Life sciences company Revvity (NYSE: RVTY) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 2.2% year on year to $698.9 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $2.86 billion at the midpoint. Its non-GAAP profit of $1.18 per share was 3.6% above analysts’ consensus estimates.

Is now the time to buy RVTY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Revvity’s third quarter results were met with a significant negative reaction from the market, as investors focused on sluggish organic revenue growth and margin compression despite headline results aligning with Wall Street expectations. Management pointed to a strong performance in its Signals software and reproductive health businesses, with CEO Prahlad R. Singh highlighting that “our signals software business continued to perform extremely well, growing 20% organically,” and that “newborn screening again grew in the high single digits in the quarter.” However, challenges persisted, particularly in China’s diagnostics segment, where volumes remained under pressure, and lower life sciences reagent sales contributed to margin declines. Singh acknowledged these headwinds, noting the company remains focused on cost containment and cash flow generation.

Looking forward, Revvity’s guidance reflects both cautious optimism and ongoing uncertainty in key markets. Management expects organic growth in the low single digits, citing early signs of improved customer activity, especially in pharma and biotech instrumentation. Singh stated, “our best and most prudent assumption for next year is that organic growth continues to remain similar to what it has been over the last several years in the 2% to 3% range.” The company is investing heavily in new AI-enabled software products and strategic partnerships, but CFO Maxwell Krakowiak cautioned that persistent headwinds in China and constrained academic funding could limit upside. Initiatives in cost containment and product innovation are expected to support margin recovery if demand trends stabilize.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust Signals software growth, stabilization in reproductive health, and ongoing challenges in China diagnostics, while emphasizing the accelerating integration of AI into both operations and product lines.

• Signals software acceleration: The Signals software business achieved 20% organic growth, driven by increased SaaS adoption and product launches like SignalsOne and Living Image Synergy AI. Management emphasized the contribution of annual recurring revenue growth and strong customer retention as key to segment outperformance.

• Reproductive health momentum: The reproductive health segment, including newborn screening and partnerships like Genomics England, delivered mid-single-digit organic growth. Management highlighted the successful launch of new diagnostic assays and collaborations, bolstering the diagnostics portfolio outside China.

• China diagnostics headwinds: Revenues from the China diagnostics business fell in the low twenties percent, reflecting ongoing reimbursement policy changes known as DRG (Diagnosis-Related Groups). The company expects these headwinds to persist into the first half of next year, with gradual stabilization projected thereafter.

• AI deeply embedded in operations: Revvity showcased rapid progress in embedding AI into both customer-facing products and internal processes. Over 30 internal AI agents have driven lead conversion and software development efficiency, while new AI-powered offerings are automating scientific workflows for clients.

• Capital deployment and buybacks: Free cash flow conversion remained strong, with $205 million allocated to share repurchases in the quarter. The board approved a new $1 billion buyback authorization, reflecting a shift toward shareholder returns while maintaining a disciplined approach to M&A.

Drivers of Future Performance

Revvity’s outlook is shaped by software-led innovation, ongoing China diagnostics weakness, and a focus on disciplined cost management to support margins.

• AI-driven product pipeline: Management is prioritizing the launch of new AI-enabled software tools across its scientific and diagnostics businesses. CEO Singh expects these offerings to drive productivity improvements for customers and differentiate Revvity as AI adoption accelerates in the life sciences sector.

• China diagnostics stabilization: The company anticipates continued pressure in China diagnostics through the first half of next year due to DRG reimbursement changes, with a return to modest growth projected in the back half of the year. Management is monitoring the evolving regulatory landscape and local manufacturing to mitigate risks.

• Margin recovery efforts: Disciplined cost containment, restructuring activities, and productivity initiatives are expected to help restore adjusted operating margins to the 28% baseline next year. CFO Krakowiak noted that any upside in organic growth could translate into incremental margin expansion, depending on demand normalization.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the adoption pace and revenue contribution from new AI-enabled software launches, (2) the trajectory of China diagnostics as DRG headwinds potentially subside, and (3) execution of cost management initiatives and their impact on margin recovery. Progress in strategic partnerships and regulatory clearance for new assays will also be important signposts for future growth.

Revvity currently trades at $98.25, in line with $98.91 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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