Executive Summary

Q4 2025 results are not yet filed; Masimo last reported Q3 2025 with GAAP revenue $371.5M (+8.2% Y/Y), non-GAAP EPS $1.32 (+38% Y/Y) and non-GAAP operating margin 27.1% (+450 bps Y/Y), while tightening FY25 revenue and raising margin/EPS guidance; Q4 includes an extra selling week and management expects consumables to accelerate into year-end .
Guidance raised: FY25 non-GAAP EPS to $5.40–$5.55 (from $5.20–$5.45), operating margin to 27.3%–27.7% (from 27.0%–27.5%); revenue narrowed to $1.510–$1.530B (from $1.505–$1.535B) .
Tariffs remain a headwind (~140 bps hit to Q3 gross margin and operating margin), but mitigation reduced FY25 tariff impact to ~$16–$17M from $33–$37M previously; Q4 will see stepped-up tariff cost recognition through inventory flow-through .
Strategic catalysts into Q4: expanded Philips partnership (share gains opportunity), continued capital return (buybacks funded by Sound United sale), and a November jury verdict awarding Masimo $634.3M against Apple in patent litigation .

What Went Well and What Went Wrong

What Went Well
- Earnings quality and leverage: Q3 non-GAAP operating margin expanded 450 bps Y/Y to 27.1%; non-GAAP EPS +38% to $1.32, supported by cost optimization and operating efficiency initiatives .
- Contracting and backlog indicators: Q3 incremental new contracts $124M (best Q3 on record); unrecognized contract revenue to be recognized in next 12 months rose 17% Y/Y to $507M; shipped 66,000 technology boards/instruments, +8% Y/Y .
- Strategic focus and partnerships: CEO underscored momentum in core healthcare and expanded Philips partnership to accelerate device integration and AI algorithms; new AI-enabled sensor roadmap (e.g., opioid-induced respiratory depression) targeted for 2026 launches .
What Went Wrong
- Mix and comps: Consumables grew just 1% Y/Y in Q3 on tough comps (20% growth in Q3’24); capital equipment rebounded +67% Y/Y off a weak base; management expects normalization as comps roll off .
- Tariff drag: Q3 gross margin declined 70 bps Y/Y to 62.2% due to ~140 bps tariff headwind despite ~+70 bps operational gains; tariffs increased Q3 cost of sales by $5M .
- Distribution shifts and accounting frictions: Move from direct to distributor in some international markets creates a ~$6M FY25 revenue headwind (neutral to profitability); leasing (ASC 842) continues to shift some capital revenue recognition timing .

Financial Results

Note: Q4 2025 not yet reported as of this writing. Latest quarterly trend below.

Metric	Q4 2024	Q1 2025	Q2 2025	Q3 2025
GAAP Revenue ($M)	$368.5	$372.0	$370.9	$371.5
Non-GAAP Revenue ($M)	$368.4	$371.0	$370.3	$371.2
GAAP Diluted EPS (continuing ops)	N/A (consol. GAAP diluted EPS -$6.52)	$0.86	$0.82	$0.99
Non-GAAP EPS ($)	$1.80	$1.36	$1.33	$1.32
Non-GAAP Operating Margin %	22.4%	28.8%	27.5%	27.1%
Non-GAAP Gross Margin %	63.0% (Healthcare)	63.1%	62.9%	62.2%

Segment/Category mix (as reported):

Metric	Q1 2025	Q2 2025	Q3 2025
Consumable & Service Revenue ($M)	$320	$338	$316
Capital & Other Revenue ($M)	$51	$32	$55

Key operating KPIs:

KPI	Q2 2025	Q3 2025
Technology boards/instruments shipped (units)	63,100	66,000
Incremental value of new contracts ($M)	$80	$124
Unrecognized contract revenue ($M)	$1,720	$1,714
Unrecognized contract revenue expected next 12 months ($M)	N/A	$507
Operating cash flow ($M)	~$62 (healthcare)	$57

Estimates comparison for Q4 2025: S&P Global consensus was not retrievable at this time due to a rate limit. We will update with beat/miss once data is accessible. Values retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance (Aug 5, 2025)	Current Guidance (Nov 4, 2025)	Change
Non-GAAP Revenue	FY2025	$1.505–$1.535B	$1.510–$1.530B	Tightened (midpoint +$0.0B)
Non-GAAP Operating Margin	FY2025	27.0%–27.5% (incl. tariffs)	27.3%–27.7% (incl. tariffs)	Raised
Non-GAAP EPS	FY2025	$5.20–$5.45 (incl. tariffs)	$5.40–$5.55 (incl. tariffs)	Raised
Non-GAAP Op. Profit	FY2025	$406–$422M (incl. tariffs)	$412–$424M (incl. tariffs)	Raised (midpoint)
Tariff impact (COGS)	FY2025	$17–$19M	$16–$17M	Lowered
EPS excl. tariffs	FY2025	$5.45–$5.70	$5.62–$5.79	Raised

Management reiterated that Q4 2025 has an extra selling week; benefit is largely offset by discontinued products and distributor model shifts in certain international markets .

