Life sciences company Revvity (NYSE: RVTY) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 4.1% year on year to $720.3 million. The company expects the full year’s revenue to be around $2.86 billion, close to analysts’ estimates. Its non-GAAP profit of $1.18 per share was 3.4% above analysts’ consensus estimates.

Is now the time to buy RVTY? Find out in our full research report (it’s free).

StockStory’s Take

Revvity’s second quarter results were met with a negative market reaction, as new regulatory headwinds in China’s diagnostics sector weighed on investor sentiment. Management attributed the quarter’s performance to robust growth in its Life Sciences division, particularly its Signals software franchise and sustained demand from pharmaceutical and biotech clients. CEO Prahlad Singh described the operating environment as “dynamic” and noted that, despite challenges, Revvity’s portfolio delivered 3% organic growth. The Diagnostics segment, however, faced setbacks due to changes in hospital lab reimbursement policies in China, which reduced multiplex test volumes.

Looking forward, Revvity’s guidance reflects the impact of the newly expanded diagnosis-related groups (DRG) policy in China, which is expected to continue suppressing diagnostic test volumes through the rest of the year. CEO Prahlad Singh highlighted ongoing cost management initiatives and targeted structural actions to help offset margin pressures. Management remains optimistic about growth in software and reproductive health, with Singh emphasizing, “We expect these promising signs to be partially offset by the new and unexpected challenges in our China immunodiagnostics business.” The company’s outlook incorporates both cautious end market trends and opportunities from recent contract wins.

Key Insights from Management’s Remarks

Management cited strong Signals software growth, stable pharma and biotech demand, and significant challenges in China’s diagnostics business as the primary drivers behind Q2 performance and updated guidance.

• Signals software outperformance: The Signals software franchise posted over 30% organic growth and set a new record for quarterly orders. Management credited rising SaaS adoption and high net retention rates, with ARR (annual recurring revenue) and APV (average per-vehicle) metrics improving year over year.

• Pharma and biotech stability: The Life Sciences segment saw mid-single-digit growth with continued strength in reagents, which have now grown for five consecutive quarters. CEO Singh noted, “Our Life Sciences reagents business has now grown 5 consecutive quarters. I think that bodes well.”

• China diagnostics headwinds: The Diagnostics segment was hit by China’s accelerated DRG policy, which reduced the volume of multiplex tests ordered by hospitals. Management expects this will continue to pressure immunodiagnostics revenue in China for at least the remainder of the year, with a high teens percentage decline forecast for that region.

• Cost management and structural actions: In response to the lower volumes and margin headwinds, Revvity is implementing both immediate and longer-term cost actions, including rightsizing its China diagnostics business and reviewing global manufacturing.

• Product innovation and launches: The launch of the IDS i20 analytical random access platform through the EUROIMMUN business expands automation capabilities in specialty testing. Initial feedback from European labs has been positive, and further assay expansions are planned.

Drivers of Future Performance

Revvity’s outlook hinges on managing China-related diagnostic pressures, continued strength in software and reagents, and cost actions designed to defend margins.

• China diagnostics volume pressure: The DRG policy in China is expected to continue reducing multiplex diagnostics test volumes, which disproportionately impacts high-margin product lines. Management is not anticipating a rapid recovery and has incorporated ongoing weakness in its full-year outlook.

• Software and reproductive health growth: Signals software and reproductive health businesses, including a ramp-up of sequencing volumes through a Genomics England contract, are set to be bright spots. These segments are expected to offset some diagnostics weakness, with the software franchise maintaining strong SaaS bookings and high retention.

• Cost containment and manufacturing review: Revvity is accelerating structural cost actions, including targeted reductions in China and a reevaluation of its manufacturing footprint. These steps are designed to stabilize margins and set a higher baseline for operating margin expansion in the following year.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the trajectory of China’s diagnostics volumes and whether single-plex test adoption offsets multiplex weakness, (2) the pace of growth and retention in the Signals software franchise, and (3) the impact of cost actions and manufacturing changes on operating margins. Execution on contract wins such as Genomics England and the rollout of new specialty testing platforms will also be critical indicators of performance.

Revvity currently trades at $87.50, down from $103.69 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.