Thermo Fisher Scientific Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Recap: Revenue grew 5% to $11.12 billion, adjusted operating income grew 9% to $2.59 billion, adjusted operating margin 23.3% (up 100 basis points), adjusted EPS grew 10% to $5.79 per share. Full-year guidance raised.
• End Markets: Pharma and biotech had mid-single-digit growth; academic and government had low single-digit decline (modest improvement); Industrial and Applied had mid-single-digit growth; Diagnostics and Healthcare had improved growth vs Q2 but still low single-digit due to China.
• Growth Strategy: Three pillars: high-impact innovation (new offerings in clinical sequencing, proteomics, analytical instruments, chromatography/mass spectrometry), trusted partner status (collaborations with AstraZeneca, OpenAI), and commercial engine (acquisitions, manufacturing center opening).
• Capital Deployment: Completed acquisitions of filtration/separation business and Sanofi's sterile finish site; repurchased $1 billion of shares; strong PPI business system impact.
• PPI Business System: Drove cost management and earnings growth, with AI collaboration enhancing productivity.

Segment Performance

• Life Sciences Solutions: Q3 revenue increased 8% vs prior year quarter, organic revenue growth 5%. Adjusted operating income increased 15%, adjusted operating margin 37.4% (up 200 basis points vs prior year).
• Analytical Instruments: Reported revenue increased 5%, organic revenue growth 4%. Adjusted operating income decreased 5%, adjusted operating margin 22.6% (down 230 basis points vs year-ago, but sequential improvement from Q2 2025).
• Specialty Diagnostics: Revenue grew 4% year over year, organic revenue growth 2%. Adjusted operating income increased 10%, adjusted operating margin 27.4% (150 basis points higher than Q3 2024).
• Laboratory Products and Biopharma Services: Reported revenue increased 4%, organic revenue growth 3% (runoff of pandemic-related revenue had 1% impact). Adjusted operating income increased 12%, adjusted operating margin 14.5% (100 basis points higher than Q3 2024).

Guidance

• Raised 2025 full-year revenue guidance to $44.1-$44.5 billion (midpoint organic growth 2% including pandemic runoff headwind).
• Adjusted operating margin outlook raised to 22.7%-22.8%.
• Adjusted EPS guidance raised to $22.6-$22.86. Midpoint reflects $420 million higher revenue from acquisitions and FX tailwinds, 20 basis points improved operating margin, and $0.20 higher adjusted EPS.
• Includes impact of recent acquisitions ($260 million revenue addition, $20 million adjusted operating income, $0.05 EPS dilution).

Risks

• Government Shutdown: Adds customer hesitancy and delays US government expenditures, but guidance accounts for reasonable outcomes.
• China Diagnostics: Weak conditions due to pricing/reimbursement environment, though relatively modest portion of business.
• Tariff/Trade Policy: Volatility in FX rates and intra-quarter volatility, impacting financial results.

Q: Michael Ryskin asked about pharma market conditions, reshoring benefits, and academic/government impact of government shutdown.

A: Marc Casper responded on engaged dialogue with pharma/biotech customers, benefits of reshoring for Thermo's businesses, and government shutdown adding uncertainty but guidance accounting for it.

Q: Tycho Peterson inquired about analytical instrument strengths, momentum, and China diagnostics.

A: Marc Casper mentioned electron microscopy and chromatography/mass spectrometry driving growth, China diagnostics impact is modest and improving. Stephen Williamson provided details on acquisitions' impact on modeling.

Q: Jack Meehan asked about 2026 growth outlook and clinical research business.

A: Marc Casper expressed confidence in midterm outlook, clinical research business progressing with strong authorization and innovation. Stephen Williamson detailed acquisitions' revenue, income, and EPS impact.

Q: Daniel Anthony Arias asked about biotech spending and China research/industrial pricing.

A: Marc Casper noted biotech momentum in clinical research and pharma services, China's academic/government pressured but pharma/biotech growth improved. Pricing in China manageable.

Q: Daniel Gregory Brennan asked about onshoring impact and EPS/tariff impact.

A: Marc Casper discussed onshoring's incremental demand and bioproduction strength. Stephen Williamson explained tariff impact in Q3 and Q4 guidance framing.

Q: Andrew Tupa inquired about contract research and 3Q to 4Q EPS.

A: Marc Casper talked about contract research accelerator program traction. Stephen Williamson noted Q3 beat and guidance raise considering reinvestment and mix.

Q: Patrick Donnelly asked about capital allocation and 2026 growth outlook.

A: Marc Casper discussed M&A appetite and growth acceleration expectations, with confidence in 2026 and beyond performance.