Azenta (AZTA)·Q1 2026 Earnings Summary
Azenta Q1 FY2026: EPS Misses as Gross Margin Pressure Weighs, Stock Falls 5%
February 4, 2026 · by Fintool AI Agent
Azenta (NASDAQ: AZTA) reported Q1 FY2026 results this morning that disappointed on profitability despite meeting revenue expectations. The life sciences tools company delivered $149M in revenue (beating consensus by 1.4%) but Non-GAAP EPS of $0.09 missed the Street's $0.11 estimate by 18%. Shares fell 5.2% in after-hours trading to $35.00, reflecting investor concern over margin compression and a challenging turnaround trajectory.
Did Azenta Beat Earnings?
The verdict: Revenue beat, but profitability missed significantly.
The EPS miss was driven by gross margin contraction—down 360 basis points YoY to 44.1%—caused by three factors:
- Underutilized lab capacity from lower North America volumes
- Rework costs on several Automated Stores projects (~$2M impact)
- Regional mix shift toward lower-margin Asia vs. North America
CEO John Marotta acknowledged the challenges: "Yes, our job just got harder, and looking ahead, we are committed to our full year 2026 guidance."
Ask Fintool AI AgentWhat Did Management Guide?
FY2026 guidance reiterated—no change despite the margin pressure:
Management is sticking to their long-range plan through 2028 outlined at December's Investor Day. CFO broke down the 300 bps target: 200 bps from gross profit (50% volume, 35% ABS/productivity, 15% price) and 100 bps from OpEx leverage.
How Did the Stock React?
After-hours reaction: -5.2% (from $36.91 close to $35.00)
The sell-off reflects disappointment with margin performance and skepticism about achieving full-year targets given the weak start. Notably, AZTA had rallied from $24 lows in late 2024 to nearly $40 heading into this print—the stock had significant expectations baked in.
What Changed From Last Quarter?
Key shifts:
- Revenue seasonality: Q1 typically weaker than Q4 due to biotech/pharma customer budget cycles
- Margin compression accelerated: Automated Stores rework costs ($2M) and lab inefficiencies ($1M) emerged as headwinds
- Free cash flow improved: $15M FCF vs negative last quarter, reflecting working capital discipline
- SG&A down $5M YoY: Particularly in G&A, reflecting operational transformation progress
Segment Performance
Sample Management Solutions (54% of Revenue)
Drivers:
- Biorepositories: Strong growth with early wins in commercial initiatives
- Consumables & Instruments: Modest YoY growth, steady demand
- Automated Stores & Cryo: Softness from macro-driven budget constraints
- Gross margin pressure: Higher rework costs on Automated Stores projects plus a non-recurring inventory item
Multiomics (46% of Revenue)
Drivers:
- Next-Generation Sequencing: Strong customer demand, HSD growth
- Gene Synthesis: Growth supported by strong oligo demand in China
- Sanger Sequencing: Meaningful YoY decline continues
- China: +26% organic growth — Biotech/pharma investment driving momentum
- North America: Softer, reflecting macro constraints and government shutdown impact
- Gross margin pressure: Regional mix shift (Asia vs. North America) and lost leverage from lower NA volumes
Ask Fintool AI AgentCapital Allocation Update
Three key developments this quarter:
1. New $250M Share Repurchase Program
- Approved December 8, 2025
- Authorized through December 31, 2028
- Represents up to 14.9% of outstanding shares
- No shares repurchased yet as of earnings release
2. B Medical Systems Sale
- Definitive agreement signed December 23, 2025
- Sale price: $63M to Thelema S.À R.L.
- Expected close: On or before March 31, 2026
- B Medical treated as discontinued operations (loss of $0.22/share this quarter)
3. Strong Cash Position
Key Management Quotes
"As I have said before, our turnaround continues, and it will not be a straight line. No turnaround is. After establishing a stronger organization and structural foundation last year, we are accelerating efforts to streamline processes and elevate performance."
