Cuộc họp công bố kết quả kinh doanh quý 3 năm 2026 của Bio-Rad (BIO): Tăng trưởng ddPCR và mở rộng biên lợi nhuận

Bio-Rad Laboratories (NYSE: BIO) công bố mức tăng trưởng doanh thu khiêm tốn trong quý 3 năm 2026, được hỗ trợ bởi mảng Chẩn đoán Lâm sàng và đà tăng trưởng liên tục của các thiết bị Droplet Digital PCR. Khả năng sinh lời non-GAAP được cải thiện, dù chi phí tái cấu trúc và khoản trích lập giảm giá trị tài sản vô hình đã khiến công ty ghi nhận khoản lỗ hoạt động theo GAAP.

Điểm nhấn chính

• Doanh thu quý 3 đạt khoảng 656 triệu USD, tăng 0,5% theo số liệu báo cáo và tăng 0,7% sau khi loại trừ biến động tỷ giá so với cùng kỳ năm trước. Đây là quý đầu tiên Bio-Rad ghi nhận mức tăng trưởng loại trừ biến động tỷ giá trong năm 2026.
• Doanh thu mảng Chẩn đoán Lâm sàng tăng 2,8% sau khi loại trừ biến động tỷ giá lên khoảng 402 triệu USD, nhờ vào các hệ thống kiểm soát chất lượng, các sản phẩm điều trị tiểu đường và thời điểm ghi nhận đơn hàng.
• Doanh thu mảng Khoa học Đời sống giảm 2,4% sau khi loại trừ biến động tỷ giá xuống còn 255 triệu USD do doanh số sắc ký quy trình sụt giảm và hoạt động nghiên cứu học thuật suy yếu. Nếu loại trừ sắc ký quy trình, phân khúc này tăng trưởng 2,5%.
• Danh mục sản phẩm ddPCR tăng trưởng 7% sau khi loại trừ biến động tỷ giá, trong khi doanh thu thiết bị tăng hơn 20% trong quý thứ ba liên tiếp, dẫn đầu bởi danh mục QX700.
• Biên lợi nhuận gộp non-GAAP mở rộng lên 54,5% từ mức 53,5% của cùng kỳ năm trước, trong khi biên lợi nhuận hoạt động non-GAAP cải thiện lên 12,8% từ mức 11,8%.
• Bio-Rad tái khẳng định dự báo cho năm 2026 và kỳ vọng tăng trưởng doanh thu cả năm sau khi loại trừ biến động tỷ giá sẽ tiệm cận mức trung vị của biên độ từ âm 3% đến dương 0,5%.

Dữ liệu tài chính cốt lõi

Bio-Rad đã ghi nhận khoản suy giảm giá trị phi tiền mặt khoảng 50 triệu USD liên quan đến các tài sản vô hình đã mua lại thuộc mảng Khoa học Đời sống. Ban lãnh đạo cho biết chi phí này phản ánh các quyết định tái cơ cấu danh mục nhằm ưu tiên lợi tức đầu tư.

Hiệu quả kinh doanh và hoạt động

Mảng Chẩn đoán Lâm sàng đã tăng trưởng trở lại, nhờ kết quả tích cực từ các hệ thống kiểm soát chất lượng và sản phẩm điều trị tiểu đường. Ban lãnh đạo mô tả kiểm soát chất lượng là mảng kinh doanh chẩn đoán lớn nhất của công ty và cho biết nhu cầu vẫn duy trì mạnh mẽ trên tất cả các khu vực.

Kết quả kinh doanh của mảng Khoa học Đời sống vẫn có sự phân hóa. Doanh số sắc ký quy trình sụt giảm cùng áp lực tiếp diễn trong lĩnh vực nghiên cứu học thuật đã bù trừ cho mức tăng doanh thu thiết bị ddPCR. Hoạt động sắc ký quy trình đã cải thiện qua từng quý trong năm 2026, dù ban lãnh đạo dự kiến doanh thu sẽ giảm so với quý trước trong quý 4, nhưng vẫn kỳ vọng có sự cải thiện so với cùng kỳ cho cả năm.

ddPCR tiếp tục là động lực tăng trưởng cốt lõi. Doanh số thiết bị tăng hơn 20% trong quý thứ ba liên tiếp, được hỗ trợ bởi việc khách hàng chuyển đổi từ qPCR truyền thống, các hợp đồng thắng thầu trước đối thủ cạnh tranh, danh mục sản phẩm được mở rộng và quy trình làm việc được đơn giản hóa. Mức tiêu thụ vật tư tiêu hao đang cải thiện nhưng vẫn chưa về mức bình thường và có thể tiếp tục thấp hơn mức bình thường sang đến năm 2027 do các hệ thống mới lắp đặt gần đây cần thời gian để nâng cao công suất sử dụng.

