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# Garmin's Record 63.3% Gross Margin Includes A $33 Million Tariff Refund, And Memory Costs Are Coming
- URL: https://www.bullished.co/garmins-record-63-3-gross-margin-includes-a-33-million-tariff-refund-and-memory-costs-are-8a0b0e7b/
- Published: 2026-10-28T11:21:39.000Z
- Updated: 2026-10-28T11:21:39.000Z
- Description: The maker of GPS watches and cockpit systems says chip shortages will hurt future margins, and refunds of tariffs flattered this quarter's.
- Author: Matteo Parrino
- Tags: SEC Filings, GRMN, Industry: Technology

[Garmin](https://www.bullished.co/tag/grmn/)'s third-quarter gross margin rose 420 basis points to a record [63.3%](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526435070/grmn-20260926.htm?ref=bullished.co), and about 160 basis points of that came from roughly $33 million in refunds of previously paid tariffs, according to its 10-Q filed Wednesday. The same filing hardens a warning: memory-chip supply constraints, it says, are expected to hurt gross margin ahead.

## Refunds flatter the margin

Garmin, which makes GPS-enabled fitness, outdoor, aviation, marine and auto devices, said the margin gain came mainly from favorable segment mix, lower product costs and the refunds. About $20 million of the $33 million sat in marine.

Marine's gross margin rose 850 basis points, which the filing attributes primarily to the refunds. Fitness and outdoor margins rose 220 and 180 basis points on lower product costs.

The refunds trace to the Supreme Court's February 20, 2026 ruling that tariffs imposed under the International Emergency Economic Powers Act were unauthorized. Garmin books them as a reduction of cost of goods sold when amounts become realizable. For the first three quarters it recognized about $54 million; the [prior quarter's filing](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526322114/grmn-20260627.htm?ref=bullished.co) cited about $21 million. Additional potential refunds exist that are not yet recognized.

## Chip costs and a swollen inventory

The 10-Q's business update says recent memory-chip shortages have raised operational complexity and costs, which the company expects to unfavorably affect future gross margin. Inventory purchase obligations, mostly noncancelable, reached $2,006.6 million, up from $1,533.7 million at the end of June, with $1,766.5 million payable within 12 months.

Inventories on the balance sheet stood at $2,251.7 million at September 26, against $1,772.3 million at December 27, 2025\. Garmin said operating cash flow reflected prepayments for inventory to secure critical components.

## Strong quarter, softer cash flow

In its [earnings release](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526435066/grmn-ex99%5F1.htm?ref=bullished.co), Garmin reported record revenue of $1.99 billion, up 12%, and operating income of $612 million, up 34%. Diluted earnings per share were $2.80, against $2.08 a year earlier. Fitness sales rose 16% and outdoor 20%, while auto OEM fell 20% on weaker domain controller sales.

Free cash flow was $293 million, with capital spending of $100.6 million against $60.5 million a year earlier. CEO Cliff Pemble said the company was raising its 2026 outlook on the momentum "as we enter the important holiday selling season."

Full-year guidance now calls for revenue of about $8.15 billion and pro forma earnings per share of $10.80, built on a 61.0% gross margin and a 29.0% operating margin.

Garmin's next dividend installment of $1.05 per share is payable December 24, 2026 to holders of record on December 11.

### Sources

- [10-Q Filing — Garmin Ltd. (GRMN)](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526435070/grmn-20260926.htm?ref=bullished.co) — SEC EDGAR
- [10-Q Filing — Garmin Ltd. (GRMN), Q2 FY2026 filed 2026-07-29 (comparison basis)](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526322114/grmn-20260627.htm?ref=bullished.co) — SEC EDGAR
- [Earnings release (8-K Item 2.02, grmn-ex99\_1.htm) — Garmin Ltd., filed 2026-10-28](https://www.sec.gov/Archives/edgar/data/0001121788/000119312526435066/grmn-ex99%5F1.htm?ref=bullished.co) — SEC EDGAR
- [Garmin Ltd. (GRMN) Stock Price, News, Quote & History - Yahoo Finance](https://ca.finance.yahoo.com/quote/GRMN/?ref=bullished.co) — Yahoo Finance
- [Garmin (GRMN) Q3 Earnings on the Horizon: Analysts' Insights on Key Performance Measures](https://finance.yahoo.com/markets/stocks/articles/garmin-grmn-q3-earnings-horizon-121505326.html?.tsrc=rss&ref=bullished.co) — Yahoo Finance
- [Garmin Ltd. (NYSE:GRMN) : Articles :: Law360](https://www.law360.com/companies/garmin-ltd/articles?ref=bullished.co) — law360.com
- [Garmin Gears Up to Report Q3 Earnings: How to Play the Stock](https://finance.yahoo.com/markets/stocks/articles/garmin-gears-report-q3-earnings-133600941.html?ref=bullished.co) — Yahoo Finance
- [Here's How Much $1000 Invested In Garmin 5 Years Ago Would Be Worth Today](https://www.benzinga.com/news/26/10/62607411/here-s-how-much-1000-invested-garmin-5-years-ago-would-be-worth-today?ref=bullished.co) — benzinga.com

### More on Garmin

- [Garmin Raises 2026 Outlook To About $8.15 Billion In Sales After Record Quarter](https://www.bullished.co/garmin-raises-2026-outlook-to-about-8-15-billion-in-sales-after-record-quarter-36f47f32/)

[All Garmin (GRMN) coverage →](https://www.bullished.co/tag/grmn/)