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DGX · Q3 2025
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DGX · Q4 2025 Earnings

Cautious

Quest Diagnostics

Reported February 10, 2026

30-second summary

Quest closed FY2025 ahead of its own raised guide — revenue $11.035B and adjusted EPS $9.85 both cleared the high end — but the FY2026 setup is materially softer than the run-rate Q3 implied. Revenue growth guidance of 6.0–7.1% steps down from FY2025's 11.8%, GAAP EPS is guided to $9.45–$9.65 (down 2–4% vs. FY2025 non-GAAP $9.85), and operating cash flow guidance of ~$1.75B is below the FY2025 ~$1.8B raised target despite stripping the disclosed one-timers. Adjusted EPS growth of 6.6–8.6% is the cleanest read on underlying earnings power, and management's tone has visibly shifted from "raising again" to "confidence in business strengths" — a deliberate de-risking of the 2026 narrative.

Headline numbers

EPS

Q4 FY2025

$2.42

Revenue

Q4 FY2025

$2.81B

+7.1% YoY

Free cash flow

Q4 FY2025

$0.31B

Operating margin

Q4 FY2025

13.8%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$2.81B+7.1%$2.82B-0.4%
EPS$2.42—$2.60-6.9%
Operating margin13.8%—13.7%+10bps
Free cash flow$0.31B—$0.42B-26.7%

Guidance

Company narrowed FY2026 revenue growth guidance to mid-single digits (6.0–7.1%) and moderated GAAP EPS (down 2–4% YoY) while affirming modest adjusted EPS growth (6.6–8.6% YoY), suggesting operational maturation and potential margin headwinds ahead despite beating FY2025 targets.

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
RevenueFY2025$10.96 billion to $11.00 billion$11.035 billion+$0.035 billion above high end of guideBeat
Diluted EPS (GAAP)FY2025$8.58 to $8.66$9.85+$1.19 above high end of guideBeat
Adjusted diluted EPSFY2025$9.76 to $9.84$9.85+$0.01 above high end of guideBeat

New guidance

MetricPeriodGuideYoY
RevenueFY2026$11.70 billion to $11.82 billion+5.9% to +7.1% YoY
Diluted EPS (GAAP)FY2026$9.45 to $9.65-4.1% to -2.0% YoY
Adjusted diluted EPSFY2026$10.50 to $10.70+6.6% to +8.6% YoY
Cash provided by operationsFY2026Approximately $1.75 billion-2.8% YoY
Capital expendituresFY2026Approximately $550 million+10.0% YoY

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Diagnostic information services$2.742B+7.3%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Requisition volume growth8.5%
Organic requisition volume growth7.9%
Revenue per requisition change-0.1%
Operating margin (adjusted)15.3%
Full year operating margin (adjusted)15.9%
Free cash flow margin (full year)12.3%
Quarterly dividend per share$0.86

Management tone

Customer optimization hangover → AI experiments → Consumer channel scaling → CoLab and AD Detect quantified → Single-guide moderation with category-defining-innovation framing.

The CoLab $1B target was reaffirmed, and Corewell was sized as a $250M FY2026 contribution within it. Jim Davis's prepared remarks explicitly stated: "We expect CoLab solutions to generate approximately $1 billion in annual revenues in 2026." Q&A then sized Corewell specifically as ~$250M of FY2026 revenue at low single-digit margins, improving to low teens in 2027. The $250M is the incremental Corewell ramp within the broader ~$1B CoLab book, not a replacement for it.

Three quarters ago management raised guidance mid-year on "continued utilization trends"; this quarter the FY2026 framing is "continued confidence in our business strengths and market fundamentals." The anchor quote — "Our 2026 guidance reflects our continued confidence in our business strengths and market fundamentals" — replaces the conviction-on-utilization language of Q2 with a softer, more defensive frame. The shift from "raising" to "reflecting confidence" is the vocabulary of a management team setting a guide it intends to clear, not one it expects to raise.

The narrative pivoted from M&A-driven growth to "category-defining clinical innovations." Through 2025 the story was hospital channel takeouts (Fresenius, Corewell), LifeLabs integration, and consumer channel scaling. The FY2026 framing leans on Alzheimer's portfolio (AB4240, PTAL), autoimmune, CardioIQ, and wearables partnerships (Whoop, Ora, Function Health). Q&A confirmed consumer growing 20%+ with above-corporate margins (no denials, no bad debt). The pivot away from M&A toward organic differentiation is consistent with the deceleration in headline growth — but it puts more weight on emerging franchises hitting their numbers.

