Motorola Solutions, Inc. (MSI) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon, and thank you for holding. Welcome to the Motorola Solutions Second Quarter 2026 Earnings Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. The presentation material and additional financial tables are posted on the Motorola Solutions Investor Relations website. In addition, a webcast replay of this call will be available on our website within 3 hours after the conclusion of this call. The website address is www.motorolasolutions.com/investor. [Operator Instructions] I would now like to introduce Mr. Brian Piotrowski, Vice President of Investor Relations. Mr. Piotrowski, you may begin your conference.

Good afternoon. Welcome to our 2026 second quarter earnings call. With me today are Greg Brown, Chairman and CEO; Jason Winkler, Executive Vice President and CFO; Jack Molloy, Executive Vice President and COO; and Mahesh Saptharishi, Executive Vice President and CTO. Greg and Jason will review our results along with commentary, and Jack and Mahesh will join for Q&A. We have posted an earnings presentation and news release at motorolasolutions.com/investors. These materials include GAAP to non-GAAP reconciliations for your reference. During the call, we reference non-GAAP financial results, including those in our outlook, unless otherwise noted. A number of forward-looking statements will be made during this presentation and during the Q&A portion of the call. These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Information about factors that could cause such differences can be found in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of our 2025 annual report on Form 10-K or any quarterly report on Form 10-Q and in our other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. I'll now turn it over to Greg.

Thanks, Brian. Good afternoon, and thanks for joining us today. I'll start off by sharing a few thoughts about the business before Jason takes us through our results and outlook. First, Q2 was an exceptional quarter with record sales and earnings. Revenue was up 13%, driven by double-digit growth in both segments and all 3 technologies. Products and Systems Integration delivered an outstanding quarter, growing 15%, highlighted by mission-critical network sales that exceeded our expectations in public safety LMR, along with continued strength in Silvus. And Software and Services also continues to perform well, growing 10% in the quarter. Additionally, Q2 included operating margin expansion of 140 basis points, excluding the benefit of the IEEPA tariff refunds. Second, our Q2 results and broad-based demand provide strong momentum for continued growth heading into the second half of this year, led by our APX NEXT devices and next-generation D-Series infrastructure. Our latest generation APX NEXT devices continue to redefine mission-critical reliability and are increasingly integrated with new features that leverage our entire ecosystem. On the P25 network side, interest in D-Series is growing as agencies prioritize the modernization of their core mission-critical communications platforms. And finally, demand for our safety and security ecosystem remains robust, fueled by record Q2 orders in all 3 technologies. As a result, we achieved a record Q2 ending backlog of $15.6 billion, which is up 11% versus a year ago. As a result of the strong Q2 performance and growing momentum, we're again raising our full-year guidance for both sales and EPS. And with that, I'll now turn the call over to Jason.

