425: Waters Q3 2025 Soars, Raises Outlook Amid BD Merger Progress

Waters Corporation reports strong third-quarter 2025 financial results, exceeding guidance, and provides positive updates on its pending combination with BD's Biosciences & Diagnostic Solutions business.

Summary

• Third-quarter 2025 sales grew 8% as reported and in constant currency to $800 million, exceeding the high end of guidance.
• Non-GAAP earnings per share increased 16% to $3.40, which was $0.20 above the midpoint of guidance.
• Instrument sales grew 6%, led by high single-digit growth in the LC-MS portfolio.
• Recurring revenue grew 9%, driven by 7% service growth and 13% chemistry growth.
• Pharma segment sales grew 11%, with double-digit growth in the Americas and Asia, and high single-digit growth in Europe.
• Industrial segment sales grew mid-single digits, with the TA division returning to positive growth at 2%.
• Academic & Government segment sales grew 1%, driven by stimulus tender wins in China.
• Asia region grew 13%, while Europe and the Americas each grew 5%. China sales grew 12%, and India grew in the high teens.
• GLP-1 testing related revenue more than doubled, and PFAS growth remains robust with orders growing approximately 30%.
• New products launched over the past five years grew approximately 50% in the quarter.
• Full-year 2025 constant currency sales growth guidance raised to a 7% midpoint (range of 6.7% to 7.3%).
• Full-year 2025 adjusted earnings per share guidance raised to a range of $13.05 to $13.15, representing 10% to 11% growth.
• Fourth-quarter 2025 constant currency sales growth is expected in the range of 5% to 7%.
• Fourth-quarter 2025 adjusted earnings per share are anticipated to be in the range of $4.45 to $4.55, reflecting 9% to 11% year-over-year growth.
• Net debt stood at $948 million at the end of the quarter.

Sentiment

Score: 9

Explanation: The filing indicates very strong financial performance, exceeding guidance, and a positive outlook for future growth drivers and the BD merger. Management expresses high confidence in execution and strategic initiatives, with no significant negative surprises or delays.

Positives

• Achieved strong third-quarter results, with top and bottom line exceeding the high end of guidance.
• Sales grew 8% as reported and in constant currency, demonstrating strong commercial momentum.
• Non-GAAP earnings per share grew 16% to $3.40, surpassing the midpoint of guidance by $0.20.
• Instrument sales grew 6%, driven by a strong instrument replacement cycle and new capacity investments.
• Recurring revenue grew 9%, with chemistry up 13% and service up 7%, indicating strong customer retention and product adoption.
• Idiosyncratic growth drivers like GLP-1 testing (revenue more than doubled), PFAS testing (orders up ~30%), and India generics (high teens growth) continue to perform very well.
• New product innovations, such as Alliance iS (sales up >300%) and Xevo TQ Absolute (sales up 30%), are gaining significant customer adoption.
• Bioseparations grew more than 20%, fueled by newly launched SEC and Affinity Bioseparation Columns.
• Pharma sales grew 11%, with double-digit growth in the Americas and Asia, and strong performance in China (up >20%).
• The TA division returned to positive growth sooner than expected, with sales up 2%.
• Raised full-year 2025 constant currency sales growth guidance to a 7% midpoint and adjusted EPS guidance to $13.05-$13.15.
• Integration planning for the BD Biosciences & Diagnostic Solutions business combination is well underway and progressing rapidly, with confidence in synergy realization.
• Launched Xevo CDMS, a transformative breakthrough in bioanalytical characterization, serving a $350 million market growing high single to low double digits.
• Empower platform is expanding its leadership into large molecule applications and will evolve with cloud-native features, AI/ML, and a subscription-based model.
• FDA's new draft guidance on biosimilars, favoring analytical characterization over clinical studies, could significantly increase demand for analytical instruments and compliant workflows.

Negatives

• Pockets of low growth persist in China generics, pharma discovery, and CROs, which are still slower.
• Academic & Government stimulus-related revenue, particularly in China, may create an 'air pocket' once the stimulus is complete, as it represents a shift of money from one year to another.

