Logitech's Q2 2026: Contradictions Emerge on Tariff Impact, North America Gaming Performance, and Consumer Uncertainty

Date of Call: October 28, 2025

Financials Results

• Revenue: Net sales up 4% year-over-year in constant currency
• Gross Margin: 43.8%, similar to the prior year; pricing and manufacturing diversification offset tariff impact
• Operating Margin: Non-GAAP operating income $230M, up 19% year-over-year; operating income margin expanded >200 basis points year-over-year; OpEx 24.4% of sales, down 240 bps YOY

Guidance:

• Net sales for Q3 expected to grow 1% to 4% year‑over‑year in constant currency
• Non‑GAAP gross margin rate expected between 42% and 43%
• Non‑GAAP operating income expected between $270M and $290M
• Guidance assumes current tariff structure; pricing and manufacturing diversification to offset tariff impacts
• Regional view: APAC double‑digit, EMEA low‑to‑mid single digits, North America ranging from slightly negative to flat/slightly positive

Business Commentary:

* Strong Financial Performance: - Logitech International reported mid-single-digit net sales growth year-over-year for Q2 fiscal year 2026, with a non-GAAP operating income of $230 million, up 19% year-over-year. - The growth was driven by superior products, innovation, and strategic priorities, including disciplined cost management and manufacturing diversification.

• Geographic and Segment Growth:
• Asia Pacific region experienced 19% year-over-year constant currency growth, led by sustained double-digit growth in China.
• EMEA grew 3% in constant currency, driven by strong growth in Video Collaboration and Personal Workspace, while Americas was down 4% due to gaming market decline.

• Gaming segment grew 5% in constant currency, driven by double-digit growth in PC gaming, while Video Collaboration grew 3%, supported by high growth in EMEA.

• Impact of Pricing and Economic Uncertainties:

• The company faced challenges in the North American consumer gaming market, which declined mid-single digits.
• Pricing increases were implemented to offset tariffs, with some impact on entry-priced gaming products, but premium products were largely unaffected.

• Uncertainties in the global economy, including tariffs, export restrictions, and inflation, affected market dynamics.

• Investment and Strategy in China:

• Logitech's China for China strategy resulted in sustained double-digit growth in China, contributing significantly to the Asia Pacific region's performance.
• The introduction of a new gaming keyboard for the Chinese market showed success, with strong demand and healthy margins.

• The strategy focuses on local innovation and marketing efforts, with significant growth in market share, particularly in Personal Workspace Solutions.

• Operational Efficiency and Cost Management:

• Logitech's non-GAAP gross margin rate for Q2 was 43.8%, showing stability year-over-year despite tariff pressures.
• Cost discipline, product cost optimization, and tariff mitigation efforts were key to maintaining profitability.
• The company reduced its share of U.S. products originating from China to 10% by the end of the calendar year, leveraging its diversified manufacturing capabilities.

Sentiment Analysis:

Overall Tone: Positive

• Management: "delivered a strong second quarter" with "net sales up 4% year‑over‑year" and "non‑GAAP operating income of $230 million, up 19% year‑over‑year." Gross margin was 43.8% "similar to the prior year" and pricing plus diversification offset tariffs; company reiterated confidence entering the holiday quarter.

Q&A:

• Question from Asiya Merchant (Citigroup Inc., Research Division): Double‑click on U.S. consumer uncertainty/gaming — was the weakness driven by your price increases, did gaming improve as the quarter progressed, and how should we think about the seasonal guide given better sell‑through vs sell‑in?
  Response: North America gaming declined mid‑single digits but improved late in Q2; price increases mostly impacted entry‑level gaming while premium and B2B were largely unaffected; Q3 guide reflects bookends where NA is either slightly negative or flat-to-slightly-positive.

• Question from Erik Woodring (Morgan Stanley, Research Division): How did consumers respond to higher prices (pre/post pricing behavior) and what elasticity assumptions are you using for the holiday? Also, any update on M&A strategy since Analyst Day?
  Response: Premium and B2B showed little impact from pricing while entry‑level consumer saw most sensitivity; pricing helped offset tariffs; M&A policy unchanged — prioritize organic investment, growing dividend, selective strategic M&A, then buybacks.

• Question from Alek Valero (Loop Capital Markets LLC, Research Division): On Gaming in the Americas when will entry‑level normalize after higher ASPs, and what's the current consumer vs B2B mix and direction?
  Response: Entry‑level gaming trends improved through Q2 but timing to fully normalize is uncertain (Q3 guide covers both faster and slower normalization); Logitech for Business is ~40% of revenue and gradually increasing.

• Question from Samik Chatterjee (JPMorgan Chase & Co, Research Division): What promotional activity are distributors planning for December vs prior years and how should we think about its impact on the gross margin guide? Also, where are OpEx efficiencies coming from?
  Response: Promotions will be surgical and targeted; Q3 gross margin (42%–43%) assumes pricing and product‑cost reductions largely offset holiday promotions and tariffs; OpEx savings came mainly from G&A controls and are being reinvested into R&D and sales & marketing.

