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Motorola Solutions, Inc. (MSI)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 revenue $2.77B (+5% YoY) and non-GAAP EPS $3.57 (+10% YoY), both above Street; GAAP EPS $3.04 (+17% YoY). Drivers: 15% growth in Software & Services, higher sales and operating leverage; FX tailwind $9M; acquisitions added $39M . Versus S&P Global consensus: revenue $2.733B* and EPS $3.36*; both were beats [GetEstimates]*.
  • Guidance raised: FY25 revenue to ~$11.65B (+7.7% YoY) from ~$11.4B (+5.5%), FY25 non-GAAP EPS to $14.88–$14.98 from $14.64–$14.74; OCF raised to $2.75B (incl. ~$75M one-time Silvus costs) .
  • Backlog $14.1B (+$150M YoY) on record Q2 orders (+27% YoY); S&S backlog +$1.0B, PSI backlog −$0.9B on strong LMR shipments .
  • Strategic: Closed Silvus for $4.4B upfront; FY25 stub revenue ~$185M; slightly dilutive to Q3 EPS, neutral for FY25; expands LMR into Mission Critical Networks (MCN) and unmanned systems TAM .
  • Near-term catalysts: Raised FY guide, record orders/backlog, AI product initiatives (Assist, SVX, AI “nutrition labels”), and federal/border security momentum; tariff headwinds (~$80M in 2H) largely mitigated via mix/operating leverage per management .

What Went Well and What Went Wrong

What Went Well

  • Record Q2 revenue/earnings; non-GAAP operating margin expanded to 29.6% (+80 bps YoY) on higher sales and operating leverage .
  • Software & Services up 15% with strength in LMR services, Video, and Command Center; video software grew ~25% YoY per CEO commentary .
  • Orders/backlog: Record Q2 orders (+27% YoY); ending backlog $14.1B, with S&S backlog at $10.7B (+$1.0B YoY), “highest S&S backlog ever” (CEO) .
  • Quote: “Q2 was outstanding, with record second-quarter revenue and earnings... robust demand... record Q2 orders... increased revenue, earnings and operating cash flow expectations for the year.” — Greg Brown, CEO .

What Went Wrong

  • Tariffs: Management anticipates ~$80M tariff costs in 2025, with most impact in 2H; Q2 margin expansion benefited little from tariffs (still ahead of plan due to mix/leverage) .
  • PSI segment flat revenue YoY and GAAP operating earnings down 4% YoY; continued investments in video and additional tariff costs weighed on PSI GAAP OE (offset by lower material costs) .
  • Airwave/UK Home Office continues to create S&S revenue recognition dynamics; S&S backlog growth partially offset by U.K. Home Office revenue recognition .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.011 $2.528 $2.765
GAAP EPS ($)$3.56 $2.53 $3.04
Non-GAAP EPS ($)$4.04 $3.18 $3.57
GAAP Operating Margin (%)27.0% 23.0% 25.0%
Non-GAAP Operating Margin (%)30.4% 28.3% 29.6%
FX Impact ($USD Millions)+$6 −$25 +$9
Acquisitions Revenue ($USD Millions)$37 $32 $39
Estimates vs ActualQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD Billions)$2.998*$2.517*$2.733*
Revenue Actual ($USD Billions)$3.011 $2.528 $2.765
EPS Consensus Mean ($)$3.887*$3.010*$3.361*
EPS Actual (Non-GAAP, $)$4.04 $3.18 $3.57

Values with asterisks retrieved from S&P Global.

Segment BreakdownQ2 2024Q1 2025Q2 2025
Products & Systems Integration Sales ($USD Billions)$1.658 $1.546 $1.653
PSI GAAP OE ($USD Millions)$379 $352 $363
PSI GAAP OE Margin (%)22.9% 22.8% 22.0%
PSI Non-GAAP OE ($USD Millions)$445 $434 $442
PSI Non-GAAP OE Margin (%)26.8% 28.1% 26.7%
Software & Services Sales ($USD Billions)$0.970 $0.982 $1.112
S&S GAAP OE ($USD Millions)$265 $230 $329
S&S GAAP OE Margin (%)27.3% 23.4% 29.6%
S&S Non-GAAP OE ($USD Millions)$313 $282 $376
S&S Non-GAAP OE Margin (%)32.3% 28.7% 33.8%
KPIs & CashQ4 2024Q1 2025Q2 2025
Ending Backlog ($USD Billions)$14.7 $14.1 $14.1
Record Q2 Orders YoY (%)——+27%
North America Revenue ($USD Billions)$2.2 $1.9 $2.0
International Revenue ($USD Billions)$0.807 $0.676 $0.738
Operating Cash Flow ($USD Millions)$1,104 (Q4 CF) $510 $272
Free Cash Flow ($USD Millions)$2,070 (FY) $473 $224
GAAP Effective Tax Rate (%)22% (FY) 21.0% 24.3%
Diluted Shares (Millions)170.3 169.8 168.8
Share Repurchases ($USD Millions)$244 (FY) $325 $218
Dividends Paid ($USD Millions)$654 (FY) $182 $182
CapEx ($USD Millions)$257 (FY) $37 $48

