Veracyte (VCYT) Q3 2025: Decipher Volumes Up 26% as Margin Surges 650bps, Fueling Pipeline Acceleration
Veracyte’s Q3 revealed a step-change in profitability and persistent double-digit growth in core testing, underpinned by Decipher’s clinical traction and a disciplined capital allocation strategy. Management is now accelerating pipeline investments, leveraging a margin profile that reached internal targets a year ahead of schedule. The company’s evidence-driven approach and channel leverage set up a durable growth runway into 2026 and beyond, with new launches and expanded indications in focus.
Summary
- Margin Outperformance Unlocks Investment Velocity: Surging EBITDA margin is enabling faster pipeline and channel expansion.
- Decipher Adoption Broadens Across Risk Segments: Clinical evidence and guideline momentum are driving share gains in prostate cancer.
- 2026 Growth Visibility Strengthens: Management signals above-consensus revenue trajectory and pipeline catalysts ahead.
Performance Analysis
Veracyte delivered 14% total revenue growth in Q3, propelled by sustained double-digit test volume expansion in its core Decipher and Affirma franchises. Decipher, a genomic prostate cancer test, posted 26% revenue growth and maintained over 25% volume growth for the 14th consecutive quarter, with notable acceleration in high-risk and metastatic segments. Affirma, the thyroid nodule diagnostic, grew 13% in volume, supported by new accounts and deeper utilization per provider. The company’s disciplined focus on its testing portfolio offset the anticipated decline in biopharma and other revenue tied to the SAS restructuring.
Profitability surged, with adjusted EBITDA margin reaching a record 30%, up 650 basis points year-over-year. This margin expansion was driven by operational efficiencies, especially in lab processes, and a favorable mix, with the V2 transcriptome rollout beginning to benefit Affirma margins. Gross margin climbed to 73% on a non-GAAP basis, with product gross margin up 800 basis points. Cash generation was robust, with $44.8 million from operations and a $366 million cash balance, positioning Veracyte to fund accelerated investment in its pipeline and commercial infrastructure.
- Testing Volume Resilience: Core testing volumes rose 18% YoY, with Decipher and Affirma driving the bulk of growth.
- Margin Expansion Leverage: Adjusted EBITDA margin outpaced expectations, providing flexibility for future investment.
- Revenue Mix Shift: Testing revenue now dominates, as biopharma revenue recedes post-SAS restructuring.
Management’s upward revision to both revenue and EBITDA margin guidance reflects confidence in the durability of core growth and the ability to invest without sacrificing financial discipline.
Executive Commentary
"Our core testing business achieved 18% revenue growth year over year after adjusting for Invisia, driven by volume growth of 26% in Decipher and 13% in Affirma... our adjusted EBITDA margin reached a record 30%, representing a 650 basis point improvement from the prior year and far exceeding our expectations."
Mark Stathley, Chief Executive Officer
"We are raising adjusted EBITDA margin guidance for the year to exceed 25% from our previous guidance of 23.5%, which was already meaningfully higher than our original 21.6% 2025 guide. This reflects our year-to-date profitability outperformance and expectations for accelerated investment in the fourth quarter in support of our strategic growth drivers."
Rebecca Chambers, Chief Financial Officer
Strategic Positioning
1. Evidence-Led Adoption and Category Leadership
Decipher’s clinical utility and evidence base are driving its emergence as the standard of care in prostate cancer. The company’s “research-empowered by GRID” model, which leverages a vast transcriptome and digital pathology database, enables rapid evidence generation and guideline inclusion. Recent trials (e.g., Stampede, BALANCE) validate Decipher’s predictive power for treatment stratification, supporting deeper penetration into high-risk and metastatic segments. This approach is now being replicated for Affirma and pipeline products.
2. Margin Strength as a Strategic Lever
Veracyte’s margin expansion is not being banked as profit but redeployed to accelerate R&D, commercial buildout, and clinical trials. The CFO highlighted “a wealth of riches” in investment opportunities, with margin discipline enabling simultaneous pipeline advancement and channel development—particularly for the upcoming Prosigna breast cancer launch and the TrueMRD pan-cancer platform. The company is targeting a 25% adjusted EBITDA margin as a sustainable long-term baseline, balancing profitability and growth investment.
3. Pipeline and Channel Synergies
Upcoming launches and indication expansions are designed to leverage existing commercial infrastructure. TrueMRD, Veracyte’s whole-genome minimal residual disease (MRD) platform, will launch in muscle invasive bladder cancer (MIBC) in 2026, targeting a market where Veracyte already reaches 70% of patients through its Decipher channel. The Prosigna breast cancer test will follow a similar channel-building playbook, with sales hiring ramping up in 2025 ahead of the anticipated 2026 launch. Management is methodically sequencing investments to match emerging demand and evidence milestones.
