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MASIMO CORP (MASI)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 2026 (quarter ended June 28, 2025) delivered solid operational execution: healthcare GAAP revenue $370.9M (+7.9% YoY), non-GAAP EPS $1.33 (+46% YoY), and non-GAAP operating margin 27.5% (+600 bps YoY) .
  • Guidance raised on August 5: non-GAAP EPS including tariffs lifted to $5.20–$5.45 (from $4.80–$5.15 in May) as tariff mitigation cut the full-year impact by >50%; ex‑tariffs EPS guided to $5.45–$5.70 .
  • Tariffs were the quarter’s key swing factor; management implemented effective mitigation, reducing expected FY tariff headwind by roughly half and limiting margin impact to ~120–130 bps in 2025 .
  • Consensus comparison: MASI reported non-GAAP EPS $1.33 vs S&P consensus $1.39* and revenue $370.9M vs $398.3M* for Q2 2026; revenue and EPS were below expectations, driven by continuing-operations reporting and ASC 842 lease accounting mix effects highlighted by management . Values retrieved from S&P Global*.

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and earnings power: non-GAAP operating margin rose to 27.5% (+600 bps YoY) and non-GAAP EPS grew 46% YoY to $1.33, supported by cost actions from 2024 and disciplined execution .
    “We once again delivered strong results… our core health care business continued to demonstrate strong growth and earnings.” — CEO Katie Szyman .
  • Tariff mitigation: management reduced the FY 2025 tariff impact by more than half vs initial estimate (to $17–$19M), lifting EPS guidance; “our team has been highly effective in the implementation of tariff mitigation measures” .
  • Commercial and leadership upgrades: expanded leadership (CCO, APAC president, CMO/strategy, QA/regulatory, CIO) and US sales realignment to leverage pulse oximetry leadership into adjacent categories (capnography, brain monitoring, hemodynamics, automation) .

What Went Wrong

  • Revenue vs estimates: Q2 2026 revenue $370.9M was below S&P consensus $398.3M*, and non-GAAP EPS $1.33 was below $1.39*; management emphasized continuing-ops basis and ASC 842 lease mix shifting capital recognition . Values retrieved from S&P Global*.
  • Tariff cost still a headwind: tariffs increased Q2 cost of sales by ~$2M (~50 bps GM headwind), with impact rising through the year as inventory costs flow through .
  • Capital equipment volatility: capital & other revenue fell 2% YoY on a constant-currency basis as ASC 842 continues shifting revenue into operating leases recognized over time, pressuring period-over-period capital lines .

Financial Results

MetricQ2 2025 (prior-year)Q1 2026 (prior quarter)Q2 2026 (current)
GAAP Revenue ($USD Millions)$343.9 $372.0 $370.9
GAAP Diluted EPS – Continuing Ops ($)$0.46 $0.86 $0.82
Non-GAAP EPS ($)$0.91 $1.36 $1.33
Non-GAAP Gross Margin (%)62.5% 63.1% 62.9%
Non-GAAP Operating Margin (%)21.5% 28.8% 27.5%

Segment breakdown (continuing operations):

Segment RevenueQ1 2026Q2 2026Q3 2026
Consumable & Service ($USD Millions)$320 $338 $316
Capital & Other ($USD Millions)$51 $32 $55

KPIs (continuing operations):

KPIQ1 2026Q2 2026Q3 2026
Technology Boards & Instruments Shipped (Units)72,200 63,100 66,000
Incremental Value of New Contracts ($USD Millions)$77 $80 $124
Unrecognized Contract Revenue ($USD Millions)$1,762 $1,720 $1,714

Estimate comparison (S&P Global):

MetricQ1 2026Q2 2026Q3 2026
Primary EPS Consensus Mean ($)1.43286*1.39*1.44286*
Revenue Consensus Mean ($USD Millions)397.97*398.33*398.38*
Values retrieved from S&P Global*.

Highlights vs estimates (Q2 2026):

  • Revenue: $370.9M vs $398.33M* → bold miss . Values retrieved from S&P Global*.
  • Non-GAAP EPS: $1.33 vs $1.39* → miss . Values retrieved from S&P Global*.

Guidance Changes

MetricPeriodPrevious Guidance (May 6)Current Guidance (Aug 5)Change
Non-GAAP Revenue ($USD Millions)FY 2025$1,500–$1,530 $1,505–$1,535 Raised mid‑point
Non-GAAP Operating Margin (%) (incl. tariffs)FY 202525.5–26.4 27.0–27.5 Raised
Non-GAAP EPS ($) (incl. tariffs)FY 2025$4.80–$5.15 $5.20–$5.45 Raised
Non-GAAP Operating Margin (%) (ex tariffs)FY 202528.0–28.5 28.3–28.7 Raised
Non-GAAP EPS ($) (ex tariffs)FY 2025$5.30–$5.60 $5.45–$5.70 Raised
Tariff impact to COGS ($USD Millions)FY 2025$33–$37 (pre‑mitigation) $17–$19 (net of mitigation) Lowered >50%

