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Motorola Solutions, Inc. (MSI)·Q1 2025 Earnings Summary

Executive Summary

  • Record Q1 sales of $2.528B (+6% YoY), non-GAAP EPS $3.18 (+13% YoY), GAAP EPS $2.53; non-GAAP operating margin expanded 160 bps to 28.3% on higher sales, favorable mix, and lower material costs .
  • Against Wall Street, MSI delivered a modest beat on revenue and EPS but missed on EBITDA: revenue $2.528B vs $2.517B consensus*, EPS $3.18 vs $3.01 consensus*, EBITDA $710M vs $758M consensus* (11 EPS estimates; 9 revenue) — mix and acquisitions weighed on S&S margins (28.7% vs 29.8% LY) .
  • Guidance: Q2 2025 revenue growth ~4% and non-GAAP EPS $3.32–$3.37; FY 2025 maintained at ~5.5% revenue growth and non-GAAP EPS $14.64–$14.74, despite up to $100M tariff headwind, which management expects to fully mitigate .
  • Operational catalysts: launch of SVX and Assist AI, extensions of Assist Chat, and a $1.09 quarterly dividend; Q1 operating cash flow hit a record $510M, and backlog ended at $14.1B (-2% YoY), reflecting strong LMR shipments (Products backlog down) and growing multiyear software/services backlog .

Values marked with * were retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Record Q1 sales, operating earnings, and cash flow; management emphasized continued prioritization of safety and security demand and strong expectations for revenue, earnings, and cash flow growth. Quote: “Q1 was an excellent start to the year…” — Greg Brown .
  • Margin expansion: non-GAAP operating margin up 160 bps to 28.3% driven by higher sales, favorable mix, and lower direct material costs; Products & SI GAAP OE margin rose to 22.8% (non-GAAP 28.1%) .
  • Strategic execution in AI/video/software: APX NEXT app subscriptions expected to exceed 200,000 devices by year-end at ~$300 per device per year; Command Center and video grew double digits; Assist and SVX launched to drive higher-tier radio adoption and recurring revenue .

What Went Wrong

  • EBITDA underperformed consensus* (actual $710M vs $758M), as S&S non-GAAP OE margin declined to 28.7% (from 29.8%) primarily due to acquisitions; International revenue fell 3% YoY on FX headwinds and lower Ukraine revenue* .
  • Backlog down 2% YoY to $14.1B, with Products & SI backlog down $1.0B (-22%) on strong LMR shipments; sequential backlog down 4% with typical Q1 order seasonality .
  • Regulatory/legal overhangs persisted: Airwave Charge Control remains in effect; collective proceeding certification expected in Sept. 2025; ongoing Hytera litigation despite partial payments and favorable appeals outcomes .

Values marked with * were retrieved from S&P Global.

Financial Results

Core results vs prior quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.790 $3.010 $2.528
GAAP Diluted EPS ($)$3.29 $3.56 $2.53
Non-GAAP EPS ($)$3.74 $4.04 $3.18
GAAP Operating Margin (%)25.5% 27.0% 23.0%
Non-GAAP Operating Margin (%)29.7% 30.4% 28.3%
Operating Cash Flow ($USD Millions)$759 $1,070 $510
Free Cash Flow ($USD Millions)$702 $983 $473
Ending Backlog ($USD Billions)$14.1 $14.7 $14.1

Segment breakdown

SegmentMetricQ4 2024Q1 2025
Products & Systems IntegrationSales ($USD Millions)$1,949 $1,546
GAAP Operating Earnings ($USD Millions)$541 $352
GAAP OE Margin (%)27.8% 22.8%
Non-GAAP Operating Earnings ($USD Millions)$594 $434
Non-GAAP OE Margin (%)30.5% 28.1%
Software & ServicesSales ($USD Millions)$1,061 $982
GAAP Operating Earnings ($USD Millions)$273 $230
GAAP OE Margin (%)25.7% 23.4%
Non-GAAP Operating Earnings ($USD Millions)$322 $282
Non-GAAP OE Margin (%)30.3% 28.7%

KPIs

KPIQ1 2025
North America Revenue ($USD Billions)$1.9
International Revenue ($USD Millions)$676
FX Headwinds ($USD Millions)$25
Revenue from Acquisitions ($USD Millions)$32
GAAP Effective Tax Rate (%)21.0%
Non-GAAP Effective Tax Rate (%)21.1%
Share Repurchases ($USD Millions)$325
Dividends Paid ($USD Millions)$182
Capital Expenditure ($USD Millions)$37
Products & SI Backlog YoY-$1.0B (-22%)
Software & Services Backlog YoY+$732M (+8%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (%)Q2 2025N/A~4% vs Q2 2024 New
Non-GAAP EPS ($)Q2 2025N/A$3.32–$3.37; assumes ~170M diluted shares; ~23.5% non-GAAP tax rate New
Revenue Growth (%)FY 2025~5.5% ~5.5% (maintained) Maintained
Non-GAAP EPS ($)FY 2025$14.64–$14.74 $14.64–$14.74 (maintained); assumes ~170M diluted shares; ~23.0% non-GAAP tax rate; ~$40M FX headwinds Maintained
Tariff ImpactFY 2025N/AUp to ~$100M, fully mitigated via cost, supply chain flexibility, pricing New detail

