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As Counter-Drone Spending Marches Toward $20 Billion, Defense Tech Companies Are Layering Visual Intelligence Onto RF-First Architectures To Stay Competitive

Featured Tickers: VisionWave Holdings, Inc. (NASDAQ: VWAV), Rekor Systems, Inc. (NASDAQ: REKR), Ondas Inc. (NASDAQ: ONDS), Red Cat Holdings, Inc. (NASDAQ: RCAT), Mercury Systems, Inc. (NASDAQ: MRCY).

KEY TAKEAWAYS

The global counter-unmanned aerial system market is projected to grow from approximately USD 2.08 billion in 2025 to roughly USD 19.06 billion by 2035, a CAGR of about 25.8%, according to Precedence Research.[1] VisionWave Holdings (Nasdaq: VWAV) has acquired the xClibre™ AI video intelligence IP — independently valued at approximately USD 60 million by BDO Consulting Group — to add a visual perception layer to its RF-based defense platforms.[2] The Pentagon's Drone Dominance Program is now targeting more than 200,000 autonomous systems, against the backdrop of a 2026 US defense budget being discussed at roughly USD 1 trillion.[3] xClibre is built on an edge-first "video-as-a-sensor" architecture, designed to convert existing camera infrastructure into a real-time AI intelligence layer with no cloud dependency.[2] Featured tickers covered in this report: VWAV, REKR, ONDS, RCAT, MRCY. , /PRNewswire/ -- Equity-Insider.com News Commentary — Modern air defense has a problem that money alone cannot solve: too many alerts, not enough certainty. Radio-frequency (RF) sensors are excellent at wide-area detection, but they cannot always tell an operator whether the contact in question is a hostile drone, a stray bird, or a passing aircraft. Visual confirmation has become a non-negotiable input before autonomous engagement — or even authorized human response — can move forward with confidence.

That single operational gap is reshaping the counter-unmanned aircraft system (C-UAS) procurement map. According to Precedence Research, the global C-UAS market is forecast to grow from approximately USD 2.08 billion in 2025 to roughly USD 19.06 billion by 2035, a compound annual growth rate of about 25.8%, with North America accounting for 49% of 2025 market share.[1] Within that growth, control systems — the integration layer that fuses detection, classification, and response — are the fastest-growing component segment, reflecting demand for AI-driven threat prioritization and automated decision support.[1]

The macro environment is amplifying the trend. The Pentagon's Drone Dominance Program is now aiming to field more than 200,000 autonomous systems, Section 1709 of the FY25 NDAA has effectively banned foreign-manufactured drones from the US market via FCC implementation, and the 2026 US defense budget is being discussed at roughly USD 1 trillion, with FY2027 proposals reportedly pushing toward USD 1.5 trillion.[3]

Against that backdrop, VisionWave Holdings, Inc. (Nasdaq: VWAV) has just made one of the most pointed strategic moves of the cycle.

VisionWave Buys The Visual Perception Layer Its Argus Stack Was Missing

On April 13, 2026, VisionWave announced the completed acquisition of the intellectual property assets underlying the xClibre™ AI video intelligence platform, pursuant to a definitive Asset Purchase Agreement dated April 10, 2026. The acquired IP was independently valued at approximately USD 60 million by BDO Consulting Group as of April 10, 2026.[2]

VisionWave's defense platforms — including its Argus™ space-enabled counter-UAS architecture and its WaveStrike™ RF-enabled fire-control workflows — had until now relied primarily on RF-based detection.[2][4] xClibre adds the visual perception layer expected to complement those RF capabilities, addressing what management described as a critical capability gap in the Company's sensing architecture.

"RF sensing tells you something is there. Video intelligence tells you what it is and what it's doing," said Douglas Davis, CEO and Executive Chairman of VisionWave.[2] "With xClibre, we have taken an important step toward delivering both — in a single integrated architecture built for the realities of contested environments. Our near-term focus is validating performance in the field. The commercial path follows from that."

Total consideration for the IP portfolio consists of 7,000,000 shares of VisionWave common stock (3,500,000 issued at closing and 3,500,000 contingent upon successful proof-of-concept validation and Nasdaq Shareholder Approval under Nasdaq Listing Rule 5635), plus a USD 6,000,000 promissory note.[2] VisionWave intends to assign the acquired IP into a dedicated subsidiary, xClibre Inc., creating a focused commercial vehicle for development and go-to-market execution.[2]

xClibre is designed as a "video-as-a-sensor" platform that converts existing camera infrastructure into a real-time AI intelligence layer. Stated capabilities include automated threat detection with behavioral analytics, rapid forensic search to accelerate post-incident investigation, visual verification of RF-detected contacts to potentially reduce false-positive response rates, and event-driven action pipelines that connect detection to autonomous system response.[2] The platform is built on an edge-first architecture — processing data locally via dedicated compute appliances, with no cloud dependency — a design choice intended to enable deployment in bandwidth-constrained forward environments and meet data sovereignty requirements.[2]

Integration is targeted across VisionWave's existing defense stack via APIs and SDKs, with near-term focus on the Argus counter-UAS platform (visual confirmation for RF-identified aerial threats), autonomous interceptor systems, the VARAN unmanned ground vehicle, and fixed-site security deployments with forensic replay capability.[2] A structured proof-of-concept evaluation with an industry partner is targeted for completion in H2 2026, and successful POC outcomes plus Nasdaq Shareholder Approval will trigger release of the remaining 3,500,000 contingent shares.[2]

The xClibre transaction lands against an active strategic backdrop. VisionWave previously entered into a definitive agreement to acquire a 51% controlling stake in C.M. Composite Materials, an Israeli manufacturer whose structural assemblies are used in Israel's multi-layer missile defense architecture, including Iron Dome and the Barak 8 long-range air defense system.[3] The Company has also been advancing its qSpeed™ pre-commercial computational acceleration architecture across defense-focused programs — including Argus counter-UAS workflows — where reduced end-to-end latency may enhance operational responsiveness in time-critical scenarios.[4]

Other Defense Tech Names Building The AI Sensing Stack

Rekor Systems, Inc. (NASDAQ: REKR)

Rekor Systems is one of the purer-play AI computer vision companies on US exchanges. Its Rekor One® roadway intelligence engine ingests data from proprietary systems, third-party sources, and existing infrastructure, applying computer vision, edge processing, pattern recognition, and predictive algorithms to transform that data into actionable intelligence.[5] On June 6, 2025, Rekor announced a one-year, USD 1.2 million Data-as-a-Service contract with a Sun Belt state transportation agency to deploy 150 Rekor Discover® systems, replacing intrusive legacy roadway sensors with FHWA-compliant AI-based technology.[6]

On October 23, 2025, the Company announced it would enter the global deepfake detection market via a new subsidiary called Rekor Labs, combining its AI and machine vision expertise to identify synthetic video, audio, and images. Proof-of-concept and alpha milestones were reported as complete, with a full product launch expected in the first half of 2026, and Rekor estimated the global deepfake detection market could exceed USD 30 billion over the next decade.[7] On March 18, 2026, the US Patent and Trademark Office granted Rekor a patent for an incident-based method to retain ALPR and vehicle recognition data based on suspected-offense severity, expanding the Company's IP portfolio in computer vision data management.[8]

Ondas Inc. (NASDAQ: ONDS)

Ondas — which changed its name from Ondas Holdings Inc. to Ondas Inc. in January 2026 — has built one of the most active counter-drone franchises among small-cap defense plays.[9] Through its Ondas Autonomous Systems unit and operating companies American Robotics, Airobotics, Apeiro Motion, Roboteam, and Sentrycs, the Company offers an integrated suite of autonomous aerial, ground, and counter-UAS solutions, including the Iron Drone Raider autonomous counter-UAS interception platform and the Optimus System.[9]

On November 17, 2025, Ondas secured an approximately USD 8.2 million order from a major European security authority to deploy multiple Iron Drone Raider systems at one of Europe's largest international airports, followed on December 1, 2025 by a second USD 8.2 million order from the same governmental customer for a different airport.[10] On December 3, 2025, Ondas announced it had been selected as prime contractor for a major government tender to develop a full-scale drone-based autonomous border-protection system, with an initial purchase order expected in January 2026 and the multi-phase program expected to culminate in the deployment of thousands of autonomous drones.[11] On January 28, 2026, the Company's Optimus drone was added to the Defense Contract Management Agency's Blue List, identifying it as an approved, secure, NDAA-compliant unmanned aircraft system for rapid Department of War procurement.[12]

Red Cat Holdings, Inc. (Nasdaq: RCAT)

Red Cat is a US-based provider of advanced all-domain drone and robotic solutions for defense and national security, operating through wholly owned subsidiaries Teal Drones and FlightWave Aerospace. Its Family of Systems is led by the Black Widow™ small unmanned aircraft system, which won the US Army's Short Range Reconnaissance (SRR) production contract over Skydio in November 2024.[13]

On February 2, 2026, Red Cat announced that an Asia-Pacific ally had selected Black Widow on a competitive tender in December 2025, the second Asia-Pacific ally to recently order the system.[14] Then on April 2, 2026, the Company announced that a NATO ally had selected Black Widow in March 2026 through a competitive tender facilitated by the NATO Support and Procurement Agency (NSPA), with deliveries scheduled across calendar year 2026.[15] Red Cat is widely viewed as a potential beneficiary of the Pentagon's Drone Dominance Program, which is focused on strengthening US ability to deploy advanced unmanned systems in future conflicts.[15]

Mercury Systems, Inc. (NASDAQ: MRCY)

Mercury Systems delivers mission-critical processing to the edge — the rugged compute infrastructure that makes AI sensor fusion possible inside platforms operating in harsh, contested environments. The Company's products are deployed in more than 300 programs across 35 countries, supporting applications in mission computing, sensor processing, command and control, and communications.[16]

On January 15, 2026, Mercury announced contract awards totaling more than USD 60 million for work associated with two critical US space and strategic weapons programs.[16] The Company's Q2 fiscal 2026 results, reported on February 3, 2026, showed bookings of USD 288 million (up 18.6% year-over-year), a book-to-bill of 1.23, and a record backlog of USD 1.5 billion (up 8.8% year-over-year).[17] On March 12, 2026, Mercury acquired SolderMask, Inc. to support higher-rate production across more than 20 Mercury programs, including the US Army's Lower Tier Air and Missile Defense Sensor (LTAMDS) program.[18] And on April 2, 2026, Mercury announced it had been selected by L3Harris Technologies (NYSE: LHX) to provide solid-state data recorders for the US Space Development Agency's Tranche 3 Tracking Layer satellite constellation, designed to protect the United States from advanced missile threats including hypersonic weapons.[19]

Frequently Asked Questions

What is xClibre and why does it matter for VisionWave?

xClibre is an AI video intelligence platform whose intellectual property assets VisionWave acquired on April 13, 2026 in a transaction valued at approximately USD 60 million by independent valuation from BDO Consulting Group. It is designed as a "video-as-a-sensor" system that converts existing camera infrastructure into a real-time AI intelligence layer, providing the visual perception capability that VisionWave's previously RF-first defense platforms — including Argus counter-UAS — had been missing.[2]

How fast is the counter-drone market actually growing?

Forecasts vary by methodology, but multiple credible sources point to compound annual growth rates in the 25%–26% range through the early 2030s. Precedence Research projects growth from approximately USD 2.08 billion in 2025 to roughly USD 19.06 billion by 2035 (CAGR of about 25.8%).[1] MarketsandMarkets projects growth from approximately USD 6.64 billion in 2025 to roughly USD 20.31 billion by 2030 (CAGR of about 25.1%) on a slightly different definitional basis.[20]

What is the Pentagon's Drone Dominance Program?

The Drone Dominance Program is a Department of War initiative aimed at fielding more than 200,000 autonomous systems in support of US forces, accelerating the delivery of advanced unmanned systems to operational units. It exists alongside Section 1709 of the FY25 NDAA, which has effectively banned foreign-manufactured drones from the US market through FCC implementation, against a 2026 US defense budget being discussed at roughly USD 1 trillion.[3]

Why is sensor fusion so important in counter-UAS architectures?

Single-modality detection — RF alone, radar alone, or optical alone — produces too many false positives in real-world conditions to support autonomous engagement or rapid human authorization. Layered architectures that combine RF detection with electro-optical confirmation and AI-driven classification are now considered the standard for both military and critical-infrastructure deployments. The control-systems segment, which fuses sensor inputs into integrated command interfaces with real-time threat response, is the fastest-growing component category in the C-UAS market.[1]

When will VisionWave's xClibre integration be validated?

VisionWave plans to conduct a structured proof-of-concept evaluation with an industry partner targeting completion in H2 2026, validating detection accuracy, false-alert performance, and integration across the multi-sensor stack. Successful POC outcomes plus receipt of Nasdaq Shareholder Approval will trigger release of the remaining 3,500,000 contingent shares of the consideration.[2]

CONTINUED… Read this and more news for VisionWave Holdings at: https://equity-insider.com/2025/09/25/the-ai-defense-technology-developments-on-the-rise-in-2025-26/

Article Sources

[1] Precedence Research, "Counter-Unmanned Aerial System (C-UAS) Market Size to Hit USD 19.06 Billion by 2035," https://www.precedenceresearch.com/counter-unmanned-aerial-system-market

[2] VisionWave Holdings, Inc., "VisionWave Acquires xClibre™ AI Video Intelligence IP Assets," April 13, 2026 (company press release).

