Zebra Technologies ZBRA · USD

Segment Information & Geographic Data Segment resultsEffective in the fourth quarter of 2025, we realigned our reportable segments from the former EVM and AIT segments to two new segments: CF and AVA. The CF segment consists of our mobile computing products, and related services and software-based offerings that were formerly part of our EVM segment. The AVA segment consists of our barcode and card printing products and related supplies and sensors, RFID and RTLS offerings, and related services that collectively represented our former AIT segment, as well as our data capture, and machine vision offerings and related services that were formerly part of our EVM segment. This change aligns with how we are operating our business to advance our strategy and the level of detailed financial information reviewed by our chief operating decision-maker going forward. Also effective in the fourth quarter of 2025, share-based compensation expense is excluded from the measurement of segment operating results. Historical segment results have been recasted to confirm with current period presentation. As previously discussed, the results of operations for Elo and Photoneo are included in the CF and AVA segments, respectively.The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews operating income to assess segment profitability monthly as well as part of the Company’s budget and forecasting process. The CODM assesses the profitability of each segment relative to its long-term growth objectives in evaluating resource allocation priorities. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Revenues The Company recognizes revenue to depict the transfer of goods, services or software solutions to a customer at an amount that reflects the consideration which it expects to receive. To determine total expected consideration, the Company estimates elements of variable consideration, which primarily include product rights of return, rebates, and other incentives. These estimates are developed using the expected value method and are reviewed and updated, as necessary, at each reporting period. Revenues, inclusive of variable consideration, are recognized to the extent it is probable that a significant reversal in cumulative revenues recognized will not occur in future periods. We enter into contracts that may include combinations of tangible products, services, and software solutions, which are generally capable of being distinct and accounted for as separate performance obligations. We evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract has more than one performance obligation. This evaluation requires judgment, and the decision to combine a group of contracts or separate the combined or single contract into multiple distinct performance obligations may impact the amount of revenue recorded in a reporting period. We deem performance obligations to be distinct if the customer can benefit from the product or service on its own or together with readily available resources (“capable of being distinct”) and if the transfer of products, services, or software solutions is separately identifiable from other promises in the contract (“distinct within the context of the contract”). For contract arrangements that include multiple performance obligations, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices for each performance obligation. In general, standalone selling prices are observable for tangible products and software licenses, while standalone selling prices for professional services, repair and maintenance services, and solutions are developed primarily with an expected cost-plus margin approach. Regional pricing, marketing strategies, and business practices are evaluated to derive estimated standalone selling prices.The Company recognizes revenue for each performance obligation upon transfer of control of the promised goods or services.

Long-Term Debt The following table shows the carrying value of the Company’s debt (in millions):December 31,20252024Term Loan A$1,575 $1,575 Senior Notes500 500 Revolving Credit Facility275 — Receivables Financing Facility161 108 Total debt$2,511 $2,183 Less: Unamortized debt issuance costs(8)(9)Less: Unamortized discounts(2)(3)Less: Current portion of debt(141)(79)Total long-term debt$2,361 $2,092 As of December 31, 2025, the future maturities of debt are as follows (in millions):2026$141 20271,870 2028— 2029— 2030— Thereafter500 Total future maturities of debt$2,511 All borrowings as of December 31, 2025 were denominated in U.S. Dollars.The estimated fair value of the Company’s debt approximated $2.5 billion and $2.2 billion as of December 31, 2025 and 2024, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.Term Loan AThe principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the first quarter of 2026 and the majority due upon maturity on May 25, 2027. The Company has made and may make prepayments in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. As of December 31, 2025, the Term Loan A interest rate was 4.97%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.Senior NotesThe Company’s senior unsecured notes (the “Senior Notes”) have a 6.5% fixed interest rate. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year. The Company has the option to or could be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries.

