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    MSI
    Earnings call· Jun 2025(Q2 FY25)

    Motorola Solutions Q2 FY25 earnings call MSI

    Aug 7, 2025 Source

    Executive summary

    Motorola Solutions Q2 FY25 — Record Orders and Raised Full-Year Guidance

    Motorola Solutions delivered a strong Q2 FY25, surpassing revenue and EPS guidance, driven by robust demand across all business areas and significant growth in software and services. Strategic investments in AI, unmanned systems, and next-gen LMR infrastructure, including the Silvus acquisition, are expanding the company's market reach and enhancing its portfolio. The company raised its full-year outlook, reflecting confidence in continued momentum and the benefits of recent acquisitions and product innovations.

    Highlights

    6

    • Record Q2 revenue and EPS exceeded guidance, with revenue up 5% YoY.

    • Software and Services revenue grew 15% YoY, driving segment operating margin expansion to 33.8%.

    • Non-GAAP operating margin expanded by 80 basis points to 29.6% overall.

    • Record Q2 orders were up 27% YoY, including 10% growth in products.

    • Ending backlog reached $14.1 billion, with Software and Services backlog at a record $10.7 billion, up $1 billion YoY.

    • Full-year FY25 guidance raised for sales, non-GAAP EPS, and operating cash flow.

    Concerns

    2

    • The Silvus acquisition is expected to be slightly dilutive for EPS in Q3 FY25 and neutral for full-year FY25.

    • The company anticipates an $80 million tariff impact for FY25, with the majority affecting the second half of the year.

    Guidance & targets

    13
    CategoryTargetConfidence
    Q3 Sales Growth
    approximately 7%
    medium materiality
    High
    Q3 Non-GAAP EPS
    $3.82 - $3.87 per share
    high materiality
    High
    Full-Year FY25 Revenue Growth
    approximately 7.7%
    high materiality
    High
    Full-Year FY25 Non-GAAP EPS
    $14.88 - $14.98 per share
    high materiality
    High
    Full-Year FY25 Operating Cash Flow
    $2.75 billion
    high materiality
    High
    Silvus Revenue Contribution
    $185 million
    medium materiality
    High
    Silvus EPS Impact
    slightly dilutive for EPS in Q3 and neutral for 2025
    medium materiality
    High
    Silvus EPS Accretion
    at least $0.20
    medium materiality
    High
    Silvus Revenue Growth
    about 20%
    medium materiality
    High
    Mission Critical Networks (MCN) Growth
    mid-single digits
    medium materiality
    High
    Full-Year FY25 Tariff Impact
    about $80 million
    low materiality
    High
    Full-Year FY25 Gross Margins
    up year-on-year
    medium materiality
    High
    Full-Year FY25 Operating Margin Expansion
    about 100 bps
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Products and SI
    Operating earnings comparable inclusive of additional tariff costs and continued investments in video, offset by lower material costs.
    $82 million P25 system upgrade for Tri-County systems in St. Louis region$30 million P25 device order for the city of Miami, Florida$22 million P25 system upgrade for the state of Michigan$15 million fixed video order for a U.S. federal customer$11 million P25 device order for the Las Vegas Metro Police department
    		$1.7 billionflat—$442 million (26.7% of sales)
    Software and Services
    Revenue growth driven by strong growth across all 3 technologies, with $39 million from acquisitions. Operating earnings up from 32.3% last year, driven by higher sales and improved operating leverage, partially offset by acquisitions.
    $44 million command center order for a U.S. state and local customer$29 million P25 system upgrade and LMR services order for the city of Chicago$12 million LMR cybersecurity order for the state of Victoria, Australia$11 million services order for the state of New Mexico$9 million LMR services order for a U.S. federal customer
    		—15%—$376 million (33.8% of sales)
    North America
    Revenue growth in all 3 technologies.
    		$2 billion6%——
    International
    Revenue growth driven by LMR.
    		$738 million4%——

    Operational metrics

    17
    Non-GAAP operating earnings
    $818 millionup 8% YoY
    Q2 FY25
    Non-GAAP operating margin
    29.6%up 80 bps
    Q2 FY25

    Driven by higher sales and improved operating leverage.

