Revvity's Q3 2025: Contradictions Emerge on China Diagnostics Impact, Software Growth, and Biotech Instruments

Date of Call: October 30, 2025

Financials Results

• Revenue: $699M, 1% organic growth (FX ~+1% tailwind vs prior assumptions)
• EPS: $1.18 adjusted EPS, $0.05 above midpoint of guidance
• Operating Margin: 26.1% adjusted operating margin, down 220 bps year-over-year

Guidance:

• Reiterate full-year organic growth of 2%–4%; Q4 expected to be largely as previously assumed.
• Full-year revenue expected $2.83–$2.88B; FX tailwind slightly under 1%.
• Full-year adjusted operating margin 27.1%–27.3%; Q4 is seasonally highest (~30%).
• Full-year adjusted EPS raised to $4.90–$5.00.
• Net interest/other ~ $83M; adjusted tax rate ~17%; average diluted shares ~ <117M.
• 2026 baseline: 2%–3% organic growth with a 28% adjusted operating-margin baseline.

Business Commentary:

* Revenue and Earnings Performance: - Revvity generated $699 million in revenue for the third quarter, resulting in 1% organic growth. - The earnings per share were $1.18, which was $0.05 above the midpoint of their guidance. - The strong earnings were driven by adjusted operating margins of 26.1%, which were modestly above expectations.

• Software Growth and Margin Expansion:
• The Signals software business grew by 20% organically in Q3.

• This growth contributed to the company's high adjusted operating margins, which were achieved through cost containment initiatives.

• Diagnostics Segment and Regional Performance:

• The diagnostics segment reported 2% organic growth, with the reproductive health business growing in the mid-single digits and newborn screening in the high single digits.

• The Americas region grew in the low single digits, and Europe in the mid-single digits, while Asia declined in the mid-single digits, with China seeing a significant 20% decline in the diagnostics business due to DRG-related declines.

• Capital Deployment and Share Repurchase:

• Revvity repurchased $205 million worth of shares in the third quarter, bringing the total to 12.5 million shares since the divestiture two and a half years ago.
• The company received a final $38 million brand payment related to a large divestiture, contributing to free cash flow of $120 million.

Sentiment Analysis:

Overall Tone: Positive

• Management called Q3 results "in line with expectations," highlighted $120M free cash flow and $205M buybacks in Q3, secured a new $1B buyback authorization, described being "increasingly optimistic" on demand, reiterated full-year organic growth 2%–4% and raised FY adjusted EPS to $4.90–$5.00.

Q&A:

• Question from Patrick Donnelly (Citi): Can you discuss the moving pieces into 2026 (China diagnostics, software comps, reagents vs instruments) and confidence in holding 28% margin?
  Response: Management reiterated a prudent 2%–3% 2026 organic outlook, pointed to improving instrument demand (pharma/biotech) and strong diagnostics ex‑China, and said they are confident in achieving a 28% operating‑margin baseline via actions already underway.

• Question from Vijay Kumar (Evercore ISI): Can you elaborate on the October pickup in customer activity (which customer types, reagents vs instruments) and whether 2%–3%/28% implies high single‑digit EPS?
  Response: Activity pickup is concentrated in pharma/biotech and on instruments; 2%–3% organic with a 28% margin baseline implies high‑single‑digit EPS growth for 2026, with a tax baseline around ~18%.

• Question from Michael Riskin (Bank of America): Can you walk through confidence in the Q3→Q4 ramp (organic and margin) and frame China DRG impact into 2026?
  Response: Q4 margin ramp is driven by seasonality (highest-volume quarter), IDX comps and a software dollar ramp plus instrument seasonality; China DRG headwinds persist through the Q2 2026 anniversary and should moderate thereafter.

• Question from Dan Leonard (UBS): What software growth is embedded in 2026 given tough comps, and thoughts on M&A vs buybacks?
  Response: Software is expected to slow to mid‑single‑digit organic growth in 2026 (after high‑teens in 2025) though ARR/APV/NRR remain strong; M&A will be disciplined and buybacks are currently viewed as the highest‑return capital deployment.

• Question from Tycho Peterson (Jefferies): Did reagents decline this quarter and what are incremental margins going forward; is budget flush into year‑end baked in?
  Response: Reagents were slightly down in Q3 due to summer softness but reagent incrementals/margin profile remain intact; modest instrument seasonality into Q4 is assumed and budget flush is only modestly reflected in guidance.

• Question from Doug Schenkel (Wolfe): What percent of sales is China exiting Q3, expected DRG decline magnitude and confidence in return to growth?
  Response: China is closer to ~6% of revenue exiting Q3; DRG drove mid‑20% declines in China immunodiagnostics in Q3 and those headwinds are expected through the Q2 2026 anniversary after which growth should normalize; immunodiagnostics ex‑China remains strong.

• Question from Puneet Souda (Leerink): Is the instrumentation recovery tied to tariff-related timing or genuine customer demand; reagent growth outlook and localization in China?
  Response: The instrument pickup is broad pharma/biotech demand, not tariff‑related; reproductive health/newborn screening manufacturing for China is fully localized and >50% of IDX is now produced locally for China.