Thank you, Greg. Revenue for the quarter grew 13% and was above our guidance with double-digit growth in both segments and in all 3 technologies, primarily driven by strong LMR demand and accelerated quick-turn conversion. Revenue from acquisitions was $243 million, while foreign currency tailwinds were $35 million during the quarter, consistent with our expectations. GAAP operating earnings were $809 million or 25.8% of sales, up from 25% in the year-ago quarter. Non-GAAP operating earnings were just over $1 billion, up 26% from the year-ago quarter, and non-GAAP operating margin was 32.9%, up 330 basis points. The increase in both GAAP and non-GAAP operating margin was driven by higher sales and improved operating leverage, inclusive of higher direct material costs and a $60 million benefit from the IEEPA refunds recorded during the quarter. Excluding the refunds, non-GAAP operating margins expanded by 140 basis points. GAAP earnings per share was $3.33, up from $3.04 in the year-ago quarter. Non-GAAP EPS was $4.41, up $0.84 or 24% from $3.57 last year. The growth in EPS was driven by higher operating earnings and a $0.25 benefit from the IEEPA refunds, partially offset by higher interest expense in the current quarter. OpEx in Q2 was $673 million, up $58 million versus last year, primarily due to the acquisitions. Turning to cash flow. Q2 operating cash flow was $469 million, up $197 million from last year, and free cash flow was $414 million, up $190 million. The increase in both operating and free cash flows was primarily driven by our higher earnings, partially offset by higher investments in inventory. Capital allocation for Q2 included $326 million in share repurchases at an average price of $413.53 per share, $201 million in cash dividends and $55 million in CapEx. During the quarter, we also entered into a definitive agreement to acquire D-Fend Solutions, an industry leader in counter-drone solutions, for $1.5 billion, which we expect to close during the second half of this year. And we are targeting to close the previously announced acquisition of Bell Canada's LMR networks services business in late Q4. Moving to segment results. In the Products and SI segment, sales were up 15% versus last year, driven by growth in MCN and Video, with MCN exceeding our expectations in public safety LMR and continued strength in Silvus. Revenue from acquisitions was $210 million and foreign currency tailwinds were $19 million during the quarter. Operating earnings were $599 million or 31.4% of sales, up 470 basis points from 26.7% in the prior year, driven by higher sales and improved operating leverage, inclusive of higher direct material costs and the IEEPA refunds. Excluding refunds, operating margin expanded 150 basis points during the quarter. Some notable Q2 wins and achievements in this segment include a $36 million P25 device and SVX order for a U.S. federal customer; a $20 million P25 device order for Atlanta, Georgia; and a $17 million P25 device order for Miami-Dade Corrections in Florida. We also won 3 large awards for our next-generation P25 infrastructure. A $52 million order from a U.S. federal customer, a $34 million order with a state and local customer in the Southeast region, and a $22 million order for St. Louis County, Missouri. All of these demonstrate the continuing customer demand for D-Series and a strong foundation for future Software and Services growth. In Software and Services, revenue was up 10% compared to last year, driven by growth across all 3 technologies. Revenue from acquisitions was $33 million and foreign currency tailwinds were $16 million in the quarter. Operating earnings in the segment were $433 million or 35.3% of sales, up from 33.8% last year, driven by higher sales, inclusive of favorable mix. Some notable Q2 highlights in this segment include a $24 million P25 services order for a North American energy company, a $20 million Command Center order for the State of Montana Department of Justice, a $16 million P25 services order for Fulton County, Georgia, and a $14 million Command Center order for Hillsborough County, Florida. During the quarter, we also secured 2 large wins for our mobile video ecosystem. A $25 million order with the Florida Highway Patrol and a $24 million order with the Kansas City Police Department successfully converting these 2 high-profile agencies, inclusive of our core responder AI assist capabilities. Looking at regional results. North America Q2 revenue was $2.2 billion, up 9% with growth across all 3 technologies. International Q2 revenue was $923 million, up 25% versus last year, driven by strong double-digit growth across all 3 technologies. Moving to backlog. Ending backlog for Q2 was $15.6 billion, up $1.5 billion or 11% versus last year, driven by record Q2 orders. Sequentially, backlog declined $71 million, primarily driven by revenue recognition for the U.K. Home Office. In the Products and SI segment, backlog increased $329 million versus last year due to strong demand in MCN and Video. Sequentially, backlog decreased $99 million, driven by strong MCN shipments during the quarter. In Software and Services, backlog increased $1.2 billion compared to last year, driven by strong demand for multiyear contracts across all 3 technologies. Sequentially, backlog increased $28 million, primarily driven by strong demand in Command Center and Video, partially offset by revenue recognition for the U.K. Home Office. Turning next to our outlook. We expect Q3 sales growth of approximately 8% with non-GAAP earnings per share between $4.39 and $4.44 per share. This assumes a weighted average diluted share count of approximately 168 million shares and an effective tax rate of approximately 23%. For the full year, we now expect revenue of approximately $12.975 billion, up from our prior guidance of $12.8 billion, along with non-GAAP earnings per share between $17.62 and $17.72 per share, up from our prior guide of $16.87 to $16.99 per share. This full-year outlook assumes a weighted average diluted share count of approximately 168 million shares and an effective tax rate between 22% and 22.5%. It also assumes favorable FX of about $100 million, which is unchanged from our prior expectations. The $175 million raise in our full-year revenue expectations is driven by MCN, including approximately $100 million from Silvus, which we now expect to generate approximately $850 million in full-year revenue. The remainder of the increase we expect in MCN is a reflection of the continued strong demand for public safety LMR. With these increased top-line expectations, we now expect double-digit growth for both segments and all 3 technologies for the full year. Products and SI is expected to now grow 11%, up from our prior guidance of 8% to 9%. And Software and Services is expected to grow 11%, up from our prior guidance of 10% to 11%. And from a technology perspective, MCN is now expected to grow between 10% and 11%, up from our prior expectations of 8% to 9%. Video is expected to grow 11%, while in Command Center, we continue to expect approximately 15% growth. Before I turn the call back to Greg, I wanted to provide an update around tariffs and memory costs. We now expect the tariff impact to be neutral for the full year as the IEEPA refunds we recorded in Q2 offsets the $60 million in tariff headwinds that we had planned for this year. And regarding memory, we now anticipate our direct memory spend to be approximately $150 million this year, up from $50 million last year. Our teams continue to successfully navigate this challenging supply environment, carrying higher inventory and collaborating closely with our key suppliers to secure continuity of supply. We still expect gross margins to be comparable to last year as the now improved tariff outlook I mentioned, offsets the increased memory cost expectations since our last call. And for full-year operating margins, we now expect approximately 170 basis points of expansion, up from 100 basis points previously. Finally, our balance sheet remains strong and gives us plenty of headroom and flexibility on capital allocation. As we previously highlighted, we expect to raise approximately $1 billion of incremental debt in the form of senior notes and term loans to finance the D-Fend acquisition, and we still expect to finish the year with a net debt-to-EBITDA leverage at approximately 2x, which is similar to where we ended last year. With that, I would now like to turn the call back to Greg.

