Zebra Technologies (NASDAQ:ZBRA) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Zebra Technologies reported record results for Q2 2026, with sales exceeding $1.5 billion, reflecting a 20.4% increase, or 9.2% on an organic basis. Adjusted EBITDA margin was 27.7%, boosted by $73 million in tariff recovery.
The company raised its full-year guidance due to positive demand trends and successful memory supply management. Sales growth for the year is expected between 14% and 16%, with an adjusted EBITDA margin of 23.5% to 24%.
Strategic initiatives included leveraging AI-powered solutions across industries, strong double-digit growth in retail, manufacturing, and healthcare, and significant progress in integrating Elo Touch to enhance self-service and point-of-sale offerings.
Operational highlights include strong performance in North America and robust growth in Asia Pacific and Latin America. EMEA showed resilience despite geopolitical challenges.
Management emphasized the company's ability to mitigate memory supply constraints and continue delivering strong results, highlighting strategic investments in RFID, machine vision, and AI.
Capital allocation included $568 million in share repurchases in the first half of 2026, with plans for an additional $150 million in the second half, reflecting confidence in long-term value creation.
Full Transcript
OPERATOR
Good day and welcome to the second quarter 2026 Zebra Technologies earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded.
I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations.
Mike Steele, Vice President of Investor Relations
Good morning and welcome to Zebra Technologies second quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially and we refer you to the risk factors discussed in our SEC filings. During this call we will reference non-GAAP financial measures as we describe business performance, with reconciliation shown at the end of this slide presentation and in our earnings press release.
Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from business acquisitions and dispositions for 12 months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. 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 three as I hand it over to Bill.
Bill Burns, Chief Executive Officer
Thank you, Mike. Good morning everyone and thank you for joining us. There are three key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability. 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, 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 were also encouraged by customer interest in our Zebra Frontline AI suite and new devices that can best deliver these solutions. In transportation and logistics, sales were flat on a strong prior-year compare, with relative outperformance in third-party logistics and warehousing. Our AI software solutions and recently launched portfolio of AI-optimized mobile computers has positioned us well with industry-leading companies who recognize Zebra's ability to bring increased productivity and service levels to their operations.
As we look ahead to 2027, we have a robust multi-year pipeline of large deployments. In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers' need for increased visibility across their operations. Electronics and pharmaceuticals were particularly strong in the quarter. Machine vision has also outperformed as our team has been executing well on growth initiatives as we invest in the business. Healthcare was our highest growth end market in Q2; we realized particularly strong performance in mobile computing as customers equip more caregivers with enterprise-grade solutions. We're excited about our opportunity to improve the patient care journey. Now, turning to slide six, we continue to build on Zebra's unique competitive positioning as the foundation for intelligent operation. Our solutions capture data at the 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 front line. 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 three strategic priorities. On our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve.
We believe both Connected Frontline and Asset Visibility and Automation have a 5% to 7% organic sales growth profile over a cycle and are confident in our ability to deliver. Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three quarters of warehouses globally are in the early stages of their automation journey. Our growth prospects are augmented by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers.
We're also driving efficiency initiatives in our business to enhance profitability, which include operating expense leverage through cost discipline, including our previously announced restructuring actions that were substantially completed in the second quarter; accelerating software development by deploying new AI tools; and enhancing our go-to-market model to improve market coverage and efficiency. We also continue to make progress on our second priority, building on our market leadership by advancing innovation.
We're seeing early traction in our new line of enterprise mobile computers and wearables that embed RFID and optimized AI processing capabilities as well as new RFID and 3D machine vision solutions. Finally, our strong earnings and cash flow generation continue to enhance our financial strength and flexibility. We are executing on a balanced capital allocation strategy, prioritizing investments in our business that elevate our portfolio of solutions while consistently returning capital to shareholders.
Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a $35 billion served market. 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 front line, 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.
Nathan Winters, Chief Financial Officer
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 and 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 1.9 times 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.
Bill Burns, Chief Executive Officer
Thank you, Nathan. Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full year. Customers are leveraging Zebra's AI-powered portfolio solutions to improve productivity, visibility, and decision-making, and we remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.
Mike Steele, Vice President of Investor Relations
Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.
OPERATOR
We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time we'll pause momentarily to assemble our roster, and our first question comes from Keith Hosam from North Coast Research. Please go ahead.
