Garmin's Q3 2025 Earnings Call: Contradictions Emerge on Outdoor Revenue Guidance, Gross Margins, and Tariff Strategies

Date of Call: October 29, 2025

Financials Results

• Revenue: $1.77B, up 12% YOY
• EPS: Pro forma EPS $1.99; GAAP EPS $2.08
• Gross Margin: 59.1%, down 90 bps sequentially
• Operating Margin: 25.8%, down 180 bps YOY

Guidance:

• Full‑year revenue expected to be approximately $7.1B.
• Full‑year gross margin expected to be approximately 58.5%.
• Full‑year operating margin raised to ~25.2% (from prior 24.8%).
• Pro forma effective tax rate expected to be ~17.5%.
• Expected pro forma EPS raised to ~$8.15 (prior $8.00).
• Segment FY revenue growth estimates: Fitness +29%, Outdoor +3%, Aviation +10%, Marine +10%, Auto OEM ~+8%.
• Full‑year free cash flow ~ $1.3B; capex ~ $275M.

Business Commentary:

* Revenue Growth Across Segments: - Garmin Ltd. reported a 12% increase in revenue to nearly $1.8 billion for Q3 2025, a new third-quarter record, despite strong comparison from the previous year with a 24% increase. - This growth was driven by strong double-digit revenue growth in three business segments: Fitness, Marine, and Aviation.

• Strong Performance in Fitness Segment:
• The Fitness segment saw revenue increase 30% to $601 million, led by strong demand for advanced wearables.

• This growth is attributed to the variety and depth of Garmin's wearable product lines and the launch of new products like the Edge 550 and 850 cycling computers.

• Outdoor Segment Revenue Decline:

• The Outdoor segment experienced a 5% decline in revenue to $498 million, primarily due to the 1-year anniversary of the dezl series launch and the fenix 8's success.

• The decline was partially offset by the launch of the fenix 8 Pro, but the dynamics of product release cycles affected short-term performance.

• Aviation Segment Growth:

• Aviation revenue increased 18% to $240 million, supported by contributions from both OEM and aftermarket product categories.

• This growth was driven by certification of retrofit integrated cockpit systems for aircraft and additions of Autoland and Autothrottle capabilities.

• Marine Segment Success:

• The Marine segment reported a 20% increase in revenue to $267 million, with growth across chartplotters, audio, and cartography categories.
• Growth was attributed to new product launches and market share gains, as well as recognition from the National Marine Electronics Association as Manufacturer of the Year.

Sentiment Analysis:

Overall Tone: Positive

• "achieved another quarter of outstanding financial results," record Q3 operating income of $457M, "raising our full year EPS guidance" and management: "anticipate delivering another record year of double‑digit growth in revenue, operating income and EPS."

Q&A:

• Question from Joseph Cardoso (JPMorgan Chase & Co): Could you dig into the downward revision to Outdoor guidance — drivers beyond fenix 8 vs Pro — and clarify drivers behind the implied Q4 gross margin step down and assumptions on FX and tariffs?
  Response: Outdoor trimmed because the fenix 8 Pro launched late and compares to an exceptionally strong fenix 8 release; gross margin pressure is from higher product costs (tariffs, stronger Taiwan dollar) and warranty accruals, and Q4 guide factors current tariff rates, FX trends and promotional seasonality.

• Question from Erik Woodring (Morgan Stanley): Where are Fitness and Outdoor in their product cycles — is this cyclical — and why has CapEx trended below prior guidance over the last few years?
  Response: Management views Fitness and Outdoor as ongoing growth opportunities (market‑share gains, not short cycles); CapEx underspend reflects timing and schedule shifts for infrastructure projects, not lack of funds.

• Question from Timothy Long (Barclays Bank PLC): What is the state of channel inventory in Fitness and Outdoor, and what drove the sequential downtick in Americas?
  Response: Channel inventory is healthy and lean with strong sell‑through ahead of Q4; the Americas dip is not meaningful long‑term and is largely due to product cycles and FX.

• Question from Jordan Lyonnais (BofA Securities): How should we think about Auto growth into next year until the new 2027 contracts ramp, and any color on Aviation OEM vs aftermarket drivers?
  Response: 2026 may see pressure as legacy programs wind down; a new large auto program is expected to ramp in back half of 2026; Aviation growth is balanced between OEM backlog and resilient aftermarket demand.

• Question from Joseph Nolan (Longbow Research LLC): What is driving Fitness strength and new user growth; and will Q4 promotions be comparable to last year?
  Response: Fitness strength is broad‑based across advanced wearables with strong new‑user registrations (double‑digit growth); Q4 promotions are expected to be comparable to prior years.

