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Robert J. Willett -- President, Chief Executive Officer, and Director

Thanks, Nathan. Hello everyone, and thank you for joining us. We began 2024 with the strategic priorities of infusing AI into more of our products and tools, transforming and expanding our sales force and integrating Moritex, our largest acquisition in company history. I am pleased with the progress we made against these strategic priorities in 2024.

We expanded our portfolio of machine vision products powered by world class AI. A couple of highlights include the industry's first AI enabled 3D smart camera, the In-Sight L38 and the addition of the Modular Vision Tunnel portfolio featuring the powerful DataMan 380 barcode reader that uses improved decoding optimized for logistics applications to minimize footprint, maximize depth of field, and read the smallest codes. We successfully executed our sales transformation, deploying a new type of Salesnoid to broaden our sales reach to customers we have not traditionally served, and we successfully integrated our largest ever acquisition, Moritex, which gives us a more complete machine vision solution and contributes positively to our bottom line. This transaction was accretive to adjusted EPS in 2024, which led to a slight increase in adjusted EPS for the year in an otherwise soft market.

In 2024, our logistics and semiconductor businesses gained moment, but conditions across our broader factory automation business remained challenging. Most of these markets stabilize throughout the year. Despite a slight improvement in relevant macro leading indicators such as PMI, we still characterize our core factory automation markets as soft but stable for now. The exception continues to be automotive where we saw a pronounced step down in 2024.

Coming into the year, we expected automotive to grow helped by significant EV battery spending, but this investment dropped off throughout the year, leading automotive to be our weakest end market in 2024. We continue to see uncertainty in auto as we begin 2025. These mixed market dynamics led to overall revenue growth of 9%, or 1% excluding Moritex for the full year. Throughout 2024, while we continue to invest in long-term growth initiatives, we stay disciplined in our approach to discretionary spending and thoughtful about hiring.

I now want to provide you with a more detailed update on our strategic initiatives. We are seeing rapid changes in technology with powerful chips accelerating AI innovation. For industrial machine vision, this means moving beyond the world of rules based algorithms toward a more sophisticated suite of powerful artificial intelligence tools. Transformer models are overtaking convolutional neural networks as the foundation of deep learning.

As this shift accelerates, customers will need significantly less data to train and configure our products, and we'll be able to ramp up and scale production faster. This will allow machine vision to address more applications and reach more customers. Cognex is defining the leading edge of this shift in industrial machine vision technology by launching industry-leading products that leverage AI to solve customer problems. Our new products address the full spectrum of machine vision applications.

At one end of the spectrum, new AI allows us to excel at the most complex and difficult inspection tasks, while at the other, it allows us to develop products that are easy to deploy and easy to use. In December, we launched VisionPro Deep Learning 4.0 illustrated on Page 4 of our presentation. This powerful software designed to tackle the most difficult problems in machine vision is Cognex's first ever product to utilize transformer models. Transformer technology, which forms the core of sophisticated large language models, such as ChatGPT, can help to vastly reduce the number of images required to train and implement a machine vision model.

VisionPro Deep Learning 4.0 signature few sample mode achieves high levels of accuracy on some of the most sophisticated inspections after training on as few as 10 images. Previous versions would have required hundreds of images to train a vision model with such capability. This is very valuable for customers who require high accuracy, but do not have large training datasets, which is often the case as they scale up their production. It is also important for customers whose production cycles are only a few months long and therefore require effective models to be ready in weeks.

Few sample mode saves customers time collecting, labeling, and managing image data, which has historically been a costly process. We have also expanded our DataMan series to address more applications for customers looking for easy to use products. As illustrated on Page 5, our new DataMan series makes identifying and tracking parts and packages across the facility easier than ever. Regardless of industry, code quality, or application complexity, embedded AI in these next generation readers helps deliver exceptional read rates for reliable performance at every stage of production.

Our latest DataMan products are examples of the products that allow us to get a highly advanced powerful technology into the hands of customers with less machine vision experience. We continue to tap into this broader customer base by investing to transform and expand sales coverage. Moving to Page 6 of the earnings presentation, we are enthusiastic about the progress of our sales transformation in 2024. Our first class of new Salesnoids continue to ramp with Q4 representing their highest quarter of bookings to date, leading to over 3000 new customers acquired by this group in 2024.

These entry-level Salesnoids are also continuing to gain strong traction in referrals with more complex vision systems to our more technical and advanced Salesnoids. The second cohort of new Salesnoids entered the field recently, and we expect this to further grow our customer base in 2025. We remain confident in the long-term value of our sales transformation strategy, allowing us to serve more customers with easy-to-use products. We're excited to continue this strategy and introduce a new cohort of Salesnoids each year.

As we plan for future years, we will be flexible about cohort sizes and be responsive to market conditions. Turning now to what we are seeing across our end markets, which you will find on Page 7 of the earnings presentation, I will discuss the end market results for the year, excluding the contribution of Moritex. End markets have been mixed as we have seen both continued softness as well as pockets of growth. Starting with logistics, revenue grew 20% in 2024.

We continue to see broad moment in logistics from global e-commerce leaders as well as regional e-commerce, retail and parcel, and post providers. Market growth has improved as large e-commerce players returned to capacity expansion, and broader logistics remains an under-penetrated market. We believe we also gain share with recent product innovations, including the success of the Modular Vision Tunnel and DataMan 380 launched last year. Moving on to automotive, revenue in automotive was down 14% year on year.

