MSI Q2 2025: Orders Jump 27%, Record Backlog
- Robust Order Growth and Backlog Strength: Q2 recorded 27% higher orders with a diversified mix across products and services—including significant wins in LMR and fixed video—bolstering the product backlog and reinforcing the execution strength of the business.
- Compelling Growth from Syllvis Integration: The acquisition of Syllvis opens exposure to a high-growth unmanned systems market with a current TAM of about $3 billion—expected to double over the next four years—and is projected to be EPS neutral in the stub period this year and 20% accretive in 2026.
- Innovative Technology and Recurring Revenue Potential: Investments in next-generation technologies—such as the new D Series base stations with LEO connectivity, enhanced APEX Next adoption with a nearly 90% attachment rate, and an expanding cloud-based video ecosystem—create significant opportunities for recurring revenue and improved margins.
- Tariff Headwinds Pressure Margins: The call noted an $80 million tariff impact mostly expected in the back half of the year, which could weigh on operating margins if mitigation efforts fall short.
- Integration and Execution Challenges with Silvis: The Silvis acquisition, while adding new growth opportunities, introduces risks such as EPS neutrality in the stub period and uncertainties around integrating a new sales motion into nontraditional markets like unmanned systems.
- Dependence on Public Sector Budgets and Regulatory Factors: A significant portion of orders comes from government and public safety agencies. This reliance on public sector funding and factors like the timing of the “one big beautiful bill” creates exposure to potential budgetary or regulatory headwinds.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | Q3 2025 | Approximately 4% | Approximately 7% | raised |
Non-GAAP EPS | Q3 2025 | Between $3.32 and $3.37 per share | Between $3.82 and $3.87 per share | raised |
Weighted Average Share Count | Q3 2025 | Approximately 170 million shares | Approximately 169 million shares | lowered |
Effective Tax Rate | Q3 2025 | Approximately 23.5% | Approximately 24% | raised |
Non-GAAP EPS | FY 2025 | Between $14.64 and $14.74 per share | Between $14.88 and $14.98 per share | raised |
Effective Tax Rate | FY 2025 | Approximately 23% | Approximately 23% | no change |
Weighted Average Share Count | FY 2025 | Approximately 170 million shares | Approximately 169 million shares | lowered |
Operating Cash Flow | FY 2025 | Approximately $2.7 billion | Raised to $2.75 billion | raised |
Revenue | FY 2025 | no prior guidance | Approximately $11.65 billion, representing 7.7% growth (up approximately $250 million from prior guidance of 5.5% growth) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Order Growth and Backlog Strength | Consistently discussed in Q1 (record orders with 5% YoY ), Q4 (record backlog increases and multiple big orders ), and Q3 (strong orders in all technologies and healthy backlog ). | Reported record Q2 orders with 27% YoY growth, strong product and software/service backlog with a mid‑$3 billion target by year‑end. | Strengthening performance with improved order momentum and backlog growth. |
Tariff Impact and Mitigation Strategies | Addressed in Q1 with an estimated $100 million impact and multiple mitigation measures via cost controls and supply chain adjustments. Also mentioned in Q4 with emphasis on flexible global manufacturing and adjustments for tariff rates , and briefly in Q3 with minimal exposure concerns. | Explained in Q2 with a reduced tariff impact estimated at $80 million and attributed reduction to effective mitigation exercises and adjustments. | Effective mitigation leading to a lower tariff burden. |
Acquisition Integration and M&A Execution Challenges | Highlighted in Q1 with successful acquisitions (RapidDeploy and Theatro) integrated positively , in Q4 with positive contributions from Teatro and strategic acquisitions , and in Q3 stressing a healthy M&A environment with good integration of 3TC. | Q2 discussion focused on the Silvis acquisition, described positively with emphasis on strategic fit, disciplined capital allocation, and plans for leveraging global reach. | Consistently positive integration, reinforcing a growth strategy. |
Technology Innovation and Digital Transformation | Emphasized in Q1 with strong cloud growth (Alta), next‐gen products like SVX and Assist, and recurring revenue from APX NEXT devices ; in Q4 with cloud adoption progress, B‑Series ASTRO, and Teatro acquisition enhancing command center offerings ; and in Q3 with integrated voice, video, and data innovations driving recurring revenue. | Q2 focused on further innovation with the launch of the SCX video remote P25 speaker mic, expanded AI integration via the Assist platform, and mission‑critical network growth accelerated by the Silvis acquisition. | Sustained momentum in digital transformation and next‑gen technology innovation. |
