Castle Biosciences Raises 2026 Revenue Outlook After Q3 Growth

Castle Biosciences (CSTL) raised its 2026 revenue guidance after third-quarter revenue increased about 24%, supported by strong growth in its TissueCypher test. The molecular diagnostics company now expects full-year revenue of $385 million to $395 million and anticipates positive adjusted EBITDA for both the fourth quarter and full year.

The new revenue range is up from the $365 million-to-$375 million forecast provided in July. Castle has raised its outlook three times since February, lifting the guidance midpoint by $45 million from its initial 2026 range of $340 million to $350 million.

Revenue growth and positive adjusted EBITDA

Revenue for the quarter ended Sept. 30 was $102.9 million, compared with $83.0 million a year earlier. Adjusted revenue, which excludes current-period changes in estimated variable consideration related to tests delivered in prior periods, rose to $101.9 million from $80.5 million.

Castle reported 32,431 test reports during the quarter. Adjusted gross margin was $78.0 million, or 76.5% of adjusted revenue, compared with $61.8 million and 76.8%, respectively, in the prior-year period. GAAP gross margin remained at 74.7%.

Adjusted EBITDA increased to $12.7 million from $9.2 million a year earlier. The company nevertheless recorded a GAAP net loss of $4.1 million, widening from a $501,000 loss in the third quarter of 2025. Adjusted EBITDA excludes items including interest, taxes, depreciation and amortization, stock-based compensation and gains or losses on equity securities.

Castle ended the quarter with $277.7 million in cash, cash equivalents and marketable investment securities.

TissueCypher leads volume growth

TissueCypher, Castle’s risk-stratification test for patients with Barrett’s esophagus, was the quarter’s principal volume growth driver. Test reports increased 47% to 15,574 from 10,609 a year earlier. The test is designed to estimate a patient’s five-year risk of progression to high-grade dysplasia or esophageal adenocarcinoma and help guide surveillance or treatment decisions.

DecisionDx-Melanoma remained another core revenue driver, although quarterly report volume declined to 10,177 from 10,459. Castle said prospective data from its DECIDE study showed that patients assigned a less-than-5% probability of sentinel lymph node positivity by the test’s i31-SLNB result had an actual positivity rate of 2.6%. The company said the findings support the test’s use in identifying patients who may be able to avoid sentinel lymph node biopsy.

DecisionDx-SCC volume fell to 3,882 reports from 4,186. Castle attributed the performance to the Medicare coverage change that took effect on April 24, 2025, as well as a refocusing of its commercial efforts. MyPath Melanoma volume declined to 798 from 1,151, while DecisionDx-UM reports edged down to 422 from 436.

Newer tests added volume without year-earlier comparisons. AdvanceAD-Tx generated 1,109 reports, and Esopredict produced 469. AdvanceAD-Tx is designed to guide systemic treatment selection for patients aged 12 and older with moderate-to-severe atopic dermatitis. Castle presented data from a 45-patient multicenter case series in which 97.8% of post-testing treatment decisions were aligned with the test result, though the test is intended to supplement rather than replace clinical judgment.

Commercial expansion and disciplined spending remain priorities

Management identified broader clinician adoption, additional clinical evidence and appropriate reimbursement coverage as key priorities. Castle also plans to balance commercial investment, focused research and development, and strategic opportunities while maintaining attention to gross margin, operating expenses and cash generation.

Execution of that strategy remains subject to reimbursement and clinical-evidence risks. Castle specifically cited the Novitas local coverage determination denying Medicare coverage for DecisionDx-SCC, as well as the possibility that later studies may not confirm earlier findings. Other uncertainties include the cost and timing of pipeline programs, integration of acquired businesses or technologies, scalability initiatives, and whether the company’s newer gastroenterology and mental-health franchises contribute to long-term financial targets as anticipated.