We continue to see declines in EV battery investment and tentativeness in large capital projects across the broader automotive business. Coming into the year, we expected strong growth in EV battery investment and for it to be one of our largest growth engines. But as the year progressed, we saw delays, reductions, and cancellations of EV battery projects. We still expect EV battery to be a long-term growth driver but likely not in 2025.

Consumer electronics revenue was down 5% year on year as smartphone design changes remain limited and we saw conservative capex spending across the market. Consumer electronics has positive long-term trends. Currently our expectations for near-term investment in consumer electronics are tempered, but we tend to have a better line of sight to this by early Q2 each year. So we will give you another update on our next earnings call.

Lastly, semi is continuing to build with significant year-on-year growth albeit off a low 2023 base. Growth is widespread across semi with investment increases from major machine builders, but we have seen strong demand driven by high bandwidth memory chip investments. As we kick off 2025, we expect moment to continue in logistics and semi, automotive to remain weak, and other factory automation growth to be relatively in line with macro indicators such as PMI. We continue to see disruptive trends playing out in our markets.

AI technology is making our products more accessible to an increasing number of customers and applications. We lead the industry in making machine vision technology usable by industrial customers at scale. With this, we can automate more inspection tasks and grow the machine vision market both by solving more of our sophisticated customer's most challenging problems, but also by making our powerful technology accessible for those less experienced in automation. Let me now hand it over to Dennis to walk you through the financial results and the outlook for the first quarter.

Dennis Fehr -- Chief Financial Officer

Thank you, Rob. Our quarterly financial highlights can be found on Page 8 of our earnings presentation posted to our investor website yesterday. Fourth-quarter revenue of $230 million finished at the high end of our guidance range and increased 17% year on year. Excluding Moritex, revenue grew by 12%.

As we have now passed the one year anniversary of the close of our Moritex acquisition, I will note that this will be the last quarter we speak to revenue trends excluding this part of our business. From a geographic viewpoint, excluding Moritex, year-on-year revenue grew double digits in both the Americas, led by continued logistics strength and compounded by accelerated demand in the quarter and in other Asia led by semiconductor. Europe declined slightly due to weaker automotive spending. Year-on-year revenue growth in the quarter was strongest in Greater China, driven by project timing in consumer electronics as well as an easy year-ago comparison.

While China revenue has grown year on year the past two quarters, we remain cautious about the overall outlook for this market, which continues to see both significant uncertainty and heightened competitive pressures. Turning to margins, adjusted gross margin was 69.4% in Q4, down 130 basis points from 70.7% a year ago, driven by Moritex, negative mix from higher logistics revenue, and to a lesser extent, pricing headwinds most pronounced in China. Adjusted operating expenses increased 3% year on year in the quarter. The increase was driven by Moritex as well as investment in our sales force transformation and expansion.

As a result of reallocation and adjustment to our employee base, we incurred $3 million of reorganization costs in the quarter that are excluded from our non-GAAP metrics. Even with our investment in Salesforce expansion, ending headcount for this year was 3% below year-ago levels and we continue to focus on tight cost management. Adjusted EBITDA margin was 18.5% in Q4, above the high end of our guidance and up nearly 6 percentage points from 12.6% a year ago. Revenue growth and tight cost management drove high incremental EBITDA margin despite gross margin pressure.

Diluted earnings per share on a GAAP basis was $0.16, up from $0.07 in Q4 of 2023. Adjusted diluted EPS was $0.20, up from $0.11 year on year. Both increases were due to higher revenue and higher margins. Driven by working capital optimization, we delivered strong free cash flow for the second quarter in a row in Q4, totaling $49 million compared to $7 million in Q4 of 2023.

Cognex returned $57 million to shareholders in the quarter. $43 million of share repurchase was our highest quarterly total since Q1 2022, and we intend to continue to be opportunistic with our stock buyback. I will also briefly cover our full year 2024 results, which can be found on Page 9 of our presentation. 2024 revenue of $915 million grew 9% year on year, or 1% excluding Moritex.

Geographically, for the full year, excluding Moritex, other Asia delivered the highest revenue growth due to semi. In addition, the Americas grew moderately, Europe declined slightly, and China declined more materially in the year. Adjusted gross margin was 69.3% in 2024, down 3.2 percentage points due to Moritex's unfavorable mix and, to a lesser extent, pricing. For the full year, adjusted operating expense increased 6%, driven primarily by Moritex as well as our sales force transformation efforts.

Adjusted EBITDA margin declined 140 basis points to 17.1% in 2024 due to lower gross margins and higher operating expense associated with our sales transformation. GAAP diluted earnings per share of $0.62 declined 6% year on year, partially due to a higher effective tax rate. Adjusted diluted EPS of $0.74 was up from $0.73 in 2023 as the accretion from Moritex offset softness in factory automation for the full year. Total free cash flow in flow in 2024 was $134 million, representing 105% conversion of adjusted net income.

We returned $119 million to our shareholders in the year and ended the year with $587 million in cash and investments and no debt. I will now turn to our outlook for the first quarter on Page 10 of our presentation. In the first quarter, we expect revenue between $200 million and $220 million. This range continues to be reflective of a mixed and volatile macro backdrop.

