QDEL Q2 Deep Dive: Cost Controls and International Growth Offset Lower COVID Diagnostics

Healthcare diagnostics company QuidelOrtho (NASDAQ:QDEL) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 3.6% year on year to $613.9 million. On the other hand, the company’s full-year revenue guidance of $2.71 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $0.12 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

QuidelOrtho’s second quarter was shaped by continued declines in COVID-19 testing, tempered by solid performance in its core laboratory and immunohematology businesses. Management attributed the year-on-year revenue decline mainly to lower COVID testing and the wind-down of donor screening, while highlighting that non-respiratory revenues, including labs and immunohematology, posted modest organic growth. CEO Brian Blaser explained, “Q2 is typically our lowest revenue quarter of the year due to seasonally low viral prevalence, especially in North America.” The company also cited improved cost control and operational efficiencies, particularly in procurement and manufacturing site consolidation, as key factors supporting profitability.

Looking forward, QuidelOrtho’s guidance is underpinned by expectations of stable growth in international markets and disciplined expense management. Management pointed to ongoing commercial and operational improvement initiatives, as well as planned new product launches like the LEX Diagnostics molecular platform, as important future growth drivers. CFO Joseph Busky emphasized, “We are maintaining our full year guidance for adjusted EBITDA and EPS, expecting lower COVID margin contribution to be fully offset by cost savings and reduced tariff impacts.” The company is closely monitoring regulatory changes and market conditions in China and other key geographies, aiming to mitigate risks while capitalizing on expansion opportunities.

Key Insights from Management’s Remarks

Management attributed Q2’s results to lower COVID-related volumes, stable international growth, and ongoing cost-saving measures, while reiterating that operational improvements are yielding margin gains and positioning the company for future product launches.

• COVID and donor screening decline: The quarter’s revenue decrease was primarily due to reduced COVID testing demand and the continued wind-down of the donor screening business, as these segments saw expected volume drops.
• International market expansion: Growth in regions such as Latin America, Japan, and EMEA (Europe, Middle East, and Africa) offset domestic softness, with Latin America up 14% and EMEA up 3% year-to-date, demonstrating the company’s focus on increasing overseas penetration where market share remains low.
• Cost structure optimization: The company’s ongoing cost-reduction initiatives, including procurement savings and manufacturing site consolidation, led to improved non-GAAP gross margins and lower operating expenses, supporting higher adjusted profits despite revenue declines.
• Product portfolio transitions: The discontinuation of the Savanna molecular platform resulted in non-cash charges but is expected to provide annual cost savings, while the acquisition of LEX Diagnostics is anticipated to enhance the molecular diagnostics portfolio upon regulatory clearance.
• Tariff impact mitigated: QuidelOrtho reduced its full-year tariff headwind estimate to $20-$25 million, down from previous estimates, due to inventory management and cost controls, and expects to fully offset these pressures through ongoing mitigation efforts.

Drivers of Future Performance

QuidelOrtho’s outlook is shaped by product mix shifts, international growth, and an emphasis on operational efficiency, while navigating lower pandemic-related revenues and evolving regulatory landscapes.

• Sustained international growth: Management expects continued expansion in underpenetrated markets such as China, Latin America, and EMEA, driven by differentiated technology and strategic focus on stat labs and clinical chemistry, though regulatory and reimbursement shifts remain ongoing risks.
• Cost savings and margin expansion: Ongoing procurement initiatives, site consolidations, and headcount reductions are projected to yield $30 million to $50 million in incremental annual savings, supporting adjusted EBITDA margin targets in the mid- to high-20% range by mid-2027.
• New product commercialization: The planned introduction of the LEX Diagnostics Velo molecular platform, pending FDA clearance, is seen as a catalyst for growth in point-of-care and professional applications, with management targeting expansion into new test menus and broader market adoption beginning in 2026.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace of international expansion, particularly in China and Latin America, (2) execution and regulatory progress for the LEX Diagnostics molecular platform, and (3) realization of procurement and operational savings that underpin margin targets. Additional attention will be given to how QuidelOrtho navigates further COVID volume declines and adapts to changes in global healthcare reimbursement policies.

QuidelOrtho currently trades at $25.19, up from $23.70 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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