Zebra Technologies Stock Jumped 20% Today on the Best Problem in Tech

Zebra Technologies (NASDAQ: ZBRA) stock broke into a run on Tuesday morning, up 20.3% as of 11 a.m. ET. The rugged-device and asset-tracking specialist reported strong second-quarter results before the opening bell, and the stock is now trading at fresh 52-week highs.

Nobody saw this coming, including Zebra

Zebra's adjusted earnings hit $6.35 per share. Analyst consensus was $4.36. Zebra's own guidance in May topped out at $4.50, so management beat the optimistic end of its own homework by 41%. Sales rose 20.4% to $1.56 billion, with organic growth of 9.2% and gains in every region.

A $73 million tariff recovery flattered the quarter, and only $41 million of that promised payback has materialized as cash so far.

But that's OK. Strip out the tariff payback benefits, and earnings still come in near $5.10 per share. Zebra's beat survives the tariff asterisk.

Management also raised full-year earnings guidance to approximately $21, up from $18.50 at the midpoint three months ago. Free cash flow guidance moved past $1 billion. That's a lot of upside for one quarter's work.

Image source: Getty Images.

The memory bottleneck is a bragging point

Here's the bullish twist. Orders don't limit zebra; it's limited by the same memory chips that AI data centers are soaking up.

Memory costs should run about $120 million higher this year, which drags third-quarter margin projections back from 27.7% toward the 22% range. CEO Bill Burns called the high end of the sales guide "unconstrained" on the earnings call. The low end is what happens if chips don't show up.

In a brief one-on-one call, I asked Burns whether customers were skimping on memory to keep costs down.

"It's literally the opposite, Anders," he said. The biggest customers are ordering extra capacity at higher prices, because they'd rather over-buy today than discover in 2028 that their scanners can't run the AI models they want.

And memory supply was a key reason for the Q2 surprise.

"We were able to get more than we anticipated going into the quarter, and therefore we went over the top end of our range because the demand is there," Burns explained.

Paying more for chips you can barely get is an unpleasant way to grow. But it's still growth, and the stock trades at about 16.5 times the new full-year earnings guidance.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zebra Technologies. The Motley Fool has a disclosure policy.