— John Marotta, President and CEO
"Yes, our job just got harder, and looking ahead, we are committed to our full year 2026 guidance of 3%-5% organic revenue growth and adjusted EBITDA margin expansion of approximately 300 basis points."
— John Marotta, President and CEO
"I've been very clear that we're not managing this business on the quarter. We're not going to do that within the three years of our turnaround that we've signaled very strongly at our Investor Day."
— John Marotta, President and CEO
"We want our investors to come away and say, 'Hey, listen, these guys are good operators. They've got a grip on the business. Yes, there's not a lot of linearity to turnarounds, but we understand it.'"
— John Marotta, President and CEO
Q&A Highlights
On Gross Margin Recovery and EBITDA Bridge
CFO Lawrence Lin broke down the Q1 EBITDA decline of $3.3M vs. prior year:
GM improvement path for full year: 50% from volume, 35% from ABS/productivity, 15% from price initiatives.
On Automated Stores Quality Issues
CEO Marotta provided specifics: 18 stores had quality issues over the past few years of sales, with only a few remaining to remediate by end of Q2. Full-year cost impact estimated at $3M-$5M.
"What was the issue ultimately? We had too much demand. The teams were being stretched, and we weren't structurally aligned around serving our customers." — John Marotta, CEO
R&D has been restructured into three dedicated teams: New Product Development, Percentage of Completion (POC), and Sustaining Engineering.
On Second-Half Acceleration
Key drivers for H2 ramp:
- 25+ new sales reps hired, typically 3-6 months to ramp — expect to contribute in H2
- Price initiatives in SRS and CNI launched at calendar year start, ramping in H2
- Kaizen events in labs and manufacturing yielding preliminary results
- North America reboot underway in both Multiomics and SMS
On M&A Pipeline
"We are very busy around M&A right now specifically, and we're very excited about what is in our hands right now. We're going to continue to put our capital to work in this area." — John Marotta, CEO
Four capital deployment levers: gross margin improvement, productivity gains, M&A, and share repurchase. Management expects to "pull all four levers" during the turnaround.
On Sanger vs. NGS Dynamics
Sanger decline is structural—management doesn't know where the bottom is but is right-sizing cost structure. Meanwhile, Plasmid-EZ (NGS) is a mid-single-digit grower and the company is "doubling growth" in that business. Company has 4,000 drop boxes globally.
On U.S. Academic and Government
Green shoots emerging despite NIH budget uncertainty. Government shutdown impact was material but has freed up. Pharma/biotech showing more clarity than last year—restructuring is largely complete and customers are moving forward on programs.
Risks and Concerns
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Margin trajectory uncertain: 360 bps of gross margin compression YoY is significant; management's "turnaround is never a straight line" comment suggests more volatility ahead
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Automated Stores project issues: 18 stores had quality issues requiring rework, with $3M-$5M full-year cost impact; remediation expected by end of Q2
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Back-half loaded targets: With Q1 Adj. EBITDA margin at 8.5%, achieving 300 bps annual expansion requires substantial H2 improvement
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Sanger structural decline: End market is shrinking with no clear bottom; requires cost structure right-sizing
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North America execution lag: Commercial reboot lags Europe/Middle East/APAC regions
Historical Earnings Context
Trend: After three consecutive EPS beats, Q1 FY2026 marks the first miss since the turnaround began. Revenue has stabilized with first YoY growth in five quarters.
Forward Catalysts
- B Medical Sale Close (by March 31, 2026): $63M in proceeds plus elimination of discontinued ops losses
- Q2 FY2026 Results (expected May 2026): Will provide visibility on H2 margin recovery trajectory
- Automated Stores Remediation Complete (end of Q2): 18 stores with quality issues, only a few remaining
- New Sales Rep Productivity: 25+ reps hired, expect 3-6 months to ramp—should contribute by H2
- M&A Activity: Management "very excited" about what's in pipeline; expect capital deployment
- Price Initiatives Ramping: SRS and CNI price increases launched at calendar year start
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