Garmin Ltd.
GRMN · NYSE
Next quarter
Expected to report Feb 17, 2027 — estimated from last year’s reporting date.
Consensus is $2.91 EPS for Dec 2026 across 3 estimates, ranging $2.77 to $3.17.
GRMN Sep 2026
- 15.97%
- $2.38
- $2.76
- —
- $1.99B
Reported results
- $1.99B
- 63.33%
- $611.65M
- 30.80%
- $541.66M
- $2.80
Highlights
- Record quarter: Revenue reached $1.99 billion, up 12% year over year; operating income rose 34% to $612 million and GAAP diluted EPS increased 35% to $2.80.
- EPS beat: Pro forma diluted EPS of $2.76 exceeded the $2.38 consensus estimate by 15.97%, and was up 39% from $1.99 a year ago.
- Margins expanded: Gross margin grew 420 basis points to 63.3% and operating margin increased 500 basis points to 30.8%; favorable mix, lower product costs and $33 million of tariff refunds contributed.
- Outdoor and fitness led: Outdoor revenue rose 20% to $597 million, driven by adventure watches; fitness grew 16% to $694 million on wearable demand. Management said new fēnix products and the screenless CIRQL wearable were drawing strong demand.
- Guidance raised: Garmin now expects 2026 revenue of approximately $8.15 billion and pro forma EPS of $10.80, up from prior guidance of $8.05 billion and $10.00.
- Memory costs loom: Higher memory and other component costs are expected to pressure gross margin, with greater impact in Q4; management expects consolidated gross margin to return to its historical range in 2027.
- Other segments diverged: Marine sales grew 16% to $310 million, aviation rose 5% to $253 million, while Auto OEM fell 20% to $132 million as domain-controller revenue declined.
- Cash and inventory: Quarterly free cash flow was $293 million versus $425 million a year ago, partly due to inventory and supplier prepayments; inventory stood at $2.25 billion and cash and marketable securities at about $4.1 billion.
Analysis
Garmin delivered a record Q3, with revenue of $1.99 billion up 12% year over year and pro forma EPS of $2.76 beating the $2.38 consensus by 15.97%. GAAP diluted EPS was $2.80, versus $2.08 a year ago. Revenue was modestly below Q2’s $2.02 billion, while operating income of $612 million and net income of $542 million were close to the prior quarter’s $616 million and $542 million. The defining feature of the print was strong operating leverage: gross margin expanded 420 basis points to 63.3%, and operating margin widened 500 basis points to 30.8%.
Growth came chiefly from outdoor and fitness, supported by adventure watches and wearables, with marine also advancing. Product costs, segment mix and $33 million in tariff refunds helped margins, but the outlook now has a more visible cost headwind: higher memory prices are expected to weigh more heavily in Q4 and beyond. Garmin raised 2026 guidance to $8.15 billion of revenue and $10.80 of pro forma EPS, while flagging a return to its historical gross-margin range in 2027. Cash generation remained substantial, though quarterly free cash flow fell to $293 million from $425 million as inventory and component prepayments increased.
Margin expansion
Profit grew faster than sales, reflecting higher gross margin and operating leverage. Gross profit rose 20% to $1.26 billion, while operating expenses increased 10% to $646 million. The 63.3% gross margin benefited from favorable segment mix, lower product costs and $33 million of tariff refunds, equivalent to about 160 basis points of gross margin. Management also cited a weaker Taiwan dollar and the contribution of premium new products. Operating margin reached 30.8%, compared with 25.8% a year earlier.
Wearables and watches
- Fitness: Revenue increased 16% to $694 million, led by wearable demand; segment operating income rose 19% to $231 million and operating margin reached 33%. Management expects fitness to be the strongest contributor to full-year company growth.
- Outdoor: Revenue rose 20% to $597 million on adventure-watch demand, with operating income up 37% to $233 million and operating margin at 39%. The fēnix 9 and 9 Pro launched during the quarter; management said initial demand was strong and it was working to fill orders.
- New customers and services: Management described demand for the CIRQL screenless wearable as stronger than expected and said Garmin Connect Plus was growing faster than the underlying segments where it is offered, with renewals and commitments after free trials also strong.
Other segments
- Marine: Revenue increased 16% to $310 million, led by sonar products; operating income rose to $94 million from $49 million. Its 64% gross margin included a notable tariff-refund benefit, though management said margin improved even excluding it. The company described the broader marine market as somewhat soft.
- Aviation: Revenue grew 5% to $253 million, primarily on OEM categories, and operating income increased 8% to $66 million. Garmin cited more than 2,500 aircraft equipped with Autoland and over 1,000 King Air G1000 retrofit flight decks delivered.
- Auto OEM: Revenue declined 20% to $132 million, primarily because of lower domain-controller sales; the segment recorded an $12 million operating loss, narrower than the $17 million loss a year earlier. Garmin expects Q4 revenue to decline at a similar rate and said a Mercedes-Benz program is expected to drive significant growth in 2027.
Memory and inventory
The current margin profile faces a growing component-cost headwind. Garmin said its safety stock of memory bought at lower prices has limited the impact so far, but current replacement supplies cost significantly more and the effect should increase in Q4. The company expects consolidated gross margin to return to its historical range in 2027, while it develops mitigations through vertical integration, scale and selective actions. Inventory reached $2.25 billion at quarter-end, up from $1.77 billion at year-end 2025, as Garmin built stocks of critical components and made supplier prepayments. Management said a new Thailand facility is on track to begin production in Q1 2027, with existing volumes nearing capacity.
Raised outlook and cash
- 2026 outlook: Revenue guidance increased by $100 million to approximately $8.15 billion, and pro forma EPS guidance rose by $0.80 to $10.80. Garmin now expects gross margin of 61.0%, operating margin of 29.0% and a 16.5% tax rate; the revised gross-margin outlook includes only tariff refunds already recorded.
- Cash generation: Quarterly operating cash flow was $394 million and free cash flow was $293 million, down from $486 million and $425 million, respectively, a year earlier. The company attributed the free-cash-flow decline primarily to inventory build, prepayments for strategic components and higher capital spending.
- Capital returns and liquidity: Garmin ended the quarter with approximately $4.1 billion of cash and marketable securities. It paid $202 million in dividends and repurchased $41 million of shares during the quarter, with about $407 million remaining under its $500 million repurchase authorization.