[3] PR Newswire / Equity-Insider.com, "Counter-Drone Just Became the Fastest-Growing Niche in Defense. VisionWave Is Already Demonstrating ARGUS," April 6, 2026, https://www.prnewswire.com/news-releases/counter-drone-just-became-the-fastest-growing-niche-in-defense-visionwave-is-already-demonstrating-argus-302734941.html

[4] VisionWave Holdings, Inc., "VisionWave Advances qSpeed™ Pre-Commercial Computational Acceleration Architecture Across Defense Programs," January 20, 2026, https://www.globenewswire.com/news-release/2026/01/20/3221720/0/en/VisionWave-Advances-qSpeed-Pre-Commercial-Computational-Acceleration-Architecture-Across-Defense-Programs-Including-Fire-Control-Counter-UAS-and-Intercept-Workflows-Where-Microseco.html

[5] Rekor Systems, Inc., corporate website, https://www.rekor.ai

[6] StockTitan, "$1.2M AI Traffic Monitoring Contract Won by Rekor Systems," June 6, 2025, https://www.stocktitan.net/news/REKR/sun-belt-state-transportation-agency-to-deploy-150-rekor-discover-1cahyoj7102b.html

[7] Rekor Systems, Inc., "Rekor Systems Announces Plan to Enter the Global Deepfake Detection Market," October 23, 2025, https://www.stocktitan.net/news/REKR/rekor-systems-announces-plan-to-enter-the-global-deepfake-detection-tjdi0dvrvvec.html

[8] StockTitan, "REKR — Rekor Systems Inc Latest Stock News & Market Updates," https://www.stocktitan.net/news/REKR/

[9] Yahoo Finance, "Ondas Inc. (ONDS) Stock Price, News, Quote & History," https://finance.yahoo.com/quote/ONDS/

[10] Ondas Holdings Inc., "Ondas Secures Additional $8.2 Million Counter-UAS Order," December 1, 2025, https://ir.ondas.com/press-releases/detail/259/ondas-secures-additional-8-2-million-counter-uas-order

[11] Ondas Holdings Inc., "Ondas Wins Strategic Government Tender to Develop and Deploy Autonomous Border-Protection System with Thousands of Drones," December 3, 2025, https://ir.ondas.com/press-releases/detail/261/ondas-wins-strategic-government-tender-to-develop-and

[12] Ondas Inc., "Ondas' American Robotics Optimus Drone Approved for Rapid Federal Procurement via DCMA Blue UAS Cleared List," January 28, 2026, https://ir.ondas.com/press-releases/detail/275/ondas-american-robotics-optimus-drone-approved-for-rapid

[13] The Robot Report, "Red Cat wins U.S. Army next-gen drone contract over Skydio," November 22, 2024, https://www.therobotreport.com/red-cat-wins-u-s-army-next-gen-drone-contract-over-skydio/

[14] Red Cat Holdings, Inc., "Red Cat Secures New Orders for Black Widow™ Drones from Asia-Pacific Ally," February 2, 2026, https://ir.redcatholdings.com/news-events/press-releases/detail/210/red-cat-secures-new-orders-for-black-widow-drones-from-asia-pacific-ally

[15] Red Cat Holdings, Inc., "Red Cat Secures New Orders for Black Widow™ Drones from NATO Ally," April 2, 2026, https://www.globenewswire.com/news-release/2026/04/02/3267257/0/en/Red-Cat-Secures-New-Orders-for-Black-Widow-Drones-from-NATO-Ally.html

[16] Mercury Systems, Inc., "Mercury Awarded Contracts for U.S. Space and Strategic Weapons Programs," January 15, 2026 (per company news listings).

[17] Mercury Systems, Inc., "Mercury Systems Reports Second Quarter Fiscal 2026 Results," February 3, 2026.

[18] Mercury Systems, Inc., "Mercury Systems Acquires SolderMask To Support Higher Rate Production," March 12, 2026, https://www.globenewswire.com/news-release/2026/03/12/3255136/18849/en/Mercury-Systems-Acquires-SolderMask-To-Support-Higher-Rate-Production.html

[19] Mercury Systems, Inc., "L3Harris Selects Mercury To Provide Solid-State Data Recorders for SDA's Tranche 3 Tracking Layer Satellites," April 2, 2026, https://www.globenewswire.com/news-release/2026/04/02/3267213/18849/en/L3Harris-Selects-Mercury-To-Provide-Solid-State-Data-Recorders-for-SDA-s-Tranche-3-Tracking-Layer-Satellites.html

[20] MarketsandMarkets, "Counter-UAS Systems Market — Global Forecast to 2030," https://www.marketsandmarkets.com/Market-Reports/counter-cuas-systems-market-4197284.html

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The above article contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact and may be "forward looking statements." Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including without limitation, the ability of VisionWave Holdings, Inc. to successfully integrate the xClibre IP, complete the proof-of-concept evaluation, obtain Nasdaq Shareholder Approval for the issuance of the contingent shares, and execute on its broader commercialization roadmap. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

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SOURCE Equity Insider

The $900.6 billion Pentagon budget that took effect in early 2026 was already the largest in American history before the Iran war started. Then, President Donald Trump proposed a budget of $1.5 trillion for the Defense Department for 2027. Whatever skepticism you might feel about the odds that Congress will set the final number anywhere near that, the directional signal is unmistakable: The United States government is in the midst of a generational expansion of its military networks, and it doesn't seem to be slowing down.

The companies that will benefit most from this cycle aren't necessarily the defense primes -- the giant primary contractors like Lockheed Martin and General Dynamics. The specific technological priorities of the current moment -- battle network integration, missile tracking, cyber warfare, and AI-enabled edge processing -- favor companies that have spent years building precisely those capabilities.

Image source: Getty Images.

1. Mercury Systems There's a way to think about Mercury Systems (MRCY +0.45%) that most coverage misses: It doesn't build the weapons. It builds what makes the weapons intelligent. Its products are processing platforms such as radiation-hardened signal processors and AI-capable edge computing subsystems that are embedded directly into the electronics of over 300 defense programs, including the F-35, the Patriot missile defense system, and numerous classified hypersonic programs.

In January, Mercury announced contracts exceeding $60 million across two critical U.S. space and strategic weapons programs. One extended a strategic weapons development contract through 2031. The other deal came from a space systems prime contractor, which tapped it to supply a subsystem for a national security satellite program -- specifically, Mercury's radiation-tolerant wideband storage and processing unit.

The "design-in" model is what makes Mercury stock particularly compelling. Once one of Mercury's processing platforms becomes embedded in a multidecade defense program -- and it is written into hundreds of them -- that sets it up for many years of ongoing revenues.

The Iran war is underscoring exactly how critical edge AI processing is at every node of the battlefield network. Mercury is the company that makes those nodes work.

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2. Leonardo DRS Leonardo DRS (DRS 1.26%) was awarded a subcontract in January 2026 to provide infrared mission payloads for the Space Development Agency's Tracking Layer Tranche 3 (TRKT3). That project is a cornerstone of the Pentagon's next-generation missile defense architecture.

Per its press release, Leonardo DRS "will design, build, integrate, and test advanced infrared mission payloads to support TRKT3’s accelerated capability to provide global detection, warning, and tracking of ballistic missiles and hypersonic weapons. The infrared capability will be used from the earliest stages of an adversarial launch through interception, including delivering precision fire-control sensing data for missile interceptors."

During the recent conflict, Iran has fired what it describes as hypersonic missiles. Tracking such weapons from space -- with the kind of speed and precision that DRS' infrared payloads are designed for -- is no longer a theoretical defense problem. The Space Force intends to deploy a constellation of approximately 30 of these missile-tracking satellites. Leonardo DRS is helping to build their eyes.

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3. Parsons owns the digital battlefield nobody sees Most defense industry coverage focuses on the companies behind the hardware -- missiles, planes, drones, satellites, etc. Parsons (PSN 1.19%) operates in the layer beneath it all, which is the cyber infrastructure that ties the battle network together. In February, its SealingTech subsidiary was awarded a three-year contract worth up to $500 million by U.S. Cyber Command to produce the Joint Cyber Hunt Kit -- a system for seeking out cyber threats on isolated computer networks.

Parsons also operates in space intelligence, signals intelligence, and missile warning -- capabilities it expanded in January through its acquisition of Altamira Technologies. The company is a classified-systems intelligence contractor that most retail investors have never heard of, which is the point. The less visible a defense contractor is to the public, the more likely its work sits in the sensitive programs that governments fund through every budget cycle, regardless of the direction the political winds are blowing.

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U.S. defense spending may or may not reach Trump's aggressive $1.5 trillion target in 2027. But the underlying demand for battle network integration, missile tracking, and cyberdefense is structural, and Mercury Systems, Leonardo DRS, and Parsons are doing the specific technical work that the next decade's worth of defense projects will be built around.

Mercury Systems, Inc. remains a Buy, with a base case price target of $97.53 (18% upside) and a more bullish target of $113.45 (37% upside). MRCY benefits from long-term demand for defense microelectronics but faces near-term risks from supply chain fragility and rising input costs due to geopolitical tensions. Recent estimate revisions show minimal change in annual revenue and EBITDA, but Q3 2026 EPS was trimmed 70% as non-recurring material receipts were excluded from ongoing guidance.

Record Q3 FY26 Bookings of $348 million grew 73.7% year-over-year; book-to-bill of 1.48Record backlog of approximately $1.6 billion; up 17.9% year-over-yearQ3 FY26 Revenue of $236 million; up 11.5% organically year-over-yearGAAP net loss of $3 million; and adjusted EBITDA of $36 million, up 46.2% year-over-year ANDOVER, Mass., May 05, 2026 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported operating results for the third quarter of fiscal year 2026, ended March 27, 2026.

“We delivered third quarter fiscal 2026 results that were ahead of our expectations, with significant year-over-year growth in backlog, revenue, and adjusted EBITDA,” said Bill Ballhaus, Mercury’s Chairman and CEO. “Strong demand signals and solid execution contributed to better than expected organic growth and margin expansion this quarter."

“In the third quarter we delivered record bookings of $348 million, with a 1.48 book-to-bill, resulting in a record backlog of approximately $1.6 billion. Revenue for the third quarter was $236 million, up 11.5% year-over-year. GAAP net loss of $3 million, adjusted EBITDA of $36 million, and adjusted EBITDA margin of 15.3%, each improving year-over-year."

Third Quarter Fiscal 2026 Results

Third quarter fiscal 2026 revenues were $236 million, compared to $211 million in the third quarter of fiscal 2025.

Total bookings for the third quarter of fiscal 2026 were $348 million, yielding a book-to-bill ratio of 1.48 for the quarter.

GAAP net loss and loss per share for the third quarter of fiscal 2026 were $3 million and $0.04, respectively, compared to GAAP net loss and loss per share of $19 million and $0.33, respectively, for the third quarter of fiscal 2025. Adjusted earnings per share (“adjusted EPS”) was $0.27 per share for the third quarter of fiscal 2026, compared to $0.06 per share in the third quarter of fiscal 2025.

Third quarter fiscal 2026 adjusted EBITDA was $36 million, compared to $25 million for the third quarter of fiscal 2025.

Cash flows provided by operating activities in the third quarter of fiscal 2026 were $6 million, compared to $30 million in the third quarter of fiscal 2025. Free cash flow, defined as cash flows from operating activities less capital expenditures for property and equipment, was $(2) million for the third quarter of fiscal 2026 and $24 million for the third quarter of fiscal 2025.

Backlog

Mercury’s total backlog at March 27, 2026 was approximately $1.6 billion, an approximate $240 million increase from a year ago. Of the March 27, 2026 total backlog, $891 million represents orders expected to be recognized as revenue within the next 12 months.

Conference Call Information

Management will host a conference call and simultaneous webcast at 5:00 p.m. ET on Tuesday, May 5, 2026, to discuss Mercury's quarterly financial results, business highlights and outlook. In addition, Company representatives may answer questions concerning business and financial developments and trends, the Company's view on earnings forecasts, and other business and financial matters affecting the Company, the responses to which may contain information that has not been previously disclosed.

To participate in the conference call Q&A as an analyst please register online at https://events.q4inc.com/analyst/603599389?pwd=RYGqad9c or dial +1 585 542 9983 by phone using Meeting ID: 603599389. The live listen-only webcast and replay will be available ir.mrcy.com/events-presentations. A replay of the webcast will be available two hours after the call and archived on the same web page for six months.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides adjusted EBITDA, adjusted income, adjusted earnings per share (“adjusted EPS”) and free cash flow, which are non-GAAP financial measures. Adjusted EBITDA, adjusted income, and adjusted EPS exclude certain non-cash and other specified charges. The Company believes these non-GAAP financial measures are useful to help investors understand its past financial performance and prospects for the future. However, these non-GAAP measures should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management believes these non-GAAP measures assist in providing a more complete understanding of the Company’s underlying operational results and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company’s business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. A reconciliation of GAAP to non-GAAP financial results discussed in this press release is contained in the attached exhibits.

Mercury Systems – Innovation that Matters®

Mercury Systems is a global technology company that delivers mission-critical processing power to the edge, making advanced technologies profoundly more accessible for today’s most challenging aerospace and defense missions. The Mercury Processing Platform allows customers to tap into innovative capabilities from silicon to system scale, turning data into decisions on timelines that matter. Mercury’s products and solutions are deployed in more than 300 programs and across 35 countries, enabling a broad range of applications in mission computing, sensor processing, command and control, and communications. Mercury is headquartered in Andover, Massachusetts, and has more than 20 locations worldwide. To learn more, visit mrcy.com. (Nasdaq: MRCY)

Investors and others should note that we announce material financial information using our website (www.mrcy.com), SEC filings, press releases, public conference calls, webcasts, and social media, including X (X.com/mrcy) and LinkedIn (www.linkedin.com/company/mercury-systems). Therefore, we encourage investors and others interested in Mercury to review the information we post on the social media and other communication channels listed on our website.