Thanks, Jason. I'd like to conclude with a few final thoughts before we open it up for Q&A. First, Q2 was superb, and I'm extremely pleased with our execution. Revenue was up 13% with significant operating margin expansion, and we drove just under $500 million in operating cash flow. Additionally, we achieved record Q2 orders and backlog, putting us in a strong position heading into the second half of this year. Second, we're seeing strength across our safety and security ecosystem. Our video business continues to perform well, particularly in mobile video, where, as Jason mentioned, we secured 2 significant orders from Florida Highway Patrol and Kansas City Police Department. These deals were highly competitive and what's most encouraging is that both of these large agencies are first-time users of our body-worn camera and in-car video solutions. In addition, Command Center continues its strong momentum as customers are increasingly adopting our software and AI assist solutions to simplify their complex emergency response workflows. Third, Silvus is performing exceptionally well, powering leading-edge MANET connectivity for unmanned systems and battlefield communications. And pending regulatory approvals, we're also looking forward to the acquisition of D-Fend, an industry leader in counter-drone solutions, which goes beyond simple detection and differentiating itself through non-kinetic cyber takeover mitigation capabilities that are increasingly critical for public safety. When you consider Silvus' leading-edge MANET communications for defense, and D-Fend's leading-edge detection and mitigation for public safety, I think we're very well positioned to address our customers' rapidly growing needs for unmanned systems in defense and counter-drone solutions in public safety. And finally, in addition to our strong results and momentum, our balance sheet and continued robust cash flow enable us to be flexible in how we deploy capital and drive long-term value, both organically and through targeted acquisitions. I feel very good about where we are and the increased guidance for the year reflects our confidence. I'll now turn the call back over to Brian.

Thank you, Greg. Before we begin taking questions, I would like to remind callers to limit themselves to 1 question and one follow-up to accommodate as many participants as possible. Operator, would you please remind our callers on the line how to ask a question?

[Operator Instructions] Our first question will come from Tim Long with Barclays.

I got a question on Silvus and then I'll follow up with one on Video. For Silvus, obviously, another raise here, that's great to see, and demand seems really strong there. Greg or Jack, could you just touch upon some of the capacity increases you guys are undertaking? What does that mean for the flow of this business? Are we still limited by capacity? And what would that mean for Silvus as we look out the next year or 2? And then I'll follow up after that.

Sure, Tim. Let me just dimensionalize Silvus too in terms of its performance. It did about $210 million in Q1, about $230 million in Q2. And as you heard us on the call, we raised the year to about $850 million. And Jack can talk about some of the things we're doing around capacity expansion.

Yes, Tim. So the first thing we did was within our Los Angeles site, we added capacity there, specifically a second floor. I think you read, Tim, that we announced the construction of a facility, a new manufacturing facility in Salt Lake City, which we're very excited about. And consistent with what we said before, we'll start to see the benefit of that in 2027. But the increased guide for Silvus this year takes into account our current capacity, and we'll live within that. I think one of the things we're also pleased with, Tim, is we've doubled the size of the sales force. So it just continues to put more balls in play for us.

Okay. That's great. And then just wanted to touch on the Video business. Pretty strong quarter. Just looking at the complexion, it looks like a lot more product [Audio Gap] some of the prior quarters, so not as much software service. So could you just talk a little bit about that mix and what that means in the quarter? And does that lead us towards a little bit more growth on the software side in the future? Anything on that mix and the take from that? Appreciate it.

Tim, you broke up a little bit, but I think you're asking about the mix and performance of Software versus Products and SI there. Video. Video -- so first of all, we're very pleased with where we're at, and we actually grew 12% during the quarter in total, and we bumped up our guide to 11% from 10% to 11%. So overall, performing even better than we had expected. In terms of the mix, at the half, both Software and Services and products are performing well. S&S software specifically for that part of the business is up double digits, and we expect software to be up double digits in the second half as well. We've seen strong camera sales. That's what's in part driving 2 quarters in a row now of strong products. But the overall mix as we step back to the year, it reflects the -- what we expect, the investments that Mahesh and team are making in our cloud and hybrid offer and the increased sales coverage that Molloy has. So we're happy with where we're at. By the way, mobile video -- as we mentioned on the call, mobile video also expectations are very good.

Your next question will come from Joseph Cardoso with JPMorgan.

Maybe for my first one, and perhaps I'm jumping ahead here and looking at the fourth quarter. But when I do the back of the envelope math on the implied fourth quarter revenue outlook, it embeds a pretty nice acceleration both sequentially and year-over-year. So maybe you can just help me think through the drivers behind that uptick that you guys are embedding into the guide, maybe thinking about it from a demand perspective across the portfolio. Is there anything in particular that's driving kind of that acceleration here as you think about the exit trajectory for the year? And then also maybe just a quick clarification. Are you guys including acquisitions that haven't been closed yet into that guidance? And then I do have a follow-up.