Trong quý, Bio-Rad đã ra mắt hệ thống chụp ảnh Western blot ChemiDoc Pro. Thuật toán phân tích của hệ thống này ứng dụng AI được huấn luyện trên hàng nghìn hình ảnh Western blot. Công ty cho biết việc ưu tiên nguồn lực R&D đã giúp đẩy nhanh thời điểm ra mắt sớm hơn khoảng hai quý. Bio-Rad cũng mở rộng danh mục cột sắc ký nhồi sẵn Foresight Pro với việc bổ sung hạt nhựa Nuvia.

Xét theo khu vực, thị trường Trung Quốc đã tăng trưởng trở lại, nhờ các đơn hàng được chuyển từ quý 2 sang và mức nền so sánh thấp hơn của năm trước. Dù vậy, ban lãnh đạo vẫn lưu ý về xu hướng ưu tiên các nhà cung cấp nội địa và áp lực định giá theo các hướng dẫn cập nhật từ Cục Quản lý An ninh Y tế Quốc gia Trung Quốc.

Dự báo của ban lãnh đạo

Bio-Rad tái khẳng định các mục tiêu dự báo non-GAAP sau đây cho năm 2026:

Trong quý 4, ban lãnh đạo kỳ vọng doanh thu báo cáo sẽ tăng từ 5% đến 6% so với quý trước, phù hợp với quy luật mùa vụ thông thường. Chi phí SG&A dự kiến đi ngang so với quý 3, trong khi chi phí R&D dự kiến tăng thêm 3 triệu USD so với quý trước. Chi phí khấu hao và phân bổ ước tính khoảng 40 triệu USD.

Ban lãnh đạo dự kiến biên lợi nhuận gộp non-GAAP sẽ giảm so với quý trước trong quý 4 do cơ cấu sản phẩm nghiêng nhiều hơn về phía thiết bị, doanh thu sắc ký quy trình giảm so với quý trước và giá nhiên liệu tăng cao.

Bước sang năm 2027, Bio-Rad cho biết sẽ tập trung vào việc quay trở lại mức tăng trưởng dương và tiếp tục mở rộng biên lợi nhuận, dù ban lãnh đạo cảnh báo rằng tăng trưởng có thể vẫn chưa hoàn toàn bình thường hóa. Công ty nhắc lại mức tiết kiệm dự kiến từ quá trình tái cấu trúc là 30 triệu USD đến 35 triệu USD, với toàn bộ lợi ích sẽ phát huy hiệu quả vào năm 2028.

Các rủi ro và lĩnh vực trọng tâm

• Nhu cầu từ khối học thuật và chính phủ Mỹ vẫn còn yếu. Các khoản chi từ NIH đã giảm khoảng 15% so với cùng kỳ năm trước trong quý 3 và kết thúc năm tài chính liên bang ở mức thấp hơn khoảng 6 tỷ USD so với ngân sách được Quốc hội phân bổ.
• Triển vọng quý 4 của Bio-Rad không đưa vào giả định về sự phục hồi của các thị trường đầu cuối thuộc khối học thuật và chính phủ Mỹ.
• Ban lãnh đạo dự kiến các hướng dẫn định giá chẩn đoán in vitro cập nhật của Trung Quốc sẽ làm giảm doanh thu năm 2027 một khoản ở mức giữa của hàng đơn vị triệu USD.
• Chi phí logistics tại Trung Đông vẫn ở mức cao và các giả định trong kế hoạch của Bio-Rad bao gồm khả năng tình trạng gián đoạn sẽ tiếp diễn sang năm 2027.
• Ban lãnh đạo kỳ vọng mọi tác động gián tiếp trong năm 2027 từ các thay đổi về hoàn trả chi phí xét nghiệm theo PAMA sẽ ở mức hạn chế, tuy nhiên các mức tỷ lệ hoàn trả cuối cùng dự kiến sẽ có vào tháng 11.
• Mức độ sử dụng vật tư tiêu hao ddPCR vẫn chưa trở lại bình thường bất chấp lượng lắp đặt thiết bị mới rất khả quan, và điều này có thể tiếp tục là yếu tố bất lợi kéo dài sang năm 2027.