Project Nova was disclosed as ~$0.25 EPS dilution in FY2026. Q3 framed Nova as a 5–7 year, $250–310M program with H2 2025 spend concentration; this quarter Q&A put a specific number on FY2026 EPS drag (~$0.25, fairly even across quarters with slight H1 skew). That's a real number against the adjusted EPS guide midpoint of $10.60 — and it explains part of why GAAP EPS is guided to decline despite revenue growth.

Q&A highlights

Luke Sergot · Barclays

What are the underlying growth drivers for 2026 guidance? Break down contributions from consumer testing, new tests, MRD reimbursement, chronic disease management, and quarterly pacing expectations given January weather impacts.

Management expects strong organic growth driven by Alzheimer's portfolio (AB4240, PTAL markers), autoimmune testing, diabetes, cardiovascular testing (CardioIQ), consumer segment (questhealth.com growing 20%+), and partnerships with wellness companies (Whoop, Ora, Function Health). Recent Elevance re-network deals in Nevada, Colorado, Georgia, and Virginia still in early innings. January weather was significant but majority of work expected to recover; very strong utilization in first 3.5 weeks of January; seasonality expected similar to 2025 and pre-COVID patterns.

Consumer segment (questhealth.com) grew >20% in 2025, expected to continue >20% growthAlzheimer's portfolio showing double-digit growth momentumElevance re-network in Nevada, Colorado, Georgia, Virginia in early innings of share gain rampJanuary weather impact significant but recovery expected; first 3.5 weeks showed very strong growth

Patrick Donnelly · Citi

Explain the moving pieces on 2026 margins despite multiple headwinds (Corwell, Project Nova, Haystack ramp, extra payroll cycle). Provide margin bridge and quarterly cadence.

Operating margin expected to expand despite negative impacts from Corwell ($250M at low single-digit margins in 2026, improving to low teens in 2027) and Project Nova ($25M EPS dilution). Offsets include strong organic volume growth (6.6% at midpoint, nearly all organic), price flat year-over-year, Haystack less dilutive in 2026, consumer business (no denials/bad debt, $250M growing 20%+), and Life Labs Canada margin rate improving. Seasonality: Q1 weakest, Q2 strongest, Q3/Q4 step down; approximately 49% EPS in H1, just over 50% in H2.

Operating margin rate expected to expand YoY despite headwindsCorwell: $250M revenue at low single-digit margins in 2026, improving to low teens in 2027Fresenius: margins improve through year-end to at or slightly above company averageProject Nova: ~$25 cents EPS dilution in 2026, fairly even across quarters with slight H1 skew

Kevin Caliendo · UBS

What is the impact from Health Insurance Exchanges (HICs) relative to original expectations? What were organic volumes in Q4 excluding Fresenius and Corwell?

Modeled 30bp headwind from exchanges is factored into 2026 guidance. Actual exchange enrollments have been better than expected, though utilization mix (bronze vs. gold plans) still uncertain; encouraged by January enrollments. Corwell all organic growth; Fresenius mostly organic. DIS organic volume growth in Q4 was ~8% total but only 4.1% excluding Fresenius and Corwell. Revenue impact from these businesses less than 1% in Q4. Organic revenue growth 5.6% excluding them, 6.4% total. Organic price/mix up ~3% excluding these businesses.

30bp revenue growth headwind from exchanges modeled in 2026 guidanceExchange enrollments better than expected; January enrollments encouragingQ4 DIS organic volume growth: 8% total, 4.1% excluding Fresenius/CorwellRevenue impact from Fresenius/Corwell in Q4: less than 1%

Jack Meehan · Nefron Research

How will PAMA data collection process unfold in 2025? Is Quest prepared to report? What is the likelihood the Results Act passes this year?

Data collection moved to first half of 2025 (vs. 2019 baseline). Quest is prepared to report but concerned that other ~10,000 labs may not be; history shows less than 1% participation led to inaccurate pricing. Results Act provides structural fix using third-party database (recommended database represents >80% of adjudicated lab recs) eliminating need for self-reporting. Over 65 co-sponsors; January 8 hearing held; management optimistic Results Act will pass in 2026 but will continue pushing. Emphasis on how mixing data from historically non-reporting labs (hospital outreach, physician office labs) should improve rate calculations.

