Zebra's Q2 sales rose 20.4% to $1,557M (9.2% organic) and EPS more than doubled to $4.85, though a $73M one-time tariff refund accounts for much of the margin jump; full-year guidance was raised.
Revenue
$1.6B
+20.4% YoY
Net income
$233M
+108.0% YoY
Diluted EPS
$4.85
+121.5% YoY
Operating margin
20.6%
How ZBRA compares with Information Technology peers
Figure
ZBRA
Peer median
Rank
Revenue growth (YoY)
+20.4%
+22.1%
33rd of 63
Operating margin
20.6%
21.9%
33rd of 63
EPS growth (YoY)
+121.5%
+35.5%
13th of 56
Rank 1 = fastest revenue growth, highest operating margin, fastest EPS growth. Peers are the other Information Technology companies with a 2026 report on this site, each at its latest period we've analyzed; fiscal calendars differ, so periods are not always the same months.
Zebra Technologies, the maker of the handheld barcode scanners, rugged mobile computers, label printers and RFID readers used in warehouses, stores and hospitals, reported record second-quarter results for the three months ended July 4, 2026. Net sales rose 20.4% to $1,557 million and diluted earnings per share more than doubled to $4.85 from $2.19. The headline flatters the underlying picture, though. About $73 million of the profit is a one-time refund of import tariffs the company paid in 2025, and 8.7 points of the sales growth came from buying Elo Touch, a self-service kiosk and touchscreen maker, last September. Strip both out and Zebra still had a good quarter: organic sales growth of 9.2%, and results above the company's own May guidance.
At a glance
Organic sales +9.2%. "Organic" means excluding currency moves and businesses bought or sold, so it measures demand for the products Zebra already had. That is the fastest growth in the release, and it came from every region, with North America, EMEA, Asia-Pacific and Latin America all up double digits on a reported basis.
Gross margin 53.0%, up from 47.6%. Most of the 5.4-point jump is the $73 million tariff refund booked against cost of sales. Without it, gross margin would have been about 48.3%, still slightly above last year.
$268 million of buybacks in the quarter ($568 million in the first half). Diluted share count fell 6.1% year over year, to 48.1 million. The first-half buybacks were larger than the $361 million of free cash flow and were partly paid for with extra borrowing.
The quarter in numbers
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$1,557M
$1,293M
+20.4%
Organic net sales growth (non-GAAP)
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Operating margin is the share of sales left after running the business, before interest and tax. Adjusted EBITDA is Zebra's own profit measure that also adds back depreciation, amortization, stock-based pay and restructuring costs.
Two segments, two different stories
Zebra reorganized into two segments in late 2025.
Connected Frontline (CF), $903 million, +25.9%. This segment covers the mobile computers carried by store and warehouse workers, point-of-sale hardware, and, since September 30, 2025, Elo Touch's kiosks and touchscreens. The 10-Q attributes the growth "primarily" to "the inclusion of Elo Touch, higher sales of mobile computers, and favorable impact of foreign currency." Elo alone added 15.9 points of growth, so organic growth was 7.5%. Segment operating income rose 54.2% to $219 million. $46 million of the tariff refund was assigned to CF, though. Remove it and CF's segment margin is about 19.2%, a little below last year's 19.8%. The filing points to "unfavorable business mix" partly offsetting the gains, which is consistent with Elo's hardware earning lower margins than Zebra's core mobile computers.
Asset Visibility & Automation (AVA), $654 million, +13.5%. This segment covers thermal barcode printers and labels, scanners, fixed industrial scanning, machine vision and RFID. It grew faster organically (11.4%), and it grew almost entirely without acquisitions. Management credits "higher sales of printing and machine vision products." Segment operating income rose 79.4% to $192 million. Excluding its $27 million share of the tariff refund, AVA's segment margin is about 25.2%, up from 18.6%. This is the cleanest improvement in the quarter: it doesn't depend on the tariff refund, and the filing cites favorable business mix and currency.
Services and software revenue was nearly flat at $241 million (+1.3%). All of the growth came from hardware ("tangible products," +24.7%). The 10-Q doesn't break out sales by end market (retail, warehouse and logistics, healthcare, manufacturing), so it isn't possible to say from the filing which customer group drove the hardware demand. The only disclosure is that demand improved "in all regions."