At the midpoint, this represents revenue in line with Q1 2024, reflecting our expectation of continued growth in logistics and semiconductor, offset by weaker automotive and an approximately $5 million FX headwind. The expected sequential step-down is driven by the acceleration in demand from customers in Q4 and an anticipated $4 million FX headwind in the first quarter. We also expect adjusted gross margin to remain in the high 60% range. Sequentially, mix is expected to be a slight headwind.

We expect adjusted EBITDA margin between 12% and 15%. The midpoint of this range represents 150 basis point increase year on year, driven by operating leverage and operating expense discipline. Lastly, we are excited to hold our Cognex Investor Day this year on June 9th and June 10th at our Boston area headquarters, and we hope to see you there. Now we will open the call for questions.

Operator, please go ahead.

Questions & Answers:

Operator

Thank you. The floor is now open for questions. [Operator instructions] Today's first question is coming from Damien Karras of UBS. Please go ahead.

Damian Karas -- Analyst

Hey, good morning, everyone.

Robert J. Willett -- President, Chief Executive Officer, and Director

Good morning, Damien.

Nathan McCurren -- Head of Investor Relations

Good morning.

Damian Karas -- Analyst

Yes, thanks for all the color around the end market. Rob, I wanted to ask you about autos. I know you've talked in the past about this being the worst market environment you've ever experienced in your career. And I know you expect autos to also continue to be your weakest market this year.

But what's your assessment on how much lower that customer spend could possibly go from here? I mean the business segment was down 14% in 2024. Are you kind of thinking like double-digit declines again in 2025, or should we be thinking much more modest declines from here?

Robert J. Willett -- President, Chief Executive Officer, and Director

Well, Damien, I think you paint the picture well is that it was a very, very, very tough year, last year for automotive and our business there in automotive. We entered the year very enthusiastic about what we saw going on in EV and EV battery manufacturing. And to give you a sense of the magnitude of that, I think coming in, we had -- we're aggressive at Cognex. We had stretch goals to really drive a lot of business into EV battery where we have just some great technology.

And I think where we ended up relative to where we came on was on the order of $50 million delta. So that was the most difficult thing that we encountered coming into the year. Obviously, that continued as the year went along. Now we think it's going to continue to be a bad year for automotive.

But I don't think on the order of decline that we saw in 2024. There are some reasons to be optimistic about automotive. We do great things in automotive when EV battery comes back, when capacity is more utilized and investment returns and what we're able to do in that space is very good. And certainly Cognex's technology in the area of sensors on the car, electronics in the car, and some of our new technology, what it can do in inspection in the car is our exciting growth areas for us.

And we have a sense that investment might start to return to that market in 2026, which then might lead to sort of a pickup for business for us later in the year. But we don't give full-year guidance. We're not optimistic that we're going to see a good year. But I'm hoping that the time of serious decline for us in automotive is over.

Damian Karas -- Analyst

That's really helpful. And then I wanted to ask you about consumer electronics, which was down for the second year in a row in 2024. And I know you said you'll have better insight when the second-quarter earnings comes around. But I wanted to ask you, in your slides you mentioned kind of limited change to form factors.

What's your sense for that aspect this coming year? Do you think that there should be more consumer electronic product changes this coming year compared to the past few years?

Robert J. Willett -- President, Chief Executive Officer, and Director

So consumer electronics revenue fell 5% for Cognex last year excluding Moritex. That said, it did grow in the back half. So due to project timing and some strength that we saw coming. It's really difficult and too early to call Cognex's year in electronics, and I will give you more color on that at our next earnings call.

There are reasons that we feel confident that in the long run consumer electronics is -- will be a great growth market for us and will continue to be. The issue is always on when do these things occur. There are a lot of great new features planned, a lot of innovation coming, whether it's in smartphones or in wearable devices or in other electronics such as augmented reality, virtual reality type technology that I think many of our customers are working hard to try to bring to market. And if and when those are successful and need to be manufactured on a massive scale, I'm very confident that companies will turn to Cognex to help them do that.

There's also a lot of human inspection going on in consumer electronics manufacturing. And if I refer you to some of the comments I made in my prepared remarks earlier, our newer technology, particularly transformer technology, allows us to meet the needs of some of those customers very well by allowing them to implement our technology quickly and to get great results, which make payback much, much faster. And to give you a little context of that, if you think of electronics, often it's a very, very rapid scaling up in a relatively short period of manufacturing at huge scale. So this technology in that market I think can be very, very valuable and I think is already being seen to be so by some of our customers in the space.

So that's kind of the overview, but to give you a direct answer to your question, too soon to say. Let's regroup here in about 13 weeks.

Damian Karas -- Analyst

Understood. Really appreciate your thoughts. Best of luck out there.

Dennis Fehr -- Chief Financial Officer

Thank you.

Operator

Thank you. [Operator instructions] The next question is coming from Tommy Moll of Stephens. Please go ahead.

Tommy Moll -- Analyst

Good morning, and thank you for taking my questions.

Robert J. Willett -- President, Chief Executive Officer, and Director

Hey, Tommy.

Dennis Fehr -- Chief Financial Officer

Hey, Tommy.

