Zebra Technologies Corporation (ZBRA) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Second Quarter 2026 Zebra Technologies Earnings Conference Call. [Operator Instructions] 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.

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. 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 reconciliations shown at the end of the 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. Bill will begin with perspectives on our second quarter 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. Then Bill and Nathan will take your questions. Now let's turn to Slide 3 as I hand it over to Bill.

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. 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 and enhancing our financial strength and flexibility. 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 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 and a 76% increase over the prior year. 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 the first half of the year, following more than $300 million in the fourth quarter. 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. 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, 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 multiyear 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. 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 6. We continue to build on Zebra's unique competitive positioning as the foundation for intelligent operations. Our solutions capture data at the front line, 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. 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 while also continuing to expand our value as their operations evolve. Turning to Slide 7. Our results reflect the progress we are making in executing on our 3 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. 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 3/4 of warehouses globally are in 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 the second quarter, accelerating software development by deploying new AI tools, 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. 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. 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. Let me wrap up before I hand over to Nate. 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. 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. And 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.

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, and 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 a 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 second quarter with a modest debt leverage ratio of 1.9x and $925 million of credit capacity. We've 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. 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. 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 10.5 points of contribution from business acquisitions and favorable FX. 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. 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. 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.

Thank you, Nathan. Before we turn to your questions, let me leave you with 3 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, and we remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.

Thanks, Bill. We'll now open the call to Q&A. [Operator Instructions]

[Operator Instructions] Our first question comes from Keith Housum from Northcoast Research.

Congratulations on a great quarter. Bill, as we're kind of thinking about the rest of the year into 2027. Now the past 2 quarters, this quarter and 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 you to give some ] guidance, but 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.

Yes, Keith, I would say that the excellent results certainly in the quarter overall with great execution by the team. So I'll start there. When we look at the vertical markets, clearly saw the T&L cycling difficult comparison last year, just high compares. But still saw solid performance across that vertical market with growth across third-party logistics and warehousing in this segment. 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 multiyear 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. 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. But we see over -- starting in '27, a strong pipeline of opportunities for refreshes within Transportation & Logistics, and we continue those conversations with customers and are ever confident in that happening.

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, 1.5 years in that and how you're thinking about that for the rest of the year?

Yes. I think just like T&L, we saw strength in manufacturing. So the -- while T&L has been a strong segment, manufacturing continues strength as well. 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. 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. 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 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. 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. 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 expected, driving growth for us.

The next question comes from Tommy Moll from Stephens.

Bill, it sounds like in second quarter, part of the reason you've exceeded the top line expectation was the memory supply was a little better than expected. 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?

Yes, 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 of the year and especially in the second quarter 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 second half outlook. So demand signals and the demand we're seeing from our customers is above what we're guiding to, 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 the year and into 2027.

Yes. 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 and we do expect, as Bill mentioned, a modest increase in memory in the second half, but the team is really working hard to meet the unconstrained demand, which, again, is near the high end of our guidance range. 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 3 to 6, but actually in the next 18 months. And then 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 5 to 7 qualified suppliers for each of our primary memory types. So 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.

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?

Just start with the overall capital allocation, we ended the quarter at 1.9x debt leverage, strong cash flow expected for the year at $1 billion. The balance sheet is 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. Our full year EPS guide assumes that we'll do an additional $150 million of share repurchase in the back half, so call it, $700 million for the year. 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 at an attractive price.

Our next question comes from Quinn Fredrickson from Baird.

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. So when do you typically get some visibility into memory costs for next year?

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. So as we kind of laid out the year in the guidance, the pricing and the price increases that we have planned at the beginning of the year are largely playing out as expected. 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. We typically get pricing at the beginning of 3 months in advance or every 3 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. So I think the team has a pretty good handle on not only what we expect for the next 3 to 6 months, but where that trajectory is expected to be as we go out into 2027. And that's where 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.

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. 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?

Yes. So 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 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. 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 on the memory supply we expect or have confidence in achieving here in the fourth quarter. So again, but the team is 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 the second quarter.

Our next question comes from Andrew Buscaglia from BNP Paribas.

I wanted to check on -- your sales have just picked up nicely in Q2. 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 -- exceeded expectations by quite a bit, even ex tariff refunds, but then your Q3 margins imply a slight step down. So 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?

I'd maybe just start with the kind of the overall outlook. I think we have obviously confidence in the guide given the first half performance. A lot of the back half is still somewhat predicated around the memory capacity that we expect. So 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. So 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. And I think on the -- 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. 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, 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. So operationally, excluding memory, it's somewhat in line sequentially in a similar level of mix as we go from the second to third quarter.

Okay. Got it. And 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?

