Diagnostics company Guardant Health (NASDAQ: GH) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 30.9% year on year to $232.1 million. The company’s full-year revenue guidance of $920 million at the midpoint came in 3.9% above analysts’ estimates. Its non-GAAP loss of $0.44 per share was 14.5% above analysts’ consensus estimates.
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Guardant Health (GH) Q2 CY2025 Highlights:
- Revenue: $232.1 million vs analyst estimates of $211.1 million (30.9% year-on-year growth, 10% beat)
- Adjusted EPS: -$0.44 vs analyst estimates of -$0.51 (14.5% beat)
- Adjusted EBITDA: -$51.89 million vs analyst estimates of -$68.5 million (-22.4% margin, 24.2% beat)
- The company lifted its revenue guidance for the full year to $920 million at the midpoint from $885 million, a 4% increase
- Operating Margin: -45.9%, up from -56.8% in the same quarter last year
- Free Cash Flow was -$65.93 million compared to -$99.08 million in the same quarter last year
- Sales Volumes rose 29.6% year on year (13.6% in the same quarter last year)
- Market Capitalization: $5.60 billion
Company Overview
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ: GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Guardant Health grew its sales at an exceptional 26.3% compounded annual growth rate. Its growth beat the average healthcare company and shows its offerings resonate with customers.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Guardant Health’s annualized revenue growth of 27.5% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 
We can better understand the company’s revenue dynamics by analyzing its number of clinical tests, which reached 64,000 in the latest quarter. Over the last two years, Guardant Health’s clinical tests averaged 25% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. 
This quarter, Guardant Health reported wonderful year-on-year revenue growth of 30.9%, and its $232.1 million of revenue exceeded Wall Street’s estimates by 10%.
Looking ahead, sell-side analysts expect revenue to grow 17.3% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and suggests the market sees success for its products and services.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.
Guardant Health’s high expenses have contributed to an average operating margin of negative 86.4% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
On the plus side, Guardant Health’s operating margin rose by 59 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 51.1 percentage points on a two-year basis. These data points are very encouraging and shows momentum is on its side.
Guardant Health’s operating margin was negative 45.9% this quarter.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Guardant Health’s earnings losses deepened over the last five years as its EPS dropped 19.6% annually. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.
In Q2, Guardant Health reported adjusted EPS at negative $0.44, up from negative $0.48 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Guardant Health to improve its earnings losses. Analysts forecast its full-year EPS of negative $2.00 will advance to negative $1.75.
Key Takeaways from Guardant Health’s Q2 Results
We were impressed by how significantly Guardant Health blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad it raised its full-year revenue guidance. Zooming out, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 1.1% to $44.75 immediately after reporting.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