Tommy Moll -- Analyst

Rob, I want to start on logistics and ask what insight you can provide there on the breadth of the strength, whether that's in terms of the geographies, the sub verticals. I'm thinking e-commerce versus parcel perhaps. And then the durability of this strength, there were multiple quarters there where I guess we were in an absorption phase for a lot of the capacity built out during the pandemic. Does it feel like we're solidly back into a period where we need more capacity, or how would you situate us?

Robert J. Willett -- President, Chief Executive Officer, and Director

Yeah, Tommy, I think you're right in pointing out that we saw our logistics business peak in 2021 where there was huge, huge investment, and then we've been through a period of absorbing that investment. And then we're now back to a period of growth. Logistics business grew 20% year on year last year, with strength really across pretty much everywhere. US, Europe, other Asia, and then as we look in terms of customer tiers, I would say, we're -- we made good progress in base based logistics, seeing some nice growth in that space.

We've made great progress with very large e-commerce players. And then as you might expect there's sort of a group more large customers, some of whom didn't grow with us last year. And others of them did. Specifically in the US, a couple of customers who I think are struggling with their own retail supply chain and execution of various things, didn't put up growth.

But that's -- those are really very few exceptions to what is a very broad and underlying return to growth. We're positive, very positive about our logistics business and what we're seeing happening. We do see more capacity being added. We do see a lot of technology being invested in this industry, whether it is vision, technology, and certainly beyond barcode reading, which is a very difficult thing we do very well.

But there's much, much more to be done, and we're seeing more and more traction with that. New customer activity is strong. We're bringing more data management with our edge intelligence platform to this space. And then as you rightly note, the parcel and post sector is an area where we see growth in.

I did spend a lot of last week in Europe visiting a lot of parcel and post businesses in that space. I would say, they're not overly enthusiastic about the investment environment in parcel and post currently, but I don't think that is going to be a headwind to our opportunity to grow in that space. These are really new customers for us, newer technologies, so we're coming off a low base and we have a lot to offer. But it's worth keeping in mind some of those possible and post companies have five-year capital spending plan that we've been starting to muscle in on now for a number of years.

And we'll play out, I think, over time. Another thing to point out of course is geographic expansion is exciting for us. The highest growth rates we see and would expect to see are markets outside the US where we have strong penetration. It's really more in markets where they're really starting to really drive e-commerce fulfillment and spend significantly on a consumer base that's becoming wealthier and spending more money online.

And I'm thinking of markets like India and Indonesia where we're making some great progress.

Tommy Moll -- Analyst

Thank you, Rob. As a follow-up, and perhaps this is for Dennis, I wanted to ask about what you would highlight for us in terms of opex discipline, Dennis. So you've sketched the contours previously on the level of investment for the emerging customer initiative. So I'm thinking elsewhere in the opex budget, what can you highlight as whether quantifying or just speaking qualitatively about a philosophy on cost management there? Thank you.

Dennis Fehr -- Chief Financial Officer

Yes. No, absolutely happy to do that. I think as we said in our prepared remarks, we're very focused on tight cost management and keep on looking for areas where we can drive efficiencies throughout the organization. And I think a positive thing I really would like to highlight is that that we invested successfully into our emerging customer initiative into the sales transformation last year.

But at the same time, our opex year over year for the full year grew by 6%, and revenue grew 9%. So that means opex growth was below the revenue growth in 2024. And maybe to help you think a bit about 2025, what we expect is that we will keep the opex growth also below the revenue growth in 2025.

Tommy Moll -- Analyst

Thank you, Dennis. I'll turn it back.

Operator

Thank you. The next question is coming from Andrew Buscaglia of BNP Paribas. Please go ahead.

Andrew Buscaglia -- Analyst

Hey, good morning, guys.

Robert J. Willett -- President, Chief Executive Officer, and Director

Good morning.

Dennis Fehr -- Chief Financial Officer

Andrew.

Andrew Buscaglia -- Analyst

I just want to get an update into the year end on the merging customer initiative in terms of your expectations, it seems like it's going well. Do you care to provide any context around incremental revenue from the strategy going forward, maybe in '25?

Robert J. Willett -- President, Chief Executive Officer, and Director

Yes, thanks. So I think you characterize it well. This has been a major initiative for Cognex. We've onboarded and got up to improve the productivity of a large first cohort of emerging customer salespeople.

Their performance in Q4 I think was in line or better than what we had expected and communicated to you at the last call. They've completed over 80,000 customer visits in 2024, adding over 3000 customers, achieving bookings right around $1 million a week. And then referring significant business to the rest of our sales team, that's turning into larger and more sophisticated opportunities for customers. So we're really starting to see much better penetration of the market, but this is just the beginning.

And we hired the second cohort, as we went through last year and they're now entering the field. And they're going to really help us expand our sales coverage. So I think we can sort of be cutting and pasting the numbers we saw with the first cohort, but hopefully doing better because we're getting better, and we're understanding how to do this more. And then I would say, I think as I communicated, we've adjusted how we're managing them and what we're doing based on what we've learned.

And so they're better integrated with our existing sales force now and so better able to cover accounts, some larger accounts where we've been really under-penetrated. They're making more calls on different customer profiles within those large accounts. And then we're also giving them really great new technology. And I think the best example would be the DataMan 290 and 390 series that is now in their hands.

Great AI technology that's easy to sell and easy to use. And this sales force was designed with technology like that in mind. So that's our playbook that we will continue to iterate on with -- as we go through future cohorts. In terms of other things, the business that we're winning is -- has over 75% gross margin.

