Fundamental Signals

Editor's Notes:

• As mentioned in the last daily brief newsletter, Revvity saw a 6%+ stock price jump yesterday, due to strong guidance and upward revision for 2025.

• There are a few things to like about the current setup - (1) bad news are mostly priced in (China headwind), (2) early-stage R&D funding upcycle for biotech is likely to start soon, given pipeline rebuild at various big pharma due to patent cliff (one example being Pfizer, as mentioned in an earlier newsletter), which should benefit RVTY, (3) multiple positive signals that may materialize into upsides - organic internal growth drivers (e.g. 20% software revenue growth under life science in the last quarter), AI focus and licensing deals with top AI players, share buyback plan, etc. More importantly, the stock is not too expensive (20x forward P/E, 5% FCF yield), around mid-point within 3-year range.

• This will be on my watchlist, as I build up my thesis and target list around global healthcare R&D upcycle, fueled by industrial policies in China, matching strategic urgency in the US (already seeing FDA being more active), and pipeline rebuild at biotech majors.

Revvity, Inc. (RVTY) is a global leader in Life Sciences and Diagnostics, providing integrated solutions from research to clinical application. The company is currently optimizing its portfolio through strategic divestitures to focus on higher-growth, higher-margin areas. Key drivers include a rebound in pharma/biotech spending, robust growth in core diagnostics, and significant expansion in its Signals Software business, particularly with AI-driven innovations.

1. Company Snapshot

• Business Description: Revvity, Inc. (RVTY) is a pivotal global player in the Life Sciences Tools & Services sector. The company offers integrated workflows, from discovery to development and diagnosis to cure, leveraging proprietary technology, a strong brand portfolio (e.g., BioLegend, EUROIMMUN), and a focus on translational science to bridge research and clinical applications.

• Recent Beat / Miss: The company, which rebranded from PerkinElmer and began trading on the NYSE in January 2024, recently announced preliminary Q4 and full-year 2025 financial results in January 2026, projecting revenue and adjusted EPS to exceed prior guidance. This positive update built on earlier Q3 2025 earnings where Revvity beat EPS estimates.

• Business Development: Strategically, Revvity has heavily invested in AI-driven solutions, launching the AI-augmented Signals Xynthetica platform in December 2025 and enhancing its Signals One platform in January 2026. Crucially, the company forged a significant collaboration with Eli Lilly in January 2026 to integrate AI in drug discovery, a move that saw a positive market reaction. Discussions with major AI firms like OpenAI for genomic data licensing further underscore its AI focus.

• Capital Allocation: Revvity's Board authorized a substantial $1 billion share repurchase program in October 2025, signaling management's belief that the stock is undervalued. Regular quarterly dividends were also announced.

• Sell-side Sentiment: Analyst coverage has been mixed but largely positive, with several firms initiating or reiterating "Outperform" or "Overweight" ratings and adjusting price targets, generally upwards. However, some analysts, including Goldman Sachs and Bank of America, initiated or downgraded to "Neutral" due to concerns around biotech funding and China exposure, despite acknowledging the company's internal growth drivers. Institutional investors showed varied activity in Q2 and Q3 2025, with several major increases and some notable reductions in stake.

• Thematic Alignment: The company's role in high-growth markets like CRISPR gene-editing, next-generation sequencing, and various diagnostics markets continues to be a central theme, supported by overall industry resurgence post-COVID challenges.

Revenue Mix (FY2025 Q3)

2. Strategic Developments

Artificial Intelligence (AI) Integration & Software:

• Collaboration with Eli Lilly (January 9, 2026): Partnered to integrate Lilly TuneLab (AI-driven predictive modeling platform) with Revvity Signals platform (Signals Xynthetica). This aims to expand access to advanced AI tools for drug discovery and foster innovation in biotech, leading to a 4.92% after-hours stock gain for Revvity.

• Signals One Platform Enhancement (January 9, 2026): Enhanced its Signals One platform with AI-powered data interpretation and decision-making capabilities to streamline R&D workflows, including a launch in India.

• Signals Xynthetica Launch (December 16, 2025): Launched an AI-Augmented Design Platform for Molecular and Materials Discovery, expected to be a cornerstone of Revvity's AI-augmented discovery vision.

• Discussions with AI Companies (December 17, 2025): OpenAI, Anthropic, and Google engaged in discussions with Revvity to potentially license its specialized genomic datasets for AI model training, highlighting the value of Revvity's data assets.

• Partnership with Profluent (November 19, 2025): Commercial partnership with Profluent, an AI models specialist for protein design in drug development and agriculture.

• Acquisitions & Integrations:

  • ACD/Labs Acquisition (Announced December 9, 2025): Definitive agreement to acquire ACD/Labs, a provider of scientific software solutions, further strengthening its software portfolio.

  • IMMY & Meridian Bioscience Integration (March 2024): Integrated these entities to enhance multiplex lateral flow capabilities for infectious disease diagnostics (e.g., cryptococcal antigen alongside HIV antibodies).

• Product Launches & Collaborations (Non-AI):

  • Somatic Cancer Reference Standards (November 2025): Collaborated with MDIC and NIST to introduce new standards, improving diagnostic assay accuracy and reliability.

  • Pin-pointTM Base Editing Platform Reagents (September 2023): Launched advanced gene editing reagents for preclinical laboratories, enhancing CRISPR technology access.

  • Euroimmun & VolitionRx Partnership (December 4, 2025): Revvity's Euroimmun division is partnering with VolitionRx in the "DETECSEPS" consortium, providing its i10 automated analyzer for sepsis detection.

