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01/11 03:11
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlighted strong financial performance with increased revenue and EPS guidance, a significant acquisition, and promising growth in key segments like AI and defense. Despite some concerns about tariffs and unclear long-term impacts, the overall sentiment was positive, supported by strong order growth and strategic investments. The Q&A session reinforced confidence in future growth, with management addressing key concerns and emphasizing strong demand drivers and backlog. The company's strategic initiatives and product innovations are expected to drive stock price positively over the next two weeks.
Revenue Revenue was up 8% in the quarter with 11% growth in software and services and 6% growth in Products in SI. Foreign currency tailwinds during the quarter were $21 million, while acquisitions added $123 million.
Operating Margins Operating margins expanded by 80 basis points, leading to record Q3 operating earnings in both segments. Non-GAAP operating margin was 30.5% of sales, up 80 basis points, driven by higher sales and improved operating leverage, partially offset by higher tariffs.
Operating Cash Flow Record Q3 operating cash flow of $799 million, up $40 million versus last year. The increase was primarily driven by higher earnings, net of noncash charges.
Earnings Per Share (EPS) GAAP EPS was $3.33, up from $3.29 in the year-ago quarter. Non-GAAP EPS was $4.06, up 9% from $3.74 last year. The growth in EPS was driven by higher sales and margins and a lower diluted share count, offset by higher interest expense in the current year.
Operating Expenses (OpEx) OpEx in Q3 was $652 million, up $35 million versus last year, primarily due to acquisitions.
Free Cash Flow Free cash flow was $733 million, up $31 million year-over-year, driven by higher earnings, net of noncash charges.
Backlog Ending backlog for Q3 was $14.6 billion, up $467 million or 3% versus last year, driven by strong demand in multiyear software and services agreements and favorable FX, partially offset by strong MCM shipments and revenue recognition from the U.K. Home Office.
Products and SI Segment Sales Sales were up 6% versus last year, driven by growth in MCN and Video. Revenue from acquisitions in the quarter was $111 million, while FX tailwinds were $11 million.
Software and Services Segment Revenue Revenue was up 11% compared to last year, driven by strong growth across all 3 technologies. Revenue from acquisitions was $12 million in the quarter, and FX tailwinds were $10 million.
Regional Revenue - North America North America Q3 revenue was $2.1 billion, up 6% versus last year.
Regional Revenue - International International Q3 revenue was $888 million, up 13% versus last year.
Silvus acquisition: The company closed the acquisition of Silvus for $4.4 billion, which positions Motorola Solutions to support customers in defense and public safety with advanced autonomous capabilities and operational resilience.
AI and new technologies: Investments in AI and new technologies are being integrated into solutions to improve first responder safety, reduce incident response times, and automate routine tasks.
Public safety and defense demand: Strong demand for safety and security solutions across public safety and defense, leading to record Q3 orders with double-digit growth in both segments.
International growth: International Q3 revenue grew by 13%, driven by strong demand across all segments and technologies.
Revenue growth: Revenue grew by 8% in Q3, with 11% growth in software and services and 6% growth in Products and SI.
Operating margins: Operating margins expanded by 80 basis points, leading to record Q3 operating earnings in both segments.
Cash flow: Achieved record Q3 operating cash flow of $799 million, up $40 million from last year.
Backlog growth: Ending Q3 backlog reached a record $14.6 billion, up $467 million from last year, driven by multiyear software and services agreements.
Customer funding environment: Global funding for safety and security remains strong, supporting continued growth in 2026.
Federal Government Shutdown: The ongoing federal government shutdown could potentially impact revenue timing for the company's federal government customers, including the Department of Defense (DoD) and Department of Homeland Security (DHS).
Higher Tariffs: Higher tariffs have partially offset the benefits of higher sales and improved operating leverage, impacting operating margins.
Interest Expense: Higher interest expenses in the current year have offset some of the gains from higher sales and margins.
Acquisition Costs: Costs associated with acquisitions, such as the $4.4 billion Silvus acquisition, have increased operating expenses and could impact financial flexibility.
Supply Chain and Revenue Recognition: Revenue recognition challenges, such as those related to the U.K. Home Office, and supply chain issues could affect backlog and revenue timing.
Q4 Revenue Growth: Expected revenue growth of approximately 11%.
Q4 Non-GAAP EPS: Expected to be between $4.30 and $4.36 per share.
Full Year Revenue: Expected to be approximately $11.65 billion, representing 7.7% growth.
Full Year Non-GAAP EPS: Guidance increased to between $15.09 and $15.15 per share, up from prior guidance of $14.88 to $14.98 per share.
Effective Tax Rate: Assumes an effective tax rate of approximately 22.5% for the full year.
Operating Cash Flow: On track to generate $2.75 billion in operating cash flow for the year, marking the third consecutive year of double-digit growth.
Balance Sheet Flexibility: No senior debt maturities until 2028, providing flexibility for M&A priorities.
Market Trends: Countries are increasing investments in drones and unmanned systems, and public safety agencies are adopting AI to improve first responder safety and operational efficiency.
2026 Outlook: Expectations for another year of strong revenue and earnings growth.
Cash Dividends: $182 million in cash dividends were distributed during Q3.
Share Repurchases: $121 million was allocated to share repurchases in Q3.
The earnings call highlighted strong financial performance with increased revenue and EPS guidance, a significant acquisition, and promising growth in key segments like AI and defense. Despite some concerns about tariffs and unclear long-term impacts, the overall sentiment was positive, supported by strong order growth and strategic investments. The Q&A session reinforced confidence in future growth, with management addressing key concerns and emphasizing strong demand drivers and backlog. The company's strategic initiatives and product innovations are expected to drive stock price positively over the next two weeks.
The earnings call reveals strong financial performance, strategic acquisitions, and product launches that align with growth strategies. Positive guidance and expected growth in key areas like software, services, and unmanned systems contribute to a favorable outlook. The Q&A section supports this with optimistic insights on new products and market expansion. Despite some tariff impacts, the company expects margin improvement. Overall, the sentiment is positive, indicating potential stock price growth.
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