Điểm nhấn phiên hỏi đáp với chuyên viên phân tích

Ban lãnh đạo cho biết tăng trưởng doanh thu năm 2027 sẽ ở mức dương nhưng chưa thể hoàn toàn bình thường hóa, do áp lực dai dẳng từ nguồn tài trợ nghiên cứu học thuật, vấn đề định giá tại Trung Quốc và chi phí logistics. Việc tiếp tục mở rộng biên lợi nhuận vẫn là mục tiêu đã đề ra.

Về ddPCR, Bio-Rad không cam kết duy trì mức tăng trưởng doanh số thiết bị trên 20% do mức nền so sánh ngày càng cao hơn. Tuy nhiên, ban lãnh đạo cho biết các khách hàng mới và việc nền tảng này tiếp tục được đón nhận rộng rãi sẽ giúp ddPCR trở thành động lực đóng góp quan trọng cho tăng trưởng trong ngắn và trung hạn.

Ban lãnh đạo cũng nhận định rằng hoạt động phát hiện thuốc ứng dụng AI có thể thúc đẩy nhu cầu khi khách hàng chuyển từ mô hình hóa trên máy tính (in silico) sang thử nghiệm trong phòng thí nghiệm ướt (wet-lab), qua đó có khả năng làm tăng hoạt động tại phòng xét nghiệm và mức độ tiêu thụ hóa chất.

Về phân bổ vốn, Bio-Rad cho biết việc mua lại cổ phiếu sẽ tiếp tục mang tính cơ hội thay vì theo kế hoạch cố định. Công ty không tìm kiếm các thương vụ mua lại mang tính chuyển đổi lớn nhưng sẽ cân nhắc các giao dịch liên quan đến quy mô doanh thu từ 100 triệu USD đến 500 triệu USD trong lĩnh vực công cụ chẩn đoán hoặc khoa học đời sống. Ban lãnh đạo cũng nhắc lại rằng khoản đầu tư cổ phần tại Sartorius AG có thể được chuyển hóa thành tiền mặt nếu xuất hiện kịch bản phù hợp.

Toàn văn biên bản cuộc gọi công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your operator today. At this time, I would like to welcome everyone to Bio-Rad's Third Quarter 2026 Results Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Ruben Argueta, Bio-Rad's Head of Investor Relations. You may begin.

Ruben Argueta

Thank you, operator. Good afternoon, everyone. And thank you for joining us. Today, we will review the financial results for the third quarter ended September 30, 2026, and provide an update on key business trends for Bio-Rad. With me on the call today are Norman Schwartz, our Chief Executive Officer; Jon DiVincenzo, President and Chief Operating Officer; and Roop Lakkaraju, Executive Vice President and Chief Financial Officer.

Before we begin our review, I would like to remind everyone that we will be making forward-looking statements about management's goals, plans and expectations, our future financial performance and other matters. These statements are based on assumptions and expectations of future events that are subject to risks and uncertainties. Our actual results may differ materially from these plans, goals and expectations. You should not place undue reliance on these forward-looking statements, and I encourage you to review our filings with the SEC, where we discuss in detail the risk factors in our business. The company does not intend to update any forward-looking statements made during the call today.

Finally, our remarks today will include references to non-GAAP financials, including net income and diluted earnings per share, which are financial measures that are not defined under generally accepted accounting principles. In addition to excluding certain atypical and nonrecurring items, our non-GAAP financial measures exclude changes in the equity value of our stake in Sartorius AG in order to provide investors with a better understanding of Bio-Rad's underlying operational performance. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings release. We have also posted a supplemental earnings presentation in the Investor Relations section of our website for your reference.

With that, I will now turn the call over to our Chief Operating Officer, Jon DiVincenzo.

