WAT · Q3 2025 Earnings

Bullish

Waters Corporation

Reported November 4, 2025

30-second summary

Waters delivered $800M revenue (+8% reported / +8% cc) and non-GAAP EPS of $3.40, beating last quarter's guide of $3.15–$3.25 by 15–25 cents and prompting a FY EPS raise to $13.05–$13.15. Bioseparations grew >20%, Chemistry +14% reported / +13% cc, Pharma +12% reported / +11% cc, and the TA segment swung to +2% growth versus the prior -5% H2 assumption. The replacement-cycle narrative is now in its second year with management explicitly framing instruments as still at low-single-digit CAGR vs. 2019 — i.e., runway, not peak.

Headline numbers

EPS

Q3 FY2025

$3.40

Revenue

Q3 FY2025

$0.80B

+8.0% YoY

Gross margin

Q3 FY2025

59.0%

Free cash flow

Q3 FY2025

$0.16B

Operating margin

Q3 FY2025

24.0%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$0.80B	+8.0%	$0.77B	+3.8%
EPS	$3.40	—	$2.95	+15.3%
Gross margin	59.0%	—	58.3%	+70bps
Operating margin	24.0%	—	24.4%	-40bps
Free cash flow	$0.16B	—	$0.02B	+736.8%

Guidance

Strong Q3 beat on both EPS (+$0.15–$0.25 above guide) and sales growth (+1.5–3.5 pts), prompting raises across full-year FY2025 EPS (+$0.10), reported sales (+0.1–1.5 pts), and constant currency sales (+0.2–1.2 pts) guidance; Q4 guidance newly issued at $4.45–$4.55 EPS.

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

Metric	Period	Prior guide	Actual	Δ	Result
Non-GAAP EPS	Q3 FY2025	$3.15 to $3.25	$3.4	+$0.15 to +$0.25 above guide	Beat
Reported sales growth	Q3 FY2025	4.5% to 6.5%	8%	+1.5 to +3.5 pts above guide	Beat
Constant currency sales growth	Q3 FY2025	5.0% to 7.0%	~9%	+2 to +4 pts above guide	Beat

New guidance

Metric	Period	Guide	YoY
Non-GAAP EPS	Q4 FY2025	$4.45 to $4.55	—
Reported sales growth	Q4 FY2025	5.2% to 7.2%	—
Constant currency sales growth	Q4 FY2025	5.0% to 7.0%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Non-GAAP EPS	FY2025	$12.95 to $13.05	$13.05 to $13.15	+$0.10 at midpoint	Raised
Reported sales growth	FY2025	5.0% to 7.0%	6.5% to 7.1%	+0.1 to +1.5 pts	Raised
Constant currency sales growth	FY2025	5.5% to 7.5%	6.7% to 7.3%	+0.2 to +1.2 pts	Raised
Non-GAAP EPS year-over-year growth	FY2025	9% to 10% (reported basis); 10% to 11% (constant currency)	approximately 10% to 11%	+1 pt midpoint (consolidated basis)	Raised

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Instruments	$0.341B	+6.0%
Service	$0.3B	+8.0%
Chemistry	$0.158B	+14.0%
Pharmaceutical	$0.48B	+12.0%
Industrial	$0.236B	+3.0%
TA Division Growth	2% as reported, 2% constant currency	—

Other KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Americas	$0.293B	+5.0%
Europe	$0.237B	+13.0%
Asia	$0.27B	+7.0%
Recurring Revenue Growth	9% in constant currency	—
Instruments Constant Currency Growth	6%	—
Adjusted Non-GAAP EPS Growth	16%	—
Adjusted Non-GAAP Operating Margin	30.3%	—
Pharma Market Growth (Constant Currency)	11%	—
Chemistry Product Growth	Double digit uptake of new bioseparations products	—
Free Cash Flow	$159.6M	—

Management tone

External environment uncertainty → AI/cloud-native informatics pilots → Replacement cycle maturing with BD as accelerant → Replacement cycle in second-year runway with subscription model and synergy execution

The replacement-cycle framing has progressed from "emerging tailwind" a year ago to "we see meaningful runway ahead" this quarter, with instruments still at low-single-digit CAGR vs. 2019 on a six-year basis. Management quoted on the call: "A year ago, we signaled the start of a new instrument replacement cycle. Since then, sales activity has surged and our momentum has continued to build." Last quarter management baked +5% back-half instruments growth despite "exceptional" funnels; Q3 came in at +6% with orders > sales, validating the conservatism call rather than retiring it. The signal: management thinks they are mid-innings, not late, on a multi-year refresh — and that CROs and biotechs (still on the sidelines) are the next leg.