Forward-Looking Safe Harbor Statement
This press release contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company's focus on enhanced execution of the Company's strategic plan. You can identify these statements by the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of any U.S. federal government shutdown or extended continuing resolution, effects of increasingly volatile geopolitical events and regional conflicts, competition, changes in technology and methods of marketing, delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government’s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of the Company's products, shortages in or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, failure to meet contractual performance specifications, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, adverse finding in government audits or investigations, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, including risks from heightened, persistent, and increasingly sophisticated nation-state level cyberattacks and emerging threats associated with agentic AI-enabled cyber tools, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the federal securities class action lawsuit and related claims, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 27, 2025 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Contact:
Tyler Hojo, CFA, Vice President of Investor Relations
Mercury Systems, Inc.
978-967-3676

Mercury Systems and Innovation That Matters are registered trademarks of Mercury Systems, Inc. Other product and company names mentioned may be trademarks and/or registered trademarks of their respective holders.

   MERCURY SYSTEMS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
       March 27, June 27, 2026 2025      Assets     Current assets:     Cash and cash equivalents$331,800  $309,099 Accounts receivable, net 95,547   109,588 Unbilled receivables and costs in excess of billings, net 269,498   278,475 Inventory 361,693   332,920 Prepaid income taxes 1,294   457 Prepaid expenses and other current assets 56,899   27,639 Total current assets 1,116,731   1,058,178       Property and equipment, net 102,592   101,440 Goodwill 942,614   938,093 Intangible assets, net 185,210   210,611 Operating lease right-of-use assets, net 50,094   52,264 Deferred tax asset 75,964   69,016 Other non-current assets 8,082   5,162 Total assets$2,481,287  $2,434,764       Liabilities and Shareholders’ Equity     Current liabilities:     Accounts payable$104,066  $79,116 Accrued expenses 69,059   35,264 Due to factoring facility 14,107   7,879 Accrued compensation 36,952   51,321 Deferred revenues and customer advances 126,312   126,797 Total current liabilities 350,496   300,377       Income taxes payable 4,046   4,046 Long-term debt 591,500   591,500 Operating lease liabilities 48,343   52,738 Other non-current liabilities 9,230   12,642 Total liabilities 1,003,615   961,303       Shareholders’ equity:     Preferred stock —   — Common stock 595   590 Additional paid-in capital 1,314,770   1,287,478 Retained earnings 151,424   181,895 Accumulated other comprehensive income 10,883   3,498 Total shareholders’ equity 1,477,672   1,473,461 Total liabilities and shareholders’ equity$2,481,287  $2,434,764          MERCURY SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
  Third Quarters Ended Nine Months Ended March 27, 2026 March 28, 2025 March 27, 2026 March 28, 2025Net revenues$235,759  $211,358  $693,840  $638,914 Cost of revenues(1) 166,709   154,248   501,258   469,188 Gross margin 69,050   57,110   192,582   169,726         Operating expenses:       Selling, general and administrative(1) 39,138   43,044   127,183   116,698 Research and development(1) 15,014   15,983   43,579   55,734 Amortization of intangible assets 9,561   10,185   29,514   32,574 Restructuring and other charges (48)  4,931   5,591   7,231 Acquisition costs and other related expenses 155   311   900   666 Total operating expenses 63,820   74,454   206,767   212,903         Income (loss) from operations 5,230   (17,344)  (14,185)  (43,177)        Interest income 2,507   1,290   6,182   2,240 Interest expense (7,331)  (8,068)  (23,066)  (25,404)Other (expense) income, net (3,093)  2,304   (5,613)  (2,900)        Loss before income tax provision (benefit) (2,687)  (21,818)  (36,682)  (69,241)Income tax provision (benefit) 174   (2,648)  (6,211)  (14,967)Net loss$(2,861) $(19,170) $(30,471) $(54,274)        Basic net loss per share$(0.04) $(0.33) $(0.51) $(0.93)        Diluted net loss per share$(0.04) $(0.33) $(0.51) $(0.93)        Weighted-average shares outstanding:       Basic 59,422   58,749   59,386   58,614 Diluted 59,422   58,749   59,386   58,614         (1) Includes stock-based compensation expense, allocated as follows:Cost of revenues$950  $813  $4,573  $759 Selling, general and administrative$6,556  $6,228  $19,878  $17,156 Research and development$1,543  $1,507  $4,765  $4,687                  MERCURY SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)
         Third Quarters Ended Nine Months Ended March 27, 2026 March 28, 2025 March 27, 2026 March 28, 2025Cash flows from operating activities:       Net loss$(2,861) $(19,170) $(30,471) $(54,274)Depreciation and amortization 17,956   19,916   55,169   62,058 Other non-cash items, net 12,335   8,989   37,490   19,674 Changes in operating assets and liabilities (20,988)  20,239   (1,953)  73,318         Net cash provided by operating activities 6,442   29,974   60,235   100,776         Cash flows from investing activities:       Purchases of property and equipment (8,263)  (5,914)  (20,713)  (15,705)Acquisition of assets and businesses, net of cash acquired (1,415)  —   (1,415)  — Other investing activities —   2,700   —   4,600         Net cash used in investing activities (9,678)  (3,214)  (22,128)  (11,105)        Cash flows from financing activities:       Proceeds from employee stock plans —   —   2,728   1,492 Payments for retirement of common stock —   —   (15,001)  — Payments of deferred financing and offering costs —   —   (3,156)  (2,249)        Net cash used in financing activities —   —   (15,429)  (757)        Effect of exchange rate changes on cash and cash equivalents 46   497   23   387         Net (decrease) increase in cash and cash equivalents (3,190)  27,257   22,701   89,301         Cash and cash equivalents at beginning of period 334,990   242,565   309,099   180,521         Cash and cash equivalents at end of period$331,800  $269,822  $331,800  $269,822                  UNAUDITED SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands, except per share data)

Adjusted EBITDA, a non-GAAP measure for reporting financial performance, excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. Management believes that exclusion of these items assists in providing a more complete understanding of the Company’s underlying results and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company’s business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. The adjustments to calculate this non-GAAP financial measure, and the basis for such adjustments, are outlined below:

Other non-operating adjustments. The Company records other non-operating adjustments such as gains or losses on foreign currency remeasurement, investments and fixed asset sales or disposals among other adjustments. These adjustments may vary from period to period without any direct correlation to underlying operating performance.

Interest income and expense. The Company receives interest income on investments and incurs interest expense on loans, financing leases and other financing arrangements. These amounts may vary from period to period due to changes in cash and debt balances and interest rates driven by general market conditions or other circumstances which may be outside of the normal course of the Company’s operations.

Income taxes. The Company’s GAAP tax expense can fluctuate materially from period to period due to tax adjustments that are not directly related to underlying operating performance or to the current period of operations.

Depreciation. The Company incurs depreciation expense related to capital assets purchased to support the ongoing operations of the business. These assets are recorded at cost or fair value and are depreciated using the straight-line method over the useful life of the asset. Purchases of such assets may vary significantly from period to period and without any direct correlation to underlying operating performance.

Amortization of intangible assets. The Company incurs amortization of intangible assets primarily as a result of acquired intangible assets such as backlog, customer relationships and completed technologies but also due to licenses, patents and other arrangements. These intangible assets are valued at the time of acquisition or upon receipt of right to use the asset, amortized over the requisite life and generally cannot be changed or influenced by management after acquisition.

Restructuring and other charges. The Company incurs restructuring and other charges in connection with management’s decisions to undertake certain actions to realign operating expenses through workforce reductions and the closure of certain Company facilities, businesses and lines of business. The Company’s adjustments reflected in restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. Management believes these items are non-routine and may not be indicative of ongoing operating results.

Impairment of long-lived assets. The Company incurs impairment charges of long-lived assets based on events that may or may not be within the control of management. Management believes these items are outside the normal operations of the Company’s business and are not indicative of ongoing operating results.

Acquisition, financing and other third party costs. The Company incurs transaction costs related to acquisition and potential acquisition opportunities, such as legal, accounting, and other third party advisory fees. The Company may also incur third party costs, such as legal, banking, communications, proxy solicitation, and other third party advisory fees in connection with engagements by activist investors or unsolicited acquisition offers. Although the Company may incur such third party costs and other related charges and adjustments, it is not indicative that any transaction will be consummated. Additionally, the Company incurs unused revolver and bank fees associated with maintaining its credit facility as well as non-cash financing expenses associated with obtaining its credit facility. Management believes these items are outside the normal operations of the Company’s business and are not indicative of ongoing operating results.

Fair value adjustments from purchase accounting. As a result of applying purchase accounting rules to acquired assets and liabilities, certain fair value adjustments are recorded in the opening balance sheet of acquired companies. These adjustments are then reflected in the Company’s income statements in periods subsequent to the acquisition. In addition, the impact of any changes to originally recorded contingent consideration amounts are reflected in the income statements in the period of the change. Management believes these items are outside the normal operations of the Company and are not indicative of ongoing operating results.

Litigation and settlement income and expense. The Company periodically receives income and incurs expenses related to pending claims and litigation and associated legal fees and potential case settlements and/or judgments. Although the Company may incur such costs and other related charges and adjustments, it is not indicative of any particular outcome until the matter is fully resolved. Management believes these items are outside the normal operations of the Company’s business, often occur in periods other than the period of activity, and are not indicative of ongoing operating results. The Company periodically receives warranty claims from customers and makes warranty claims towards its vendors and supply chain. Management believes the expenses and gains associated with these recurring warranty items are within the normal operations and operating cycle of the Company’s business. Therefore, management deems no adjustments are necessary unless under extraordinary circumstances.

Stock-based and other non-cash compensation expense. The Company incurs expense related to stock-based compensation included in its GAAP presentation of cost of revenues, selling, general and administrative expense and research and development expense. The Company also incurs non-cash based compensation in the form of pension related expenses and matching contributions to its defined contribution plan. Although stock-based and other non-cash compensation is an expense of the Company and viewed as a form of compensation, these expenses vary in amount from period to period, and are affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of the Company’s shares, risk-free interest rates and the expected term and forfeiture rates of the awards, as well as pension actuarial assumptions. Management believes that exclusion of these expenses allows comparisons of operating results to those of other companies, both public, private or foreign, that disclose non-GAAP financial measures that exclude stock-based compensation and other non-cash compensation.

Mercury uses adjusted EBITDA as an important indicator of the operating performance of its business. Management excludes the above-described items from its internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to the Company’s board of directors, determining a portion of bonus compensation for executive officers and other key employees based on operating performance, evaluating short-term and long-term operating trends in the Company’s operations, and allocating resources to various initiatives and operational requirements. The Company believes that adjusted EBITDA permits a comparative assessment of its operating performance, relative to its performance based on its GAAP results, while isolating the effects of charges that may vary from period to period without direct correlation to underlying operating performance. The Company believes that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making. The Company believes that trends in its adjusted EBITDA are valuable indicators of its operating performance.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. The Company expects to continue to incur expenses similar to the adjusted EBITDA financial adjustments described above, and investors should not infer from the Company’s presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.

The following table reconciles the most directly comparable GAAP financial measure to the non-GAAP financial measure.

 Third Quarters Ended Nine Months Ended March 27, 2026 March 28, 2025 March 27, 2026 March 28, 2025Net loss$(2,861) $(19,170) $(30,471) $(54,274)Other non-operating adjustments, net 2,445   (3,911)  2,894   (3,097)Interest expense, net 4,824   6,778   16,884   23,164 Income tax provision (benefit) 174   (2,648)  (6,211)  (14,967)Depreciation 8,395   9,731   25,655   29,484 Amortization of intangible assets 9,561   10,185   29,514   32,574 Restructuring and other charges (48)  4,931   5,591   7,231 Impairment of long-lived asset —   —   —   — Acquisition, financing and other third party costs 581   1,072   3,412   4,512 Fair value adjustments from purchase accounting 132   131   394   486 Litigation and settlement expense, net 2,120   5,467   11,631   8,948 Stock-based and other non-cash compensation expense 10,768   12,124   42,381   34,108 Adjusted EBITDA$36,091  $24,690  $101,674  $68,169                  Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash provided by operating activities less capital expenditures for property and equipment, which includes capitalized software development costs, and, therefore, has not been calculated in accordance with GAAP. Management believes free cash flow provides investors with an important perspective on cash available for investment and acquisitions after making capital investments required to support ongoing business operations and long-term value creation. The Company believes that trends in its free cash flow are valuable indicators of its operating performance and liquidity.

Free cash flow is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. The Company expects to continue to incur expenditures similar to the free cash flow financial adjustment described above, and investors should not infer from the Company’s presentation of this non-GAAP financial measure that these expenditures reflect all of the Company's obligations which require cash.

The following table reconciles the most directly comparable GAAP financial measure to the non-GAAP financial measure.