Jonathan DiVincenzo

Thanks, Ruben. Good afternoon, everyone, and thank you for joining us. The third quarter represented another step forward in our efforts to improve Bio-Rad's operating and financial performance. Total company revenue in the third quarter was approximately $656 million, an increase of 0.5% on a reported basis and 0.7% on a currency-neutral basis compared with the prior year. This was our first quarter of currency-neutral growth this year. Gross margin expanded to 54.5% on a non-GAAP basis.

While the pace of revenue growth remains modest, we are encouraged by the progress across several areas of the business. Clinical diagnostics returned to growth, supported by quality systems and diabetes products. In life science, excluding process chromatography, revenue increased 2.5% year-over-year. This represents the third consecutive quarter of sequential improvement in the growth rate. It was driven by our genomics portfolio, including our Droplet Digital PCR business, led by the QX700 portfolio. ddPCR instrument revenue increased more than 20% for the third consecutive quarter, supported by both conversions from traditional qPCR and competitive wins. We believe these wins are attributable to our expanded portfolio, market-leading assay library and a simplified workflow.

While consumables performance continues to improve, pull-through has not yet normalized, and that could continue into 2027. The pace of our placements over the past year gives us confidence that as those systems ramp to full utilization, pull-through will normalize with them. Longer term, we remain very excited about the opportunity in ddPCR. There are numerous applications for our technology, ranging from biopharma R&D to clinical diagnostics to applied testing and the penetration remains low. We are confident ddPCR will remain a durable growth driver for Bio-Rad for many years to come. These results demonstrate progress in our business.

Turning to some of our key end markets. Conditions remain mixed with encouraging developments in some areas and continued pressure in others. In biopharma, we are seeing signs of improving customer activity. While the recovery remains gradual, we view these trends as constructive for the demand for the coming years. Within process chromatography, revenue has improved sequentially throughout 2026. While we expect a sequential decline in the fourth quarter, 2026 revenue should improve year-over-year.

In the U.S., funding conditions in the academic and government markets remain challenging. NIH outlays declined approximately 15% in the third quarter compared with the prior year and finished the federal fiscal year roughly $6 billion below congressional appropriations. Consistent with this environment, our fourth quarter outlook does not assume a recurring academic and government end markets. In the United States, we're closely watching the Protecting Access to Medicare Act, or PAMA, which governs Medicare reimbursement rates for surging clinical laboratory tests. Preliminary rise rates were published in September and final rates expected in November.

While Bio-Rad is not directly reimbursed under these rates, changes in laboratory reimbursement can influence our customers' economics and purchasing decisions. We have not observed a meaningful change in customer purchasing behavior attributed to the proposed rates to date and expect any indirect impact on our business in 2027 to be limited. We will continue to evaluate the implications as the final rates become available. Within our APAC region, we saw a return to growth in China in the third quarter. This performance was largely driven by orders that shifted from the second quarter, together with a favorable prior year comparison.

The operating environment here remains challenging, with continued preferences for domestic suppliers and pricing power affecting the competitive landscape. The National Healthcare Security Administration's updated guidelines continues to create pricing pressure across China's in vitro diagnostics market. Based on our current assessment, we estimated revenue impact in the middle single-digit millions of dollars in 2027. We are addressing this environment through commercial execution, portfolio management and cost discipline while maintaining a measured view of the near-term market outlook.

Within EMEA, in the Middle East, our [indiscernible] teams continue to work closely with our customers and supply chain partners to maintain product availability. Logistics costs remain elevated, and our current planning assumptions contemplate continued disruption into 2027. We believe maintaining a realistic set of assumptions is important as we manage through these external changes.

Now turning to our operational priorities. We remain focused on 3 interconnected objectives: strengthening execution, improving our cost structure and increasing the productivity across our enterprise. Within our global supply chain, we continue to advance initiatives focus on operational efficiency, procurement, inventory management and optimization of our manufacturing footprint. These initiatives are important components of our efforts to improve gross margin and build a more efficient operating model.

Another important enabler is artificial intelligence. We are approaching AI with 2 practical objectives; improving how we operate the company and enhancing the price we deliver to our customers. As discussed on the Q2 call, we're applying AI to processes where we believe it can improve productivity, decision-making and execution. Our focus on applications that deliver measurable business value. Over time, we expect these efforts, together with the broader organizational improvements to continue -- to contribute to productivity.