Data collection window: first half of 2025 (moved from 2019 baseline)Quest prepared to participate; other ~10,000 labs uncertainHistorical participation rate: less than 1% of labsResults Act recommended third-party database represents >80% of adjudicated lab recs

Erin Wright · Morgan Stanley

Assess sustainability of consumer testing growth, margin profile, new partnerships (Whoop, Aura, Function Health), utilization trends, and 2026 guidance assumptions for consumer segment.

Consumer segment driven by prevention-focused consumers linking biometrics (sleep, nutrition, movement) with biomarkers through wearable partnerships; positive renewal rates observed. Value-added resellers address gap in non-covered preventive tests. questhealth.com at $100M run-rate with episodic testing (allergy, tick, A1C, STD) showing strong repeat business. Direct consumer growing ~35% in 2025; partnerships with wearables/wellness companies vibrant ecosystem. Margins attractive above corporate average due to all cash-pay model (no denials/bad debt). Confident in >20% CAGR long-term; continuing to sign new

Answers to last quarter's watch list

CoLab revenue trajectory toward the $1B target — Reaffirmed. Jim Davis's prepared remarks restated the approximately $1 billion annual CoLab revenue expectation for 2026, with Corewell contributing ~$250M of incremental FY2026 revenue at low single-digit margins, improving to low teens in 2027.
Resolved positively
Q4 adjusted operating margin holding above 15.3% — Q4 adjusted operating margin came in at exactly 15.3%, at the lower bound of the watch range. FY adjusted margin of 15.9% delivered the promised expansion vs. prior year, but the Q4 print left no cushion.
Continue monitoring
PAMA outcome by year-end — Unresolved. Q&A confirmed data collection moved to first half of 2025 and the Results Act is progressing (65+ co-sponsors, January 8 hearing) but has not passed. The $100M exposure remains, with management framing 2026 passage as the new target.
Continue monitoring
Initial FY2026 guidance shape — Revenue guidance of 6.0–7.1% growth implies organic growth at the 6.6% midpoint per Q&A (with Fresenius/Corewell embedded as mostly organic). That's above the FY2025 raised 4.5–5.0% organic range, but lower-quality organic given partnership-driven volume. The headline number landed higher than the LRP would have implied but with mix that warrants scrutiny.
Resolved positively
2026 OCF baseline after stripping FY2025 one-timers — Management quantified the FY2025 one-time benefits at ~$150M and called out an additional ~$120M FY2026 headwind from one more payroll cycle. That puts the clean FY2025 OCF baseline at ~$1.74B; FY2026 guide of ~$1.75B essentially matches that baseline, implying underlying growth offsets the payroll headwind but little expansion beyond. Status: Resolved with limited expansion.
AD Detect disclosure cadence — No formal periodic disclosure of advanced diagnostics or Alzheimer's testing revenue was introduced. Q&A cited "double-digit growth momentum" in the Alzheimer's portfolio but kept it qualitative.
Not resolved

What to watch into next quarter

Q1 2026 organic volume growth ex-Fresenius/Corewell holding above 4%: Q4 printed +4.1% on this basis. With January weather and the partnership lap still ahead, anything below 4% signals the underlying business is weaker than the headline 6.6% organic suggests.

Q1 adjusted operating margin trajectory vs. Q1 2025: management telegraphed Q1 as the weakest quarter with H1 at ~49% of FY EPS. With Project Nova ~$0.25 EPS dilution slightly H1-weighted, watch whether Q1 adjusted EPS clears ~$2.35 — the implied run-rate for the FY $10.60 midpoint.

CoLab ramp toward the reaffirmed $1B target: Corewell's $250M contribution is the sized FY2026 piece. Watch for any quarterly color on the residual ~$750M and on Corewell margin progression from low single digits toward low teens by 2027.

PAMA data collection completion and Results Act floor vote: data collection runs through H1 2026. Watch for any committee markup or floor action on the Results Act; absent passage, the $100M exposure crystallizes for 2027.

OCF cadence vs. ~$1.75B FY guide: Q1 OCF below $250M would suggest the conservatism in the guide is actually working capital tightening rather than buffer.

Consumer segment quantification: ~$250M growing 20%+ was disclosed in prepared remarks. Watch whether management begins formal periodic disclosure of consumer revenue, which would validate the "category-defining" framing.

Sources

  1. Quest Diagnostics Q4 FY2025 press release (SEC filing): https://www.sec.gov/Archives/edgar/data/1022079/000102207926000005/dgx123120258-kexhibit991.htm
  2. Quest Diagnostics Q4 FY2025 earnings call prepared remarks and Q&A (analyst attributions).

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