Azenta (AZTA)

Life sciences company Azenta (NASDAQ:AZTA) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 5.5% year on year to $159.2 million. Its non-GAAP profit of $0.19 per share was in line with analysts’ consensus estimates.

Company Overview

Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ:AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.

Companies specializing in drug development inputs and services play a crucial role in the pharmaceutical and biotechnology value chain. Essential support for drug discovery, preclinical testing, and manufacturing means stable demand, as pharmaceutical companies often outsource non-core functions with medium to long-term contracts. However, the business model faces high capital requirements, customer concentration, and vulnerability to shifts in biopharma R&D budgets or regulatory frameworks. Looking ahead, the industry will likely enjoy tailwinds such as increasing investment in biologics, cell and gene therapies, and advancements in precision medicine, which drive demand for sophisticated tools and services. There is a growing trend of outsourcing in drug development for nimbleness and cost efficiency, which benefits the industry. On the flip side, potential headwinds include pricing pressures as efforts to contain healthcare costs are always top of mind. An evolving regulatory backdrop could also slow innovation or client activity.

Azenta's competitors include Hamilton Company and Liconic AG in the automated storage systems market, Laboratory Corporation of America and Thermo Fisher Scientific in sample storage and services, and genomics service providers like BGI Genomics, Eurofins Scientific, and Twist Bioscience.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $594.1 million in revenue over the past 12 months, Azenta is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Azenta struggled to consistently generate demand over the last five years as its sales dropped at a 4.8% annual rate. This wasn’t a great result and suggests it’s a low quality business.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Azenta’s annualized revenue declines of 5.5% over the last two years align with its five-year trend, suggesting its demand has consistently shrunk.

We can better understand the company’s revenue dynamics by analyzing its most important segment, Sample Management. Over the last two years, Azenta’s Sample Management revenue averaged 3.5% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.

This quarter, Azenta reported year-on-year revenue growth of 5.5%, and its $159.2 million of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

Although Azenta was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 7.1% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Azenta’s operating margin rose by 1.6 percentage points over the last five years. This performance was mostly driven by its recent improvements as the company’s margin has increased by 6.6 percentage points on a two-year basis.

In Q3, Azenta generated an operating margin profit margin of 1.2%, up 3.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

Sadly for Azenta, its EPS declined by 18.8% annually over the last five years, more than its revenue. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its operating margin and repurchased its shares during this time.

In Q3, Azenta reported adjusted EPS of $0.19, up from $0.11 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Azenta’s full-year EPS of $0.45 to grow 81.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Azenta’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 15.1%, meaning it lit $15.07 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Azenta’s margin dropped by 16 percentage points during that time. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Azenta burned through $5.69 million of cash in Q3, equivalent to a negative 3.6% margin. The company’s cash flow turned negative after being positive in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends trump temporary fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Azenta’s five-year average ROIC was negative 3%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Azenta’s ROIC averaged 1.8 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Azenta is a well-capitalized company with $343.3 million of cash and $51.24 million of debt on its balance sheet. This $292 million net cash position is 21.2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see Azenta beat analysts’ revenue expectations this quarter. EBITDA also exceeded expectations. On the other hand, its EPS was in line. Overall, this was a decent quarter. The stock remained flat at $30.04 immediately after reporting.

Updated: December 4, 2025 at 11:17 PM EST

Before investing in or passing on Azenta, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We see the value of companies making people healthier, but in the case of Azenta, we’re out. To kick things off, its revenue has declined over the last five years. On top of that, Azenta’s declining EPS over the last five years makes it a less attractive asset to the public markets, and its cash burn raises the question of whether it can sustainably maintain growth.

Azenta’s P/E ratio based on the next 12 months is 45.3x. This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $39.83 on the company (compared to the current share price of $34.87).