The second opportunity to incorporate AI into our products to improve their capabilities and the value they deliver to our customers. And that brings me to innovation. We continue to make progress in strengthening our product development pipeline and improve the pace at which we bring new solutions to market. During the third quarter, we launched the ChemiDoc Pro imaging system, our new flagship platform for Western blot imaging. This launch is a tangible example of the benefits of our R&D portfolio prioritization initiated in late 2025. For example, by concentrating resources on selected development programs and improving execution, we were able to accelerate ChemiDoc Pro launch by approximately 2 quarters.

Its analytical algorithm was developed using AI trained on thousands of Western blot images with the objective of improving the consistency and reliability of image analysis and image interpretation. For customers, these capabilities are designed to enhance confidence in their results and support research productivity. For Bio-Rad, the launch expands our opportunity to serve both existing customers considering system upgrades and new customers seeking advanced imaging capabilities. We also expanded our Foresight Pro prepacked chromatography column portfolio during the quarter to include our Nuvia resins. This extension broadens the formats available to customers and reflects closer collaboration amongst our product development, marketing and field application teams.

While individual product launches will contribute to growth over time, our broader objective is to establish a more consistent and predictable cadence of innovation across our portfolio. As part of our ongoing portfolio evaluation, we also recorded a noncash impairment of certain intangible assets during the quarter. We are taking a disciplined approach to evaluating technologies and product programs including making decisions about where continued investment offers the greatest potential churn. Our objective is to improve the return on R&D investments to support revenue growth.

So in closing, the third quarter provided encouraging evidence of progress. We returned to modest currency-neutral revenue growth, delivered another quarter of strong ddPCR instrument performance and continued to improve our non-GAAP gross margin and advanced important organizational and innovation initiatives. Recognizing that our end markets remain uneven, our priorities remain clear: consistent organic growth, improved profitability and strengthening the execution capabilities of the company. There is more work ahead, but we are encouraged by the progress we are making and remain focused on delivering measurable, sustainable improvements in performance.

With that, I will turn the call over to Roop.

Roop Lakkaraju

Thank you, Jon, and good afternoon. I'd like to start with a review of the third quarter 2026 results, then move to guidance. Overall, net revenues for the third quarter of 2026 were approximately $656 million on a reported basis versus $653 million in Q3 of 2025, a year-over-year increase of 0.5%. On a currency-neutral basis, this represents 0.7% year-over-year increase. Life Science sales in the third quarter of 2026 were $255 million, a decrease of 2.8% compared to Q3 of 2025 on a reported basis and a 2.4% decrease on a currency-neutral basis. This was primarily driven by lower process chromatography sales and ongoing challenges in the academic research market, partially offset by increased ddPCR instrument sales.

Excluding process chromatography, Life Science currency-neutral sales increased 2.5%. Currency-neutral sales decreased in the Americas, partially offset by increased sales in EMEA and Asia Pacific and Greater China. Our ddPCR portfolio posted 7% currency-neutral growth in the quarter with instrument revenue growing more than 20% year-over-year. Clinical Diagnostic sales in the third quarter of 2026 were approximately $402 million compared to $391 million in Q3 of 2025, an increase of 2.7% on a reported basis and 2.8% on a currency-neutral basis. Growth was driven by timing of orders and quality systems in diabetes products. Regionally, growth came from Americas and Asia Pacific.

Turning to gross margin. Consolidated gross margin was 50.1% for the third quarter of '26, compared to 52.6% in Q3 of '25. The year-over-year decline primarily reflects charges associated with our restructuring program. On a non-GAAP basis, third quarter gross margin was 54.5% versus 53.5% in the year ago period, and improved sequentially from 53.9% in the second quarter. SG&A expense for the third quarter of 2026 was $257 million, or 39.2% of sales, compared to $207 million or 31.7% of sales in Q3 of 25%. The increase in SG&A expense was primarily due to higher restructuring costs. Third quarter non-GAAP SG&A expense was $214 million or 32.6% of sales versus $202 million or 31% of sales in the year ago period.

