tapebrief
CRL · Q4 2025

CRL · Q1 2026 Earnings

Neutral

Charles River Laboratories

Reported May 7, 2026

30-second summary

30-second take: Q1 FY2026 revenue of $996M (+1.2% YoY reported, -1.5% organic) and non-GAAP EPS of $2.06 came in on plan, and management reaffirmed both FY2026 organic revenue (-1.5% to -0.5%) and FY2026 non-GAAP EPS ($10.80–$11.30). The only guidance change this quarter was a ~50bps trim to reported revenue growth (to -5.5% to -4.0% from -5.0% to -3.5%) attributed entirely to FX, and the introduction of a GAAP EPS range of $5.35–$5.85 that primarily reflects the divestiture impacts already in motion (the CDMO/Cell Solutions divestiture closed May 6, 2026, and European Discovery Services sites are expected to close in May 2026). The Q1 GAAP loss of $(0.30) was driven by a $118M ($1.53/share) loss on assets held for sale tied to those divestitures, not operational deterioration. DSA bookings were characterized as "solid" with proposals up high single-digit YoY and three sequential quarters of proposal growth; management reiterated a ~500bps H2 operating margin step-up with "clear line of sight," over half from acquisitions/divestitures plus cost savings and DSA cost roll-off. CRL also repurchased $200M of stock in the quarter.

Headline numbers

EPS

Q1 FY2026

$2.06

Revenue

Q1 FY2026

$1.00B

+1.2% YoY

Free cash flow

Q1 FY2026

$-0.01B

Operating margin

Q1 FY2026

12.0%

Key financials

Q1 FY2026
MetricQ1 FY2026YoY
Revenue$1.00B+1.2%
EPS$2.06—
Operating margin12.0%—
Free cash flow$-0.01B—

Guidance

Full-year 2026 non-GAAP EPS guidance raised modestly, but FY organic revenue outlook effectively unchanged and reported revenue slashed ~5 percentage points due to FX headwinds; GAAP EPS cut sharply; operating margin improvement guidance withdrawn.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Operating marginQ1 FY2026mid-teens12%at low end of 'mid-teens' range (typically 14–16%)Met

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Non-GAAP EPS
FY2026
$10.70 – $11.20$10.80 – $11.30+$0.10 at midpoint (+0.9%)Raised
Reported revenue growth
FY2026
at least flat to +1.5%-5.5% to -4.0%-5.0 to -6.0 percentage pointsLowered
GAAP EPS
FY2026
$6.30 – $6.80$5.35 – $5.85-$0.75 at low end (-11.9%), -$0.95 at high end (-14.0%)Lowered
Operating margin improvement
FY2026
20 to 50 basis points improvement from 2025 base of 19.8%Withdrawn — no replacement—Withdrawn
Non-GAAP EPS growth
FY2026
approximately 4% to 9% growth YoY——Lowered

Reaffirmed unchanged this quarter: Organic revenue growth (-1.5% to -0.5%)

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
Research Models and Services (RMS)$0.208B-2.2%
Discovery and Safety Assessment (DSA)$0.597B+0.7%
Manufacturing Solutions$0.191B+6.8%
RMS Organic Revenue Growth-5.5%—
DSA Organic Revenue Growth-1.4%—
Manufacturing Organic Revenue Growth2.9%—

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Organic Revenue Growth-1.5%
Non-GAAP Operating Margin16.3%
Non-GAAP Net Income$101.7M
Stock Repurchased$200.0M

Management tone

The disclosure posture this quarter is "execute the plan." Management reaffirmed both organic revenue and non-GAAP EPS, closed the larger of the announced divestitures, and committed publicly to a ~500bps H2 operating margin step-up with "clear line of sight." The cautious-optimism language from prior quarters carries through ("we all share cautious optimism … but certainly it's early stage and we always will be cautious about going too far over on our skis"), but it is now paired with concrete execution markers (deal closed, KF integration in flight, buybacks delivered).

