Waters Corporation (WAT) Earnings & Analysis

Latest quarter

Waters reported Q2 FY2026 revenue of $1.6 billion, up 113.4% from Q2 FY2025, and said revenue was 1.25% above the consensus of $1.6 billion. The company reported adjusted EPS, as the consensus counts it, of $3.05, which was 1.33% above the consensus of $3.01.

The filing said $817 million of revenue from the acquired Biosciences and Diagnostic Solutions business drove the reported increase, while legacy revenue increased 7% through broad-based growth across product lines and regions. Waters reported a diluted loss per share of −$1.39, compared with diluted EPS of $2.47 a year earlier; the filing attributed the change to acquisition-related purchase-accounting charges, amortization, restructuring, interest expense, and transaction and integration costs. Gross margin was 44.6%, versus 58.4%, while operating margin was −5.23%, versus 24.4%. Waters reported free cash flow of $153.0 million, compared with $18.0 million a year earlier. The company said Q2 revenue of $1.6 billion was above its own guidance range of $1.6 billion to $1.6 billion.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Dr. Udit Batra said organic revenue grew 7% as reported and 9% in constant currency, with orders outpacing sales. He said Analytical Sciences grew 7% as reported and 9% in constant currency, led by 8% growth in instruments, 10% in chemistry and 9% in service. Batra said pharma and academic-and-government end markets each grew at double-digit rates, while the company saw improved U.S. biotech and contract-research-organization spending.

Batra said the acquired Biosciences and Diagnostic Solutions businesses generated $817 million of second-quarter revenue and grew 4% on a reported basis. He said the Biosciences division grew 3%, with Flow Clinical up 8%, while China reduced divisional growth by 2%. Chief Financial Officer Amol Chaubal said China Flow Clinical revenue declined 20% because of DRG constraints and the lack of a localized portfolio. Batra said a localized flow-instrument program is expected to begin contributing to growth in the fourth quarter, while the company has installed new commercial leadership and execution processes in China.

On pricing, Chaubal said the company increased its pricing assumption for the remainder of the year after Q2 pricing exceeded the level embedded in prior guidance. Batra said the company had established regional deal desks to manage discounting and said the acquired businesses had dedicated pricing directors. He also said the company had profiled about 700 U.S. accounts for reagent-rental compliance work.

Chaubal said adjusted gross margin was 54% and adjusted operating margin was 25% in Q2, reflecting a full quarter of ownership of the acquired businesses. Batra said Waters had completed its planned 2026 cost actions, which are expected to deliver $75.0 million of cumulative savings in FY2026 and approximately $200.0 million of run-rate savings. Chaubal said the company expected cost actions to provide a $25 million adjusted operating-income benefit in Q3 and a $50 million benefit in Q4.

Analysts asked about the outlook for the acquired businesses, China, pricing and tariff refunds. Batra said Waters expects the acquired businesses to exit FY2026 with growth of 6% or better, and Chaubal said tariff refunds would be net-neutral because customer surcharges would also be reversed. Batra said Waters would not quantify the potential revenue contribution from pharma reshoring at this stage.

Guidance

Waters raised FY2026 adjusted EPS guidance to $14.45 to $14.65 from $14.40 to $14.60. The company raised FY2026 total reported revenue guidance to $6.4 billion to $6.5 billion from $6.4 billion to $6.5 billion. Waters also said it raised its acquired-business revenue expectation by $10 million to approximately $3.045 billion. The company set FY2026 organic constant-currency revenue-growth guidance at 7.00% to 9.00%.