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growthFY 20255.5% ($11.4B) 7.7% ($11.65B) Raised
Non-GAAP EPSFY 2025$14.64–$14.74 $14.88–$14.98 Raised
Operating Cash FlowFY 2025~$2.7B ~$2.75B (incl. ~$75M Silvus transaction expense) Raised
Q3 Revenue growthQ3 2025—~7% YoY New
Q3 Non-GAAP EPSQ3 2025—$3.82–$3.87 New
Diluted share count assumptionFY/Q3 2025~170M (FY) ~169M Lower
Non-GAAP tax rate assumptionFY/Q3 2025~23% FY; ~23.5% Q2 guide ~23% FY; ~24% Q3 Maintained (FY)
Silvus revenue contributionFY 2025—~$185M New
Dividend per shareNext payment—$1.09 payable Oct 15, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI initiatives (Assist, SVX, AI labels)Launched SVX and Assist;-cloud/SaaS adoption; Alta momentum CEO: video software +25% YoY; Assist platform expanding; introduced AI “nutrition labels” to enhance transparency Strengthening; broader productization
Supply chain & tariffsFlexible footprint; guided to ~$100M tariffs; mitigation via cost/pricing; PPV benefits Est. 2025 tariff impact ~$80M, mostly 2H; minimal impact on Q2 margins; mitigated via mix/leverage Headwind manageable; back-half loaded
Product performance (LMR/Video/Command Center)Double-digit video; Command Center growth; PSI margins expansion in Q1 PSI flat revenue; S&S +15%; notable P25 wins; video orders strong incl. federal Mix shift to S&S; PSI steady
Regional trendsNA strong; International down on Ukraine and FX; managed services in EMEA/Australia NA +6% to $2.0B; International +4% to $0.738B; backlog mix shift NA remains robust; Int’l recovering
Regulatory/legalAirwave charge control; UK HO revenue recognition; Hytera litigation updates Continued Hytera collections; legal updates; UK HO continues to affect recognition Ongoing, contained
R&D execution (LMR base station, LEO)Next-gen ASTRO infrastructure pipeline, strong interest New D Series base stations: better capacity/energy; early wins; potential multi-year refresh; LEO redundancy in base stations Accelerating refresh cycle
Unmanned systems/Defense (Silvus)Announced intent; defense/border opportunities; FedRAMP progress Closed Silvus; FY25 stub ~$185M; MCN category; EPS neutral FY25; 2026 growth expectations; spectrum monitoring/drone detection New TAM expansion

Management Commentary

  • “Record Q2 revenue and earnings per share that exceeded our guidance... we’re raising our full year guidance for sales, earnings per share, and operating cash flow.” — Greg Brown, CEO .
  • “Non-GAAP operating margin was 29.6%, up 80 basis points... driven by higher sales and improved operating leverage.” — Jason Winkler, CFO .
  • On Silvus: “A technology leader... complements our leadership in LMR and video... opportunities to leverage our strong customer relationships.” — Greg Brown .
  • On SVX/Assist: “Creating a new category... a body-worn assistant vs. camera... gateway into Assist, translation, situational awareness.” — CTO Mahesh Saptharishi .
  • On tariffs: “This year’s tariff impact will be about $80M... began seeing impact in late Q2... most in second half; operating margin expansion did not have significant impact from tariffs.” — CFO .

Q&A Highlights

  • Silvus strategy and financials: MCN category; FY25 revenue ~$185M stub; slightly dilutive in Q3, neutral FY25; expected EPS accretion in 2026; broad defense/unmanned partner ecosystem; Ukraine exposure <15% of Silvus FY25 revenue .
  • Tariffs: ~$80M impact in 2025, majority in 2H; mitigations via discretionary cost controls, supply chain flexibility, selective pricing; gross margin expected up YoY, ~100 bps operating margin expansion for FY25 .
  • LMR base station (D Series): capacity/energy gains; redundancy via LEO; multi-year refresh opportunity; services upsell (cybersecurity, software monetization) .
  • SVX demand: Orders outpacing expectations; drives APX NEXT adoption and $300/device/year app subscriptions with >90% attach rates in NA .
  • Backlog composition: S&S backlog power-hitter is LMR services; PSI backlog down on strong shipments; quick-turn product orders expected to grow in 2H .

Estimates Context

  • Q2 2025 beats vs S&P Global consensus: Revenue $2.765B vs $2.733B*; Non-GAAP EPS $3.57 vs $3.36*. Q1 2025 and Q4 2024 similarly beat on both revenue and EPS. Raised FY guide implies upward estimate revisions in revenue/EPS and likely operating cash flow as Street digests Silvus stub and improved core trajectories [GetEstimates]*.

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat and guide raise: Broad-based demand with margin expansion; S&S mix and operating leverage driving EPS upside even before Silvus contributions .
  • Backlog/orders support 2H trajectory: Record Q2 orders (+27% YoY) and $14.1B backlog underpin Q3/Q4; PSI quick-turn and S&S multi-year contracts balance execution risk .
  • Tariff headwinds largely deferred: ~$80M impact mostly in 2H; margin expansion guided for FY25 suggests mitigation via mix, pricing, and cost controls; watch execution through 2H .
  • Silvus expands TAM and MCN: Near-term neutral on EPS, strategic foothold in unmanned/defense; expect services/recurring opportunities and broader international reach via MSI footprint .
  • AI differentiation: Assist and SVX create new categories in public safety workflows; AI “nutrition labels” may accelerate trust/adoption; cloud SaaS (Alta/VESTA Hybrid) strengthening recurring profile .
  • Capital allocation: Continued buybacks/dividends ($1.09 declared), new $2.25B revolver; balance sheet supports opportunistic M&A and shareholder returns .
  • Trading implications: Stock should respond positively to sustained beat/raise pattern, record orders/backlog, and AI/MCN narratives; monitor tariff impact in 2H and Silvus integration milestones .