Healthcare diagnostics company QuidelOrtho (NASDAQ: QDEL) announced better-than-expected revenue in Q2 CY2026, with sales up 2.8% year on year to $630.9 million. On the other hand, the company’s full-year revenue guidance of $2.56 billion at the midpoint came in 5.4% below analysts’ estimates. Its non-GAAP profit of $0.13 per share was significantly above analysts’ consensus estimates.

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"Our second quarter performance demonstrated QuidelOrtho's underlying strength and the benefits of our diversified portfolio, with solid results across our core franchises and regions, with the exception of China. Demand headwinds in China related to the proposed IVD pricing guidelines and a softer global respiratory environment are continuing to impact our business," said Brian J. Blaser, President and Chief Executive Officer of QuidelOrtho.

Company Overview

Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ: QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. QuidelOrtho struggled to consistently generate demand over the last five years as its sales dropped at a 4.2% annual rate. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. QuidelOrtho’s annualized revenue declines of 2.9% over the last two years suggest its demand continued shrinking.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 2.8% year-on-year declines. Because this number aligns with its reported revenue growth, we can see that foreign exchange has not had a meaningful impact on topline.

This quarter, QuidelOrtho reported modest year-on-year revenue growth of 2.8% but beat Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Adjusted Operating Margin

QuidelOrtho has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average adjusted operating margin of 23.3%.

Looking at the trend in its profitability, QuidelOrtho’s adjusted operating margin decreased by 46.5 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 4.5 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q2, QuidelOrtho generated an adjusted operating margin profit margin of negative 3.5%, down 13.3 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for QuidelOrtho, its EPS declined by 42.8% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

Diving into the nuances of QuidelOrtho’s earnings can give us a better understanding of its performance. As we mentioned earlier, QuidelOrtho’s adjusted operating margin declined by 46.5 percentage points over the last five years. Its share count also grew by 61.1%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q2, QuidelOrtho reported adjusted EPS of $0.13, up from $0.12 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 QuidelOrtho’s full-year EPS to grow 52% from $1.35 to $2.05.

Key Takeaways from QuidelOrtho’s Q2 Results

It was good to see QuidelOrtho beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 21.6% to $12.80 immediately following the results.

QuidelOrtho underperformed this quarter, but does that create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).