    GAAP EPS
    $3.04up from $2.60 YoY
    Q2 FY25
    Non-GAAP EPS
    $3.57up 10% YoY
    Q2 FY25

    Driven by higher sales, operating margins, and lower diluted share count.

    Operating expenses
    $615 millionup $22 million YoY
    Q2 FY25

    Primarily due to acquisitions.

    Share repurchases
    $218 million
    Q2 FY25
    Cash dividends
    $182 million
    Q2 FY25
    Capital expenditure
    $48 million
    Q2 FY25
    Silvus adjusted EBITDA margin
    approximately 45%
    FY25

    Expected for full year 2025.

    Silvus Ukraine revenue
    less than 15%
    FY25

    Expected to be even less in FY26.

    Silvus Ukraine revenue
    even less than that
    FY26

    Expected to be even less than 15% of overall revenues.

    Average coupon on senior notes
    just under 4.6%
    Q2 FY25
    Video software growth
    25%
    Q2 FY25
    Video software growth
    over 20%
    Annually
    APX NEXT attachment rate
    greater 90%
    Q2 FY25
    APX NEXT application services revenue per radio
    $300
    Per year
    Unmanned systems TAM
    $3 billion
    Current

    Industry KPIs

    8
    MetricValueDetails
    Capital return$218 million share repurchases, $182 million cash dividendsUSD
    Backlog order book$14.1 billionUSD
    Orders backlog qualityRecord Q2 orders
    Product orders order growth10%%
    Segment growth margin targetsMid-single digits%
    Recurring software service revenue$10.7 billionUSD
    Revenue mix by product customer typeNorth America $2 billion, International $738 millionUSD
    Design wins product cycle transitionsSeveral large orders

    Orderbook & backlog

    6
    Ending backlog$14.1 billionQ2 FY25

    up $150 million YoY, up $19 million QoQ

    Driven by strong demand, including record Q2 orders.

    Software and Services backlog$10.7 billionQ2 FY25

    up $1 billion YoY, up $191 million QoQ

    Highest S&S backlog ever. Driven by strong demand for multiyear contracts across all 3 technologies and foreign currency impact, partially offset by revenue recognition for U.K. home office.

    Products and SI ending backlogdecreasedQ2 FY25

    decreased $902 million YoY, $172 million QoQ

    Due to continued strong LMR shipments.

    Q2 ordersup 27%Q2 FY25

    YoY

    Record Q2 orders, including 10% growth in products.

    Product ordersup 10%Q2 FY25

    YoY

    Part of record Q2 orders.

    APX NEXT order growthdouble-digitQ2 FY25

    YoY

    Product announcements

    4
    ProductTypeDetails
    SVXlaunch
    Next-generation ASTRO P25 LMR infrastructurelaunch
    Public Safety AI platform Assistlaunch
    AI labelslaunch

    Deals & partnerships

    3
    SilvusAcquisition of a technology leader in mobile ad hoc networks (MANETs).$4.4 billion

    Closed subsequent to quarter end. Provides exposure to unmanned systems market (air, ground, water) and complements LMR and video offerings. All 3 rating agencies affirmed BBB level ratings post-acquisition.

    BRINCStrategic alliance to provide American-made purpose-built public safety drones.

    Part of Motorola's drone as a first responder (DFR) strategy, allowing customers to reduce emergency response times and deliver critical supplies.

    SkySafeAlliance to integrate advanced drone detection solutions.

    Integrates SkySafe's solutions into Motorola's command center software, enabling detection, identification, tracking, and analysis of drone activity.

    Risks & headwinds

    3
    Silvus acquisition EPS impactQ3 FY25 and FY25

    slightly dilutive for EPS in Q3 FY25 and neutral for full-year FY25

    Mitigation: Expected to be at least $0.20 accretive in FY26, demonstrating long-term value creation.

    Tariff impactFY25, majority in H2

    approximately $80 million for FY25

    Mitigation: Down from prior estimate of $100 million due to mitigation efforts.

    Spectrum availability for Silvus in North AmericaNear term

    Limitation for Silvus's technology within drones for public safety

    Mitigation: Requires licensed spectrum; company is exploring solutions and some public safety agencies have received waivers. Silvus's spectrum monitoring can still be integrated into DFR programs.

