Garmin Ltd. (NYSE:GRMN) shares fell sharply in premarket trading on Wednesday after the navigation and wearable technology company posted third-quarter revenue that narrowly missed Wall Street estimates, even as it topped earnings forecasts and lifted its full-year profit guidance.
The stock dropped 7.3% following the results, reflecting investor disappointment over the top-line miss.
Garmin reported third-quarter revenue of $1.77 billion, slightly below the consensus estimate of $1.78 billion, though sales were up 12% year over year. Adjusted earnings per share came in at $1.99, just above analyst expectations of $1.98, but unchanged from the same period a year earlier.
Despite the mixed results, the company raised its full-year earnings guidance to $8.15 per share, exceeding the consensus estimate of $8.12. However, its fiscal 2025 revenue forecast of about $7.1 billion came in marginally below expectations of $7.16 billion.
“We achieved another quarter of strong financial results with growth in both consolidated revenue and operating income, and we experienced strong double-digit revenue growth in three business segments reflecting the strength of our unique, diversified business model,” said Cliff Pemble, Garmin’s President and CEO.
The company highlighted its fitness division as a key growth driver, with revenue jumping 30% year over year to $601 million amid robust demand for advanced wearables. Its aviation and marine segments also performed well, posting revenue gains of 18% and 20%, respectively. By contrast, the outdoor business fell 5%, and auto OEM sales slipped 2%.
Margins weakened slightly during the quarter. Operating margin contracted to 25.8% from 27.6% a year ago, while gross margin eased to 59.1% from 60.0%. The company generated $486 million in operating cash flow and $425 million in free cash flow.
Looking ahead, Garmin projects a gross margin of 58.5% and an operating margin of 25.2% for the full year, saying it is well-positioned for the upcoming holiday season with “a strong lineup of innovative products.”