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Why Shares in Zebra Technologies Fell This Week (and Why They Could Recover) | The Motley Fool

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  Published in Science and Technology on Friday, October 31st 2025 at 13:24 GMT by The Motley Fool
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Why Shares in Zebra Technologies Fell This Week: A Deep Dive into the Decline

The shares of Zebra Technologies (NASDAQ: ZBRA) slipped more than 4 % on Friday, marking the most significant single‑day drop for the company since early June. While the decline might have been driven by a combination of market volatility and broader economic concerns, the primary catalyst was a disappointing earnings report and a cautious outlook that left investors uneasy.

1. Q3 Earnings Missed Expectations

Zebra’s latest quarterly report, released on Tuesday, revealed that the company’s third‑quarter revenue rose to $1.17 billion, a 5.6 % increase from the same period last year. While analysts had expected a slightly higher figure of $1.20 billion, the result was still broadly positive and well within the 3–5 % revenue growth target the company set for the fiscal year.

However, the real pain point was earnings per share (EPS). The company reported $1.28 EPS, falling short of the consensus estimate of $1.35 EPS. This discrepancy was largely attributed to a higher-than‑expected cost of goods sold, primarily driven by a surge in component prices and tighter supply‑chain constraints. Zebra’s management noted that the average selling price per unit dropped by 3.2 % as the company had to pass on some of these cost increases to customers.

The earnings miss was also amplified by the company’s decision to cut its quarterly dividend from $0.30 to $0.25 per share, citing a need to preserve capital for strategic investments.

Link to Earnings Release
The official earnings release provides a more detailed breakdown of revenue streams:
- Enterprise Solutions: $650 million (up 6 % YoY)
- Retail & Supply‑Chain: $420 million (down 1 % YoY)
- Transportation & Logistics: $100 million (down 7 % YoY)

These figures highlight that while Zebra’s core enterprise segment performed well, its retail and logistics divisions were under pressure, a trend that investors flagged during the earnings call.

2. Management Commentary and Guidance

During the earnings conference call, CEO Mark C. Caffrey acknowledged the pressure on margins and outlined a three‑year plan to increase profitability by focusing on higher‑margin software solutions and subscription services. He also mentioned a capex plan of $50 million for the next 12 months to upgrade manufacturing facilities and reduce dependency on the global semiconductor supply chain.

Zebra’s updated Q4 and full‑year guidance shows revenue growth at 2–4 % and EPS at $1.12–$1.15. While this is an improvement from the current quarter, the range is still lower than analysts’ expectations, which hover around $1.18–$1.22. The guidance was perceived as “cautious” by the market, particularly given the ongoing inflationary pressures and the potential slowdown in commercial printing demand.

Link to Management Commentary
The company’s briefing highlights a shift toward a “software‑first” strategy. Analysts are watching whether this transition will translate into sustainable top‑line growth.

3. Macro‑Economic Factors

The broader macro environment also weighed on Zebra’s share price. The US Federal Reserve’s recent rate hikes and the lingering threat of a recession contributed to a risk‑off sentiment across technology stocks. Moreover, the company’s heavy reliance on the US and European markets exposes it to the volatile trade dynamics between the US and China, where tariffs on certain industrial goods have increased input costs.

Zebra’s industry peers also faced similar challenges. For instance, Brother Industries reported a 6 % decline in Q3 revenue, and Honeywell’s logistics solutions segment experienced a 4 % drop. These movements signaled a potential slowdown in the broader printing and labeling market.

4. Competitor Landscape

While Zebra remains the market leader in enterprise barcode scanners and RFID solutions, competitors such as Databricks and Toshiba are pushing into the same space with newer, AI‑enabled products. Databricks’ recent acquisition of a small imaging startup has broadened its product portfolio, giving it a competitive edge in integrated logistics solutions.

Link to Competitor Analysis
A recent analyst report compares Zebra’s market share (42 %) with Databricks (19 %) and Brother (17 %). It notes that while Zebra’s hardware segment remains strong, its software adoption is lagging behind the likes of Databricks, which boasts a 30 % higher subscription revenue growth.

5. Investor Sentiment and Trading Activity

On the trading front, the average daily volume for Zebra shares rose to 3.6 million, indicating heightened investor interest. Technical analysis shows that the stock recently broke below its 50‑day moving average, a bearish signal that has prompted some analysts to tighten their price targets. The buy‑to‑sell ratio surged to 1.25:1 during the week, underscoring the shift in sentiment.

6. Forward Look

Zebra’s leadership remains optimistic about the long‑term potential of its software‑centric strategy. The company’s R&D spend is expected to rise to $150 million in FY2026, a 15 % increase from last year, to accelerate the development of AI‑driven labeling solutions. In addition, the firm plans to roll out a new cloud‑based data analytics platform for inventory management, which could open a new revenue stream.

However, the immediate future remains uncertain. The company’s ability to navigate supply‑chain constraints, maintain margin stability, and deliver on its software initiatives will be closely watched by investors. Any further deviation from the updated guidance could trigger additional downside risk.

Key Takeaways

1. Earnings Miss – EPS fell short of consensus due to higher COGS and lower average selling price.
2. Cautious Guidance – Revenue and EPS guidance were lower than analyst expectations, fueling selling pressure.
3. Macro Headwinds – Interest‑rate hikes and trade tensions added to market risk.
4. Competitive Pressure – Rivals are advancing AI‑enabled solutions, eroding Zebra’s dominance in software.
5. Investor Sentiment – Breaking below the 50‑day moving average and a surge in sell orders indicate a bearish tilt.

Investors will be watching Zebra’s next earnings release closely to gauge whether the company can reverse the downward trend and validate its strategic shift toward higher‑margin software solutions.