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WATERS CORP /DE/ (WAT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered an all-around beat and guide-up: revenue of $799.9M grew 8% YoY (8% CC) and +4% QoQ, with non-GAAP EPS of $3.40 up 16% YoY; instruments +6% CC and recurring revenue +9% CC led by double‑digit chemistry growth .
  • Results exceeded S&P Global consensus: revenue $799.9M vs $783.0M est.; non‑GAAP EPS $3.40 vs $3.22 est. (beats on both revenue and EPS) * [GetEstimates].
  • Full‑year 2025 guidance raised again: CC sales growth to 6.7%–7.3% (reported 6.5%–7.1%) and non‑GAAP EPS to $13.05–$13.15; Q4 non‑GAAP EPS guided to $4.45–$4.55 and CC sales growth to 5%–7% .
  • Pharma rose 11% CC (double‑digit Americas), chemistry +14% reported (+13% CC), TA returned to growth, and gross margin reached ~59% (up 70 bps QoQ), while orders outpaced shipments, expanding backlog (supportive into Q4) .
  • Stock setup: positive catalysts include broad-based Pharma strength, chemistry outperformance, prudent yet higher FY guide, and synergy runway from the pending BD Biosciences & Diagnostic Solutions combination; tariff normalization and China recovery add tailwinds .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based growth with Pharma +11% CC and chemistry +14% reported (+13% CC), while instruments grew +6% CC; TA returned to positive growth (+2% reported) .
    • Sequential momentum: as-reported sales +4% QoQ; gross margin ~59% (up ~70 bps QoQ) on tariff normalization; adjusted operating margin 30.3%; orders > shipments with backlog growth .
    • CEO on innovation-led demand: “We…develop the Xevo Charge Detection Mass Spectrometer, which uses up to 100‑fold less sample volume… and delivers results in under 10 minutes.” .

  • What Went Wrong

    • GAAP EPS down YoY to $2.50 vs $2.71 last year; GAAP operating margin of 24.0% vs 28.5% in Q3’24, reflecting higher OpEx (including acquisition/ERP-related costs) and higher interest expense ($21.9M vs $17.2M) .
    • Academic & Government (A&G) modest at +2% reported (+1% CC), with management noting stimulus dynamics and a need for caution post-stimulus .
    • Q4 outlook is purposely prudent (midpoint assumes ~16% QoQ revenue ramp vs 18% last year and ~22% historical average), tempering near-term upside even as fundamentals strengthen .

Financial Results

Headline Results vs Prior Year and Prior Quarter

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$740.3 $771.3 $799.9
GAAP EPS ($)$2.71 $2.47 $2.50
Non‑GAAP EPS ($)$2.93 $2.95 $3.40
GAAP Operating Margin (%)28.5% 24.4% 24.0%
Adjusted Operating Margin (%)30.8% 29.1% 30.3%

Growth lenses and mix:

  • Revenue: +8% YoY reported (+8% CC) ; +4% QoQ as-reported .
  • Mix: Instruments +6% CC; Recurring +9% CC; Chemistry +14% reported (+13% CC) .
  • Pharma +11% CC; Industrial +4% CC; A&G +1% CC .

Actuals vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($M)$783.0*$799.9
Non‑GAAP EPS ($)$3.22*$3.40

Values with asterisk (*) retrieved from S&P Global.

Segment and End-Market Breakdown (Revenue, $M)

  • By Operating Segment | Segment | Q3 2024 | Q3 2025 | YoY Reported | YoY CC | |---|---|---|---|---| | Waters | $655.7 | $713.4 | +9% | +9% | | TA | $84.7 | $86.5 | +2% | +2% | | Total | $740.3 | $799.9 | +8% | +8% |

  • By Products & Services | Category | Q3 2024 | Q3 2025 | YoY Reported | YoY CC | |---|---|---|---|---| | Instruments | $323.1 | $341.5 | +6% | +6% | | Service | $278.3 | $299.9 | +8% | +7% | | Chemistry | $138.9 | $158.5 | +14% | +13% | | Total Recurring | $417.2 | $458.4 | +10% | +9% |

  • By Geography | Geography | Q3 2024 | Q3 2025 | YoY Reported | YoY CC | |---|---|---|---|---| | Asia | $251.3 | $269.7 | +7% | +13% | | Americas | $279.1 | $292.8 | +5% | +5% | | Europe | $209.8 | $237.4 | +13% | +5% |

  • By End Market | Market | Q3 2024 | Q3 2025 | YoY Reported | YoY CC | |---|---|---|---|---| | Pharma | $430.1 | $479.8 | +12% | +11% | | Industrial | $227.7 | $235.7 | +3% | +4% | | Academic & Gov’t | $82.4 | $84.4 | +2% | +1% |

KPIs and Balance Sheet/Cash Flow

KPIQ3 2025
Adjusted Free Cash Flow ($M)$159.6
Cash & Equivalents ($M)$459.1
Net Debt ($M)~$948 (company commentary)
Weighted Avg. Diluted Shares (M)59.622
Tax Rate (Operating/Guided FY)~14% in Q3; FY guide 16.5%