Keith Hosam, Analyst at North Coast Research
Great. Thanks, guys. Appreciate it, and good morning. Congratulations on a great quarter. Hey Bill, is worth kind of thinking about, you know, the rest of the year into 2027. Now the past two quarters, this quarter and last quarter, you referenced some successful deployments expected in 2027 in the T&L segment. Can you give us a little bit more color on that? Again I'm not asking for 2027 guidance, but it sounds like your confidence in 2027 is growing based on some of the bookings that you have for that.
Just any color you can provide on that would be great.
Bill Burns, Chief Executive Officer
Yeah, 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 that T&L cycling difficult comparison last year—just high compares—but still solid performance across that vertical market with growth across third-party logistics and warehousing in this segment. So we feel good about transportation and logistics and the investments they're making in technology.
Despite the compare from a year ago, I'd say that, as you referenced, really a robust multi-year pipeline of large deployments coming across T&L, really focused on last mile delivery. And, you know, our customers and our differentiation coming from our new mobile devices which add RFID and AI capabilities to those devices are, you know, clearly giving us a competitive advantage in the market. The deployment of RFID continues across transportation and 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 2027, a strong pipeline of opportunities for, you know, refreshes within transportation and logistics, and we continue those conversations with customers and are ever confident in that happening.
Keith Hosam, Analyst at North Coast Research
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, year and a half in that—how you think about that for the rest of the year?
Bill Burns, Chief Executive Officer
Yeah, I think just like T&L, you know, we saw strength in manufacturing. You know, so while T&L has been a strong segment, you know, manufacturing continues strength as well. So we're seeing, you know, the drive again for increased visibility across the supply chain. Electronics and pharmaceuticals, certainly a strength in the quarter in manufacturing, and then that driving really outperformance in Machine Vision, with, you know, the team executing well within Machine Vision.
Really, we've aligned our business unit, our go-to-market teams, to really focus on, you know, specific opportunities within manufacturing. We've talked about our increased focus on manufacturing over the last couple of quarters, and that alignment with our regional sales teams is really driving, you know, our value proposition into the marketplace, which is resonating with, you know, not just our sales teams, but our partners and our customers as well.
We continue to enhance the portfolio of solutions in Machine Vision and, you know, we're seeing an excitement by the team and then, you know, strong growth. I mean, you know, there's lots of examples, you know, using AI for optical character recognition, for instance, in places like outside of manufacturing logistics and inside of manufacturing, you know, things like food and beverage. So there's lots of examples of places where we're focused and we're winning.
We've seen strong performance from Photoneo. So, you know, acquisition in the space to continue to, you know, enhance our offerings both organically and inorganically in Machine Vision. So we like this space. We're seeing growth across the business in manufacturing, we're seeing it diversifying the business, and our team's focus is playing out as we'd expect it, driving growth for us.
OPERATOR
The next question comes from Tommy Moll from Stevens. Please go ahead.
Tommy Moll, Analyst at Stevens
Good morning, and thank you for taking my questions.
Bill Burns, Chief Executive Officer
Hey, Tommy.
Tommy Moll, Analyst at Stevens
Good morning, Bill. It sounds like in second quarter, part of the reason you 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? Thank you.
Bill Burns, Chief Executive Officer
Yeah, I'll start and then maybe hand over to Nathan. I would say that, you know, memory continues to be a dynamic and challenging environment. I'd say that our teams executed really well, both, you know, through the first half year and especially in second quarter here. Worked closely with our suppliers to secure the memory we needed to get above the top end of our guide. We had told you that our demand was at that level and that really it was being gated by memory constraints.
We're confident in mitigating the memory challenges to achieve our second half outlook. Demand signals and the demand we're seeing from our customers is above what we're, you know, guiding to. And, you know, there are still constraints out there, but the team has done, you know, an amazing job to really secure memory. And I'll let Nate take you through the details, but they're doing a lot to make sure that we can deliver for our customers, you know, not just in second quarter, but, you know, through the second half of the year and into 2027.
Nathan Winters, Chief Financial Officer
Yeah, Tommy, just to add a few things, you know, 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's 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 three to six months, but actually next 18 months and then a lot of work with our product teams on qualifying new suppliers, new different chip types. We have 10, we're working with 10 different new suppliers and the goal is to have five to seven qualified suppliers for each of our primary memory types. So I think, you know, all those actions we're taking, you know, gives us confidence that we'll be able to continue to secure the volume we need to support our customers into 2027, and the growth that's required.
Tommy Moll, Analyst at Stevens
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?