So again, as we expected in that regard. Then -- so you asked about 2025, and I think we're going to see that continue, our progress continue. And we've got the metrics and the way to manage it. And we continue to be pleased.

Dennis Fehr -- Chief Financial Officer

And maybe just to add on that to your specific question on the incremental side. We've been talking in the last earnings call and Rob said also just before that we really integrated that these Salesnoids, these entry-level Salesnoids into the larger sales organization and let them go also to existing customers. So in that regard, they're not really able to give you like a number here as what is incremental. Like Rob said, we're tracking their bookings metrics and other sales efficiency KPIs very closely.

But just that one particular question, we just can't answer you in that way. So I hope that gives you a bit more color to that as well.

Andrew Buscaglia -- Analyst

OK. And what are -- you guided to gross margins in the high 60s. And what are the biggest levers there that could provide some tailwind to margins going above 70% again? Is it really just volume coming back, or can this emerging customer initiative have an impact in '25 on gross margins already?

Robert J. Willett -- President, Chief Executive Officer, and Director

I'll kick off at a high level, but then I'll throw it to Dennis to give you more detail. So the wonder of Cognex is implementing great technology to factory automation and logistics. We've got a lot of great technology coming, and the DataMan 290 is an example of that for sure. And then all the sales force that we have now in the field making, tens of thousands of sales calls to sell.

It should be a tailwind for us as as as as we move forward, and then there is certainly a volume story where we've seen volumes not growing anywhere near our expectations over the last few years. We've built an infrastructure ready to supply a much larger business, and as that business comes and as markets recover, certainly the follow through on incremental revenue should be high.

Dennis Fehr -- Chief Financial Officer

Right. We guided for the first quarter to the high 60s, so pretty much in line to what we have guided previously. So in the near term, there's certainly some effects that we have strong growth in logistics, which typically is slightly dilutive to the gross margin. So there's a bit of a mix headwind on that side.

Certainly, the growth in logistics has a fantastic flow through to the bottom line. You've seen, if you look back at Q4, with coming out at the high end of the revenue range, we had a nice earnings in that regard. If you think about the logistics impact to the total PNL, very positive on the bottom line, but certainly in the near, it's a slight headwind toward gross margin. But then as Rob said, in the long term, the sales transformation sales expansion of coverage is a nice measure to bring up gross margin with the incremental or the accretive gross margin we are getting from that initiatives.

We have strong leverage also in terms of using the infrastructure. We have a new NPIs we talked in the prepared remarks about, like DM 290 for example, that product family. So there are really areas where we can drive gross margin increases, and that's really what we'll be focused on in the mid to long term.

Andrew Buscaglia -- Analyst

Yes. Thank you.

Operator

Thank you. The next question is coming from Jamie Cook of Truist Securities. Please go ahead.

Jamie Cook -- Analyst

Hi, Good morning. I guess two questions. One, Rob, just on the total market serve the 6.5 billion that you guys have put out there, just wondering understanding you probably still feel comfortable with that number. I'm just wondering if perhaps as you're thinking going forward, do we pivot which end markets we want to focus on? Perhaps markets that are less cyclical, like automotive or consumer electronics, maybe focusing more on medical or other markets.

So that I just get your sales over time can be less cyclical versus some of the markets that you focus on. So wondering if there'll be a pivot there over time. And then I guess my second question, obviously you're still sitting with a very strong balance sheet sitting in net cash with Moritex behind you. I'm just wondering what your appetite is or the environment is for acquisitions in 2025 relative to where we sat in sat in 2024.

Thank you.

Robert J. Willett -- President, Chief Executive Officer, and Director

Yes. Thank you. Let me talk about our markets and how we think about that and volatility and opportunity within them first, and then I'll ask Dennis to address the second part of your question about capital. So we'll give you an update on our view of our served markets in June at the Analyst Day.

I think -- look forward to sharing that with you and our view about how we expand them. Obviously, we did expand with the acquisition of Moritex and adjacencies and other markets we're moving into that where we see opportunities to grow that service market, and we'll give you more color on on that. In terms of kind of where our interests lie and kind of where -- how to think about volatility within those markets, we see our logistics market is still our largest served market and the one we expect to grow fastest. Now that was true when we last gave you an update, and it's still true today very much that there was a growth market for us and will continue to be a great focus of innovation and investment.

And so that's exciting and witness the Modular Vision Tunnel, the progress we're making with parcel and post companies. Our great success with the technology leaders in that space, and we think that has a long way to run. In terms of other markets, what I would say is, I think we all understand that Cognex is highly indexed on the technology leaders and the big leaders in the premier customers in our markets whether it's automotive or consumer electronics. And those tend to have more -- they have -- tend to put more volatility into our business overall.

But our emerging customer initiative really allows us to broaden our customer base, going from serving about 30,000 customers as we do to going down more into more mid-tier and more entry-level customers and really broadening that. So we would expect that to take some volatility out of our business in future. And with volatility, you can see that we can underperform in difficult periods and outperform as I think we did in the fourth quarter as a result of some very strong relationships we have and some very good markets, but that's not ideal in terms of running a stable business. And I think the emerging customer program allows us to do that quite well.

