Bio-Rad's Q1 2026 came in within revenue guidance but was hit hard by the Middle East conflict, which cut diagnostics revenue by $11 million and drove non-GAAP operating margin down to 6.6% from 10.8%, prompting a downward revision to full-year 2026 guidance. ddPCR instrument revenue grew 24% on QX700 strength and competitive wins, though ddPCR consumables fell low double digits and process chromatography declined 13% currency neutral. Management reaffirmed a near-term mid-teens operating margin ambition, detailed a more defined $100M-$500M M&A target range, and characterized the Middle East disruption as transitory while evaluating structural cost actions.
Thank you, Regina. Good afternoon, everyone, and thank you for joining us. My name is Ruben Argueta, Bio-Rad's new Head of IR. It's a pleasure to join the team and be with you here. Today, we will review the financial results for the first quarter ended March 31st, 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 generally under generally accepted accounting principles. In addition to excluding certain atypical and non-recurring 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.
Thanks, Ruben. Welcome to the team. Good to have you here. Good afternoon, everyone. Thank you for joining us. In the first quarter, our teams executed within a dynamic operating environment. 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. This region has been one of Bio-Rad's fastest-growing markets for several years. 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. In life science, reported net sales were flat, reflecting mix and market conditions. Academic demand remained constrained, particularly in Americas, where our customers' budgets have been significantly impacted by changes in funding. While NIH funding increased modestly year-over-year, our voice of customer pulse surveys indicate that behind the scenes there continues to be considerable disruption, and we continue to see a lag between funding approvals and purchasing activity. In biopharma, we are seeing early signs of stabilization. Early-stage biotech remains cautious. However, activity among later-stage companies is more robust. We expect gradual improvement through the year. 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. Our digital PCR product area continues to be a strategic differentiator. In the quarter, ddPCR instrument revenue grew 24% over prior year. This is an encouraging leading indicator since new customers typically drive consumable pull-through within six-12 months of purchase and installation. The new QX700 platform is driving both competitive wins and conversion from qPCR, supported by an extensive assay menu and expanding publication base. 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. Looking ahead, we continue to expect a measured recovery in life science led by biopharma.
In clinical diagnostics, we delivered modest reported growth of just under 2%. As I mentioned earlier, performance in the quarter was impacted by geopolitical disruption in the Middle East, which affected both demand and logistics. While this creates near-term challenges, we expect eventual market normalization once the conflict is resolved. Outside of this region, the segment performed as planned. In particular, demand for our quality systems and immunohematology franchises shows signs of strength. From a margin standpoint, diagnostics was adversely affected by a disproportionate share of supply chain cost pressures. In light of these continuing supply chain challenges, we understand the need to rationalize manufacturing capacity and network. We're also addressing these challenges through focused actions in procurement and manufacturing. Turning to our operational priorities, we are executing against a clear agenda focused on improving agility, resiliency, and efficiency across the company.
In our efforts to become more agile, we are increasing flexibility in our manufacturing footprint. During the quarter, we began manufacture of select life science instruments In China for China, improving responsiveness to local market demand and allowing us to compete in tenders while minimizing tariff exposure. This initiative is indicative of how we are using efficient capital deployment to build operational capabilities for long-term business continuity. In R&D, we have re-engineered our innovation engine to deliver improved return on investment. Following our portfolio prioritization decisions, we are concentrating investment in areas with the strongest commercial potential. As I mentioned earlier, one example of this prioritization is the fact that 99% of our digital assays are now supported on the new QX700 platform, again, ahead of plan.
As we prioritize our projects, our focus areas are expanding into high-growth clinical applications, leveraging our ddPCR technology, advancing our digital PCR portfolio, including our next-gen system and oncology assays, and embedding AI capabilities to accelerate development and enhance platform performance. While it is early, this focus allows us to deliver more consistent, higher quality growth over time. In closing, we are executing with discipline in a challenging environment. We are making progress on the operational actions within our control, improving supply chain capability, strengthening execution, and focusing investment where it matters most. We remain confident that these actions will translate into improved financial performance over time. With that, I'll turn the call over to Roop.
