Motorola Solutions pushes margins above 30% as AI and backlogs reshape the balance sheet

Record quarter caps a five‑year EPS run

Motorola Solutions closed 2025 with the kind of numbers that suggest not a late‑cycle peak, but a business still finding new gears. In the fourth quarter, revenue climbed 12%, comfortably ahead of guidance, with both major segments – Products & Systems Integration and Software & Services – delivering double‑digit growth across all three of the company’s core technology pillars: mission‑critical networks (MCN), video, and Command Center software.

The quality of that growth mattered as much as the quantity. Non‑GAAP operating income jumped 19% year on year to $1.1bn, helping push the non‑GAAP operating margin to a record 32.1%, up 170 basis points. GAAP operating earnings reached $944m, or 27.9% of sales, also ahead of the prior year.

Earnings per share followed suit. Non‑GAAP EPS rose 14% to $4.59 in the quarter, while GAAP EPS climbed to $3.86 from $3.56, propelled by higher sales, richer margins and a lower diluted share count, partially offset by higher interest expense and a slightly higher tax rate.

For the full year, management could justifiably claim an “outstanding” performance. Revenue increased 8% to $11.7bn, and non‑GAAP EPS rose 11% to $15.38 – the fifth consecutive year of double‑digit EPS growth. GAAP EPS, flattered by the anniversary of a prior‑year loss related to the Silver Lake notes settlement, surged 38% to $12.75.

Perhaps the most symbolic milestone was at the operating line: non‑GAAP operating margins expanded 130 basis points to 30.3%, the company’s first ever year with margins above the 30% threshold. On a GAAP basis, operating margin also improved, to 25.6% from 24.8%.

The margin story was broadly consistent across the portfolio. In Products & SI, full‑year revenue reached $7.3bn, up 5%, with operating margin advancing to 28.9% from 28.1%. In Software & Services, the growth was faster and even more margin‑rich: revenue grew 13% to $4.4bn, and segment operating margin widened by 170 basis points to 32.5%.

Backlog and orders: from COVID distortion to “quick‑turn” normality

Behind the headline numbers lies a balance‑sheet transformation that may matter more to long‑term investors than any single quarter’s EPS beat. Motorola Solutions ended 2025 with an all‑time record backlog of $15.7bn, up $1bn year over year and up $1.2bn sequentially. Orders grew 26% in the fourth quarter alone, and management highlighted that the year’s strong intake had pushed Software & Services backlog up by $1.4bn year on year and $945m sequentially.

In Products & SI, the picture is more subtle. Segment backlog actually fell $323m year on year, ending at $3.8bn, as the company worked through the artificially elevated backlog built up during the semiconductor shortages of the COVID era. Sequentially, however, backlog still increased by $235m in Q4 on the back of record orders in MCN and video. Management stressed that over half of 2025 revenue came from “quick‑turn” deals – sold and installed within the year – and that they expect a similar mix in 2026 as the business returns to its pre‑pandemic rhythm.

The order book hints at the demand drivers beneath the surface. In Q4 Products & SI, notable wins included a $180m P25 system order and network expansion for the state of Tennessee, a $162m P25 device and SVX body‑worn assistant order from a U.S. federal customer, an $81m TETRA system in North Africa, a $20m Silvus unmanned systems order, and a $20m fixed video deal in Argentina. On the Software & Services side, highlights ranged from a $201m, ten‑year P25 services renewal with Maryland, to an $86m Command Center order for an international customer, and sizable TETRA services deals for London Underground and other European clients.

Geographically, the growth engine in the quarter shifted decisively beyond U.S. borders. North America revenue grew 7% in Q4 to $2.4bn, and also 7% for the full year to $8.4bn. International revenue, by contrast, leapt 26% in Q4 to $1bn and 11% for the full year to $3.3bn, with strong double‑digit growth across all technologies and both segments.

Management pushed back, implicitly, against the bearish thesis that the roll‑off of U.S. federal ARPA funding would sap demand. They argued that what investors are seeing is not a one‑off funding bulge, but a structural prioritization of safety and security by public safety and defense customers, now reflected in both a normalized backlog and three consecutive quarters of double‑digit product order growth – with a fourth quarter of double‑digit orders expected in Q1 and similar momentum anticipated for all of 2026.

Cash, capital and the Silvus pivot toward “new defense”

If earnings and backlog show a business in rude health, the cash flow statement reveals how aggressively Motorola Solutions has been willing to reinvest that health. Operating cash flow hit a record $2.8bn in 2025, up 19% year on year, while free cash flow climbed 21% to a record $2.6bn. It was the third consecutive year of double‑digit growth in cash generation.