On DSA demand, the framing has matured from proposal-momentum narrative to a tighter bookings-and-conversion story. Proposals up HSD YoY in both cohorts, three sequential quarters of proposal growth, and management explicitly flagging "conversion rates have accelerated" — clients moving from proposal to booking to revenue faster than the historical one-to-two-quarter cadence in some cases. Q1 global biopharma bookings were below an exceptionally strong year-ago compare (last year's Q1 had a slew of bookings after pharma reprioritizations cleared); management characterized the segment as "stable and increasing." Smaller, early-stage biotech remains the soft spot — Gradle business unit cited as still below desired demand.

On margins, management leaned into the H2 step-up with unusually specific bridge mechanics — over half from acquisitions/divestitures, balance from corporate one-time roll-offs, cost savings, NHP timing in RMS, and DSA cost normalization. Q1 non-GAAP operating margin compressed ~280bps YoY to 16.3% on three named pressures (DSA study-related direct costs, RMS mix, executive-transition stock comp). The first-half non-GAAP margin is expected in the "high teens" with the H2 jump to follow.

On capital allocation, the message tightened: continued portfolio review with possible further site consolidations or divestitures, an active M&A roadmap (KF and PathoQuest already closed this year), and continued buybacks. The Cooperation Agreement era posture of returning capital while reshaping the portfolio remains intact.

Recurring themes management leaned on this quarter:

Cautious optimism on biotech funding and IPO market reopeningNormalized seasonality in DSA, biologics testing, and microbial businessesPharma clients transitioning from restructuring to pipeline accelerationNAMs (New Approach Methods) as integrated evolution, not revolutionary disruptionMulti-decade commitment to animal reduction through technology integration

Risks management surfaced:

Early-stage demand recovery prone to reversalBiotech funding environment remains conditional on IPO market stabilityClient budget reprioritization cycles create earnings volatilityDependency on external technology evolution (AI, NAMs availability)

Q&A highlights

Patrick Donnelly · Citi

Breakdown of 2H margin expansion drivers and confidence in momentum continuing into 2027, particularly given KF acquisition impact

High teens margins in H1, expecting 500 bps improvement in H2. Over half from M&A/divestitures, remainder from corporate cost reductions, one-time items not recurring, NHP shipment timing, and DSA cost savings. Annualized KF accretion ~$0.60/share, divestitures ~$0.30/share. In 2027 vs 2026, expecting ~50-55 cents incremental accretion from M&A/divestitures.

H1 2026 margins: high teensH2 2026 margin improvement: 500 basis pointsKF acquisition annualized accretion: ~$0.60/shareDivestitures annualized impact: ~$0.30/share

Justin Bowers · Deutsche Bank

Conversion rates and decision velocity for proposals, and clarification on large pharma budget increases for preclinical spend

Conversion from proposal to booking to revenue typically 1-2 quarters, with acceleration common for existing customers (sometimes same quarter). Conversion rates have accelerated overall, improving backlog quality. Large pharma wants more programs to IND/clinic but constrained by same budget, requiring refocus on preclinical efforts to achieve this.

Typical proposal-to-revenue timeline: 1-2 quarters booking, then 1-2 quarters to revenueAccelerated conversion for existing customers, sometimes same-quarter revenueLarge pharma pursuing more programs to clinic with same budget constraintsIncreased focus on preclinical/early-stage efforts by pharma

Max Smock · William Blair

Year-over-year and sequential proposal trends by client segment and color on AI-assisted drug discovery impact expectations

Proposals up high single digits YoY in both biopharmaceutical and biotech segments. Sequential proposals up three quarters in a row. AI-assisted programs have very small sample set currently, but AI-assisted companies work on multiple programs. Optimistic trend will materialize but very early days; expects AI to lower discovery costs with reinvestment potential.

Proposals up high single digits YoY in both segmentsSequential proposal growth: three quarters in a rowAI-assisted drug programs: very small current sample setAI-assisted companies typically work on multiple programs simultaneously

Birgit Stathopoulos · Management

Small/midsize biotech funding and demand signals, specifically addressing sluggish early-stage activity

IPO and later-stage biotech seeing uptick in demand with easier access to funding. Very early-stage biotech still sluggish with lower funding and cautious discussions. General funding inflow increasing confidence, driving some spending. Gradle business unit underperforming versus expectations. Mixed picture with opportunity for improvement.

