Motorola Solutions raises outlook as record backlog fuels 2026 growth

Motorola Solutions, Inc. (NYSE:MSI) raised its 2026 revenue, earnings and cash flow outlook after a record order quarter pushed backlog to US$16.6 billion, up 14% from a year earlier. Third-quarter sales rose 12% to US$3.376 billion, while non-GAAP earnings per share increased 16% to US$4.69.

Record orders support higher full-year guidance

The company lifted its full-year revenue forecast to approximately US$13.050 billion, from US$12.975 billion previously, and now expects non-GAAP EPS of US$17.94 to US$17.99, compared with its earlier range of US$17.62 to US$17.72. Operating cash flow expectations also increased to US$3.050 billion.

Both operating segments contributed to the quarter. Products and Systems Integration sales rose 12% to US$2.118 billion, while Software and Services grew 13% to US$1.258 billion. Backlog increased by US$2.1 billion year on year, with Software and Services adding US$1.4 billion and Products and Systems Integration adding US$635 million. The company said record third-quarter orders were spread across its Mission Critical Networks, Video and Command Center technologies.

Non-GAAP improvement masks weaker GAAP measures

The headline earnings picture is more complicated than the adjusted result. GAAP EPS fell 8% to US$3.06, net earnings attributable to Motorola Solutions dropped to US$512 million from US$562 million, and GAAP operating margin contracted to 23.0% from 25.6%. The company attributed the margin pressure primarily to a higher contingent earnout adjustment linked to the strong performance of Silvus.

On the company’s non-GAAP measure, operating earnings rose 19% to US$1.096 billion and margin expanded to 32.5%. That measure excludes items including share-based compensation, intangible asset amortisation and the contingent earnout adjustment. Motorola Solutions also excludes Hytera-related legal gains and expenses; it recognised US$73 million of Hytera litigation-related gains in the first nine months of 2026. Non-GAAP guidance has not been quantitatively reconciled to GAAP because future reconciling items cannot be reasonably predicted.

D-Fend acquisition adds counter-drone capability and debt

Motorola Solutions completed its US$1.3 billion acquisition of D-Fend Solutions, a counter-drone technology provider, during the quarter. The purchase was primarily funded with US$950 million of new long-term senior notes. The company also acquired AI software provider DeepNeuronic for US$29 million and issued a new US$300 million 364-day term loan while repaying an earlier loan associated with the Silvus acquisition.

That expansion has increased the balance-sheet demands behind the growth story. Long-term debt stood at US$9.361 billion at October 3, up from US$8.413 billion at the end of 2025, while interest expense rose to US$107 million for the quarter from US$86 million. Motorola Solutions also authorised an additional US$2 billion for share repurchases, although it bought back only US$94 million of stock during the quarter at an average price of US$457.07.

Cash flow and supply costs remain pressure points

Quarterly operating cash flow fell to US$662 million from US$799 million, while free cash flow declined to US$589 million from US$733 million. The company attributed the reduction primarily to higher tax and interest payments. Inventory rose to US$1.511 billion from US$983 million at the end of 2025 as Motorola Solutions manages higher memory costs, tariff uncertainty and wider supply-chain volatility.

The raised outlook therefore rests on strong demand and backlog conversion, but also on the company’s ability to absorb acquisition-related financing costs and supply pressures. The next test is whether the record order book translates into cash at the pace implied by the new full-year expectations, rather than remaining concentrated in working capital and multi-year commitments.