Bio-Rad's Q3 2025: Contradictions Emerge in Process Chromatography, Diagnostics, Tariff Impact, Digital PCR, and China Market Outlook

Date of Call: October 29, 2025

Financials Results

• Revenue: $653M in Q3 2025, up 0.5% reported vs $650M in Q3 2024; currency-neutral down 1.7% YOY
• EPS: $2.26 non-GAAP diluted EPS, up from $2.02 in Q3 2024; GAAP net loss of $342M or $12.70 per diluted share (driven by Sartorius equity fair-value change)
• Gross Margin: GAAP gross margin 52.6% vs 54.8% in Q3 2024; non-GAAP gross margin 53.5% vs 55.6% in prior year
• Operating Margin: GAAP operating margin ~10.0% (flat YOY); non-GAAP operating margin 11.8% vs 11.3% in Q3 2024

Guidance:

• Maintain 2025 full-year currency-neutral revenue growth of flat to 1%.
• Full-year non-GAAP gross margin outlook 53.5%–54.5% and non-GAAP operating margin 12%–13%.
• Expect modest Life Science revenue improvement in Q4; process chromatography to be lower sequentially and Y/Y in Q4.
• Diagnostics expected to return to growth in Q4 as China reimbursement headwind annualizes and quality-controls revenue times into the quarter.
• Anticipate a slight Q4 gross-margin step-up and operating-margin improvement of at least 80 basis points sequentially.
• Full-year free cash flow targeted at ~$310M–$330M.

Business Commentary:

* Revenue Performance and Segment Trends: - Bio-Rad reported revenue of $653 million for Q3 2025, a 0.5% increase year-over-year. - The Life Science segment experienced flat revenue on a reported basis, with a 1.5% decline on a currency-neutral basis, primarily due to constrained academic research and biotech funding, especially in the Americas. - The Clinical Diagnostics segment saw a 0.6% increase on a reported basis but a 1.8% decrease on a currency-neutral basis, impacted by lower reimbursement rates for diabetes testing in China.

• Gross Margin and Operating Margin Trends:
• Q3 reported GAAP and non-GAAP gross margins were 52.6% and 53.5%, respectively, compared to 54.8% and 55.6% in the year-ago period, due to higher material costs and reduced fixed manufacturing absorption.

• Operating margin exceeded consensus, with Q3 operating income flat at 10% of sales, reflecting proactive cost management and net reductions in R&D expenses.

• Droplet Digital PCR Strategy and Partnerships:

• Bio-Rad advanced its Droplet Digital PCR strategy, completing global sales training and demonstrating positive customer receptivity, particularly in the entry-level segment.

• The company expanded partnerships for ddPCR-based diagnostics, with Gencurix selecting Bio-Rad as the exclusive distributor for Droplex oncology testing kits in Europe, and Biodesix validating its ESR1 assay in CLIA-accredited labs.

• Outlook and Market Conditions:

• For 2026, Bio-Rad anticipates low to mid-single-digit revenue growth, depending on academic and biotech funding recovery, and expects process chromatography to normalize at a high single-digit growth rate.
• Despite uncertainties, Bio-Rad remains cautious about academic research and biotech funding recovery, with a focus on driving margin expansion through operational efficiency and cost management initiatives.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized "solid execution" and that "operating margin exceeded consensus" and said they are "maintaining our 2025 full year outlook," while also flagging China reimbursement headwinds and constrained academic funding — a mix of cautious optimism and persistent headwinds.

Q&A:

• Question from Patrick Donnelly (Citigroup Inc., Research Division): Can you talk about the expectations for 4Q? Maybe just talk about the ramp into 4Q, the assumptions there would be helpful.
  Response: Mgmt expects a slight sequential uptick in both Life Science and Diagnostics in Q4; process chromatography to decline sequentially while ddPCR strength and quality-controls revenue should help lift results.

