Quest Diagnostics (DGX 7.04%) reported its second-quarter 2025 results on July 22, achieving consolidated revenue of $2.76 billion (up 15.2% year over year), organic revenue growth of 5.2%, while adjusted EPS rose 11.5% year over year to $2.62. Management raised full-year revenue guidance to $10.8 billion to $10.92 billion and adjusted EPS to $9.63 to $9.83, citing sustained demand for advanced diagnostics, the integration of last year's LifeLabs acquisition, and scale-driven productivity gains. Investors should note updated mid-term expectations for growth drivers, operational efficiencies, and regulatory risk exposure discussed below.
Automation drives margin expansion and productivity at DGX
Reported operating income increased to $438 million and adjusted operating income was $466 million, expanding margins by 110 basis points and 30 basis points year over year, respectively, reflecting strategic automation deployments. Cash from operations surged 67.1% year to date to $858 million, aided by a one-time CARES Act tax credit and the timing of receipts and disbursements.
"We have now installed our front-end automation solution, which speeds specimen aliquoting and labeling in half a dozen sites. We also recently completed a successful pilot of our automated accessioning platform at our Clifton lab. We plan to roll out both solutions across our lab network through the rest of the year and into 2026."
— Jim Davis, Chairman, Chief Executive Officer, and President
Systematic automation rollouts underpin the company’s targeted 3% annual cost and productivity improvement forecast.
LifeLabs acquisition accelerates inorganic revenue growth for Quest Diagnostics
Acquisitions contributed 10% to revenue expansion, with LifeLabs representing approximately 8% of that contribution and producing both procurement and operational synergies.
"We had said operating margin was gonna take a couple of years to get to be on parity with overall enterprise Quest rates. I think we're tracking to that goal, if not better, you know, and it's generating the EPS contribution that we expect."
— Sam Samad, Chief Financial Officer
Strong execution on the LifeLabs integration provides Quest Diagnostics with a scalable Canadian foothold and immediate financial accretion, de-risking its inorganic growth thesis and supporting continued M&A-led expansion.
Regulatory and pricing headwinds remain contained for 2025
Management estimates the company's exposure to the impact of the “One Big Beautiful Bill” will be limited, with worst-case volume impact sized at 30 to 40 basis points in 2026 and minimal Medicaid-related risk in 2026-2027. Wage inflation held at 3% to 4% for the first half of the year, and the impact of tariffs on China- and Europe-sourced supplies remains within the company's guidance, and it expects to offset that impact via advance contracting and alternate sourcing efforts.
"For the Medicaid impact, we don't believe there's a material impact. We don't believe there's any impact in 2026, and an immaterial impact in 2027. For the exchange impact, you know, assuming these subsidies are not renewed at the end of this year, you know, we expect in 2026, approximately 30 basis points of impact on our volumes. That's what we've sized. Obviously, there's assumptions around that, but that's what we believe."
— Sam Samad, Chief Financial Officer
This risk containment supports ongoing guidance confidence.
Looking ahead
Management raised adjusted EPS outlook to a range of $9.63 to $9.83, incorporating 3.5% to 4% organic revenue growth and a 6% to 6.5% M&A contribution. Capital expenditure guidance remains at approximately $500 million, primarily funding Project Nova, with operating margin forecast to expand year over year. The outlook assumes absorption of current tariffs. That guidance does not account for potential new M&A activity or pending legislative changes such as changes to the Protecting Access to Medicare Act.
