Garmin (GRMN) Q3 2026 earnings: outdoor revenue up 20%, memory costs hit cash

Garmin (GRMN) Q3 2026 earnings, released on October 28, 2026 in an 8-K earnings release for the quarter ended September 26, beat the company's earlier outlook on revenue, margins and full-year guidance, while its cash flow guidance was cut [1]. Three questions framed Garmin coming into the quarter: whether outdoor adventure watches would return to growth after new launches, whether fitness wearables could keep growing fast on a larger base, and how far rising memory prices would pull second-half gross margin down. Outdoor revenue swung from a first-half decline to 20% growth and became the largest source of added profit; fitness revenue grew 16%, slower again, but with a higher gross margin; and memory costs did not depress third-quarter gross margin, showing up first in inventory and cash flow instead [1]. Taken together, growth and profit conversion came in better than previously judged, cash generation fell short of plan, and the memory hit to gross margin has been pushed into the fourth quarter and 2027.

Garmin designs, makes and sells devices and services for five markets: fitness, outdoor, aviation, marine and auto [2]. Consumer products reach individual buyers through retailers, e-commerce and the company's own website, while aviation and auto products are sold to aircraft makers and carmakers. Garmin manufactures most of its own products, and its profit comes mainly from wearables, adventure watches and avionics.

Outdoor revenue returns to growth, and fēnix 9 adds the most profit

The outdoor segment's third-quarter revenue was $597 million, up 20% year over year [1]. Outdoor revenue had fallen 5% in the first quarter and 2% in the second, and at that time the company expected a stronger second half as new products launched [4]. The 10-Q attributes the quarter's growth to adventure watches, and management named the fēnix 9 series, launched in the third quarter, as the main driver [5][6].

Outdoor profit improved faster than revenue. Segment gross margin rose from 66% to 68%, which the 10-Q attributes to lower product costs; operating income was $233 million, up 37%, and operating margin rose from 34% to 39% [5]. The roughly $63 million increase in outdoor operating income accounted for about 40% of the company's total operating income increase [1].

Whether this growth lasts is not yet proven. The CEO said early fēnix 9 buyers were mainly existing users upgrading, and the company is still working through a backlog of orders [6]. Launch-quarter revenue includes initial channel fill, which the filings do not separate from sales to end users. The company expects growth momentum to continue in the fourth quarter and full-year outdoor growth to exceed 2025's rate [6].

Gross margin beats the outlook while memory costs move to inventory and cash

Third-quarter consolidated gross margin was 63.3%, up 420 basis points from a year earlier [1]. About $33 million of tariff refunds contributed 160 basis points; excluding them, gross margin was about 61.7%. The company also credited favorable segment mix, lower product costs from a weaker Taiwan dollar, and premium new products [5][6]. Operating income was $612 million, up 34%, for an operating margin of 30.8% [1].

Garmin raised its full-year guidance on these results. The July guidance called for revenue of about $8.05 billion, a 59.7% gross margin and a 27.0% operating margin, which implied a second-half gross margin of about 58.5% [3]. The new guidance calls for revenue of about $8.15 billion, a 61.0% gross margin, a 29.0% operating margin and pro forma EPS of $10.80 [1]. On the new guidance, the implied second-half gross margin is about 61.0%, with the fourth quarter at about 59.0%.

The margin improvement has a clear time limit. Management said results benefited from a safety stock of memory bought at lower prices, that new supplies are being bought at significantly higher market prices, and that the third quarter saw only a small impact, with more to come in the fourth quarter [6]. The company expects consolidated gross margin to return to a historical range in 2027 but gave no figure [6].

The cost pressure has moved first to the balance sheet and cash flow. Inventory was $2.25 billion at quarter end, up from $1.77 billion at the start of the year, and inventory purchase obligations were $2.01 billion [5]. Third-quarter free cash flow was $293 million, compared with $425 million a year earlier [1]. Garmin lowered its full-year free cash flow outlook from about $1.4 billion to about $1.1 billion, citing higher inventory and memory prepayments [4][6], which implies fourth-quarter free cash flow of only about $60 million.

Conclusion

The quarter strengthens the case for Garmin's growth and profit conversion: outdoor is growing again, fitness is holding mid-teens growth, and growth is more balanced than in the first half. The fitness slowdown still needs fourth-quarter confirmation, because some demand was deferred by a backlog for the CIRQA smart band and by channel destocking, and revenue from acquired businesses consolidated into the segment was not disclosed [6]. The high third-quarter gross margin relied on low-cost memory inventory and tariff refunds, neither of which will repeat, and profit growth did not convert into cash at the same pace. The next tests are whether outdoor and fitness keep growing in the fourth quarter, whether gross margin holds near 59%, what level the 2027 gross margin guidance sets, and when the cash tied up in inventory comes back.

Sources

[1] GRMN 8-K filed 2026-10-28 Exhibit 99.1 (3Q26 press release), 2026-10-28, Form 8-K Exhibit 99.1 earnings release, https://www.sec.gov/Archives/edgar/data/1121788/000119312526435066/grmn-ex99_1.htm [2] GRMN 10-K filed 2026-02-18 · company overview and five markets, 2026-02-18, Form 10-K annual report, https://www.sec.gov/Archives/edgar/data/1121788/000119312526056028/grmn-20251227.htm [3] GRMN 8-K filed 2026-07-29 · fiscal 2026 guidance, 2026-07-29, Form 8-K Exhibit 99.1 earnings release, https://www.sec.gov/Archives/edgar/data/1121788/000119312526322113/grmn-ex99_1.htm [4] GRMN Q2 2026 earnings call 2026-07-29 · guidance, 2026-07-29, second-quarter earnings call summary, https://gateway.drillr.ai/mcp/private [5] GRMN 10-Q filed 2026-10-28 (3Q26, quarter ended 2026-09-26), 2026-10-28, Form 10-Q quarterly report, https://www.sec.gov/Archives/edgar/data/1121788/000119312526435070/grmn-20260926.htm [6] GRMN Q3 2026 earnings call 2026-10-28 · transcript (Drillr earning_call_summary.content), 2026-10-28, third-quarter earnings call transcript, drillr:earning_call_summary/GRMN/2026-10-28