Q3 guidance implies some slight deceleration. I mean, still very strong, wondering what's informing that guidance. Similarly for Q3 margins. You had a nice exceeded expectations by quite a bit, even ex tariff refunds. Your Q3 margins imply a slight step down. I'm just wondering if there's something going on with mix or timing of demand, or timing of orders coming through, or how would you characterize that?

Speaker #5: But your Q3 guidance implies some slight deceleration I mean, still very strong, but wondering what's informing that guidance. And then similarly for Q3 margins, you had a nice seeded expectations by quite a bit, even X tariff refunds.

Speaker #3: So, if you look at the Q3 sales guide of 17 to 20 percent, 8% organic at the midpoint, which includes about two points of pricing.

Speaker #3: Again, we feel, feel great about, you know, the, that ramp and the trajectory and the underlying demand supporting, supporting the business. And I think on the from an EBITDA rate perspective, if you look the step down from Q2 to Q3, obviously, a, a primary driver that is removing the IPA refund here in the Q2 results, and there's about a point degradation, coming from higher memory costs.

Speaker #5: But then your Q3 margins imply a slight step-down. So I'm just wondering if there's something going on with Nick's or timing of demand or timing of orders coming through or how would you characterize that?

Speaker #3: So we do expect memory costs, to increase as we go from Q2 to Q3. we were able to fully mitigate, the memory step up in the second quarter with our own pricing actions.

Speaker #1: Yeah, look, maybe just start with kind of the overall outlook. I think we have obviously confidence in the guy given the first half performance, a lot of the back half is still somewhat predicated around the memory capacity.

Nathan Winters: Yeah, look, I'd maybe just start with the kind of the overall outlook. I think we have, obviously, confidence in the guide given the H1 performance. A lot of the H2 is still somewhat predicated around the memory capacity that we expect. To a certain degree, the growth rates are somewhat based on just prior year compares and where we expect the supply to play out and gives us confidence in that guide. If you look at the Q3 sales guide of 17% to 20%, 8% organic at the midpoint, which includes about 2 points of pricing. Again, we feel great about that ramp and the trajectory and the underlying demand supporting the business.

Speaker #3: but we do anticipate a slight degradation, as we go into the third quarter, which was which was always planned out as part of our implied guide, at the beginning of the year.

Speaker #1: That we expect. So to a certain degree, the growth rates are somewhat just somewhat based on just prior year compares and where we expect the supply to play out and gives us confidence in that guide.

Speaker #3: So, operationally, excluding memory, it's, it's somewhat in line sequentially, in a similar level of, of mix, as we go from the second to third quarter.

Speaker #1: So if you look at the Q3 sales guide of '17 to 20%, 8% organic at the midpoint, which includes about two points of pricing.

Speaker #6: Okay, got it. And, you know, your raised prices, this year, obviously to help mitigate things. I think you, you indicated you can raise prices again if you want to.

Speaker #1: Again, we feel great about that ramp and the trajectory and the underlying demand supporting the business. And I think from an EBITDA rate perspective, if you look the step-down from Q2 to Q3, obviously a primary driver that is removing the IPA refund here in the Q2 results and there's about a point degradation coming from higher memory costs.

Speaker #6: I guess I guess what gives you that confidence and how, how quickly can you implement it and why, you know, what do you what would you need to see if you had to move forward with, with further price increases?

Nathan Winters: I think from an EBITDA rate perspective, if you look at the step down from Q2 to Q3, obviously a primary driver that is removing the IEEPA refunds here in the Q2 results, and there's about 1 point degradation coming from higher memory costs. We do expect memory costs to increase as we go from Q2 to Q3. We were able to fully mitigate the memory step-up in the Q2 with our own pricing actions. We do anticipate a slight degradation as we go into the Q3, which was always planned out as part of our implied guide at the beginning of the year. Operationally, excluding memory, it's somewhat in line sequentially in a similar level of mix as we go from the Q2 to Q3.

Speaker #3: Yeah, I'd say, you know, Andrew would prefer not to raise price. that's our, our certainly our, our strong preference. but we've, you know, had to do that based on the significant increase in, in memory.

Speaker #1: So, we do expect memory costs to increase as we go from Q2 to Q3. We were able to fully mitigate the memory step-up in the second quarter with our own pricing actions.

Speaker #3: We believe that and have confidence that if, you know, we need to, we can see that, pricing flow through. And, we've been able to demonstrate that both in our business and, in the ELO acquisition, you know, as well on both sides.

Speaker #1: But we do anticipate a slight degradation as we go into the third quarter, which was always planned out as part of our implied guide at the beginning of the year.

Speaker #1: So operationally, excluding memory, it's somewhat in line sequentially, at a similar level of mix, as we go from the second to the third quarter.

Speaker #3: So our preference is not to raise price, but, as we need to do that is, is memory pricing continues to increase, you know, we'll do that just like other suppliers have had to do.

Speaker #5: Okay, got it. And your raise prices this year, obviously to help mitigate things. I think you indicated you can raise prices again if you want to.

Andrew Buscaglia: Okay. Got it. You raised prices this year, obviously to help mitigate things. I think you indicated you can raise prices again if you want to. I guess what gives you that confidence and how quickly can you implement it, and what would you need to see if you had to move forward with further price increases?

Speaker #3: So I think that our preference is not, but that's kind of which is where things are at across the industry. There's just no way not to, to raise price given the, you know, significant increase in memory, pricing today.

Speaker #5: I guess, what gives you that confidence, and how quickly can you implement it? And what would you need to see if you had to move forward with further price increases?

Speaker #6: Yeah. Okay. Thank you.

Speaker #4: The next question comes from Joe Giordano from TD Cowan. Please go ahead.

Speaker #2: Yeah, I'd say, Andrew, we'd prefer not to raise price. That's certainly our strong preference. But we've had to do that based on the significant increase in memory.

Nathan Winters: Yeah, I'd say, Andrew, we'd prefer not to raise price. That's certainly our strong preference. We've had to do that based on the significant increase in memory. We believe that, and have confidence that if we need to, we can see that pricing flow through. We've been able to demonstrate that both in our business and in the Elo acquisition as well on both sides. Our preference is not to raise price, but as we need to do that is if memory pricing continues to increase, we'll do that just like other suppliers have had to do. I think that our preference is not but that's kind of just where things are at across the industry. There's just no way not to raise price given the significant increase in memory pricing today.

Speaker #7: Hey, guys. Good morning. Look, I know we've I know we've talked about this a lot. I just want to be very clear. Like, and correct me if I'm wrong in how I was thinking about it, but last quarter, I think you characterized the revenue guidance as like at the high end as kind of unachievable in light of current memory availability at that time.

Speaker #2: We believe that, and have confidence that if we need to, we can see that pricing flow through. And we've been able to demonstrate that both in our business and in the ELO acquisition as well, on both sides.

Speaker #7: Now, I hear you raised a high end. Like, is the high end of your revenue guidance achievable in the current memory availability framework?

Speaker #2: So our preference is not to raise price, but as we need to do that is memory pricing continues to increase. We'll do that just like other suppliers have had to do.

Speaker #3: Yeah, it's I'd say, you know, Joe, that I think that the position we took in Q2 is, you know, the same that we've taken for Q3 and the full year guide, which is the demand signals today from our customers and the investments they're making across each of our vertical markets and across you know, each of our regions, really leads us to the high end of our outlook for Q3 and for the full year.

Speaker #2: So I think that our preference is not, but that's kind of where things are at across the industry. There's just no way not to raise price given the significant increase in memory pricing today.

Speaker #5: Yeah, okay. Thank you.

Andrew Buscaglia: Yeah. Okay. Thank you.

Speaker #3: The next question comes from Joe Giordano from TD Cowan. Please go ahead.

Operator: The next question comes from Joe Giordano from TD Cowen. Please go ahead.

Speaker #4: Hey guys, good morning. Look, I know we've talked about this a lot. I just want to be very clear. And correct me if I'm wrong in how I was thinking about it, but last quarter, I think you characterized the revenue guidance at the high end as kind of unachievable in light of current memory availability at that time.

Speaker #3: And the, you know, midpoint of that outlook factors in the potential supply constraints associated with, you know, memory that we're seeing. So I think it's the same approach we had in Q2.

Joe Giordano: Hey, guys. Morning.

Nathan Winters: Morning, Joe.