• Question from Dan Arias (Stifel): How should we model the ~$10M gel contribution sequentially and which biotechs are driving instrument enthusiasm?
  Response: The ~$10M gel contribution is a second‑half amount with some in Q3 and modest sequential pickup into Q4, expected to be a steady recurring contribution in 2026; instrument demand uptick is concentrated in mid‑to‑large biotechs.

• Question from Catherine Schult (Baird): For the 2%–4% full‑year range, should we anchor to the low end for Q4; how did US academic/government perform and how big is shutdown risk?
  Response: Midpoint implies Q4 organic around 2%–3%; US academic/government was down mid‑single digits in Q3 and a modest reagent headwind from the government shutdown is already baked into Q4 guidance.

• Question from Sabu Nambi (Guggenheim): As customers implement AI, is that a threat or opportunity and which instruments will first participate in recovery; will you provide book‑to‑build?
  Response: Management views AI as a net opportunity—driving near‑term reagent/instrument demand and positioning Signals for long‑term upside; initial instrument benefit expected in cellular imaging/high‑content screening, and they will not provide book‑to‑build data.

Contradiction Point 1

China Diagnostics Impact and Expectations

It involves the impact and expectations surrounding China diagnostics, which is a significant segment for the company, affecting overall revenue and strategic planning.

Can you provide an update on China's diagnostics situation and outlook? - Douglas Schenkel(Wolfe)

2025Q3: As you've heard from us in the past, given the onshoring of manufacturing capabilities and an increase in local content, China represents a very small portion of our sales, about 6%. - Steve Willoughby(Senior Vice President, IR)

What are the revenue assumptions for the year, and when will DRG pricing headwinds in China stabilize? - Douglas Schenkel(Wolfe Research, LLC)

2025Q2: IDx in China is less than 6% of total revenue and will likely be less than 5% in '26. - Maxwell Krakowiak(CFO)

Contradiction Point 2

Software Growth Expectations

It involves the expectations for software growth, which is a significant revenue contributor and a key area of focus for the company.

What is the expected growth outlook for your software business in 2026? - Dan Leonard(UBS)

2025Q3: We expect our software business to grow mid-single-digit next year. The contributions from new products are expected to be really modest in the near term as they continue to be launched and we expect the ramping to take some time. - Steve Willoughby(Senior Vice President, IR)

How much of the software growth comes from new contracts versus continued licensing, and how is the growth being sustained? - Puneet Souda(Leerink Partners)

2025Q2: We also remain committed to delivering on our long-term growth objectives, which include accelerating organic revenue growth in fiscal '26 to 4% to 6% and expanding our software business, which has grown 22% and 32% in fiscal '24 and '25, respectively. - Maxwell Krakowiak(CFO)

Contradiction Point 3

Instruments and Biotech Activity

It involves the expectations for instrument sales, particularly in the biotech sector, which is a crucial market for the company's growth.

Can you clarify October customer activity levels and their impact on 2026 guidance? - Vijay Kumar(Evercore ISI)

2025Q3: Customer activity is increasing, particularly in pharma biotech, focusing on instrumentation. - Prahlad Singh(President and CEO)

Can you provide details on the Life Sciences segments, particularly reagents and instruments, with strong performance? - Daniel Brennan(TD Cowen)

2025Q2: Pharma/biotech continues to show stability with 5 consecutive quarters of reagent growth. The business is optimistic despite challenges in capital equipment spending. - Prahlad R. Singh(CEO, President & Director)

Contradiction Point 4

China Diagnostics Impact

It involves differing assessments on the impact of DRG adjustments on China diagnostics sales, which is a significant revenue factor for Revvity.

What is the current status and outlook for China diagnostics? - Doug Schenkel (Wolfe)

2025Q3: China diagnostics represent about 6% of sales. DRG impacts are expected to persist until the second quarter of 2026, with a low single-digit growth assumption for the second half of 2026. - Steve Willoughby(CFO)

How do you expect 2Q to perform in China? Are there impacts from government actions against Revvity and other Western vendors due to political tensions? - Daniel Brennan (TD Cowen)

2025Q1: Diagnostics business is in China for China, and Life Sciences supply chain redundancy is in place. - Prahlad Singh(CEO)

Contradiction Point 5

Software Growth Expectations

It involves differing expectations for the growth rate and drivers of Revvity's software business, which is a critical growth area for the company.

What is the expected growth for your software business in 2026? - Dan Leonard (UBS)

2025Q3: Steve Willoughby anticipated mid-single-digit growth for software in 2026, with contributions from new MIPS. - Steve Willoughby(CFO)

How do you expect Q2 to perform in China? Are there government actions affecting Revvity and other Western vendors amid heightened political tensions? - Daniel Brennan (TD Cowen)

2025Q1: Software is now expected to show stronger growth than previously anticipated. - Maxwell Krakowiak(CFO)