So Joe, to answer the last part first, the guidance we're providing for the full year and the beat and the raise reflect the assets we have today. Love the fact that we're, as Jason mentioned, guiding the year up $175 million for the full year on top line revenue. All of that is pretty much MCN, of which $100 million is Silvus, $75 million of LMR. The confidence is also informed by the overperformance in Q2, which we beat consensus by $130 million. Why did we do that? It's because of better conversion and strong demand. That said, the second half as we look, remains unchanged. We've always planned for a strong second half. That's informed by the visibility of what we have. It's informed by double-digit orders growth again expected in Q2, expected double-digit orders in the second half. And when you decompose kind of our expectations, there are some specific ship acceptance and product releases around the infrastructure D-Series that are coming in Q4 that marry up with the conversion expectations of Jack's sales team, which informs that strong Q4. And lastly, I'd say LMR is strong. LMR was stronger than we thought in Q2. But by the way, we still expect the LMR business to grow in the second half of this year, 10% as well. So just really strong growth, great orders performance and feel good about where we are now with our expectations between now and the end of the year.

No. Awesome color, Greg. I really appreciate all of that. And then maybe as my second one here, gross margin stepped up meaningfully in the quarter, even excluding the tariff benefit, but you guys are still guiding stable gross margin outlook for the full year. Maybe can you bridge the 2Q performance against that? Like what are the puts and takes relative to the headwinds from the cost inflation that you're highlighting versus maybe the tailwinds from mix and pricing levers? And how does that shake out as we progress through the year to kind of get us to this more stable gross margin outlook for the full year?

Sure. So favorable mix has been a growth driver for us for a number of quarters, and we expect that to continue. Customers are adopting more feature-rich solutions, and that's in part what helps drive our growth. In terms of headwinds, I mentioned on the call that memory, which last year was $50 million, we now expect to be $150 million. That's up from 90 days ago. So that $100 million of increase, a large part of that's going to be faced in the second half because of timing, because of inventory and the positions we had to begin the year. So that's a little color around the headwinds. And that's -- with the offsets we plan, we're still able to maintain comparable gross margins for the year and to grow OE for the company at 170 bps with contributions at OE from both segments.

Your next question will come from Andrew Spinola with UBS.

I think there's obviously a lot of interest in the second half ramp in the LMR business coming into this quarter. But the second question that I typically have been getting is trying to understand if you put all this COVID backlog shifting behind us and the sharp ramp in the second half, how are we looking in terms of [Audio Gap] in the LMR business. Is there anything where we can look at the product side and think increases in officers or international markets, anything that can drive that -- or infrastructure D-Series, anything that can drive that business to an accelerated growth rate over the medium term?

Yes. Thanks for the question. So certainly, coming out of the last call, there's been a lot of interest in LMR. We're pleased with where public safety LMR is, which is MCN, the technology minus Silvus. We had growth in the quarter. We had continued order strength, as Greg mentioned. We overperformed in the quarter, and we increased the year $75 million, whereas now we expect this year's LMR growth to be better than last year's. And we've always planned for a ramp in the second half, and that's consistent with, in part, product releases. The D-Series deals that we've been talking about, we talked about 3 of them on the call and more prior to that, require staging and implementation and going and getting to sites. That's planned for the second half. And in addition, Jack, you've got some product releases happening in D-Series that will make it available to more customers in the second half.

UHF will begin shipping in Q4, Jason.

So nothing's changed in our expectations for first half, second half contribution. If anything, we've overperformed our expectations in the first half.

And Andrew, I would say just kind of overall, when you think about the trend of public safety systems or let's just call it LMR and what those platforms afford our customers. Historically, it was always around mission-critical voice. Now with the adoption of APX NEXT, it incorporates broadband for 5G and broadband applications. Now our latest APX NEXT radio is LEO compatible, adding another band for rural coverage for low earth orbit satellite. You have the device refreshes with APX NEXT. Now we introduced the D-Series, which is the first time we've upgraded the infrastructure in a dozen years. And that's informing part of the strong growth in Q4, given ship release of new infrastructure. And then look, we'll see -- you're going to see us continue to do things around this multidimensional multimodal platform called public safety LMR. And I just think that more and more customers see the criticality of LMR. They're making investments in LMR and MCN. We too are as well, both organically and inorganically. And while we mentioned D-Fend and the announcement of that deal, that D-Fend was a highly sought-after asset. It's all about leading counter-drone technology, not just detect and track and identify but surgically do cyber takeover, which very, very few people do, and we think D-Fend does the best. We'll work the traps on the regulatory approvals, and there's still work to be done there. But we're excited about that asset as well, which we had mentioned to you at the time we announced the deal. We expect it to be about $185 million in revenue. It has historically a CAGR revenue growth of 50% over the last 3 years. But again, as you think about LMR, as you think about critical networks, as you think about public safety platforms and the unique ecosystem and capability we're building, it's not just what we have today, but what we expect to have shortly, and that's exciting as well.

Appreciate that. One follow-up question, Greg. AI has been in the market now. You've had a product for maybe a couple of quarters. Some of the competitors have had different types of products, similar to yours, some more analytical. How is the industry accepting AI? Is it performing to expectations, both your product and across the industry in terms of acceptance and just performance?

I think it's performing well. We talk about AI in the context of embedding it in pretty much everything we do, specifically in the context of public safety around the individual personas. So how does AI -- how does it get implemented and productized through the lens of a public safety responder law enforcement offer? How does it get instantiated with a dispatcher? How does it get implemented through a real-time crime center? And I think Mahesh has done a great job of building it out both on-prem as well as hybrid solutions, and I think our traction is quite good.

