Garmin had a great quarter and spent a good chunk of the earnings call explaining why next year will be harder. The part watch buyers care about came in the Q&A, when an analyst asked CEO Cliff Pemble point blank whether Garmin has the pricing power to offset rising component costs.
Pemble did not say no.
"I think pricing is something that, when I mentioned the mitigations that we can use, it's one of the things that we can look at as one of the tools that we have," he said. "But we don't over focus on one particular thing, and we try to get the best balance of all the different ways that we can mitigate cost increases in our supply chain."
That is not an announcement. Garmin has not raised anything, named any product, or given a date. But it is the first time in this cycle that the company has said out loud that higher shelf prices are an option rather than a last resort.
What actually changed
Garmin has been coasting on memory bought cheap. The company stockpiled flash and DRAM ahead of the price run, and that safety stock has been propping up margins while component prices climbed.
"The results have benefited from our safety stock of memory purchased at lower prices," Pemble said. "New supplies are being purchased at current market prices, which are significantly higher than last year."
That buffer is now unwinding. Garmin said the impact was small in Q3, will be more noticeable in Q4, and carries into 2027. It also expects consolidated gross margin to slide back toward its historical range next year, "primarily due to higher memory costs."
Put numbers on that and the squeeze is easy to see. Q3 gross margin came in at 63.3%, and $33 million of that was tariff refunds Garmin had already booked. Full year guidance sits at 61%, which the company noted is only 32 basis points better than the full year 2025 figure. An analyst on the call guessed 2027 lands nearer 58% to 59%. Management declined to confirm a number, citing segment mix, currency, and the Mercedes domain-controller ramp as moving parts.
Why memory got expensive, in Garmin's own words
Memory pricing is being dragged around by the AI buildout, and Pemble was explicit that the damage is wider than chips.
"There is definitely second order effects driven by the memory situation and the overall AI build out," he said. "That creates both availability supply issues as well as some pricing issues in other areas. For example, you mentioned PCBs."
So it is not just the flash that holds your maps and activities. It is the boards those parts sit on. Garmin said it has been making prepayments to secure supply and carrying more inventory as a result, with ending inventory around $2.3 billion, up both year over year and sequentially. Free cash flow for the year is tracking near $1.1 billion after that inventory build.
None of this is unique to Garmin. It is the same memory crunch hitting phones, laptops, and every other device with storage in it. The difference is that Garmin sells $1,000 adventure watches, and it has spent two years telling investors it can protect margins through vertical integration and premium mix.
The premium mix argument cuts both ways
Garmin's newest watches are its most expensive ones, and that is deliberate. The Fenix 9 and Fenix 9 Pro pushed the flagship line further upmarket with an all-titanium case option and the biggest AMOLED panel Garmin has put on an adventure watch.
"Many of our new ones, especially our premium in nature and have a lot of desirable features and capability," Pemble said. "So we're able to command higher margins for those products as well, which become a higher part of our mix."
That gives Garmin room to absorb some cost. It also gives Garmin room to raise prices without changing anything else, because the buyer for a titanium Fenix is not especially price sensitive. The outdoor segment, which houses the Fenix line, turned in $597 million in revenue, up 20%, with gross margin of 68% and operating margin of 39%.
If you are waiting for the Fenix 9 to get cheaper before you buy, this call is your warning. The most likely path from here is flat pricing with fewer discounts rather than a cut, and the current generation may end up looking like the cheap one.
How the market took it
Investors did not wait for the pricing question to be answered. Shares fell 6.79% to $269.71 after the print, per Investing.com, despite revenue of $1.99 billion (up 12%), operating income of $612 million (up 34%), and pro forma EPS of $2.76 that beat consensus by roughly $0.37. We broke down those Q3 numbers and the outdoor segment's 20% jump earlier today.
Record quarter, raised guidance, stock down nearly 7%. The market read the 2027 margin reset as the real story, which is a fair reading of the memory commentary.
Garmin has been here before. When tariffs hit in 2025, the company leaned on the same playbook: vertical integration, selective mitigation, and a willingness to let price move where it had to. Our earlier coverage of how tariffs hit Garmin laid out that the company would rather protect margin than chase volume, and Pemble referenced that episode directly on this call as proof the company can navigate a cost shock without losing its footing.
What buyers should actually expect
Three things are true at once right now.
- No price increase has been announced. Garmin said pricing is a tool, not a plan. Any specific claim about a Fenix 9 or Forerunner price change in 2027 is speculation at this point.
- The direction of pressure is up. Memory bought at 2025 prices is running out, and the replacement stock costs significantly more. Garmin has already told investors margins come down next year because of it.
- Discounts are the first lever, not the last. Garmin protects price on new hardware. The realistic near-term outcome is thinner promotional pricing through the holidays and into spring rather than a headline increase on the Fenix line.
The community has been expecting this for weeks. In an r/Garmin thread about the Edge 1060 pre-order this month, one owner wrote that memory prices look like "an excuse to bump price when everybody and their mother is raising prices," and argued Garmin had already decided it does not want to be a volume player.
That is the tension Garmin has to manage. The Fenix 9 is selling well enough that the company is still filling backorders, which is not a position that encourages discounting.
Bottom Line
Garmin just told everyone, politely and in financial language, that the era of cheap components is over and that its margins have about a point and a half to give back next year. The company would rather find efficiencies first, and it probably will find some. But if memory prices stay where they are through 2027, the easiest place to recover a point of gross margin is the price tag on the watch.
For anyone planning a Fenix 9, Forerunner, or Venu purchase in the next six months, the practical advice is boring and correct: buy when you need it, do not assume the current price is a temporary high, and watch the holiday promotions closely. They may be the last generous ones for a while.
Sources: Garmin Q3 2026 earnings call transcript (Motley Fool and Gloom, both independently transcribed, quotes cross-checked between them), Garmin investor relations guidance, Gadgets & Wearables' reporting on the call, Investing.com on the share move, and discussion in r/Garmin. Garmin has not announced any price changes.
