OSI Systems Q3 2025: Unraveling Contradictions in Tariffs, Revenue Growth, and Market Trends

Tariff impact and flexibility, service revenue growth and sustainability, backlog and growth expectations, Mexico revenue trends, tariffs and revenue impact are the key contradictions discussed in OSI Systems' latest 2025Q3 earnings call.



Revenue and Earnings Growth:
- OSI Systems reported record revenues of $444 million for Q3 of fiscal '25, representing a 10% increase year-over-year.
- The growth was driven by strong performance across all three divisions, particularly a 10% year-over-year increase in the Security division and a 15% year-over-year increase in the Optoelectronics and Manufacturing division.

Backlog and Bookings:
- The company finished Q3 with a record backlog exceeding $1.8 billion, supported by a book-to-bill ratio above 1.0.
- This strong bookings were attributed to robust sales across multiple regions and diversified customer demand in the Security division, with significant contributions from large orders and long-term contracts.

Operating Cash Flow Improvement:
- OSI Systems generated record Q3 operating cash flow of $82 million, representing a significant jump over the previous year's negative cash flow.
- The improvement was driven by strong profits and better working capital metrics, including a 10% reduction in DSO from Q2.

Service Revenue Growth:
- Service revenues increased significantly, contributing to a 10% year-over-year increase in Security division revenues.
- This growth was primarily due to the increasing installed base of security products requiring ongoing services, leading to higher recurring revenue at a higher margin.

Strategic Acquisitions and Product Development:
- The acquisition of an RF solutions business contributed around $29 million to Security division revenues, with opportunities emerging from long-range secure communication systems.
- The acquisition and integration of this technology are expected to provide long-term growth, supported by strategic investments in R&D for innovative product development.