The other thing I'd say and maybe echoing one of the key points that Greg just made is AI is no longer a nice to have, it's a need to have within each of our applications. And we have taken that philosophy right from the beginning where it's not an over-the-top solution. It is embedded deeply within each of our platforms. Yes, it's integrated. And just to sort of punctuate that point, 100% of our VESTA emergency call handling solutions in Q2 were at the assist tier, which is effectively the tier of our solution that includes all the AI capabilities. The same is true across CAD records as well. So it is becoming something that is key and embedded within each of those platforms. And that, in turn, is meaningfully raising our ASPs across the board. A couple of other things that I think that we have done and we take great pride in is we introduced this notion of AI labels. And that is, I think, quite important for our customers because they would like to know what the status of data ownership is, what type of models are being used? Does it run on-prem? Does it run on cloud? What elements of data are used to compute various things that they are seeing from a decision standpoint. We are very transparent and open about what it is that they do. And across the board, we also offer free training on demand for our customers to effectively use those capabilities in whatever workflows that they choose to use it for. And we are seeing great acceptance across the board with that.

Your next question will come from Adam Tindle with Raymond James.

Okay. I just wanted to maybe start this time last quarter, I think a lot of us were surprised by the PSI operating margin in Q1. S&S had an upside to offset, but I think the composition of that quarter was a little different than investors thought. Here we are 90 days later with a huge rebound in PSI margins on a sequential basis. So maybe just as a starting point, Jason, could you walk through sort of the drivers that led to this level of improvement? And you've mentioned memory costs increasing. I know in the past, as you had cost increases, it makes sense for you to start raising price to correspond with that. I wonder how you're thinking about pricing as a lever as well going forward.

Sure, Adam. So part of Q2, as we mentioned, was stronger conversion with orders brought in by the sales team that we're able to execute in. A lot of that has to do with devices. And so we had more devices shipments. We have a higher inventory position, by the way, that's helping us get to strong quick turn levels. It's helping us navigate the memory challenges on pricing. So part of the improvement in op margin quarter-over-quarter had to do with the mix towards devices, which we were able to turn within the quarter. That's a key driver as to the overperformance and the better margins. The second part of your question around levers that we have. I mean memory as a content to LMRs are pretty small. It's a more material contributor or item in Video. We have made some surgical price increases on high memory content items in Video, for example, like video servers. And we'll continue to look at that as an overall offset for the portfolio, but continuing to secure the supply that we need, of course, paying higher prices, but it's enabling us to meet the demand that we're seeing. We'll continue to look at it as a possibility going forward.

Got it. Maybe just continuing that thought as a follow-up, Greg, investors are looking at the product backlog being down sequentially, but also your positive commentary on the outlook for the product business, in particular. And I think Jason's guidance suggests that the back half is actually going to accelerate in terms of the product growth. So with product backlog down sequentially versus this acceleration implied in revenue, what are investors maybe missing if they over fixate on the backlog trends?

No. Look, we're thrilled. I know you're focused on the sequential, but we love the year-over-year performance. And at the end of the day, this is more about, as Jason and we have said since the beginning of the year, the MSI revenue story becomes more one of conversion than backlog. Now having said that, love the fact that Q2 was another double-digit orders quarter. Love the fact that the back half on orders growth is expected to be double digits. But if you want to specifically look at product backlog, look, as we sit here in August, at the end of the day, I expect product backlog to be up at the end of this year versus last year. So -- but I think it's more -- backlog is a component, but the story more about our growth is overall demand, which is stronger conversion, which is stronger and double-digit orders growth.

And Adam, to your point, the product backlog of the high 3s is a strong place to be complemented by the double-digit order set that's in front of us and that we've been capturing and that the pipeline supports going forward. And that's the setup for how we expect things to play out in the second half of the year.

That's helpful. Congrats on awesome quarter.

Yes. Thank you, Adam. Appreciate it.

Your next question will come from George Notter with Wolfe Research.

I wanted to dig into the Silvus progress a bit more. Obviously, continues to really do well. I know -- I think you said, Jack, that you increased the sales force or doubled the size of the sales force. But I'm just curious, like as you look out, where you're seeing opportunities, what geos, what applications? Anything more you can tell us about the underlying demand trends there and customer interest would be great.

We could tag team it. But contextually, George, I think the good news is the overall demand is driven by international demand and what I would characterize as kind of a macro global defense modernization. I think you see our growth driven by NATO countries, EU defense spending. Germany is a theater in particular, that's strong. Obviously, Ukraine that's in conflict and growing demand in the U.S. and Indo-Pacific. You take that strong demand and couple it with the earlier question around capacity expansion. Jack has done a great job more than doubling the sales force. I think you'll see supply chain efficiencies increase as well. We have the new capacity facility in Salt Lake City that comes online in early Q1. Could not be more pleased with that asset. It's been a year, I think a year tomorrow or a year the following day that we actually closed on it. It's performing better than we thought. We knew demand would be strong. It's even stronger than we thought. And I think a tip of the hat to Jack and his team and Vivek and the Silvus team in L.A., it's been superb and thrilled to have it. And look, it's proving out, I think, the thesis behind -- we were very disciplined and intentional with that Silvus acquisition. I would say the same thing about D-Fend. We think in Silvus it's the leading player and the leading-edge technology in unmanned. And similarly, once we run the traps on the regulatory approvals, we think D-Fend is unique, specifically around cyber takeover and mitigation, which is a unique characteristic, and we love both of those assets.