• Question from Patrick Donnelly (Citigroup Inc., Research Division): Any initial thoughts on 2026 — China diagnostics, academic government, and moving pieces on the revenue side?
  Response: Mgmt is cautious on U.S. academic funding (NIH) with instruments most affected, sees consumables holding up, views China as an open question, expects gradual biotech recovery, and anticipates process-chromatography normalizing to high-single-digit growth longer-term.

• Question from Patrick Donnelly (Citigroup Inc., Research Division): On digital PCR, what does the market look like and thoughts going into next year on that piece?
  Response: Mgmt reports strong customer receptivity, an expanding commercial effort and partnerships that should provide diagnostic upside, though sales cycles remain extended.

• Question from Daniel Leonard (UBS Investment Bank, Research Division): I think the total year guidance implies a range of 1% to 5% organic growth assumed for Q4 — can you confirm and how have you embedded a government shutdown assumption into that figure?
  Response: Mgmt says Q4 contemplates the government shutdown and they remain comfortable holding full-year currency-neutral revenue guide of 0%–1% and non-GAAP operating margin of 12%–13%, implying sequential margin improvement in Q4.

• Question from Daniel Leonard (UBS Investment Bank, Research Division): The comment that process chromatography ought to be a high single-digit grower for 2026 — does that reflect market normalization?
  Response: Mgmt acknowledges ongoing volatility but expects normalization from '25 to '26 with process chromatography targeting high-single-digit growth as a reasonable assumption.

• Question from Daniel Leonard (UBS Investment Bank, Research Division): Could you quantify the diabetes pricing headwind in China on the quarter so we can see the incremental benefit when it lapses?
  Response: Simplified impact: approximately a mid-single-digit price reduction plus a low-to-mid-single-digit channel correction, together representing the major portion of the China diabetes headwind.

• Question from Brandon Couillard (Wells Fargo Securities, LLC, Research Division): Any color on instruments versus consumables in ddPCR in Q3? Was the integration disruptive to revenues during retraining?
  Response: Mgmt says integration was not disruptive, pipeline and demo demand grew, consumables were softer in Q3 but should rebound in Q4, and the portfolio remains on plan for the year.

• Question from Brandon Couillard (Wells Fargo Securities, LLC, Research Division): If growth remains low-single-digit, can you expand margins next year and what are the P&L moving parts?
  Response: Mgmt targets ~3%–5% growth to enable better absorption and expects margin expansion via lean operational initiatives, logistics improvements, purchasing leverage and OpEx productivity efforts.

• Question from Tycho Peterson (Jefferies LLC, Research Division): Why don't you expect China diagnostic headwinds next year given others have cited VBP spillover?
  Response: Mgmt says VBP hasn't materially affected them this year, expects strength from quality-controls to offset headwinds, and that broader China macro improvement would lift demand across the business.

• Question from Tycho Peterson (Jefferies LLC, Research Division): Backing out process chromatography (down high single-digit), was the Life Science weakness just funding-related and how did it compare to your expectations?
  Response: Mgmt indicates results met expectations once one-time large orders from the prior year are neutralized, with pressure concentrated in North America while EMEA held up.

• Question from Tycho Peterson (Jefferies LLC, Research Division): Post-launch, to what degree are ddPCR systems getting written into budgets as a leading indicator?
  Response: Mgmt reports strong pipeline growth and high demand for demos, but limited visibility into formal multi-quarter budget entries — signaling positive demand indicators rather than clear long-lead tenders.

• Question from Jack Meehan (Nephron Research LLC): For QX Continuum and Stilla, how is demo activity and funnel building for 2026, and any change to revenue contribution assumptions?
  Response: Mgmt still targets the single‑million revenue contribution previously discussed, sees strong customer feedback and interest across Continuum and QX (notably competitive at the lower-end), and feels good about funnel development.

• Question from Jack Meehan (Nephron Research LLC): Why did the Americas Life Sciences weaken sequentially — delayed ramp, pull-forward, or funding dynamics?
  Response: Mgmt attributes the slowdown to tightened budgets at larger academic institutions, seasonal (summer) sluggishness and a general wait‑and‑see customer stance.