The company does not provide GAAP reconciliations for forward-looking non-GAAP metrics .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/Technology initiativesVideo & Command Center growth; continued portfolio investment Launched SVX and Assist; extended Assist Chat; APX NEXT apps scaling; cloud Alta growing Accelerating AI adoption and monetization
Supply chain / TariffsNot highlighted; supply chain normalized Tariffs up to ~$100M; mitigation through dual sourcing, footprint shifts, discretionary cost control, selective pricing; USMCA compliance reduces Mexico risk New headwind, managed
Product performanceStrong LMR shipments; Products growth; devices/orders Products & SI up 4%; higher-tier public safety devices drove margin expansion High-tier device mix improving margins
Regional trendsGrowth NA & International; UK impact NA +9%; International -3% (FX, lower Ukraine LMR) NA resilient; International FX/Ukraine weigh
Regulatory/legalAirwave Charge Control; backlog adjustments; appeals scheduled Charge Control remains; collective proceeding certification Sept. 2025 expected Ongoing UK overhang
Hytera litigationAppeals affirmed trade secret damages; escrow funds $61M escrow released (Nov 2024); ~$10M partial payment (Mar 4, 2025) Incremental recoveries
R&D executionNew product introductions; acquisitions (Noggin, Theatro, RapidDeploy) SVX/Assist launch; Command Center/video orders; acquisitions closed Strong cadence

Management Commentary

  • Strategy and demand: “Our customers are continuing to prioritize investments in safety and security… driving our continued expectations for strong revenue, earnings and cash flow growth” — Greg Brown .
  • Margin drivers: “Non-GAAP operating margin was 28.3%, up 160 bps, driven by higher sales, favorable mix and lower direct material costs, partially offset by acquisitions” — Jason Winkler .
  • Tariffs: “We are reaffirming guidance despite higher costs… up to $100M this year… mitigated via supply chain actions, cost controls, and pricing opportunities” — Jason Winkler .
  • APX NEXT recurring revenue: “By year-end, we expect over 200,000 APX NEXT devices with an app subscription in North America, generating ~$300 per year per device” — Jason Winkler .
  • SVX/Assist potential: “SVX converges secure voice, video and AI… eliminates need for a separate body-worn camera… drives adoption of higher-tier radios and software apps” — Greg Brown .

Q&A Highlights

  • Demand and guidance posture: Despite FX tailwinds, management kept FY guidance prudent given volatility and tariff dynamics; NA orders were record in Q1; International resilient via managed services in EMEA/Australia .
  • Tariff mitigation specifics: USMCA compliance reduces Mexico risk; Malaysia exposure drives bulk of tariff impact; majority mitigation is cost reduction rather than pricing .
  • SVX/Assist early interest: Strong cross-portfolio demand; examples include customers upgrading to APX NEXT and unifying on MSI body-worn after SVX demos; monetization through software attach .
  • Federal market: Strong demand under continuing resolution; increased focus areas include borders, next-gen LMR and body-worn .
  • Backlog seasonality: Q1 sequential decline tied to LMR shipments, UK revenue recognition, and typical Q1 order patterns; product orders expected to grow in FY25 .

Estimates Context

MetricConsensus* (Q1 2025)Actual (Q1 2025)Surprise*
Revenue ($USD Billions)$2.517$2.528 +$0.011*
Primary EPS ($)$3.01$3.18 +$0.17*
EBITDA ($USD Millions)$758$710*-$48*
Revenue - # of Estimates9——*
EPS - # of Estimates11——*
MetricQ3 2024 Consensus*Q3 2024 ActualQ4 2024 Consensus*Q4 2024 Actual
Revenue ($USD Billions)$2.763$2.790 $2.998$3.010
Primary EPS ($)$3.38$3.74 $3.89$4.04

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-led margin expansion and recurring revenue scaling (APX NEXT apps, cloud Alta, Command Center) underpin a sturdy non-GAAP margin profile, even as acquisitions modestly compress S&S margins .
  • MSI delivered a clean beat on revenue and EPS vs consensus*, but EBITDA underperformed*; near-term narrative is favorable given product launches (SVX/Assist) and monetizable software attach .
  • FY25 guide maintained despite up to ~$100M tariff headwind, signaling confidence in mitigation levers and pipeline; Q2 guide implies steady growth while absorbing cost pressures .
  • Backlog quality evolving: Products backlog declines on shipments while S&S backlog rises on multiyear contracts; this supports visibility and recurring mix improvement .
  • Legal overhangs (Airwave charge control, CAT collective claim) persist but are well understood; Hytera litigation continues to yield cash recoveries (escrow release; partial payment) .
  • Near-term trading: Focus on SVX/Assist adoption signals, Q2 execution vs guide, tariff mitigation cadence, and S&S margin trajectory; medium-term thesis: rising recurring/software mix, high-tier devices, and disciplined capital allocation (dividends, repurchases, targeted M&A) .
  • Watch catalysts: Federal and state budget cycles supportive of safety tech; ongoing AI rollouts (Assist) and drone integrations may expand TAM and attach rates .
Notes: Non-GAAP adjustments in Q1 2025 were ~$0.65 per diluted share, excluding highlighted items, share-based comp, and intangible amortization **[68505_352829a5d1194a2280ce71ee7d0e9fb1_0]** **[68505_0000068505-25-000022_msiq12025pressrelease.htm:14]**. MSI does not reconcile forward-looking non-GAAP guidance to GAAP **[68505_352829a5d1194a2280ce71ee7d0e9fb1_2]**.

All non-asterisked figures sourced from company filings and materials cited inline. Values marked with * were retrieved from S&P Global.