Nathan Winters, Chief Financial Officer
Thank you. Just start with the overall capital allocation. We ended the quarter 1.9 debt leverage, strong cash flow expected for the year at a billion dollars. The balance sheet's in great shape. As we mentioned on the call, we repurchased $568 million through the second quarter, but we've continued to be active here in the early part of the third quarter. Given what we believe is still an attractive stock valuation, 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 the stock still remains at an attractive price.
OPERATOR
Our next question comes from Quinn Frederickson from Baird. Please go ahead.
Quinn Frederickson, Analyst at Baird
Hey, good morning, guys.
Bill Burns, Chief Executive Officer
Morning, Quinn.
Quinn Frederickson, Analyst at 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?
Nathan Winters, Chief Financial Officer
I'll take that. You know, 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 and the guidance, the pricing and the price increases that we have planned at the beginning of the year are largely playing out as expected. 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, you know, at the beginning of three months in advance or every three months. But I'd say up to this point our key suppliers have been pretty transparent around where they expect the price to go out into the future while it's not selling. So I think the team has a pretty good handle on not only what we expect for the next three to six months, but where that trajectory is expected to be as we go out into 2027 and, and that's what we're going to continue to monitor.
And I'd say our commitment, just like it was this year, is to continue to take the necessary actions to mitigate that exposure in the P&L, whether that's through our own increased pricing actions or other productivity initiatives to offset and continue to ensure we expand margins as we go into 2027.
Quinn Frederickson, Analyst at Baird
Thanks, Nathan. And then you gave guidance for third quarter and the full year here. So 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?
Nathan Winters, Chief Financial Officer
Yeah, so if you look again, we have a robust pipeline here as we go into the second half. So I think the conversations continued to be productive, you know, 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 the 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's actively working to secure that pipeline. Get the visibility we need back to the supply chain team so we can work with our supplier to meet that demand which again we were able to do here in the second quarter.
OPERATOR
And our next question comes from Andrew Buscoglia from BNP Paribas. Please go ahead.
Andrew Buscoglia, Analyst at BNP Paribas
Hey, good morning everyone. Thanks for taking my question.
Bill Burns, Chief Executive Officer
Morning, Andrew. Good morning.
Andrew Buscoglia, Analyst at BNP Paribas
Hey, I wanted to check on. You know, 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, of orders coming through or how do you, how would you characterize that?
Nathan Winters, Chief Financial Officer
Maybe just start with the, you know, kind of the overall outlook. I think we have obviously confidence in the guide given the first half performance. You know, a lot of the back half is still somewhat predicated around the memory capacity that we expect. So to a certain degree the growth rates are somewhat, you know, just 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 two points of pricing, again we feel great about that ramp and the trajectory and the underlying demand supporting the business. And I think from an EBITDA rate perspective, if you look to step down from Q2 to Q3, obviously a primary driver that is removing the IPA refund here in the Q2 results. And there's about a point degradation coming from higher memory costs. 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, 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.
Andrew Buscoglia, Analyst at BNP Paribas
Okay, got it. And, you know, 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 why? What would you need to see if you had to move forward with further price increases?
Bill Burns, Chief Executive Officer
Yeah, I'd say, you know, Andrew would prefer not to raise price. That's our, certainly our strong preference. But we've, you know, had to do that based on the significant increase in memory. We believe that and have confidence that if, you know, we need to, we can see that pricing flow through. And we've been able to demonstrate that both in our business and in the ELO acquisition, you know, as well, on both sides. So our preference is not to raise price, but as we need to do that as memory pricing continues to increase, you know, 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, you know, significant increase in memory pricing today.
Andrew Buscoglia, Analyst at BNP Paribas
Okay, thank you.
OPERATOR
The next question comes from Joe Giordano from TD Cowen. Please go ahead.
Joe Giordano, Analyst at TD Cowen
Hey, guys.
Bill Burns, Chief Executive Officer
Morning. Morning, Joe.
Joe Giordano, Analyst at TD Cowen
Look, I know we've. I know we've talked about this a lot. I just want to be very clear, like, and correct me if I'm wrong in how I was thinking about it, but last quarter, I think you characterized the revenue guidance as at the high end, as kind of unachievable in light of current memory availability at that time. Now, here you raise the high end. Like, is the high end of your revenue guidance achievable in the current memory availability framework?
Bill Burns, Chief Executive Officer
Yeah, I'd say, you know, Joe, that I think that the position we took in Q2 is, you know, the same that we've taken for Q3 and the full year guide, which is the demand signals today from our customers and the investments they're making across each of our vertical markets and across 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 the challenging and dynamic environment around memory. So the prudent thing for us to do is the demand signals take us to the high end. But our guide is really at the midpoint of our guide. That really factors in the potential supply constraints that we'd expect to see in second half.