Yes. The only thing I'd build on is, listen, the secret sauce here is Spectrum Dominance 2.0 software. It's not only we talked about MANET technology being high bandwidth, which enables various forms of multimodal throughput on the battlefield, but it's anti-jam. It's a low probability of intercept and detect. But just specifically, the U.S. DOW just ran some trials and Silvus received exceptional scoring in terms of anti-jam testing results. And I think as we see in highly congested environments when us versus our competition get put to the test, I think it's just further testament to what Vivek and the technical team have built there. And then we've added, as we talked about being a scale player, we're invested in additional capacity, go-to-market. We continue to extend and invest in R&D, not only in the waveform, but in the software aspects of it. And they're firing on all cylinders, I think just to echo what Greg said, we're really proud of what they've accomplished.

Your next question will come from Meta Marshall with Morgan Stanley.

I wanted to ask a question on APX NEXT and just the software subscriptions that you're seeing kind of attached to that. In the past, you've noted somewhere around $300 per year. Just wanted to see what applications are either getting the most traction or if there's any update to that number? And then maybe as a follow-up question, just kind of any traction with SPX.

Sure. Thanks, Meta. And you're right. We expect 300,000 subscribers by the year-end '26. That would be up from about 200,000 by end of '25. So strong growth. The pricing of the apps is around 300. It's gone up a little bit with the advent of some new apps. And I'll let Jack talk about where the apps that the customers like best, but they are definitely -- it's a driver. It's now going to be almost $100 million ARR business by year's end.

Yes. I think just, Meta, in terms of those things, it's SmartConnect, which essentially enables a user who may be going out of their jurisdiction to expand their coverage capacity, Smart Programming and then Location continues to be -- as we think about accountability, Location continues to be an application that gets consumed. Related to SPX, and Mahesh may have something he wants to add. SPX traction, we're really proud. We've now got 150 customers operational with SPX. You heard Greg and Jason talk about Florida Highway Patrol and Kansas City, Missouri. I want to point out that those -- we didn't go in and extend those customers. They're not existing customers we extended. Those were new RFPs that we secured against our competition in addition to St. Joseph County, Indiana, who used to deal with one of our competitors and now signed on because they love the story of our full ecosystem. That's just in North America in Q2. You look at what we've done internationally, where we're over 20 countries right now in body-worn camera, name a couple of big ones, over 20,000 users with the Sao Paulo Military Police. Moroccan Gendarmerie, a Nordic National Police Department. And I think we continue to get momentum with our reach and trust that we have internationally.

And those successes were competitive flips.

They absolutely were, right. The other point I'd make around APX NEXT and SPX is they are paired together. So when we talk about an SPX win, that's paired with customers that are using APX NEXT. So it's yet another combination that's powerful for both parts of the portfolio.

Your next question will come from Tomer Zilberman from Bank of America.

Guys, I wanted to go back to the LMR discussion. I think you mentioned earlier that you expect the segment to grow 10% in the second half. I mean that's a really strong number. That's on par with the growth that you were seeing a couple of years ago when you had the benefit of both the North American refresh cycle and also the supply chain environment, which is driving up orders. I guess the question is, as it pertains to your commentary around APX NEXT, is that driving another cycle this time around? And I think a while ago, you gave us a disclosure that APX NEXT was about 25% of public safety shipments. Is there any update to that number you can give us?

Sure. So we talked about a growth driver of the second half ramp being infrastructure, which is D-Series and the timing of the deployments and the new offer of UHF, which is coming to market. Conversion and quick turn for devices continues to be strong. It was stronger than we expected in Q2, and we expect it to be strong in the second half with continued momentum in customers choosing APX NEXT, which comes to us at a premium at the time of sale and also with the ARR subscription that Meta just asked about.

Yes. I mean the only other thing that we haven't talked about is APX NEXT has historically been a police phenomenon and a credit to Mahesh and his team. But in Q2, we announced the APX -- the first APX NEXT XN, which actually puts us in the first NF -- National Fire Protection 1930 certification. So we have an APX NEXT device that we can now bring to the fire market as well.

Your next question will come from James Fish with Piper Sandler.

This is Ryan on for James Fish. On the drone side, any pickup in pipeline post-World Cup? And now that you have D-Fend and Silvus' pillars here, how are you feeling about mitigation and prevention strategies that we could see MSI add organically or inorganically going forward?