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2)Current Guidance (Q3)Change
Constant Currency Sales GrowthFY 2025+5.5% to +7.5% +6.7% to +7.3% Raised
Reported Sales GrowthFY 2025+5.0% to +7.0% +6.5% to +7.1% Raised
Non‑GAAP EPS ($)FY 2025$12.95 to $13.05 $13.05 to $13.15 Raised
CC Sales GrowthQ4 2025—+5.0% to +7.0% Introduced
Reported Sales GrowthQ4 2025—+5.2% to +7.2% Introduced
Non‑GAAP EPS ($)Q4 2025—$4.45 to $4.55 Introduced
Gross Margin (approx.)FY 2025—~59.2% Introduced
Adjusted Operating Margin (approx.)FY 2025—~31% Introduced
Net Interest Expense ($M)FY 2025—~$36 Introduced
Avg. Diluted Shares (M)FY 2025—~59.7 Introduced
Tax RateFY 2025—~16.5% Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q1)Current Period (Q3)Trend
Instrument replacement cycleQ2: Robust replacement among large Pharma and CDMOs; raised FY guide . Q1: Double‑digit instrument growth; raised FY guide .Year 2 of cycle; instruments +6% CC; orders > shipments; strong sequential ramp; Alliance iS sales +300% YoY; TQ Absolute strength Accelerating
Chemistry/bioseparationsQ2: Double‑digit chemistry growth . Q1: Early strength; innovation pipeline .Chemistry +14% reported (+13% CC); bioseparations “more than 20%”; new affinity/SEC columns uptake Strengthening
GLP‑1 and PFASQ2: Incremental vectors GLP‑1, PFAS .GLP‑1 testing >2x YoY; PFAS orders +~30% Strengthening
China & regional dynamicsQ2: Asia +14% CC; Europe +8% CC .Asia +13% CC; China +~12%; A&G stimulus wins but caution; India high‑teens Improving but mixed
Empower/informatics & subscription modelQ1: Foundation for growth; software initiatives .Empower “superhighway” toward cloud, AI/ML features; transition to subscription underway with large pharma in late stages Building
Tariffs/macroQ1: Tariffs mitigated by ops actions; FX improved .Gross margin improvement as tariff remediation normalized; prudent Q4 ramps assume current tariff structure Easing headwind
BD BDS combinationQ2: Integration planning underway; value creation via synergies .Two integration summits; day‑1 readiness; revenue/cost synergies outlined; EPS accretion in first 12 months post‑close targeted Advancing

Management Commentary

  • CEO (Udit Batra): “Our team yet again delivered outstanding results… Pharma grew double digits… and new LC‑MS and chemistry products captured opportunities from the growing share of biologics and novel modalities” .
  • On innovation: “Xevo Charge Detection Mass Spectrometer… uses up to 100‑fold less sample… and delivers results in under 10 minutes” .
  • On outlook and catalysts: “We are raising our adjusted EPS guidance… We will enter 2026 with a robust cadence of breakthrough product launches… and an exciting opportunity to unlock meaningful near-term synergies” .
  • On BD integration: “Integration planning is well underway… six business unit workstreams and 10 functional workstreams… focused on day‑one readiness” .

Q&A Highlights

  • Pharma strength and regional mix: Double‑digit pharma growth across regions; Alliance iS +30% YoY; GLP‑1 testing doubled; China driven by CDMOs supporting local biotech; India high‑teens growth .
  • Guidance philosophy for Q4: Midpoint implies ~16% QoQ ramp vs 18% last year and ~22% historical; chemistry ~6%, service ~8% (extra day), instruments ~5%; no pull‑forward in Q3; backlog built .
  • Empower subscription strategy: Transition to subscription model with cloud/AI features (utilization insights, anomaly detection, data integrity); large pharma in late‑stage discussions; meaningful upside potential .
  • Biosimilar policy update: FDA draft guidance elevating analytical characterization may increase demand for Waters’ bioanalytical workflows; upside potential with measured adoption pace .
  • TA recovery and cycle duration: TA improved as tariff volatility stabilized and interest‑rate outlook improved; replacement cycle still mid‑innings with rich order funnel .

Estimates Context

  • Waters beat S&P Global consensus on both revenue and EPS: $799.9M vs $783.0M est.; $3.40 vs $3.22 est. * [GetEstimates].
  • Given raised FY revenue and EPS guidance and commentary on backlog, Street models likely need to lift Q4 and FY margins slightly (59.2% FY gross margin, ~31% adjusted op margin) and reflect prudent—but potentially beatable—Q4 revenue/EPS ranges .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Broad‑based beat and guide‑up with durable drivers (replacement cycle, chemistry/bioseparations, GLP‑1/PFAS) and backlog expansion—constructive into Q4 .
  • Mix quality improving: double‑digit Pharma and chemistry strength; TA back to growth; margin tailwind from tariff normalization and value engineering to come .
  • FY guide now embeds ~59.2% gross margin and ~31% adjusted op margin; prudent Q4 ramp leaves room for upside if order conversion continues .
  • Strategic catalysts in 2026: Empower subscription monetization, CDMS adoption, bioseparations pipeline, and synergy realization from the BD BDS combination .
  • Regional momentum (China, India) and idiosyncratic vectors (GLP‑1, PFAS) support above‑trend growth vs peers, though A&G stimulus normalization warrants caution .
  • Watch for integration milestones and regulatory progress on BD deal; early revenue synergy levers include service plan attachment and cross‑selling into diagnostics/process‑dev labs .