Nathan Winters, Chief Financial Officer
But obviously both, both are 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's doing to secure additional supply. So I think both, as Bill mentioned, that's playing out in the guidance. But I think the positive note is that both were substantially higher than we were three months ago. By the great work from the team.
Joe Giordano, Analyst at TD Cowen
Is an LTA available to you guys if you wanted to pursue that?
Nathan Winters, Chief Financial Officer
You know, 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, you know, achieving it. And if those were necessary to, you know, to obtain increased supply, we absolutely would.
But hasn't been necessary to this.
OPERATOR
The next question comes from Piyush Awasthi from Citi. Please go ahead.
Piyush Awasthi, Analyst
Good morning, guys, and thanks for taking my questions. Just following up on some of the other questions asked on the guidance raise. I mean, you are raising the organic growth expectations for the full year for 2026. Can you provide some clarity on how we should be thinking about the two segments? Connected Frontline has some memory constraints, so I understand that, but AVA had a really strong quarter. Not sure if there's any one-time item to call out there, but do you expect AVA should lead that growth, or do you think CF could more meaningfully contribute as we progress through the year?
Bill Burns, Chief Executive Officer
Yeah, I think we see strong growth across both the segments. So Asset Visibility and Automation really focused on insights into assets within our customers. Think of inventory as an example in retail. So print, data capture, machine vision, and RFID are all part of that portfolio of solutions. We in Q2 saw strong growth in print, again driven by strength in manufacturing, for example, but we also had strong growth rates in volume and run rate for our data capture solutions.
Our supplies business continues to be strong, very strong quarter in machine vision, and RFID deployments continue. So I think strength in Asset Visibility and certainly in the Automation segment, but also Connected Frontline. I think that we're clearly seeing that our customers are deploying more devices in the hands of more frontline workers to really improve productivity, drive collaboration, and enhance their interaction that associates have with customers on the front line.
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 of the year with momentum with the Elo acquisition, with the two sales teams working closely together and positioning those solutions across our customer base.
So I'd say expect growth in both segments in second half of the year, and feel good about the demand we're seeing across the portfolio, across the regions, across the different vertical markets, truly broad-based growth.
Piyush Awasthi, Analyst
Very helpful. And I think I get the point that it's very broad-based, but it seems like EMEA has been a bit of a laggard. I mean, there was decent growth this quarter, and you mentioned a Middle East impact there. But can you elaborate on the underlying demand environment across different business verticals in the EMEA region specifically? And as you think of 2026, based on the conversations with your customers there, how do you think Europe would contribute to the organic sales growth?
Bill Burns, Chief Executive Officer
Yeah, 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, the geopolitical challenges there. Relative strength, I'd say, in retail, manufacturing, and 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 slightly below the other regions of North America. And then certainly we saw a lot of strength in Asia Pacific and Latin America. But I don't think we have any concerns about EMEA. We feel good about what they're seeing, and it's been pretty resilient given all the things happening across the European market.
OPERATOR
The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.
Meta Marshall, Analyst at Morgan Stanley
Great, thanks. A couple of questions from me. Just in terms of on Elo, clearly the business is continuing to do quite well, but in terms of revenue synergies or selling into the base, where are you in terms of exploiting some of those natural overlaps? And then maybe on the healthcare side, you noted very strong traction there over the last quarter. Just trying to get a sense of, are those new customers, are those new project types? Where is that traction coming from?
Thank you.
Bill Burns, Chief Executive Officer
I'll start with Elo. I would say that we're excited about the performance and the work around integration. As you mentioned, it really reaffirms our conviction in the acquisition of Elo, and the combined capabilities between our two portfolios really give us another dimension on the front line, which is really the focus areas there: modernizing point of sale, continuing to streamline self-service, and then the payment portfolio at Elo. I think we saw growth above our expectations in Q2.
Strong pipeline of opportunities driven by our sales teams working closely together and growing that commercial pipeline, but also progress we're making on synergies. About $10 million identified so far. 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 a 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 in healthcare—strong performance in mobile computing. We're clearly seeing the equipping of more caregivers with enterprise-grade solutions. It's really around staff communication and collaboration, enhancing patient safety, and 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. We've taken the Elo products and solutions—an area that really wasn't a primary focus for them—into the HIMSS trade show earlier this year and are 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.
OPERATOR
The next question comes from Guy Hardwick from Barclays. Please go ahead.
