Danaher (DHR) Q4 2025: Bioprocessing Core Up High Single Digits, Setting 2026 Growth Floor
Danaher’s Q4 capped a year of disciplined execution, with bioprocessing and diagnostics driving outperformance and innovation launches supporting durable growth. Segment-level conservatism shapes 2026 guidance, while margin expansion and M&A readiness position DHR for upside if end markets recover faster than modeled.
Summary
- Bioprocessing Momentum Sets Growth Baseline: High single-digit core growth in bioprocessing anchors 2026 outlook, with consumables leading and equipment stabilizing.
- Diagnostics and Innovation Fuel Portfolio Strength: Diagnostics delivered mid-single-digit growth, and new product launches in life sciences and diagnostics underpin competitive positioning.
- Margin Expansion and M&A Optionality: Cost actions drive 100bps margin tailwind, and balance sheet strength signals readiness for disciplined M&A as valuations moderate.
Performance Analysis
Danaher’s fourth quarter results reflected a measured but broad-based recovery across key segments. Core revenue grew 2.5% in Q4, with full-year core revenue up 2%. Bioprocessing led the portfolio, delivering high single-digit core growth, driven by robust demand for consumables tied to commercialized biologic therapies and a return to flat equipment growth after mid-teens declines in the prior year. Orders for equipment grew sequentially for a third straight quarter, signaling foundational stability but with management emphasizing prudence in extrapolating a trend.
Diagnostics posted mid-single-digit growth globally outside China, with Leica Biosystems and Radiometer each up nearly 10%. Beckman-Coulter Diagnostics extended its streak of mid-single-digit or better growth for the sixth consecutive quarter, propelled by immunoassay strength. Molecular diagnostics outperformed on respiratory testing, exceeding expectations due to an active flu season, while non-respiratory molecular assays grew double digits, led by sexual health and hospital-acquired infection panels. Life sciences remained muted, with flat instrument growth and soft consumables demand, especially from academic and early-stage biotech customers.
- Bioprocessing Core Growth: High single-digit gains in consumables, with equipment stabilizing, underpin the 2026 segment outlook.
- Diagnostics Engines Deliver: Strong instrument and assay growth offset China softness, with respiratory testing outperforming seasonal expectations.
- Innovation Drives New Product Revenue: Approximately 25% YoY growth in new product revenue highlights the impact of portfolio refreshes across Cytiva, CyEx, Beckman-Coulter, and Cepheid.
Operating profit margins declined 130bps YoY as cost savings initiatives offset volume leverage, but full-year free cash flow conversion remained robust at 145%, marking a 34-year streak above 100%. The company’s ability to generate strong cash flow through cycles remains a defining strength.
Executive Commentary
"We delivered a strong finish to the year with better than expected performance across the portfolio. We were particularly encouraged by continued strength in our bioprocessing business, along with improving momentum in diagnostics and life sciences. Our team's disciplined execution also enabled us to exceed our fourth quarter margin, earnings, and cash flow expectations."
Reiner Blair, President and Chief Executive Officer
"I think you'll see the second half is certainly building up, but that's largely almost all the benefit from the cost actions in the fourth quarter."
Matt McGrew, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Bioprocessing Foundation and Upside Levers
Bioprocessing, the core of Danaher’s growth engine, is modeled for high single-digit growth in 2026, with consumables expected at the upper end of that range and equipment revenue flat but supported by backlog. Management’s guidance embeds caution, citing only one quarter of equipment growth as insufficient to call an inflection. However, order momentum and the prospect of incremental demand from U.S. reshoring and biosimilar uptake represent clear upside levers. Notably, commercial volume drives 75% of bioprocessing, with emerging biotech accounting for 10-15%—a segment showing early signs of improved order activity as funding conditions stabilize.
2. Diagnostics Resilience and Menu Expansion
Diagnostics performance was broad-based, with Beckman-Coulter, Leica Biosystems, and Radiometer driving strength outside China. Cepheid’s respiratory and non-respiratory panels outperformed, and the FDA-cleared GI panel extends its multiplexing strategy. The diagnostics segment is positioned for further growth as China headwinds moderate and menu innovation continues, with management projecting $1.8 billion in respiratory revenue for 2026 assuming a typical season and stable testing protocols.