4. Digital Pathology Integration
The company is building a comprehensive digital image repository, with over 115,000 slides scanned, to support future AI-driven diagnostics and research collaborations. While management sees digital pathology and AI as complementary to molecular diagnostics, they caution that clinical adoption will depend on robust evidence and clear utility, echoing Decipher’s own adoption journey. The integration of digital and molecular data is viewed as a future differentiator.
5. Capital Allocation Discipline
While M&A remains on the table, Veracyte’s primary capital deployment is internal—clinical trials, product development, and commercial infrastructure. Management stresses that its strong cash position will not drive undisciplined acquisitions. The company’s “portfolio management and planning” philosophy underpins its measured approach to both margin and investment pacing.
Key Considerations
Veracyte’s Q3 marks a pivotal moment, with margin outperformance enabling a more aggressive pipeline and commercial ramp while maintaining financial discipline. The following strategic factors are most relevant for investors:
Key Considerations:
- Decipher Standard of Care Traction: Ongoing volume growth, guideline inclusion, and multi-risk utility are expanding Decipher’s market share and TAM penetration.
- Affirma Margin and Utilization Upside: Transition to the V2 transcriptome is improving efficiency and test accessibility, with full benefit expected in 2026.
- Pipeline Commercialization Synergy: TrueMRD and Prosigna launches are structured to leverage existing channels, reducing go-to-market risk and spend.
- Margin-Driven Investment Cycle: Record margins are being intentionally reinvested to accelerate clinical evidence and commercial buildout, supporting future growth durability.
- Cash Generation as Strategic Buffer: Strong operating cash flow provides flexibility to fund pipeline and withstand external shocks.
Risks
Competitive intensity in molecular diagnostics and MRD is rising, with new entrants and evolving digital pathology solutions posing both threat and opportunity. Reimbursement dynamics, especially ASP pressure from lab benefit managers, remain a watchpoint. The company’s strategy of simultaneous pipeline and channel expansion could strain execution bandwidth if market conditions shift. Management’s guidance assumes continued operational discipline and evidence-driven adoption, but any missteps in clinical data generation or channel buildout could impact the growth trajectory.
Forward Outlook
For Q4 2025, Veracyte guided to:
- Testing revenue growth driven by Decipher and Affirma volume momentum
- Adjusted EBITDA margin at or above 25%, reflecting accelerated investment in strategic initiatives
For full-year 2025, management raised guidance:
- Total revenue to $506–$510 million
- Testing revenue to $484–$487 million
- Adjusted EBITDA margin to exceed 25%
Management highlighted several factors that shape the outlook:
- Full benefit of Affirma V2 transcriptome and product mix shift in 2026
- Ramp in clinical trial and commercial spend ahead of TrueMRD and Prosigna launches
- Above-consensus early view for 2026 revenue, despite a $10 million biopharma revenue headwind
Takeaways
Veracyte’s Q3 demonstrates a potent combination of volume-driven growth, margin expansion, and evidence-led adoption that is enabling a step-up in pipeline and channel investment without sacrificing profitability.
- Decipher and Affirma as Growth Engines: Both franchises continue to gain share and deepen utilization, with guideline momentum and clinical evidence supporting durable double-digit growth.
- Margin Strength Fuels Pipeline Acceleration: Surpassing internal margin targets a year early allows Veracyte to aggressively invest in TrueMRD, Prosigna, and commercial infrastructure.
- 2026+ Growth Visibility: Management’s early read suggests above-consensus revenue, with the company well-positioned to capitalize on new launches and channel synergies.
Conclusion
Veracyte’s disciplined execution and evidence-first strategy are translating into both near-term outperformance and long-term growth visibility. The company’s ability to simultaneously expand margin, reinvest in the pipeline, and build new commercial channels sets up a compelling trajectory heading into 2026.
Industry Read-Through
Veracyte’s results underscore the value of evidence-backed clinical adoption and operational discipline in molecular diagnostics. The persistent double-digit growth in core testing, despite a crowded landscape, highlights the power of guideline inclusion and channel leverage. The company’s approach to digital pathology—prioritizing evidence and complementarity over hype—serves as a cautionary note for AI-driven entrants. For the broader diagnostics and oncology testing sector, the quarter signals that margin expansion, if reinvested strategically, can catalyze both pipeline velocity and commercial scale, while pure-play biopharma service revenue remains vulnerable to restructuring and competitive churn.