What the headline numbers hide
The tariff refund is the biggest one-off, and it is included in the adjusted figures too. In February 2026 the U.S. Supreme Court ruled that tariffs imposed in 2025 under the International Emergency Economic Powers Act (IEEPA) were not authorized. In Q2, Zebra judged a refund of all ~$73 million it had paid to be probable and booked it as a reduction to cost of sales. The company does not strip this out of its non-GAAP numbers, so the $6.35 adjusted EPS and 27.7% adjusted EBITDA margin both include it. By our rough estimate (taxing the $73 million at the ~19% adjusted rate and dividing by 48.1 million shares), the refund is worth about $1.20 of adjusted EPS. That puts underlying adjusted EPS at roughly $5.10, and adjusted EBITDA margin excluding the refund at about 23%. By the end of the quarter only $14 million had arrived in cash. Another $27 million came in by July 31, and the rest sits in receivables.
Excluding the refund, profit still grew fast. Operating income without the $73 million would be about $248 million, up roughly 36% on $183 million, and operating margin about 15.9% versus 14.2%. Management also says it "fully mitigated increased memory costs through price realization," meaning price increases covered the higher cost of memory chips.
GAAP vs adjusted gap: $1.50 per share. Non-GAAP net income of $305 million adds back $37 million of amortization of acquired intangibles (up from $25 million, mostly Elo), $43 million of stock-based pay, $8 million of restructuring and $2 million of acquisition costs, then subtracts the tax effect. These are the usual adjustments, though the stock-based pay is a real recurring cost.
The prior year had its own drags. Q2 2025 included $10 million of losses on long-term investments and an $11 million foreign-exchange loss, compared with $2 million of FX loss this year. That makes the GAAP net income comparison (+108%) look better than operations alone. Higher debt pushed net interest expense up to $35 million from $25 million, working in the other direction.
Buybacks added roughly 14 points of EPS growth. At last year's share count, Q2 EPS would have been about $4.54 (+107%) instead of $4.85 (+121.5%). The effective tax rate edged down from 18.8% to 18.2%, a small help.
Cash conversion is fine, but borrowing funded the buybacks. First-half operating cash flow of $387 million was 1.05x net income of $368 million. Free cash flow (operating cash flow minus capital spending) rose to $361 million from $288 million. Receivables grew $193 million in the half, of which $59 million is the pending tariff refund. Excluding it, receivables rose about 16% since December, slower than sales growth. Inventory barely moved ($733 million vs $729 million). But $568 million of buybacks exceeded free cash flow, and revolving-credit borrowings rose from $275 million to $565 million. Total debt went from $2,511 million to $2,776 million, against $157 million of cash.
Takeaway: Zebra's record quarter looks less dramatic once the $73 million tariff refund is removed. Excluding it, operating margin rose about 1.7 points rather than 6.4. The underlying improvement is still real: 9.2% organic growth, led by printing and machine vision in AVA, beat the company's own 14%–17% reported-growth guide. The part to watch is Connected Frontline, where the Elo acquisition adds sales faster than it adds margin.
Guidance: raised well above the tariff effect
Management raised its full-year 2026 outlook (all non-GAAP except sales):
Full-year 2026 guidance
Previous (May 12)
Now (Aug 4)
Sales growth
10%–14% (incl. ~7 pts acquisitions/FX)
14%–16% (incl. ~8 pts acquisitions, dispositions and FX)
Adjusted EBITDA margin
~22%
23.5%–24.0%
Non-GAAP diluted EPS
$18.30–$18.70
$20.75–$21.25
Free cash flow
>$900M
>$1B
The EPS midpoint went up $2.50. By our estimate about $1.20 of that is the Q2 tariff refund, so the rest reflects the Q2 beat plus a better second half. In Q2 itself Zebra guided to $4.20–$4.50 and reported $6.35, or about $5.10 excluding the refund. For Q3, the company expects sales growth of 17%–20% (about 10.5 points from acquisitions, dispositions and currency, implying roughly 6.5%–9.5% organic growth), an adjusted EBITDA margin of about 22%, and non-GAAP EPS of $4.70–$4.90.
Our read: The Q3 margin guide of ~22% sits close to the ~23% underlying Q2 margin excluding the refund, so management isn't forecasting margin expansion from here. The upside depends on sales volume. Elo stops boosting reported growth after September 30, 2026, when it passes the one-year mark, so from Q4 reported growth will look much closer to organic growth. The rest of the year depends on three things: whether AVA's double-digit organic growth in printing and machine vision holds up; whether price increases keep covering memory costs; and how quickly the remaining ~$32 million of tariff refunds turns into cash. Leverage is the other variable. Zebra is buying back shares faster than it generates free cash, and interest expense is rising, so a demand slowdown would show up in EPS faster than it did a year ago.