 Third Quarters Ended Nine Months Ended March 27, 2026 March 28, 2025 March 27, 2026 March 28, 2025Net cash provided by operating activities$6,442  $29,974  $60,235  $100,776 Purchases of property and equipment (8,263)  (5,914)  (20,713)  (15,705)Free cash flow$(1,821) $24,060  $39,522  $85,071                  Adjusted income and adjusted earnings per share (“adjusted EPS”) are non-GAAP measures for reporting financial performance, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. Management believes that exclusion of these items assists in providing a more complete understanding of the Company’s underlying results and trends and allows for comparability with its peer company index and industry. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. The Company uses these measures along with the corresponding GAAP financial measures to manage the Company’s business and to evaluate its performance compared to prior periods and the marketplace. The Company defines adjusted income as income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision(1). Adjusted EPS expresses adjusted income on a per share basis using weighted average diluted shares outstanding.  

The following tables reconcile the most directly comparable GAAP financial measures to the non-GAAP financial measures.

 Third Quarters Ended March 27, 2026 March 28, 2025Net loss and loss per share$(2,861) $(0.04) $(19,170) $(0.33)Other non-operating adjustments, net 2,445     (3,911)  Amortization of intangible assets 9,561     10,185   Restructuring and other charges (48)    4,931   Impairment of long-lived assets —     —   Acquisition, financing and other third party costs 581     1,072   Fair value adjustments from purchase accounting 132     131   Litigation and settlement expense, net 2,120     5,467   Stock-based and other non-cash compensation expense 10,768     12,124   Impact to income taxes(1) (6,279)    (7,240)  Adjusted income and adjusted earnings per share(2)$16,419  $0.27  $3,589  $0.06         Diluted weighted-average shares outstanding   60,776     59,367         (1) Impact to income taxes is calculated by recasting income before income taxes to include the items involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The recalculation also adjusts for any discrete tax provision or benefit related to the items.
(2) Adjusted earnings per share is calculated using diluted shares whereas Net loss per share is calculated using basic shares. There was a $0.01 impact and no impact to the calculation of adjusted earnings per share as a result of this for the third quarters ended March 27, 2026 and March 28, 2025, respectively.   Nine Months Ended March 27, 2026 March 28, 2025Net loss and loss per share$(30,471) $(0.51) $(54,274) $(0.93)Other non-operating adjustments, net 2,894     (3,097)  Amortization of intangible assets 29,514     32,574   Restructuring and other charges 5,591     7,231   Impairment of long-lived assets —     —   Acquisition, financing and other third party costs 3,412     4,512   Fair value adjustments from purchase accounting 394     486   Litigation and settlement expense, net 11,631     8,948   Stock-based and other non-cash compensation expense 42,381     34,108   Impact to income taxes(1) (23,930)    (20,515)  Adjusted income and adjusted earnings per share(2)$41,416  $0.68  $9,973  $0.17         Diluted weighted-average shares outstanding   60,525     59,024         (1) Impact to income taxes is calculated by recasting income before income taxes to include the items involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The recalculation also adjusts for any discrete tax provision or benefit related to the items.
(2) Adjusted earnings per share is calculated using diluted shares whereas Net loss per share is calculated using basic shares. There was no impact and a $0.01 impact to the calculation of adjusted earnings per share as a result of this for the nine months ended March 27, 2026 and March 28, 2025, respectively. 

For the quarter ended March 2026, Mercury Systems (MRCY - Free Report) reported revenue of $235.76 million, up 11.5% over the same period last year. EPS came in at $0.27, compared to $0.06 in the year-ago quarter.

The reported revenue represents a surprise of +12.06% over the Zacks Consensus Estimate of $210.38 million. With the consensus EPS estimate being $0.06, the EPS surprise was +350%.

While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance.

As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately.

Here is how Mercury Systems performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:

Net Revenue- Sensor & Effector- Radar: $44.84 million versus the two-analyst average estimate of $36.23 million. The reported number represents a year-over-year change of +24.8%.Net Revenue- Sensor & Effector- Electronic Warfare: $30 million compared to the $20.51 million average estimate based on two analysts. The reported number represents a change of +40.1% year over year.Net Revenue- Other: $31.82 million compared to the $32.51 million average estimate based on two analysts. The reported number represents a change of -9.6% year over year.Net Revenue- Sensor & Effector- Total: $114.16 million versus the two-analyst average estimate of $78.85 million. The reported number represents a year-over-year change of +43.8%.Net Revenue- C4I: $89.78 million versus $95.22 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a -7.2% change.Net Revenue- Sensor & Effector- Other Sensor & Effector: $39.32 million versus the two-analyst average estimate of $22.12 million. The reported number represents a year-over-year change of +78.4%.View all Key Company Metrics for Mercury Systems here>>>

Shares of Mercury Systems have returned +3.7% over the past month versus the Zacks S&P 500 composite's +9.5% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term.

Key Takeaways Mercury Systems fiscal Q3 EPS jumped to 27 cents, beating estimates and rising sharply year over year.MRCY posted record $348M bookings, up 73.7% Y/Y, with backlog hitting $1.6B and strong production demand.MRCY raised fiscal 2026 outlook, citing stronger revenue growth, improved margins and robust pipeline. Mercury Systems (MRCY - Free Report) reported adjusted earnings of 27 cents per share for the third quarter of fiscal 2026, which beat the Zacks Consensus Estimate by 350%. The bottom line increased significantly year over year from 6 cents in the prior-year quarter.

In the fiscal third quarter, MRCY reported revenues of $236 million, reflecting an 11.5% organic year-over-year increase and surpassing the Zacks Consensus Estimate by 12.06%.

Fiscal third-quarter results were ahead of management's expectations, with significant year-over-year growth in backlog, revenues and adjusted EBITDA, driven by strong demand signals and solid execution.

MRCY's Q3 DetailsTotal bookings for the third quarter of fiscal 2026 were a record $348 million, up 73.7% year over year, yielding a book-to-bill ratio of 1.48. As a defense technology company focused on mission-critical processing systems, Mercury Systems operates primarily as a single-segment business serving aerospace and defense markets. Third-quarter bookings were driven largely by follow-on production orders, reflecting the company's transition toward higher-rate production. The largest bookings spanned several missile, C4I and space programs, and the quarter featured the strongest bookings of the fiscal year for solutions leveraging Mercury's Common Processing Architecture. The company also secured a follow-on development award on a strategic program with potential to proliferate across multiple platforms.

MRCY achieved a record total backlog of approximately $1.6 billion as of March 27, 2026, up 17.9% (an approximately $240 million increase) year over year. Of the total backlog, $891 million represents orders expected to be recognized as revenues within the next 12 months. The 12-month backlog also increased 10.3% sequentially. Trailing 12-month bookings reached a record $1.23 billion.

MRCY's Q3 Operating DetailsThird-quarter fiscal 2026 adjusted EBITDA was $36 million, up 46.2% from $25 million in the third quarter of fiscal 2025. The adjusted EBITDA margin was 15.3%, expanding 360 basis points year over year. GAAP net loss and diluted loss per share for the third quarter of fiscal 2026 were $3 million and 4 cents, respectively, compared with GAAP net loss and loss per share of $19 million and 33 cents, respectively, for the third quarter of fiscal 2025.

MRCY’s Q3 Balance Sheet & Cash FlowAs of March 27, 2026, cash and cash equivalents totaled $331.8 million compared with $335 million as of Dec. 26, 2025. Long-term debt was $591.5 million, unchanged from the prior quarter. In the reported quarter, cash flow from operations was $6.4 million compared with $30 million in the third quarter of fiscal 2025. Free cash outflow was $2 million in the third quarter of fiscal 2026 compared with free cash flow of $24 million in the prior-year quarter. The fiscal third-quarter free cash outflow meaningfully outperformed the company's expectations, which had reflected the pull-forward of approximately $30 million of cash receipts into the second quarter.

MRCY Completes SolderMask AcquisitionDuring the quarter, Mercury Systems completed the acquisition of SolderMask, Inc., a specialized manufacturing process technology provider with unique expertise in dry-film solder mask applications leveraged across more than 20 Mercury programs, including the U.S. Army's Lower Tier Air and Missile Defense Sensor program and a number of Common Processing Architecture programs. The transaction closed on March 3, 2026, with Mercury acquiring SolderMask's assets, intellectual property and five-person workforce. Operations continue at the Huntington Beach, CA, facility, while a parallel manufacturing process line is being established at Mercury's Phoenix facility to enable greater throughput as key programs ramp into higher-rate production.

MRCY Raises Fiscal 2026 OutlookFollowing its fiscal third-quarter outperformance, Mercury raised its full-year fiscal 2026 outlook. The company now expects fiscal 2026 annual revenue growth approaching mid single-digits, up from the prior outlook of low single-digits, supported by efforts to stage material earlier and better align the supply base. Full-year adjusted EBITDA margin is now expected in the mid-teens, up from approaching mid-teens previously. Free cash flow is expected to be positive in the fourth quarter of fiscal 2026. Management noted that fourth-quarter bookings have the potential to be the strongest of the fiscal year, based on a pipeline of opportunities more robust than in the third quarter — a potential indicator of increased top-line growth and further margin expansion beyond fiscal 2026. The outlook excludes any upside from domestic priorities, such as the Golden Dome or increased global defense budgets.

MRCY Zacks Rank & Stocks to ConsiderMercury Systems currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector include Analog Devices (ADI - Free Report) , Applied Materials (AMAT - Free Report) and Audioeye (AEYE - Free Report) , each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Analog Devices have gained 46.4% in the year-to-date period. Analog Devices is set to report the second quarter of fiscal 2026 results on May 20.

Applied Materials shares have gained 52.3% in the year-to-date period. Applied Materials is scheduled to report its second-quarter 2026 results on May 14.

Audioeye shares have lost 21.6% in the year-to-date period. Audioeye is set to report its first-quarter 2026 results on May 13.

On May 28, 2026, Mercury Systems Inc (MRCY) shares rose 11.3% to a current price of $108.11. The stock has shown impressive price performance over the past year

Mercury Systems Inc (NASDAQ:MRCY) has received a multi-year contract to deliver 1,000 of its RTBX06 BuiltSECURE servers to Blue Raven, a leading distributor in the defense industry, marking the largest production order to date for the aerospace and defense electronics company's Common Processing Architecture.

The Andover, Massachusetts-based company said the contract covers a multi-year delivery schedule, providing forward visibility into a production stream of 1,000 units of the RTBX06 platform.

Mercury described Blue Raven as a leading distributor in the defense industry but did not disclose end customer identities, dollar value, or the specific platforms onto which the servers will be integrated.

The order is the largest production commitment to date for Mercury's Common Processing Architecture, a reusable hardware platform designed to be deployed across multiple defense and aerospace applications. A common architecture allows multiple programs to draw from a shared hardware baseline, which can reduce per-unit costs and shorten certification timelines for customers that adopt it.

For Mercury, the order validates the Common Processing Architecture strategy as a route to scaling production runs beyond program-specific bespoke builds. Multi-year contracts of this size support production planning and supply chain commitments, particularly in defense electronics where component lead times and certification cycles are long.

The BuiltSECURE branding refers to Mercury's family of secure processing products designed for trusted compute applications in defense and aerospace systems. The RTBX06 sits within that family as a member of the company's processing server line. Under the agreement, Mercury will produce, configure, and support the servers, while Blue Raven will handle global resale and distribution.

Mercury Systems is a global aerospace and defense electronics company, supplying secure processing systems and components to prime contractors and defense distributors, including its RTBX06 BuiltSECURE servers within a Common Processing Architecture portfolio.

Shares of Mercury Systems gained 3.5% on Friday morning.

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

The Zacks Earnings ESP, ExplainedThe Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.

Should You Consider Idexx Laboratories?The final step today is to look at a stock that meets our ESP qualifications. Idexx Laboratories (IDXX - Free Report) earns a #3 (Hold) five days from its next quarterly earnings release on May 5, 2026, and its Most Accurate Estimate comes in at $3.45 a share.

By taking the percentage difference between the $3.45 Most Accurate Estimate and the $3.42 Zacks Consensus Estimate, Idexx Laboratories has an Earnings ESP of +0.77%. Investors should also know that IDXX is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

IDXX is one of just a large database of Medical stocks with positive ESPs. Another solid-looking stock is HCA Healthcare (HCA - Free Report) .

HCA Healthcare is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on July 24, 2026. HCA's Most Accurate Estimate sits at $7.39 a share 85 days from its next earnings release.

The Zacks Consensus Estimate for HCA Healthcare is $7.38, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.10%.

IDXX and HCA's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're ReportedUse the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, ExplainedThe Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Catalyst Pharmaceutical?The final step today is to look at a stock that meets our ESP qualifications. Catalyst Pharmaceutical (CPRX - Free Report) earns a #2 (Buy) seven days from its next quarterly earnings release on May 11, 2026, and its Most Accurate Estimate comes in at $0.69 a share.

By taking the percentage difference between the $0.69 Most Accurate Estimate and the $0.64 Zacks Consensus Estimate, Catalyst Pharmaceutical has an Earnings ESP of +7.81%. Investors should also know that CPRX is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

CPRX is just one of a large group of Medical stocks with a positive ESP figure. Idexx Laboratories (IDXX - Free Report) is another qualifying stock you may want to consider.

Slated to report earnings on May 5, 2026, Idexx Laboratories holds a #3 (Hold) ranking on the Zacks Rank, and its Most Accurate Estimate is $3.45 a share one day from its next quarterly update.

For Idexx Laboratories, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3.42 is +0.77%.