Empower has shifted from being described as an established informatics platform to a deliberate AI-native subscription transition. The anchor quote: "These cloud-native features will leverage artificial intelligence and machine learning to reduce manual interventions, save analyst time, and minimize compliance risks from human error." In Q&A, management offered the first quantification of the model shift — one customer fleet transition equals "low double-digit millions" of upside — and disclosed 450,000 global Empower users as the addressable base. Small-to-mid pharma is already transitioning; large pharma is in late-stage discussions. This is no longer software maintenance; it is a deliberate revenue-model rebuild that will start producing premium feature releases through 2026.

The BD combination narrative moved from "future value creation" (announced Q1, structured Q2) to operational countdown. Management said two integration summits have happened, "six big business unit work streams and 10 functional work streams are now fully mobilized" for day-one readiness, and the close is on track for around end of Q1 calendar 2026. Compared to Q2 — when the synergy bridge was the talking point — this quarter's framing is execution machinery.

On policy/external environment, the tone shifted from cautious to constructive: "the external environment continues to improve across our key end markets, supported by more stable global trade conditions and a clearer policy backdrop." MFN tariff clarity was cited multiple times in Q&A as a customer-side unlock, and the FDA biosimilar guidance was framed as potentially making analytical testing "the primary gatekeeper for biosimilar approval" — a regulatory tailwind being extrapolated into demand.

Recurring themes management leaned on this quarter:

Instrument replacement cycle strength and runwayLarge molecule/bioseparations growth accelerationNew product innovation driving premium growth (Zevo CDMS, bioseparations columns)Idiosyncratic growth drivers durability (GLP-1 testing doubling, PFAS orders ~30%)China CDMO/biotech strength and patent cliff tailwind in India genericsAI/cloud-native informatics platform evolution and subscription model transition

Risks management surfaced:

Pending BD combination completion and integration execution risk (end of Q1 2026 target)Tariff structure impact (incorporated in guidance but acknowledged as headwind)Currency translation headwinds (separate guidance for reported vs constant currency)Segments still underperforming (China generics, pharma discovery, CROs noted as slower)Reliance on new product adoption and unmet needs validation in bioanalytical characterization

Q&A highlights

Puneet Soura · Lyric Inc

On 4Q guidance: Are you expecting budget flush, pull forwards from Q3, and what is the instruments vs chemistry breakdown? On Empower: How should we think about incremental upside from the subscription-based model versus the prior model?

Management indicated strong Q4 setup with 16% Q3-to-Q4 ramp (versus historical 22% and 18% last year), showing prudent guidance. No pull forward; orders exceeded sales, building healthy backlog. Chemistry expected ~6%, Service ~8% (with one extra day benefit of ~100bps), Instruments ~5%. Empower Superhighway has three parts: expanding compatible instruments (flow, PCR), providing value-added services to 450k global users via cloud-ready software (utilization data, anomaly detection, audit trail intelligence), and transitioning customers from capex/service to subscription model. Early adoption in small-to-mid pharma; large pharma in late-stage discussions. One customer fleet transition could yield low double-digit millions upside. Too early to quantify precisely.

Q4 guidance: 5-7% growth midpoint (16% ramp Q3 to Q4 vs. historical 22%)Chemistry ~6%, Service ~8%, Instruments ~5% for Q4One extra day adds ~100 basis points to recurring revenue450,000 global Empower users

Casey Woodring · JP Morgan

TA business came back faster than expected (grew 2% in Q3 vs. prior 5% decline assumption for H2). Walk through latest expectations and exit-year TA guidance. On instrument order funnel: orders exceeding shipments; what is the replacement cycle runway and could it last longer given strength, new launches, FDA biosimilar guidance, and reshoring?

TA stabilization driven by tariff volatility easing with large industrial customers and improving interest rate outlook releasing stalled capital projects. Funnel remains rich with large pharmas and CDMOs in mid-replacement cycle; innovation in LC/MS and bioanalytical/bioseparations resonating. Three customer groups still on sidelines: CROs (expected to return end of year), biotechs, and branded generics in China. Instruments still in low single-digit CAGR vs. 2019 (six-year basis), indicating long runway ahead. MFN clarity on tariffs relief allows customers to plan systematically and adopt new products more confidently, benefiting CapEx release. Reshoring benefit seen through clearer policy environment and differentiated portfolio.

TA grew 2% in Q3 vs. prior assumption of -5% for H2Large pharma and CDMO replacement cycles ongoingInstruments at low single-digit CAGR vs. 2019 (six-year basis)CROs expected to enter replacement cycle end of year and into 2026

Doug Schenkel · Wolf

Pacing dynamics: beat Q3 revenue but guidance raise was smaller than beat magnitude; margins light in Q3 but Q4 assumed big jump; tax rate low in Q3 but big jump expected in Q4. How much weight on quarterly puts/takes vs. full-year tracking? On 2026: comfortable with 6-8% core growth guidance with difficult comps despite strong momentum, and 50-100bps margin expansion?

