Zebra must hold a 22% margin in the quarter memory prices jump 10-20%
Zebra guided the very quarter memory gets 10-20% dearer, and $1.95 billion of debt falls due May 2027. Jefferies says the 22% margin is defensible; the tape says otherwise, and the next reading is November 18.
Vincent Jiangtwo-minute read
Zebra Technologies+1.94% — Zebra Technologies, up 1.94 percent today told investors on November 3 to expect about 22% adjusted EBITDA margin in the fourth quarter 145. Ten days later, Intel's−4.19% — Intel, down 4.19 percent today chief executive said memory prices are up "six, seven times" and could get worse in 2027, with DRAM contract prices rising 10-15% and NAND 15-20% this quarter, per TrendForce 145. The quarter Zebra must defend its margin is the quarter its bill of materials gets dearer. 145
The market called the quarter a miss, because of one line
The quarter itself was strong: net sales of $1.614 billion, up 22.3%, organic growth of 11.3%, non-GAAP earnings of $4.95 a share, up 27.6% 12. The stock still fell 8.8% that day, because adjusted gross margin dropped 220 basis points to 46.0%, below the published estimate near 47.7%, on mix and memory costs. 12
Gross margin fell to 45.7%, the lowest in almost three years and 2.3 points below a year earlier
Data
| Gross margin | |
|---|---|
| Q4 '23 | 44.4% |
| Q1 '24 | 47.9% |
| Q2 '24 | 48.4% |
| Q3 '24 | 48.8% |
| Q4 '24 | 48.6% |
| Q1 '25 | 49.3% |
| Q2 '25 | 47.6% |
| Q3 '25 | 48% |
| Q4 '25 | 47.3% |
| Q1 '26 | 49.6% |
| Q2 '26 | 53% |
| Q3 '26 | 45.7% |
The margin line the wire called flat was not
One recap called the 21.6% adjusted EBITDA margin flat 172. A German trade outlet prints the prior quarter at 27.7% 172. If that is right, the margin fell roughly 610 basis points in two quarters, and the 22% fourth-quarter guide is a recovery, not a hold 172. Management is raising prices to pass memory costs through, and says pass-through is working. 172
Adjusted EBITDA margin fell to 21.6%, and the Q4 guide only gets back to 22%
- Adjusted EBITDA margin
- Estimate
Data
| Adjusted EBITDA margin | |
|---|---|
| Q2 FY26 | 27.7% |
| Q3 FY26 | 21.6% |
| Q4 FY26 guide (estimate) | 22% |
The balance sheet sets the deadline
Zebra has $2.58 billion of debt against $182 million of cash, with $1.95 billion due May 2027, while buybacks ran at $640 million year to date 42. Free cash flow of at least $1 billion for the year covers both, until it does not. 42
The sell side has staked its call
Jefferies−1.25% — Jefferies, down 1.25 percent today initiated at Buy with a $382 target on November 11, calling roughly 22% adjusted EBITDA margins defensible and projecting about 8% revenue growth in 2027 346. The stock closed November 13 at $324, 15% below its October high 346. Management speaks at the Stephens conference in Nashville on November 18, the first stage since the print 346. If the margin line holds, the tape is wrong. If pass-through slips, the May 2027 wall moves closer. 346
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