Bio-Rad Laboratories, Inc. Q2 FY2026 earnings call

• End Market Trends
  • Academic/government research demand remains below historical levels, particularly in the Americas. While NIH funding has started increasing year-over-year, purchasing activity lags funding; recent indicators are encouraging but a sustained recovery has not yet been confirmed.
  • Biopharma demand shows early signs of stabilization, with improvement most evident among later-stage and commercial-scale biotech; early-stage biotech remains cautious as funding conditions have not fully normalized, pointing to a gradual market recovery.
  • Process chromatography, which makes up less than 5% of total annual revenue, declined year-over-year as expected due to its niche positioning and revenue concentration with a small number of commercial products.
• Regional Performance
  • Americas revenue remains soft due to academic market pressure, but showed sequential improvement entering Q2, with cautious optimism for H2 2026.
  • Asia Pacific excluding China grew 6% currency-neutral, with broad growth across major product lines.
  • China, which represents ~6% of total revenue, declined in the high teens currency-neutral due to quality control order timing and softer life science instrument demand. A $4 million headwind from China dynamics for H2 2026 is already incorporated into full-year guidance. Local in-China manufacturing is now operational, allowing participation in more local tenders to improve long-term competitiveness.
  • Middle East revenue grew 7% year-over-year, with channel partners replenishing $3 million in inventory during the quarter, though underlying customer demand has not stabilized. Ongoing regional conflict has increased global fuel and transportation costs.
• Strategic and Operational Updates
  • Digital PCR remains a key strategic differentiator. Strong Q2 instrument growth was driven by the QX700 system, which has gained share from qPCR supported by a broad assay menu, large install base, and growing scientific publication support. Strong instrument sales build a foundation for future recurring consumables revenue.
  • The one-year anniversary of the Stila Technologies acquisition was reached; the expanded portfolio has accelerated revenue growth and delivered margin performance ahead of original expectations, reinforcing management's discipline-focused M&A strategy of acquiring differentiated products that complement existing capabilities.
  • A new phase of organizational transformation was announced, including restructuring of the organizational structure, workforce reductions, and facility rationalization. This is not just a cost-cutting program: it aims to reshape the company to be faster and more agile, reallocate resources to innovation and customer-facing growth priorities, and add critical high-value skills.
  • Artificial intelligence is a core enabler of transformation, already delivering tangible results: agentic AI cut 12 months of software development to 6 weeks, and enabled development of new cloud functionality in one month, avoiding thousands of hours of traditional engineering work.
  • Management is in constructive dialogue with Elliott Management, and reports broad alignment on core objectives: improving execution, sharpening capital allocation, and closing the gap between Bio-Rad's market value and its underlying business value. The company views its stake in Sartorius AG as a valuable, monetizable asset that provides strategic optionality, to be monetized at the right time and price.

Bio-Rad reported total Q2 2026 revenue of $651 million, flat year-over-year on a reported basis and down 1.9% on a currency-neutral basis. There are two core operating segments:

1. Life Science: Q2 2026 revenue was $252 million, representing 38.7% of total company revenue. This is a 4.1% year-over-year decrease on a reported basis and a 5.1% decrease on a currency-neutral basis. The decline was driven by ongoing weakness in the academic research market and tough year-over-year comparisons for process chromatography. Excluding process chromatography, life science revenue was flat currency-neutral, an improvement from prior trends. Digital PCR was a bright spot, growing 6% currency-neutral year-over-year, with instrument revenue growing over 20%.
2. Clinical Diagnostics: Q2 2026 revenue was $399 million, representing 61.3% of total company revenue. This is a 2.6% year-over-year increase on a reported basis and a 0.3% increase on a currency-neutral basis. Modest growth was led by strength in quality controls and the blood typing product portfolio, with the segment returning to currency-neutral growth in the quarter.

