Scientific instruments company Waters Corporation (NYSE: WAT) reported Q1 CY2026 results exceeding the market’s revenue expectations, but sales fell by 12.8% year on year to $1.27 billion. On top of that, next quarter’s revenue guidance ($1.62 billion at the midpoint) was surprisingly good and 3.7% above what analysts were expecting. Its non-GAAP profit of $2.70 per share was 17% above analysts’ consensus estimates.

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"Thanks to the hard work of our teams, we delivered an excellent first quarter as a combined company," said Udit Batra, Ph.D., President & Chief Executive Officer, Waters Corporation.

Company Overview

Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Waters Corporation’s sales grew at an impressive 16.7% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Waters Corporation’s annualized revenue growth of 36.7% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Waters Corporation’s organic revenue averaged 4.9% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Waters Corporation’s revenue fell by 12.8% year on year to $1.27 billion but beat Wall Street’s estimates by 4.5%. Company management is currently guiding for a 4.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 20.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and implies the market sees success for its products and services.

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Adjusted Operating Margin

Waters Corporation has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average adjusted operating margin of 21.2%.

Analyzing the trend in its profitability, Waters Corporation’s adjusted operating margin decreased by 16.4 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 16.9 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

This quarter, Waters Corporation generated an adjusted operating margin profit margin of negative 2.1%, down 13.7 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Waters Corporation’s EPS grew at a decent 5.9% compounded annual growth rate over the last five years. However, this performance was lower than its 16.7% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Waters Corporation’s earnings to better understand the drivers of its performance. As we mentioned earlier, Waters Corporation’s adjusted operating margin declined by 16.4 percentage points over the last five years. Its share count also grew by 31.1%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q1, Waters Corporation reported adjusted EPS of $2.70, up from $2.25 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Waters Corporation’s full-year EPS of $13.58 to grow 10.2%.

Key Takeaways from Waters Corporation’s Q1 Results

We were impressed by how significantly Waters Corporation blew past analysts’ organic revenue expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 6.8% to $322.40 immediately following the results.

Waters Corporation put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).