    What to watch in Q3 FY25

    5

    Product backlog target

    Year-end FY25
    CurrentWell on track for mid-$3 billion (excluding Silvus)
    TargetMid-$3 billion or higher

    Why it matters

    Indicates continued strong demand and future revenue visibility for products, crucial for overall growth.

    Last quarter, you put out this mid $3 billion product backlog bogey out there for year-end. And which based on the 2Q orders looks like you're well on track to. Maybe you can just take a moment and talk about like on a product level, where you're seeing this growth in the product orders across your portfolio? ... if anything, I feel as good, I actually feel better about that. And just to be clear, that color did not include anything associated with Silvus. So I still feel very good about the mid-3s even better than I did in May.

    Q&A highlights

    6

    Update on the mid-$3 billion product backlog target for year-end, drivers of product order growth, and how Silvus impacts this outlook.

    Management feels even more confident about achieving the mid-$3 billion product backlog target, which excludes Silvus. Record Q2 orders (27% total, 10% product) were driven by LMR device refresh, new LMR infrastructure (D-Series, APX consoles), fixed video, and large federal orders. Silvus is a market leader, expected to grow 20% in 2026, be EPS neutral in FY25, and at least $0.20 accretive in 2026. The 'One Big Beautiful Bill' provides significant funding for DoD, customs, border, and enterprise, with impact expected in early Q4 FY25.

    “if anything, I feel as good, I actually feel better about that. And just to be clear, that color did not include anything associated with Silvus. So I still feel very good about the mid-3s even better than I did in May.”

    asked by Joseph Cardoso · answered by Gregory Brown

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Raised Outlook

    Motorola Solutions reported an outstanding Q2 FY25, with revenue up 5% and non-GAAP EPS increasing 10% YoY, both exceeding guidance. This performance was driven by strong customer demand across all business areas, particularly a 15% growth in software and services. The company expanded non-GAAP operating margins by 80 basis points to 29.6% and generated record Q2 orders, up 27% YoY. Based on these results, full-year guidance for sales, EPS, and operating cash flow has been raised.

    02

    Strategic Investments in Innovation and Growth

    The company continues to invest organically and inorganically in solutions for sustainable long-term growth. Recent innovations include SVX, a new video remote P25 speaker mic that integrates secure voice, video, and AI, and next-generation ASTRO P25 LMR infrastructure with D-Series base stations. Investments in drones and unmanned systems, including the Silvus acquisition and alliances with BRINC and SkySafe, are expanding market participation in rapidly growing areas like defense, border security, and public safety.

    03

    Differentiated AI Strategy

    Motorola Solutions highlighted its differentiated approach to AI, which began with fixed video several years ago and now includes the Public Safety AI platform Assist. This platform aims to help 911 call takers and first responders make better decisions through AI-assisted report writing, leveraging a holistic view of incident data. The company also introduced AI labels to provide transparency on AI usage, fostering trust with customers and communities.

    04

    Silvus Acquisition: Expanding Market Leadership

    The acquisition of Silvus for $4.4 billion is a strategic move to gain leadership in mobile ad hoc networks (MANETs), a market Motorola Solutions did not previously participate in. Silvus's technology provides high-speed, infrastructure-less communication for unmanned systems and is complementary to the company's existing LMR and video offerings. The acquisition is expected to be EPS neutral in FY25 but accretive by at least $0.20 in FY26, with Silvus revenue projected to grow 20% in FY26.

    05

    Impact of Government Funding and Budget Outlook

    The recently passed 'One Big Beautiful Bill' is expected to provide significant funding over the next four years for DoD, customs, border security, and ICE, much of which is directed at refreshing technology. This funding, along with accelerated depreciation for enterprise customers, is anticipated to kick in during early Q4 FY25 and is already factored into the raised guidance. State and local budgets for FY26 also appear strong, supporting continued demand for Motorola's solutions.

    06

    Evolution of LMR to Mission Critical Networks (MCN)

    The LMR technology category is being expanded to 'Mission Critical Networks' (MCN) to include Silvus, with MCN expected to grow mid-single digits in FY25. The introduction of the D-Series base stations and access consoles is driving a multi-year network refresh cycle, creating opportunities for new service selling, including cybersecurity and software monetization. This strategic shift aims to drive more recurring revenue and application-based services, enhancing the long-term durability of the business.

    AI-generated summary of the company’s earnings call. Not investment advice.