Healthcare diagnostics company Quest Diagnostics (NYSE: DGX) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 15.2% year on year to $2.76 billion. The company’s full-year revenue guidance of $10.86 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $2.64 per share was 2.5% above analysts’ consensus estimates.

Is now the time to buy DGX? Find out in our full research report (it’s free).

StockStory’s Take

Quest Diagnostics delivered a quarter that surpassed Wall Street’s expectations, with strong results driven by a combination of acquisition contributions and robust organic growth. Management highlighted heightened demand for advanced diagnostic tests and expanded access through new health plan contracts as primary factors behind the performance. CEO Jim Davis pointed to increased test ordering from both physicians and enterprise accounts as essential to the company’s top-line momentum, noting that “demand for our innovative clinical solutions contributed significantly to organic revenue growth.”

Looking ahead, Quest Diagnostics’ updated guidance reflects confidence in both continued organic growth and contributions from recent acquisitions. The company is emphasizing expanded access to new patient populations, further development in advanced diagnostics, and operational improvements via automation as key drivers. CFO Sam Samad stated, “Our updated revenue guidance assumes approximately 3.5% to 4% organic revenue growth in addition to contributions from acquisitions completed in 2024 and announced to date.” Management also pointed to investments in modernization projects and strategies to offset headwinds from tariffs and regulatory changes.

Key Insights from Management’s Remarks

Management attributed the quarter’s strong performance to successful integration of acquisitions, growth in advanced diagnostics, and increased access via new payer contracts.

• Acquisition integration progress: The LifeLabs acquisition was a major contributor, accounting for the bulk of M&A-driven growth. Management noted that operational synergies are tracking ahead of expectations, with CEO Jim Davis citing procurement and operational know-how gains from both organizations.

• Advanced diagnostics momentum: Double-digit revenue growth in areas such as cardiometabolic, autoimmune, and brain health testing helped drive improved test mix. The launch of the AB4240 and PTOW2-17 AB detect panel for Alzheimer’s disease and progress in oncology (notably the Haystack MRD test) were highlighted as growth engines.

• Expanded payer access: The company secured new contracts with Elevance and Centene, adding over a million covered lives in several U.S. states. This led to a steady increase in utilization and volume growth throughout the quarter, as patients transitioned into the network.

• Consumer and enterprise channel expansion: Quest hit a milestone of one million customer orders on its direct-to-consumer platform, while also seeing strong growth from enterprise clients in functional medicine, a field focused on preventive healthcare and holistic patient management.

• Operational improvements and automation: Ongoing investments in automation and AI, including front-end automation and digital accessioning platforms, are delivering productivity gains and supporting margin expansion. Employee retention also improved, contributing to operational efficiency.

Drivers of Future Performance

Management expects continued revenue and margin growth, supported by expanded access, innovation in diagnostics, and operational efficiencies, but notes risks from regulatory and macroeconomic factors.

• Continued expansion of advanced diagnostics: The company is banking on growing test volume and new launches in high-value diagnostics, including neurology and oncology. Management expects this to drive both revenue and favorable test mix, particularly as tests like Haystack MRD gain broader adoption among oncologists.

• Operational modernization and cost management: Ongoing investments in automation, digitization, and Project Nova (a modernization effort targeting the order-to-cash process) are expected to yield productivity improvements and cost savings. Management anticipates these operational gains will support margin expansion, even as wage inflation remains in the 3-4% range.

• Navigating regulatory and reimbursement risks: Management is monitoring legislative changes, such as potential impacts from PAMA (Protecting Access to Medicare Act) and the recent healthcare bill affecting insurance exchange participation. While near-term financial impacts are expected to be limited, management acknowledged that longer-term reimbursement pressures could pose headwinds.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely watch (1) the pace of adoption and revenue mix from new advanced diagnostics like the Alzheimer’s and oncology panels, (2) the integration and financial impact of the LifeLabs acquisition, and (3) progress on operational modernization and automation initiatives. Additionally, we are monitoring potential regulatory changes affecting reimbursement rates and insurance coverage, as these could influence both volume and pricing power.

Quest currently trades at $179.10, up from $166.56 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

Our Favorite Stocks Right Now

Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.