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 generally under generally accepted accounting principles. 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. We reported Q1 results within our revenue guidance as we navigated several external pressures, most notably associated with the ongoing conflict in the Middle East.
We haven't highlighted this in the past, but in 2025, the region represented over 9% of our diagnostic segment, primarily driven by our blood typing franchise. The conflict substantially reduced our first quarter 2026 revenues, and depending upon the timing of resolution, will be a significant headwind for revenue and margin for full year 2026. Despite the macro headwinds, our teams remain focused on executing our strategic initiatives, accelerating innovation, and driving further efficiencies across the organization to increase competitiveness. Academic demand remained constrained, particularly in Americas, where our customers' budgets have been significantly impacted by changes in funding.
On the commercial side, ensuring we capture our fair share of demand in a constrained market requires our sales organization to work differently. We have sharpened the focus of our commercial teams on segment-level prioritization, directing coverage towards customers with active funding, accelerating conversions from our existing installed base, and competing aggressively where competitive displacement opportunities exist. Ahead of schedule, the team now has enabled over 99% of our digital PCR assays to be available on the new QX700 series, which is driving instrument growth. In clinical diagnostics, we delivered modest reported growth of just under 2%.
| Metric | Period | Current guidance |
|---|---|---|
| FY2026 guidance | FY2026 | Adjusted downward due to ongoing Middle East conflict (demand softness and channel/logistics challenges) (lowered) |
| Process chromatography growth path | FY2027 | Low single digit next year on path back to mid single digit (reaffirmed) |
| Q2 revenue phasing | Q2 2026 | ~5% lift from Q1; core potentially down ~5%-6% organic (new) |
| Q2 gross margin | Q2 2026 | Tick down slightly versus Q1 due to three months of elevated freight (new) |
| Operating margin ambition | Near term | Mid-teens operating margin in the near term (reaffirmed ambition) |
| Metric | YoY | Note |
|---|---|---|
| Net sales | +1.1% reported (-4.2% currency neutral) to ~$592M | Lower sales in both Life Science and Clinical Diagnostics segments |
| Life Science segment sales | Flat reported (-4.3% currency neutral) to $229M | Ongoing academic research market challenges, particularly in the Americas |
| Clinical Diagnostics segment sales | +1.9% reported (-4.1% currency neutral) to ~$364M | Revenue declines in EMEA from the Middle East regional conflict ($11M impact) |
| ddPCR portfolio | Essentially flat | Softer biopharma consumables as customers shifted R&D priorities, despite instrument growth |
| ddPCR instrument revenue | +24% | QX700 platform driving competitive wins and qPCR conversions |
| Process chromatography | -13% currency neutral | As expected, year-over-year decline |
| Non-GAAP gross margin | 53.1% vs 53.8% | Unfavorable Middle East absorption, instrument mix, freight surcharges, and FX |
| Non-GAAP operating margin | 6.6% vs 10.8% | Lower gross margin year-over-year |
| Non-GAAP net income | $51M ($1.89 EPS) vs $71M ($2.54 EPS) | Excludes Sartorius equity value change; lower margin |
| Free cash flow | $78M vs $96M | Lower operating cash generation; 153% conversion ratio |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Middle East conflict | Region was a fast-growing market expected to contribute growth in 2026 | Substantially reduced Q1 revenue ($11M impact, >9% of diagnostics in 2025); significant full-year headwind, treated as transitory not permanent | Deteriorating |
| Academic research funding | Cautious, stabilizing | Demand remained constrained, particularly Americas; modest NIH increase but continued disruption and lag between funding and purchasing | Soft |
| Biopharma funding | Improved in H2 2025, skewed later-stage | Early signs of stabilization; later-stage robust, early-stage cautious; gradual improvement expected through the year | Improving |
| ddPCR portfolio | QX700 accelerating, mid-single-digit FY2026 growth | Instrument revenue up 24% and 99%+ assays enabled on QX700, but consumables soft (down low double digits); strongest position in years | Mixed - instruments strong, consumables soft |
| Process chromatography | -50 bps FY2026 headwind, vaccine demand changes | Q1 played out as expected; no change in inflection seen; low single digit next year on path to mid single digit | Stable/as expected |
| M&A strategy | Actively looking at assets | Targeting companies with $100M-$500M revenue and demonstrated revenue/margin profiles, complementary, not transformative; Sartorius position monetizable optionality | Active, more defined |
| China diagnostics | No VBP impact, monitoring | NHSA cost-containment update during quarter, but nothing impacting Bio-Rad to date per local teams | Stable |