Logitech Delivers Strong Q2, But Webcam Woes Linger

Logitech International (LOGI) has long been a master of turning mundane tech accessories into must-have products. From gaming keyboards to video conferencing systems, the company’s ability to innovate has kept it ahead of the curve. But its latest quarterly results, while broadly positive, reveal a critical weakness that investors can’t afford to ignore. Let’s break it down.

The Good News: Logitech’s Q2 Was a Win

Logitech reported Q2 FY2025 revenue of $1.12 billion, a 6% year-over-year increase in both U.S. dollars and constant currency. This beat analyst estimates of $1.09 billion, driven by strong performances across nearly all product lines. Here’s the breakdown:

• Gaming: Revenue hit $300.5 million, up 7%, fueled by its Streamlabs acquisition and new hardware launches.
• Keyboards & Combos: Soared 8% to $210 million, reflecting ongoing demand for productivity tools.
• Tablet Accessories: Surged 34% to $85.6 million, a category that’s clearly hitting its stride.
• Video Collaboration: Rose 5% to $160 million, benefiting from hybrid work trends.

Profitability also took a leap. Non-GAAP gross margin expanded to 44.1%, a 210-basis-point improvement over the prior year, thanks to operational efficiency and disciplined pricing. Non-GAAP EPS hit $1.20, up 10% year-over-year and well above the consensus estimate of $1.10.

The company also raised its full-year outlook, now projecting sales of $4.39–4.47 billion (up from $4.34–4.43 billion) and non-GAAP operating income of $720–750 million (vs. prior guidance of $700–730 million).

The Bad News: Webcams Are Struggling

While most categories thrived, Logitech’s webcam sales dropped 9% to $80.3 million. This is the third consecutive quarter of declines, raising concerns about a sustained slowdown in demand for home-office gear. CEO Hanneke Faber noted that webcam sales were “impacted by ongoing macroeconomic pressures,” but the trend is worrisome.

Webcams account for roughly 7% of Logitech’s total revenue, so the decline isn’t catastrophic. But it’s a red flag in a market where hybrid work is still the norm for many companies. Investors should ask: Is this a temporary hiccup, or a sign that Logitech’s webcam dominance is fading?

The Bigger Picture: Can Logitech Sustain Momentum?

The company’s tablet accessories and gaming segments are firing on all cylinders. The former’s 34% growth suggests Logitech is successfully expanding into emerging markets, while gaming’s resilience (despite broader industry headwinds) speaks to the strength of its ecosystem.

Meanwhile, Logitech’s operational discipline is clear. Cash flow from operations hit $166 million, and the company returned $340 million to shareholders via dividends and buybacks. With a $1.4 billion cash balance, Logitech has the flexibility to invest in innovation or acquire smaller rivals.

But the webcam slump underscores a vulnerability. If hybrid work continues to decline, or competitors undercut Logitech’s pricing, this segment could drag down margins.

Conclusion: Bullish, But Keep an Eye on the Webcam

Logitech’s Q2 was a win—there’s no denying it. The company is executing well, with strong cash flow and a revised outlook that reflects confidence. The stock’s post-earnings rally (up ~5% in after-hours trading) suggests investors agree.

However, the webcam weakness is a reminder that no tech company is immune to shifting trends. If Logitech can stabilize webcam sales while capitalizing on growth in gaming and tablets, this stock could be a buy. But if webcam declines persist, investors might want to wait for a pullback.

Final Take: Logitech is still a leader in accessories, but its webcam stumble shows that even the best companies face challenges. For now, the positives outweigh the negatives—hold or buy, but don’t close your eyes to the risks.

Investors should monitor webcam trends closely. If the category stabilizes or rebounds, Logitech’s growth story remains intact. If not, this “fly in the ointment” could become a bigger issue. Stay vigilant!