The capital allocation ledger is equally striking. In 2025, the company deployed $4.9bn on acquisitions, headlined by the purchase of Silvus Technologies, a specialist in high‑performance, mesh networking radios used in unmanned systems and defense applications. It also returned capital via $1.2bn of share repurchases, including $490m in Q4, and $728m in cash dividends. CapEx remained modest at $265m.

The board kept its dividend drumbeat intact, approving an 11% increase in the annual payout – the fourteenth straight year of double‑digit dividend growth. On the liability side, Motorola issued $2bn of long‑term senior notes and $1.5bn of term loans to fund Silvus, while repaying $322m of senior debt in 2025 and a further $200m of the term loan shortly after year‑end, leaving $1.3bn outstanding.

Silvus is quickly emerging as more than just an accretive bolt‑on. Management said the asset had “a very good Q4”, driven by demand from Ukraine and unmanned systems, and that 2025 Silvus revenue skewed more international than North American, with particularly strong traction in Ukraine, the UK and Germany. For 2026, they raised Silvus revenue expectations to $675m – up $75m from the outlook a quarter earlier.

More strategically, Silvus is being positioned as Motorola’s entry ticket into “new defense” and unmanned systems: everything from drones across multiple size classes to naval and NATO modernization programmes. The company is pouring incremental R&D and go‑to‑market investment into Silvus, integrating procurement and supply chain to shorten lead times and gain scale, but otherwise letting the business run largely standalone. Management underscored its importance as a “litmus test” of the evolving defense technology market in Ukraine and beyond.

While Silvus currently focuses on defense, border security and federal law enforcement, management acknowledged that state and local public‑safety use could represent incremental TAM over time – constrained mainly by spectrum availability today. For now, however, the near‑term growth narrative is firmly anchored in defense and unmanned systems, both in the U.S. and across NATO allies.

Software, AI and the “nerve center” of emergency work

If the balance sheet is being remade by Silvus and backlogs, the income statement is increasingly being coloured by software and artificial intelligence. The Software & Services segment, already accounting for $4.4bn of 2025 revenue, is guided to grow a further 10–11% in 2026. Within that, the Command Center software suite is expected to deliver 15% growth, on top of 15% growth in 2025, with Q1 likely to run even hotter due to implementation timing. Video software is pegged at 10–11% growth, powered by cloud adoption and a hybrid architecture that allows customers to mix on‑premise and cloud via the Unity and Alta platforms.

Underneath those aggregates sits a growing stack of AI‑enabled products that management is beginning to talk about as an integrated ecosystem rather than isolated tools. The company has long played in core public‑safety workflows – 911 call handling, computer‑aided dispatch (CAD), and radio consoles – and is the market leader in CAD, present in almost two‑thirds of public safety answering points (PSAPs) in the U.S. It also dominates LMR networks and devices.

Now, that installed base is being wired together with AI‑driven “Assist Suites” that, in Motorola’s narrative, promise to reclaim “the most valuable resource in public safety: time.” Two such suites were launched recently: one for 911 dispatchers (Dispatcher Assist), and one for field officers and first responders (Responder Assist), both sold on a role‑based subscription model at $99 per user per month.

These packages aggregate capabilities the company has been rolling out over the past 18 months – transcription, translation, summarisation of 911 calls, and “Assist Chat” – and embed them inside core applications rather than as over‑the‑top services. The scale is already non‑trivial: in 2025, Motorola says about 33 million emergency calls benefited from its Assist for 911 tools.

For dispatchers, the AI now not only transcribes and translates calls, but can help automatically create incidents in CAD, triage information and link data across 911, CAD and console workflows. For responders, the Responder Suite spans three broad buckets: the incident response phase (including on‑the‑fly translation, voice‑driven status updates and queries into records and 911 transcripts); administrative tasks such as report writing, where “Narrative Assist” is designed to cut report time from an hour to 15 minutes by pre‑populating from CAD and records; and investigation and compliance functions like video redaction, where the company claims AI can shrink redaction tasks from 35 hours to one hour per case.

Crucially for investors, these are packaged as recurring, software‑only additions on top of existing radio and application contracts. Management emphasised that, unlike some rivals, Motorola is not using long‑term, locked‑in contracts as a primary lever; customers can choose shorter terms, and the $99 price point is pitched as “about half” of competitive offerings while covering a broader set of workflows.

Overlaying this is APEX Next, Motorola’s cloud application platform for first responders, which now counts over 200,000 subscribers and is expected to reach 300,000 by year‑end 2026, paying roughly $300 per user per year for applications. APEX Next applications are embedded in the Command Center growth figures and contribute meaningfully to the acceleration in that line.

