VALUATION HIGHLIGHTS

1. Products constitute 64% of the Trefis price estimate for Motorola Solutions's stock.
2. Services constitute 36% of the Trefis price estimate for Motorola Solutions's stock.

WHAT HAS CHANGED?

Q1 2026 Snapshot

Motorola Solutions reported solid first-quarter 2026 financial results, driven by a record ending backlog of $15.7 billion, up 11% year-over-year. Total revenue reached $2.71 billion, climbing 7% y-o-y and slightly beating the $2.70 billion Wall Street consensus estimate, fueled by an 18% surge in Software and Services. Non-GAAP earnings per share landed at $3.37, outpacing analyst projections of $3.24 and marking a 6% increase from the adjusted EPS of $3.18 reported in the same quarter last year. However, GAAP earnings per share declined from $2.53 to $2.18 due to a $75 million non-cash charge tied to the contingent Silvus earn-out calculation.

Outlook

For the full fiscal year 2026, the company increased its total revenue expectation to approximately $12.8 billion (up from its prior forecast of $12.7 billion). It boosted its non-GAAP earnings per share (EPS) outlook to between $16.87 and $16.99 (up from the previous range of $16.70 to $16.85). This upward revision is heavily supported by strong adoption of cloud-native Command Center solutions, advanced video security analytics, and an upgraded full-year outlook for its Silvus business to $750 million.

To achieve these targets, management expects to generate roughly $3 billion in full-year operating cash flow and expand non-GAAP operating margins via strong operational leverage, which will help comfortably absorb about $60 million in anticipated first-half tariff headwinds and rising memory component costs.

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 51.7%% in 2022 and rose to 59.0% in 2025. 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 73% in 2025. This was primarily on account of higher software sales, lower direct material costs, despite higher tariffs. and the addition of VaaS International Holdings' revenues to the services division. Going forward, we expect this percentage to increase to about 80% 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 88% 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:

1. Aiding police departments to communicate with their patrol cars and help respond to crime incidents efficiently.
2. 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:

1. Baggage tracking at airports and transit authorities.
2. Retailers to drive workforce productivity with wireless WLAN.
3. 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 about 59% compared to 42% levels for the services division.

KEY TRENDS

1. 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.

2. 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.

3. Acquisitions will help to achieve continuous growth
   • In 2025, Motorola Solutions completed four strategic acquisitions to expand its software, video, and mission critical network capabilities. It acquired RapidDeploy in February for about $240 million to add cloud native 911 solutions, and Theatro in March for roughly $174 million to enhance AI and voice powered workflow tools for frontline workers. In August, it closed the $4.4 billion acquisition of Silvus Technologies, adding advanced software defined high speed MANET networking technology. Most recently, it acquired Blue Eye in November for approximately $79 million, strengthening its AI powered remote video monitoring services. These deals accelerate the company’s shift toward higher margin, recurring software and services revenue.

     Motorola is leveraging its strong product innovation to remain a step ahead of its competitors, helping it secure critical contracts. This should help the company to achieve steady growth over the coming years.