  • Liquid Handling Platforms Upgrade (2023): Enhanced capabilities for high-throughput COVID-era diagnostics.

3. Financial Scorecard

Annual Trends (M = Million USD)

Recent Momentum (M = Million USD, Q3 FY25 Ended 2025-09-30)

• Q3 2025 Results (Reported October 27, 2025):

  • Adjusted EPS: $1.18, beating consensus estimates of $1.14 by $0.04.

  • Revenue: $698.95 million, slightly below consensus ($699.75 million) but representing a 2.2% year-over-year increase (1% organic growth).

  • Life Sciences segment revenue was flat organically, while Diagnostics grew 2% organically.

• Preliminary Q4 & Full Year 2025 Results & Revised Guidance (Announced January 12-13, 2026):

  • Q4 2025 Revenue: Approximately $772 million, with reported growth of ~6% and organic growth of ~4%.

  • Full Year 2025 Revenue: Approximately $2,855 million, with reported growth of ~4% and organic growth of ~3%.

  • Full Year 2025 Adjusted EPS: Expected to exceed the upper-end of the previously provided guidance of $4.90-$5.00.

  • Market Reaction: Following this announcement, Revvity's shares were reported to be up nearly 6% in extended trading (January 12, 2026).

• Previous FY25 Guidance History:

  • November 26, 2025: Adjusted EPS outlook revised to $4.90-$5.00 (up from prior $4.85-$4.95). Revenue guidance updated to $2.83-$2.88 billion (from $2.84-$2.88 billion).

• 2026 Outlook & Margin Expansion (Analyst/Management Commentary):

  • Analysts expect FY26 EPS to surge 8.2% annually to $5.31.

  • Management anticipates material expansion of operating and net margins by 2026. This is driven by a shift towards higher-margin, software-enabled, and consumables-driven offerings, alongside structural cost actions.

• Debt and Leverage (as of September 2025):

  • Total Debt: US$3.21 billion.

  • Net Debt: US$2.28 billion (after accounting for US$931.4 million in cash).

  • Net Debt to EBITDA Ratio: 2.8x, indicating a significant but manageable level of leverage.

• Valuation Context:

  • NTM P/E: Current 19.7x (3Y Range: 16.1x - 25.8x)

  • NTM EV/EBITDA: Current 15.1x (3Y Range: 13.0x - 19.3x)

• Share Repurchase Program (Authorized October 27, 2025):

  • Board approved a $1.00 billion stock buyback program, representing up to 8.7% of its outstanding shares. This move signals management's belief that the company's shares are undervalued.

• Quarterly Dividend (Announced October 27, 2025):

  • Declared a quarterly dividend of $0.07 per share, payable on February 6, 2026, to shareholders of record on January 16, 2026. This translates to an annualized dividend of $0.28, a yield of 0.3%, and a payout ratio of 14.07%.

4. Key Debates & Risks

• Market Controversy: The primary debate centers on Revvity's ability to consistently deliver on its growth outlook amidst external headwinds. While the company has seen positive signs in pharma/biotech spending and strong software growth, ongoing challenges in China (DRG impacts) and recurring revenue misses despite EPS beats raise questions about the sustainability and quality of its organic growth, particularly in the Diagnostics segment. Management's confidence in long-term growth and share repurchase authorization contrasts with analyst skepticism about near-term operational challenges and margin trends.

• Analyst Sentiment & Price Targets

  • Consensus: "Moderate Buy" rating with a mean price target of $113.87, in line with latest price level (~$110).

  • Goldman Sachs (Initiated December 9, 2025): "Neutral" rating, $105.00 price target. Cited lingering near-term headwinds (early-stage biotech funding, China diagnostics) but acknowledged company-specific growth drivers, consumables recovery, and the ACD/Labs acquisition as positive factors.

  • Bank of America (Downgraded December 15, 2025): Downgraded to "Neutral" with a $110.00 price target. Previously lowered target to $99.00 (from $110.00) on September 22, 2025, while maintaining a "Buy" rating.

• Top Risks:

  • China Market Headwinds: Regulatory changes (DRG), economic slowdown, and geopolitical tensions in China continue to impact both Diagnostics and Life Sciences segments, posing a significant drag on organic growth.

  • Product Innovation & Competition: The need for continuous R&D and timely introduction of new, competitively priced products is critical in innovation-driven markets. Failure could lead to market share loss and technological obsolescence against aggressive competitors.

  • Foreign Exchange Fluctuations: A strong U.S. dollar consistently acts as a headwind, reducing reported international revenue and impacting profitability.

Appendix. Significant Institutional Investor Activity (Q2 & Q3 2025)

Major Increases in Stake :

• T. Rowe Price Investment Management Inc.: Increased by 8.5%, holding 22.5 million shares valued at $2.38 billion (Q1 2025).

• EdgePoint Investment Group Inc.: Increased by 26.3% (Q3 2025), holding 8.5 million shares valued at $751.5 million.

• Primecap Management Co. CA: Increased by 18.7%, holding 1.3 million shares valued at $131.5 million (Q2 2025).

• Norges Bank: Acquired a new stake of 1.2 million shares valued at $124.5 million (Q2 2025).

• Massachusetts Financial Services Co. MA: Increased by 26.6%, holding 1.1 million shares valued at $112.2 million (Q2 2025).

• Allspring Global Investments Holdings LLC: Increased by 14,741.7%, holding 771,470 shares valued at $70.7 million (Q3 2025).

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.