Yes, I'd say, Andrew, we'd prefer not to raise price. That's our -- certainly our strong preference. But 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, and we've been able to demonstrate that both in our business and in the Elo acquisition as well on both sides. So our preference is not to raise price. But as we need to do that as memory pricing continues to increase, we'll do that just like other suppliers have had to do. 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.

The next question comes from Joe Giordano from TD Cowen.

Look, I know we've talked about this a lot. I just want to be very clear, like -- and correct me if I'm wrong and 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. Now here you raised the high end. Like is the high end of your revenue guidance achievable in the current memory availability framework?

Yes. 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. 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. 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. But in second half, we're continuing to see a challenging and dynamic environment around memory. So the prudent thing for us to do is to -- the demand signals take us at 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.

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 and the great work the team is 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 3 months ago by the great work from the team.

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

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. 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, but hasn't been necessary to this point.

The next question comes from Piyush Avasthy from Citi.

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. Like can you provide some clarity on how we should be thinking about the 2 segments, like Connected Frontline has some 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 more meaningfully contribute as we progress through the year?

Yes, I think we see strong growth across both the segments. So Asset Visibility & Automation really focused on insights into assets within our customers. So think of inventory as an example in retail. So 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. But we also had strong growth rates in volume and run rate for data capture solutions. Our supplies business continues to be strong. Strong quarter, a very strong quarter in machine vision and RFID deployments continue. So I think strength in Asset Visibility certainly -- & 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, how do they enhance their interaction associates have with the customers on the frontline. And that segment, of course, is mobile computing, but also our Elo segment fits into that software and our AI solutions, and 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 AI suite and deployments our customers are looking to make. Elo, we had a strong performance in the second quarter and expect that to continue in the second half year with momentum with the Elo acquisition with the 2 sales teams working closely together and positioning those solutions across our customer base. So I'd say you expect growth in both segments in the second half of the year and feel good about the demand across -- we're seeing across the portfolio, across the regions, across the different vertical markets, truly broad-based growth.

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

Yes. I mean EMEA was slightly behind the other regions. And 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 compares from the prior year. 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. So I think we're seeing strong growth, it was 7% for the quarter. And I think that slightly below the other regions of North America. And then certainly, we saw a lot of strength in Asia Pac and Latin America. 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.

The next question comes from Meta Marshall from Morgan Stanley.

A couple of questions for me. Just in terms of -- on Elo, just where do you feel like you've 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 overlap? 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?

I'll start with Elo. I would say that excited about certainly the performance and the workaround integration as you mentioned, it really reaffirms our conviction that the acquisition of Elo and the combined capabilities between our 2 portfolios that really gives us another dimension on the frontline, 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. 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. But the real synergies come, as you pointed out, around the commercial side of things. We're expanding into new geographies that Elo didn't have a presence in before. 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 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, and you see this repeatedly from time to time here in healthcare, strong performance in mobile computing. So 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. So 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. So I think that healthcare continues to be a strong vertical for us, new customers and existing customers and new use cases and certainly more devices in the hands of more clinical workers overall.

The next question comes from Guy Hardwick from Barclays.

Great results, guys. So Nathan, so I think if you go back 3 months ago, you said that the $120 million of memory headwinds would be half offset by price, so maybe $50 million, $60 million realized over the 3 quarters. It looks like you've already realized $20 million. I think you said in the Q3 guidance, there's going to be 2 points of price. So that suggests perhaps another $30 million. So can you tell us what's happening in pricing? Is pricing being realized more quickly than you realized? Was there some mix effect? Or has there been some other price increases that perhaps have not been announced, which are benefiting results?

Yes. No, Guy, that's exactly right. So out of the $120 million of gross headwinds, we had previously communicated $60 million expected benefit from pricing. We've increased that now to $90 million primarily due to the strength we saw in the second quarter. And I think that's a real credit to the team. One thing we did differently this time versus other price increases, while the price increase went into effect in the later part of March, we were proactively looking at deals and quoting opportunities at the higher price going back to the beginning of the year as we saw the price increase. So I think that proactively getting those projects that were in the pipeline for the second quarter and embedding the incremental pricing ahead of the actual price increase in the announcement was a big driver. And I think the team has been super focused on it, a big credit to the sales team and our product teams for driving it. But that obviously gives us confidence here as we go to the back half of the year to deliver on what we need for the back half and substantially -- and continue to increase that as we go into the fourth quarter and into '27 to fully mitigate the exposure.

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

Yes, it's pretty well split. I mean, EMC takes a little bit longer just given the types of deals and the project base. But the vast majority of the price increase we announced in the second quarter was for our mobile computing portfolio. But we've seen nice strong realization in print and other parts of the portfolio. So we're seeing it pretty broad-based. But I'd say the mobile computing made up probably about half 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.