Well, Ryan, we don't have D-Fend yet. We are expecting that transaction to close in the second half. But think about it, Silvus is unmanned defense. D-Fend is counter-drone technology for public safety. So different technologies and different verticals. I love D-Fend. I love -- it was an engagement that took multiple months. As I mentioned a few minutes ago, it's a leading-edge, highly sought-after asset because, look, we hear all these things about drones. It's one thing to detect them. A lot of people can do that. D-Fend can detect, it can track, it can identify, but then how do you mitigate it? And how do you mitigate it in a public safety context or critical infrastructure context without collateral damage? You can't use bombs or bullets or kinetic. You have to find a different way. What we loved about D-Fend and their creativity and ingenuity is they do it through surgical cyber takeover. So they track it, identify it, take it over and take the communications link over and then neutralize that threat with no residual damage, no threat to public safety communities. That's what we think is best-in-class. So I think there's a lot of that. By the way, if you look at FIFA, you mentioned Ryan, World Cup, it was -- D-Fend was in virtually all of those theaters, all of those stadiums providing cyber mitigation, which played a critical role. And I read a report several days ago that there was over 700 different drones detected over multiple sites through -- over the course of FIFA. I think D-Fend was a meaningful component to that detection and mitigation. So we feel very good about it.

Yes. And if you look at just in the last 7 days, the Department of Homeland Security came out and announced a $1.5 billion unmanned aircraft contract. 2 tiers, first of which was systems, the second of which was comprehensive services. It's important to point out that there was multi-vendors selected on the systems, but only one, D-Fend, that actually provides cyber mitigation system. Greg, I think, eloquently pointed out, to keep the public safe to bring the drone down safely, there's only one way to do it, and that's cyber, and they were the company selected there.

And then a quick follow-up. How are state and local municipal budgets holding up for 2026? And are you seeing any hesitation in large-scale APX NEXT upgrades? Or is the funding environment still highly supportive?

No, 2026 the budgets have been -- continue to be very good. We've actually -- what we do this time of year, midyear because we start to look at '27 budgets, which have now been floated in some cases, approved. The good news for us is in 2027 for state and local, public safety budgets are growing faster than government budgets, both state and local. And then if we think about software as it relates to public safety and the funding attributed to software for public safety, that's growing even faster than money being allocated to public safety. So we think all in for '27, generally conducive to our business.

Your next question will come from Matt Niknam with Truist.

Congrats on the quarter. I have one follow-up and one, I guess, more main question. So the follow-up is you talked about double-digit order growth in the second half of the year. I just want to clarify, is that for the Products and SI segment? Or is that for the total business? And then broadly speaking around supply chain, just wondering if you can talk about the visibility you've got with your suppliers in terms of being able to procure what you need to accommodate demand and whether there could be upside to the guide if you're able to get access to more profit this year?

Matt, I'll answer the second question first. I think you're getting at memory. Memory for us is a challenge in what we're having to pay for it. We're paying more. This year, we're going to spend $150 million. Last year it was $50 million. The availability has been good and continues to be good because we're working with our vendors to secure the continuity of supply. We are carrying higher inventory and capturing its availability. And I'd remind those on the call that our LMR, specifically MCN portfolio does use a simpler form of RAM. It's not the latest, greatest high-speed DRAM, and we can substitute it. And so that's allowing us to have more shots on goal, and we are attaining and getting the continuity of supply we need. We are having to pay more. That said, we're still growing operating margins 170 bps expected this year with comparable gross margins. To answer the first part of your question, the double-digit growth is expected in products, specifically Products and SI in the second half.

[Operator Instructions] Your next question will come from Irvin Liu with Evercore ISI.

Congrats on the nice set of numbers. I had one and a follow-up as well. Just given the continued outperformance of Silvus, I wanted to check whether you held an updated view on where the Silvus TAM stands today. I think most recently, you indicated the TAM is currently about $3 billion and expected to double over the next 4 to 5 years. But, I guess, I just wanted to better understand whether your growth here on Silvus was more TAM-driven or share-driven. I mean it sounds like the latter to me.

I would say it's more share-driven actually than TAM-driven. We don't have any information that would materially change the TAM that you just outlined that we have quantified. I think the performance of Silvus is around share gain and execution and not addressable market expansion per se.

Got it. And for my follow-up, you discussed the D-Series infrastructure product as a contributor of LMR strength for Q4 looking ahead. Just given that this is the first infrastructure product in 12 years, are you seeing any sort of benefits of a pent-up demand for infrastructure broadly that can potentially unlock multiyear infrastructure refresh cycle?

Yes, we are. And just to dimensionalize it, infrastructure is a little less than 1/4 of the LMR business. And to have a D-Series, as Greg mentioned, that's new, refreshed, Jack can talk about the customer attributes they like the best and to have them investing in it means that it's expected to be a growth driver, not only for Products and SI by the way. Most of the customers that are investing in this infrastructure are signing up for new 5-, 10-year Software and Services wrappers around it. So we'll see the benefit of that over time as well. Jack, in terms of features and what's really uptaking?

