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    WAT
    Earnings call· Jun 2026(Q2 FY26)

    WATERS CORP /DE/ Q2 FY26 earnings call WAT

    Aug 4, 2026 Source

    Executive summary

    Waters Corporation Q2 FY26 — Strong Organic Growth and Acquired Business Acceleration

    Waters Corporation delivered a strong Q2 FY26, driven by robust organic growth and significant acceleration in its newly acquired Biosciences and Diagnostic Solutions businesses. The company exceeded revenue and EPS guidance, benefiting from strong commercial execution, new product innovation, and improving end-market conditions, particularly in pharma and academic/government segments. Strategic initiatives, including a 180-day revitalization plan for acquired assets and cost actions, are progressing ahead of schedule, positioning the company for continued growth and margin expansion despite currency headwinds and ongoing challenges in China.

    Highlights

    5

    • Total company as reported revenue was $1.645 billion, exceeding guidance.

    • Organic revenue grew 9% in constant currency, exceeding the high end of guidance by 100 basis points.

    • Bioscience and Diagnostic Solutions revenue grew 4% on a reported basis, accelerating 400 basis points from the prior quarter.

    • Adjusted EPS grew 3% to $3.05, landing at the high end of guidance.

    • GLP-1 testing revenue grew over 40% this quarter, with broad-based geographic strength.

    Concerns

    3

    • China Flow Clinical declined 20% due to DRG constraints and lack of localized product portfolio.

    • China Diagnostic Solutions microbiology declined 13% due to ongoing DRG headwinds.

    • A stronger U.S. dollar resulted in a 150 basis point headwind to organic revenue guidance and offset $0.25 of EPS.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year 2026 Organic Constant Currency Revenue Growth
    7% to 9%
    high materiality
    High
    Full-year 2026 Organic Reported Revenue
    $3.37 billion to $3.431 billion
    high materiality
    High
    Full-year 2026 Biosciences and Diagnostic Solutions Reported Revenue
    $3.045 billion
    high materiality
    High
    Full-year 2026 Total Reported Revenue
    $6.415 billion to $6.476 billion
    high materiality
    High
    Full-year 2026 Adjusted EBIT Margin
    28.2%
    medium materiality
    High
    Full-year 2026 Net Interest Expense
    $190 million
    low materiality
    High
    Full-year 2026 Tax Rate
    15.5%
    low materiality
    High
    Full-year 2026 Adjusted EPS
    $14.45 to $14.65
    high materiality
    High
    Q3 2026 Organic Constant Currency Revenue Growth
    8% to 10%
    high materiality
    High
    Q3 2026 Organic Reported Revenue
    $850 million to $867 million
    high materiality
    High
    Q3 2026 Biosciences and Diagnostic Solutions Revenue
    $895 million
    high materiality
    High
    Q3 2026 Total Reported Revenue
    $1.745 billion to $1.762 billion
    high materiality
    High
    Q3 2026 Adjusted EPS
    $3.95 to $4.05
    high materiality
    High
    Cumulative Cost Savings
    $75 million
    medium materiality
    High
    Run Rate Cost Savings
    $200 million
    high materiality
    High
    Revenue Synergies
    $50 million
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Analytical Sciences
    Constant currency growth was 9%. Strength driven by robust replacement activity, idiosyncratic growth drivers, and improved market conditions in U.S. biotech and CROs. Growth led by U.S., China, and rest of Asia (all double digits). Academic and government strength broad-based (Europe mid-teens, Asia double-digits, Americas 6%). Industrial strength in food and environmental (PFAS double-digits) offset by softness in chemical analysis.
    Instruments growth (constant currency): 8%Chemistry growth (constant currency): 10%Service growth (constant currency): 9%Pharma end market growth: 11%Non-pharma end market growth: 4%Academic and government end market growth: 11%Industrial end market growth: 1%
    		$669 million7%——
    Biosciences
    Reported growth was 3%, representing a 400 basis point acceleration in year-over-year growth versus the full first quarter rates. Acceleration driven by Flow Clinical due to strong execution, pricing, and improving end markets. Flow Research trajectory improved through the quarter. China decline in Flow Clinical due to DRG constraints and lack of localized product portfolio. RUO Reagents returned to positive growth due to improved execution, pricing, and customer activity levels.
    Flow Clinical growth: 8%Flow Research decline: 2%Flow Clinical growth ex-China: mid-teensFlow Clinical China decline: 20%RUO Reagents growth: positive
    		$368 million3%——
    Advanced Diagnostics
    Reported growth was 7%. Diagnostic Solutions growth driven by improved commercial execution and incremental pricing. Clinical Business Unit growth led by double-digit strength in Americas and Europe. Molecular Diagnostics and Point of Care growth driven by strong placements in HPV testing on BD core platform.
    Diagnostic Solutions revenue: $449 millionDiagnostic Solutions growth: 5% (400 bps acceleration vs Q1 full quarter)Clinical Business Unit revenue: $72 millionClinical Business Unit growth (reported): 15%Clinical Business Unit growth (constant currency): 14%Microbiology reported revenue: $319 millionMicrobiology growth: 4%Microbiology growth ex-China: 6%Microbiology China decline: 13%Molecular Diagnostics and Point of Care reported revenue: $129 millionMolecular Diagnostics and Point of Care growth: 9%
    		$521 million7%——
    Materials Science
    Constant currency growth was 8%. Spending trends improved across aerospace and defense, electronics testing for semiconductors, and data center applications.
    		$87 million6%——