The next question comes from Trevor Sahr from William Blair.

This is Trevor on for Brian. Just one for me. I was wondering if you could give a little bit more detail on the memory tech and the signals from customers -- sorry, suppliers and how they're investing for that new memory tech in 2027. And are customers asking for your products to be upgraded to this new memory tech for '27?

Yes. So if you look, we've done a lot of work within the portfolio. I mean the vast majority of our products are on the low-power LPDDR5, which is where the primary memory type that a lot of the capacity is moving to. So I think that puts us in a nice position of our portfolio being where capacity is moving towards and we're obviously working with each one of our suppliers as they move to the next-generation memory type within that band as well as qualifying new suppliers. The work with our commercial teams and our customers is really around, again, do they need 6, 8, 12, 16 gig memory? And what's the right memory for the use cases that they have, the applications? Obviously, what their future use of the device is going to be over the next 2 to 3 years as they're making those decisions? But also there's a big price difference between those different types that we will to make sure our customers are aware of as well as capacity is different across each one of those. So I'd say 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. So it's quite an extensive amount of coordination across the groups. But I think the team is 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 meet their long-term needs with the best possible outcome, both from a timing and pricing perspective.

And the next question comes from [ Patrick Muth ] from Needham.

This is [ Patrick Muth ] on for Jim Ricchiuti 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? 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?

Yes, 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, so retail, transportation, logistics, manufacturing, government as well. So we're expecting growth for the full year despite second quarter being flat, that's really primarily just timing on projects. Again, no concerns on our part about the growth of RFID. I think we're seeing the continued opportunities beyond retail apparel into broader merchandise parcel within transportation, logistics, fresh food in grocery, quick-serve restaurants, healthcare, government applications. So broad use cases of RFID really going to drive that growth for full year, just again not concerned about second quarter really at all. It's all project timing. Track and trace across the supply chain continues to be a focus for our customers. Zebra has the broadest set of solutions inside RFID today. So whether it's fixed or handheld reading, our printers today printing RFID labels, we're really excited about our new line 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 from our customers that are pulling RFID for those devices. So we're excited about RFID and the expanded opportunity it represents. And again, full year growth definitely expected from the RFID portfolio.

Yes. If you look at the back half margin as well as OpEx assumptions, the Q3 guide around approximately 22%, as I mentioned earlier, it was a slight step down from the Q2 results, excluding IEEPA refund of about 1 point, reflecting the higher memory costs, and we'd expect a similar margin profile as we go into the fourth quarter that's embedded in the guidance. I'd say, a lot of work on the OpEx line. We'll get about 1 point of scaling for the year, driven on the higher volume, but also we took significant restructuring throughout the first half of the year, which we completed here exiting the second quarter, which is allowing us to not only rightsize 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. So we'd expect that scaling to continue here as we go through the back half of the year and into 2027 in OpEx.

And our last question comes from Amit Mehrotra from UBS.

This is Pratap on for Amit Mehrotra. So my first question is on the full year guide. If we take out pricing, volume growth seems to be around mid-single-digit range. Now as we think beyond this year, do you think that rate is sustainable and can even improve into the next year? Like I know this is a 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?

Yes. If you look at our full year sales guide of 14% to 16%, 15% at the midpoint, that's organic growth of 7 points, which includes 2 points of price, and some of that pricing will roll over into 2027 just given the timing of the announcements, where acquisitions and FX make up 8 points -- the remaining 8 points of the delta. Look, I think as Bill mentioned earlier, we're excited about the long-term opportunities for the company. And while we're not guiding for '27, I think if you look at the underlying demand of the business, the pipeline, we have a project in the innovation, we feel confident that we'll be able to continue to meet the growing demand for our customers. And I'd say there's no reason to -- as we look at the long-term growth of 5% to 7 % that would be not somewhere within that range as we move forward out of '27, but into 2027. But a lot of that depends on, again, the timing of the pipeline along with looking at the memory capacity as we enter '27.

And just 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? 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 is under constraint?

Yes, I think what we were saying before is that the demand certainly is strong from our customers and the momentum continues across each of our vertical markets. And across both Asset Visibility and the Connected Frontline segments. Our outlook is -- demand would represent kind of the high end of our outlook for Q3 and the full year and we're factoring in supply constraints into that, that takes us down to about the midpoint of our guide, which is the same that we did in our guide for Q2. We were able to secure additional memory supply, which pushed us above the top end of our range for Q2. But we clearly are seeing strong demand for our solutions, and we're factoring in the potential constraints of memory into our guide for Q3 and for full year.

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

Yes, 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 are making excellent progress on our 2026 priorities, and we're excited about the opportunities ahead of us. Have a great day, everyone. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.