Management emphasized full-year view over quarterly timing dynamics. Q3 outperformance required higher annual bonus payout and incremental commission; tax timing includes discrete items trued up on annual basis (full-year guidance 16.5% effective rate). Full year tracking ahead with high single-digit growth and double-digit EPS growth. On 2026: not providing specific guidance in Q3, will address at year-end/Q4, but confirmed setup is excellent. Multiple catalysts: stable policy environment (pharma/academia), mid-innings instrument replacement cycle (still low single-digit CAGR vs. 2019), GLP-1 testing (doubled YoY, more coming with new competitors), India (high teens growth), PFAS testing, bioanalytical/bioseparations momentum, CDMS strength, Empower/MALLS informatics. Management confident in sustaining performance.

Full-year effective tax rate guidance: 16.5%High single-digit growth and double-digit EPS growth on track for 2025GLP-1 testing revenue doubled Q3 vs. prior year; new entrants coming (semaglutide, genetics)India: high teens growth

Dan Arias · Stifel

Biosimilar opportunity: drug sales guidance moves up nicely each year (26 > 25, 27/28 significantly higher). To what extent are pill count increases underpinning that growth vs. pricing? What changes for Waters when it comes to volume opportunity each year?

Management emphasized that biosimilar volume (pill count) is the key driver of Waters' opportunity. Current penetration of advanced therapies remains extremely low due to pricing/affordability. Removing clinical study requirements and substituting bioanalytical characterization enables more biosimilars to enter market, driving price down, access up, and penetration up. This creates significant volume growth opportunity for Waters testing. Management sees this as a major patient health improvement if policy gains traction. Drug sales dollar growth guidance reflects both volume expansion (from lower prices enabling penetration) and pricing, but volume is the lever.

Penetration of advanced therapies (oncology, immunotherapy) still extremely lowBioanalytical characterization replacing clinical studies removes barrier to biosimilar entryPrice decline → access increase → penetration increase (volume-driven)Policy improvement on biosimilar characterization is significant for patient health

Answers to last quarter's watch list

Back-half instrument growth vs. 5% assumption — Instruments came in at +6% with orders exceeding sales and backlog building; Q4 guide implies ~+5%, which is again conservative versus internal momentum.

Resolved positively

TA segment trajectory and TA Americas weakness — TA returned to +2% in Q3, materially ahead of the -5% H2 assumption (9-month TA -1%). Management attributed the inflection to MFN tariff clarity and improving rate outlook releasing industrial CapEx.

Resolved positively

Gross margin recovery from tariff remediation — Gross margin printed 59.0%, +70bps sequential, and non-GAAP operating margin hit 30.3%, consistent with the "progressive Q3-Q4 improvement" claim.

Resolved positively

China growth versus the conservative low-to-mid single-digit H2 guide — China grew ~12% in Q3 (pharma +20%, A&G ~20%); Q4 is modeled at high single digits. Management reiterated the long-run China assumption is low-to-mid single digits and called the stimulus contribution a timing benefit.

Continue monitoring

BD Biosciences deal close timing and microbiology mass-spec roadmap — Close reaffirmed for around end of Q1 calendar 2026; integration work streams fully mobilized. No incremental color on the 2-3 year microbiology mass-spec product timeline this quarter.

Continue monitoring

Realization of the $8M pull-forward — Management didn't call out the pull-forward explicitly on the print. Given Q3's broad beat, it appears immaterial to results either way.

Not resolved

What to watch into next quarter

Whether Q4 instruments growth lands above the ~5% implied in segment guidance — Q3 showed orders > sales and backlog building, so an in-line print would itself be a tell on conservatism

Empower subscription transition: any quantified customer count or ARR contribution from the "low double-digit millions per fleet" upside management hinted at

CRO cohort re-engagement — management said CROs are expected back end-of-year and into 2026; Q4 commentary on order activity will be the first datapoint

BD close execution: confirmation of end-of-Q1-2026 timing and any change to the synergy bridge as integration work streams produce findings

2026 guidance framework at the Q4 call — Schenkel's question on whether 6–8% core growth and 50–100bps margin expansion is the right setup was deflected; the answer will frame the stock into year-end

TA segment durability — Q3's return to +2% was driven by policy clarity rather than structural demand recovery; watch whether the inflection extends or reverses if industrial sentiment shifts

Sources

Waters Corporation Q3 2025 press release (Form 8-K Exhibit 99.1), filed via SEC EDGAR: https://www.sec.gov/Archives/edgar/data/1000697/000119312525263520/d40092dex991.htm
Waters Corporation Q3 2025 earnings call transcript (prepared remarks and Q&A), November 4, 2025

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