Thank you, Jon, and good afternoon. I'd like to start with a review of the first quarter of 2026 results. Net sales for the first quarter of 2026 were approximately $592 million, which represents a 1.1% increase on a reported basis versus $585 million in Q1 of 2025. On a currency-neutral basis, this represents a 4.2% year-over-year decrease and was driven by lower sales in both Life Science and Clinical Diagnostics segments. Sales of the Life Science segment in the first quarter of 2026 were $229 million, essentially flat compared to Q1 of 2025 on a reported basis, and a 4.3% decrease on currency-neutral basis, primarily driven by ongoing challenges in the academic research market, particularly in the Americas.
Currency-neutral sales decreased in the Americas and EMEA, partially offset by increased sales in Asia Pacific. Our ddPCR portfolio was essentially flat in Q1 due to softer biopharma consumables as customers shift their R&D priorities despite the instrument growth. The year-over-year instrument growth that Jon DiVincenzo noted, we believe is a strong indicator of our market share gains, especially considering the current market conditions. Finally, the Stilla acquisition is on track to be accretive by mid-year. More importantly, the QX700 is contributing to both revenue growth and margin expansion. Life science ex-Process Chromatography revenue increased 1% year-over-year and decreased 3.1% on a currency-neutral basis. Consumables revenue in academic and biopharma research was down 3.9%, reflecting the challenging academic research funding environment. Our Process Chromatography business, as expected, experienced a year-over-year currency-neutral decline of 13%.
Sales of the clinical diagnostics segment in the first quarter of 2026 were approximately $364 million, compared to $357 million in Q1 of 2025, an increase of 1.9% on a reported basis and a decrease of 4.1% on a currency-neutral basis, primarily driven by revenue declines from our EMEA region as a result of the regional conflict in the Middle East. The regional conflict affected demand and execution of logistics for our diagnostics products, resulting in $11 million impact to the business in the quarter. As a result of the ongoing challenges within the Middle East, this will have a continued effect on our business for the remainder of 2026. Consolidated gross margin was 52.3% for both the first quarter of 2026 and 2025.
On a non-GAAP basis, first quarter gross margin was 53.1% versus 53.8% in the year ago period. The lower Q1 gross margin was due to several factors, including unfavorable manufacturing absorption as a result of the decreased Middle East revenue, which contributed to margin pressure by 40 basis points, higher instruments versus consumables mix, which adversely affected margin by 30 basis points, higher freight fuel surcharges by 20 basis points, and FX by 20 basis points. SG&A expense for the first quarter of 2026 was $212 million or 35.9% of sales, compared to $209 million or 35.7% in Q1 of 2025. First quarter non-GAAP SG&A spend was $211 million versus $192 million in the year ago period.
The increase in SG&A expense was primarily due to foreign exchange impact resulting from a weaker U.S. dollar on our international cost base, partially offset by lower restructuring costs. Research and development expense in the first quarter of 2026 was $63 million, or 10.6% of sales, compared to $74 million, or 12.6% of sales in Q1 of 2025. First quarter non-GAAP R&D spend was $65 million versus $60 million in the year-ago period. Q1 operating income was approximately $34 million compared to operating income of approximately $24 million in Q1 of 2025. On a non-GAAP basis, first quarter operating margin was 6.6% compared to 10.8% in Q1 of 2025, reflecting the lower gross margin year-over-year.
The change in fair market value of equity security holdings and loan receivables, primarily related to the ownership of Sartorius AG shares, contributed $562 million to our reported net loss of $527 million, or $19.55 per diluted share. Non-GAAP net income, which excludes the impact of the change in equity value of the Sartorius shares, was $51 million, or $1.89 diluted earnings per share for the first quarter of 2026 versus $71 million or $2.54 diluted earnings per share for Q1 of 2025. Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q1 were $1.565 billion compared to $1.541 billion at the end of 2025.
Inventory at the end of Q1 was $771 million, up from $741 million at the end of 2025. For the first quarter of 2026, net cash generated from operating activities was $108 million compared to $130 million for Q1 2025. Net capital expenditures for the first quarter of 2026 were approximately $30 million. Depreciation and amortization for the first quarter was $41 million. Free cash flow for the first quarter was $78 million, which compares to $96 million in Q1 of 2025 and represents a free cash flow to non-GAAP net income conversion ratio of 153% for the first quarter of 2026.
