VALUATION HIGHLIGHTS
- Products constitute 67% of the Trefis price estimate for Motorola Solutions's stock.
- Services constitute 33% of the Trefis price estimate for Motorola Solutions's stock.
WHAT HAS CHANGED?
- Q3 2025 Snapshot
Motorola Solutions delivered a solid Q3 2025, with revenue up about 8% to roughly $3.01 billion and non-GAAP EPS rising to $4.06, ahead of expectations. Margins expanded as software and services — the higher-margin segment — grew double digits, helping lift the overall non-GAAP operating margin to about 30.5%. Cash generation was strong, with free cash flow of roughly $733 million, and backlog inched up to about $14.6 billion, underscoring resilient demand across public-safety and enterprise customers.
Note: Motorola's FY'24 ended on December 31, 2024
- Outlook
Motorola Solutions issued an upbeat outlook following its Q3 2025 beat, guiding Q4 revenue to grow roughly 11% and projecting non-GAAP EPS of $4.30–$4.36, reflecting continued strength in its mission-critical communications and software businesses. For the full year, management maintained its revenue forecast of about $11.65 billion (roughly 7.7% growth) while raising full-year non-GAAP EPS guidance to $15.09–$15.15, boosted by robust backlog, solid free-cash-flow momentum, and the expected contribution from its Silvus Technologies acquisition.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Motorola Solutions' value that present opportunities for upside or downside to the current Trefis price estimate for the company:
- Motorola Solutions Products' Gross Profit Margins: Motorola Solutions Products' gross margins stood at 54% in 2020 and rose to about 59% in 2024. We expect this metric to increase slightly over the long term. However, if Motorola Solutions' margins increase further to reach historical levels of around 65% by the end of our forecast period, there could be an upside of about 5% to our Trefis price estimate for Motorola Solutions's stock.
- Services Revenue as % of Product Revenue: Motorola Solutions Services Revenue as % of Product Revenue stood at 68% in 2024. This was primarily on account of higher software sales and the addition of VaaS International Holdings' revenues to the services division. Going forward, we expect this percentage to increase to over 75% as the company focuses more on software and services. If Motorola Solutions' Services Revenue as % of Product Revenue increases more than our expectations to reach levels of around 87% by the end of our forecast period, there could be an upside of about 5% to our Trefis price estimate for Motorola Solutions's stock.
BUSINESS SUMMARY
Motorola Solutions is a mission-critical telecommunications equipment provider and sells radios, accessories, base stations, and other equipment to government agencies, including law enforcement, emergency services agencies, and commercial clients. It also provides comprehensive services for government, public safety, and commercial communication networks.
Government Security devices are the devices used for:
- Aiding police departments to communicate with their patrol cars and help respond to crime incidents efficiently.
- Tools for electric power distribution, fire station alerting, irrigation control, and video instruments for traffic control purposes.
Commercial Security devices are the devices used for:
- Baggage tracking at airports and transit authorities.
- Retailers to drive workforce productivity with wireless WLAN.
- Wireless connectivity at universities.
SOURCES OF VALUE
We believe the Products segment is the most valuable segment for the following reasons:
Higher revenues from Products
Motorola's Products division, which primarily sells Land Mobile Radio products and security cameras, is the biggest source of Motorola's valuation, as it accounts for roughly 60% of total revenues.
Higher margins
Margins from the Products division are also higher, standing at over 58% compared to 40% levels for the services division.
KEY TRENDS
- Widespread LTE shift
- The adoption of LTE for public safety use and the broader trend of an analog-to-digital shift in the U.S. and internationally are likely to be the key drivers of Motorola's value.
- Motorola is also likely to benefit from the stickiness of its government customers as well as its strong market position. The large installed base of security devices is also expected to grab a big chunk of that market going forward.
- Continued government spending on critical security systems
- The Government is increasingly migrating to more technologically advanced systems with real-time data storage while replacing manual activities. This will require similar upgrades to its systems. In such a scenario, Motorola's services department is going to be a major beneficiary.
- Due to increased security deployed by the government at the airport to deter illegal immigration, the government will need technical support. Motorola's Biometrics service meets that need.
- Acquisitions will help to achieve continuous growth
