Motorola Solutions (MSI) Q2 FY26 earnings call: guidance and Q&A

Inquired about capacity increases for Silvus and its implications for future growth, given strong demand.

Management detailed capacity expansion at the Los Angeles site and the new Salt Lake City facility (benefiting in 2027), noting the increased guide for Silvus already accounts for current capacity. They also highlighted doubling the sales force.

“But the increased guide for Silvus this year takes into account our current capacity, and we'll live within that. I think one of the things we're also pleased with, Tim, is we've doubled the size of the sales force.”

asked by Tim Long · answered by John Molloy

Asked about the mix of product vs. software in the Video business and its implications for future software growth.

Management stated Video grew 12% in Q2, with software specifically up double digits and expected to continue. Strong camera sales drove product growth, but the overall mix reflects investments in cloud/hybrid offers and increased sales coverage.

“Video -- so first of all, we're very pleased with where we're at, and we actually grew 12% during the quarter in total, and we bumped up our guide to 11% from 10% to 11%. So overall, performing even better than we had expected.”

asked by Tim Long · answered by John Molloy

Asked about drivers for the implied Q4 revenue acceleration and whether guidance includes unclosed acquisitions.

Guidance reflects current assets only. The Q2 beat was due to better conversion and strong demand. The strong H2 plan is informed by visibility, expected double-digit orders growth, and specific D-Series infrastructure product releases and ship acceptances in Q4. LMR is expected to grow 10% in H2.

“The confidence is also informed by the visibility of what we have. It's informed by double-digit orders growth again expected in Q2, expected double-digit orders in the second half.”

asked by Joseph Cardoso · answered by Gregory Brown

Asked to bridge Q2's strong gross margin performance against the full-year stable outlook, considering memory cost headwinds and pricing levers.

Favorable mix continues to drive growth. Memory costs are a significant headwind ($150M in FY26 vs $50M in FY25), with most of the increase impacting H2. Surgical price increases have been made on high memory content items like video servers. Despite headwinds, comparable gross margins are maintained, and operating margins are expected to expand 170 bps.

“In terms of headwinds, I mentioned on the call that memory, which last year was $50 million, we now expect to be $150 million. That's up from 90 days ago. So that $100 million of increase, a large part of that's going to be faced in the second half because of timing, because of inventory and the positions we had to begin the year.”

asked by Joseph Cardoso · answered by Jason Winkler

Asked about the sustainability of LMR growth beyond the COVID backlog and H2 ramp, specifically if APX NEXT or D-Series can drive accelerated medium-term growth.

LMR growth is strong, overperforming expectations in H1, with a planned H2 ramp driven by D-Series deployments and new UHF offers. APX NEXT, with its broadband and LEO compatibility, and the D-Series infrastructure upgrade (first in 12 years) are expected to drive continued investments in mission-critical platforms, making it a multi-dimensional growth story.

“Now our latest APX NEXT radio is LEO compatible, adding another band for rural coverage for low earth orbit satellite. You have the device refreshes with APX NEXT. Now we introduced the D-Series, which is the first time we've upgraded the infrastructure in a dozen years.”

asked by Andrew Spinola · answered by Gregory Brown

Asked about the industry's acceptance of Motorola's AI products and their performance relative to expectations.

AI is performing well and is embedded in everything Motorola does, specifically for public safety personas (responder, dispatcher, real-time crime center). Traction is good, with 100% of VESTA emergency call handling solutions in Q2 using the AI-assist tier, significantly raising ASPs. Transparency on AI labels and free training are also key.

“AI is no longer a nice to have, it's a need to have within each of our applications. And we have taken that philosophy right from the beginning where it's not an over-the-top solution. It is embedded deeply within each of our platforms.”

asked by Joseph Cardoso · answered by Mahesh Saptharishi

Asked why investors might be missing the full picture if they over-fixate on the sequential decline in product backlog, given positive outlook and implied H2 acceleration.

While product backlog was down sequentially, the YoY performance is strong. The story is more about conversion than backlog, with Q2 seeing double-digit orders and H2 expected to continue this trend. Product backlog is expected to be up YoY by year-end.

“No. Look, we're thrilled. I know you're focused on the sequential, but we love the year-over-year performance. And at the end of the day, this is more about, as Jason and we have said since the beginning of the year, the MSI revenue story becomes more one of conversion than backlog.”

asked by Adam Tindle · answered by Gregory Brown

Asked for more details on underlying demand trends for Silvus, including geographies and applications, and whether growth is TAM or share-driven.

Demand is driven by international macro global defense modernization, particularly NATO countries, EU defense spending (Germany), Ukraine, and Indo-Pacific. Growth is primarily share-driven, not TAM expansion. Highlighted Spectrum Dominance 2.0 software, anti-jam capabilities, and recent U.S. DOW trials.

“I would say it's more share-driven actually than TAM-driven. We don't have any information that would materially change the TAM that you just outlined that we have quantified. I think the performance of Silvus is around share gain and execution and not addressable market expansion per se.”

asked by George Notter · answered by Gregory Brown