CPRX and IDXX's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

Find Stocks to Buy or Sell Before They're ReportedUse the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

WESTBROOK, Maine--(BUSINESS WIRE)--IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced first quarter results.

First Quarter Results

The Company reports revenues of $1,141 million for the first quarter of 2026, an increase of 14% as reported and 11% organic, driven by Companion Animal Group ("CAG") growth of 15% as reported and 12% organic.

First quarter earnings per diluted share (“EPS”) were $3.47, an increase of 17% as reported and 15% on a comparable basis. First quarter EPS included a $0.05 per share impact from a loss on an equity investment, $0.09 per share in tax benefits from share-based compensation, and $0.14 per share benefit from currency changes.

“Excellent commercial execution delivered exceptional first quarter results and positions IDEXX for continued strength through 2026,” said Jay Mazelsky, President and Chief Executive Officer. “IDEXX Cancer Dx™ platform momentum continues to build with the recent International launch and growing adoption in the U.S., and our IDEXX inVue Dx™ roll-out further advances our innovation-driven growth strategy. Initial customer response to the controlled launch of IDEXX inVue Dx FNA has been very encouraging and supports broadening access over the remainder of the year. As I transition from the CEO role, IDEXX remains well-positioned for continued success, and I look forward to continuing to work with Mike Erickson to drive long-term sustained growth in the business.”

First Quarter Performance Highlights

Companion Animal Group (“CAG”)

CAG revenue growth was led by CAG Diagnostics recurring revenue growth of 14% as reported and 11% organic, including 21% reported and 12% organic gains in International regions, and 11% reported and organic growth in the U.S., outpacing sector growth levels. U.S. growth was aided by a modest easing of clinical visit pressures and increased diagnostic frequency.

Additional U.S. companion animal practice key metrics are available in the Q1 2026 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors.

Sustained commercial execution - including net customer gains, solid volume gains, benefits from IDEXX innovation, and expansion of the premium instrument installed base - drove double-digit CAG Diagnostics recurring revenue growth.

IDEXX VetLab™ consumables generated 20% reported and 15% organic revenue growth, supported by testing utilization gains, including increasing benefit from recent product launches, 12% growth in IDEXX's global premium instrument installed base, and net price gains. Reference laboratory diagnostic and consulting services generated 12% reported and 10% organic revenue growth, with benefits from higher testing volumes and net new customer gains. Rapid assay products revenues increased 1% as reported and were flat on an organic basis, driven by net price benefits with volume continuing to be impacted from the growing adoption of the Catalyst™ Pancreatic Lipase Test, which continues to shift some testing across modalities. CAG Diagnostics capital instrument revenues expanded 33% as reported and 28% on an organic basis, led by strong quarterly instrument placements, including benefits from 1,100 IDEXX inVue Dx placements.

Veterinary software, services and diagnostic imaging systems revenues grew 12% on a reported and 11% on an organic basis for the quarter, led by cloud-native software growth and continued installed base expansion, including record diagnostic imaging system installations.

Water

Water revenues grew 11% as reported and 7% organic for the quarter, reflecting solid organic growth in the U.S. and Latin America.

Livestock, Poultry and Dairy (“LPD”)

LPD revenues increased 14% as reported and 7% organic for the quarter, led by strong growth across core product categories.

Gross Profit and Operating Profit

Gross profit increased 16% as reported and 13% on a comparable basis. Gross margin of 63.4% increased 90 basis points as reported and comparable, supported by strong recurring revenue volume gains, operational productivity initiatives, and net price realization, which was offset by inflationary impacts and investments.

Operating margin was 31.8% for the quarter, higher than the prior year period by 10 basis points as reported and by 100 basis points on a comparable basis. Operating margin results reflect a 17% operating expense increase as reported and 11% growth on a comparable basis, including a $5 million loss on an equity investment in the current period and lapping a ~$9 million prior year benefit from a discrete expense accrual adjustment related to a concluded litigation matter. Operating expense growth was driven by investments in commercial capabilities, higher R&D spend related to advancing the Company's innovation agenda, further investment in the Veterinary Software and Services business, and higher employee benefit and incentive costs.

2026 Growth and Financial Performance Outlook

The Company is updating its full year revenue growth guidance range to $4,675 million - $4,760 million, or reported growth of 8.6% - 10.6%, an increase of $42 million at midpoint. This reflects a positive adjustment of ~1% at midpoint to full year estimates for reported revenue growth, reflecting strong CAG Diagnostics recurring revenue performance and outlook for modestly improving clinical visit trends. The Company is increasing its outlook for organic revenue growth to 7.7% - 9.7%, an increase of 0.7% at midpoint, reflecting the operational benefits highlighted above.

The Company increased its full year reported operating margin outlook to 32.1% - 32.5%, bringing the projected full year operating profit margin expansion to 50 - 90 basis points as reported and on a comparable basis. This outlook benefits from strong first quarter operating performance, while advancing strategic investment priorities.

The Company updated its EPS outlook range to $14.45 - $14.90, reflecting increased reported growth of 11% - 14% and 11% - 15% comparable growth. At midpoint this reflects benefits of $0.13 per share from operational performance and $0.05 from updated estimates for foreign exchange impacts, offset by $0.05 impact from a loss on an equity investment.

The following table provides the Company's updated outlook for annual key financial metrics in 2026 with a comparison to the prior outlook:

Amounts in millions except per share data and percentages

2026 Growth and Financial Performance Outlook

Updated

Prior

Revenue

$4,675

-

$4,760

$4,632

-

$4,720

Reported growth

8.6%

-

10.6%

7.6%

-

9.6%

Organic growth

7.7%

-

9.7%

7.0%

-

9.0%

CAG Diagnostics Recurring Revenue Growth

Reported growth

9.6%

-

11.6%

8.6%

-

10.6%

Organic growth

8.7%

-

10.7%

8.0%

-

10.0%

Operating Margin

32.1%

-

32.5%

32.0%

-

32.5%

Operating margin expansion

50 bps

-

90 bps

40 bps

-

90 bps

Comparable margin expansion

50 bps

-

90 bps

30 bps

-

80 bps

EPS

$14.45

-

$14.90

$14.29

-

$14.80

Reported growth

11%

-

14%

9%

-

13%

Comparable growth

11%

-

15%

10%

-

14%

Other Key Metrics

Net interest expense

~ $34

~ $34

Share-based compensation tax benefit

~ $15

~ $15

Share-based compensation tax rate benefit

~ 1.0%

~ 1.0%

Effective tax rate

~ 21.4%

~ 21.3%

Share-based compensation EPS impact

~ $0.19

~ $0.19

Reduction in average shares outstanding

1%

-

2%

1%

-

2%

Operating Cash Flow (% of Net Income)

105%

-

115%

105%

-

115%

Free Cash Flow (% of Net Income)

85%

-

95%

85%

-

95%

Capital Expenditures

~ $180

~ $180

The following table outlines estimates of foreign currency exchange rate impacts, net of foreign currency hedging transactions, and foreign currency exchange rate assumptions reflected in the above financial performance outlook for 2026.

Estimated Foreign Currency Exchange Rate Impacts

2026

Revenue growth rate impact

~0.9%

CAG Diagnostics recurring revenue growth rate impact

~0.9%

Operating margin growth impact

~ 30 bps

EPS impact

~ $0.27

EPS growth impact

~ 2%

Go-Forward Foreign Currency Exchange Rate Assumptions

2026

In U.S. dollars

euro

$1.16

British pound

$1.33

Canadian dollar

$0.72

Australian dollar

$0.70

Relative to the U.S. dollar

Japanese yen

¥160

Chinese renminbi

¥6.90

Brazilian real

R$5.15

Conference Call and Webcast Information

IDEXX Laboratories, Inc. will host a conference call today at 8:30 a.m. (ET) to discuss its first quarter 2026 results and management’s outlook. Individuals can access a live webcast of the conference call through a link on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (ET) via the same link and will remain available for one year. The live call also will be accessible by telephone. To listen to the live conference call, please dial 1-800-330-6730 or 1-213-279-1575 and reference passcode 492760.

2026 Annual Meeting of Shareholders

IDEXX Laboratories, Inc. will hold its 2026 Annual Meeting of Shareholders (the “2026 Annual Meeting”) on Tuesday, May 12, 2026 at 10:00 a.m. (ET). The 2026 Annual Meeting will be a virtual meeting via a live audio webcast at www.virtualshareholdermeeting.com/IDXX2026. The online pre-meeting forum can be accessed before the 2026 Annual Meeting at www.proxyvote.com. At this online pre-meeting forum, you can submit questions in writing in advance of the 2026 Annual Meeting, vote, view the Rules of Conduct and Procedures relating to the 2026 Annual Meeting and access copies of the Company's proxy materials and annual report.

Shareholders as of the close of business on March 16, 2026 are entitled to attend the 2026 Annual Meeting, vote their shares electronically and submit questions before and during the live audio webcast. As part of the 2026 Annual Meeting, the Company will answer the questions submitted by our shareholders during a live Q&A session, as time permits. The Company will publish the answer to each question, including those which we are unable to address during the meeting due to time constraints during the 2026 Annual Meeting, on the Company’s Investor Relations website as soon as practicable after the meeting. An archived replay will be available at www.virtualshareholdermeeting.com/IDXX2026 after the conclusion of the 2026 Annual Meeting. Further information on the 2026 Annual Meeting can be found in the Company’s proxy materials.

About IDEXX Laboratories, Inc.

IDEXX is a global leader in pet healthcare innovation. Our diagnostic and software products and services create clarity in the complex, constantly evolving world of veterinary medicine. We support longer, fuller lives for pets by delivering insights and solutions that help the veterinary community around the world make confident decisions—to advance medical care, improve efficiency, and build thriving practices. Our innovations also help ensure the safety of milk and water across the world and maintain the health and well-being of people and livestock. IDEXX Laboratories, Inc. is a member of the S&P 500™ Index. Headquartered in Maine, IDEXX employs approximately 11,000 people and offers solutions and products to customers in more than 175 countries and territories. For more information about IDEXX, visit www.idexx.com.

Note Regarding Forward-Looking Statements

This earnings release and the statements to be made in the accompanying earnings conference call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the Company’s business prospects and estimates of the Company’s financial results for future periods. Forward-looking statements are included above under "2026 Growth and Financial Performance Outlook" and elsewhere and can be identified by the use of words such as "expects", "may", "anticipates", "intends", "would", "will", "plans", "believes", "estimates", "projected", "should", and similar words and expressions. Our forward-looking statements include statements relating to our expectations regarding financial performance; revenue growth (including instrument revenue growth in 2026) and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates and interest rates; projected operating margins and expenses and capital expenditures; projected tax, tax rate and EPS benefits from share-based compensation arrangements; projected effective tax rates, reduction of average shares outstanding and net interest expense; projected impact of tariffs; trends and other factors impacting the pet healthcare industry, including U.S. clinical visits; IDEXX inVue Dx analyzer placements; future IDEXX Cancer Dx testing panel addition; rollout of Fine Needle Aspiration to the IDEXX inVue Dx analyzer and future commercial and menu expansions; and future advancements in artificial intelligence. These statements are intended to provide management's expectations or forecasts of future events as of the date of this earnings release; are based on management's estimates, projections, beliefs, and assumptions as of the date of this earnings release; and are not guarantees of future performance. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things, the adverse impact, and the duration, of macroeconomic events, conditions, and uncertainties, such as geopolitical instability (including wars, terrorist attacks, and armed conflicts), general economic uncertainty, changes in U.S. and other countries’ tariff and trade policies, severe weather and other natural conditions, and supply chain challenges on our business, results of operations, liquidity, financial condition, and stock price, as well as the matters described under the headings "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and in the corresponding sections of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, as well as those described from time to time in the Company’s other filings with the U.S. Securities and Exchange Commission available at www.sec.gov. The Company specifically disclaims any obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Regarding Non-GAAP Financial Measures

The following defines terms and conventions and provides reconciliations regarding certain measures used in this earnings release and/or the accompanying earnings conference call that are not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"), otherwise referred to as non-GAAP financial measures. To supplement the Company’s consolidated results presented in accordance with GAAP, the Company has disclosed non-GAAP financial measures that exclude or adjust certain items. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors’ evaluation of the Company’s business performance and liquidity and are useful for period-over-period comparisons of the performance of the Company’s business and its liquidity and to the performance and liquidity of our peers. While management believes that these non-GAAP financial measures are useful in evaluating the Company’s business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.

Constant currency - Constant currency references are non-GAAP financial measures which exclude the impact of changes in foreign currency exchange rates and are consistent with how management evaluates our performance and comparisons with prior and future periods. We estimate the net impacts of currency on our revenue, gross profit, operating profit, and EPS results by restating results to the average exchange rates or exchange rate assumptions for the comparative period, which includes adjusting for the estimated impacts of foreign currency hedging transactions and certain impacts on our effective tax rates. These estimated currency changes impacted first quarter 2026 results as follows: increased gross profit growth by 3.3%, no impact to gross margin expansion, increased operating expense growth by 2.0%, increased operating profit growth by 4.5%, increased operating profit margin growth by 40 basis points, and increased EPS growth by 4.6%. Constant currency revenue growth represents the percentage change in revenue during the applicable period, as compared to the prior year period, excluding the impact of changes in foreign currency exchange rates. See the supplementary analysis of results below for revenue percentage change from currency for the three months ended March 31, 2026 and refer to the 2026 Growth and Financial Performance Outlook section of this earnings release for estimated foreign currency exchange rate impacts on 2026 projections and estimates.