    Operational metrics

    41
    Total company as reported revenue
    $1.645 billion
    Q2 FY26
    Organic revenue
    $828 million
    Q2 FY26
    Waters Bioscience and Diagnostic Solutions revenue
    $817 million
    Q2 FY26
    Organic revenue growth
    7%
    Q2 FY26
    Organic revenue growth
    9%exceeded high end of guidance range by approximately 100 basis points
    Q2 FY26
    Bioscience and Diagnostic Solutions revenue growth
    4%400 basis point improvement versus last quarter's flat full quarter growth rate
    Q2 FY26
    Adjusted EPS
    $3.05grew 3%
    Q2 FY26

    Landed at the high end of guidance range.

    Adjusted gross margin
    54%
    Q2 FY26

    In line with expectations, reflecting an anticipated sequential step down as ownership of acquired businesses normalized to a full quarter.

    Adjusted operating margin
    25%
    Q2 FY26

    Consistent with expectations.

    Tax rate
    15.6%
    Q2 FY26
    Net interest expense
    $55 million
    Q2 FY26
    Diluted loss per share (GAAP)
    $1.39
    Q2 FY26

    Reflecting acquisition-related purchase accounting charges, including amortization of acquired intangibles and inventory step-up.

    Severance payments
    $21 million
    Q2 FY26
    Integration cost payments
    $27 million
    Q2 FY26
    Net cash settlement due from BD
    $157 million
    Q2 FY26
    Biosciences and Diagnostic Solutions growth ex-China
    6%
    Q2 FY26
    Americas as reported revenue
    $690 million
    Q2 FY26
    Europe as reported revenue
    $505 million
    Q2 FY26
    Asia as reported revenue
    $450 million
    Q2 FY26
    Mass spec instruments placed in pharma DMPK settings
    $10 million
    Q2 FY26

    Early revenue synergies continued to build.

    Acquired businesses net price realization
    90 bps
    Q2 FY26

    Achieved in Q2 alone, towards a goal of 150 basis points.

    China Flow Research improvement
    25 percentage pointsswing from -30% in Q1
    Q2 FY26

    Due to improved speed and efficiency of export license approvals.

    BACTEC FXI input capacity
    2 to 3x greater
    Q2 FY26

    Compared to competing systems.

    BACTEC FXI time savings
    up to 10 days
    annualized

    Of annualized time savings versus prior generation systems.

    BACTEC FXI early adopter site reduction in hands-on time
    80%
    Q2 FY26

    Reported by one early adopter site after switching to FXI.

    Aged BACTEC systems for replacement
    over 12,000
    Q2 FY26

    Large, well-defined installed base.

    GLP-1 testing growth
    over 40%
    Q2 FY26

    Broad-based growth across virtually every geography.