• Question from Ivan Feinseth (Tigress Financial Partners LLC): How is the Blaze equine product uptake and production pacing; and attach rates for connectivity on 8 Pro/Bounce?
  Response: Blaze has strong early interest but will take time to build channel momentum; connectivity‑enabled products show high attach/signup rates for the associated service plans.

• Question from Benjamin Bollin (Cleveland Research Company LLC): What drove the Auto accrued warranty charge and how should we think about Auto OEM margin structure and component supply?
  Response: The warranty accrual was an isolated prior‑period issue that's been addressed; long‑term Auto OEM targets remain mid‑ to upper‑teens gross margin and mid‑single‑digit operating margin at scale; semiconductor trends are tightening but expected to yield higher‑performance components over time.

• Question from Noah Zatzkin (KeyBanc Capital Markets): Is the Marine upside idiosyncratic or is the end market improving; any updates on tariffs?
  Response: Marine upside reflects a stabilizing/improving end market plus market‑share gains in chartplotters, trolling motors and cartography; tariffs are broadly stable and being managed via supply‑chain adjustments.

Contradiction Point 1

Outdoor Segment Revenue Guidance

It involves changes in revenue expectations for the Outdoor segment, impacting revenue projections and investor expectations.

What caused the 10% downward revision in Outdoor segment revenue guidance for the back half of the year? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: We are lowering our revenue outlook for the Outdoor segment by approximately 10% in the back half of the year. - Clifton Pemble(CEO)

Can you clarify the 2025 revenue outlook and how it compares to the prior guidance? - Joseph Cardoso (JPMorgan)

2024Q4: We are maintaining our 2025 outlook for Outdoor in the mid-30s, with growth in the second half. - Clifton Pemble(CEO)

Contradiction Point 2

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

What caused the reduced seasonal decline in gross margin for Q4? Are FX headwinds and tariffs factored into the guidance assumptions? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: The change to the Gross margins for Q3 are expected to be approximately 59.5% to 60.5%. - Douglas Boessen(CFO)

Will Blackwell's Q4 revenue be additive, and what is the expected exit rate for gross margins? - Stacy Rasgon (Bernstein Research)

2025Q2: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s. - Douglas Gerard Boessen(CFO)

Contradiction Point 3

Tariffs and Mitigation Strategies

It highlights differing approaches and effectiveness of mitigating tariff impacts on the company's financial performance and operations.

What are the drivers of the less seasonal gross margin decline in the 4Q implied guide? Are FX headwinds and tariffs assumed in the guide? - Joseph Cardoso (JPMorgan Chase & Co)

2025Q3: Q3's lower gross margin is due to higher product costs, including those related to tariffs. - Douglas Boessen(CFO)

Are you seeing any demand pullbacks due to tariff concerns, from customers building inventory or consumers delaying purchases? - Joseph Cardoso (JPMorgan Chase & Co)

2025Q1: We're aware of the trade concerns, but they're not affecting consumer behavior. The channel and consumers are balanced. - Cliff Pemble(CEO)

Contradiction Point 4

Demand and Consumer Behavior

It involves conflicting statements on consumer demand and its reaction to the tariff environment, which is crucial for revenue projections and investor confidence.

Can you explain the downward revision to the Outdoor guidance, particularly the 10% revenue outlook reduction in the second half? What factors caused this deviation from the previous outlook? - Joseph Cardoso (JPMorgan Chase & Co)

2025Q3: We're not seeing any indications of demand weakness. Retailers and consumers are not overstocking products. - Clifton Pemble(CEO)

How do you assess consumer demand for the second half given ever-changing tariff policies? - George Wang (Barclays)

2025Q1: We're including precautionary conservatism. Our products are unique, and we believe demand will remain steady. No major shifts in consumer behavior expected. - Cliff Pemble(CEO)

Contradiction Point 5

Outdoor Segment Revenue Outlook

It involves changes in financial forecasts for the Outdoor segment, impacting investor expectations and revenue projections.

What caused the 10% downward revision to the Outdoor segment's second-half revenue guidance? What factors caused this deviation from the prior outlook? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: The fenix 8 Pro launch was delayed in Q3, and its impact was limited. - Clifton Pemble(CFO)

What factors are driving growth in the outdoor segment despite a soft market, and what is the status of new auto OEM programs? - Joseph Nolan (Longbow Research LLC)

2025Q2: Outdoor revenue was $377 million, up 17% year-over-year, with strong growth in the fenix 8 and Zumo line. Full-year guidance is up 20%. - Clifton Pemble(CEO)