Guy Hardwick, Analyst at Barclays
Hi, good morning. Great results, guys. So, Nathan, I think if you go back three months ago you said that the $120 million of memory headwinds would be half offset by price, so maybe $50–$60 million realized over the three quarters. Looks like you've already realized $20. I think you said in the Q3 guidance there's going to be two points of price, so that suggests perhaps another $30. Can you tell us what's happening in pricing? Is pricing being realized more quickly than you realized?
Was there some mix impact? Or have there been some other price increases that perhaps have not been announced which are benefiting results?
Nathan Winters, Chief Financial Officer
Yeah, 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 proactively getting those projects that were in the pipeline for the second quarter and embedding the incremental pricing ahead of the actual price increase and the announcement was a big driver, and I think the team's been super focused on it. 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.
Guy Hardwick, Analyst at Barclays
And in EMC, what sort of price increases are you realizing?
Nathan Winters, Chief Financial Officer
Yeah, it's pretty well split. I mean, the 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.
OPERATOR
The next question comes from Trevor Saar from William Blair. Please go ahead.
Trevor Saar, Analyst at William Blair
Thanks. This is Trevor on for Brian. Just one for me. I was wondering if you could give a little bit more detail on the memory tech and the signals from 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?
Bill Burns, Chief Executive Officer
Yeah. 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 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, and obviously what their future use of the device is going to be over the next two to three years as they're making those decisions. But also there's a big price difference between those different types that we will 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's doing a great job of working that between the sales team, the business units, and our supply chain team to get the right product to our customers that meets their long-term needs with the best possible outcome both from a timing and pricing perspective.
Trevor Saar, Analyst at William Blair
Great, thank you.
OPERATOR
And the next question comes from Patrick Muth from Needham. Please go ahead.
Patrick Muth, Analyst at Needham
Hi, thank you for taking my question. This is Patrick Muth on for Jim Rasherdi 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? Thank you.
Bill Burns, Chief Executive Officer
Yeah, Patrick, I'll start and then hand over to Nathan. Strong pipeline of opportunities with RFID as we continue to see investments across the supply chain. So retail, transportation, logistics, manufacturing, government as well. So we're expecting, you know, 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, health care, government applications, so broad use cases of RFID really going to drive that growth for full year. Just, you know, 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, you know, for our customers. Zebra has the broadest, you know, set of solutions inside, you know, RFID today. So whether it's fixed or handheld reading, you know 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, you know, full-year growth definitely expected, you know, from the RFID portfolio.
Nathan Winters, Chief Financial Officer
Yeah, if you look at the back-half margin as well as OPEX assumptions, you know the Q3 guide around approximately 22%. As I mentioned there was a slight step down from the Q2 results excluding IPA refund of about a 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 as a lot of work on the OPEX line. We will get about a point of scaling for the year driven on the higher volume but also, you know, we took significant restructuring throughout the first half of the year which we've completed here, exiting the second quarter, which is allowing us to not only, you know, right-size the portfolio, but absorb some of the higher healthcare costs and those types of things while we continue to invest in our new AI solutions as well as expanded market coverage in our go-to-market team. So we'd expect that scaling to continue here as we go through the back half of the year and into 2027 in OPEX.
OPERATOR
And our last question comes from Amit Malhotra from UBS. Please go ahead.
Analyst on behalf of Amit Mehrotra at UBS
Good morning. This is 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?
Thank you.
Nathan Winters, Chief Financial Officer
Yeah. So 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, you know, acquisitions and FX make up 8 points, the remaining 8 points of the delta—look, I think, you know, 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 you look at the underlying demand of the business, the pipeline we have of projects, and 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, you know, as we look at the long-term growth of 5 to 7, that would be, you know, 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, you know, the memory capacity as we enter 27.
Analyst on behalf of Amit Mehrotra at UBS
Thank you. 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?
Nathan Winters, Chief Financial Officer
Yeah, I think we would. You know, 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, you know, across both asset visibility and the connected frontline segments. You know, our outlook is, you know, demand would represent kind of the high end of our outlook for Q3 and the full year. And we're factoring in, you know, supply constraints into that. That takes us, you know, down to about the midpoint of our guide, which is the same, you know, that we did in our guide for Q2.
We were able to secure additional memory supply, which pushed us, you know, above the top end of our range for Q2. But, you know, we clearly are seeing strong demand for our solutions and, you know, we're factoring in the potential constraints of memory into our guide for Q3 and for full year.
OPERATOR
This concludes our question and answer session. I'd like to turn the conference back over to Bill Burns for any closing remarks.
Bill Burns, Chief Executive Officer
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.
OPERATOR
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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