Quest Diagnostics (NYSE:DGX) reported double-digit revenue growth and raised its full-year 2026 outlook after what executives described as strong demand across its physician, hospital and consumer channels, as well as increased volume from major collaborations with Corewell Health and Fresenius Medical Care.
On the company’s second-quarter earnings call, Chairman, Chief Executive Officer and President Jim Davis said Quest grew revenue by more than 10% in the quarter, driven by “broad clinical demand from physicians, hospitals, and consumers” and higher volume tied to the Corewell and Fresenius relationships. Chief Financial Officer Sam Samad said consolidated revenue was $3.04 billion, up 10.2% from the prior year, while consolidated organic revenue rose 10%.
Reported operating income was $459 million, or 15.1% of revenue, compared with $438 million, or 15.9% of revenue, a year earlier. Adjusted operating income was $502 million, or 16.5% of revenue, compared with $466 million, or 16.9% of revenue, last year. Samad said the increase in adjusted operating income reflected organic revenue growth, partially offset by wage increases.
Reported diluted earnings per share were $2.84, compared with $2.47 a year earlier. Adjusted diluted EPS was $3.12, up from $2.62 in the prior-year period. Samad said the EPS improvement was driven by organic operating performance and the favorable resolution of various tax contingencies, which contributed $0.10 per share in the quarter. Excluding that one-time tax benefit, adjusted EPS grew 15.3%.
Company Raises 2026 Guidance
Quest raised its full-year 2026 revenue and earnings outlook, citing first-half performance and ongoing demand. The company now expects:
- Revenue of $11.95 billion to $12.05 billion, representing growth of 8.3% to 9.2%.
- Reported EPS of $9.97 to $10.17.
- Adjusted EPS of $11.05 to $11.25.
- Cash from operations of approximately $1.8 billion.
- Capital expenditures of approximately $550 million.
Samad said the guidance excludes any contribution from prospective mergers and acquisitions. He also noted that Project Nova expenses are unchanged for the full year, but the company now expects increased spending in the second half compared with prior expectations. Higher fuel costs in the second half are also included in the outlook.
Despite those pressures, Samad said Quest still expects operating margin to expand versus the prior year. He said the company expects to lap the Corewell and Fresenius impacts in the fourth quarter, reducing their dilutive effect on total operating margins in the second half.
Physician, Hospital and Consumer Channels Drive Growth
Davis said the physician channel delivered high single-digit revenue growth during the quarter, supported by demand for clinical innovations, new customer wins and expanded business with existing customers. He cited growth in geographies where Quest has expanded access through health plans and acquisitions, as well as enterprise accounts focused on prevention and wellness.
In hospitals, Davis said revenue grew at a double-digit rate, primarily from co-lab solutions with Corewell Health in Michigan. Reference testing revenue also increased versus both the first quarter and the prior year. During the question-and-answer portion of the call, Davis said the company’s core hospital reference business generated mid-single-digit revenue growth, with slightly higher volume growth. He said same-store sales in co-lab arrangements excluding Corewell also grew at a mid-single-digit rate.
Davis said Quest formed a new co-lab agreement during the quarter with a nonprofit regional health system in California. He added that the company has a “strong pipeline” of potential hospital collaborations, hospital outreach acquisitions and independent lab opportunities.
In consumer health, Davis said questhealth.com continued to generate “robust revenue growth,” with strong demand for existing wellness panels and new services including thyroid testing. He said the broader consumer business, which includes direct and indirect offerings, was previously sized at about $250 million and is currently growing toward the high end of the company’s 20% to 30% expectation for 2027.
Advanced Diagnostics and Automation Highlighted
Davis said Quest posted double-digit revenue growth across several advanced diagnostic areas, including cardiometabolic testing such as ApoB and Lp(a), liver fibrosis testing and autoimmune testing through the company’s analyzer solution. In brain health, he said the company continued to drive “robust double-digit growth” across its AD-Detect blood tests, including amyloid beta and p-tau biomarkers.
In oncology, Davis highlighted New York State approval of the Haystack MRD test, which he said allows Quest to extend commercial efforts to all 50 states. He also said Quest became the largest reference lab to extend access to cancer tests such as Haystack MRD through Flatiron Health’s OncoEMR molecular profiling integration platform. A pilot with American Oncology Network has begun, with plans to roll out to Flatiron’s 4,700 clinicians and other providers nationwide later this year.
Davis also discussed operational initiatives, saying Quest remains on track to deliver 3% in annual cost savings and productivity improvements through its Invigorate program. He pointed to expanded use of automation and artificial intelligence, including Hologic’s Genius Digital Diagnostics System for Pap test slide review, front-end specimen processing automation, a web-based collection tool called IntelliDraw and an AI tool intended to reduce the time needed to track and order supplies at patient service centers.
Executives Address Reimbursement, Bad Debt and PAMA
Asked about Affordable Care Act exchange-related impacts, Davis said Quest continues to assume a 30-basis-point revenue impact from the expiration of ACA exchange subsidies. He said enrollment declines have not translated into a major business impact, noting that requisition volume in that book is down about 8%, but tests per requisition are up 6%, leaving test volume down about 2% and revenue “relatively flat.”
Executives also said they are not seeing deterioration in bad debt trends. Samad said hospital collections remain in line with expectations and that patient concessions, which he said typically hover around 5% of revenue, have not worsened and were slightly improved versus the prior-year quarter.
On PAMA, Davis outlined three possible outcomes: new CMS rates following the current data collection process, passage of the RESULTS Act, or another delay. He said Quest supports the RESULTS Act, which he described as a better method for collecting market data through a third-party approach. Davis said the bill has more than 115 co-sponsors and broad support from patient and consumer organizations. If the RESULTS Act passes, he said rates would stay flat for 2027 and 2028, with new rates taking effect in 2029 and annual cuts capped at no more than 5%.
Davis closed the call by saying Quest entered the second half with growth momentum and continued demand for lab insights, while remaining focused on its strategy of connecting patients and providers to testing and actionable health information.
About Quest Diagnostics (NYSE:DGX)
Quest Diagnostics (NYSE: DGX) is a leading provider of diagnostic information services that supports clinical decision-making for patients, physicians and healthcare organizations. The company operates a network of clinical laboratories and patient service centers that perform a broad range of laboratory tests and diagnostic assays used in routine care, disease diagnosis, monitoring and screening.
Its services span core clinical laboratory testing, anatomic pathology, molecular and genomic diagnostics, infectious disease testing and toxicology.
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