    Pharma reshoring expansion sites tracked
    76
    Q2 FY26

    Linked to U.S. pharma investment announcements; roughly half are under active construction.

    Pharma reshoring CapEx spend
    $100 billion
    Q2 FY26

    Represents capital deployment for reshoring initiatives.

    Waters market share in tracked reshoring sites
    70%
    Q2 FY26

    Approximate share of tracked sites linked to customer accounts where Waters holds high market share.

    Cumulative cost savings
    $75 million
    FY26

    Expected for 2026.

    Run rate cost savings
    $200 million
    FY26

    Expected, placing the company ahead of schedule.

    Revenue synergies
    $50 million
    FY26

    Well on track to deliver this year.

    Organic constant currency growth
    10%
    H1 FY26
    Organic instrument revenue CAGR
    2.5%below the 5% long-term historical growth rate from 2009 to 2019
    2019-2026

    Reflects the multiphase recovery that has elongated the replacement cycle.

    PFAS applications growth
    double digits
    FY26

    Remained a source of strength in Industrial segment.

    China Flow Clinical decline
    20%
    Q2 FY26

    Due to ongoing DRG constraints and lack of localized product portfolio.

    China Diagnostic Solutions microbiology decline
    13%
    Q2 FY26

    Better than expected, despite DRG headwinds.

    Q4 implied organic constant currency growth
    4%
    Q4 FY26

    Prudently calls for this growth, including a 1-1.5% headwind from 3 fewer working days.

    Q3 adjusted operating income benefit from cost actions
    $25 million
    Q3 FY26

    Expected benefit.

    Q4 adjusted operating income benefit from cost actions
    $50 million
    Q4 FY26

    Expected benefit.

    Industry KPIs

    9
    MetricValueDetails
    Revenue EPS guidance7% to 9%%
    China revenue exposuredouble digits%
    Pricing price realization90 basis pointsbps
    Diagnostics testing demand9%%
    M a contribution synergies$50 millionUSD
    Segment organic revenue growth9%%
    Reshoring US manufacturing tailwind76sites
    Instruments vs consumables services mix8%%
    Organic core revenue growth by end market11%%

    Product announcements

    8
    ProductTypeDetails
    cyclic IMS 20launch
    Xevo MRTP 10launch
    BioResolve peptide columnslaunch
    GTS resolve lipid columnslaunch
    Xevo TQ Absolute XR IVD mass speclaunch
    on-cell differential scanning calorimeterlaunch
    FACSDiscover A7 cell analyzerlaunch
    BACTEC FXIlaunch

    Deals & partnerships

    2
    Becton, Dickinson and Company (BD)Acquisition of Waters, Biosciences and Diagnostic Solutions businesses.

    First full quarter under Waters' leadership, driving acceleration to mid-single-digit growth.

    IMU BiosciencesStrategic partnership to scale a precision immunology platform for population-wide immune mapping and disease characterization.IMU has raised over $50 million to date

    Supporting next-generation immune profiling and AI-enabled precision medicine in clinical diagnostic applications. Expected to become the world's largest immune data set.

    Risks & headwinds

    4
    Stronger U.S. DollarQ2 FY26 and full year 2026

    150 basis points headwind to organic revenue guidance; $0.25 impact on EPS.

    Mitigation: Disciplined cost management and overachievement on cost actions.

    China DRG HeadwindsQ2 FY26, expected to roll into baseline in Q4

    Flow Clinical declined 20%; Diagnostic Solutions microbiology declined 13%.

    Mitigation: Localized product portfolio (FXI in Q4), leadership changes, improved export license approvals, localized manufacturing for flow instruments, sharpened focus on pharma market.

    Softness in Chemical AnalysisQ2 FY26

    Partially offset strength in Industrial segment.

    Historical Trade Inventory Build in Acquired BusinessesHistorical Q3/Q4 seasonality

    $20 million of trade inventory build in Q3 (prior year) that unwound in Q4, creating a 3% growth headwind in Q3 and tailwind in Q4.

    Mitigation: Waters does not plan to replicate this pattern.