Growth and organic revenue growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted. Organic revenue growth is a non-GAAP financial measure that represents the percent change in revenue, as compared to the same period for the prior year, net of the impact of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers. Organic revenue growth should be considered in addition to, and not as a replacement of or a superior measure to, revenue growth reported in accordance with GAAP. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three months ended March 31, 2026. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Please refer to the 2026 Growth and Financial Performance Outlook section of this earnings release for estimated full year 2026 organic revenue growth for the Company and CAG Diagnostics recurring revenue growth. The percentage change in revenue resulting from acquisitions represents revenues during the current year period, limited to the initial 12 months from the date of the acquisition, that are directly attributable to business acquisitions. Revenue from acquisitions is expected to have an immaterial impact on projected full year 2026 revenue growth and no impact on CAG Diagnostics recurring revenue growth. Projected second quarter 2026 organic revenue growth for the Company and CAG Diagnostics recurring revenue each reflects adjustment to projected second quarter 2026 organic revenue growth for the Company and CAG Diagnostics recurring revenue, as applicable, for a positive ~60 basis point impact from year-over-year foreign currency exchange rate changes at noted exchange rates; no impact to either of these projected growth measures is expected from acquisitions.

We exclude from organic revenue growth the effect of changes in foreign currency exchange rates because changes in foreign currency exchange rates are not under management’s control, are subject to volatility, and can obscure underlying business trends. We calculate the impact on revenue resulting from changes in foreign currency exchange rates by applying the difference between the weighted average exchange rates during the current year period and the comparable prior year period to foreign currency denominated revenues for the prior year period.

We also exclude from organic revenue growth the effect of certain business acquisitions and divestitures because the nature, size, and number of these transactions can vary dramatically from period to period, and because they either require or generate cash as an inherent consequence of the transaction, and therefore can also obscure underlying business and operating trends. We consider acquisitions to be a business when all three elements of inputs, processes, and outputs are present, consistent with ASU 2017-01, “Business Combinations: (Topic 805) Clarifying the Definition of a Business.” In a business combination, if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, we do not consider these assets to be a business. A typical acquisition that we do not consider a business is a customer list asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. We believe the efforts required to convert and retain these acquired customers are similar in nature to our existing customer base and therefore are included in organic revenue growth.

Comparable growth metrics - Comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) are non-GAAP financial measures and exclude the impact of changes in foreign currency exchange rates and non-recurring or unusual items (if any). Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Management believes that reporting comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) provides useful information to investors because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding key metrics used by management. Comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) should be considered in addition to, and not as replacements of or superior measures to, gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain reported in accordance with GAAP.

The reconciliation of these non-GAAP financial measures is as follows:

Three Months Ended

Year-over-Year

March 31,

March 31,

Change

Dollar amounts in thousands

2026

2025

Gross profit and growth (as reported)

$

722,739

$

623,379

16

%

Gross margin and margin gain

63.4

%

62.4

%

90 bps

Less: comparability adjustments

Change from currency

20,471

—

Comparable gross profit and growth

$

702,268

$

623,379

13

%

Comparable gross margin and margin gain

63.3

%

62.4

%

90 bps

Operating expenses and growth (as reported)

$

360,153

$

306,845

17

%

Less: comparability adjustments

Change from currency

6,270

—

Loss on equity investment

5,000

—

Now-concluded litigation matter

—

(8,600

)

Comparable operating expense and growth

$

348,883

$

315,445

11

%

Operating profit and growth (as reported)

$

362,586

$

316,534

15

%

Operating margin and margin gain

31.8

%

31.7

%

10 bps

Less: comparability adjustments

Change from currency

14,201

—

Loss on equity investment

(5,000

)

—

Now-concluded litigation matter

—

8,600

Comparable operating profit and growth

$

353,385

$

307,934

15

%

Comparable operating margin and margin gain

31.8

%

30.8

%

100 bps

Amounts presented may not recalculate due to rounding.

Projected 2026 comparable operating margin expansion outlined in the 2026 Growth and Financial Performance Outlook section of this earnings release reflects the following adjustments: (i) full year 2026 reported operating margin adjusted for $5 million unfavorable impact of loss on an equity investment; and (ii) adjustment to projected 2026 operating margin for a positive impact from year-over-year foreign currency exchange rate changes at noted exchange rates; and (iii) adjustment to 2025 operating margin for positive impact of the approximately $9 million discrete litigation expense accrual adjustment in the first quarter of 2025.

Projected second quarter 2026 comparable operating margin expansion reflects adjustment to projected second quarter 2026 operating margin expansion for a positive ~10 basis point impact from year-over-year foreign currency exchange rate changes at noted exchange rates.

These impacts described above reconcile reported gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain (including projected 2026 and second quarter 2026 operating margin expansion) to comparable gross profit growth, comparable gross margin gain, comparable operating expense growth, comparable operating profit growth and comparable operating margin gain for the Company.

Comparable EPS growth - Comparable EPS growth is a non-GAAP financial measure that represents the percentage change in earnings per share (diluted) ("EPS") for a measurement period, as compared to the prior base period, net of the impact of changes in foreign currency exchange rates from the prior base period and excluding the tax benefits of share-based compensation activity under ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and non-recurring or unusual items (if any). Management believes comparable EPS growth is a more useful way to measure the Company’s business performance than EPS growth because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding a key metric used by management. Comparable EPS growth should be considered in addition to, and not as a replacement of or a superior measure to, EPS growth reported in accordance with GAAP. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts.

The reconciliation of this non-GAAP financial measure is as follows:

Three Months Ended

Year-over-Year

March 31,

March 31,

Growth

2026

2025

Earnings per share (diluted) and growth

$

3.47

$

2.96

17

%

Less: comparability adjustments

Share-based compensation activity

0.09

0.01

Loss on equity investment

(0.05

)

—

Now-concluded litigation matter

—

0.08

Change from currency

0.14

—

Comparable EPS and growth

$

3.30

$

2.87

15

%

Amounts presented may not recalculate due to rounding.

Projected 2026 comparable EPS growth outlined in the 2026 Growth and Financial Performance Outlook section of this earnings release reflects the following adjustments: (i) adjustment to projected full year 2026 reported EPS for estimated positive year-over-year foreign currency exchange rate change impact of $0.27 at noted exchange rates; and (ii) adjustment to projected full year 2026 reported EPS for estimated positive impact of share-based compensation activity of ~$0.19; and (iii) adjustment to projected full year 2026 EPS of $0.05 for unfavorable impact of a loss on an equity investment; and (iv) adjustment to full year 2025 reported EPS for a positive $0.08 impact from the discrete litigation expense accrual adjustment in the first quarter of 2025; and (v) adjustment to full year 2025 reported EPS for positive impact of share-based compensation activity of $0.35.

These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2026 reported EPS growth) to comparable EPS growth for the Company.

Segment and Other Income from Operations - We report segment income from operations in our Segment Information table below. Segment income from operations is a non-GAAP financial measure that adjusts for the impact of foreign currency transaction gains and losses and should be considered in addition to, and not as a replacement for, or superior measure to, income from operations. We exclude foreign currency transaction gains and losses for each reportable segment (CAG, Water, and LPD) from segment income from operations and report the full amount of foreign currency transaction gains and losses in Other. We believe that reporting segment income from operations provides supplemental analysis to help investors further evaluate each reportable segment’s business performance by excluding foreign currency transaction gains and losses, which are centrally managed by our corporate treasury function and which we do not consider relevant for assessing the results of each reportable segment’s operations. In addition, we believe that reporting segment income from operations provides information to investors regarding key metrics that are used by management, including our chief operating decision-maker, in evaluating the performance of each reportable segment.

The reconciliation of this non-GAAP financial measure is as follows for the three months ended March 31, 2026 and 2025:

Amounts in thousands

Three Months Ended March 31,

2026

2025

Income from Operations

Impact from Foreign Currency

Segment and Other Income from Operations

Income from Operations

Impact from Foreign Currency

Segment and Other Income from Operations

CAG

$

337,165

$

390

$

337,555

$

294,572

$

583

$

295,155

Water

23,643

26

23,669

20,774

43

20,817

LPD

1,262

28

1,290

80

45

125

Other

516

(444

)

72

1,108

(671

)

437

Total

$

362,586

$

—

$

362,586

$

316,534

$

—

$

316,534

Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Free cash flow should be considered in addition to, and not as a replacement of or a superior measure to, net cash provided by operating activities. See the supplementary analysis of results below for our calculation of free cash flow for the three months ended March 31, 2026 and 2025. To estimate projected 2026 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of approximately $180 million. Free cash flow conversion, or the net income to free cash flow ratio, is a non-GAAP financial measure that is defined as free cash flow, with respect to a measurement period, divided by net income for the same period. To calculate trailing twelve-month net income to free cash flow ratio for the twelve months ended March 31, 2026, we have deducted purchases of property and equipment of approximately $127 million from net cash provided from operating activities of approximately $1,210 million, divided by net income of approximately $1,095 million.

Debt to Adjusted EBITDA (Leverage Ratios) - Adjusted EBITDA, gross debt, and net debt are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure of earnings before interest, taxes, depreciation, amortization, non-recurring transaction expenses incurred in connection with acquisitions, share-based compensation expense, and certain other non-cash losses and charges. Management believes that reporting Adjusted EBITDA, gross debt, and net debt in the Debt to Adjusted EBITDA ratios provides supplemental analysis to help investors further evaluate the Company's business performance and available borrowing capacity under the Company's credit facility. Adjusted EBITDA, gross debt, and net debt should be considered in addition to, and not as replacements of or superior measures to, net income or total debt reported in accordance with GAAP. For further information on how Adjusted EBITDA and the Debt to Adjusted EBITDA Ratios are calculated, see the Company's Annual Report on Form 10-K for the year ended December 31, 2025 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

Notes and Definitions

Discrete litigation expense accrual - During the first quarter of 2025, the Company reduced its previously established $89.0 million accrual related to a concluded litigation matter by approximately $9 million, which represented our best estimate at that time of the amount of the loss.

Concluded litigation matter - The Company was a defendant in a litigation matter involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement, and the trial court ruled in favor of the plaintiff in 2020. Following appeals and in light of the appellate court's April 3, 2025 decision, on April 17, 2025, the Company paid the judgment of approximately $80 million, and the plaintiff executed a satisfaction and release of judgment, which was filed with the trial court on the same date, concluding this matter. For further information, see the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

IDEXX Laboratories, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations

Amounts in thousands except per share data (Unaudited)

Three Months Ended

March 31,

March 31,

2026

2025

Revenue:

Revenue

$

1,140,820

$

998,427

Expenses and Income:

Cost of revenue

418,081

375,048

Gross profit

722,739

623,379

Sales and marketing

175,250

156,223

General and administrative

119,115

91,561

Research and development

65,788

59,061

Total operating expense

360,153

306,845

Income from operations

362,586

316,534

Interest expense, net

(7,144

)

(6,450

)

Income before provision for income taxes

355,442

310,084

Provision for income taxes

76,996

67,407

Net Income:

Net income attributable to stockholders

$

278,446

$

242,677

Earnings per share: Basic

$

3.50

$

2.98

Earnings per share: Diluted

$

3.47

$

2.96

Shares outstanding: Basic

79,648

81,319

Shares outstanding: Diluted

80,162

81,922

IDEXX Laboratories, Inc. and Subsidiaries

Selected Operating Information (Unaudited)

Three Months Ended

March 31,

March 31,

2026

2025

Operating Ratios

Gross profit

63.4

%

62.4

%

(as a percentage of revenue):

Sales, marketing, general and administrative expense

25.8

%

24.8

%

Research and development expense

5.8

%

5.9

%

Income from operations1

31.8

%

31.7

%

1Amounts presented may not recalculate due to rounding.