3. Life Sciences: Gradual Recovery and Innovation Pipeline
Life sciences remains the laggard, with end markets muted by funding constraints in academic and early-stage biotech. However, pharma demand is recovering, especially in Europe, and new products like the CyEx Xenotos 8600 and Beckman-Coulter’s Mosaic module are gaining traction. Management frames academic and government spending stabilization, and biotech funding conversion to orders, as key to unlocking segment upside. Abcam, recombinant protein business, showed three consecutive months of growth, with improved operating margins post-acquisition.
4. Margin Expansion and Cost Discipline
Cost actions totaling $250 million underpin 100bps of margin expansion in 2026, with the majority of benefit realized in the second half. Productivity initiatives include rooftop consolidation and process efficiency, with long-term savings expected to sustain. Free cash flow conversion remains a hallmark, supporting both organic investment and capital deployment flexibility.
5. M&A Readiness and Capital Allocation
Danaher’s balance sheet is primed for M&A, with debt to EBITDA below 2x and management signaling increased readiness as valuations and rates improve. The focus remains on end markets with structural tailwinds, defensible assets, and financial discipline. The company is positioned to act on opportunities that meet its long-term value creation criteria.
Key Considerations
Danaher’s quarter demonstrates a blend of operational discipline and strategic patience, setting a conservative baseline with clear levers for upside:
- Segment-Level Caution: Guidance embeds flat equipment, muted academic/government life sciences, and only gradual recovery, leaving room for outperformance if macro or funding conditions improve.
- Innovation as a Growth Multiplier: New product launches across bioprocessing, diagnostics, and life sciences are driving 25% growth in new product revenue, reinforcing competitive differentiation.
- Diagnostics Menu and Installed Base: Cepheid’s multiplexing and menu expansion strategy, alongside Beckman’s immunoassay momentum, provide a recurring revenue base and growth visibility.
- Cost Actions Drive Margin: Productivity and restructuring initiatives are expected to deliver a 30-cent EPS tailwind, with most benefit accruing in the back half of 2026.
- M&A Optionality: Constructive deal environment and balance sheet strength create capacity for disciplined inorganic growth, particularly in attractive end markets.
Risks
Risks remain around the pace of end market recovery, particularly in academic/government and early-stage biotech funding, as well as potential policy or reimbursement shifts in diagnostics. Equipment order momentum, while improving, is not yet a sustained trend, and China remains a variable in both bioprocessing and diagnostics. Management’s guidance is intentionally conservative, but a slower-than-expected recovery would pressure both topline and incremental margin realization.
Forward Outlook
For Q1 2026, Danaher guided to:
- Core revenue up low single digits
- Adjusted operating profit margin of approximately 28.5%
For full-year 2026, management initiated guidance:
- Core revenue growth of 3% to 6%
- Adjusted diluted EPS of $8.35 to $8.50
Management highlighted several factors that shape the year:
- High single-digit bioprocessing growth led by consumables, with equipment flat
- Diagnostics growth reaccelerating as China headwinds moderate and menu expansion continues
- Life sciences modeled for flat growth, with upside if academic/government or biotech funding improves
Takeaways
Danaher’s 2025 finish cements bioprocessing and diagnostics as portfolio anchors, while cost actions and cash flow discipline create margin and capital allocation flexibility.
- Bioprocessing Anchors Growth: High single-digit growth in consumables and stabilizing equipment underpin the 2026 outlook, with backlog and order book supporting visibility.
- Diagnostics and Innovation Offset Macro Drag: Menu expansion and robust instrument demand in diagnostics, coupled with new product launches, help offset muted life sciences and China volatility.
- Upside Hinges on End Market Recovery: Faster-than-modeled improvement in academic/government spending or biotech funding would drive segment-level outperformance, with margin and EPS leverage.
Conclusion
Danaher’s Q4 and full-year 2025 results reflect a cautious but strengthening foundation, with bioprocessing and diagnostics leading the way. Margin expansion and M&A readiness provide levers for value creation as market conditions evolve.
Industry Read-Through
Danaher’s bioprocessing strength and cautious equipment outlook mirror broader dynamics in the life sciences tools sector, where consumables demand outpaces capital equipment recovery. Diagnostics outperformance, especially in menu expansion and multiplexing, signals continued opportunity for peers with recurring testing platforms. The company’s emphasis on innovation and margin discipline highlights the importance of portfolio refresh and cost actions as secular funding and policy pressures persist. For the sector, capital deployment discipline and readiness for M&A will be key differentiators as valuations and rates normalize.