Later-stage biotech: strong funding access and demand uptickEarly-stage biotech: still sluggish funding, cautious client discussionsGradle business unit: demand below expectationsSmaller biotech confidence increasing with general funding availability

Anne Hines · Mizuho Securities

Status of $300M cost program annualization and risk of big pharma insourcing capacity due to AI investments

~$300M cost reduction over several years (5% of cost base), with incremental $100M in 2026. Too early to provide 2027-2028 targets; will be included in investor day guidance. On AI/insourcing: clients investing in early-stage AI (target ID, molecular design) but unlikely to insource regulated safety assessment work due to complexity, capacity constraints, and required expertise. More likely to collaborate on early-stage AI rather than insource preclinical work.

Cumulative cost savings: ~$300M over several years2026 incremental cost savings: $100MCost savings represent 5% of cost base2027-2028 targets: no specific guidance provided

Answers to last quarter's watch list

DSA book-to-bill sustaining above 1.0x for two consecutive quarters — The press release does not publish a Q1 book-to-bill ratio, but the transcript characterizes proposals as up HSD YoY in both cohorts with three sequential quarters of proposal growth, and conversion rates accelerated. Management explicitly expects bookings momentum to continue. Q1 DSA organic at -1.4% is materially better than Q4 FY2025's -3.3% and within FY guide. Status: Directionally affirmative; continue monitoring for a quantified disclosure.
Divestiture transaction execution by Q1 FY2026 release — CDMO and Cell Solutions divestiture to GI Partners closed May 6, 2026; European Discovery Services sites expected to close in May 2026. Status: Resolved positively / executed as committed.
RMS organic revenue trajectory vs. low-to-mid single-digit decline guide — RMS organic printed -5.5% in Q1, at the worse end of management's own FY range. China was a positive offset to weakness in NA small models and large models. The FY range was reaffirmed. Status: Within guide but at the worse boundary; monitor.
Q1 FY2026 non-GAAP operating margin print — Non-GAAP operating margin printed 16.3%, at the upper edge of "mid-teens" but down ~280bps YoY on three named pressures (DSA direct costs, RMS mix, executive-transition stock comp). Management committed to ~500bps H2 step-up. Status: In line with Q1 guide; H2 execution is the test.
EPS bridge composition vs. guide — Non-GAAP EPS reaffirmed at $10.80–$11.30. Per transcript, KF contributes ~$0.25 partial-year accretion (~$0.60 annualized) and divestitures ~$0.10 partial-year (~$0.30 annualized). The Q1 GAAP loss is fully attributable to the $1.53/share divestiture loss on assets held for sale. Status: Resolved with clear quantified bridge.

What to watch into next quarter

Disclosed Q2 DSA book-to-bill ratio or quantified bookings figure: Q1 was qualitatively "solid" with proposal momentum; a specific Q2 ratio would convert proposal-trend narrative into measurable bookings progression.

Trajectory of the H2 ~500bps margin step-up: Q2 needs to print first-half "high teens" non-GAAP operating margin and show concrete progress on the bridge items (corporate one-time roll-off, KF accretion ramp, divestiture-related margin lift, NHP cost normalization). Slippage on any of these bridge pieces puts the FY non-GAAP EPS reaffirmation at risk.

RMS organic prints above -4% or below -5%: -5.5% in Q1 puts RMS at the worse end of FY guide. Continued China strength offsetting NA softness is the swing variable.

GAAP EPS run-rate vs. new $5.35–$5.85 FY range: Q1 GAAP loss embedded the $1.53/share divestiture-related loss. Q2 should reveal a cleaner GAAP earnings run-rate; any drift outside the FY range likely signals new below-the-line items rather than operational issues.

Completion of the European Discovery Services site divestiture in May 2026: Per company commitment; non-closure would force a guidance refresh.

Early-stage biotech demand inflection: Gradle and other early-stage-exposed lines remain soft; an inflection here would meaningfully de-risk H2.

Sources

  1. Charles River Laboratories Q1 FY2026 earnings press release, filed 2026-05-07. https://www.sec.gov/Archives/edgar/data/1100682/000110068226000036/crl1q26earningsrelease.htm
  2. Charles River Laboratories Q1 FY2026 earnings call transcript (prepared remarks and Q&A), May 7, 2026.

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.