NOVT Q2 Deep Dive: Medical Device Growth Offset by Guidance Caution and Trade Uncertainty

August 12, 2025 at 23:29 PM EDT

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Medicine and manufacturing technology provider Novanta (NASDAQ: NOVT) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 2.2% year on year to $241 million. On the other hand, next quarter’s revenue guidance of $245.5 million was less impressive, coming in 3.8% below analysts’ estimates. Its non-GAAP profit of $0.76 per share was 3.6% above analysts’ consensus estimates.

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Novanta (NOVT) Q2 CY2025 Highlights:

Revenue: $241 million vs analyst estimates of $238 million (2.2% year-on-year growth, 1.3% beat)
Adjusted EPS: $0.76 vs analyst estimates of $0.73 (3.6% beat)
Adjusted EBITDA: $52.16 million vs analyst estimates of $51.49 million (21.6% margin, 1.3% beat)
Revenue Guidance for the full year is $977.5 million at the midpoint, below analyst estimates of $983.2 million
Adjusted EPS guidance for the full year is $3.29 at the midpoint, missing analyst estimates by 2.4%
EBITDA guidance for the full year is $227.5 million at the midpoint, below analyst estimates of $231.5 million
Operating Margin: 11.4%, in line with the same quarter last year
Market Capitalization: $4.36 billion

StockStory’s Take

Novanta’s second quarter was marked by strong execution in its core medical and automation markets, but the market responded negatively to the results. Management pointed to robust double-digit growth in the Advanced Surgery and Robotics Automation businesses, driven by new product launches and sustained procedure growth in healthcare. CEO Matthijs Glastra highlighted the company’s new product revenue growing over 50% year-over-year and customer orders up 10%, indicating demand strength. However, challenges persisted in industrial capital equipment and precision medicine segments, due in part to trade disruptions and sluggish end-market dynamics.

Looking forward, Novanta’s management expressed caution regarding its full-year outlook, citing persistent trade tensions, tariff impacts, and uncertainty in customer order patterns—especially in China. CFO Robert Buckley noted that the company’s guidance factors in ongoing risk from a $35 million China revenue exposure and the timing of manufacturing shifts to mitigate tariffs. CEO Matthijs Glastra emphasized the importance of ramping new products and accelerating cost reduction plans, while also focusing on acquisitions to drive future growth, stating, “We remain focused on our top three priorities for Novanta in 2025: ramp all our planned new products, deliver strong profit margin, and acquire additional companies that fit our strategy.”

Key Insights from Management’s Remarks

Management attributed the quarter’s results to strong adoption of new products in medical and robotics, while ongoing trade and industrial headwinds tempered growth in other segments.

Advanced Surgery momentum: Novanta’s Advanced Surgery business experienced double-digit growth, supported by new product launches in surgical robotics and minimally invasive surgery. Management highlighted success in smoke evacuation devices, which benefit from new regulatory requirements for surgical environments.
Robotics and automation traction: The Robotics and Automation segment grew nearly 16% year-over-year, driven by demand for physical AI applications like warehouse automation. A significant $50 million contract win with a leading e-commerce robotics customer was secured, with revenue expected to begin in 2026.
Precision Medicine challenges: The Precision Medicine unit faced a year-over-year decline due to weak biotech funding, regulatory disruptions, and a shift toward new technologies such as RFID and machine vision. However, management noted sequential improvement and expects ongoing stabilization as the product mix transitions.
Tariff and trade responses: Management executed a tariff mitigation strategy—shifting production to non-tariff regions and launching cost reduction plans—to address $4 million in year-to-date tariff impacts. Design win activity with Chinese customers accelerated, reflecting confidence in Novanta’s mitigation strategies despite muted U.S. factory orders.
M&A and portfolio evolution: The Kion acquisition, focused on RFID and AI-enhanced inventory management, outperformed expectations and contributed to sales. Management indicated a strong pipeline for additional acquisitions, with the amended credit facility enabling further strategic transactions in the second half of 2025.

Drivers of Future Performance

Novanta expects new product ramps and operational efficiencies to partially offset ongoing trade risks and muted end-market demand in the coming quarters.

Continued new product adoption: Management believes growth will be led by ongoing launches in advanced surgery, robotics, and automation, with physical AI applications in warehouse and humanoid robotics representing expanding addressable markets. The company expects its Advanced Surgery revenue to nearly double by 2030, underpinned by new regulatory-driven devices and increased medical procedure volumes.
Operational cost actions: The company is accelerating cost reduction initiatives, including regionalizing manufacturing and simplifying its operating model, to structurally improve margins and reduce tariff exposure. CFO Robert Buckley noted that most restructuring savings are expected to materialize in late 2025 and into 2026, supporting margin stability despite persistent cost pressures.
M&A as a growth lever: Novanta plans to pursue additional acquisitions that align with its focus on recurring revenue and intelligent subsystems. Management indicated that attractive valuations and increased actionability in the current macroeconomic environment make this a key pillar for future growth.

Catalysts in Upcoming Quarters

Going forward, the StockStory team will be watching (1) the ramp-up and market acceptance of new products, especially in advanced surgery and robotics; (2) the execution and savings from cost reduction and regional manufacturing strategies to mitigate tariff impacts; and (3) the company’s ability to complete and integrate new acquisitions that diversify and strengthen its portfolio. Successful navigation of trade dynamics and stabilization in end markets will also be critical.

Novanta currently trades at $121.19, down from $124.19 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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