Motorola Solutions' Q3 2025: Contradictions Emerge on Silvus Growth, Revenue Forecasts, Product Backlog, and Tariff Impact

Date of Call: October 30, 2025

Financials Results

• Revenue: $2.99B, up 8% YOY (North America $2.1B; International $888M); FX tailwind $21M; acquisitions added $123M
• EPS: Non-GAAP EPS $4.06, up 9% YOY (GAAP EPS $3.33, vs $3.29 prior year)
• Operating Margin: Non-GAAP operating margin 30.5% of sales, up 80 bps YOY; GAAP operating margin 25.6% of sales, vs 25.5% prior year

Guidance:

• Q4: revenue growth ~11%; non-GAAP EPS $4.30–$4.36; assumes ~24% effective tax rate and ~169M weighted average shares.
• Full year: revenue ~ $11.65B (7.7% growth); updated non-GAAP EPS $15.09–$15.15 (previously $14.88–$14.98); assumes ~169M diluted shares and ~22.5% tax rate.
• Silvus: updated FY expectation ~ $500M and expected to be accretive $0.30–$0.40 to EPS next year; management expects ~20% Silvus growth next year.
• On track for ~ $2.75B operating cash flow this year.
• Management provided color (not formal guidance) for 2026 potential revenue near ~$12.6B and continued margin expansion.

Business Commentary:

• Revenue and Earnings Performance:
• Motorola Solutions reported revenue growth of 8% for Q3 2025, with a notable 11% increase in software and services and a 6% growth in Products in SI.
• The company's operating earnings were $770 million, and non-GAAP operating earnings increased by 11% from the previous year.

• This growth was driven by robust growth in software and services across all technology sectors and a strong start for the newly acquired Silvus.

• Backlog and Orders Growth:

• The company ended Q3 with a record backlog of $14.6 billion, up 3% year-on-year, and reported record Q3 orders with double-digit growth in both segments.

• The increase was attributed to strong demand for multiyear contracts across software and services and favorable foreign exchange rates.

• Silvus Acquisition and Impact:

• Silvus contributed $121 million in revenue to the quarter and is expected to achieve $500 million in revenue for the year, surpassing initial expectations.

• The acquisition is anticipated to add $0.30 to $0.40 to earnings next year, supporting additional investment and international market expansion for Silvus.

• Software and Services Growth:

• The Software and Services segment reported revenue growth of 11%, with notable achievements such as a $57 million P25 services order and a $25 million command center order.
• The growth was driven by strong demand across all technologies, particularly P25 services and mobile video solutions.

Sentiment Analysis:

Overall Tone: Positive

• Management called Q3 "another really strong quarter," reported record Q3 operating cash flow of $799M and record Q3 backlog of $14.6B, raised full‑year EPS guidance, and said Silvus is "off to a strong start" with FY expectations rising to ~$500M — all signaling constructive momentum and confidence.

Q&A:

• Question from Timothy Long (Barclays Bank PLC): Can you dig into sustainability of growth into 2026 and update on SPX and APX NEXT early performance?
  Response: Management said underlying demand is strong, they see potential ~ $12.6B for 2026 (not formal guide), expect continued margin and cash‑flow expansion, SPX orders and APX NEXT adoption are outpacing expectations with APX NEXT devices targeted at ~300k by end‑2026.

• Question from Tomer Zilberman (BofA Securities): How is Silvus tracking versus the 20% growth target and any shutdown‑related risks to core growth?
  Response: Silvus is stronger than expected (FY now ~ $500M), still expected to grow ~20% next year and be ~$0.30–$0.40 accretive to EPS; shutdown is mainly a federal timing risk—state/local demand remains largely unaffected.

• Question from Joseph Cardoso (JPMorgan): How much did Silvus contribute to product orders/backlog and how should we think about product backlog exiting the year?
  Response: Product order growth is largely driven by core products (ex‑Silvus); Silvus added ~ $200M of backlog, and management now expects product ending backlog to be stronger—mid‑to‑high '3s (improving vs prior mid‑3s view).

