Castle Biosciences Q3 2026 Earnings: TissueCypher Growth Drives 24% Revenue Gain

Castle Biosciences (Nasdaq: CSTL) reported Q3 2026 revenue of $102.9 million, up 24% from $83.0 million, while diluted EPS was a loss of $0.13 versus a loss of $0.02 a year earlier. TissueCypher report volume rose 47%, making it the principal operating growth driver. Operating loss narrowed and adjusted EBITDA increased, but the GAAP net loss widened mainly because equity securities shifted from a gain to a loss.

Core Earnings Data

Revenue increased by $19.8 million as management identified TissueCypher as a key contributor. The two core revenue-driving tests generated 22% more reports in total, although the gain came from TissueCypher while DecisionDx-Melanoma volume declined modestly for the quarter.

GAAP gross margin remained at 74.7%, allowing the higher revenue base to produce greater gross profit. Higher research and development and selling, general and administrative expenses absorbed part of that increase, but operating loss still narrowed substantially.

Adjusted EBITDA is a non-GAAP measure that excludes items including stock-based compensation, depreciation and amortization, interest, taxes, and gains or losses on equity securities.

Business and Product Performance

Test volumes were uneven across the portfolio. TissueCypher added nearly 5,000 reports year over year, more than offsetting lower volumes for DecisionDx-Melanoma and several additional tests within the reported test mix.

DecisionDx-Melanoma’s quarterly decline contrasts with 5% growth for the first nine months of 2026, when reports reached 30,478. AdvanceAD-Tx and Esopredict added volume without prior-year comparisons, but the company did not disclose revenue by individual test.

Castle also presented clinical evidence intended to support adoption. A TissueCypher study found that clinicians changed management recommendations in 90% of cases after receiving test results. DecisionDx-Melanoma data came from a prospective, multicenter study involving 2,799 patients, supporting the test’s use in sentinel lymph node biopsy and recurrence-risk decisions.

Profitability, Cash Flow and Balance Sheet

The higher revenue base improved operating leverage. Research and development expense increased to $15.8 million from $13.0 million, while selling, general and administrative expense rose to $63.8 million from $55.9 million. Those increases totaled approximately $10.7 million, compared with a $14.8 million increase in GAAP gross profit, resulting in a narrower operating loss.

Quarterly operating cash flow was positive at $19.7 million, although it declined from $22.6 million. For the first nine months, operating cash flow fell more sharply to $12.8 million from $37.4 million. Accounts receivable absorbed $8.1 million of cash during the nine-month period, while prepaid expenses and other current assets used another $8.8 million. Stock-based compensation of $32.6 million was a significant non-cash addition in the operating cash flow reconciliation.

Castle ended September 2026 with $277.7 million in cash, cash equivalents, and marketable investment securities. Current and long-term debt totaled approximately $10.1 million. Capital expenditures were $28.6 million for the first nine months, while property and equipment increased to $111.5 million following investments that included the opening of a new 55,000-square-foot laboratory and office facility in Scottsdale, Arizona.

Operating Improvement Was Obscured by Investment-Market Volatility

The widening GAAP net loss did not result from deterioration in core operating results. Operating loss narrowed to $2.7 million from $6.8 million, and adjusted EBITDA increased to $12.7 million from $9.2 million.

Below the operating line, net equity securities moved from a $3.6 million gain in Q3 2025 to a $3.4 million loss in Q3 2026—a negative swing of approximately $7.0 million. That change more than offset the improvement in operating loss and was the principal reason the reported net loss widened to $4.1 million.

Investors should also note the gap between GAAP and adjusted results. Q3 adjusted EBITDA excludes $11.2 million of stock-based compensation and the $3.4 million equity securities loss, among other adjustments, so the improvement in this measure does not yet represent GAAP profitability.

Earnings Guidance

Castle raised both ends of its full-year revenue range by $20 million. The midpoint increased from $370 million to $390 million, or approximately 5%, while the company reiterated its expectation for positive adjusted EBITDA.

The adjusted EBITDA outlook is directional rather than a quantified range.

Risks Investors Need to Watch

• Growth is concentrated in TissueCypher. Its report volume rose 47%, while DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, and DecisionDx-UM all declined in the quarter. Slower TissueCypher adoption would therefore have an outsized effect on the current volume trend.
• GAAP losses remain sensitive to non-operating items. The approximately $7.0 million year-over-year swing in equity securities illustrates how investment-market movements can obscure progress in the underlying business.
• Year-to-date cash conversion weakened. Nine-month operating cash flow fell from $37.4 million to $12.8 million as receivables and prepaid expenses absorbed cash, even though Q3 itself generated $19.7 million.
• Coverage and reimbursement remain material. Castle identified reimbursement decisions as a business risk, and the earlier DecisionDx-SCC Medicare coverage change affected nine-month comparisons. DecisionDx-SCC volume also declined 7% in Q3.
• New products and capacity require execution. AdvanceAD-Tx and Esopredict are generating initial volumes, while the new Scottsdale facility expands capacity. The financial return depends on sustained adoption and effective use of the added infrastructure.

Summary

Castle Biosciences’ Q3 2026 results showed higher revenue, stable gross margin, a narrower operating loss, and improved adjusted EBITDA, led by rapid TissueCypher volume growth. The wider GAAP net loss primarily reflected equity securities volatility rather than weaker core operations. The raised revenue outlook points to continued momentum, while product-level concentration, year-to-date cash conversion, reimbursement conditions, and progress toward GAAP profitability remain the main issues to monitor.