• Management reaffirmed all full-year 2026 non-GAAP financial guidance:
  • Full-year currency-neutral total revenue growth is expected to remain between -3% and +0.5%.
  • Life science segment currency-neutral revenue growth is projected between -3% and -1%.
  • Clinical diagnostics segment currency-neutral revenue growth is projected between -3% and +1%.
  • Full-year non-GAAP gross margin is expected to remain between 53% and 54%.
  • Full-year non-GAAP operating margin is expected to remain between 10% and 12%.
  • Full-year free cash flow is projected to remain between $290 million and $340 million.
• Q3 2026 revenue is expected to be flat sequentially relative to Q2 2026, consistent with typical seasonal patterns. A mid-single-digit sequential revenue increase from Q3 to Q4 2026 is projected, driven by digital PCR growth in life science and quality control/blood typing growth in clinical diagnostics.
• The announced restructuring is already underway and expected to be substantially completed by the end of 2027. Annualized net cost savings of $30 million to $35 million are expected after reinvestment in growth capabilities, with most savings realized by end-2027. Minimal savings are expected in 2026, with approximately 40 to 50 basis points of incremental operating margin expansion projected for 2027.
• Digital PCR is expected to deliver near-term mid-single-digit annual growth, with a target of high-single-digit durable long-term growth as consumables pull-through from recent strong instrument placements builds over time.

• Academic research market demand has not yet sustained a recovery, and continued weakness would pressure life science revenue performance.
• China market dynamics, including softer life science demand and order timing volatility for clinical diagnostic products, create a $4 million headwind for H2 2026, and ongoing regulatory and market changes in China create continued uncertainty.
• Ongoing conflict in the Middle East has driven elevated global fuel and logistics costs, and continued regional volatility is expected through H2 2026, creating near-term variability for revenue and margins.
• Process chromatography has concentrated revenue with a small number of customers, leading to quarter-to-quarter lumpiness and tough year-over-year comparisons in 2026 that create a modest drag on Q3 2026 growth.
• Early-stage biotech funding conditions have not fully normalized, keeping biopharma demand weaker than full potential for the near term.
• Monetization of the Sartorius AG stake carries tax uncertainty, with the final tax impact dependent on the structure of any future monetization transaction.

Q: Digital PCR instrument growth hit over 20% in Q2—was this driven by one-time factors or underlying sustainable market demand? / A: Growth was broad-based and sustainable, not one-time. Stila Technologies integration, completed a year ago, was executed ahead of schedule, quickly qualifying the full existing Bio-Rad assay menu onto the new expanded platform. The broader portfolio motivated the commercial team, which has won share from qPCR across all geographies, with significant growth even in the currently soft academic segment, as well as in biopharma. This growth reflects ongoing competitive momentum for the franchise.

Q: The new restructuring is expected to deliver 40-50 bps of 2027 margin expansion—Is this incremental to underlying margin expansion, and where will the savings come from? / A: The 40-50 bps of expansion is fully incremental to underlying core margin growth. Most restructuring actions are focused on operating expense (SG&A and functional R&D areas), with additional savings from facility rationalization that will take time to implement through 2027. Beyond restructuring, management is also pursuing product cost reductions above the gross margin line, and expects new products launching through 2027 to have higher average margins, further supporting expansion. AI-enabled efficiency gains and procurement leverage also offer additional margin upside.

Q: What is the expected long-term durable growth rate for digital PCR after lapping the strong growth from the Stila acquisition? / A: Management remains confident in digital PCR's long-term prospects. While year-over-year comparisons become tougher after recent strong growth, there is still significant remaining opportunity for new instrument placements. Over the next 6-12 months, consumables pull-through from the recent wave of instrument placements will add to growth, even in the current soft academic market. The Stila acquisition pulled forward product development by multiple years, and additional pipeline products will support growth over the coming years, leading to a target of high-single-digit durable long-term growth from the current mid-single-digit near-term trend.

Q: To hit the full-year life science growth guidance of -3% to -1%, second half growth has to improve meaningfully from the first half—what drivers will step up in H2? / A: The H2 improvement is broad-based across multiple business lines. Digital PCR and its associated applied markets are core growth contributors. Additional strength comes from partnerships in applied markets and diagnostic applications for the company's gene expression portfolio. Q4 will also benefit from easier year-over-year comparisons for process chromatography, which faced very strong comps in H2 2025 that will not repeat in H2 2026.