Joe Giordano: Look, I know we've talked about this a lot. I just want to be very clear, and correct me if I'm wrong in how I was thinking about it. Last quarter, I think you characterized the revenue guidance at the high end as kind of unachievable in light of current memory availability at that time. Now, here you raised the high end. Is the high end of your revenue guidance achievable in the current memory availability framework?

Speaker #3: We've now taken for Q3 and full year. the team executed, you know, very well delivering for our customers in Q2, which has got us to the, you know, above the high end of our range.

Speaker #4: Now, I hear you raised the high end. Is the high end of your revenue guidance achievable in the current memory availability framework?

Speaker #3: but, you know, in second half, we're continuing to see, challenging and, you know, dynamic environment around memory. So, the prudent thing for us to do is to the demand signals take us to the high end, but our guide is really, you know, at the midpoint of our guide that really factors in the potential supply constraints that we'd expect to see in second half.

Speaker #2: Yeah, I'd say Joe, that I think that the position we took in Q2 is the same that we've taken for Q3 and the full-year guide, which is the demand signals today from our customers and the investments they're making across each of our vertical markets and across each of our regions really leads us to the high end of our outlook for Q3 and for the full year.

Nathan Winters: Yeah. I'd say, Joe, that I think that the position we took in Q2 is the same that we've taken for Q3 and the full year guide, which is the demand signals today from our customers and the investments they're making across each of our vertical markets and across each of our regions

Speaker #3: But obviously, both, both were significant steps up from where we were last quarter, both in which I think is a response to what we see as the underlying demand.

Speaker #3: and the great work the team's doing to secure additional supply. So I think both, as, as Bill mentioned, that's playing out in the guidance, but I think the, the positive note is that both were substantially higher than we were three months ago by the by the great work from the team.

Bill Burns: Really leads us to the high end of our outlook for Q3 and for the full year. The midpoint of that outlook factors in the potential supply constraints associated with memory that we're seeing. I think it's the same approach we had in Q2, we've now taken for Q3 and full year. The team executed very well delivering for our customers in Q2, which has got us to above the high end of our range. In H2, we're continuing to see a challenging and dynamic environment around memory. The prudent thing for us to do is the demand signals take us to the high end, our guide is really at the midpoint of our guide that really factors in the potential supply constraints that we'd expect to see in H2.

Speaker #2: And the midpoint of that outlook factors in the potential supply constraints associated with memory that we're seeing. So, I think it's the same approach we had in Q2.

Speaker #7: is an LTA available to you guys if you wanted to pursue that?

Speaker #2: We've now taken for Q3 and full year. The team executed very well, delivering for our customers in Q2, which has got us to the above the high end of our range.

Speaker #3: You know, we've had discussions regarding, supply agreements with, with various of our, our memory suppliers. But our, our priority up to this point's really been on qualifying new suppliers and memory types.

Speaker #2: But in second half, we're continuing to see the challenging and dynamic environment around memory. So the prudent thing for us to do is to the demand signals take us to the high end, but our guide is really at the midpoint of our guide that really factors in the potential supply constraints that we'd expect to see in second half.

Speaker #3: along with working on that visibility, both here in the short and long term. And, and that's been playing out. So while those discussions are ongoing, we don't think it's limiting us or, or preventing us from, you know, achieving it.

Speaker #3: And if, if those were necessary to re you know, to obtain increased supply, we absolutely would, but, but hasn't been necessary to this.

Speaker #1: But obviously, both were significant steps up from where we were last quarter, both in which I think is a response to what we see as the underlying demand.

Nathan Winters: Obviously, both were significant steps up from where we were last quarter, which I think is a response to what we see as the underlying demand, and the great work the team's doing to secure additional supply. I think both, as Bill mentioned, that's playing out in the guidance, I think the positive note is that both were substantially higher than we were three months ago by the great work from the team.

Speaker #4: The next question comes from Piyush Alosthi from Citi. Please go ahead.

Speaker #1: And the great work the team's doing to secure additional supply. So I think both as Bill mentioned, that's playing out in the guidance, but I think the positive note is that both were substantially higher than we were three months ago by the great work from the team.

Speaker #1: Good morning, guys, and thanks for taking my questions. just, just following up on, like, some of the other questions asked on the guidance raise, I mean, you are raising the organic growth expectations for the full year for 2026.

Speaker #4: Is an LTA available to you guys if you wanted to pursue that?

Speaker #1: Like, can you provide some clarity on how we should be thinking about the two segments? Like, connected frontline has some me-memory constraints, so I understand that, but AVA had a really strong quarter, not sure if there's, like, any one-time item to call out there, but do you expect, like, AVA should lead that growth, or do you think, like, CF could, you know, more meaningfully contribute as we progress through the year?

Joe Giordano: Is an LTA available to you guys if you wanted to pursue that?

Speaker #1: Yeah, we've had discussions regarding supply agreements with various of our memory suppliers. But our priority up to this point has really been on qualifying new suppliers and memory types, along with working on that visibility both here in the short and long term.

Nathan Winters: We've had discussions regarding supply agreements with various of our memory suppliers, but our priority up to this point has really been on qualifying new suppliers and memory types, along with working on that visibility, both here in the short and long term, and that's been playing out. While those discussions are ongoing, we don't think it's limiting us or preventing us from achieving it. If those were necessary to obtain increased supply, we absolutely would, but it hasn't been necessary to this point.

Speaker #1: And that's been playing out. So while those discussions are ongoing, we don't think it's limiting us or preventing us from achieving it. And if those were necessary to obtain increased supply, we absolutely would.

Speaker #3: Yeah, I think we see, you know, strong growth across, you know, both the segments. So asset billion automation really you know, focused on, you know, insights into assets we've been our customers.

Speaker #1: But it hasn't been necessary to do this.

Speaker #3: So think of inventory as an example in, in retail. So print, data capture, machine vision, RFID are all part of that portfolio of solutions.

Speaker #3: The next question comes from Piyush Alasthi from Citi. Please go ahead.

Operator: The next question comes from Piyush Aloti from Citi. Please go ahead.

Speaker #5: Good morning, guys, and thanks for taking my questions. Just following up on some of the other questions asked on the guidance raise—I mean, you are raising the organic growth expectations for the full year for 2026.

Piyush Aloti: Good morning, guys, thanks for taking my questions. Just following up on some of the other questions asked on the guidance raise. You are raising the organic growth expectations for the full year for 2026. Can you provide some clarity on how we should be thinking about the two segments? Like Connected Frontline has some memory constraints, so I understand that, but AVA had a really strong quarter. Not sure if there's any one-time item to call out there, but do you expect AVA should lead that growth, or do you think CF could more meaningfully contribute as we progress through the year?

Speaker #3: We. In Q2 saw strong growth in print, again, driven by strength in manufacturing, for example. But we also had, you know, strong growth rates in, in volume and run rate for our data capture solutions, our supplies business continues to be strong.

Speaker #5: Can you provide some clarity on how we should be thinking about the two segments? Connected Frontline has some memory constraints, so I understand that, but AVA had a really strong quarter. I'm not sure if there's any one-time item to call out there, but do you expect AVA should lead that growth, or do you think CF could more meaningfully contribute as we progress through the year?

Speaker #3: Strong quarter, very strong quarter in machine vision and, and RFID deployments continue. So I think strength in asset visibility certainly in, in automation segment, but also connected frontline.

Speaker #3: So I think that, you know, we're clearly seeing that our customers are deploying, you know, more devices in the hands of more frontline workers to really improve productivity, drive collaboration, you know, how do they enhance their interaction, you know, associate tab with the, you know, customers on the on the frontline.

Speaker #2: Yeah, I think we see strong growth across both the segments. So asset billion automation really focused on insights into assets within our customers. So think of inventory as an example in retail.

Bill Burns: I think we see strong growth across both segments. Asset Visibility & Automation really focused on insights into assets within our customers. Think of inventory as an example in retail. Print, data capture, machine vision, RFID are all part of that portfolio of solutions. We, in Q2, saw strong growth in print, again, driven by strength in manufacturing, for example. We also had strong growth rates in volume and run rate for our data capture solutions. Our supplies business continues to be strong. Strong quarter, very strong quarter in machine vision, and RFID deployments continue. I think strength in Asset Visibility, certainly in automation segment, but also Connected Frontline. I think that we're clearly seeing that our customers are deploying more devices in the hands of more frontline workers to really improve productivity, drive collaboration.