The company is also leaning into cybersecurity and managed services as a growth vector within Software & Services. Managed detection and response customers grew 77% year on year, Motorola said, and its cyber platform now processes around a billion security events per day, with 99% handled automatically by AI. That initially grew out of protecting P25 networks, but is now being extended into PSAPs and enterprise networks, from refineries to hospitals.

With the newer D Series infrastructure refresh cycle beginning in P25 networks, many customers are tying their hardware upgrades to longer‑duration software and services contracts, further enhancing recurring revenue and margin visibility.

Devices, video and the federal aperture

On the hardware front, Motorola is trying to redraw the competitive map in body‑worn devices and radios. Its SVX “body‑worn assistant” – a converged device that combines secure voice, video and AI, eliminating the need for a separate body camera – has shipped over 15,000 units since launch. Every field salesperson now carries an SVX, management said, and customer feedback has been “outstanding,” with a “robust funnel” of opportunities and quotes out to hundreds of agencies. The device recently received FedRAMP approval, alongside APEX Next radios and the digital evidence management back‑end, a key hurdle for U.S. federal deployments.

That FedRAMP certification, coupled with Silvus and other defence‑adjacent offerings, is widening Motorola’s view of the federal total addressable market. While state and local public safety have historically been the core, management now sees a “much better” set‑up to pursue federal agencies with an integrated package of radios, SVX devices, cloud software and managed services.

Video, meanwhile, continues to be a steady growth engine at scale, with management guiding to 10–11% growth in 2026 after similar double‑digit performance in 2025. Both the cloud‑native Alta platform and the on‑prem Unity offering grew in Q4, and the overall camera base increased slightly in 2025, with expectations for a stronger deployment year in 2026.

The strategic pitch here is moving from simple surveillance to a blend of security, safety and compliance use cases, aided by generative AI features introduced last year across both platforms. That is particularly relevant in verticals such as healthcare and education, where recent high‑profile incidents and calls for greater camera density are driving deployments, but where analytics – detecting anomalous behaviour, ensuring protocol compliance, accelerating investigations – may ultimately matter more than mere video coverage.

Tariffs, memory and the 2026 glidepath

If there is a cloud to the margin sunshine, it comes from the policy rather than the demand side. Tariffs that began to bite in the second half of 2025 will step up again in 2026, with management planning for an incremental $60m headwind, especially in the first half. Memory costs are also rising, though the company stressed that memory remains a relatively small input – less than $50m of its roughly $6bn cost of goods sold.

To offset these pressures, Motorola is leaning on a familiar toolkit: mix‑shift to higher‑margin devices and software; continued adoption of feature‑rich radios and APEX Next; further growth in Software & Services; vendor diversification and supply chain work; and “surgical” pricing moves across parts of the portfolio. Despite tariffs and memory inflation, management expects gross margins to remain “comparable,” and is guiding to another 100 basis points of operating margin expansion in 2026, with both segments contributing.

The top‑line guidance for 2026 reflects that same mix of confidence and caution. The company now expects about $12.7bn of revenue, up from the $12.6bn “color” provided in November, representing roughly high‑single‑digit growth. Of the $100m uplift versus prior commentary, about $75m comes from higher Silvus expectations and $25m from the core business.

By segment, management is planning for 10–11% growth in Software & Services and 7–8% in Products & SI. By technology, video is pegged at 10–11%, Command Center at a further 15%, and MCN at 7–8%, with MCN growth expected to accelerate in the second half as the year unfolds. Revenue contribution from acquisitions is assumed at similar levels to 2025, and foreign exchange is expected to be a $100m tailwind, unchanged from prior assumptions.

Seasonally, the company is preparing investors for a familiar pattern: a sequentially softer Q1 from Q4, in line with pre‑COVID seasonality, followed by a stronger second half. The Q1 guide calls for 6–7% revenue growth and non‑GAAP EPS of $3.20–$3.25, on a 20.5% tax rate and 168m diluted shares.

Beyond the numbers, management’s tone was notably assured. The CEO closed by highlighting not only record financial performance but what he sees as a structurally strengthening position: a record backlog, a robust orders pipeline, a “strong liquidity profile,” and a balance sheet that provides “significant flexibility” for further M&A and buybacks. In a sector shaped by rising geopolitical risk, heightened concern over domestic safety, and the slow digitisation of emergency response, Motorola Solutions is betting that its evolving ecosystem – from Silvus radios on unmanned drones to AI that quietly drafts police reports – will keep that backlog, and those 30%‑plus margins, intact.