Research and development expense for the third quarter of 2026 was $71 million or 10.9% of sales, equal to the third quarter of the prior year. Third quarter non-GAAP R&D expense was $60 million versus $70 million in the year ago period. The decrease in R&D largely reflects focused management and R&D programs and a prior year milestone payment that did not repeat. During the quarter, we also recorded a noncash impairment of approximately $50 million related to purchased intangible assets in the Life Science segment. The charge reflects the portfolio decisions we are making to prioritize our return on investments.

Q3 GAAP operating loss was approximately $50 million compared to operating income of approximately $65 million in Q3 of 2025. On a non-GAAP basis, third quarter operating margin was 12.8% compared to 11.8% in Q3 of 2025, and this represents a sequential improvement from 12.5% in the second quarter of '26. Third quarter 2026 non-GAAP net income, which excludes the impact of the change in equity value [indiscernible] shares was $72 million or $2.65 diluted earnings per share versus $61 million or $2.26 diluted earnings per share for Q3 of 2025.

For full details on the balance sheet, cash flow, tax and Sartorius valuation, please refer to our earnings presentation, press release and 10-Q filed today, all available on our Investor Relations website.

Moving on to our non-GAAP guidance for '26. We are reaffirming our guidance of full year '26 currency-neutral revenue growth between minus 3% and plus 0.5%. We expect full year growth to be approximately at the midpoint of this range. We expect Life Science segments currency-neutral revenue growth to be between minus 3% and minus 1% and the Clinical Diagnostics segment's currency-neutral revenue growth to be between minus 3% and plus 1%. We expect a sequential revenue ramp from Q3 to Q4, up 5% to 6% on a reported basis, in line with our typical seasonality.

Included in this guide is continued softness in the academic and government market and a favorable comparison for process chromatography. We expect full year non-GAAP gross margin to be in the upper half of the guidance range of between 53% and 54%. We expect a sequential decline in the fourth quarter due to product mix shifting more toward instruments, the expected sequential decline in process chromatography revenue and higher fuel prices, which are expected to continue into '27. In the fourth quarter, we expect SG&A to be flat to Q3 and a $3 million sequential step-up in R&D support continued innovation.

We're also modeling approximately $40 million of depreciation and amortization in the quarter. We expect full year non-GAAP operating margin to be in the upper half of the guidance range of between 10% and 12%. We are reaffirming our 2026 full year free cash flow estimate to be in the range of approximately $290 million to $340 million. Through 9 months, we've generated $210 million in the fourth quarter is seasonally our strongest.

Our third quarter results do not include any benefit from tariff refunds. In our year-end results, we expect to recognize any tariff refunds that we receive. As a reminder, we did not pass any tariff-related surcharges to our customers, instead absorbing them in our cost of goods sold. As a result, we will not need to test any of the refunded amounts to our customers. Finally, any tariff refunds will be recognized on a GAAP basis only, and as such, will be excluded from our non-GAAP results. We continue to firmly believe that Bio-Rad is capable of delivering operating margins above 20%, and we are not satisfied with the gap between our current performance and that potential.

We are committed to delivering stronger profitability while investing in innovation and sustainable growth, and we look forward to sharing further updates as that work progresses.

I'll now turn the call over to Norman.

Norman Schwartz

Thank you, Roop. Just maybe a few comments on [indiscernible] as we wrap up on products, in 2024, as you may remember, we began refocusing our product development efforts on market segments where we're best positioned to compete. Innovation has always been fundamental to Bio-Rad. And I think the products that Jon mentioned are good examples of that work to date. In today's challenging markets, delivering differentiated products that meet customer needs, I think it's certainly more important than ever.

So next, over the past 12 months, our Board has been evaluating its composition and the mix of experience that will really best support Bio-Rad's future. We believe would benefit from additional perspectives and broader operational experience in both life science tools and in diagnostics. And with that in mind, we have been actively evaluating candidates to expand our Board. We would expect to be able to share updates with you in the near future on this project.

And maybe finally, with regard to Elliott Management. I guess I would say our dialogue continues to be active and productive, and we believe we're broadly aligned on the objectives. So as we move forward, I'm certainly encouraged by the progress we're making and excited about what's ahead.