• Question from Didier Scemama (BofA Securities, Research Division): How will you think about marketing spend for the holidays given FX tailwinds and lean channels, and can you elaborate on China‑for‑China product/pricing success?
  Response: Will invest selectively where it accelerates growth; marketing effectiveness has improved so spend is more efficient; China‑for‑China innovations (e.g., G316 keyboard at mid/low‑price tiers) are driving share and strong APAC performance.

• Question from Michael Foeth (Vontobel Holding AG): Are channel inventories equally lean across regions and how does that tie to sell‑in vs sell‑through? Also, color on gaming subsegments (simulation, console, PC)?
  Response: Channel weeks‑on‑hand are in target across regions; Americas saw sell‑out outpace sell‑in (positive heading into Q3); gaming strength is concentrated in premium/PC and sim segments (Pro +25%, SIM +10%), while lower end is more muted but improving.

• Question from Martin Jungfleisch (BNP Paribas Exane, Research Division): Is the strength in keyboards and mice driven by a Windows refresh or other factors? And what was the tariff headwind and will it ease as China‑to‑U.S. sourcing shifts?
  Response: Growth in keyboards/mice is driven primarily by premium portfolio (MX, Ergo) with only a mild tailwind from PC refreshes; tariffs were ~150bps headwind offset by ~150bps of price (net fully offset this quarter) and similar dynamics are expected in Q3 assuming tariff structure remains.

Contradiction Point 1

Impact of Tariffs on Gross Margin

It involves differing expectations regarding the impact of tariffs on gross margin, which is a critical financial indicator for investors.

How does Q2 revenue guidance account for pricing impacts and the Americas pause? And what are the tariff impacts expected in Q3? - Samik Chatterjee (JPMorgan Chase & Co)

2026Q2: For the December quarter, with current tariffs, we expect a neutral to negative impact of up to 100 basis points on gross margin. - Johanna W. Faber(CEO)

How does Q2 revenue guidance account for pricing changes and the Americas pause? Can you address Q3 tariff impacts? - Samik Chatterjee (JPMorgan Chase & Co)

2026Q1: For Q2, with current tariffs, we expect a neutral to negative impact of up to 100 basis points on gross margin. - Johanna W. Faber(CEO)

Contradiction Point 2

Gaming Market Performance in North America

It involves differing assessments of the gaming market performance in North America, which is a significant revenue segment for the company.

How is U.S. consumer uncertainty in gaming affecting pricing pressures? Why does the guidance show mid-teens growth when sell-through exceeds sell-in? - Asiya Merchant (Citigroup Inc., Research Division)

2026Q2: In Q2, the gaming market in North America declined mid-single digits. Trends improved as the quarter progressed. - Johanna Faber(CEO)

Can you explain consumer reaction to price changes, particularly the impact on market share and sales volume, and whether it justifies future pricing strategies? - Didier Scemama (BofA Securities)

2026Q1: Gaming demand was up 6% year-over-year. - Johanna W. Faber(CEO)

Contradiction Point 3

Consumer Uncertainty in Gaming

It highlights differing assessments of consumer sentiment and behavior in the gaming market, which is crucial for understanding Logitech's sales performance and future strategies.

What is the impact of price increases on U.S. consumer uncertainty in gaming? - Asiya Merchant (Citigroup Inc., Research Division)

2026Q2: In Q2, the gaming market in North America declined mid-single digits. Trends improved as the quarter progressed. - Johanna Faber(CEO)

Which products are most demand-resilient amid macroeconomic uncertainty? Where should Logitech strategically focus? - Unidentified Analyst (Loop Capital)

2025Q4: Gaming grew double digits in fiscal '25. - Hanneke Faber(CEO)

Contradiction Point 4

Inventory Levels and Channel Dynamics

It involves differing perspectives on channel inventory levels and their impact on sales and operations.

What are your distribution partners' promotional plans for the December quarter and how will they impact gross margin guidance? - Samik Chatterjee(JPMorgan Chase & Co, Research Division)

2026Q2: We do have some normal seasonal inventory buildup in our channel starting now to get ready for the holidays, which we expect to ramp up in the coming weeks. - Matteo Anversa(CFO)

Can you clarify the Q4 outlook for implied sales, gross margins and non-GAAP EBIT? - Jörn Iffert(UBS)

2025Q3: We continue to see strong demand and an opportunity to increase market share in certain categories as we work through channel inventory. - Matteo Anversa(CFO)

Contradiction Point 5

Marketing and Sales Strategy

It involves different approaches to marketing and sales strategies, which could impact revenue growth and market share.

Can you provide details on the simulation, console, and PC gaming subsegments? - Michael Foeth(Vontobel Holding AG)

2026Q2: We do believe things are improving gradually. And we're very focused on our innovation to drive revenue growth. - Johanna Faber(CEO)

How durable are the gaming results with new refreshes and comps? - Ananda Baruah(Loop Capital)

2025Q3: We have a very, very good momentum coming out of China. And we had a very strong Q3 as well. And as I said, we were also happy with the performance of our S&M investment. - Johanna Faber(CEO)