Barcode Veteran Zebra Technologies Is Earning Its AI Stripes

Barcode-scanning and data management expert Zebra Technologies (NASDAQ: ZBRA) reported fourth-quarter results last week. The report edged out Wall Street’s average expectations across the board, though it should be noted that the bar was set pretty low.

Still, Wall Street embraced Zebra’s earnings report. Its guidance targets suggested that the ongoing quarter is showing a milder revenue slowdown, to be followed by a rebound later on and a robust full-year performance overall. That was enough to drive Zebra’s stock price 12% higher on Thursday, returning to levels not seen since last summer.

But wait — there’s more. As it turns out, Zebra is leaning into the artificial intelligence (AI) boom with several promising technologies. Let me walk you through how the company’s AI ambitions may help shareholders in 2024 and beyond.

One zebra covered in barcode stripes on the open plains, with a herd grazing in the blurry distance under a wide open sky.

Let’s explore Zebra’s AI expertise

Zebra has always been an AI expert at heart. Machine learning algorithms help modern barcode scanners interpret codes in low-light situations, at odd angles to the reader, or when the code label is less than squeaky-clean. And the company started building on that AI expertise years ago, with helpful acquisitions such as AI-based retail forecasting specialist Antuit.ai in 2021 and machine vision veteran Matrox in 2022.

It’s almost as if Zebra’s management could see the AI surge coming from a mile away. That early insight shouldn’t be surprising, given the company’s broad network of clients and partners, not to mention Zebra’s own expertise in analyzing data patterns.

On that note, the company recently collaborated with semiconductor giant Qualcomm (NASDAQ: QCOM) to run a ChatGPT-like large language model (LLM) on Zebra’s handheld tablets and computers. Sounds as normal as Tacos on Tuesday, right? However, most LLMs require an internet connection, allowing your local device to tap into the computing muscle of a central server in the cloud. The breakthrough innovation here is that Zebra’s Qualcomm-powered LLM runs entirely on the mobile device.

“Many of our customers don’t have a lot of connectivity from their locations; think of a store or a warehouse,” Zebra CEO Bill Burns said in a phone interview with The Fool. “There are not a lot of high-speed pipes out of those from a communications perspective. And it’s costly to go back to the cloud every time you want to use a generative AI model. But the idea would be that you can take your newest worker and make them as efficient as your most experienced worker.”

Burns offered the example of a supermarket manager reporting a shortage of strawberries to Zebra’s LLM. Based on previous experience and the fundamental retail know-how built into this generative AI chatbot, a tablet computer can suggest moving the blueberries and raspberries closer together so the display doesn’t look empty.

It’s like having a grizzled industry veteran in your pocket at all times, even on the go in network-impaired locations. Or, imagine needing AI insights on handling power outages with no connectivity at all. A cloud-based LLM would literally leave that unfortunate store manager in the dark.

“It’s leveraging Qualcomm technology along with our software to do that, and other large language models, but us populating those models with our customers’ information,” Burns said. “Our customers are really excited about it.”

Going beyond large language models

That’s just one example among the dozens of AI projects up Zebra’s striped sleeve, by the way.

“Everybody thinks of AI today in LLMs, but the reality is that if we look at all the different things we’re doing across AI, we’ve probably got 50 different projects across our portfolio,” Burns said. “It’s everything from machine vision inspection, optical character recognition, navigation for autonomous vehicles, product recognition, workforce planning, to demand planning — they all use traditional AI techniques. And the advantage to an LLM really is more planning and communication. It’s easier to interface with the data, as opposed to the hard calculation of what we know is traditional AI.”

In an era where AI is no longer a luxury but a necessity, Zebra Technologies stands out as a visionary. The company is integrating advanced AI capabilities directly into its products and services, offering unique benefits like the connection-less LLM experience. This strategic vision extends beyond immediate technological advancements, aiming to redefine how businesses interact with data and automation.

ZBRA PE Ratio (Forward)

For the savvy investor, Zebra represents an opportunity to be part of a company that’s not just keeping pace with progress on the Serengeti of technology but runs a step ahead, crafting tools to drive the next wave of business innovation and efficiency.

And you can pick up this innovative stock at a reasonable valuation of 2.8 times sales or 20 times forward earnings estimates. That’s a comfortable way to invest in the high-tech future of retail, distribution networks, and data management. You should consider grabbing a few shares before Zebra’s trot breaks into an AI-assisted gallop.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm and Zebra Technologies. The Motley Fool has a disclosure policy.