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2026)Current Period (Q2 2026)Trend
Tariffs & MitigationInitial FY 2025 guidance excluded tariff impact; later framed potential $33–$37M COGS increase before mitigation Net tariff impact guided down to $17–$19M; Q2 COGS hit ~$2M; margin headwind ~50 bps; mitigation actions underway Improving (impact reduced)
Sales mix & ASC 842Noted ASC 842 shift from capital to operating leases affects capital revenue timing Capital & other revenue −2% cc; ASC 842 cited as growth headwind and reason for decline Structural accounting headwind persists
Commercial executionBlueprint set; realignment to leverage pulse ox leadership into adjacencies Expanded leadership; specialty reps per region to pull through advanced categories; impact expected more in 2026 Building (execution ramping)
Philips partnershipKey OEM relationship historically; expansion aspiration Relationship “remains very strong”; discussions to continue partnership “well into the future” despite competitor announcements Stable to positive
CybersecurityReported incident in Q2; cost excluded from non-GAAP Systems fully operational; minimal financial impact in quarter/year; insurance expected to cover costs Resolved
Product/regulatoryStrength in O3/SedLine; innovation pipeline highlighted O3 delta Hb parameters FDA clearance expanded to all patient populations and somatic/cerebral use Positive innovation momentum
HemodynamicsOngoing development with LiDCO and Root platform Next‑gen Root and enhanced hemodynamics planned back half of 2026; pilots ongoing Upcoming launch (2026)

Management Commentary

  • “We once again delivered strong results in the second quarter as our core health care business continued to demonstrate strong growth and earnings.” — CEO Katie Szyman .
  • “Our operations and finance teams have worked relentlessly to reduce our exposure to new tariffs… our updated EPS guidance now exceeds our original projections provided at the beginning of the year before the tariff situation had even started.” — CEO Katie Szyman .
  • “Gross margin of 62.9% improved 40 bps year over year… tariffs increased cost of sales by $2M this quarter… operating margin of 27.5% improved 600 bps year over year.” — CFO Micah Young .
  • “Our updated guidance now incorporates $17 to $19M of tariff impact… with over 60% of the reduction coming from our intensive efforts to mitigate the impact.” — CFO Micah Young .

Q&A Highlights

  • Philips relationship: “Massimo [relationship] with Philips remains very strong… in conversations to continue [it] well into the future.” — CEO .
  • Tariffs path into 2026: Management outlined annualized COGS impact ~200–260 bps net of mitigation to‑date, with medium‑term actions identified to halve the burden further .
  • Hemodynamics: Next‑gen Root with enhanced hemodynamics targeted for back half of 2026; pilots via smart cable ongoing to gather clinical feedback .
  • Cybersecurity: Operations fully restored; minimal financial impact; systems fortified and insurance expected to cover recovery costs .
  • Seasonality & revenue cadence: Expect step down in Q3 from Q2, with seasonally strong Q4 (extra week) offset by discontinued product lines and distributor model changes .

Estimates Context

  • Q2 2026 reported: non-GAAP EPS $1.33 and GAAP revenue $370.9M .
  • S&P Global consensus: EPS $1.39* and revenue $398.3M* for Q2 2026; MASI delivered below consensus on both metrics. Management cited ASC 842 lease accounting and continuing-operations basis as key context for revenue presentation . Values retrieved from S&P Global*.
  • Prior quarter comparisons: Q1 2026 non-GAAP EPS $1.36 vs $1.43286*; revenue $372.0M vs $397.97M* (below); Q3 2026 non-GAAP EPS $1.32 vs $1.44286*; revenue $371.5M vs $398.38M* (below) . Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Tariff mitigation is a major positive driver: MASI lowered 2025 tariff impact by >50%, lifting EPS/margin guidance despite rising quarterly tariff flow-through — supports multiple expansion and earnings durability .
  • Margin expansion is broad‑based: Q2 non-GAAP operating margin +600 bps YoY to 27.5% as 2024 cost initiatives continue to accrue; this underpins FY guidance and cash generation .
  • Revenue optics: Continued OPS/ASC 842 mix can mask capital strength; focus on consumable growth (Q2: $338M, +8% cc) and KPIs (contracts, unrecognized revenue) for underlying demand trend .
  • Strategic positioning improving: Strengthened leadership, sales realignment, and Philips partnership clarity enhance visibility to pull‑through in advanced parameters (capnography, brain monitoring, hemodynamics) into 2026 .
  • Product/regulatory catalysts: Expanded FDA clearance for O3 delta hemoglobin parameters broadens brain/somatic monitoring utility; next‑gen Root/hemodynamics launch expected in back half of 2026 .
  • Near-term trading implications: Expect investor focus on tariff trajectory (further mitigation potential), margin sustainability, and contract/consumable momentum; Q3 seasonality and tariff inventory timing could create volatility, with strong Q4 set-up .
  • Medium-term thesis: Core healthcare franchise and innovation pipeline, coupled with structural margin improvements and OEM partnerships, support earnings growth and free cash flow compounding beyond 2025 .