Speaker #3: And, you know, that segment, of course, is mobile computing, but also, our ELO segment fits into that, you know, software and our AI solutions.

Speaker #2: So, print, data capture, machine vision, and RFID are all part of that portfolio of solutions. We, in Q2, saw strong growth in print, again driven by strengthened manufacturing, for example.

Speaker #3: And we're seeing, you know, mobile computing next-generation of those devices adding AI capabilities and, you know, RFID next-generation wearables, you know, devices optimized with the processing power necessary to deploy AI, both our AI suite and deployments our customers are looking to make.

Speaker #2: But we also had strong growth rates in volume and run rate for our data capture solutions. Our supplies business continues to be strong. It was a strong quarter—a very strong quarter—in machine vision, and RFID deployments continue.

Speaker #3: ELO, we had a strong performance, you know, in, in second quarter and expect that to continue into second half year with momentum with the ELO acquisition, you know, with the two sales teams working closely together and positioning those solutions across our customer base.

Speaker #2: So I think strengthened asset visibility, certainly, and the automation segment, but also connected frontline. So I think that we're clearly seeing that our customers are deploying more devices in the hands of more frontline workers to really improve productivity, drive collaboration, and enhance the interaction associates have with customers on the frontline.

Speaker #3: So I'd say you expect growth in both segments, in, in second half year and feel good about the demand across you know, we're seeing across the portfolio, across the regions, across the different vertical markets.

Bill Burns: How do they enhance their interaction associates have with the customers on the frontline? That segment, of course, is mobile computing, but also our Elo segment fits into that, software and our AI solutions. We're seeing mobile computing, next generation of those devices, adding AI capabilities and RFID, next generation wearables, devices optimized with the processing power necessary to deploy AI, both our Zebra Frontline AI Suite and deployments our customers are looking to make. Elo, we had a strong performance in Q2 and expect that to continue into H2 with momentum with the Elo acquisition, with the two sales teams working closely together and positioning those solutions across our customer base. I'd say we expect growth in both segments in H2 and feel good about the demand we're seeing across the portfolio, across the regions, across the different vertical markets.

Speaker #3: Truly broad-based growth.

Speaker #2: And that segment, of course, is mobile computing, but also our ELO segment fits into that software and our AI solutions. We're seeing mobile computing—the next generation of those devices—adding AI capabilities and RFID; next-generation wearables; devices optimized with the processing power necessary to deploy AI, both our AI suite and the deployments our customers are looking to make.

Speaker #1: Very helpful. and I think, like, I get the point that it's, it's very broad-based, but it seems like EMEA has been a bit of a laggard.

Speaker #1: I mean, there was decent growth this quarter, but, like and you mentioned, like, Middle East impact there, but can you elaborate on the underlying demand environment across, like, different business verticals in the in, in the EMEA EMEA region specifically?

Speaker #1: And as you think of, like, 2026, like, based on the conversations with your customers there, like, how do you think, like, Europe would contribute to the organic sales growth construct?

Speaker #2: ELO, we had a strong performance in the second quarter and expect that to continue into the second half of the year, with momentum from the ELO acquisition. With the two sales teams working closely together and positioning those solutions across our customer base.

Speaker #3: Yeah, I mean, you know, EMEA was slightly behind the other, other regions in, in, I think, if you go back a couple of quarters ago, you know, EMEA growth was, a bit challenged, but I think some of that was, was tougher compared from the prior year.

Speaker #2: So, I'd say that we expect growth in both segments in the second half of the year and feel good about the demand we're seeing across the portfolio, across the regions, and across the different vertical markets.

Speaker #3: We're seeing resilient demand. You know, across Europe, obviously, as you said, you know, softness in the Middle East, right, is the, you know, the geopolitical challenges there.

Speaker #2: Truly broad-based growth.

Speaker #3: relative strength, I'd say, in, in retail, manufacturing, healthcare across you know, EMEA, you know, double-digit growth, you know, in, in machine vision, our supplies business, RFID, you know, print, mobile computing.

Bill Burns: Truly broad-based growth.

Speaker #5: Very helpful. And I think I get the point that it's very broad-based, but it seems like EMEA has been a bit of a laggard.

Piyush Aloti: Very helpful. I think I get the point that it's very broad-based, but it seems like EMEA has been a bit of a laggard. There was decent growth this quarter, and you mentioned a Middle East impact there, but can you elaborate on the underlying demand environment across different business verticals in the EMEA region specifically? As you think of 2026, based on the conversations with your customers there, how do you think Europe would contribute to the organic sales growth construct?

Speaker #5: I mean, there was decent growth this quarter, but and you mentioned Middle East impact there, but can you elaborate on the underlying demand environment across different business verticals in the EMEA region specifically?

Speaker #3: So I think we're seeing, you know, strong growth that was it was 7% for the quarter, and I think that, you know, slightly below the other regions of, of North America and, and then certainly we saw a lot of strength in Asia-Pacific and Latin America, but I don't think we have any concerns about EMEA.

Speaker #5: And as you think of 2026, based on the conversations with your customers there, how do you think Europe would contribute to the organic sales growth construct?

Speaker #3: We feel good about what they're seeing, and it's been pretty resilient given, all the things happening across the European market.

Speaker #2: Yeah, I mean, EMEA was slightly behind the other regions. And I think to go back a couple of quarters ago, EMEA growth was a bit challenged, but I think some of that was tougher compared from the prior year.

Bill Burns: Yeah, EMEA was slightly behind the other regions. I think if you go back a couple of quarters ago, EMEA growth was a bit challenged, but I think some of that was tougher comparison the prior year. We're seeing resilient demand across Europe. Obviously, as you said, softness in the Middle East is the geopolitical challenges there. Relative strength, I'd say in retail, manufacturing, healthcare across EMEA. Double-digit growth in machine vision, our supplies business, RFID, print, and mobile computing. I think we're seeing strong growth. It was 7% for the quarter, and I think did slightly below the other regions of North America. Certainly we saw a lot of strength in Asia Pacific and Latin America. I don't think we have any concerns about EMEA. We feel good about what they're seeing, and it's been pretty resilient given all the things happening across the European market.

Speaker #4: The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.

Speaker #2: We're seeing resilient demand. Across Europe, obviously, as you said, softness in the Middle East, right, is the geopolitical challenges there. Relative strength, I'd say in retail manufacturing, healthcare across EMEA, double-digit growth in machine vision, our supplies business, RFID, print, mobile computing.

Speaker #2: Great. Thanks. a couple of questions for me, just in terms of on ELO, just where do you feel like you got, you know, clearly the business is continuing to do quite well, but just in terms of kind of revenue synergies or selling into the base, you know, where are you in terms of kind of exploiting some of those, natural overlaps?

Speaker #2: And then, maybe on the healthcare side, y-you know, you noted very strong kind of traction there over the last quarter. Just trying to get a sense of, you know, are those new customers, are those new project types, just where is that, kind of traction coming from?

Speaker #2: So, I think we're seeing strong growth. It was 7% for the quarter, and I think that's slightly below the other regions of North America. Then, certainly, we saw a lot of strength in Asia-Pacific and Latin America.

Speaker #2: Thank you.

Speaker #2: But I don't think we have any concerns about EMEA. We feel good about what they're seeing. And it's been pretty resilient given all the things happening across the European market.

Speaker #3: Yeah, I'll start with ELO. I would say that, you know, excited about certainly the performance and, and the work around integration as, as you mentioned, it really reaffirms our conviction that, you know, in the acquisition of ELO and the combined capabilities between our two portfolios, that, you know, it really gives us another dimension on the frontline, which is really the, the focus areas there are, you know, modernizing, you know, point of sale, certainly continuing to streamline self-service, and then you know, payment, the payment portfolio at ELO.

Speaker #3: The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.

Operator: The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.

Speaker #6: Great. Thanks. A couple of questions for me, just in terms of on ELO, just where do you feel like you got clearly the business is continuing to do quite well, but just in terms of kind of revenue synergies or selling into the base, where are you in terms of kind of exploiting some of those natural overlaps?

Meta Marshall: Great. Thanks. A couple of questions for me. Just in terms of, on Elo, where do you feel like? Clearly, the business is continuing to do quite well, but just in terms of revenue synergies or selling into the base, where are you in terms of exploiting some of those natural overlaps? Maybe on the healthcare side, you noted very strong kind of traction there over the last quarter. Just trying to get a sense of, are those new customers? Are those new project types? Just where is that kind of traction coming from? Thank you.