• Question from Jack Meehan (Nephron Research LLC): Can you quantify the one-time large orders in the prior year that affected Life Science comparables?
  Response: Mgmt estimates the prior-year one-time orders in Life Science were in the low-double-digit millions, which helps explain the swing to low-single-digit year-over-year growth on a normalized basis.

Contradiction Point 1

Process Chromatography Growth Expectations

It involves differing expectations for process chromatography growth, which is a significant part of Bio-Rad's revenue, impacting investor trust and stock price volatility.

Does the projected high single-digit growth in process chromatography reflect market normalization? - Daniel Leonard (UBS Investment Bank, Research Division)

2025Q3: Our guidance remains intact at mid single-digit growth for the year, reflecting the well-recognized VBP headwinds and normalization of process chromatography to high single-digit growth. - Roop Lakkaraju(CFO)

Can you discuss the pull-forward in the quarter and its sustainability? - Patrick Bernard Donnelly (Citigroup Inc.)

2025Q2: We raised our guide on process chrome from high single digits to low double digits, indicating sustainability. - Roop K. Lakkaraju(CFO)

Contradiction Point 2

Diagnostics Growth Expectations

It involves differing expectations for the growth of the diagnostics segment, which is crucial for understanding the company's financial outlook and strategic planning.

Can you quantify the diabetes pricing headwind in China this quarter? - Patrick Donnelly (Citigroup)

2025Q3: For 2025, we expect our diagnostics business to decline approximately 8% to 9% due to challenging macroeconomic conditions. - Roop Lakkaraju(CFO)

What caused the 100 bps decline in diagnostics growth? - Conor McNamara (RBC Capital Markets)

2025Q1: For full year 2025, we now expect diagnostics sales to decline in the low double-digit range. - Roop Lakkaraju(CFO)

Contradiction Point 3

Impact of Tariffs on Margins

It concerns the financial impact of tariffs on the company's margins, which are critical for understanding the company's financial health and profitability.

Can you quantify the diabetes pricing headwind in China this quarter? - Patrick Donnelly (Citigroup)

2025Q3: We still expect a 130 basis point headwind from tariffs in Q3, which is our estimate as of today. - Roop Lakkaraju(CFO)

Is the 130 basis point margin impact from tariffs a three-quarter impact? - Jack Meehan (Nephron Research)

2025Q1: The 130 basis points reflects the tariffs, which we are managing through surcharges and some of our mitigation efforts. - Roop Lakkaraju(CFO)

Contradiction Point 4

Digital PCR Market Recovery

It involves differing expectations for the recovery of the digital PCR market, which is a key growth area for Bio-Rad.

What's the market outlook for ddPCR and Digital PCR in 2024? - Patrick Donnelly (Citigroup Inc., Research Division)

2025Q3: Commercial excitement is high, and we're seeing good customer receptivity. Through partnerships, we expect upside in diagnostics. We anticipate a broader market recovery to drive instrument demand. - Jonathan DiVincenzo(COO)

Does the digital PCR guidance include equipment decline, and what are growth expectations for new product introductions? - Tycho Peterson (Jefferies)

2024Q4: Digital PCR growth is primarily driven by consumables. The instrument market remains soft. New product contributions are not significant initially but will build over time. - Roop Lakkaraju(CFO)

Contradiction Point 5

China Diagnostics Market Outlook

It involves differing expectations for the China diagnostics market, which is a key geography for Bio-Rad's operations, affecting strategic planning and investor expectations.

Can you stress test China diagnostics assumptions for 2026? Why no VBP headwinds? - Tycho Peterson (Jefferies LLC, Research Division)

2025Q3: We expect quality controls to remain strong. Macroeconomic improvement in China could benefit all players, offsetting some market headwinds. - Roop Lakkaraju(CFO)

Could you explain the Q1 forecast and how it compares to Q4's trend? - Jack Meehan (Nephron Research LLC)

2024Q4: The China reimbursement environment also negatively impacted segment results, particularly in Diabetes and our healthcare business in China. This was driven by reduced government reimbursement for diabetes monitoring and reduced government reimbursement for medical services impacting our healthcare business. - Roop Lakkaraju(CFO)