Logitech International SA (NASDAQ: LOGI) shares plummeted 5.10% in pre-market trading on Wednesday following the release of its fourth-quarter earnings report for fiscal year 2025. Despite reporting some positive results, the computer peripherals maker faces headwinds that have alarmed investors.

While Logitech achieved a 7% constant currency net sales growth for fiscal year 2025 and improved its non-GAAP gross and operating margins, several factors contributed to the negative market reaction. The company withdrew its long-term financial outlook due to uncertainties surrounding tariffs and macroeconomic volatility. This move has raised concerns among investors about Logitech's future performance.

One of the primary concerns is the anticipated impact of tariffs on Logitech's business. The company expects a 200 basis point negative impact on global gross margins in the first quarter of fiscal 2026 due to these tariffs. Additionally, Logitech projects its gross margins to decrease in Q1 2026, with a projected range of 41% to 42%, down from the 43.5% achieved in fiscal year 2025. This decline is attributed to tariff impacts and the depletion of pre-tariff inventory.

Further adding to investor worries are challenges in the European market, where Logitech is experiencing a slowdown in sell-through due to inventory adjustments and cautious behavior from B2B customers. The company also recorded a $23 million bad debt reserve due to issues with an e-commerce payment provider, which impacted its financial results.

Despite these challenges, Logitech's management remains optimistic about its ability to navigate the current environment. The company has highlighted its diversified manufacturing footprint, which reduces reliance on China and positions it well to mitigate tariff impacts. However, the market's reaction suggests that investors are taking a cautious stance until there is more clarity on how Logitech will address these headwinds in the coming quarters.