Speaker #3: So I think, you know, we saw growth above our expectations in Q2, strong pipeline of opportunities driven by our sales teams working closely together and growing that commercial pipeline, but also, progress we're making on synergies about $10 million identified so far.

Speaker #6: And then maybe on the healthcare side, you noted very strong kind of traction there over the last quarter. Just trying to get a sense of are those new customers, are those new project types, just where is that kind of traction coming from?

Speaker #3: But the real you know, synergies come as, as you pointed out, around the commercial side of things. We're expanding in the new geographies that, ELO didn't have a presence in before.

Speaker #6: Thank you.

Speaker #2: I'll start with ELO. I would say that I'm excited about, certainly, the performance and the work around integration, as you mentioned. It really reaffirms our conviction that, in the acquisition of ELO and the combined capabilities between our two portfolios, it really gives us another dimension on the frontline. Really, the focus areas there are modernizing point of sale, certainly continuing to streamline self-service, and then the payment portfolio at ELO.

Bill Burns: Yeah, I'll start with Elo. I would say that, excited about certainly the performance and the work around integration, as you mentioned. It really reaffirms our conviction that in the acquisition of Elo and the combined capabilities between our two portfolios that really gives us another dimension on the front line, which is really the focus areas there are modernizing point of sale, certainly continuing to streamline self-service, and then the payment portfolio at Elo. I think we saw growth above our expectations in Q2, strong pipeline of opportunities driven by our sales teams working closely together and growing that commercial pipeline, but also progress we're making on synergies, about $10 million identified so far. The real synergies come, as you pointed out, around the commercial side of things. We're expanding in the new geographies that Elo didn't have a presence in before.

Speaker #3: We've got named accounts across the globe in which we're, you know, focused on joint selling efforts and those are beginning to, to pay off, with strong pipeline of opportunities.

Speaker #3: You know, early wins and, you know, continuing to position the entire broad portfolio. I'd say in healthcare, you know, highest growth vertical in the quarter and, and you see this, you know, repeatedly from time to time here in, in, healthcare, you know, strong performance in mobile computing.

Speaker #2: So I think we saw growth above our expectations in Q2, strong pipeline of opportunities driven by our sales teams working closely together and growing that commercial pipeline, but also progress we're making on synergies about $10 million identified so far.

Speaker #3: So we're clearly seeing the equipment equipping of more, you know, caregivers with enterprise-grade solutions. It's really around staff communication and collaboration, enhancing you know, patient safety around operational efficiency.

Speaker #2: But the real synergies come as you pointed out around the commercial side of things. We're expanding in the new geographies that ELO didn't have a presence in before.

Speaker #3: In, in the healthcare base, we've seen you know, clinical mobility. We've care, locations, driving the business, track and trace opportunities across healthcare and getting better, visibility into what inventory they have.

Speaker #2: We've got named accounts across the globe in which we're focused on joint selling efforts, and those are beginning to pay off with a strong pipeline of opportunities, early wins, and continue to position the entire broad portfolio.

Bill Burns: We've got named accounts across the globe in which we're focused on joint selling efforts. Those are beginning to pay off with strong pipeline of opportunities, early wins, and continuing to position the entire broad portfolio. I'd say in healthcare, highest growth vertical in the quarter. You see this repeatedly from time to time here in healthcare. Strong performance in mobile computing. We're clearly seeing the equipping of more caregivers with enterprise-grade solutions. It's really around staff communication and collaboration, enhancing patient safety, around operational efficiency in the healthcare base. We've seen clinical mobility. We've seen urgent care locations driving the business, track and trace opportunities across healthcare and getting better visibility into what inventory they have. We also see Elo opportunities in healthcare.

Speaker #3: we also see ELO opportunities in healthcare. So we've, we've taken the ELO products and solutions and area they really weren't you know, a primary focus for them into the HIMS trade show, earlier this year and really looking at self-service applications both for things like patient check-in or, or visitor check-in, you know, but more opportunities in healthcare for, for ELO as well.

Speaker #2: I'd say in healthcare, highest growth vertical in the quarter and you see this repeatedly from time to time here in healthcare, strong performance in mobile computing.

Speaker #2: So we're clearly seeing the equipment of more caregivers with enterprise-grade solutions. It's really around staff communication and collaboration, enhancing patient safety around operational efficiency.

Speaker #3: So I think that, you know, healthcare continues to be a strong vertical for us. new customers and existing customers and, and new use cases and certainly more devices in the hands of more, clinical workers, you know, overall.

Speaker #2: In the healthcare space, we've seen clinical mobility. We've seen urgent care locations driving the business, track and trace opportunities across healthcare, and getting better visibility into what inventory they have.

Speaker #4: The next question comes from Guy Hardwick from Barclays. Please go ahead.

Speaker #1: Hi, good morning. great results, guys. so Nathan, so I think if we go back three months ago, you said that the 120 million of memory headwinds would be half offset by price, so maybe 50, 60 million realized over the three quarters.

Speaker #2: We also see ELO opportunities in healthcare. So we've taken to ELO products and solutions, an area they really weren't a primary focus for them into the HIMSS trade show earlier this year and really looking at self-service applications both for things like patient check-in or visitor check-in but more opportunities in healthcare for ELO as well.

Bill Burns: We've taken the Elo products and solutions, an area they really weren't a primary focus for them into the HIMSS trade show earlier this year and really looking at self-service applications, both for things like patient check-in or visitor check-in, but more opportunities in healthcare for Elo as well. I think that healthcare continues to be a strong vertical for us. New customers, existing customers, and new use cases, and certainly more devices in the hands of more

Speaker #1: Looks like you've already realized 20. I think you said in the Q3 guidance there's gonna be two points of price. So that suggests perhaps another 30.

Speaker #1: So can you tell us what's happening in pricing that is pricing realized more quickly than you realized, or is there some mix in effect, or has there been some other price increases that perhaps have not been announced, which are which, which are benefiting results?

Speaker #3: Yeah. No, Guy, no, that's exactly right. So out of the 120 million of gross headwinds, we had previously communicated 60 million expected benefit from pricing.

Speaker #3: We've, we've increased increased that now to 90, primarily due to the strength we saw in the second quarter. and I think that's, a real credit to the team you know, one thing we did differently this time versus other price increases while the price increase went into effect in later part of March, you know, we were proactively looking at deals, you know, and quoting opportunities at the higher price, going back to the beginning of the year as we saw the price increase.

Speaker #3: So, I think that, you know, proactively getting, you know, those projects that were in the pipeline for the second quarter and embedding the incremental pricing ahead of the actual price increase in the in the, in the announcement was a big driver.

Speaker #3: And I think the, the team's been super focused on it. a big credit to the sales team, and our product teams for driving it.

Speaker #3: but that's, obviously gives us confidence here as we go to the back half of the year to, to deliver on what we need for the back half and, and substantially ins, ins, in continue to increase that as we go into the fourth quarter and into '27 to fully mitigate the exposure.

Speaker #1: Okay. And in EMC, what do you think kind of just in EMC, what sort of price increases are you realizing?

Speaker #3: Yeah, it's, it's pretty well split. I mean, the EMC takes a little bit longer just given the types of deals and the project base.

Speaker #3: but the vast majority of the price increase we, we announced in the in the second quarter, was for our mobile computing portfolio. but we've seen nice strong prioritization in print, and other parts of the portfolio.

Speaker #3: So we're seeing it pretty broad-based. but I'd say the, the mobile computing made up probably about half of the of the price increase here in the second quarter, and we'd expect that to increase, as we go to the back half of the year.

Speaker #4: The next question comes from Trevor Saar from William Blair. Please go ahead.

Speaker #2: And thanks. This is Trevor on for Brian. just one for me. I was wondering if you could give a little bit more detail on the, the memory tech and, and, and the signals from customers or sorry, suppliers.

Speaker #2: and how they're investing for that new memory tech in 2027. and are customers asking, for your product to be upgraded to this new memory tech for '27?

Speaker #3: Yeah. So if you look, you know, we've done a lot of work, within the portfolio. I mean, the, the vast majority of our products, are on the, the low-power, LPDDR5, which is where, you know, the primary, memory type that a lot of the capacity position of our portfolio being, you know, where capacity is moving towards.

Speaker #3: and we're obviously working with each one of our suppliers as they move to the next generation memory type within that within that band, as well as qualifying new suppliers.