You asked about other markets, medical, which is a big bag of medical businesses, including pharmaceutical, life science, medical device representing about 10% of our business overall. Those markets haven't been good over the last few years since COVID. Confident I think everyone is that they will return to growth, and that's the type of market again where we will be having much more sales activity as a result of our emerging customer sales force and much more appropriate products for the level of technical expertise that those industries have to adopt. And so I would expect over time that we would see smaller markets, packaging-related, medical, even aerospace markets where we've been very underpenetrated.

But we're seeing some nice progress in terms of activity and as those markets recover, hopefully a broader base of customers with less volatility.

Dennis Fehr -- Chief Financial Officer

Let me take it from here in regards to the M&A question. Maybe I'll start first with a quick summary of the overall capital strategy and then talk a bit more about M&A specifically. So on overall capital strategy, I've been always saying that our No. 1 area is our organic investments, think about like the sales transformation and sales expansion which we're investing into.

Then second comes M&A, third, share buybacks and force dividends. So it's kind of the order of priorities, which means M&A quite quite high in that stack, and we have been coming out of the Moritex acquisition, which I think we feel extremely positive and successful about. We talked about how that has helped to be accretive to adjusted EPS and bring it up by a penny. They are.

So in that regard, I think we made very good success story on the Moritex side, and that clearly means like that we are looking for continued M&A. But it's also clear that we're looking for quality deals, and that means we'll be thoughtful when we're making these decisions. And at the same time, I think there's probably a lot further to discuss where probably doesn't have the time right now. But I'm really looking forward to continue a bit more in this conversation at our Investor Day, so we can talk then a bit more about like, hey, what could be potential markets, how do we think about like the balance sheet in that regard.

So a lot of good topics to cover there, and I think we'll address these at Investor Day.

Jamie Cook -- Analyst

Thank you. Very helpful.

Operator

Thank you. The next question is coming from Piyush Avasthy of Citi. Please go ahead.

Piyush Avasthy -- Analyst

Hey. Good morning, guys. Thanks for taking my questions.

Dennis Fehr -- Chief Financial Officer

Hi. Good morning.

Piyush Avasthy -- Analyst

So the current U.S. administration appears to be more pro US manufacturing. Speaking with your customers across the auto or consumer electronics and markets, have you at least begun to see a step up in conversations where your customers are talking about reshaping their manufacturing footprint and maybe adopting more automation and machine vision?

Robert J. Willett -- President, Chief Executive Officer, and Director

Yeah. Thanks for the question. I would say there's certainly an increase of discussion and interest around that topic, no question. And I think every manufacturer in America is thinking very much about the risks and upside associated with with tariffs and other actions that are going on.

I would put a little in the context though that there's just a huge amount of uncertainty and confusion. So I think it's not -- that interest isn't really leading to I think action at the moment. It's leading to confusion, and hopefully we'll see more clarity and then more more actually action. But maybe to give you a little context if we think about our Q4 performance and our Q1 guidance, I think there was a lot -- quite a lot of excitement and positivity that we saw in the back end of last year, really post-election in November and December, which did account for some higher spending, one in prior years I might have called it budget flush type spending that went on in November and December in Americas really only, I'd say.

And I might size that about $6 million to $7 million of business that I think we received in Q4 as a result of that enthusiasm that really came straight out of Q1. So I think there's that. We do have FX is is I think a worry in general for companies where the strength of the US dollar is a $5 million or so headwind for us in Q1 as well. So -- and then there are a lot of policy changes obviously.

If we were -- when we were talking a year ago, there was, a lot of enthusiasm about the Inflation Reduction Act and other things. Clearly, a lot of -- there's a lot more confusion about that. So certainly, that's all at play. I do think in -- if we see major investment in manufacturing and major onshoring going on in the United States, Cognex should be a major beneficiary of that given our strength in this market.

Piyush Avasthy -- Analyst

Helpful. I was a bit late on the call, so maybe you addressed this, but I think you highlighted pricing challenges in the quarter, particularly competing in the China region. Can you update us on that? How would you characterize the pricing environment as it doesn't seem that the demand outlook has changed much, and our competitors in other regions being disciplined from a pricing standpoint? Or are you seeing more incidents of lowering prices to win contracts?

Robert J. Willett -- President, Chief Executive Officer, and Director

I would say, we've been talking for a few quarters now about price -- the pricing dynamic in China. China certainly is an extremely competitive market for us and our customers. So I don't think there's much change to report from that situation in the last quarter, compared to what we're generally seeing. But China is a market where there are strong and emerging competitors in our industry and to us specifically.

I think everyone's been seeing this as an extremely difficult market. Some of the larger players that we see, emerging state-owned enterprises have actually been cost cutting and reducing some of their spend. So certainly, they're feeling the sort of pain that we're seeing in that market. Our strategy, taking a leaf out of the innovator's dilemma, is we want to maintain share, and we want to maintain customers and share as we go through this in China.

We have very strong technology and good gross margins even at difficult prices. So we're willing to take a hit to pricing to maintain share, and that's been the situation it continues to be. As we bring new technology to market, we're hopeful that we'll have bigger deltas that we can assert, the DataMan 290 being an example of something we might might see in that space. But I'd say, in terms of the pricing discussion, it's a very distant gross margin topic compared to some of the volume things that hit our gross margin or the diluted -- the dilution of Moritex, which we're getting to grips with and should improve also.

Dennis, what would you add?

