Scientific instruments company Waters Corporation (NYSE:WAT) announced better-than-expected revenue in Q1 CY2025, with sales up 3.9% year on year to $661.7 million. Guidance for next quarter’s revenue was better than expected at $751 million at the midpoint, 0.8% above analysts’ estimates. Its non-GAAP profit of $2.25 per share was 1.2% above analysts’ consensus estimates.
Revenue: $661.7 million vs analyst estimates of $654.1 million (3.9% year-on-year growth, 1.2% beat)
Adjusted EPS: $2.25 vs analyst estimates of $2.22 (1.2% beat)
Adjusted EBITDA: $218.3 million vs analyst estimates of $206.1 million (33% margin, 5.9% beat)
Revenue Guidance for Q2 CY2025 is $751 million at the midpoint, roughly in line with what analysts were expecting
Management slightly raised its full-year Adjusted EPS guidance to $12.90 at the midpoint
Operating Margin: 22.9%, up from 21% in the same quarter last year
Free Cash Flow Margin: 35.3%, down from 36.8% in the same quarter last year
Organic Revenue rose 6.7% year on year (-9.3% in the same quarter last year)
Market Capitalization: $21.39 billion
StockStory’s Take
Waters Corporation’s first quarter results were influenced primarily by robust demand for analytical instruments, particularly in pharmaceutical and industrial applications. CEO Udit Batra attributed the company’s double-digit instrument growth to a combination of strong replacement cycles in late-stage pharma quality control and manufacturing, as well as high adoption rates for new products like the Alliance iS HPLC system and the Xevo TQ Absolute mass spectrometer. Batra emphasized the momentum in high-volume testing for GLP-1 and PFAS, signaling that these specialized applications continue to drive outsized growth in both established and emerging markets.
Looking ahead, management’s updated guidance reflects confidence in both the continued recovery of customer capital spending and the company’s ability to offset newly announced tariffs. CFO Amol Chaubal described Waters’ swift supply chain and pricing actions as key to limiting the net impact of tariffs. As Batra noted, “We are executing from a position of strength, anchored by resilient sources of growth and a revitalized portfolio that continues to command strong pricing.” The company also highlighted idiosyncratic growth drivers and ongoing innovation as foundational to its raised full-year earnings outlook.
Key Insights from Management’s Remarks
Waters’ management highlighted several product and market dynamics that underpinned the quarter’s outperformance and ongoing operational resilience.
Instrument Replacement Cycle: The company reported that large pharma, generics, and contract development and manufacturing organizations (CDMOs) all showed double-digit growth, driven by an active replacement cycle for analytical instruments.
Product Innovation Momentum: New product launches, such as the Alliance iS HPLC system and Xevo TQ Absolute mass spectrometer, saw high adoption, especially in regulated environments requiring advanced quality control and high sensitivity.
PFAS and GLP-1 Testing Expansion: Growth in testing for PFAS (per- and polyfluoroalkyl substances) exceeded 90% in the quarter, supported by tightening environmental regulations. Similarly, demand for GLP-1 testing solutions contributed materially to top-line performance as manufacturing output increased.
Pricing Strategy Execution: Waters achieved 200 basis points of like-for-like pricing gains and implemented selective surcharges related to tariffs. Management described customer acceptance of these price changes as high, with “80% to 90%” of customers understanding the rationale behind targeted surcharges.
India Market Strength: The India business recorded nearly 20% year-on-year growth, attributed to generics manufacturing demand. Management believes that continued innovation and strong customer relationships in this region will support future expansion.
Drivers of Future Performance
Management’s outlook for the next quarter and the full year centers on leveraging differentiated product offerings, pricing power, and operational agility to navigate ongoing macroeconomic and policy shifts.
Tariff Mitigation and Supply Chain Adaptation: Rapid operational responses—including supply chain adjustments and targeted surcharges—are expected to offset most tariff-related cost increases, minimizing their effect on operating margins.
Continued Instrument Cycle and High-Volume Testing: Management expects the instrument replacement cycle, as well as demand for high-volume testing (notably for PFAS and GLP-1), to remain significant contributors to growth.
Regional and Segment Diversification: Sustained strength in India, anticipated resilience in China, and robust performance in pharma and industrial end markets are seen as key factors supporting stable revenue streams despite headwinds in academic and government segments.
Top Analyst Questions
Jack Meehan (Nephron): Asked about the replacement cycle in pharma and whether tariffs are influencing customer behavior. Management said replacement momentum remains strong and saw no evidence of order pull-forward due to tariffs.
Tycho Peterson (Jefferies): Probed on pricing power and customer pushback, particularly in pharma. Management reported 200 basis points of like-for-like pricing gains, noting high acceptance of targeted tariff surcharges.
Catherine Schulte (Baird): Inquired about China’s outlook and potential stimulus. Management projected low single-digit growth for the rest of the year, with further stimulus viewed as upside.
Brandon Couillard (Wells Fargo): Sought clarity on PFAS testing acceleration and sustainability. Management highlighted ongoing regulatory drivers and described PFAS as a multi-year growth opportunity, not a one-off event.
Daniel Brennan (TD Cowen): Questioned whether pharma customers are accelerating orders ahead of tariffs. Management reiterated that demand is driven by replacement cycles, not preemptive buying due to policy changes.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will track (1) the durability of instrument replacement demand, particularly in pharma and industrial markets; (2) the effectiveness of tariff mitigation strategies in preserving operating margins; and (3) sustained growth in specialized testing applications such as PFAS and GLP-1. We will also monitor progress in the India market and the impact of new product launches on customer adoption and revenue diversification.
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