Speaker #3: You know, the work with our commercial teams and our and our customers is really around, you know, again, do they need 6, 8, 12, 16, you know, gig memory?

Speaker #3: And what's the right memory for the use cases that they have, the applications? Obviously, what their future use of the device is gonna be over the next two to three years as they're making those decisions.

Speaker #3: but also, there's a big price difference between those different types. that we wanna make sure our customers are aware of, as well as capacity is different across each one of those.

Speaker #3: So, I'd say it's a it's a very active dialogue, with the customers around their needs, the timing of when they need the product, and then what's available.

Speaker #3: So it's, it's a, a quite an extensive amount of coordination, across the groups. But I think the team's doing a great job of working that between the sales team, the business units, and our supply chain team to get the right product to our customers that meets their long-term needs, with the best possible outcome, both from a timing and pricing perspective.

Speaker #2: Great. Thank you.

Speaker #4: And the next question comes from Patrick Moot from Needham. Please go ahead.

Speaker #5: Hi. Thank you for taking my question. This is Patrick Moot on for Jim Rashoudi at Needham. I was curious about the RFID growth in the quarter and if you guys are still expecting, that double-digit growth for the full year as opposed to OPEX investments in RFID.

Speaker #5: And then secondly, is there any more color that you guys can share on gross margins and OPEX in the second half of the year?

Speaker #5: Thank you.

Speaker #3: Yeah, Patrick, I'll start and then hand over to Nathan. strong pipeline of opportunities with RFID as we continue to see investments across the supply chain.

Speaker #3: So retail, transportation, logistics, manufacturing, government as well. So we're expecting, you know, growth, growth for the full year, despite second quarter being flat. That's really, you know, primarily just timing on projects.

Speaker #3: Again, no concerns on our part about the growth of RFID. I think we're seeing the continued, you know, opportunities beyond, you know, retail apparel into broader merchandise, parcel within transportation logistics, fresh food in, in grocery, quick serve restaurants, healthcare, government applications.

Speaker #3: So broad use cases of RFID really gonna drive that growth for full year just, you know, again, not concerned about second quarter really at all.

Speaker #3: It's all project timing. Track and trace across the supply chain continues to be a focus. You know, for our customers, Zebra is the broadest, you know, set of solutions inside, you know, RFID today.

Speaker #3: So whether it's fixed or handheld reading, you know, or, printers today printing RFID labels, or we're really excited about our new line of, of mobile devices and wearables that have integrated, near-field RFID reading capabilities associated with them, embedded in those devices that we're seeing a lot of interest.

Speaker #3: From our customers that are pulling RFID for those devices. So we're excited about RFID and the expanded opportunity it represents. And again, you know, full year growth, definitely expected, you know, from the RFID portfolio.

Speaker #3: Yeah. And if you look at the, the back half, margin as well as OPEX assumptions, if you look, you know, the Q3 guide around, you know, approximately 22%.

Speaker #3: as I mentioned earlier, it was a slight step down from the, the Q2 results, excluding IPA refund of about a point, reflecting the higher memory cost.

Speaker #3: And we'd expect a similar margin profile, as we go into the fourth quarter. That's, embedded in the guidance. And I'd say a, a lot of work on, on the OPEX line.

Speaker #3: We, we, we'll get about a point of scaling for the year, driven on the higher volume, but also, you know, we took significant restructuring, throughout the first half of the year, which we've completed here, exiting the second quarter.

Speaker #3: which is allowing us to not only, you know, right-size the portfolio, but absorb some of the higher healthcare costs and those types of things, while we continue to invest in our new AI solutions as well as expanded market coverage in our go-to-market team.

Speaker #3: So, we'd expect that scaling to continue here as we go through the back half of the year and into 2027 in OPEX.

Speaker #4: And our last question comes from Amit Malhotra from UBS. Please go ahead.

Speaker #6: Good morning. This is Pratap on for Amit Malhotra. So, my first question is on the full year guide. If we take out pricing, volume, like, volume growth seems to be around mid-single.

Speaker #6: Is it range? Now, as we think beyond this year, do you think that rate is, sustainable and can even improve into the next year?

Speaker #6: Like, I know this is, bit too early to provide any outlook for 2027, but can you help me with any framework around this? Like, which parts of the portfolio can accelerate versus which can slow down?

Speaker #6: Thank you.

Speaker #3: Yeah. So if you look at our, our full year sales guide of 14 to 16%, 15% at the midpoint, that's organic growth of, of seven points, which includes two points of price, and, and some of that pricing will roll over into 2027 just given the timing, of the announcements.

Speaker #3: where, you know, acquisitions and FX make up, eight points the, the remaining eight points of the delta. look, I think, you know, as, as Bill mentioned earlier, we're excited about the long-term opportunities for the company.

Speaker #3: and while we're not guiding for '27, I think you look at the underlying demand of the business, the pipeline, we have a projects in, in the innovation, we feel confident that we'll be able to continue to meet the, you know, growing demand for our customers.

Speaker #3: and I'd say there's no reason to, you know, as we look at the long-term growth, the five to seven, that would be, you know, so not somewhere within that range as we move forward out of '27, but into 2027.

Speaker #3: But a lot of that depends on, again, the timing of the pipeline, along with looking at, you know, the memory capacity as we enter '27.

Speaker #6: thank you. And just on the for on a follow-up on this, like, if I look at the quarter organic sales growth was like 9%, which is very strong, but was memory still a constraint for you in the quarter?

Speaker #6: Like, in other words, like, do you think sales growth could have been even higher in the second quarter and full year guide if memory isn't a constraint?

Speaker #3: Yeah. I think we would, you know, what we were saying before is that the demand certainly is, is strong from our customers and the momentum continues across each of our vertical markets.

Speaker #3: And, you know, across both asset visibility and the connected frontline segments, you know, our outlook, is, you know, demand would represent kind of the high end of our outlook for Q3 and the full year.

Speaker #3: And we're factoring in, you know, supply constraints into that. That takes us, you know, down to about the midpoint of our guide, which is the same you know, that we did in our guide for Q2.

Speaker #3: We were able to secure additional memory supply, which pushed us, you know, above the top end of our range for Q2. But, you know, we clearly are seeing strong demand for our solutions.

Speaker #3: And, you know, we're factoring in the potential constraints of memory. Into our guide for Q3 and for full year.

Speaker #4: This concludes our question and answer session. I'd like to turn the conference back over to Bill Burns for any closing remarks.

Speaker #3: Yeah. I'd like to wrap up by thanking our employees, our partners, and our suppliers. for their support in delivering record results in Q2, we're making excellent progress on our 2026 priorities.

Speaker #3: And we're excited about, the opportunities ahead of us. Have a great day, everyone. Thank you.

Speaker #1: This concludes our question-and-answer session. I'd like to turn the conference back over to Bill Burns for any closing remarks.

Speaker #2: Yeah, I'd like to wrap up by thanking our employees, our partners, and our suppliers. For their support in delivering record results in Q2, we're making excellent progress on our 2026 priorities and we're excited about the opportunities ahead of us.

Speaker #2: Have a great day, everyone. Thank you.

Operator: Good day, welcome to the Q2 2026 Zebra Technologies Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations. Please go ahead.

Mike Steele: Good morning, welcome to Zebra Q2 earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one 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 reconciliation shown at the end of this slide presentation and in our earnings press release.

Mike Steele: 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 Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with perspectives on our Q2 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. Bill and Nathan will take your questions. Let's turn to slide three as I hand it over to Bill.

Bill Burns: Thank you, Mike. Good morning, everyone, thank you for joining us. There are three key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability. This strong performance, together with the continued momentum we are seeing across our business, supports our meaningful raise to the full-year outlook. Second, our results reflect Zebra's unique value proposition. Customers are investing to digitize and automate frontline operations, and our integrated portfolio is central to their progress. Zebra's AI-powered solutions are helping customers globally to improve outcomes, to enhance productivity, visibility, and real-time decision making. Third, we are executing on our clear strategy to create long-term shareholder value by driving sustainable growth. Building on our industry leadership and track record of innovation in enhancing our financial strength and flexibility. With that, let's turn to our Q2 results.