Dennis Fehr -- Chief Financial Officer

Yes, no, absolutely. I think if you think about it both 2024 as a full year or Q1 and Q4 is specifically, I think really the biggest topics we have seen working in the gross margin is really Moritex and then mix effects like the strong growth of logistics. And it's also very clearly that volume plays a big role as well. So that means we have infrastructure and fixed costs right there.

So higher volume or lower volume really drives leverage there. And then pricing is really the fourth item there in the stack, which is really to a lesser extent, but it's very clearly that we are seeing these dynamics and therefore wanted to be transparent and clear about what we are seeing. And that's particularly in China, and I think Rob covered that well.

Piyush Avasthy -- Analyst

I appreciate all the color, guys. Good luck.

Operator

Thank you. The next question is coming from Jacob Levinson of Melius Research. Please go ahead.

Jacob Levinson -- Analyst

Hi. Good morning, everyone.

Robert J. Willett -- President, Chief Executive Officer, and Director

Good morning.

Dennis Fehr -- Chief Financial Officer

Good morning.

Jacob Levinson -- Analyst

Just to attack the M&A side of things from a different angle. I know you folks have bought some really interesting machine learning assets at SUALAB and before [Inaudible] so to speak. Has the rise of AI and the broader public consciousness, does that increase the competition for those types of deals? Or are they just too niche for most buyers that would be looking at the things that interest you guys?

Robert J. Willett -- President, Chief Executive Officer, and Director

So, Jake, to be clear on your question, you're asking kind of are those assets still out there? How are they kind of priced and how are we thinking about them?

Jacob Levinson -- Analyst

Yes, exactly.

Robert J. Willett -- President, Chief Executive Officer, and Director

Yes. So at Cognex, we really excel at finding the best technology for our kind of specific market, industrial machine vision. We're very well known. We have a great reputation, and we cultivate the companies that -- small companies that we think are doing great work.

ViDi is a great example of that. Really an excellent Swiss-based company with some phenomenal engineers doing things that when we really got to understand them, blew us away and we were delighted to acquire them. So I think that was eight years ago I guess, and I think probably that the general investor community saw the potential for advanced technology in manufacturing. So there are a lot of companies that were very heavily invested in the years following that time that are now I'd say for sale.

And so there's a lot of them to see. But a note of caution is when we really get in and look at those companies, they may have raised $50 million of capital on a business plan to have sales of $30 million now, and their sales are 10% of that amount, and they're really more around consulting or other things. They really haven't achieved the potential that they expected. So I think the valuation of those companies is not what people thought they would be five years ago, which is an opportunity for Cognex because some of them have them have good technology they haven't been able to bring to market.

But certainly, the realism about what they actually have and where they are is one I would say is a strong theme that I would observe. Overall, I think it kind of underscores that to play well in our market, it's not enough to have great technology. You have to understand customers. You have to have applications, engineers who really understand the application, and that's where the 3000 or so strong noids that we have who are out there every day, the 30,000 customers or so with the -- who knows? Some of them are the most sophisticated suppliers of technology.

that's great opportunities for us to take technology and apply it, which isn't quite as easy as it might appear to someone who eight years ago launched off on a plan. So I'd say that's the current state of it. My hope is that some of those really good companies and great engineering teams will join Cognex over time. And there's the potential for that to happen, certainly.

Jacob Levinson -- Analyst

OK, appreciate it, Rob. I'll keep it to one question today. Good luck.

Dennis Fehr -- Chief Financial Officer

Thank you.

Robert J. Willett -- President, Chief Executive Officer, and Director

Thank you.

Operator

Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.

Joe Ritchie -- Analyst

Hey, guys, good morning.

Robert J. Willett -- President, Chief Executive Officer, and Director

Hi, Joe.

Dennis Fehr -- Chief Financial Officer

Good morning.

Joe Ritchie -- Analyst

So, Rob, I thought your comments on infusing AI into your tools and the fact that you now require less images to train a model are really interesting. I guess I'm just curious on one hand, I can think of that as being a competitive advantage if you are first mover in your technology is advanced relative to others. On the other hand, it also kind of seems like it may potentially lower the barriers to entry for additional competitors, start-ups, Maybe Chinese competitors. I'm just curious, how do you get comfortable that you can sustain your technology advantage, and this isn't just going to increase competition for your end markets?

Robert J. Willett -- President, Chief Executive Officer, and Director

Yes. Great question, Joe. Thanks so much for it. It is both a great opportunity and a potential threat for Cognex.

There's no doubt about that. The technology is allowing us to do things for customers very quickly and very well that we and they couldn't do before, and it will spread the technology more broadly within existing customers. And that's very exciting. And here it's worth pointing out that there's a lot of great public technology from Silicon Valley kind of coming out of companies.

But that technology isn't ready for industrial application, and there's a lot of expertise we have in taking publicly available models and applying them and really making them work. They don't work well when just applied even with experienced programmers to our industry without deep domain and technology and customer knowledge that we have. I think where this technology is also really both very exciting for us, but also will change our industry is it's making machine vision much easier to apply and implement. And you can really see that we're leading in that space as a result of applying technology in edge learning.

Deep learning went to edge learning, and transformer models are in a way a future that almost no learning. And that that is something that we do extremely well and are leading the industry in, but it will change the sale and it will change who we sell to and how we sell and what we provide for them. Less application engineering, more pure technology that they can implement. I would say I'm pretty optimistic about what that means for Cognex in the next few years.