So maybe with that, operator, we'll open up the line for questions.

Operator

[Operator Instructions] Your first question comes from Dan Leonard with RBC Capital Markets.

Phần hỏi đáp

Dan Leonard

To start off, I'm just trying to get a better sense of where your head's at in framing 2027. I think there were -- I counted on 3 or 4 discrete lingering headwinds you reminded that could drag into 2027. But I'm not really sure how to interpret what your thinking is for the appropriate starting point in aggregate on revenue to clarify?

Roop Lakkaraju

Okay. This is Roop, again. Good to have you on the call. So from a revenue standpoint, I think 1 of the things we're trying to balance here is to give a perspective of the end markets that we're dealing with and how we're navigating through that with the understanding that ultimately as we continue to drive innovation and some of the portfolio management that we've been doing is to get back to growth. And we think that 2027 and obviously, it's a little bit early right now with this third quarter call, and we'll lay out '27's guidance at the year-end call, but we'll be focused on driving towards positive growth rate in '27, and as part of that, obviously, driving further margin expansion in '27 as we move forward.

So hopefully, that helps you the bread crumbs that we put into the script to give you a sense of the end market dynamics we're dealing with, it's simply to help frame our understanding and what we're dealing with, with our portfolio and our customer set.

Dan Leonard

Okay. So the message is growth but not fully normalized given the bread crumbs that you have to contend with?

Roop Lakkaraju

That's right.

Dan Leonard

Okay. And then just specifically on Droplet Digital, -- you've had a number of quarters in a row with really strong instrumentation growth. What's your degree of conviction that, that can continue as opposed to any caution that you're going to start cycling up against more challenging comparisons?

Jonathan DiVincenzo

Dan, Jon DiVincenzo. Thanks for the question. As we model this out, first of all, we reflect on, I don't know, the last year that the new portfolio has been in the marketplace. And it's very positive to see a number of new customers. We're expanding kind of the available market that we're serving. And there's a lot of positivity there. We're going to continue to have these wins. I can't project it's going to be 20% continuity. As you said, we come up against some more difficult comps, but even in that challenging academic environment, customers are still choosing to invest in the platform. They may not be at full utilization of the platform yet, but it will be an important part of their research moving forward. So we continue to believe it's going to be an important part of our growth in the near to midterm.

Operator

Your next question comes from the line of Jack Meehan with Operon Research.

Jack Meehan

Wanted to talk about the Diagnostics business a little bit more. You mentioned some of the expectations around the China region. I was wondering if you could just talk about how the region performed in the quarter and like how you think the updates are going to -- how exactly is that impacting the business or ability to compete in the market?

Roop Lakkaraju

So Jack, maybe I'll start out. This is Roop. So first, in terms of the dynamics, we've had some -- China was a little bit stronger for us in the quarter as a discrete quarter for the third quarter. largely driven by order timing around quality control, some process chromatography, these sort of things, which is obviously positive to see. I think from an overall China dynamic, when you speak about the guidelines that have just come out, we think overall that there -- and we kind of said this within the prepared remarks, there is some single-digit million impact into '27, we think obviously, we're doing the final assessments. Those guidelines are getting rolled out. So there's a little bit yet to come potentially.

But overall, we don't think it's overly material, but there is some impact. I think from an overall China the ex perspective [indiscernible] continues to be strong there, and we continue to execute within the market overall.

Jack Meehan

Great. Okay. And then on the Life Science side, kind of ex digital PCR, ex process chromatography, remainder of the Life Science business. I was wondering if you could just talk about how you see demand trends across academic and pharma at the moment? And building off that, just whether you're seeing any indications of demand related to AI-related experiment?

Jonathan DiVincenzo

Yes, Jack, Jon DiVincenzo. Good questions there. So we -- although we have some optimism on academic, it still is not where you normally would think the academic spending would go on a kind of a run rate basis and all the activity in the labs. We'll see what happens with the midterm election, if that is any positive out of tailwind into '27 and '28. In biopharma, we see kind of an improved environment. Initially, it was kind of the later stages of the large pharma and biotech customers, but it's seen moving over to more discovery role. I think when it comes to AI, overall, we believe that's a positive for demand for our portfolio.