Income TaxesThe geographical sources of income before income taxes were as follows (in millions)Year Ended December 31, 202520242023Domestic$360 $486 $167 Foreign200 149 167 Total$560 $635 $334 Income tax expense (benefit) consisted of the following (in millions):Year Ended December 31, 202520242023Federal (national)$81 $46 $(3)State16 17 1 Foreign44 44 40 Total$141 $107 $38 The Company’s effective tax rates were 25.2%, 16.9% and 11.4% for the years ended December 31, 2025, 2024 and 2023, respectively. A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate is provided below (in millions):Year Ended December 31,202520242023AmountPercentAmountPercentAmountPercentU.S. Federal Statutory Tax Rate$118 21.0 %$133 21.0 %$70 21.0 %State and Local Income Taxes, net of federal income tax effect(1)12 2.2 16 2.5 1 0.2 Foreign Tax EffectsSingaporeStatutory tax rate difference between Singapore and United States(1)(0.3)(1)(0.2)(4)(1.1)Other— — 1 0.1 — — CanadaChanges in valuation allowance(21)(3.8)(5)(0.8)5 1.4 Other— — 3 0.4 (7)(2.1)LuxembourgEffect of Changes in Tax Laws or Rates Enacted in the Current Period— — 15 2.3 — — Changes in valuation allowance— — (13)(2.1)— 0.1 Other— — (1)(0.2)— — Other Foreign Jurisdictions9 1.6 — 0.1 — — Effect of Cross-border Tax Laws1 0.1 (37)(5.8)(18)(5.4)U.S. Federal Tax CreditsResearch and development tax credits(10)(1.8)(14)(2.2)(19)(5.7)Nontaxable or nondeductible U.S. Federal ItemsOfficers' Comp §162(m) & Share-based Comp19 3.4 8 1.3 8 2.4 Other7 1.2 1 0.2 1 0.3 Changes in Unrecognized Tax Benefits8 1.5 3 0.5 1 0.3 Other AdjustmentsOther(1)0.1 (2)(0.2)— — Effective Tax Rate$141 25.2 %$107 16.9 %$38 11.4 %(1)State taxes in Kentucky and Illinois made up the majority (greater than 50%) of the tax effect in this category (2023-2025)For the year ended December 31, 2025, the Company’s effective tax rate was higher than the federal statutory rate of 21% due primarily to expense related to foreign earnings subject to U.S. taxation as a result of 2025 U.S tax legislation, taxes related to impacts of U.S. share-based compensation, increased reserves for uncertain tax positions, and U.S. state income taxes, partly offset by the generation of U.S. tax credits and the release of certain Canadian valuation allowance reserves.

Share-Based Compensation The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018, which superseded and replaced all prior share-based incentive plans. Outstanding awards issued prior to the 2018 Plan are governed by the provisions of those plans until such awards have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options. Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units. The Company uses treasury shares as its source for issuing shares under the share-based compensation programs. As of December 31, 2025, the Company had 1,279,139 shares of Class A Common Stock remaining available to be issued under the 2018 Plan. The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, are included in the Consolidated Statements of Operations as follows (in millions): Year Ended December 31,Compensation costs and related income tax benefit202520242023Cost of sales$12 $9 $6 Selling and marketing36 27 16 Research and development51 36 25 General and administration76 38 19 Total compensation expense$175 $110 $66 Income tax benefit$29 $18 $13 As of December 31, 2025, the total unearned compensation cost related to the Company’s share-based compensation plans was $138 million, which will be recognized over the weighted average remaining service period of approximately 1.4 years.The majority of the Company’s share-based compensation awards are issued as part of its employee and non-employee director incentive program each fiscal year. Beginning in 2025, the annual employee equity incentive awards were granted in the first quarter. The non-employee director equity awards will continue to be granted in the second quarter. The Company also issues awards associated with recently acquired companies and other off-cycle events.

Leases The Company leases various manufacturing and repair facilities, distribution centers, research facilities, sales and administrative offices, equipment, and vehicles. All leases are classified as operating leases with remaining terms of up to 10 years, with certain leases containing renewal options and termination options. The Company records ROU assets and lease liabilities on the Consolidated Balance Sheets associated with the fixed lease and non-lease payments of leases with terms greater than one year. The following table presents activities associated with our leases (in millions):December 31,202520242023Fixed lease expenses$48 $50 $52 Variable lease expenses17 20 35 Total lease expenses$65 $70 $87 Cash paid for leases$67 $72 $82 ROU assets obtained in exchange for lease obligations$30 $44 $55 Reductions of ROU assets and lease liabilities(2)(7)(1)Net non-cash increases to ROU assets and lease liabilities$28 $37 $54 ROU asset impairments$8 $— $— Variable lease expenses incurred were not included in the measurement of the Company’s ROU assets and lease liabilities. These expenses consisted primarily of distribution center service costs that were based on product distribution volumes, as well as non-fixed common area maintenance, real estate taxes, and other operating costs associated with various facility leases. Expenses related to short-term leases were not significant.Cash payments for leases are included within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows. ROU assets obtained in exchange for lease obligations include new lease arrangements entered into by the Company, contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions. Reductions of the Company’s ROU assets and lease liabilities generally relate to contract modifications to lease agreements that result in a reduction to future minimum lease payments, as well as changes in assessments that render it no longer reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period.