Yes. I think we've made coverage more efficient. It's more energy efficient at the site, which is critically important to a lot of customers right now as they think about kind of greening their networks. We also introduced our ASTRO Site Satellite Resiliency, which essentially improves the resiliency and redundancy of the networks that incorporates low earth orbit satellite just as a backup to a backup, if you will. But I think the most important thing for us as we look at it is it's -- our customers are betting on us for the long term. It's Minnesota Department of Transportation for 5 years. Maryland, a 10-year renewal. It's Australia -- we had a customer down in Australia signing on for 10 years. So I think it's a continued validation. We've had 3 big states that have signed on with D-Series in the last 3, 4 quarters and 3 major American cities that have signed on. We think there's more to come. Our customers are excited about it. And by the way, there's 2 rails. They're investing in the network, but they're also, as Jason pointed out earlier, continuing to think about the refreshing of the devices. And I think it's a testament to our product team on how they envision these things working together. And then obviously, the services that we provision for our customers to wrap around those things.

Your final question will come from Louie DiPalma with William Blair.

Following up on the last question, should the D-Series upgrade cycle be considered a onetime boost to the second half growth rate for this year? Or should it carry over into next year such that LMR will remain in positive growth territory?

So think of D-Series and infrastructure as a slower-moving building part of our growth story. It's because if you -- I just -- I talked about 3 states. We have over 40 statewide networks in the United States, and we have 10 of the provincial networks in Canada. And so you can just do the math on that, Louie, we've got a lot more to do. And these are multiyear plans. And the reality of it is, is a lot of these people sit down, particularly with infrastructure and look at a 10-year plan. And so they're all not going to happen at once. It won't be just a fourth quarter thing. This will be something that will continue to refresh networks, quite frankly, into the 2030s.

Great. So it should be a positive catalyst also for next year, right?

Yes.

And my second question, the Silvus acquisition has been a home run and many investors have wondered why Silvus didn't go the IPO path rather than selling to you because the growth has been so exceptionally strong. I wanted to ask about this Motorola effect and your ability to supercharge growth. So D-Fend has elite technology for radio frequency counter-drone mitigation. And do you expect the combination of D-Fend's technology with Motorola's brand and the cross-selling and the manufacturing capacity that you can replicate with D-Fend what you've done with Silvus?

Yes. And you hit on it. It's exactly right. So I think Silvus -- we think Silvus is a one-of-one asset. I mentioned that -- and that acquisition took a long time. We were really thorough. We had -- I mean, it was almost a year in its engagement. We were very intentional. We were very thorough. What is it about Motorola Solutions that can make Silvus grow better than they can on their own? Number one is the brand equity and the installed base of the customers that we have in this case, particularly [ MoDs ] internationally, where we immediately give that asset, which is, you call elite, I agree, visibility into theaters maybe they didn't have initially. Second, its go-to-market sales motion. Molloy has already more than doubled the sales force. Third is coals on the fire and expansion and focus around government affairs, both in North America and internationally. Fourth is being able to buy supply chain, components, efficiency, capacity in a way that Motorola can bring to bear the back office, the IT, the systems, the manufacturing, low unit cost component acquisition. So net-net, we can have it grow -- it can grow faster through sales and it can scale faster with the infrastructure of Motorola Solutions. And lastly, highly culturally compatible, RF centricity, different market, great product. The Silvus team has been superb, not just because of the revenue and the growth, and we love all that. It's great. The people are outstanding. The technical depth, superb. They see around corners. They look and we look to extend the lead we believe we have even further from a technology expansion point. And I think we feel very similarly about D-Fend, the elite technology around cyber takeover, around not just detection and tracking and identification, but unique mitigation. Once again, by the way, an Israeli company, we've been in Israel over 60 years. We have 600 people there, plus or minus. So the density of our presence in Israel, the commonality around cultural innovation, not just in Israel, but in RF and that cultural creativity that Mahesh's LMR team and mission-critical team brings, I think will be a similar story with D-Fend. I think we can do more with D-Fend than anyone else can or they could do on their own. And I think that was largely in part why the 2 companies decided to get together. I'm super excited about the opportunities in public safety counter-drone for that asset once we're able to close it after regulatory approval.

This concludes our question-and-answer session. I will now turn the floor over to Mr. Greg Brown, Chairman and Chief Executive Officer for any additional comments or closing remarks.

I just want to say thank you to all the Motorola people listening in, to our customers. Thank you to our partners. It was a great quarter, great quarter with double-digit orders, strong revenue growth, operating margin expansion, generating just under $500 million just in Q2 of cash flow. We talked about the strength of mission-critical networks and land mobile radio specifically. That informed our beat in Q2, which was $130 million, which was $100 million from LMR and $30 million driven by Silvus. That's informing the full-year raise of $175 million, $100 million from Silvus, generally $75 million from LMR. The business is strong. The product refresh cycle is good, both on devices and on infrastructure. I think the supply chain team, I want to say thank you as well to Motorola. We made a conscious decision to carry more inventory. We were thoughtful about getting ahead of memory and aligning that with conversion that allowed us to execute. We think that will continue in the back half. And lastly, I just love the momentum we have as we sit here today for the rest of this year. Thanks for listening. Look forward to talking to you next November.

This does conclude today's teleconference. A replay of this call will be available over the Internet within 3 hours. The website address is www.motorolasolutions.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time.