    What to watch in Q3 FY26

    5

    Acquired Businesses Growth Rate

    Exit 2026
    Current4% reported (Q2 FY26)
    Target6% or better

    Why it matters

    Indicates successful integration and revitalization of acquired assets, crucial for long-term growth algorithm.

    we expect to exit the year with 6% or better growth rate for the 2 businesses and that sets us up really well entering into 2027.

    Q&A highlights

    5

    Given BD Life Sciences grew north of 5% constant currency, well above the deal model, and despite China headwinds and new product contributions, could it become a >6% asset in the medium term?

    Udit Batra expressed extreme satisfaction with the A+ execution, citing mid-single-digit growth. He detailed drivers for future acceleration: leadership changes, strengthened execution (pricing, instrument replacement, digital commerce), A7 launch (Sept 15) into an improved biotech/academic funding environment, China localization for flow cytometry (full portfolio in Q4), and BACTEC FXI launch (now US available, 4500 instruments for replacement). He expects to exit 2026 with 6% or better growth for the acquired businesses, setting up well for 2027.

    “we expect to exit the year with 6% or better growth rate for the 2 businesses and that sets us up really well entering into 2027.”

    asked by Vijay Kumar · answered by Udit Batra

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Organic Performance and End-Market Recovery

    Waters' legacy business demonstrated sustained high single-digit growth, with 9% constant currency organic revenue growth in Q2 FY26 and 10% for the first half of the year. This performance was driven by robust commercial execution and new product innovation. Key end markets, including pharma (11% growth) and academic/government (11% growth), showed significant strength, with U.S. biotech and CROs adding a new layer of demand. China pharma also returned to double-digit growth in the first half, becoming accretive again.

    02

    Acquired Businesses Accelerate Growth

    The newly acquired Biosciences and Diagnostic Solutions businesses achieved mid-single-digit growth (4% reported) in their first full quarter under Waters' leadership, a 400 basis point acceleration from the previous quarter. This rapid improvement is attributed to the successful implementation of a 180-day revitalization plan focusing on commercial discipline, pricing initiatives, and addressing China-specific challenges. The company expects these businesses to exit 2026 with 6% or better growth, setting a strong foundation for 2027.

    03

    Strategic Initiatives and Cost Actions

    Waters completed its planned cost actions for 2026, realizing $75 million in cumulative savings for the year and achieving an expected run rate savings of $200 million, ahead of schedule. These actions, including direct procurement savings, optimized field operations, and leaner cost structures, are expected to support solid margin progression in the second half of FY26. Management anticipates these efforts will drive mid-teens adjusted EPS growth over the next several years.

    04

    New Product Innovation and Pipeline

    The company launched several new products, including the cyclic IMS 20 and Xevo MRTP 10 mass specs, BioResolve peptide and GTS resolve lipid columns, and the Xevo TQ Absolute XR IVD mass spec. Key launches for acquired businesses include the FACSDiscover A7 cell analyzer, set to launch on September 15, and the BACTEC FXI blood culture system, which received FDA 510(k) clearance. BACTEC FXI is expected to drive a multi-year instrument replacement cycle for over 12,000 aged systems.

    05

    GLP-1 and Reshoring Tailwinds

    GLP-1 testing revenue grew over 40% this quarter, with strong performance across all geographies, including India and China. Additionally, pharma reshoring represents a significant incremental growth opportunity, with 76 expansion sites linked to U.S. pharma investment. Roughly half of these sites are under active construction, representing approximately $100 billion in CapEx spend. Waters expects to capture a disproportionate share of demand from these sites given its high market share with 70% of tracked accounts.

    06

    China Market Dynamics and Localization

    While China presented headwinds for Flow Clinical (down 20%) and Diagnostic Solutions (down 13%) due to DRG constraints, the company is actively addressing these. Initiatives include improving export license approvals for Flow Research, leading to a 25 percentage point swing from a 30% decline to a mid-single-digit decline. Waters is also localizing manufacturing for flow instruments and appointing new commercial leadership for Biosciences in China, expecting these efforts to drive faster growth.

    AI-generated summary of the company’s earnings call. Not investment advice.