Earnings Call Themes & Trends

Topic	Q2 2025 (Q-2)	Q3 2025 (Q-1)	Q4 2025 (Current period status)
AI/Technology initiatives	Redeploying advanced algorithms into clinical sensors; example: AF detection via pulse ox; roadmap for intelligent monitoring .	Expanding AI across devices with Philips; OIRD algorithm targeting hospital integration for 2026 .	Investor Day (Dec 3) to detail pipeline and long-term outlook .
Supply chain/tariffs	Tariff mitigation cut FY25 impact >50% (to $17–$19M); margin headwind 120–130 bps; ongoing mitigation plans .	Tariff drag ~140 bps in Q3; FY25 impact further reduced to $16–$17M; path to halve annualized COGS impact over time .	Expect stepped-up tariff cost recognition through Q4 via inventory flow-through .
Product performance (consumables vs capital)	Consumables +8% (cc) Y/Y; capital -2% (cc) Y/Y; leases (ASC 842) a headwind to reported capital revenue .	Consumables +1% Y/Y on tough comp; capital +67% Y/Y off weak base; two-year stack normalizes both .	Management expects consumables to accelerate in Q4 (seasonality + large contracts) .
Regional/commercial execution	New leadership hires; US sales realigned to drive specialty pull-through; target 10–20% growth in adjacencies .	Strongest Q3 contracting on record; next-12-month unrecognized revenue +17% Y/Y .	Distributor model shift in some OUS markets (revenue timing headwind; neutral to margins) .
Regulatory/legal	—	Continued Apple litigation costs excluded from non-GAAP; Sound United sale closed .	Jury verdict awarded $634.3M to Masimo vs Apple (Nov 18) .

Management Commentary

“Revenues grew 8%, operating margin improved by 450 basis points, and EPS grew by 38%... We closed the sale of Sound United... and announced the expansion of our strategic partnership with Philips” — CEO Katie Szyman, Q3 PR .
“Our gross margin of 62.2% experienced a decline of 70 basis points compared to the prior year due to tariff impacts outweighing operational improvements... Tariffs increased our cost of sales by $5 million this quarter” — CFO Micah Young, Q3 call .
“We are tightening our full-year revenue guidance... raising our operating margin guidance... and raising our earnings per share guidance to be in the range of $5.40–$5.55” — CFO, Q3 call .
“Under [the Philips] partnership, Philips will expedite the adoption of our AI algorithm across additional devices and market segments... including the integration of capnography and the launch of next-gen wearables” — CEO, Q3 call .

Q&A Highlights

Consumables normalization: Q3 consumables +1% Y/Y due to prior-year strength; management expects stronger consumables in Q4 with contract-driven shipments .
Distributor model impact: Shift from direct-to-distributor in some OUS markets creates a ~$6M FY25 revenue headwind, neutral to earnings/margins; bulk in Q4 .
Philips partnership outlook: Masimo remains under-indexed in Philips’ installed base; sees runway to gain share over next five years while maintaining product mix .
Capital allocation: Post-Sound United, priority on buybacks at current valuation and tuck-in tech acquisitions ; $350M buybacks 3Q–4Q to date .
Tariffs: Annualized COGS impact after implemented mitigation estimated at ~200–260 bps, with potential to halve over time via further actions .

Estimates Context

We attempted to retrieve S&P Global consensus for Q4 2025, FY2025, and FY2026 (revenue, EPS, EBITDA), but the request hit a daily limit; therefore, specific consensus figures are unavailable at this time. Values retrieved from S&P Global.
Directionally, management raised FY25 EPS and margin guidance in Q3, implying a stronger earnings exit rate into Q4 despite tariff headwinds and distribution shifts .
We will update beat/miss analysis vs consensus once SPGI estimates become accessible. Values retrieved from S&P Global.

Key Takeaways for Investors

Setup into Q4 is constructive: raised FY25 EPS/margin guidance and messaging of stronger consumables in Q4 (plus an extra week) should support a healthy year-end print, while capital may be softer Q/Q on seasonality and mix .
Margin story intact despite tariffs: operational improvements and mitigation have outpaced tariff headwinds YTD, with a credible plan to further reduce annualized COGS impact over time .
Demand indicators robust: record Q3 contracting, higher next-12-month unrecognized revenue, and increased board shipments underscore durable demand and visibility .
Strategic levers: expanded Philips partnership (share gains), AI-enabled sensing roadmap (e.g., OIRD), and continued portfolio investment target multi-year growth beyond pulse oximetry .
Capital allocation supportive: sale of Sound United redeploys capital to buybacks and selective tuck-ins; share repurchases already added ~$0.08 to FY25 EPS guidance midpoint .
Legal tailwind: the $634.3M jury verdict vs Apple reinforces IP strength and may act as a sentiment catalyst, though timing/collection risk remains inherent to litigation outcomes .
Watch Q4 call for: consumables acceleration, tariff flow-through, distributor transition in OUS, Philips integration cadence, and 2026 framework (company plans to detail longer-term outlook at Investor Day) .

Appendix: Additional Q4 2025 Context

Investor Day scheduled for December 3, 2025, where management will outline strategy, product pipeline, and long-term financial outlook .
FY24 baselines: Healthcare revenue $1.395B (+9% Y/Y), non-GAAP EPS $4.40 (+16% Y/Y) .
Q4 seasonality: extra selling week provides ~1 pt to FY25 growth but largely offset by portfolio and channel changes, per CFO .

MASIMO CORP (MASI)·Q4 2025 Earnings Summary