We are very close to our customers, particularly customers that are deploying AI and transitioning from in silico modeling to the wet lab work and how do we ensure that we're supporting that transition. Overall, we just think it's going to be meaning more productive testing in the lab, more utilization of reagents in our products and are quite optimistic about the impact on the market for both academic as well as drug discovery.

Jack Meehan

Great. And 1 last question is just on capital deployment. It looks like the buyback was a little muted in the quarter. Can you just talk about how you think about allocating capital? And then I would be remiss not to ask about just any way you thought on sort of core strategy monetize in...

Jonathan DiVincenzo

Jack, you trailed off at the end there. Would you mind just kind of restating the tail end of year? I heard the capital allocation and the buyback piece. Was there an incremental piece you mentioned as well?

Jack Meehan

Yes, sorry. The just latest thoughts on the Sartorius stake and ability to monetize that.

Jonathan DiVincenzo

Got it. So maybe I'll start with the Sartorius stake. Our point of view on that hasn't changed. It's a monetizable asset. And if there is a potential scenario in which we think it would make sense to monetize it, we would do so. And that's within our own rights to do so. So that's kind of Sartorius. So same as before, no change in comments there. As it relates to capital allocation, obviously, we talk about kind of 3 significant areas of capital allocation. One is investing back in the business from a CapEx standpoint. We continue to do that, especially from innovation capability. The second is share repurchases, which we have done.

But we've also indicated that we'd be opportunistic with those share repurchases and therefore, not necessarily systemic in every quarter. And with all that said, we still feel like we're undervalued and from an intrinsic value standpoint, there's opportunity for value creation from a share price standpoint, but we will continue to look at it more opportunistically versus systemic, if you will.

The final piece is M&A. And as we've stated very clearly, we're not seeking to do transformative deals. However, we are focused on finding deals of some scale and size. And as we've said in prior earnings calls, anywhere from $100 million to $500 million of revenue, whether it's in the DX space or the life sciences tool space, would be interesting to us. But what's critical is it provides value differentiation for our customers, gives us the ability to drive top line growth as [indiscernible] has done, and allows us to expand margins and drive working capital efficiency.

So we'll continue to have that kind of balanced capital allocation outlook, but any discrete lack of share repurchases in a quarter or not shouldn't be read in any direction other than we'll continue to balance these different areas quarter-to-quarter.

Operator

[Operator Instructions] Your next question comes from Tycho Peterson with Jefferies.

Unknown Analyst

This is Chad on for Tycho. Could you give us an update on where you are against the $80 million to $90 million restructuring program and if the $30 million to $35 million net realized savings is still the right ballpark for 2027.

Roop Lakkaraju

Jack, this is Roop. I'll jump into that. We are executing on the restructuring plan that we announced in the Q2 call. So that is proceeding. The $30 million, $35 million is still intact in terms of savings that we expect to see. And just as a reminder to you in the market. That really is into 2028. So the actions will take hold throughout the latter part of '26 and throughout '27. And as such, the full realization of that 30% to 35% will really be in full effect starting in '28.

Unknown Analyst

And then on Diagnostics, you called out upside in quality control and diabetes. Can you just give us a refreshed sense of how big and material these businesses are and kind of the latest trends you're seeing, how sustainable do you think they are?

Roop Lakkaraju

Yes. I mean from a China standpoint, and Jack, I think you were referring to China specifically or...

Unknown Analyst

Quality control and diabetes within diagnostics.

Roop Lakkaraju

Okay. So we haven't actually quantified those specific areas. With that said, we have said and obviously, diagnostics is about 61% of our total revenue, roughly at the enterprise level. Quality Controls is the largest franchise that we have within diagnostics. We're a market leader there, and we continue to see strength on a global basis across all regions.

From a diabetes standpoint, we've seen strength as we've gone throughout 2026. We're very pleased with that, and that's broad-based across various regions around the world, and we continue to focus on identifying those growth opportunities, both in QC diabetes, but other parts of our diagnostics portfolio as well.

Operator

There are no further questions at this time. I would like to turn the call back over to Ruben Argueta for any closing remarks.

Ruben Argueta

Thank you again for joining us today. Also, a quick reminder that we will be attending the UBS Global Healthcare Conference next week and hope to connect with many of you there. Goodbye.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.