Dependence on Public Sector Spending and Regulatory Factors | Regularly noted in Q1, where public safety technology and federal demand were highlighted , in Q4 with detailed discussion of federal, state, and local budgets along with regulatory milestones like FedRAMP High , and in Q3 with healthy state and local budgets supporting public safety. | Not explicitly mentioned in Q2 discussions. | Less emphasis in the current period, indicating a potential deprioritization of regulatory/public sector topics. |
Foreign Exchange Volatility and Global Economic Risks | Discussed in Q1 with FX headwinds (e.g. $25 million) and guidance adjustments reflecting currency fluctuations , in Q4 with both favorable and unfavorable FX impacts on revenue and backlog , and in Q3 with modest FX headwinds detailed by segment. | No specific mention of foreign exchange issues or global economic risks in Q2 commentary. | Reduced focus, possibly due to improved stability or lesser impact sentiment. |
Pricing Uncertainty and Margin Management | Addressed in Q1 with discussions of pricing adjustments to offset tariffs, cost control measures, and expectations of operating margin expansion ; Q3 also mentioned margin management with PPV relief and improved operating margins. | Not mentioned during Q2 discussions. | Diminished commentary, suggesting stabilized margins or reduced pricing concerns. |
Market Expansion into Unmanned Systems | Introduced in Q1 with a focus on partnership with BRINC for Drone as a First Responder system ; not mentioned in Q4 and Q3 earnings calls. | Q2 highlighted strategic expansion with the acquisition of Syllvis, a comprehensive drone strategy, and international sales expansion in unmanned systems. | Emerging and increasingly prioritized as a major growth opportunity. |
Potential Supply Chain Disruption Risks | Discussed in Q1 in relation to supply chain actions accompanying tariff challenges , in Q4 with reference to global manufacturing flexibility and monitoring tariffs , and in Q3 with normalized lead times and PPV relief noted as positive developments. | Not mentioned in Q2 commentary. | Omission in current period, suggesting improved stability in the supply chain environment. |
Geopolitical Revenue Risks | Addressed in Q4 with explicit mention of no revenue expectations from Ukraine (down from $80 million previously) , and indirectly in Q1 regarding lower LMR revenue from Ukraine along with tariff-related concerns ; Q3 did not include discussion on geopolitical risk. | Not mentioned in Q2 earnings call discussions. | Decreased emphasis, indicating that geopolitical factors are less of a focus in current narratives. |
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Product Backlog
Q: What is the product backlog status?
A: Management remains very confident with the mid three product backlog figure—improved from May and excluding Silvis—with strong, record orders driving momentum. -
Syllvis Impact
Q: How does Silvis affect our portfolio?
A: They view Silvis as a market leader that broadens exposure into unmanned systems while complementing LMR and video, expecting it to be EPS neutral this year and accretive going forward. -
Margin & Tariff
Q: What drove operating margin improvements?
A: Improvements stemmed from an enhanced product mix and tariff mitigations that reduced the impact to $80M, contributing roughly 100 bps of margin expansion. -
Unmanned Systems TAM
Q: What is the unmanned market potential?
A: Management estimates a current TAM of about $3B in unmanned systems—with growth fast enough to potentially double over four years—boosted by a strong drone strategy. -
Apex Next Growth
Q: How’s Apex Next adoption progressing?
A: Apex Next is experiencing robust double-digit order growth with nearly 90% attachment rates, driving recurring application service revenues. -
Fiscal ‘26 Outlook
Q: How strong are fiscal '26 budgets?
A: They report very solid state and local budgets with steady tax receipts, underpinning a favorable outlook for fiscal 2026 orders and growth. -
Syllvis Sales Motion
Q: How is Silvis being sold?
A: The sales approach for Silvis is direct and strategic, leveraging global presence, channel partnerships, and government affairs to rapidly expand market penetration. -
Drone First Responder
Q: Does Silvis bolster first responder technology?
A: While currently focused on high-end battlefield applications, Silvis is expected to eventually enhance law enforcement drone responses, though near-term spectrum constraints persist. -
LEO Integration
Q: What about LEO satellite connectivity plans?
A: They plan to support LEO connectivity through their new base stations by engaging with LEO providers, thereby boosting network redundancy and high-bandwidth coverage.
Research analysts covering Motorola Solutions.