• Question from Joseph Cardoso (JPMorgan): Given multiple product initiatives, how should we think about product gross‑margin trajectory?
  Response: Management said adoption of feature‑rich APX NEXT is margin‑accretive, tariffs were a headwind ($70–$80M in H2) but product mix favorability and operating leverage have driven margin improvement.

• Question from Andrew Spinola (UBS): Is the ~40% incremental margin a sustainable run‑rate and is there a structural shift to higher margins?
  Response: Management believes margin expansion can continue driven by higher software/services mix, APX NEXT adoption, product portfolio improvements, AI efficiencies and disciplined expense management—opportunity remains but tariffs will modulate near‑term timing.

• Question from Andrew Spinola (UBS): Did the infrastructure upgrade create pent‑up demand and will we see multiyear deployment activity?
  Response: Yes—D‑Series infrastructure is driving large multiyear upgrade orders (Colorado, Tennessee, Michigan); customers increasingly bundle infrastructure with managed services, implying multi‑year deployment and recurring revenue upside.

• Question from George Notter (Wolfe Research): Any data on SVX traction beyond early customer wins—are customers enabling AI assist/DEMS/functionality?
  Response: SVX and Assist show meaningful early adoption: >1,000 customers using Assist for DEMS with >80% reductions in sharing time, assisted narrative cutting report revisions >50%, and real‑time translation already used in field incidents.

• Question from Adam Tindle (Raymond James): Q3 EPS upside was driven below the line—what drove operating performance and why confident margins improve next year?
  Response: Management pointed to operating leverage from core growth, Silvus contribution, and tax benefits; coupled with product/service mix (notably cloud video and APX NEXT), tariff mitigation and expense discipline, they expect continued operating margin expansion.

• Question from Adam Tindle (Raymond James): Early learnings from Silvus vs prior deals like Avigilon?
  Response: Silvus has outperformed early expectations, is highly complementary (international/defense focus), technical leadership and cultural fit validated, and management plans to invest in GTM and R&D—expecting $0.30–$0.40 EPS accretion next year.

• Question from Keith Housum (Northcoast Research): What's Silvus's international vs domestic and military vs state/local mix and current state/local use?
  Response: Silvus is primarily international and defense‑oriented today; state/local adoption is limited by spectrum constraints, though Silvus is usable for domestic special events under FCC exemptions.

• Question from Keith Housum (Northcoast Research): What drove the 16% command‑center growth and where is traction strongest?
  Response: Command center growth was driven by APX NEXT applications, strength in control room/911 international, and cloud/subscription adoption, supporting the company's software and services expansion.

• Question from James Fish (Piper Sandler): With SVX in market a quarter, any competitor pricing pressure observed?
  Response: Management sees early wins (70 agencies), believes SVX's TCO and single‑device advantages plus mission‑critical audio and AI differentiation outweigh a race to price, positioning SVX competitively on capability rather than on discounting.

• Question from Jyhhaw Liu (Evercore ISI): Will Silvus develop S&S revenue long‑term and does 20% growth embed S&S; is APX NEXT adoption accelerating?
  Response: Silvus is currently product/SI heavy but has clear potential to add software/services over time; the 20% outlook is revenue growth with potential future S&S uplift; APX NEXT is accelerating but still early—300k devices target vs ~2M total first responders.

• Question from Meta Marshall (Morgan Stanley): Any OBBA/tax‑rate impact and how are you mitigating tariffs—via pricing or manufacturing changes?
  Response: Tax‑rate impacts are immaterial; OBBA viewed as favorable to customers; tariff mitigation includes inventory acceleration, dual sourcing, USMCA‑compliant manufacturing and supply‑chain load balancing rather than only pricing.

• Question from Benjamin Bollin (Cleveland Research): How does the Silvus sales motion compare to other technologies and how will it feed backlog over time?
  Response: Silvus sales combine long‑cycle program‑of‑record efforts, rapid DoD trialing and broad unmanned platform integrations; Motorola is expanding direct sales coverage internationally and Silvus contributed ~ $200M of backlog at close.