During the first quarter of 2026, we repurchased 176,000 shares through our buyback program at a total cost of approximately $48 million. Since Q1 of 2024, we've spent $542 million to repurchase 2.1 million shares at an average price per share of approximately $261. Moving on to our non-GAAP guidance for 2026. We have decided to adjust our 2026 guidance. As Jon mentioned in his comments, the Middle East, which represented the fastest-growing region for us over the past few years, was again expected to contribute growth in 2026. As a result of the ongoing conflict in the region, we are seeing continued demand softness, challenges getting product to our channel partners and into end customers.
Once the conflict resolves, we believe that infrastructure rebuild will be prioritized, and ultimately, when the region is stable, the Middle East will return to a double-digit growth area for us. Our updated guidance is currency-neutral revenue growth for the full year to be between -3% and +0.5%. The life science segment year-over-year currency-neutral revenue growth is expected to be between -3% and -1% due to continued challenges in academic funding with an adverse impact from the Middle East conflict in the high single-digit millions. We are still modeling a modest biopharma recovery. For the diagnostics segment, we estimate currency-neutral revenue growth to be between -3% and +1%. We project mid-single digit growth for our quality controls business.
We are assuming that the remaining diagnostics portfolio, ex quality controls, is expected to decline between negative mid to low single digit. Full year non-GAAP gross margin is projected to be between 53% and 54% due to the lower revenue, which is reducing our fixed cost absorption and higher freight rates. Full year non-GAAP operating margin projected to be between 10% and 12%. We estimate the non-GAAP full year tax rate to be approximately 22%. As a result of the lower revenue and operating profit, we've updated our 2026 full year free cash flow estimate to be in the range of approximately $290 million-$340 million.
Regarding share repurchases, we will continue to be opportunistic, and as of March 31st, we have approximately $237 million available for additional buybacks under the current board authorized program. I'll now turn the call over to Norman.
Great. Thank you, Roop. You know, as you've heard from Jon and Roop, you know, we are operating in a challenged and challenging environment. However, you know, underlying the market noise, I think we continue to make progress on many fronts. In the last 24 months, for example, you know, we've strengthened our management team and how we operate as a company. To me, this is a team with deep operational experience, and I think it is reflected in the rigor, the discipline, and consistency in current decision-making and in implementation. We see that in our portfolio decisions where we're focusing investment and making the choices necessary to bring quality products to market more quickly and to improve returns.
We see that in our operating model, building capabilities like our In China for China initiative to improve responsiveness to local demand and allowing us to participate in local tenders in a cost-effective manner. You see it in our M&A with a focus on disciplined strategic opportunities where we can create value for our customers, the company, and shareholders. We do see M&A as a key lever for us in our longer-term strategy to accelerate top line growth and margin expansion. I would say here our focus has shifted from early-stage opportunities to companies with demonstrated revenue and margin profiles, businesses where we can leverage our capabilities and scale to accelerate growth in attractive markets. I think Stilla Technologies is a good example of this approach, strengthening a core platform with a scalable, commercially proven business.
In terms of size, today our target acquisition is companies within the $100 million-$500 million revenue range, you know, with complementarity to our current business. You know, we're not at the moment focused on anything transformative. You know, in short, I think we see our strategy as disciplined, targeted, and accretive. Finally, we always get the question on Sartorius, I thought maybe I'd just take a moment to reiterate our position. Fundamentally, we continue to be thoughtful, disciplined stewards of the asset. The Sartorius position is monetizable and provides us with optionality, which we evaluate with the same rigor we apply to every capital decision we make. That said, our focus is really running, growing, and positioning Bio-Rad for market leadership and maximizing long-term shareholder value. Every capital allocation decision, including Sartorius, comes from that vantage point.
Overall, if I think about where we are today, you know, our end markets in life science and diagnostics, although challenged in the near term, are durable and resilient. I think we're well-positioned as a market leader in a number of segments. In the meantime, we continue building on the operational discipline required to deliver consistent revenue growth and mid-teens operating margin in the near term. That's all from me. Operator, now I think we'll open up the line for questions.