Bill Burns: Turning to slide four, we delivered results exceeding our outlook, driven by our team's execution and positive demand trends across our portfolio. We had strong performance across all segments and regions, with double-digit growth in our retail, manufacturing, and healthcare end markets. Elo Touch contributed strong, profitable growth with robust customer interest in our combined portfolio of solutions as we drive synergies with the acquisition. For the quarter, we generated sales of more than $1.5 billion, growing more than 20% or 9% on an organic basis from the prior year. An adjusted EBITDA margin of 27.7%, including the benefit of $73 million of tariff recovery, and non-GAAP diluted earnings per share of $6.35, a 76% increase over the prior year.

Bill Burns: Excluding the benefits of tariff recovery, we expanded adjusted EBITDA margin by 2 points, driven by better than expected gross margins, as well as operating expense leverage benefiting from our productivity initiatives. These results demonstrate both the durability of demand for our solutions and our ability to convert this demand into profitable growth. Our strong performance and financial position also supports our disciplined approach to capital allocation. We repurchased more than $560 million of shares in H1, following more than $300 million in Q4. This elevated level of capital return reflects our conviction in Zebra and our long-term value creation opportunity. Our business momentum and progress navigating the memory supply environment gives us confidence in raising our outlook for the full-year.

Bill Burns: Moving to slide five, I want to share some additional details on our key end markets. In retail, e-commerce and convenience stores were bright spots, driven by consumers' elevated expectations for faster delivery and expanded fulfillment options. Our recently acquired Elo Touch business delivered strong growth benefiting from self-service trends. We are also encouraged by customer interest in our Zebra Frontline AI Suite and new devices that can best deliver these solutions. In transportation logistics, sales were flat on a strong prior year compare, with relative outperformance in third-party logistics and warehousing. Our AI software solutions and recently launched portfolio of AI-optimized mobile computers has positioned us well with industry-leading companies who recognize Zebra's ability to bring increased productivity and service levels to their operations. As we look ahead to 2027, we have a robust multi-year pipeline of large deployments.

Bill Burns: In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers need for increased visibility across their operations. Electronics and pharmaceuticals were particularly strong in the quarter. Machine vision has also outperformed, as our team has been executing well on growth initiatives as we invest in the business. Healthcare was our highest growth end market in Q2. We realized particularly strong performance in mobile computing as customers equip more caregivers with enterprise-grade solutions. We're excited about our opportunity to improve the patient care journey. Now turning to slide six. We continue to build on Zebra's unique competitive positioning as the foundation for intelligent operation. Our solutions capture data at the frontline, turn that data into insights, and enable customers to take action in real time. AI strengthens this ongoing process by enabling faster decision-making, greater automation, and continuous workflow improvement.

Bill Burns: Benefits include increased productivity and better experiences for frontline workers as well as consumers. We are deeply embedded in our customers' workflows and understand how work gets done on the frontline. This allows us to serve as trusted partners to our customers and to co-innovate with them to digitize, automate, and deploy AI. With our integrated portfolio, we meet customers where they are today in their automation journey. We'll also continue to expand our value as their operations evolve. Turning to slide seven. Our results reflect the progress we are making in executing on our three strategic priorities. On our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve.

Bill Burns: We believe both Connected Frontline and Asset Visibility & Automation have a 5% to 7% organic sales growth profile over a cycle and are confident in our ability to deliver. Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in the early stages of their automation journey. Our growth prospects are augmented by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers. We're also driving efficiency initiatives in our business to enhance profitability, which include operating expense leverage through cost discipline, including our previously announced restructuring actions that were substantially completed in Q2, accelerating software development by deploying new AI tools, and enhancing our go-to-market model to improve market coverage and efficiency.

Bill Burns: We also continue to make progress on our second priority, building on our market leadership by advancing innovation. We're seeing early traction in our new line of enterprise mobile computers and wearables that embed RFID and optimized AI processing capabilities, as well as new RFID and 3D machine vision solutions. 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 solutions while consistently returning capital to shareholders. Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a $35 billion served market.

Bill Burns: Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow, not just a single use case, creating a meaningful competitive advantage. Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. We have a resilient financial model with strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value. I will now turn the call over to Nathan to review our Q2 financial results, progress in navigating memory supply, and our improved 2026 outlook.

Nathan Winters: Thank you, Bill. Let's start with the P&L on slide 10. In Q2, total company sales increased 20.4%, or 9.2% on an organic basis. We exceeded the high end of our guidance range, primarily due to our ability to secure increased memory supply, as well as continued momentum across the business and favorable pricing. Our Connected Frontline segment grew nearly 26%, including the recent Elo acquisition, or 7.5% on an organic basis, led by mobile computing. Our Asset Visibility & Automation segment grew 11.4%, led by printing and machine vision. We realized solid performance across all our regions. North America sales increased 9%, led by our retail, manufacturing, and healthcare end markets. EMEA sales grew 7%, with broad-based growth across Europe, partially offset by continued softness in the Middle East. Asia Pacific sales increased 13%, led by China, Korea, and Southeast Asia.

Nathan Winters: Latin America sales grew 15%, led by Mexico and Brazil. Adjusted gross margin improved 540 basis points to 53.3%, largely due to the $73 million IEEPA tariff recovery that was not included in our outlook, as well as favorable foreign currency exchange. Additionally, we fully mitigated a $20 million increase in memory costs through strong price realization. Gross margin outperformance, along with 170 basis point improvement in operating expense leverage, enabled us to expand adjusted EBITDA margin by 7.1 points to 27.7%. Non-GAAP diluted earnings per share were $6.35, a 76% year-over-year increase, significantly exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 11. Year to date, we generated $361 million of free cash flow, ending the Q2 with a modest debt leverage ratio of 1.9 times and $925 million of credit capacity.

Nathan Winters: We have been deploying capital consistent with our allocation priorities, repurchasing $568 million of stock in the H1 of the year. Turning to slide 12. Our team has a track record of managing through disruptions by being proactive, maintaining close supplier partnerships, and using our scale to create flexibility in the supply chain. We are successfully navigating the current memory cost and supply environment and have line of sight to what we need to support our outlook. Suppliers are delivering on their commitments, enabling our strong sales growth. We continue to work proactively across multiple fronts, including direct supplier co-planning, alternative sourcing options, and transitions to higher density memory components, where capacity is expected to increase into 2027. Additionally, the component pricing trajectory for the year is tracking in line with our expectations. Our cost position remains favorable relative to spot market rates, given our direct supplier relationships.

Nathan Winters: Looking ahead, we are committed to protecting profitability by taking additional price and other operational actions as necessary. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 17% to 20%, including approximately 10 and a half points of contribution from business acquisitions and favorable FX. Our Q3 adjusted EBITDA margin is expected to be approximately 22%, and non-GAAP diluted earnings per share are expected to be in the range of $4.70 and $4.90. For the full-year, we expect sales growth between 14% and 16%, reflecting a 3-point increase at the midpoint from our prior outlook. Our guide factors in year-to-date outperformance, momentum across the business, including manufacturing and machine vision, previously announced price increases related to memory, and an 8-point favorable impact from acquisitions and FX.

Nathan Winters: Our full-year adjusted EBITDA margin is now expected to be between 23.5% and 24%, and non-GAAP diluted earnings per share is expected to be between $20.75 and $21.25. Our full-year guide continues to reflect full mitigation of the approximately $120 million memory cost headwind. We've been driving this through targeted price increases and other direct memory initiatives, as well as net savings from our restructuring actions, volume leverage, and FX favorability. Free cash flow for the year is now 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. Please reference additional modeling assumptions on slide 13. With that, I will turn the call back to Bill.

Bill Burns: Thank you, Nathan. Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full-year. Customers are leveraging Zebra's AI-powered portfolio solutions to improve productivity, visibility, and decision-making. We remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.

Mike Steele: Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Keith Housum from Northcoast Research. Please go ahead.

Keith Housum: Great. Thanks, guys, appreciate it, and good morning. Congratulations on this great quarter. Hey, Bill, as we're kind of thinking about the rest of the year into 2027, now the past two quarters, this quarter, last quarter, you referenced some successful deployments expected in 2027 in the T&L segment. Can you give us a little bit more color on that? Again, I'm not asking for 2027 guidance, it sounds like your confidence in 2027 is growing based on some of the bookings that you have for that. Just any color you can provide on that would be great.

