Garmin Ltd. GRMN reported pro forma earnings of $2.76 per share for the third quarter of 2026, beating the Zacks Consensus Estimate of $2.38 by 15.97%. The bottom line increased 39% year over year from $1.99 reported in the year-ago quarter.
Net sales rose 12% to $1.99 billion and came in line with the Zacks Consensus Estimate. Fitness and Outdoor together accounted for 65% of sales, supported by demand for wearables and adventure watches. Gross margin expanded 420 basis points to 63.3%.
GRMN's Fitness Revenues Rise on Wearable Demand
Fitness revenues advanced 16% year over year to $694.3 million. The segment benefited from continued demand for wearables, with operating income increasing 19% to $230.6 million. Gross and operating margins were 63% and 33%, respectively.
During the quarter, Garmin launched the CIRQA Smart Band, a screenless wearable offering health and fitness insights. The company also recently introduced new Edge cycling computers, including the Edge 1060 with hands-free voice controls and the Edge Explore 3 series.
Garmin Ltd. Price, Consensus and EPS Surprise
Garmin Ltd. price-consensus-eps-surprise-chart | Garmin Ltd. Quote
Garmin's Outdoor Sales Surge on Adventure Watches
Outdoor revenues jumped 20% to $597.3 million, primarily driven by demand for adventure watches. Operating income climbed 37% to $233 million, while gross and operating margins reached 68% and 39%, respectively.
The company launched the f??nix 9 and f??nix 9 Pro adventure watch series during the quarter. It also introduced Garmin Drive GPS navigators featuring high-resolution ultrawide displays. The launches expanded Garmin's flagship adventure watch and navigation offerings.
GRMN Sees Growth Across Aviation and Marine
Aviation revenues increased 5% to $252.7 million, led by original equipment manufacturer product categories. Operating income rose 8% to $65.8 million. The segment recorded gross and operating margins of 78% and 26%, respectively.
Garmin unveiled the G2000 PRIME flight deck for high-performance piston and electric aircraft and announced certification of an all-glass retrofit cockpit for the original Cessna CitationJet.
Marine revenues grew 16% to $309.9 million, driven by broad-based demand led by sonar products. Marine operating income surged 90% to $94 million, while gross and operating margins were 64% and 30%, respectively. The company launched LiveScope 2 and received six Product of Excellence awards from the National Marine Electronics Association.
Garmin's Auto OEM Revenues Contract
Auto OEM revenues declined 20% year over year to $131.9 million, primarily due to domain controllers. The segment recorded a gross margin of 16% and an operating loss of $11.9 million compared with a loss of $16.7 million a year earlier.
Lower operating expenses helped narrow the operating loss despite the decline in sales. Garmin continues to work toward the launch of its Mercedes-Benz domain controller program.
Garmin's Operating Profitability Improves
Gross profit increased 20% year over year to $1.26 billion, while gross margin expanded 420 basis points to 63.3%. Operating income rose 34% to $611.6 million, with operating margin expanding 500 basis points to 30.8%. Favorable segment mix, lower product costs and approximately $33 million in refunds of previously paid tariffs supported profitability. GAAP earnings jumped 35% to $2.80 per share.
Operating expenses increased 10% to $646.1 million. Research and development expenses rose 9% to $312.9 million, mainly due to personnel costs. Selling, general and administrative expenses climbed 10% to $333.2 million, reflecting higher personnel-related and advertising expenses.
Garmin Returns Cash to Shareholders
Garmin generated $393.9 million in operating cash flow and $293.3 million in free cash flow during the quarter compared with $485.6 million and $425.1 million, respectively, a year earlier. Capital expenditures totaled $100.6 million. In the first three quarters of 2026, it generated operating and free cash flows of $1.33 billion and $1.04 billion, respectively. It incurred capital expenditure of $295 million during the first nine months of 2026.
The company paid $202 million in dividends and repurchased $41 million of shares. In the first three quarters of 2026, Garmin paid $578.5 million in dividends and bought shares worth $123.2 million. Approximately $407 million remained under its share repurchase authorization at the end of the third quarter. It ended the quarter with approximately $4.1 billion in cash and marketable securities and $2.25 billion in inventory.
Garmin Raises 2026 Outlook
Garmin now expects 2026 revenues of approximately $8.15 billion, up from its prior projection of $8.05 billion. Pro forma earnings are forecast at $10.80 per share compared with the previous outlook of $10.
The company raised its gross margin forecast to 61% from 59.7% and its operating margin estimate to 29% from 27%. The projected pro forma tax rate remains unchanged at 16.5%.
Management raised its 2026 guidance following record operating results and continued momentum heading into the holiday selling season.
GRMN’s Zacks Rank and Stocks to Consider
Garmin currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI, Applied Materials AMAT and Cisco Systems CSCO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Analog Devices have rallied 54.4% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $13.00 per share, up by a penny over the past seven days, indicating an increase of 66.9% year over year.
Shares of Applied Materials have jumped 54.5% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.79 per share, unchanged over the past 30 days, calling for a rise of 35.8% year over year.
Cisco Systems shares have surged 45.3% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, implying an increase of 18% year over year.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This innovative software-as-a-service firm upped its user base +22% year over year. That rate is increasing and margins are expanding as AI efficiencies take effect. Of course, all our elite picks aren't winners, but this one could far surpass earlier Zacks' Stocks Set to Double like D-Wave Quantum, which shot up +680.1%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Garmin Ltd. (GRMN): Free Stock Analysis Report
Analog Devices, Inc. (ADI): Free Stock Analysis Report
Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).