• Question from Louie Dipalma (William Blair): How is Silvus positioned for major Army programs (NGC2, Soldier Borne Mission Command)?
  Response: Silvus is engaged in the architectures for next‑gen command/control programs and soldier‑borne systems (working with multiple integrators); involvement is ongoing—some programs are early stage but Silvus is positioned as a key component.

Contradiction Point 1

Silvus Growth and Contribution

It involves differing expectations and statements about the growth and financial contribution of Silvus, which is a significant acquisition for the company.

Is Silvus meeting the 20% growth target, and are there government shutdown risks in Q4 and 2026? - Tomer Zilberman(BofA Securities)

2025Q3: Silvus has exceeded expectations, now on track for $500 million in 2025 and potential EPS contribution of $0.30 to $0.40 next year. - Jason Winkler(CFO)

Where are you most excited about opportunities domestically and internationally, and how do these translate into current orders? - Joseph Lima Cardoso(JPMorgan)

2025Q2: Silvus is expected to grow 20% in 2026 and contribute financially in 2026. - Gregory Q. Brown(CEO)

Contradiction Point 2

Silvus Revenue and Contribution Expectations

It involves differing expectations for Silvus' revenue and contribution to earnings per share, which are critical for investor expectations.

How is Silvus performing compared to the 20% growth expectation, and are there government shutdown risks in Q4 and 2026? - Tomer Zilberman (BofA Securities, Research Division)

2025Q3: Silvus has exceeded expectations, now on track for $500 million in 2025 and potential EPS contribution of $0.30 to $0.40 next year. - Jason Winkler(CFO)

What has changed in the full-year guidance for Silvus since the last update? - Brandon Nispel (RBC Capital Markets)

2025Q1: Silvus revenue is now expected to be in the range of $450 million to $500 million due to increased demand from customers in the US and international markets. - Jason Winkler(CFO)

Contradiction Point 3

Product Backlog and Order Growth

It affects investor expectations regarding the sustainability of order growth and revenue, which are crucial for the company's financial outlook.

What is Silvus's contribution to the backlog and what is the product backlog at year-end? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: Mid- to high-3s expected for product backlog by year-end due to strong orders. - Gregory Brown(CEO)

How should we view the product backlog at year-end and 2023 backlog growth versus 2022? - Andrew Spinola (UBS Investment Bank, Research Division)

2025Q1: We expect that backlog growth will be a bit more moderate, driven by the strong order flow in 4Q but is likely to hold down by the level of backlog growth we've experienced in the first quarter. - Jason Winkler(CFO)

Contradiction Point 4

Silvus Revenue and Growth Expectations

It directly impacts expectations regarding the revenue and growth contribution of Silvus, potentially influencing company revenue and investor expectations.

Is Silvus meeting the 20% growth expectation, and are there government shutdown risks for Q4 and 2026? - Tomer Zilberman (BofA Securities, Research Division)

2025Q3: Silvus has exceeded expectations, now on track for $500 million in 2025 and potential EPS contribution of $0.30 to $0.40 next year. - Jason Winkler(CFO)

Are you seeing any impact on customer behavior or deployment timing from recent Trump administration policies, federal spending shifts, or DOJ actions? - Alyssa Shreves (Barclays)

2024Q4: We expect Silvus to increase from $300 million in revenue in 2024 to over $400 million in 2025, achieving a growth rate of more than 33%. - Jason Winkler(CFO)

Contradiction Point 5

Tariff Management and Impact on Margins

It involves changes in financial forecasts, specifically regarding tariff management and their impact on margins, which are critical indicators for investors.

How sustainable is 40% incremental margin growth, and what impact do tariffs have? - Andrew Spinola (UBS Investment Bank, Research Division)

2025Q3: Tariffs are being managed through inventory and supply chain optimization, with no significant impact on margins. - Gregory Brown(CEO)

Can you quantify the headwind from tariffs and identify the specific regions affected? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2024Q4: Tariffs in our guide reflect current rates. Outlook assumes flexibility with footprint across Mexico, Malaysia, and Canada, with potential adjustments as needed. - Jason Winkler(CFO)