Quest Diagnostics' Strategic Positioning in the Evolving Diagnostic Landscape: Innovation and Market Share Dynamics in Lab-Based Healthcare

The U.S. clinical diagnostics market remains a fiercely contested arena, with Quest Diagnostics (DGX) and LabCorp (LH) locked in a high-stakes battle for dominance. As of Q2 2025, LabCorp holds a commanding 44.00% market share, while Quest trails at 34.33%. Yet, beneath these numbers lies a more nuanced story: Quest's aggressive investments in artificial intelligence (AI), machine learning (ML), and strategic partnerships are reshaping its competitive positioning. With the global AI in diagnostics market projected to surge to $96.52 billion by 2032, Quest's ability to innovate could determine whether it closes the gap with LabCorp or cedes further ground.

AI-Driven Innovation: Quest's Strategic Alliances and Acquisitions

Quest has positioned itself as a leader in integrating AI into diagnostic workflows, leveraging partnerships and acquisitions to accelerate its transformation. In March 2025, the company announced a collaboration with Google Cloud to enhance data management, analytics, and personalized healthcare experiences through generative AI technologies. This partnership aims to improve data quality and security while exploring AI's potential in patient engagement and physician support.

A pivotal move came in May 2024, when Quest acquired PathAI Diagnostics, a digital pathology firm specializing in AI-driven cancer diagnosis. The acquisition not only added PathAI's digitized laboratory in Memphis but also integrated its AI algorithms into Quest's pathology operations, promising faster and more accurate cancer detection. Meanwhile, in September 2025, Quest partnered with Epic Systems to implement the Epic Diagnostic Enterprise system, streamlining operations and enabling faster deployment of AI and automation innovations.

By contrast, LabCorp's AI strategy has focused on clinical decision-making tools. Its 2025 launch of the AI-powered Test Finder, expanded to the Labcorp Diagnostic Assistant and Labcorp Link platforms, allows providers to identify lab tests via conversational prompts embedded in EHR systems. While LabCorp's approach emphasizes clinician workflow integration, Quest's partnerships span broader operational and diagnostic domains, suggesting a more holistic AI integration strategy.

Financial Resilience and Growth Drivers

Quest's financial performance in 2025 underscores its strategic momentum. For Q3 2025, the company reported revenues of $2.82 billion, a 13.1% year-over-year increase, and diluted EPS of $2.16, up 8.5%. These gains reflect robust demand for diagnostic services, bolstered by automation and AI-driven productivity. For the full year, Quest raised its adjusted EPS guidance to $9.76–$9.84, citing contributions from acquisitions, organic growth, and collaborations with entities like Corewell Health and wearable tech firms WHOOP and ŌURA Health.

Cash flow generation has also strengthened, with a 63.1% increase from 2024 in year-to-date operating cash flow. Strategic acquisitions, such as the recent purchase of dialysis testing assets from Fresenius Medical Care, and the expansion of Co-Lab Solutions, are expected to drive an additional $1 billion in revenue by 2026. These moves highlight Quest's ability to scale through both technological and operational innovation.

Market Share Dynamics: Closing the Gap or Falling Behind?

While LabCorp's larger market share provides economies of scale, Quest's focus on AI and automation is narrowing the gap. The company's 2025 profit and revenue forecasts, raised in October, underscore confidence in its ability to outperform industry trends. Moreover, Quest's partnerships with Google Cloud and Epic position it to capitalize on the AI diagnostics boom, a sector expected to grow at a compound annual rate of 28.7% through 2032.

However, LabCorp's Test Finder and EHR integrations are gaining traction among providers, particularly in primary care settings. The key differentiator may lie in execution: Quest's end-to-end AI integration-from pathology to data analytics-could offer a more scalable solution for hospitals and health systems seeking to reduce diagnostic delays and errors.

Conclusion: A Strategic Bet on AI and Execution

Quest Diagnostics' strategic positioning in 2025 reflects a clear bet on AI and digital transformation. While LabCorp's larger market share remains a hurdle, Quest's financial strength, innovative partnerships, and acquisition-driven growth position it as a formidable contender. For investors, the company's ability to translate AI investments into operational efficiency and diagnostic accuracy will be critical. As the diagnostics market evolves, Quest's focus on holistic AI integration may prove to be its most valuable asset.