How Zebra Technologies Is Dodging Tariff Costs While Others Panic

Anders Bylund, The Motley Fool

Sun, May 4, 2025, 12:37 PM 5 min read

• New tariffs will impact Zebra's EBITDA by about 10% in Q2, but only 5% in the second half of 2025.

• The data management specialist has reduced U.S. shipments from China from 85% to just 30%, significantly reducing its exposure to tariff costs.

• Zebra's stock is down 34% and trading at just 13 times free cash flows, and it looks like a great buy these days.

Data management expert Zebra Technologies (NASDAQ: ZBRA) reported first-quarter results on April 29. Revenues rose 11% year over year while earnings jumped 42% higher. The company beat Wall Street's consensus estimates across the board.

That's great news for Zebra's investors, customers, and other stakeholders. But that's not the end of the story. The most important part of this report was how the company will handle the incoming torrent of new tariff expenses. As it turns out, Zebra will benefit from lessons learned (and actions taken) in the coronavirus pandemic and the worldwide shipping shortages that followed.

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Zebra's management expects some tariff expenses in 2025. The direct costs should add up to about $30 million in the second quarter and $70 million for the full fiscal year.

These costs will apply to Zebra's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). To put the tariff impact into perspective, Zebra's adjusted EBITDA was $292 million in Q2 and $1.05 billion in fiscal year 2024. Hence, the tariff-based damage should be roughly 10% of adjusted EBITDA profits in the next quarter, slowing down to less than 7% for the full year.

I realize that the first quarter played no part in the tariff drama, so it should be excluded from these calculations. The profit reduction still slows significantly in the second half, targeting a tariff cost of approximately 5% in that period. That's what I get after backing out the reported and estimated EBITDA numbers for the Q1 and Q2 periods.

Zebra's tariff expenses should be pretty manageable even in the first stage, followed by even lighter impacts later on. I got Zebra CEO Bill Burns on the phone and asked how the company is dodging those potentially massive tariff bills. Will Zebra benefit from the supply chain tweaks it made in recent years?

Bill agreed with my thesis, highlighting Zebra's diversified supply chain with an increasingly global network of manufacturing services and components.