IDEXX Laboratories, Inc. and Subsidiaries

Segment and Other Information

Amounts in thousands (Unaudited)

Three Months Ended

March 31, 2026

Percent of Revenue

March 31, 2025

Percent of Revenue

Revenue:

CAG

$

1,054,052

$

919,836

Water

50,265

45,321

LPD

32,483

28,596

Other

4,020

4,674

Total

$

1,140,820

$

998,427

Gross Profit:

CAG

$

667,509

63.3

%

$

574,823

62.5

%

Water

36,537

72.7

%

32,073

70.8

%

LPD

16,910

52.1

%

14,365

50.2

%

Other

1,783

44.4

%

2,118

45.3

%

Total

$

722,739

63.4

%

$

623,379

62.4

%

Income from Operations:

CAG

$

337,555

32.0

%

$

295,155

32.1

%

Water

23,669

47.1

%

20,817

45.9

%

LPD

1,290

4.0

%

125

0.4

%

Other

72

1.8

%

437

9.3

%

Total

$

362,586

31.8

%

$

316,534

31.7

%

IDEXX Laboratories, Inc. and Subsidiaries

Revenues and Revenue Growth Analysis by Product and Service Categories and by Domestic and International Markets

Amounts in thousands (Unaudited)

Three Months Ended

March 31, 2026

March 31, 2025

Dollar Change

Reported Revenue Growth1

Percentage Change from
Currency

Percentage Change from Acquisitions

Organic Revenue Growth1

Net Revenue

CAG

$

1,054,052

$

919,836

$

134,216

14.6

%

3.0

%

—

11.6

%

United States

690,900

623,889

67,011

10.7

%

—

—

10.7

%

International

363,152

295,947

67,205

22.7

%

9.3

%

—

13.4

%

Water

$

50,265

$

45,321

$

4,944

10.9

%

3.8

%

—

7.1

%

United States

26,393

23,503

2,890

12.3

%

—

—

12.3

%

International

23,872

21,818

2,054

9.4

%

7.5

%

—

1.9

%

LPD

$

32,483

$

28,596

$

3,887

13.6

%

6.4

%

—

7.2

%

United States

6,384

5,788

596

10.3

%

—

—

10.3

%

International

26,099

22,808

3,291

14.4

%

7.9

%

—

6.5

%

Other

$

4,020

$

4,674

($

654

)

(14.0

%)

—

—

(14.0

%)

Total Company

$

1,140,820

$

998,427

$

142,393

14.3

%

3.1

%

—

11.2

%

United States

725,232

654,861

70,371

10.7

%

—

—

10.7

%

International

415,588

343,566

72,022

21.0

%

9.0

%

—

11.9

%

Three Months Ended

March 31, 2026

March 31, 2025

Dollar Change

Reported Revenue Growth1

Percentage Change from

Currency

Percentage Change from Acquisitions

Organic Revenue Growth1

Net CAG Revenue

CAG Diagnostics recurring revenue:

$

920,313

$

806,267

$

114,046

14.1

%

3.1

%

—

11.0

%

IDEXX VetLab consumables

412,582

344,779

67,803

19.7

%

4.2

%

—

15.4

%

Rapid assay products

84,938

84,034

904

1.1

%

1.2

%

—

(0.1

%)

Reference laboratory diagnostic and consulting services

386,179

344,406

41,773

12.1

%

2.5

%

—

9.7

%

CAG Diagnostics services and accessories

36,614

33,048

3,566

10.8

%

3.6

%

—

7.2

%

CAG Diagnostics capital – instruments

$

42,449

$

31,994

$

10,455

32.7

%

4.7

%

—

28.0

%

Veterinary software, services and diagnostic imaging systems:

$

91,290

$

81,575

$

9,715

11.9

%

1.0

%

—

10.9

%

Recurring revenue

73,536

65,793

7,743

11.8

%

1.1

%

—

10.7

%

Systems and hardware

17,754

15,782

1,972

12.5

%

0.5

%

—

12.0

%

Net CAG revenue

$

1,054,052

$

919,836

$

134,216

14.6

%

3.0

%

—

11.6

%

Three Months Ended

March 31, 2026

March 31, 2025

Dollar Change

Reported Revenue Growth1

Percentage Change from Currency

Percentage Change from Acquisitions

Organic Revenue Growth1

CAG Diagnostics recurring revenue:

$

920,313

$

806,267

$

114,046

14.1

%

3.1

%

—

11.0

%

United States

594,483

536,977

57,506

10.7

%

—

—

10.7

%

International

325,830

269,290

56,540

21.0

%

9.3

%

—

11.7

%

1See Statements Regarding Non-GAAP Financial Measures, above. Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

Amounts in thousands (Unaudited)

March 31, 2026

December 31, 2025

Assets:

Current Assets:

Cash and cash equivalents

$

200,528

$

180,070

Accounts receivable, net

603,544

552,378

Inventories

382,400

377,756

Other current assets

267,603

303,623

Total current assets

1,454,075

1,413,827

Property and equipment, net

740,382

747,380

Other long-term assets, net

1,191,040

1,189,552

Total assets

$

3,385,497

$

3,350,759

Liabilities and Stockholders'

Equity:

Current Liabilities:

Accounts payable

$

129,974

$

110,408

Accrued liabilities

453,552

530,147

Line of credit

530,000

398,000

Current portion of long-term debt

149,997

74,995

Deferred revenue

36,328

35,264

Total current liabilities

1,299,851

1,148,814

Long-term debt, net of current portion

299,854

374,842

Other long-term liabilities, net

229,689

221,720

Total long-term liabilities

529,543

596,562

Total stockholders' equity

1,556,103

1,605,383

Total liabilities and stockholders' equity

$

3,385,497

$

3,350,759

IDEXX Laboratories, Inc. and Subsidiaries

Selected Balance Sheet Information (Unaudited)

March 31,
2026

December 31,
2025

September 30,
2025

June 30,
2025

March 31,
2025

Selected Balance Sheet Information:

Days sales outstanding1

46.2

46.8

46.5

44.7

45.7

Inventory turns2

1.4

1.6

1.5

1.5

1.3

1Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.

2Inventory turns are calculated as the ratio of our inventory-related cost of revenue for the quarter multiplied by four, divided by the average inventory balances at the beginning and end of each quarter.

IDEXX Laboratories, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

Amounts in thousands (Unaudited)

Three Months Ended

March 31, 2026

March 31, 2025

Operating:

Cash Flows from Operating Activities:

Net income

$

278,446

$

242,677

Non-cash adjustments to net income

77,550

55,972

Changes in assets and liabilities

(89,748

)

(60,687

)

Net cash provided by operating activities

266,248

237,962

Investing:

Cash Flows from Investing Activities:

Purchases of property and equipment

(31,984

)

(30,026

)

Acquisitions

(2,599

)

—

Proceeds from net investment hedges

1,039

416

Net cash used by investing activities

(33,544

)

(29,610

)

Financing:

Cash Flows from Financing Activities:

Borrowings under credit facility, net

132,000

69,500

Repurchases of common stock

(351,036

)

(400,890

)

Proceeds from exercises of stock options and employee stock purchase plans

18,161

7,193

Shares withheld for statutory tax withholding payments on restricted stock

(10,555

)

(6,124

)

Net cash used by financing activities

(211,430

)

(330,321

)

Net effect of changes in exchange rates on cash

(816

)

(2,327

)

Net increase (decrease) in cash and cash equivalents

20,458

(124,296

)

Cash and cash equivalents, beginning of period

180,070

288,266

Cash and cash equivalents, end of period

$

200,528

$

163,970

IDEXX Laboratories, Inc. and Subsidiaries

Free Cash Flow

Amounts in thousands (Unaudited)

Three Months Ended

March 31, 2026

March 31, 2025

Free Cash Flow:

Net cash provided by operating activities

$

266,248

$

237,962

Investing cash flows attributable to purchases of property and equipment

(31,984

)

(30,026

)

Free cash flow1

$

234,264

$

207,936

1See Statement Regarding Non-GAAP Financial Measures, above.

IDEXX Laboratories, Inc. and Subsidiaries

Common Stock Repurchases

Amounts in thousands except per share data (Unaudited)

Three Months Ended

March 31, 2026

March 31, 2025

Shares repurchased in the open market

588

931

Shares acquired through employee surrender for statutory tax withholding

17

14

Total shares repurchased

605

945

Cost of shares repurchased in the open market

$

360,833

$

409,215

Cost of shares for employee surrenders

10,555

6,124

Total cost of shares

$

371,388

$

415,339

Average cost per share – open market repurchases

$

613.87

$

439.64

Average cost per share – employee surrenders

$

629.35

$

444.52

Average cost per share – total

$

614.30

$

439.71

More News From IDEXX Laboratories, Inc.

This positive momentum comes as broader market indices, including the S&P 500 and Nasdaq, are also showing gains, with the S&P 500 up by 0.76% and the Nasdaq up by 0.90%.

Diagnostics Segment Drives Growth Across RegionsThe pet healthcare company reported first-quarter earnings of $3.47 per share, beating the consensus of $3.41.

Sales reached $1.14 billion, slightly above the consensus of $1.109 billion, equivalent to an organic growth of 11%.

A modest easing of clinical visit pressures and increased diagnostic frequency aided U.S. growth.

"Excellent commercial execution delivered exceptional first quarter results and positions IDEXX for continued strength through 2026," said Jay Mazelsky, President and CEO.

Conference Call HighlightsIDEXX Laboratories Inc's operating margin improved by 100 basis points, supported by gross margin expansion and strong recurring revenue growth.

The company highlighted strategic initiatives, including the launch of FNA and the expansion of its Cancer DX platform, with positive customer feedback and increased adoption.

Management emphasized the importance of diagnostics in veterinary care and the potential for AI to enhance innovation and diagnostics utilization.

The company is optimistic about its long-term growth prospects, supported by a strong innovation pipeline and expanding global presence.

Company Raises 2026 GuidanceIDEXX Laboratories raised its fiscal 2026 earnings from $14.29-$14.80 to $14.45-$14.90 compared to the consensus of $14.53.

The company increased its 2026 sales guidance from $4.63 billion-$4.72 billion to $4.675 billion-$4.76 billion compared to the consensus of $4.678 billion.

IDXX Technical Outlook: Key Support, Resistance And MomentumCurrently, Idexx Laboratories is trading at $564.00, which places it 2.6% below its 20-day simple moving average (SMA) of $572.90 and 5.1% below its 50-day SMA of $588.05.

The stock's relative strength index (RSI) is at 45.20, indicating a neutral momentum, suggesting that the stock is neither overbought nor oversold at this time.

Key Resistance: $594.50 — a nearby level where rebounds can stall. Key Support: $548.50 — a nearby level where buyers previously stepped in. IDXX Stock Price Activity: IDEXX Laboratories shares were up 3.35% at $582 during premarket trading on Tuesday, according to Benzinga Pro data.

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Key Takeaways IDEXX posts Q1 EPS of $3.47, up 17.2%, beating estimates as revenues climbed 14% to $1.14B. IDEXX growth driven by CAG Diagnostics recurring revenues and software, imaging expansion. IDEXX raises 2026 outlook, guiding higher revenues and EPS on sustained growth momentum. IDEXX Laboratories, Inc. (IDXX - Free Report) posted first-quarter 2026 earnings per share (EPS) of $3.47, up 17.2% year over year. The figure surpassed the Zacks Consensus Estimate by 1.5%.

Comparable constant-currency EPS of $3.30 improved 15% year over year.

IDEXX’s RevenuesQuarterly revenues increased 14% year over year (up 11% organically) to $1.14 billion. The reported figure topped the Zacks Consensus Estimate by 2.1%.

Following the earnings announcement, IDXX shares gained 0.3% in the pre-market trading today.

IDEXX’s Q1 Revenue Analysis by SegmentsIDEXX derives revenues from four operating segments: CAG, Water, Livestock, Poultry andDairy (“LPD”), and Other.

CAG’s revenues rose 14.6% year over year on a reported basis and 11.6% on an organic basis to $1.05 billion.

CAG revenue growth was led by CAG Diagnostics recurring revenue growth of 14% as reported and 11% organic.  

Veterinary software, services and diagnostic imaging systems revenues grew 12% reportedly and 11% on an organic basis, led by cloud-native software growth and continued installed base expansion, including record diagnostic imaging system installations.

The Water segment’s revenues increased 10.9% year over year reportedly and 7.1% on an organic basis to $50.3 million.

For the first quarter, LPD revenues jumped 13.6% reportedly and 7.2% on an organic basis to $32.5 million.          

Revenues from the Other segment dropped 14% on a reported basis as well as organically to $4 million.

IDEXX’s Margin PerformanceGross profit rose 15.9% to $722.7 million. The gross margin expanded 92 basis points (bps) to 63.4% despite an 11.5% rise in the cost of revenues.

Sales and marketing expenses surged 12.2% to $175.3 million. G&A expenses rose 30.1% to $119.1 million. R&D expenses jumped 11.4% to $65.8 million. The operating profit in the reported quarter rose 14.5% year over year to $362.6 million. The operating margin in the quarter expanded 8 bps to 31.8%.

IDEXX’s Financial PositionIDEXX exited the first quarter of 2026 with cash and cash equivalents of $200.5 million compared with $180.1 million at the end of fourth-quarter 2025.

Cumulative net cash provided by operating activities was $266.3 million compared with $238 million in the prior-year period.

IDEXX Laboratories, Inc. Price, Consensus and EPS SurpriseIDEXX’s Upgraded 2026 GuidanceIDEXX upgraded an initial outlook for 2026, forecasting revenues in the range of $4,675-$4,760 million (up from $4,632-$4,720 million). The Zacks Consensus Estimate is currently pegged at $4.67 billion.

Full-year EPS is projected to be in the band of $14.45-$14.90 (up from the previous guidance of $14.29-$14.80), implying growth of 11-14% (up from 9-13%). The Zacks Consensus Estimate is currently pegged at $14.54.

Our View on IDEXXIDEXX exited the first quarter of 2026 with both revenues and earnings beating estimates. The performance was supported by consistently high levels of execution by IDEXX teams around the world. U.S. CAG Diagnostics’ recurring revenue growth was aided by increased diagnostic frequency, including modest easing of clinical visit pressures and increased diagnostic frequency. The expansion of both margins in the quarter is also encouraging.

The IDEXX Cancer Dx Platform continues to gain strong momentum, driven by its recent international expansion and increasing adoption across the United States. The rollout of IDEXX inVue Dx is further strengthening its innovation-led growth strategy. 

IDEXX’s Zacks Rank & Key PicksIDXX currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Globus Medical (GMED - Free Report) , Intuitive Surgical (ISRG - Free Report) and Phibro Animal Health (PAHC - Free Report) .

Globus Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter 2025 adjusted EPS of $1.28, which surpassed the Zacks Consensus Estimate by 20.8%. Revenues of $826.4 million beat the Zacks Consensus Estimate by 4.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

GMED has an earnings yield of 4.7% compared to the industry’s negative yield of 1.4%. The company’s earnings beat estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 18.79%.

