Hologic (HOLX) Q3 Revenue Beats 1%

Key Points

• GAAP revenue of $1.02 billion for Q3 FY2025 exceeded expectations and guidance, driven by higher Diagnostics and Surgical sales.

• Non-GAAP earnings per share reached $1.08, beating analyst estimates for non-GAAP EPS and GAAP revenue and prior-year performance.

• Organic Breast Health revenue declined 10.1%, while tariff headwinds and margin pressure emerged as concerns.

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Hologic (NASDAQ:HOLX), a global medical technology company specializing in diagnostics and women’s health, reported financial results for the third quarter of fiscal 2025 on July 30, 2025. The most notable headline: both GAAP revenue and non-GAAP earnings per share came in ahead of expectations, with GAAP revenue at $1,023.8 million compared to the $1,008.6 million analyst consensus, and non-GAAP earnings per share of $1.08 versus the $1.06 forecast. These figures beat both external analyst and company guidance (non-GAAP). The company continued to generate strong operating cash flow, though Organic revenue growth and margins faced headwinds in certain segments, particularly in Breast Health. Overall, Hologic posted a mixed quarter with clear outperforming areas, but underlying pressure in some key markets and business lines.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.

Company Overview and Recent Focus

Hologic is a leading developer and manufacturer of medical devices and diagnostic products, with a core focus on women’s health. Its main business segments are Diagnostics, Breast Health, Surgical, and Skeletal Health.

Recent efforts center on innovation in diagnostic testing systems and expanding its portfolio of advanced imaging products. Key success factors include regulatory compliance, continuous research and development investment, and a strategic push toward increasing recurring revenue streams such as service contracts and disposable products.

Highlights of the Quarter: Segment Dynamics and Key Events

The Diagnostics segment delivered a small revenue increase of 1.8%, reaching $448.9 million (GAAP). Core molecular diagnostic products, such as the Panther and Panther Fusion systems, continued to grow, supported by applications like the BV/CV/TV (bacterial vaginosis/candida vaginitis/trichomoniasis) molecular assays. Excluding COVID-19 related sales, organic Diagnostics revenue rose 3.9%. However, the division felt pressure from a 17.1% drop in total COVID-19 revenue and ongoing funding cuts for HIV testing in Africa. Outside the US, Diagnostics sales declined 5.8%, marked by challenging markets in Africa and China.

The Breast Health segment posted a 5.1% decline in reported revenue, with organic Breast Health revenue down 10.1%. Capital equipment, mainly 3D mammography gantry systems, remained under pressure, while service and disposables partially mitigated declines. The recently acquired Endomagnetics business contributed positively within Interventional Breast Solutions. Management pointed to a post-pandemic lull in equipment replacement, but commented that the division is likely at or past its low point as of Q2 FY2025, with expectations for a rebound in the next quarter.

Surgical segment revenue increased 7.1% year over year, lifted by contributions from the acquired Gynesonics business and robust international sales. Organic growth in this area stood at 2.0%. Key products in this segment include minimally invasive gynecological systems like Fluent Pro, a fluid management platform for uterine procedures.

Skeletal Health saw a 64.7% spike in revenue year over year (GAAP), as manufacturing constraints that limited supply in previous quarters were resolved. Management described this period as a “catch up” for the segment, with normalization anticipated going forward.

Non-GAAP margins experienced some contraction compared to the previous year. Non-GAAP gross margin slipped by 0.8 percentage points, largely due to product mix changes and increased inventory reserves. Non-GAAP operating margin fell by 1.1 percentage points, mainly due to margin dilution from integrating Endomagnetics and Gynesonics. Company-wide, cash generation remained solid, with $343.2 million in operating cash flow and $1.74 billion in cash and equivalents at quarter-end. Hologic continued to repurchase shares, buying back 0.7 million shares worth $36 million. A key emerging headwind in Q3 and Q4 FY2025 is the impact of new tariffs linked to production in Costa Rica and China, with tariffs expected to increase inventory acquisition costs by $20–25 million per quarter, with almost $20 million expected to be added to cost of goods sold in Q4 FY2025.

Looking Ahead: Guidance and Strategic Considerations

For the fourth quarter, management projects GAAP revenue of $1.03 to $1.04 billion, which would mark a 4.3 to 5.3% increase in revenue from the prior year. Non-GAAP earnings per share are forecast at $1.09 to $1.12, an expected increase of 7.9 to 10.9 %. The company expects reported full-year revenue between $4.081 and $4.091 billion, with non-GAAP earnings per share of $4.23 to $4.26. Guidance implies a sequential recovery is anticipated, particularly in Breast Health, as well as continued strength in core Diagnostics outside COVID-19 testing.

No dividend is paid by HOLX at this time. Investors may want to watch for trends in recurring service revenue, the ongoing impact of macro policy changes like tariffs, and management's ongoing mitigation efforts for tariff costs, as well as the continued focus on boosting recurring revenues and new product adoption, though integration of recent acquisitions remains an area for monitoring.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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