What Quest Diagnostics (DGX) Said on Its Q3 Earnings Call

Key Points

• Quest Diagnostics reported strong Q3 results, with revenue up 10% to $3.1 billion and adjusted EPS rising 15.4% to $3.00. Growth was supported by higher testing volumes, demand across physician, hospital and consumer channels, and productivity gains from automation and AI.
• The company raised and narrowed its 2026 outlook, forecasting revenue of $12.065 billion to $12.105 billion and adjusted EPS of $11.25 to $11.35. Consumer-health revenue is expected to grow more than 30%, helped by a planned Apple Health testing offering priced at $119.
• Management flagged potential headwinds from 2027 PAMA reimbursement changes, estimating an impact of about 1% of total revenue, and disclosed unauthorized access to a client test-ordering system; the incident has not materially disrupted operations, though the investigation is ongoing.

Quest Diagnostics NYSE: DGX reported third-quarter 2026 revenue growth of 10% and adjusted earnings-per-share growth of more than 15%, citing demand across its physician, hospital and consumer channels as well as productivity gains from automation and artificial intelligence. The company raised and narrowed its full-year revenue and earnings outlook.

Chairman, Chief Executive Officer and President Jim Davis said the company’s organic growth reflected expanding clinical needs among an aging population and increased consumer interest in preventive health and wellness. “We grew revenues 10% and adjusted earnings per share over 15% in the quarter,” Davis said.

Third-Quarter Results

Chief Financial Officer Sam Samad said consolidated revenue totaled $3.1 billion, up 10% from the prior-year quarter. Diagnostic information services revenue increased 10.2%, or 10.1% organically.

Total requisition volume rose 14.5%, while organic volume increased 14.4%. Quest’s relationships with Corewell Health and Fresenius Medical Care accounted for 9.5% of quarterly volume. Excluding those relationships, volume increased 5%.

Revenue per requisition declined 4.2% on a reported basis because of the business mix associated with Corewell and Fresenius. Excluding those relationships, revenue per requisition increased 1.7%, driven mainly by a greater number of tests per requisition. Unit-price reimbursement was generally flat, Samad said.

• Reported operating income was $479 million, or 15.5% of revenue, compared with $386 million, or 13.7% of revenue, a year earlier.
• Adjusted operating income was $517 million, or 16.7% of revenue, up from $458 million, or 16.3% of revenue, in the prior-year period.
• Reported diluted EPS was $2.78, compared with $2.16 a year earlier.
• Adjusted diluted EPS rose 15.4% to $3.00 from $2.60.
• Year-to-date cash from operations was $1.49 billion, compared with $1.42 billion in the prior year.

The 40-basis-point improvement in adjusted operating margin was driven by organic revenue growth, partly offset by wage increases and the mix effect from the Corewell and Fresenius businesses, according to Samad.

Channel Growth and Consumer Health Plans

Davis said the physician channel posted high-single-digit revenue growth, while the hospital channel grew revenue by double digits, aided by Co-Lab Solutions with Corewell Health in Michigan. Hospital reference-testing revenue grew in the mid-single digits.

The company also finalized a definitive agreement to acquire select outreach assets from a longtime Co-Lab customer, described as a leading health system in the Northeastern U.S. Quest expects the transaction to close later this year.

Consumer health remains a faster-growing channel, with Quest expecting growth exceeding 30% for the full year. The company announced that iPhone and iPad users will be able to order laboratory tests through the Apple Health app. The offering, expected to fully launch later this year, will allow users to purchase, schedule and receive results for more than 50 biomarkers, including ApoB and Lp(a), through the app.

The panel will also include biometric measurements such as blood pressure and weight when blood is drawn at one of Quest’s 2,000 patient service centers. Davis said the service will be priced at $119. Samad said consumer health margins are accretive to Quest’s overall operating margins because of dense test requisitions and the absence of denials and patient concessions.

Diagnostics, Automation and Kidney Care

Quest said key advanced-diagnostics tests grew revenue by double digits in areas including cardiometabolic testing, hormone testing and Alzheimer’s disease testing. Davis said the company plans to add the FDA-cleared Roche p-tau217 test to its portfolio and has launched an AD-Detect panel including APOE, amyloid beta and p-tau217 biomarkers.

In women’s health, Quest formed an industry collaboration with Waters Corporation to provide access to Onclarity self-collection kits through clinical, health-plan and consumer-health channels. Quest expects to introduce the at-home option next year.

The company remains on track to achieve 3% in annual cost savings and productivity improvements through its Invigorate program. During the quarter, Quest expanded automated specimen aliquoting to three drug-monitoring laboratories, bringing the total number of labs using the technology to 10. It also began using AI at its Clifton, New Jersey, laboratory to scan dialysis water for microbes and impurities.

Quest’s Project Nova initiative, which is intended to enhance provider and patient experiences, moved from the design phase to the solutions-build phase. The company expects to begin deploying Epic Solutions in its first laboratory in fall 2027. Project Nova is expected to reduce 2026 EPS by $0.25, with about 70% of that expense incurred in the second half of the year.

Raised Outlook and PAMA Concerns

Quest now expects full-year 2026 revenue of $12.065 billion to $12.105 billion, representing growth of 9.3% to 9.7%. The company projected reported EPS of $10.21 to $10.31 and adjusted EPS of $11.25 to $11.35. It expects approximately $1.9 billion in operating cash flow and about $550 million in capital expenditures.

Management also addressed the preliminary 2027 rate-setting process under the Protecting Access to Medicare Act, or PAMA. Samad said Quest estimates the 2027 PAMA effect at about 1% of total company revenue, with the cumulative effect for 2027 through 2029 expected to be less than 1.3% of revenue.

Davis said the company intends to offset a portion of the potential impact through efficiencies, while preserving investments that support growth, frontline staffing and laboratory operations. Quest and the American Clinical Laboratory Association continue to support the RESULTS Act, legislation intended to reform the PAMA data-collection process.

Separately, Samad said Quest learned of unauthorized access to a test-ordering system used by certain clients that do not use an electronic medical record system. He said the incident had not materially disrupted operations or the company’s ability to serve physicians and patients, while noting that the investigation remains in its early stages.

About Quest Diagnostics (NYSE:DGX)

Quest Diagnostics Incorporated NYSE: DGX is a provider of diagnostic information services. The company performs laboratory testing that helps physicians, hospitals and other healthcare providers diagnose, treat and monitor diseases and health conditions. Its services include routine blood and other specimen testing, pathology, molecular and genetic testing, and specialized diagnostic services.

Quest Diagnostics serves a broad range of customers, including hospitals, physician practices, health plans, employers, government agencies and individual consumers.

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