MSI: Recurring Revenue Mix Will Drive Upside Despite Recent Price Target Trims

Analysts have trimmed their price target on Motorola Solutions by approximately $5 to about $494 per share. The revision reflects slightly higher discount rate assumptions and modest pressure on long term margins, while analysts remain encouraged by resilient revenue growth, recurring revenue mix, and potential upside from deferred government deals in 2026.

Analyst Commentary

Bullish analysts highlight that the recent price target trims still sit near record share levels, underscoring confidence in Motorola Solutions' long term growth algorithm and earnings durability. They point to a strong Q3 performance and maintained 2025 sales guidance as signs that execution remains solid despite near term macro and government funding noise.

At the same time, more cautious voices argue that the stock is already pricing in much of the medium term upside, with valuation hovering near peak levels and sentiment elevated after a strong run. These analysts see a more balanced risk reward profile, particularly if bookings growth moderates in the first half of the year.

Bullish Takeaways

Q3 outperformance and reiterated 2025 sales guidance reinforce the view that core demand, especially from public safety and government customers, remains resilient and supportive of premium valuation multiples.
Growing exposure to recurring revenue, including software and services, is seen as a key driver of higher visibility, margin stability, and potential multiple expansion over time.
Strategic moves such as the Silvus acquisition and leadership in LMR and adjacent communications markets are viewed as enhancing competitive positioning and long term growth optionality.
Deal slippage tied to government shutdown dynamics is framed as timing related, with bullish analysts seeing potential upside to 2026 revenue and earnings as these contracts ultimately convert.

Bearish Takeaways

Valuation near historical peaks leaves limited room for multiple expansion, making future returns more dependent on flawless execution and sustained mid to high single digit revenue growth.
Signs of a bookings slowdown in the first half raise concerns that growth could decelerate from recent levels, which could pressure both top line momentum and investor sentiment.
Elevated expectations around recurring revenue and margin resilience create downside risk if government budgets or project timing prove less favorable than modeled.
Cautious analysts prefer to wait for a better entry point, arguing that current pricing already reflects a robust growth and margin trajectory with little buffer for macro or execution missteps.

What's in the News

Motorola Solutions and Google integrated Android Emergency Live Video into Motorola Solutions' 911 command center software, enabling Android callers to livestream video to 911 call handlers within seconds for faster, more informed emergency response (Key Developments).
The board of directors approved an 11% increase in the regular quarterly dividend to $1.21 per share, with the next payment scheduled for January 15, 2026 to shareholders of record as of December 15, 2025 (Key Developments).
The company reaffirmed its full year 2025 revenue guidance of approximately $11.65 billion, representing 7.7% growth, and projected about 11% revenue growth for the fourth quarter of 2025 versus the prior year (Key Developments).
Motorola Solutions expanded its public safety AI assistant, Assist, with new capabilities such as Assisted Narrative for AI-supported report writing and Assist Chat for policy search and intelligence in the field, integrated into CommandCentral platforms and SVX devices (Key Developments).
The company advanced Drone as First Responder capabilities by enabling drones to auto-deploy when an officer triggers an emergency on an APX NEXT radio, while integrating BRINC and SkySafe technologies to provide aerial intelligence and comprehensive drone detection in CommandCentral Aware (Key Developments).

Valuation Changes

The fair value estimate has edged down slightly from about $498 to roughly $494 per share, reflecting modestly more conservative long term assumptions.
The discount rate has ticked up marginally from approximately 8.44% to about 8.44%, increasing the hurdle rate applied to future cash flows.
Revenue growth has risen slightly from around 7.60% to roughly 7.63%, indicating a modestly stronger outlook for top line expansion.
The net profit margin has slipped slightly from about 19.80% to roughly 19.73%, incorporating a minor expectation of long term margin pressure.
The future P/E multiple has eased slightly from roughly 37.6x to about 37.3x, implying a marginally lower valuation applied to forward earnings.

Motorola is benefiting from rising demand for advanced public safety technology and a shift toward high-margin, recurring software and services.
Expansion into unmanned systems and upgrades in core infrastructure are driving a robust, multi-year growth outlook with strong visibility.
Rising competition, shifting technology trends, and dependence on government contracts create revenue uncertainty and may disrupt Motorola Solutions' transition to higher-margin software and services.

