Guardant Health (GH)

Diagnostics company Guardant Health (NASDAQ:GH) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 38.5% year on year to $265.2 million. The company’s full-year revenue guidance of $967.5 million at the midpoint came in 4.9% above analysts’ estimates. Its non-GAAP loss of $0.39 per share was 20.3% above analysts’ consensus estimates.

Company Overview

Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ:GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.

The testing and diagnostics services industry plays a crucial role in disease detection, monitoring, and prevention, serving hospitals, clinics, and individual consumers. This sector benefits from stable demand, driven by an aging population, increased prevalence of chronic diseases, and growing awareness of preventive healthcare. Recurring revenue streams come from routine screenings, lab tests, and diagnostic imaging, with reimbursement from Medicare, Medicaid, private insurance, and out-of-pocket payments. However, the industry faces challenges such as pricing pressures, regulatory compliance, and the need for continuous investment in new testing technologies. Looking ahead, industry tailwinds include the expansion of personalized medicine, increased adoption of at-home and rapid diagnostic tests, and advancements in AI-driven diagnostics that enhance accuracy and efficiency. However, headwinds such as reimbursement uncertainties, competition from decentralized testing solutions, and regulatory scrutiny over test validity and cost-effectiveness may impact profitability. Adapting to evolving healthcare models and integrating automation will be key for sustaining growth and maintaining operational efficiency.

Guardant Health competes with other liquid biopsy providers including Foundation Medicine (owned by Roche), Thermo Fisher Scientific (NYSE:TMO), and Exact Sciences (NASDAQ:EXAS). In the minimal residual disease testing space, competitors include Natera (NASDAQ:NTRA) and NeoGenomics (NASDAQ:NEO), while in cancer screening, GRAIL (owned by Illumina) and Freenome are significant rivals.

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 $902.6 million in revenue over the past 12 months, Guardant Health 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 put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Guardant Health’s 27.2% annualized revenue growth over the last five years was exceptional. Its growth beat the average healthcare company and shows its offerings resonate with customers.

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. Guardant Health’s annualized revenue growth of 29.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Guardant Health reported wonderful year-on-year revenue growth of 38.5%, and its $265.2 million of revenue exceeded Wall Street’s estimates by 12.6%.

Looking ahead, sell-side analysts expect revenue to grow 19.1% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and implies the market is baking in success for its products and services.

Guardant Health’s high expenses have contributed to an average operating margin of negative 81.6% 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, Guardant Health’s operating margin rose by 68.5 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 46.8 percentage points on a two-year basis. These data points are very encouraging and show momentum is on its side.

Guardant Health’s operating margin was negative 37.3% this quarter.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Guardant Health’s earnings losses deepened over the last five years as its EPS dropped 18.5% annually. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.

In Q3, Guardant Health reported adjusted EPS of negative $0.39, up from negative $0.45 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 Guardant Health to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.94 will advance to negative $1.73.

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.

Guardant Health’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 52.9%, meaning it lit $52.90 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Guardant Health’s margin expanded by 43.3 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

Guardant Health burned through $45.76 million of cash in Q3, equivalent to a negative 17.3% margin. The company’s cash burn was similar to its $55.26 million of lost cash in the same quarter last year.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Guardant Health burned through $262.2 million of cash over the last year, and its $1.3 billion of debt exceeds the $580 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Guardant Health’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Guardant Health until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly Guardant Health blew past analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 15.5% to $83.43 immediately after reporting.

Updated: December 3, 2025 at 10:58 PM EST

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

Aside from its balance sheet, Guardant Health is a pretty decent company. First off, its revenue growth was exceptional over the last five years, and analysts believe it can continue growing at these levels. And while its declining EPS over the last five years makes it a less attractive asset to the public markets, its growth in clinical tests was surging. On top of that, its rising cash profitability gives it more optionality.

Guardant Health’s forward price-to-sales ratio is 11.2x. Despite its notable business characteristics, we’d hold off for now because its balance sheet concerns us. We think a potential buyer of the stock should wait until the company generates sufficient cash flows or raises money.

Wall Street analysts have a consensus one-year price target of $99.68 on the company (compared to the current share price of $106.80).