Intuitive Surgical, carrying a Zacks Rank #2 (Buy) at present, posted a first-quarter 2026 adjusted EPS of $2.50, which exceeded the Zacks Consensus Estimate by 20.2%. Revenues of $2.77 billion topped the Zacks Consensus Estimate by 6.2%.

ISRG has an earnings yield of 2.1% in contrast to the industry’s negative yield of 0.9%. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 16.82%.

Phibro Animal Health, carrying a Zacks Rank #2 at present, posted a second-quarter fiscal 2026 adjusted EPS of 87 cents, which outpaced the Zacks Consensus Estimate by 27.01%. Revenues of $373.9 million outperformed the Zacks Consensus Estimate by 4.72%.

PAHC has an estimated long-term earnings growth rate of 21.5% compared with the industry’s 12.1% growth. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 20.15%.

On May 11, 2026, IDEXX Laboratories Inc (IDXX) shares fell 5.0% to a current price of $532.00. This decline comes amid a challenging performance period for the

MindWalk Holdings Corp. (NASDAQ: HYFT) today released a systematic report identifying over 20 discovery-originated drug candidates with documented origins in a

Third menu expansion in four years broadens intestinal parasite detection in routine care

WESTBROOK, Maine--(BUSINESS WIRE)--IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced the expansion of its Fecal Dx™ antigen testing platform with taeniid tapeworm, including Taenia and Echinococcus species. Proven to detect up to twice as many intestinal parasite infections earlier than fecal flotation alone,1 Fecal Dx antigen testing delivers broader parasite detection in a single test for both wellness and sick-pet care.

“This advancement reflects how we innovate at IDEXX, developing platforms that grow with our customers as care evolves.”

Share Since launching in 2012, more than 50 million Fecal Dx antigen tests have been run worldwide,2 reflecting strong clinical adoption over time. With each menu expansion, Fecal Dx has grown into a scalable diagnostic platform with increasing clinical scope and practice value.

“This advancement reflects how we innovate at IDEXX, developing platforms that grow with our customers as care evolves,” said Mike Erickson, President and CEO of IDEXX. “By broadening the insight available through Fecal Dx, we’re making fecal testing easier to incorporate into everyday decision-making, helping veterinary teams reach more pets with greater confidence.”

Taenia and Echinococcus species are recognized by the Companion Animal Parasite Council (CAPC) as clinically important parasites,3,4 with growing relevance for veterinarians worldwide. In particular, in areas where Echinococcus species is endemic, it can pose a significant zoonotic risk and remains a notable concern in parts of Europe, the United States and Canada. With this addition, Fecal Dx antigen testing now detects seven of the most clinically relevant intestinal parasite groups, including hookworm, roundworm, whipworm, flea tapeworm, taeniid tapeworm, Cystoisospora and Giardia (in select panels).

“The addition of taeniid tapeworm detection to IDEXX Fecal Dx makes this an even more complete intestinal parasite screen for cats and dogs,” said Michael Rose, DVM, Managing Owner, Monticello Animal Hospital.* “This allows veterinarians to institute medical treatment early, which helps protect pet health and reduce zoonotic risk to owners.”

Beginning in late June, Fecal Dx antigen testing panels and profiles for IDEXX Reference Laboratories customers in the United States and Canada will automatically include detection of taeniid tapeworm at no additional cost.

For more information, please visit the Fecal Dx antigen testing web page.

*Dr. Rose has received compensation for consulting services he has provided to IDEXX.

About IDEXX

IDEXX is a global leader in pet healthcare innovation. Our diagnostic and software products and services create clarity in the complex, constantly evolving world of veterinary medicine. We support longer, fuller lives for pets by delivering insights and solutions that help the veterinary community around the world make confident decisions—to advance medical care, improve efficiency, and build thriving practices. Our innovations also help ensure the safety of milk and water across the world and maintain the health and well-being of people and livestock. IDEXX Laboratories, Inc. is a member of the S&P 500™ Index. Headquartered in Maine, IDEXX employs approximately 11,000 people and offers solutions and products to customers in more than 175 countries and territories. For more information about IDEXX, visit: www.idexx.com.

Note Regarding Forward-Looking Statements

This news release contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” “project,” and similar words and expressions. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. These statements are subject to risks, uncertainties, assumptions, and other important factors. Readers are cautioned not to put undue reliance on such forward-looking statements because actual results may vary materially from those expressed or implied. The reports filed by IDEXX pursuant to United States securities laws contain discussions of some of these risks and uncertainties. IDEXX assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised to review IDEXX’s filings with the United States Securities and Exchange Commission (which are available from the SEC’s EDGAR database at sec.gov and via IDEXX’s website at idexx.com).

More News From IDEXX Laboratories, Inc.

Bullish or Bearish? Vetting Animal Health Care StocksIDEXX Laboratories NASDAQ: IDXX President and CEO Michael Erickson used a Stifel investor conference appearance to emphasize the company’s innovation pipeline, expanding commercial reach and growing use of software and artificial intelligence across veterinary diagnostics.

Erickson, who recently became CEO after roughly 14 years at the company, said IDEXX remains focused on a long-term strategy built around diagnostics, software and customer engagement. He described the company as “purpose-driven” and said its platform is intended to help veterinarians gain deeper clinical insights and improve practice productivity.

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“We’re really focused on innovation,” Erickson said. “I’ve never been more excited about our portfolio of innovations.”

Software and AI Remain Key Priorities Erickson said IDEXX sees significant opportunity in software and AI, both in its products and in internal operations. He pointed to inVue Dx and SediVue Dx as examples of AI already embedded in IDEXX diagnostic platforms.

With inVue Dx, Erickson said IDEXX has transformed manual, technique-sensitive cytology workflows by eliminating the need to make a slide in certain applications. The instrument uses optics and onboard AI to provide answers in about 10 minutes for areas such as cytology and blood morphology, he said.

He also said AI could help improve veterinary practice efficiency through tools such as ambient scribing and could support IDEXX’s own productivity. Erickson said some software teams at IDEXX are using AI to generate code, reducing work that previously took “weeks or months” to “days or weeks.”

Erickson said IDEXX may develop some AI-enabled capabilities internally while also partnering with third parties. He noted that the company has a connected software ecosystem with more than 100 third-party integrations.

inVue Dx Launch Described as One of IDEXX’s Most Successful Much of the discussion centered on inVue Dx, the company’s point-of-care diagnostic platform. Jonathan Block, managing director at Stifel, said IDEXX had previously discussed expectations for 5,500 placements in 2026 and noted that first-quarter placements were 1,100.

Erickson said inVue Dx has been “one of the most successful launches” in IDEXX history and said the company remains comfortable with its full-year forecast despite quarterly lumpiness. He said the initial applications in ear cytology and blood morphology address large categories of testing already occurring in veterinary hospitals.

The CEO said IDEXX continues to expand the platform’s menu through connected instruments. Since the company’s first-quarter call, he said IDEXX added additional red blood cell morphology capabilities, including spherocytes, schistocytes and keratocytes, after previously adding acanthocytes.

Erickson also said IDEXX is in a controlled launch for fine needle aspirate, or FNA, and expects to move to a broader launch later this year. He described FNA as a “platform within a platform” and said it addresses high-stakes cancer-related use cases, such as evaluating lumps and bumps in pets.

Block asked whether some practices might be waiting for the full FNA launch before adopting inVue Dx. Erickson said that could happen in some cases, but IDEXX has not seen it as a headwind to achieving its goals.

Erickson also said inVue Dx is already “comfortably” within the previously discussed $3,500 to $5,500 revenue-per-box range, even before the broader FNA launch. He said most practices with inVue Dx are using it for both ear cytology and blood morphology, and some customers want multiple instruments to handle volume.

Growth Outlook Tied to Multiple Drivers Asked about the company’s growth cadence for the remainder of the year, Erickson said IDEXX’s performance is not dependent on a single product. He pointed to double-digit first-quarter growth across point-of-care diagnostics and reference labs, including 15% growth in point-of-care consumables.

Erickson said innovation is helping IDEXX grow faster than the broader sector. He also said the company is seeing “green shoots” among dogs older than five, including in both wellness and non-wellness visits during the first quarter. The company has been facing headwinds in clinical visits, but Erickson said IDEXX modestly adjusted its full-year view from negative 2% to negative 1.5%.

John Ravis, vice president of investor relations, added that IDEXX is seeing benefits from net customer gains and adoption of new innovations. He said the company’s installed base grew 12% in the first quarter and that reference lab growth has accelerated across major modalities and geographies, including international markets.

Cancer Dx Seen as a Long-Term Development Opportunity Erickson also discussed Cancer Dx, IDEXX’s early cancer detection test that currently starts with lymphoma. Block said roughly 7,500 practices are ordering the test.

Erickson said IDEXX is pleased with demand and described the test as a breakthrough in a historically underdeveloped area of veterinary medicine. He said the test can detect lymphoma up to eight months before clinical signs and can help type the lymphoma to guide care.

The company has priced Cancer Dx at $15 when packaged with an IDEXX blood panel, which Erickson said supports broader access while also driving blood work at IDEXX reference labs. He said 70% of the Cancer Dx volume is being run together with blood work at IDEXX reference labs.

Erickson said about 20% of Cancer Dx volume is coming from practices that do not use IDEXX as their primary reference lab, which he said supports new customer growth. He also said IDEXX plans to add mast cell tumor later this year and expects to cover about one-third of major cancers after that addition. The company has said it expects to reach 50% coverage by 2028.

MilQ-ID Details Remain Limited Block also asked about MilQ-ID, a trademark he said Stifel had identified. Erickson declined to provide details on the product’s functionality or timing, saying IDEXX will discuss it when it is ready.

“What MilQ-ID will do, it will transform the category that it’s in, and it will be entirely complementary to what we have today in our IDEXX VetLab Suite,” Erickson said.

Asked whether IDEXX’s commercial organization can support multiple point-of-care analyzer innovations at the same time, Erickson said there is no capacity issue. He said the company has continued to invest in its commercial organization in the U.S. and internationally and plans to keep expanding that footprint.

Erickson closed by describing IDEXX’s innovation strategy as “multi-front,” spanning instruments, assays, software and AI. He said the company will continue to pursue integrated solutions across those areas.

About IDEXX Laboratories NASDAQ: IDXXIDEXX Laboratories, Inc NASDAQ: IDXX is a global developer, manufacturer and provider of diagnostic products and services primarily for the animal health, water testing and food safety markets. Headquartered in Westbrook, Maine, the company supplies in-clinic diagnostic instruments, consumables, reference laboratory testing and practice-management tools that support veterinarians, livestock and dairy producers, and utilities and food producers worldwide.

IDEXX's product portfolio includes point-of-care tests and immunoassays designed for rapid diagnosis in veterinary clinics, in-clinic chemistry and hematology analyzers, automated urinalysis systems, and digital diagnostic solutions.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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Stock to Watch: Idexx Laboratories (IDXX - Free Report) Headquartered in Westbrook, ME, IDEXX Laboratories, Inc. is a developer, manufacturer and distributor of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. The company also sells a series of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market.

IDXX is a #3 (Hold) on the Zacks Rank, with a VGM Score of B.

Additionally, the company could be a top pick for growth investors. IDXX has a Growth Style Score of B, forecasting year-over-year earnings growth of 12.2% for the current fiscal year.

Six analysts revised their earnings estimate higher in the last 60 days for fiscal 2026, while the Zacks Consensus Estimate has increased $0.12 to $14.68 per share. IDXX also boasts an average earnings surprise of +6.1%.

With a solid Zacks Rank and top-tier Growth and VGM Style Scores, IDXX should be on investors' short list.

Wall Street expects a year-over-year decline in earnings on higher revenues when Sonic Automotive (SAH - Free Report) reports results for the quarter ended March 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.

The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on April 30. On the other hand, if they miss, the stock may move lower.

While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise.

Zacks Consensus EstimateThis auto dealer is expected to post quarterly earnings of $1.46 per share in its upcoming report, which represents a year-over-year change of -1.4%.

Revenues are expected to be $3.74 billion, up 2.5% from the year-ago quarter.

Estimate Revisions TrendThe consensus EPS estimate for the quarter has been revised 2.45% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts.

Price, Consensus and EPS Surprise

Earnings WhisperEstimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How Have the Numbers Shaped Up for Sonic Automotive?For Sonic Automotive, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting that there are no recent analyst views which differ from what have been considered to derive the consensus estimate. This has resulted in an Earnings ESP of 0%.

On the other hand, the stock currently carries a Zacks Rank of #5.

So, this combination makes it difficult to conclusively predict that Sonic Automotive will beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that Sonic Automotive would post earnings of $1.53 per share when it actually produced earnings of $1.52, delivering a surprise of -0.65%.

Over the last four quarters, the company has beaten consensus EPS estimates two times.

Bottom LineAn earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

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Sonic Automotive doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.

Expected Results of an Industry PlayerAmong the stocks in the Zacks Automotive - Retail and Whole Sales industry, Penske Automotive (PAG - Free Report) , is soon expected to post earnings of $2.91 per share for the quarter ended March 2026. This estimate indicates a year-over-year change of -14.2%. This quarter's revenue is expected to be $7.95 billion, up 4.6% from the year-ago quarter.

The consensus EPS estimate for Penske has been revised 1.4% lower over the last 30 days to the current level. However, a higher Most Accurate Estimate has resulted in an Earnings ESP of +0.11%.

When combined with a Zacks Rank of #4 (Sell), this Earnings ESP makes it difficult to conclusively predict that Penske will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.