Catalysts

About Motorola Solutions

Provides public safety and enterprise security solutions in the United States, the United Kingdom, Canada, and internationally.What are the underlying business or industry changes driving this perspective?

The accelerating focus on public safety and security-fueled by heightened geopolitical instability, border security needs, and new government funding programs like the "One Big Beautiful Bill"-is driving strong, sustained customer demand for advanced, integrated communication solutions. This expanding long-term tailwind is visible in Motorola's record Q2 orders, growing backlog, and consistent multi-year contract wins, supporting above-trend revenue growth and durability.
The rapid adoption of integrated smart technologies-including AI-enhanced video security, spectrum monitoring, and advanced mesh networking through offerings like SVX and Silvus Mobile Ad Hoc Networks-is positioning Motorola to capitalize on the proliferation of smart cities and next-gen public safety applications. This is enabling high double-digit growth in software and services and supports higher-margin, recurring revenue streams.
The transition toward a greater mix of software and managed/recurring services, especially in command center and video solutions, continues to drive operating leverage and net margin expansion. This shift is further supported by strong attachment rates on new hardware (e.g., APX NEXT and SVX) and growing international SaaS/cloud deployments, boosting long-term earnings growth.
Expansion in the rapidly growing unmanned systems and drone communications markets, bolstered by the Silvus acquisition and new international sales strategies, is expected to open new revenue streams and enhance Motorola's addressable market. Management expects the unmanned market TAM to potentially double over the next four years while Silvus is forecast to contribute 20%+ growth and be EPS accretive next year.
Structural multi-year product refresh cycles-such as major upgrades to LMR infrastructure (D-Series), device fleet renewal, and new regulatory-driven mandates (e.g., NG911, broadband/LTE for public safety)-are sustaining consistent investment from global public sector customers. This translates into a robust, multi-year backlog and high visibility into future cash flow and earnings.
Each of these catalysts is poised to support above-consensus revenue, margin, or earnings growth, indicating the stock could be undervalued relative to the company's improving long-term fundamentals.

Motorola Solutions Earnings and Revenue Growth

Motorola Solutions Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Motorola Solutions's revenue will grow by 7.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 19.1% today to 20.2% in 3 years time.
Analysts expect earnings to reach $2.8 billion (and earnings per share of $17.2) by about September 2028, up from $2.1 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 38.0x on those 2028 earnings, up from 37.6x today. This future PE is greater than the current PE for the US Communications industry at 27.2x.
Analysts expect the number of shares outstanding to decline by 0.31% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.37%, as per the Simply Wall St company report.

Motorola Solutions Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Motorola Solutions' core LMR/MCN products risk long-term pressure as broadband, 5G, and open-source, interoperable technologies see expanded adoption, potentially diverting public safety and enterprise spend away from legacy platforms and shrinking the company's traditional revenue base.
Heavy reliance on U.S. and government contracts, which are dependent upon multi-year fiscal budgets, appropriations cycles ("One Big Beautiful Bill"), and government policy priorities, exposes Motorola to earnings volatility, delayed project funding, and unpredictable revenue streams.
The company's ongoing transformation to higher-margin software and services could face headwinds if adoption of its recurring cloud and application solutions (especially internationally) is slower than expected, hindering sustained margin expansion and the desired shift in revenue mix.
Large new acquisitions like Silvus introduce significant integration, execution, and leverage risk; elevated debt levels, acquisition-related costs/interest, and possible underperformance by Silvus or other acquired assets could pressure long-term net margins and cash flows if growth synergies do not materialize as planned.
Motorola faces increasing competition from large technology firms and specialized defense/commercial communications providers entering public safety, cloud video, and unmanned/drone systems-potentially leading to pricing pressure, loss of market share in key growth areas, and a negative impact on future revenue and earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $503.75 for Motorola Solutions based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.8 billion, earnings will come to $2.8 billion, and it would be trading on a PE ratio of 38.0x, assuming you use a discount rate of 8.4%.
Given the current share price of $477.93, the analyst price target of $503.75 is 5.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

MSI: Recurring Revenue And Government Contracts Will Drive Performance Amid Uncertainty