Business AcquisitionsEloOn September 30, 2025, the Company acquired all of the equity interests in Elo Holdings, Inc. (“Elo”), an innovator of solutions that engage customers, enhance self-service, and accelerate automation across a wide range of end markets. Through its acquisition, the Company expanded its portfolio of self-service and consumer-facing workflow offerings. The acquisition was accounted for under the acquisition method of accounting for business combinations. The Company’s purchase consideration was $1,303 million comprised of cash paid, net of Elo’s cash on-hand.The Company utilized estimated fair values as of the acquisition date to allocate the purchase consideration to the identifiable assets acquired and liabilities assumed. The fair value of the net assets acquired was based on several estimates and assumptions, as well as customary valuation techniques, primarily the excess earnings method for technology, the distributor method for customer relationships and the relief from royalty method for trade names. While we believe these estimates provide a reasonable basis to record the net assets acquired, the purchase price allocation is considered preliminary and subject to adjustment during the measurement period, which is up to one year from the acquisition date. The primary fair value estimates still considered preliminary as of December 31, 2025 include intangible assets and income tax-related items.The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):Identifiable intangible assets$501 Inventory96 Accounts receivable59 Other assets acquired41 Deferred tax liabilities(62)Accounts payable(48)Other liabilities assumed(60)Net assets acquired$527 Goodwill on acquisition776 Total purchase price$1,303 The $776 million of goodwill, which is non-deductible for tax purposes, has been allocated to the CF segment and principally relates to the planned global expansion and integration of Elo into the Company’s self-service and consumer-facing workflow offerings. The purchase price allocation to identifiable intangible assets acquired was as follows:Fair Value (in millions)Useful Life (in years)Technology$277 7Customer relationships206 10Trade name18 3Total identifiable intangible assets$501 The operating results have been included in the Company’s Consolidated Balance Sheets and Statements of Operations beginning on the acquisition date.

Management’s RoleManagement is responsible for day-to-day cybersecurity risk management activities, including proactively identifying, assessing, prioritizing, managing and mitigating enterprise cybersecurity risks. Our Chief Financial Officer (“CFO”) is the accountable leader in executive management for Zebra’s IT and cybersecurity programs.The Chief Security Officer (“CSO”) is the senior-most security professional responsible for the implementation of the Company’s cybersecurity, product security, and corporate/physical security programs, and reports to the CFO. The CSO also makes recommendations to the Company’s executive management regarding the Company’s cybersecurity risk mitigation priorities. The Company’s current CSO has served in that role for Zebra since 2018. He is a recognized leader in the field of cybersecurity with over 15 years of global executive cybersecurity experience.The Chief Information Officer (“CIO”) is a peer to the CSO, also reports to the CFO. The CIO and CSO partner to define and execute the Company’s cybersecurity strategy, with the CIO’s organization responsible for executing cybersecurity risk mitigation plans. Zebra’s current CIO was appointed to the role in 2022 and has nearly 20 years of experience in managing IT functions.The Chief Information Security Officer (“CISO”) reports to the CSO and oversees the Company’s Security Operations Center (“SOC”). The CISO establishes and oversees the execution of prioritized cybersecurity mitigation plans for the Company. Zebra’s current CISO was appointed to the role in 2018 and has held multiple leadership roles overseeing IT functions since joining the Company in 2004, including driving efforts within the cybersecurity function.Cybersecurity Risk ManagementThe underlying controls of our cybersecurity risk management program are based on recognized industry practices and standards for cybersecurity and information technology, including the National Institute of Standards and Technology Cybersecurity Framework. Our approach to cybersecurity risk management includes the following key elements:•Defense and On-going Monitoring – Our SOC is responsible for the on-going monitoring and analysis of cybersecurity threats to the Company. The SOC evaluates cybersecurity incidents according to the Company’s cyber incident response plan, appropriate cybersecurity incident playbook, and crisis communications cybersecurity incident plan.