Garmin raises its 2026 forecast again as watch sales grow, but warns memory chips will cost more

Garmin raised its full-year forecast again on 28 October, after record third-quarter revenue of $1.99 billion, up 12% on a year earlier. Its fitness and outdoor divisions, which make the watches, bike computers and bands used by runners, cyclists and triathletes, both grew faster than the company as a whole.

The company now expects 2026 revenue of about $8.15 billion and pro forma earnings of $10.80 a share. In July it had forecast $8.05 billion and $10.00.

“We achieved another quarter of record operating results driven by strength across markets and product categories,” said Cliff Pemble, Garmin’s president and chief executive, in the company’s release.

Watches lead the way

Fitness revenue rose 16% to $694.3 million in the quarter to 26 September. Garmin said growth was “led by strong demand for wearables”. The quarter included the launch of the CIRQA Smart Band, Garmin’s first screenless tracker, and the announcement of the Edge 1060 and Edge Explore 3 bike computers. The fitness division made an operating profit of $231 million.

Outdoor revenue grew 20% to $597.3 million, “primarily driven by adventure watches”, with the fēnix 9 and fēnix 9 Pro launched during the quarter. Outdoor’s operating profit was $233 million, slightly more than fitness.

Marine grew 16% and aviation 5%. Only the unit that supplies systems to carmakers shrank, by 20%.

Slowing, and a cost warning

The fitness figure was a slowdown. Fitness revenue grew 25% in the second quarter, according to Garmin’s July release, and by about 42% in the first quarter on its reported figures. On the earnings call, Pemble said registrations of new fitness and outdoor devices had run ahead of shipments into shops, MarketBeat reported, and the5krunner reported that he attributed part of the gap to retailers running down their stock.

Profit margins rose sharply. Gross margin was 63.3%, up from 59.1%, and Garmin said the increase included about $33 million in refunds of tariffs it had paid earlier.

That level is not expected to last. According to both MarketBeat and the5krunner, Pemble told analysts that memory components bought earlier at lower prices are running out, that new supplies cost much more, and that he expects Garmin’s gross margin to return to its “historical range” in 2027. He said Garmin would lean on its vertical integration, its scale and selective cost cuts to soften the impact, MarketBeat reported.

Garmin’s forecast for free cash flow, the money left after running costs and investment, fell from about $1.4 billion to about $1.1 billion, according to the5krunner. Quarterly free cash flow was $293 million, which the5krunner compared with $425 million a year earlier. It linked the fall to Garmin building up stocks of memory and paying suppliers in advance.

Subscriptions and the CIRQA band

Garmin does not publish subscriber numbers for Connect+, its $69.99-a-year premium tier. Pemble said on the call that Connect+ was growing faster than the product lines behind it, with strong renewals after free trials, and that CIRQA buyers were signing up too, MarketBeat and the5krunner both reported. Some CIRQA features, such as nutrition tracking, are only for subscribers, the5krunner noted.

He also said CIRQA demand had exceeded Garmin’s expectations and the company was still working through a backlog of orders.

Why it matters to athletes

The figures show where Garmin’s growth now comes from: watches and, increasingly, subscriptions attached to them. The company bought TrainingPeaks this year and has started charging larger apps for access to its Connect data, while giving individual users free access to their own. A company expecting tighter margins in 2027 has more reason to look for recurring revenue. Whether that means higher prices or more features moved behind Connect+ is not something Garmin has announced.