Bill Burns: Yeah, Keith, I would say that the excellent results certainly in the quarter, overall with great execution by the team. I'll start there. When we look at the vertical markets, clearly, saw that T&L cycling, difficult comparison last year, just high compares. Still saw solid performance across that vertical market with growth across third-party logistics and warehousing in the segment. We feel good about transportation and logistics and the investments they're making in technology, despite the compare from a year ago. I'd say that, as you referenced, really a robust multi-year pipeline of large deployments coming across T&L, really focused on last mile delivery and our customers and our differentiation coming from our new mobile devices, which add RFID and AI capabilities to those devices are clearly giving us a competitive advantage in the market.

Bill Burns: The deployment of RFID continues across transportation logistics, as we see that investment continuing. I'd say that they're focused really on worker productivity, how do they drive operational efficiency, how do they increase visibility of parcels across their network. We see over, starting in 2027, a strong pipeline of opportunities for refreshes within transportation logistics, and we continue those conversation with customers and are ever confident in that happening.

Keith Housum: Great. I appreciate that. You made some positive commentary in terms of machine vision this quarter. Any color you can comment on in terms of the progress that you've made over the past year and a half in that, and how you think about that for the rest of the year?

Bill Burns: Yeah, I think just like T&L, we saw strength in manufacturing. While T&L's been a strong segment, manufacturing continues strength as well. We're seeing the drive again for increased visibility across the supply chain. Electronics and pharmaceuticals certainly a strength in the quarter in manufacturing, and then that driving really outperformance in machine vision with the team executing well within machine vision. Really, we've aligned our business unit, our go-to-market teams to really focus on specific opportunities within manufacturing. We've talked about our increased focus on manufacturing over the last couple of quarters, and that alignment with our regional sales teams is really driving our value proposition into the marketplace, which is resonating with not just our sales teams, but our partners and our customers as well.

Bill Burns: We continue to enhance the portfolio of solutions and machine vision, and we're seeing an excitement by the team and then strong growth. There's lots of examples, using AI for optical character recognition, for instance, in places like outside of manufacturing, logistics, and inside of manufacturing, things like food and beverage. There's lots of examples of places where we're focused and we're winning. We've seen strong performance from Photoneo, so acquisition in the space to continue to enhance our offerings both organically and inorganically in machine vision. We like this space. We're seeing growth across the business in manufacturing. We're seeing it diversifying the business, and our team's focus is playing out as we'd expect, to driving growth for us.

Operator: The next question comes from Tommy Moll from Stephens. Please go ahead.

Tommy Moll: Good morning, and thank you for taking my questions.

Bill Burns: Hey, Tommy. Morning.

Tommy Moll: Bill, it sounds like in Q2, part of the reason you exceeded the top-line expectation was the memory supply was a little better than expected. My question is, to what extent is your guidance for 3Q and H2 still constrained by that memory supply? To what extent do you have visibility into 2027 on that improving? Thank you.

Bill Burns: Yeah, I'll start and then maybe hand over to Nathan. I would say that memory continues to be a dynamic and challenging environment. I'd say that our teams executed really well both through H1 of the year and especially in Q2 here, to work closely with our suppliers to secure the memory we needed to get above the top end of our guide. We had told you that our demand was at that level and that really it was being gated by memory constraints. We're confident in mitigating the memory challenges to achieve our H2 outlook. Demand signals and the demand we're seeing from our customers is above what we're guiding to. There is still constraints out there, but the team has done an amazing job of really securing memory.

Bill Burns: I'll let Nate take you through the details, but they're doing a lot to make sure that we can deliver for our customers, not just in Q2, but through H2 of the year and into 2027.

Nathan Winters: Yeah, Tommy, just to add a few things. We talked about this before in terms of the different mitigation strategies and actions that teams are taking. We do expect, as Bill mentioned, a modest increase in memory in H2. The team's really working hard to meet the unconstrained demand, which again, is near the high end of our guidance range. I think that the work we're doing with the direct supplier co-planning is really paying out, working on the supply pipeline, not just for the next three to six months, but actually the next 18 months. A lot of work with our product teams on qualifying new suppliers, new different chip types. We're working with 10 different new suppliers, and the goal is to have five to seven qualified suppliers for each of our primary memory types.

Nathan Winters: I think all those actions we're taking gives us confidence that we'll be able to continue to secure the volume we need to support our customers into 2027 and the growth that's required.

Tommy Moll: Nathan, a follow-up for you on the share repurchase activity. Pretty robust through H1. What can you tell us about any plans to continue to deploy capital there in H2 of this year? Thank you.

Nathan Winters: Yeah. If you just start with the overall capital allocation, we ended the quarter at 1.9 debt leverage. Strong cash flow expected for the year at $1 billion. The balance sheet's in great shape. As we mentioned on the call, we repurchased $568 million through Q2. We've continued to be active here in the early part of Q3, given what we believe is still an attractive stock valuation. Our full-year EPS guide assumes that we'll do an additional $150 million of share repurchase in H2, so call it $700 million for the year. I think we plan to take a bit more of a balanced approach here in H2 to maintain some flexibility. Again, have the option to continue to purchase more if we think the stock still remains at an attractive price.

Operator: Our next question comes from Quinn Fredrickson from Baird. Please go ahead.

Quinn Fredrickson: Hey, good morning, guys.

Bill Burns: Morning, Quinn.

Quinn Fredrickson: Just on memory, you talked about supply. I'm wondering when you might get visibility into next year's component costs from your key suppliers. I know you're on contract, not spot pricing. When do you typically get some visibility into memory costs for next year?

Nathan Winters: Hey, Quinn. I'll take that. One, from a cost, I think just to start with this year, the market pricing is in line with our prior guides. As we laid out the year and the guidance, the pricing and the price increases that we had planned at the beginning of the year are largely playing out as expected. As you would expect, there's quite a variability across the different memory types, and the direct purchasing with those memory suppliers is a really big benefit in terms of avoiding the spot market as much as we can. We typically get pricing at the beginning of three months in advance, or every three months. I'd say up to this point, our key suppliers have been pretty transparent around where they expect the price to go out into the future, while it's not set.

Nathan Winters: I think the team has a pretty good handle on not only what we expect for the next three to six months, where that trajectory is expected to be as we go out into 2027, and that's what we're going to continue to monitor. I'd say our commitment, just like it was this year, is to continue to take the necessary actions to mitigate that exposure in the P&L, whether that's through our own increased pricing actions or other productivity initiatives to offset and continue to ensure we expand margins as we go into 2027.

Quinn Fredrickson: Thanks, Nathan. You gave guidance for Q3 and the full-year here. Looks like organic growth for Q4 is implied in about the 8% range. Can you just discuss how you think about what's embedded around year-end customer budget flush or large deals at this stage based on your conversations with customers?

Nathan Winters: Yeah. If you look, again, we have a robust pipeline here as we go into the H2. I think the conversations have continued to be productive, similar to what they are in prior years. We don't typically get that full indication till we get to later part of Q3 and earlier part of Q4. We feel good about the position we have for Q4 in terms of the overall pipeline. Today, somewhat, Q4 is capped by just on the memory supply we expect or have confidence in achieving here in Q4. The team's actively working to secure that pipeline, get the visibility we need back to the supply chain team so we can work with our suppliers to meet that demand, which again, we were able to do here in Q2.

Operator: Our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead.

Andrew Buscaglia: Hey, good morning, everyone. Thanks for taking my question.

Nathan Winters: Morning, Andrew.

Andrew Buscaglia: Good morning. Hey. Wanted to check on, your sales have just picked up nicely in Q2. Your Q3 guidance implies some slight deceleration. I mean, still very strong, wondering what's informing that guidance. Similarly for Q3 margins. You had a nice exceeded expectations by quite a bit, even ex tariff refunds. Your Q3 margins imply a slight step down. I'm just wondering if there's something going on with mix or timing of demand, or timing of orders coming through, or how would you characterize that?

Nathan Winters: Yeah, look, I'd maybe just start with the kind of the overall outlook. I think we have, obviously, confidence in the guide given the H1 performance. A lot of the H2 is still somewhat predicated around the memory capacity that we expect. To a certain degree, the growth rates are somewhat based on just prior year compares and where we expect the supply to play out and gives us confidence in that guide. If you look at the Q3 sales guide of 17% to 20%, 8% organic at the midpoint, which includes about two points of pricing. Again, we feel great about that ramp and the trajectory and the underlying demand supporting the business.

