Novanta's Q2 2025 Earnings Call: Dissecting Contradictions on Tariffs, Revenue, and Industrial Outlook

Impact of tariffs on revenue and market conditions, impact of the macroeconomic environment on revenue, Foxconn robotics revenue projections, Industrial segment outlook, impact of tariffs on China revenue are the key contradictions discussed in Novanta Inc.'s latest 2025Q2 earnings call.



Revenue and Margin Performance:
- Novanta reported revenue of $241 million for Q2 2025, reflecting a 2% reported revenue growth and a 2% decline in organic revenue.
- Adjusted gross margins held at 46% and adjusted EBITDA margin at 22%, both in line with expectations.
- The performance was driven by strong design win activity and new product revenue growth of over 50% year-over-year.

Medical and Robotics Growth:
- The Advanced Surgery business experienced 17% growth year-over-year, driven by strong patient procedure growth and new product launches.
- The Robotics and Automation applications saw 16% year-over-year growth, with demand for products supporting physical AI applications.
- Growth in these segments is driven by long-term secular growth trends and new product introductions, including a $50 million contract in warehouse robotics.

Tariff Mitigation and Strategic Acquisitions:
- Novanta is actively mitigating trade tariff impacts and expects significant cost reductions from its regional manufacturing strategy.
- The acquisition of Kion Technologies has already exceeded expectations, contributing to growth in the second half of 2025.
- The company is actively pursuing additional acquisitions to evolve its portfolio and remain focused on high-growth medical and recurring consumable markets.

Life Sciences Challenges and Technology Shift:
- The Precision Medicine business experienced a 13% sales decline year-over-year, impacted by weak end market dynamics and trade disruptions.
- The shift towards advanced technology solutions such as RFID and machine vision is expected to sequentially improve business performance.
- The company is managing profit flow-through and capital allocation to maintain focus on long-term growth opportunities in life sciences.