I don't -- I think this -- the technology that you're seeing coming out of Silicon Valley is still going to be too hard to apply really to our customers. And the people who are going to apply it first are going to be us, and we're going to see it kind of driving. And that's -- I also feel really good about the emerging customer salesforce we're putting in place who can just get that technology out to so many more users and sell it much more quickly than we have before. So that's the overall picture.

But we're a technology company. The business is always -- the technology is getting better and faster and easier to use. Prices come down, applications expand, new markets appear. It's wild and wooly and fun business, and we've been doing it for 43 years, and we're going to go on taking those same principles that have made us successful to this new revolution.

Joe Ritchie -- Analyst

Thank you, Rob. I'll keep it there.

Robert J. Willett -- President, Chief Executive Officer, and Director

Thank you.

Andrew Buscaglia -- Analyst

Thanks.

Operator

Thank you. The next question is coming from Ken Newman of KeyBanc Capital Markets. Please go ahead.

Katie Fleischer -- KeyBanc Capital Markets -- Analyst

Hi. This is Katie Fleisher on for Ken I'll keep it short here. I just was wondering how your positioning for tariffs. And any potential margin impacts from those of another trade war materializes?

Dennis Fehr -- Chief Financial Officer

Yes, happy to take that. I would say the headline statement here is that based on the tariffs which have been announced so far, there's no material impact to Cognex in direct on the cork side. So certainly, things are uncertain. More tariffs may come.

But in general of what is announced so far, no direct impact. Then, of course, there could be a secondary impact from the tariffs. So in the near term, again, there's -- with this uncertainty, we talked about like -- we have seen a lot of positive moment in the November, December time frame. And that has shifted toward a more near-term uncertainty and some of our customer size.

Think about the automotive supply chain across Mexico, Canada and the US. So that's not necessarily a hopeful, but then if you think about it in the mid and and longer term, the reshoring opportunity for Cognex is tremendous. So that means if that is really starting to happen, then there's a tremendous additional market upside for us.

Katie Fleischer -- KeyBanc Capital Markets -- Analyst

Great, thank you. I'll leave it there.

Operator

Thank you. We're showing time for one final question. Our last question today is coming from Jairam Nathan of Daiwa. Please go ahead.

Jairam Nathan -- Analyst

Hi. Thanks for squeezing me in here. So I just wanted to go back to your Moritex acquisition. I think when you made the acquisition, the objectives were expanding beyond Japan and using more of Moritex optics into Cognex equipment.

So I just wanted to kind of understand how you guys -- how it was done in the year. What's the progress? And I said one more question, please.

Robert J. Willett -- President, Chief Executive Officer, and Director

Yeah, great. We're about a year and a quarter into owning Moritex, and we're very pleased with how we're taking their technology and selling it to our existing customers. That's one way in which we can increase gross margin and grow our business. So that's kind of awesome.

We're taking the technology to many customers, which -- because they were very much primarily a Japanese-focused business. We're globalizing it for them and then where you're going to see more and more of it integrated into our core products. So it's a lot of good progress and increasing excitement around that.

Jairam Nathan -- Analyst

Do you need to do any validation? Would it -- does it take longer to kind of get into -- get Moritex components into the products? Is that a bottleneck or something?

Robert J. Willett -- President, Chief Executive Officer, and Director

It's something we're very used to doing. It's very sophisticated. We got PhD photonics people and optics people that work on that, but we're very comfortable, and we know how to do it.

Jairam Nathan -- Analyst

OK. And just finally, some of the logistics companies seem to be, especially on the parcel side, seem to be -- they're talking about moving from -- moving to sensing from scanning. I just wanted to understand how would that impact Cognex if that trend kind of continues. I just want to say it could be good for you.

I just want to understand that.

Robert J. Willett -- President, Chief Executive Officer, and Director

Sure. I'll keep my answer brief, but today kind of the barcode is the defining way in which packages are identified. I don't expect that to change, but certainly there is the opportunity to have more package recognition using machine vision on it. And some packages are complicated, and being able to use vision to inspect them is something we're extremely good.

It's somewhere that our customers would like to go, and it's certainly one journey we're enjoying and exploring with them.

Jairam Nathan -- Analyst

OK. Thank you.

Robert J. Willett -- President, Chief Executive Officer, and Director

Thank you.

Operator

Thank you. This brings us to the end of the question-and-answer session. I would like to turn the floor back over to Mr. Rob Willett for closing comments.

Robert J. Willett -- President, Chief Executive Officer, and Director

Well, thank you so much for joining us this morning. I enjoyed the discussion, and we look forward to speaking with you again on next quarter's call.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Nathan McCurren -- Head of Investor Relations

Robert J. Willett -- President, Chief Executive Officer, and Director

Dennis Fehr -- Chief Financial Officer

Damian Karas -- Analyst

Rob Willett -- President, Chief Executive Officer, and Director

Tommy Moll -- Analyst

Andrew Buscaglia -- Analyst

Jamie Cook -- Analyst

Piyush Avasthy -- Analyst

Jacob Levinson -- Analyst

Joe Ritchie -- Analyst

Katie Fleischer -- KeyBanc Capital Markets -- Analyst

Jairam Nathan -- Analyst

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Cognex (CGNX) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool