Why was the EPS increase only $0.05 despite organic revenue raise and higher cost actions? Is the guidance conservative, and were any tariff refund assumptions baked in?

Amol Chaubal explained that $0.03 EPS from organic sales/cost actions was offset by $0.25 from a stronger U.S. dollar, leading to the net $0.05 raise. He noted the Q4 organic growth guide (4% CC) is prudent, factoring in 3 fewer working days (1-1.5% headwind). On tariffs, he stated Waters rapidly neutralized impact last year, so any refunds would be net neutral due to corresponding surcharges to customers. “between the organic sales raise and the higher cost actions, we get about $0.03 of EPS. But then about $0.25 of EPS are eaten up by stronger U.S. dollar.”

How much of the acquired business guidance raise is related to pricing, how quickly can it ramp to 150 basis points, and what is the customer feedback on these changes?

Amol Chaubal stated Q2 pricing was 0.9% (vs. 0.5% embedded in prior guide). Udit Batra added that the goal is to reach 150 bps quickly, citing the reagent rental compliance efforts (700 U.S. accounts, expert hired) which will improve pricing and accelerate new product uptake. He emphasized that the deal desk model, adopted from legacy Waters, is efficient and reduces bureaucracy, leading to faster approvals. “we've already seen 90 basis points in Q2, where implementation of the deal desk and the execution discipline gave us a lift from the historical 50 basis points to 90, we're well honor to get to the 150 basis points.”

How much of the pressure in flow research is due to lingering headwinds in U.S. academic/government and biotech, and what are the other initiatives to turn around the flow research business beyond China?

Udit Batra clarified that flow reagent side grew, and instrument headwinds are largely from China. U.S. instrument side saw growth, benefiting from improving academic/biotech markets. For China, he highlighted a broader flow cytometry portfolio available in Q4 (localized) and new leadership (Ching Lee). Amol Chaubal added that the FACSDiscover A7 launch (Sept 15) will address the ex-China gap. “In China, there are sort of independent variables that you need to keep in mind. One, we have a broader flow cytometry portfolio available starting Q4. We've sort of localized our portfolio the same playbook we ran for legacy analytical sciences.”

WAT

Waters (WAT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 4, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year 2026 Organic Constant Currency Revenue Growth	7% to 9% high materiality	FY26	High
Full-year 2026 Organic Reported Revenue	$3.37 billion to $3.431 billion high materiality	FY26	High
Full-year 2026 Biosciences and Diagnostic Solutions Reported Revenue	$3.045 billion high materiality	FY26	High
Full-year 2026 Total Reported Revenue	$6.415 billion to $6.476 billion high materiality	FY26	High
Full-year 2026 Adjusted EBIT Margin	28.2% medium materiality	FY26	High
Full-year 2026 Net Interest Expense	$190 million low materiality	FY26	High
Full-year 2026 Tax Rate	15.5% low materiality	FY26	High
Full-year 2026 Adjusted EPS	$14.45 to $14.65 high materiality	FY26	High
Q3 2026 Organic Constant Currency Revenue Growth	8% to 10% high materiality	Q3 · FY26	High
Q3 2026 Organic Reported Revenue	$850 million to $867 million high materiality	Q3 · FY26	High
Q3 2026 Biosciences and Diagnostic Solutions Revenue	$895 million high materiality	Q3 · FY26	High
Q3 2026 Total Reported Revenue	$1.745 billion to $1.762 billion high materiality	Q3 · FY26	High
Q3 2026 Adjusted EPS	$3.95 to $4.05 high materiality	Q3 · FY26	High
Cumulative Cost Savings	$75 million medium materiality	FY26	High
Run Rate Cost Savings	$200 million high materiality	Ongoing	High
Revenue Synergies	$50 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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 million	7%	—	—
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 million	3%	—	—
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 million	7%	—	—
Materials Science Constant currency growth was 8%. Spending trends improved across aerospace and defense, electronics testing for semiconductors, and data center applications.	$87 million	6%	—	—

Product announcements

Product	Type	Timeline
cyclic IMS 20	launch	recent months
Xevo MRTP 10	launch	recent months
BioResolve peptide columns	launch	recent months
GTS resolve lipid columns	launch	recent months
Xevo TQ Absolute XR IVD mass spec	launch	recently launched
on-cell differential scanning calorimeter	launch	recently expanded
FACSDiscover A7 cell analyzer	launch	September 15
BACTEC FXI	launch	recently received FDA 510(k) clearance

Deals & partnerships

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 Biosciences Strategic 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

Stronger U.S. Dollar Q2 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 Headwinds Q2 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 Analysis Q2 FY26

Partially offset strength in Industrial segment.

Historical Trade Inventory Build in Acquired Businesses Historical 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

Acquired Businesses Growth Rate

Exit 2026

Current 4% reported (Q2 FY26)

Target 6% 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.

Find out whether WAT delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.