Azenta (AZTA)

Life sciences company Azenta (NASDAQ:AZTA) missed Wall Street’s revenue expectations in Q2 CY2025, with sales flat year on year at $143.9 million. Its non-GAAP profit of $0.14 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 $585.7 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 sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Azenta’s demand was weak and its revenue declined by 7.2% per year. This wasn’t a great result and is a sign of poor business quality.

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. Azenta’s annualized revenue declines of 3.6% over the last two years suggest its demand continued shrinking.

Azenta also breaks out the revenue for its most important segment, Sample Management. Over the last two years, Azenta’s Sample Management revenue averaged 4.5% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.

This quarter, Azenta missed Wall Street’s estimates and reported a rather uninspiring 0.2% year-on-year revenue decline, generating $143.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will catalyze better top-line performance.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Although Azenta broke even 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 7.3% 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.

Looking at the trend in its profitability, Azenta’s operating margin decreased by 3 percentage points over the last five years, but it rose by 6 percentage points on a two-year basis. Still, shareholders will want to see Azenta become more profitable in the future.

This quarter, Azenta generated a negative 0.5% operating margin. The company's consistent lack of profits raise a flag.

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 18.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into Azenta’s earnings to better understand the drivers of its performance. As we mentioned earlier, Azenta’s operating margin expanded this quarter but declined by 3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, Azenta reported adjusted EPS at $0.14, up from $0.07 in the same quarter last year. This print beat analysts’ estimates by 1%. Over the next 12 months, Wall Street expects Azenta’s full-year EPS of $0.37 to grow 105%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

While Azenta posted positive free cash flow this quarter, the broader story hasn’t been so clean. Azenta’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 12.9%. This means it lit $12.85 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Azenta’s margin dropped by 18.8 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’s free cash flow clocked in at $14.97 million in Q2, equivalent to a 10.4% margin. Its cash flow turned positive after being negative in the same quarter last year

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 3.9%, 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. Unfortunately, Azenta’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Azenta is a well-capitalized company with $318.9 million of cash and $52.63 million of debt on its balance sheet. This $266.2 million net cash position is 17.9% 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.

While revenue missed, EPS was in line. Overall, this quarter could have been better. Still, the stock traded up 2% to $33.06 immediately after reporting.

Updated: November 14, 2025 at 11:13 PM EST

Are you wondering whether to buy Azenta or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We see the value of companies making people healthier, but in the case of Azenta, we’re out. To begin with, 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 profitability fell over the last five years.

Azenta’s P/E ratio based on the next 12 months is 40.2x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $35.17 on the company (compared to the current share price of $28.93).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.