Risks

• One or more closing conditions to the BD transaction, including regulatory approvals, may not be satisfied or waived on a timely basis or otherwise.
• A governmental entity may prohibit, delay, or refuse to grant approval for the consummation of the proposed transaction, or may require conditions, limitations, or restrictions.
• The required approval by Waters stockholders may not be obtained for the proposed transaction.
• The proposed transaction may not be completed on the terms or in the time frame expected, or at all.
• Unexpected costs, charges, or expenses may result from the proposed transaction.
• Uncertainty exists regarding the expected financial performance of the combined company following completion of the proposed transaction.
• Failure to realize the anticipated benefits of the proposed transaction, including synergies, may occur due to delays in completion or integration.
• Difficulties and delays may arise in the combined company achieving revenue and cost synergies.
• Inability of the combined company to retain and hire key personnel could impact performance.
• The occurrence of any event could give rise to termination of the proposed transaction.
• Stockholder litigation or other litigation, settlements, or investigations in connection with the proposed transaction may affect timing or result in significant costs.
• Evolving legal, regulatory, and tax regimes could impact the business.
• Changes in general economic and/or industry-specific conditions or volatility from tariffs could affect results.
• The potential impacts of the U.S. government shutdown that began in October 2025 could affect operations.
• Actions by third parties, including government agencies, could pose risks.
• The anticipated tax treatment of the proposed transaction may not be obtained.
• There is a risk of greater than expected difficulty in separating SpinCo's business from BD's other businesses.
• Disruption of management time from ongoing business operations due to the pendency of the proposed transaction, or other effects on relationships with employees, customers, suppliers, or other counterparties.

Future Outlook

Waters is well-positioned to build on its momentum in 2026, driven by the ongoing instrument replacement cycle, higher service attachment, increased product adoption through e-commerce, and continued innovation in idiosyncratic growth drivers and bioseparations/bioanalytical characterization. A wave of new product launches is planned for 2026, including the Xevo CDMS and significant premium features for Empower, leveraging AI/ML for cloud-native, connected, and intelligent platforms. The pending combination with BD's Biosciences & Diagnostic Solutions business is expected to be a powerful catalyst for near-term synergy realization and long-term value creation. The recent FDA draft guidance on biosimilars, emphasizing analytical characterization, is seen as a significant upside opportunity for increased demand for analytical instruments and compliant workflows.

Management Comments

• Dr. Udit Batra: "As I reflect on my five-year anniversary at Waters, I'm filled with gratitude. Over these years, our team has consistently delivered on our commitments and strengthened the foundation of this company."
• Dr. Udit Batra: "Today, we celebrate another quarter of outstanding commercial momentum. We marked another breakthrough innovation with Xevo CDMS, the next generation of mass spectrometry, and prepared to combine with BD's Biosciences & Diagnostic Solutions business, ushering in an exciting new era for Waters."
• Dr. Udit Batra: "This performance reflects the combined positive impact of innovation and execution along with clear benefits from our strategic expansion into high growth areas."
• Dr. Udit Batra: "We see meaningful runway ahead as customers progress through the multi-year process of replacing their aged instrument fleets."
• Dr. Udit Batra: "Our idiosyncratic growth drivers, GLP-1 testing, PFAS testing, and India generics continue to perform very well."
• Dr. Udit Batra: "The success in pharma, the success in bioseparations or chemistry is all due to a deliberate focus that we put a few years ago on launching products that meet unmet needs across our customer segments."
• Dr. Udit Batra: "Our pending combination with BD's Biosciences & Diagnostic Solutions business represents a powerful catalyst for near-term synergy realization and long-term value creation."
• Dr. Udit Batra: "Xevo CDMS represents a transformative breakthrough in bioanalytical characterization. It enables direct high resolution measurement of largest and most complex therapeutics in high volume applications."
• Dr. Udit Batra: "Empower will continue to evolve as a more complete panel for bioanalytical characterization across multiple techniques, including flow cytometry, creating a unified compliant data environment for our customers most advanced analytical workflows."
• Dr. Udit Batra: "The proposed framework [FDA biosimilar guidance] will reduce the need for routine comparative clinical efficacy studies, and instead rely primarily on advanced analytical characterization. This could represent a meaningful shift towards analytical testing becoming the primary gatekeeper for biosimilar approval."
• Dr. Udit Batra: "We remain on track to complete the combination of BD's biosciences and diagnostic solutions business with Waters Corporation around the end of the first quarter of calendar year 2026."
• Amol Chaubal: "Momentum remains strong with as-reported sales increasing 4% quarter over quarter, while orders continued to outpace shipments leading to backlog growth."
• Amol Chaubal: "Our growth strategy is delivering, driving exceptional performance and positioning us for sustained momentum ahead."
• Amol Chaubal: "The guidance is prudent: 16% versus 18% last year historical, 22% ramp."
• Amol Chaubal: "Whatever the cards are, we always rise up. We look at every crisis as an opportunity and we make sure we deliver what we commit."

