AI Takeaway
MSI reported Q1 FY2026 revenue growth of 7.4% to $2.71B, but profitability declined sharply with net income falling 14.9% to $366M as higher costs, increased debt from a major acquisition, and margin compression weighed on results.
Revenue
$2.71B
++7.36% YoY
EPS (Basic)
$2.21
-14.34% YoY
Gross Margin
50.2%
-1.24% YoY
Operating Income
$525M
-9.79% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
MSI grew revenue 7.4% year-over-year to $2.71B in Q1 FY2026, up from $2.53B in the prior-year period, indicating continued demand for its products and services despite a challenging margin environment.
Source: Source: 10-Q Income Statement
Gross margin declined 1.2 percentage points to 50.2%, operating margin fell 3.7 percentage points to 19.3%, and net margin compressed to 13.5%, reflecting cost of revenue growing faster (+10.1%) than revenue (+7.4%) and elevated operating expenses.
Source: Source: 10-Q Income Statement & Key Ratios
Total assets surged 32.2% to $19.08B while long-term debt jumped 48.2% to $8.42B, suggesting MSI completed a significant acquisition or capital deployment that substantially leveraged the balance sheet. Cash & equivalents fell 43.4% to $886M.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockLong-term debt increased 48.2% to $8.42B, significantly raising MSI's financial leverage. With stockholders' equity of only $2.54B, the debt load creates meaningful interest expense obligations and reduces financial flexibility. A deterioration in operating cash flow could strain debt servicing capacity.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockReported EPS of $3.37 versus the $3.28 analyst consensus — a +2.8% beat for Q1 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $2.71B | $2.53B | +7.36% |
Cost of Revenue | $1.35B | $1.23B | +10.10% |
Gross Profit | $1.36B | $1.3B | +4.77% |
Operating Income | $525M | $582M | -9.79% |
Net Income | $366M | $430M | -14.88% |
EPS (Basic) | $2.21 | $2.58 | -14.34% |
EPS (Diluted) | $2.18 | $2.53 | -13.83% |
R&D Expense | $252M | $233M | +8.15% |
SG&A Expense | $439M | $436M | +0.69% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $19.08B | $14.43B | +32.20% |
Current Assets | $5.95B | $5.9B | +0.88% |
Current Liabilities | $5.56B | $4.92B | +12.94% |
Stockholders' Equity | $2.54B | $1.64B | +55.03% |
Cash & Equivalents | $886M | $1.56B | -43.35% |
Long-Term Debt | $8.41B | $5.68B | +48.23% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash Flow | $451M | $510M | -11.57% |
Investing Cash Flow | $-183M | $-477M | +61.64% |
Financing Cash Flow | $-525M | $-597M | +12.06% |
Share Buybacks | $118M | $325M | -63.69% |
D&A | $143M | $81M | +76.54% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 50.2% | 51.4% | -1.24% |
Operating Margin | 19.3% | 23.0% | -3.68% |
Net Margin | 13.5% | — | — |
ROE | 14.4% | — | — |
ROA | 1.9% | — | — |
Current Ratio | $1.071 | — | — |
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MSI's Q1 FY2026 results showed revenue growing 7.4% to $2.71B, but profitability declined sharply with net income down 14.9% to $366M and diluted EPS falling to $2.18 from $2.53. The quarter was marked by margin compression, a major increase in long-term debt to $8.42B, and a 76.5% surge in D&A suggesting a significant recent acquisition.
MSI's cost of revenue grew 10.1%, faster than revenue growth of 7.4%, compressing gross margin to 50.2% from 51.4%. Additionally, higher interest expense from a 48.2% increase in long-term debt to $8.42B likely weighed on net income, which fell 14.9% to $366M.
While no acquisition is explicitly named in the available filing text, the financial data strongly suggests a major transaction: total assets surged 32.2% to $19.08B, long-term debt jumped 48.2% to $8.42B, and D&A rose 76.5% to $143M — all consistent with a significant debt-funded acquisition and related intangible amortization.
MSI's financial health shows signs of stress: the current ratio is a thin 1.07x, cash fell 43.4% to $886M, and long-term debt stands at $8.42B versus stockholders' equity of $2.54B — implying leverage of roughly 3.3x. Operating cash flow of $451M provides some coverage, but the elevated debt load and compressed margins warrant close monitoring.
MSI experienced broad margin deterioration in Q1 FY2026: gross margin fell 1.2 percentage points to 50.2%, operating margin dropped 3.7 percentage points to 19.3%, and net margin came in at 13.5%. These declines reflect cost of revenue and operating expenses growing faster than revenue, a trend that could persist if integration costs from recent acquisitions remain elevated.