Waters Corporation (NYSE: WAT) Q2 2025 Earnings | 08/04/2025

Summary of Waters Corporation Q2 2025 Earnings Call

Key Highlights:

• Strong Q2 Performance: Waters reported 9% reported sales growth (8% constant currency), exceeding guidance.

  • Instruments: Mid-single-digit growth, led by LC and mass spectrometry (high single-digit growth).

  • Recurring revenue: Up 11% (service +9%, chemistry +16%).

  • Non-GAAP EPS: $2.95 (+12% YoY), above guidance midpoint.

  • Pharma: Low double-digit growth, driven by instrument replacement and new product adoption.

  • Industrial: +6%, with strong PFAS testing (+50% YoY).

  • Academic & Government (A&G): Declined low single digits, better than expected.

Strategic Execution:

1. Commercial Excellence:

   • Service plan attachment rose 200 bps to 52%.

   • E-commerce adoption now >40% of chemistry revenue.

   • CDMO penetration increased to 27% of pharma revenue.

2. Innovation Momentum:

   • Alliance IS sales grew 300% YoY.

   • Zivo TQ Absolute XR orders doubled expectations.

   • MaxPeak Premier columns grew >30%.

   • New BioResolve Protein A affinity columns launched.

3. Growth Expansion:

   • GLP testing (+70% YoY), PFAS testing (+50% YoY), India (high-teens growth).

   • Price contribution: 200 bps in Q2 and H1.

Financials & Guidance Update

• Q2 Sales: $771M (+9% reported, +8% constant currency).

• Gross margin: 58.3% (impacted by tariffs, regional mix).

• Adjusted operating margin: 29.1%.

• Free cash flow: $159M (after tax payments, capex).

• Raised Full-Year 2025 Guidance:

  • Sales growth: 5.5%-7.5% (constant currency).

  • Non-GAAP EPS: $12.95-$13.05 (+9-10% YoY).

• Q3 2025 Outlook:

  • Sales growth: 5%-7% (constant currency).

  • Non-GAAP EPS: $3.15-$3.25 (+8-11% YoY).

BD Biosciences & Diagnostics Acquisition Update

• Expected close: Early 2026.

• Growth assumptions:

  • BD Biosciences & Diagnostics grew at 5% CAGR (2019-2024).

  • Temporary headwinds (pharma research, supply disruptions, China export ban) expected to ease.

  • Projected growth: 4.5% (2026), 5% (2027), mid-single digits (2028+).

• Synergies:

  • $345M EBITDA synergies by Year 5 ($200M cost, $290M revenue synergies).

  • Cost synergies: Manufacturing, procurement, commercial streamlining.

  • Revenue synergies: Commercial excellence, high-growth adjacencies (bioanalytical, bioseparations, diagnostics).

• Microbiology Upside:

  • $500M TAM (mass spec for microbial ID).

  • Pharma sterility testing: $300M high-growth opportunity.

Q&A Highlights

• LC/MS Growth: Strong replacement cycle in pharma/CDMOs; TQ Absolute XR gaining traction.

• China: Double-digit growth (pharma, industrial, A&G); cautious H2 outlook.

• Margins: Q2 impacted by tariffs, tax rate; expected normalization in H2.

• Microbiology Strategy: Long-term opportunity (3-5 years); immediate focus on sterility testing.

Conclusion

Waters delivered strong Q2 results, raised guidance, and remains confident in its core business momentum and BD acquisition synergies. The company is executing well on innovation, commercial expansion, and operational efficiency, positioning for sustained growth.