Industry Context

The external environment for Waters Corporation continues to improve across key end markets, supported by more stable global trade conditions and a clearer policy backdrop for pharma customers. The company's strong performance in China, particularly in pharma and academic/government segments, stands out compared to peers. The recent draft guidance from the U.S. FDA, aimed at modernizing and accelerating biosimilar drug development by relying more on advanced analytical characterization, represents a significant industry shift that could increase demand for analytical instruments and compliant workflows, directly benefiting Waters' bioseparations and bioanalytical characterization portfolio.

Comparison to Industry Standards

• Waters' China sales grew 12%, with pharma sales up more than 20% and Academic & Government up approximately 20%, which is described as 'a lot better than peers have seen'.
• Alliance iS sales grew over 300% year-over-year, indicating exceptional market reception for a flagship HPLC product.
• Xevo TQ Absolute platforms grew 30%, bolstered by the launch of the Xevo TQ Absolute XR.
• GLP-1 testing related revenue more than doubled, reflecting strong demand in a high-growth area.
• PFAS growth remains robust, with orders growing approximately 30%, similar to the prior quarter.
• India team delivered excellent performance with revenue up high teens, benefiting from the ongoing patent cliff of blockbuster drugs.
• Bioseparations grew more than 20%, with small molecule applications growing 10%.
• New products launched over the past five years grew approximately 50% in the quarter, significantly contributing to 11% year-to-date chemistry growth.
• Empower is used in more than 80% of novel drug approvals by the FDA, EMA, and China's NMPA, setting a high standard for compliant informatics.
• BD's Kiestra platform has roughly 10-20% growth in Europe over the last couple of years, whereas in the U.S., the penetration is at a very low level, indicating a significant opportunity for the combined entity.
• The Q4 2025 guidance assumes a 16% quarter-over-quarter increase in reported sales, which is prudently below the seasonal pattern observed last year (18%) and the historical average for Waters (22%).

Stakeholder Impact

• Shareholders: Expected to benefit from strong financial performance, raised guidance, and long-term value creation and synergy realization from the BD combination.
• Employees: Integration planning for the BD merger involves 120 leaders from both organizations, indicating significant collaboration and potential for new opportunities within the combined entity.
• Customers: Will benefit from breakthrough innovations like Xevo CDMS, enhanced Empower platform with AI/ML, and a broader portfolio of solutions, particularly in bioanalytical characterization and bioseparations. The FDA's biosimilar guidance could lead to increased access to more affordable biologics.
• Creditors: Net debt of $948 million is noted, indicating ongoing financial management.

Next Steps

• Complete the combination with BD's Biosciences & Diagnostic Solutions business around the end of the first quarter of calendar year 2026.
• Launch a wave of new products in 2026, building on recent success.
• Begin a significant release cadence for Empower in 2026, introducing premium cloud-native features leveraging AI/ML.
• Continue integration planning and synergy delivery action plan for the BD combination.
• Focus on delivering strong performance for the full year 2025 and into 2026.

Key Dates

Recommendation

Waters Corporation delivered exceptional third-quarter results, significantly exceeding guidance and demonstrating robust commercial momentum across key segments and geographies. The company's strategic focus on innovation, particularly in high-growth areas like GLP-1 and PFAS testing, bioseparations, and bioanalytical characterization, is yielding substantial returns. The raised full-year 2025 guidance for both sales and EPS, coupled with a strong outlook for 2026 driven by new product launches and the accretive BD merger, signals sustained growth. The pending BD combination is on track, with management expressing high confidence in synergy realization. The potential impact of the FDA's biosimilar guidance further strengthens the long-term growth narrative. These factors collectively present a compelling investment case for strong upside potential.

Keywords

Waters Corporation, Q3 2025, Financial Results, Becton Dickinson, BD, SpinCo, Merger, Acquisition, Biosciences & Diagnostic Solutions, LC-MS, HPLC, Mass Spectrometry, Bioanalytical Characterization, Bioseparations, Empower, Xevo CDMS, GLP-1 Testing, PFAS Testing, India Generics, Pharma, Industrial, Academic & Government, China, India, Revenue Growth, EPS Growth, Guidance, FDA Biosimilars, Instrument Replacement Cycle