Nathan Winters: I think from an EBITDA rate perspective, if you look at the step down from Q2 to Q3, obviously a primary driver that is removing the IEEPA refunds here in the Q2 results, and there's about 1 point degradation coming from higher memory costs. We do expect memory costs to increase as we go from Q2 to Q3. We were able to fully mitigate the memory step-up in the Q2 with our own pricing actions. We do anticipate a slight degradation as we go into the Q3, which was always planned out as part of our implied guide at the beginning of the year. Operationally, excluding memory, it's somewhat in line sequentially in a similar level of mix as we go from the Q2 to Q3.

Andrew Buscaglia: Okay. Got it. You raised prices this year, obviously to help mitigate things. I think you indicated you can raise prices again if you want to. I guess what gives you that confidence and how quickly can you implement it, and what would you need to see if you had to move forward with further price increases?

Nathan Winters: Yeah, I'd say, Andrew, we'd prefer not to raise price. That's certainly our strong preference. We've had to do that based on the significant increase in memory. We believe that, and have confidence that if we need to, we can see that pricing flow through. We've been able to demonstrate that both in our business and in the Elo acquisition as well on both sides. Our preference is not to raise price, but as we need to do that is if memory pricing continues to increase, we'll do that just like other suppliers have had to do. I think that our preference is not but that's kind of just where things are at across the industry. There's just no way not to raise price given the significant increase in memory pricing today.

Andrew Buscaglia: Yeah. Okay. Thank you.

Operator: The next question comes from Joe Giordano from TD Cowen. Please go ahead.

Joe Giordano: Hey, guys. Morning.

Nathan Winters: Morning, Joe.

Joe Giordano: Look, I know we've talked about this a lot. I just want to be very clear, and correct me if I'm wrong in how I was thinking about it. Last quarter, I think you characterized the revenue guidance at the high end as kind of unachievable in light of current memory availability at that time. Now, here you raised the high end. Is the high end of your revenue guidance achievable in the current memory availability framework?

Nathan Winters: Yeah. I'd say, Joe, that I think that the position we took in Q2 is the same that we've taken for Q3 and the full-year guide, which is the demand signals today from our customers and the investments they're making across each of our vertical markets and across each of our regions

Bill Burns: Really leads us to the high end of our outlook for Q3 and for the full-year. The midpoint of that outlook factors in the potential supply constraints associated with memory that we're seeing. I think it's the same approach we had in Q2, we've now taken for Q3 and full-year. The team executed very well delivering for our customers in Q2, which has got us to above the high end of our range. In H2, we're continuing to see a challenging and dynamic environment around memory. The prudent thing for us to do is the demand signals take us to the high end, our guide is really at the midpoint of our guide that really factors in the potential supply constraints that we'd expect to see in H2.

Nathan Winters: Obviously, both were significant steps up from where we were last quarter, which I think is a response to what we see as the underlying demand, and the great work the team's doing to secure additional supply. I think both, as Bill mentioned, that's playing out in the guidance, I think the positive note is that both were substantially higher than we were three months ago by the great work from the team.

Joe Giordano: Is an LTA available to you guys if you wanted to pursue that?

Nathan Winters: We've had discussions regarding supply agreements with various of our memory suppliers, but our priority up to this point has really been on qualifying new suppliers and memory types, along with working on that visibility, both here in the short and long term, and that's been playing out. While those discussions are ongoing, we don't think it's limiting us or preventing us from achieving it. If those were necessary to obtain increased supply, we absolutely would, but it hasn't been necessary to this point.

Operator: The next question comes from Piyush Aloti from Citi. Please go ahead.

Piyush Avasthy: Good morning, guys, thanks for taking my questions. Just following up on some of the other questions asked on the guidance raise. You are raising the organic growth expectations for the full-year for 2026. Can you provide some clarity on how we should be thinking about the two segments? Like Connected Frontline has some memory constraints, so I understand that, but AVA had a really strong quarter. Not sure if there's any one-time item to call out there, but do you expect AVA should lead that growth, or do you think CF could more meaningfully contribute as we progress through the year?

Bill Burns: I think we see strong growth across both segments. Asset Visibility & Automation really focused on insights into assets within our customers. Think of inventory as an example in retail. Print, data capture, machine vision, RFID are all part of that portfolio of solutions. We, in Q2, saw strong growth in print, again, driven by strength in manufacturing, for example. We also had strong growth rates in volume and run rate for our data capture solutions. Our supplies business continues to be strong. Strong quarter, very strong quarter in machine vision, and RFID deployments continue. I think strength in Asset Visibility, certainly in automation segment, but also Connected Frontline. I think that we're clearly seeing that our customers are deploying more devices in the hands of more frontline workers to really improve productivity, drive collaboration.

Bill Burns: How do they enhance their interaction associates have with the customers on the frontline? That segment, of course, is mobile computing, but also our Elo segment fits into that, software and our AI solutions. We're seeing mobile computing, next generation of those devices, adding AI capabilities and RFID, next generation wearables, devices optimized with the processing power necessary to deploy AI, both our Zebra Frontline AI Suite and deployments our customers are looking to make. Elo, we had a strong performance in Q2 and expect that to continue into H2 with momentum with the Elo acquisition, with the two sales teams working closely together and positioning those solutions across our customer base. I'd say we expect growth in both segments in H2 and feel good about the demand we're seeing across the portfolio, across the regions, across the different vertical markets.

Bill Burns: Truly broad-based growth.

Piyush Avasthy: Very helpful. I think I get the point that it's very broad-based, but it seems like EMEA has been a bit of a laggard. There was decent growth this quarter, and you mentioned a Middle East impact there, but can you elaborate on the underlying demand environment across different business verticals in the EMEA region specifically? As you think of 2026, based on the conversations with your customers there, how do you think Europe would contribute to the organic sales growth construct?

Bill Burns: Yeah, EMEA was slightly behind the other regions. I think if you go back a couple of quarters ago, EMEA growth was a bit challenged, but I think some of that was tougher comparison the prior year. We're seeing resilient demand across Europe. Obviously, as you said, softness in the Middle East is the geopolitical challenges there. Relative strength, I'd say in retail, manufacturing, healthcare across EMEA. Double-digit growth in machine vision, our supplies business, RFID, print, and mobile computing. I think we're seeing strong growth. It was 7% for the quarter, and I think did slightly below the other regions of North America. Certainly we saw a lot of strength in Asia Pacific and Latin America. I don't think we have any concerns about EMEA. We feel good about what they're seeing, and it's been pretty resilient given all the things happening across the European market.

Operator: The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.

Meta Marshall: Great. Thanks. A couple of questions for me. Just in terms of, on Elo, where do you feel like? Clearly, the business is continuing to do quite well, but just in terms of revenue synergies or selling into the base, where are you in terms of exploiting some of those natural overlaps? Maybe on the healthcare side, you noted very strong kind of traction there over the last quarter. Just trying to get a sense of, are those new customers? Are those new project types? Just where is that kind of traction coming from? Thank you.

Bill Burns: Yeah, I'll start with Elo. I would say that, excited about certainly the performance and the work around integration, as you mentioned. It really reaffirms our conviction that in the acquisition of Elo and the combined capabilities between our two portfolios that really gives us another dimension on the front line, which is really the focus areas there are modernizing point of sale, certainly continuing to streamline self-service, and then the payment portfolio at Elo. I think we saw growth above our expectations in Q2, strong pipeline of opportunities driven by our sales teams working closely together and growing that commercial pipeline, but also progress we're making on synergies, about $10 million identified so far. The real synergies come, as you pointed out, around the commercial side of things. We're expanding in the new geographies that Elo didn't have a presence in before.

Bill Burns: We've got named accounts across the globe in which we're focused on joint selling efforts. Those are beginning to pay off with strong pipeline of opportunities, early wins, and continuing to position the entire broad portfolio. I'd say in healthcare, highest growth vertical in the quarter. You see this repeatedly from time to time here in healthcare. Strong performance in mobile computing. We're clearly seeing the equipping of more caregivers with enterprise-grade solutions. It's really around staff communication and collaboration, enhancing patient safety, around operational efficiency in the healthcare base. We've seen clinical mobility. We've seen urgent care locations driving the business, track and trace opportunities across healthcare and getting better visibility into what inventory they have. We also see Elo opportunities in healthcare.

Bill Burns: We've taken the Elo products and solutions, an area they really weren't a primary focus for them into the HIMSS trade show earlier this year and really looking at self-service applications, both for things like patient check-in or visitor check-in, but more opportunities in healthcare for Elo as well. I think that healthcare continues to be a strong vertical for us. New customers, existing customers, and new use cases, and certainly more devices in the hands of more