QDEL Q4 Deep Dive: Margin Expansion, R&D Pipeline, and Guidance Disappoints

Healthcare diagnostics company QuidelOrtho (NASDAQ:QDEL) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 2.2% year on year to $723.6 million. The company’s full-year revenue guidance of $2.8 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $0.46 per share was 8.8% above analysts’ consensus estimates.

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StockStory’s Take

QuidelOrtho’s fourth quarter was marked by improved operational efficiency and growth in its core labs and non-respiratory businesses, but the market responded negatively to its results. Management identified cost discipline and organizational realignment as key drivers, with CEO Brian Blaser highlighting $140 million in cost savings and an expanded adjusted EBITDA margin. The company’s Labs segment maintained mid-single-digit growth, and its Triage business saw strong adoption. However, respiratory revenues declined as expected, and tariffs, product mix, and increased instrument placements pressured gross margins. CFO Joseph Busky described margin improvements as “a direct result of our company-wide cost savings initiatives,” but acknowledged that timing and product mix remain ongoing challenges.

Looking ahead, QuidelOrtho’s guidance reflects ongoing operational improvements but also incorporates continued uncertainty in respiratory testing and only gradual margin progress. Management cited ongoing investments in R&D, supply chain optimization, and the rollout of new platforms as strategic priorities. Blaser noted, “We are sharpening our focus by prioritizing higher growth markets and being selective in how and where we deploy capital.” The company expects procurement initiatives and the integration of new molecular diagnostics platforms to support future profitability, but guidance for adjusted EPS and EBITDA fell short of analyst expectations, with management highlighting depreciation and ongoing facility consolidation as near-term constraints.

Key Insights from Management’s Remarks

Management pointed to a blend of cost savings, product launches, and regional strength as the primary drivers of the quarter’s performance, while also noting challenges from tariffs and respiratory revenue declines.

• Cost structure realignment: The company’s $140 million in cost savings came from operational changes, including reduced operating expenses and improved execution discipline, which expanded adjusted EBITDA margins into the low 20% range.
• Labs and Triage segment momentum: The Labs business, buoyed by clinical chemistry strength, grew 7% in the quarter, while the Triage cardiac diagnostics line expanded 16%, reflecting robust demand and high customer renewal rates.
• Respiratory revenue headwinds: As anticipated, COVID-19 testing demand continued to decline, offset partially by a 6% increase in flu-related sales. Management described the combo flu/COVID test as a “durable” revenue stream, with more than half of flu revenues now derived from this product.
• International market performance: Latin America and Asia Pacific saw double-digit and high single-digit growth respectively, with EMEA (Europe, Middle East, and Africa) delivering flat revenue but a notable 900-basis-point margin improvement. China posted low single-digit growth amid potential regulatory changes tied to value-based procurement (VBP).
• Product pipeline advancements: The quarter saw FDA clearances for new high-sensitivity troponin assays and informatics solutions, as well as a strategic partnership to expand assay menus in international markets. R&D upgrades, including a reorganized team and process modernization, have accelerated the development and launch of new platforms.

Drivers of Future Performance

Looking forward, QuidelOrtho’s outlook is shaped by margin initiatives, respiratory market uncertainty, and product launches in core and emerging markets.

• Margin expansion and cost controls: Management is targeting a mid-20% EBITDA margin over the next few years, driven by procurement projects, facility consolidations, and optimization of the manufacturing footprint. While some direct procurement savings are expected in the coming year, most benefits will materialize later, with CEO Brian Blaser stating, “We still have a lot of opportunity to optimize profitability in a number of regions.”
• Respiratory and molecular testing uncertainty: Guidance assumes flat COVID revenue and a typical flu season, but management emphasized the unpredictable nature of respiratory testing volumes. The ongoing wind-down of the U.S. Donor Screening business introduces further variability, and the integration of the LEX Diagnostics platform is expected to have a dilutive impact in the near term before supporting margin expansion longer term.
• International and new platform growth: The company expects growth in international markets, supported by new immunoassay and chemistry platforms, particularly outside the U.S. (OUS). Strategic partnerships will address menu gaps for competitive tenders, with launches of the VITROS 450 system and additional assays expected to drive future revenue and competitive positioning.

Catalysts in Upcoming Quarters

Looking ahead, our analysts are monitoring (1) the pace and impact of new platform launches, including VITROS 450 and LEX Diagnostics; (2) progress on procurement and facility optimization initiatives to support margin expansion; and (3) international market growth, particularly in Latin America, Asia Pacific, and OUS immunoassay tenders. Regulatory developments in China and the sustainability of Labs segment momentum will also be closely tracked.

QuidelOrtho currently trades at $26.03, down from $28.80 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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