Navigating Contradictions: Insights from the 2025 Q3 Earnings Call on China Tariffs, Market Growth, and U.S. Recovery

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Strong Financial Performance in Q3:
- Accuray Incorporated reported revenue of $113 million for Q3, up 12% year-over-year.
- The growth was driven by strong performances in both developed and emerging markets, along with a robust service business contributing to 49% of revenue and 59% of gross margin.

Adjusted EBITDA Improvement:
- Accuray's adjusted EBITDA for Q3 was $6 million, compared to $1.1 million in the prior year.
- The increase was primarily due to higher shipments, better service margins, and lower overall operating expenses.

Book-to-Bill Ratio and Order Growth:
- The company's book-to-bill ratio was over 1.2x, indicating healthy customer demand for solutions across both developed and emerging markets.
- Approximately 35% of order growth came from the replacement of aged equipment, suggesting a strong demand for Accuray's products.

Service Business Growth:
- Accuray's Q3 service revenue grew by 9% year-over-year, contributing to 49% of total revenue.
- The growth was driven by higher pricing, increased scale, and operating leverage, positioning the service business as a growth engine for future margin expansion.

Tariff Impact and Mitigation Strategies:
- The company expects minimal shipments to China despite customer demand, potentially impacting $10 million to $15 million in Q4 revenue, mainly due to product sales in China.
- Accuray is implementing mitigation strategies, including establishing a foreign trade zone in the U.S. and working with its China JV to obtain a tariff exemption for life-saving products.