AZTA — Q3 2026 Financial Report Analysis

Revenue up 12%, but the profitable half of the business got less profitable

Azenta stores and manages biological samples for drug makers, biotechs and research hospitals (freezers, automated cold-storage systems and biobank services, its Sample Management Solutions segment) and runs gene sequencing and gene synthesis for paying customers (its Multiomics segment). In its fiscal third quarter, revenue from continuing operations rose 12% to $161.2 million, the fastest growth in the year so far. But the company still lost money from operations: an operating loss of $4.2 million, slightly wider than the $1.9 million loss a year earlier. The two segments moved in opposite directions. Multiomics, a loss-maker for years, nearly broke even; Sample Management, the segment that usually carries the profit, saw its margin roughly halve because of rework costs on its large automated storage systems.

Fiscal calendar note: Azenta's fiscal year ends September 30, so "fiscal Q3 2026" here is the three months from April 1 to June 30, 2026. It is the latest quarter filed; full-year fiscal 2026 results (October 2025 to September 2026) are due in the annual 10-K later this year. All figures below are continuing operations unless stated: the B Medical Systems vaccine-cold-chain business, sold on July 1, 2026, is reported separately as a discontinued operation.

At a glance

• Revenue $161.2M, +12% year on year (+9% organic). "Organic" strips out currency movements (about 1 point) and the UK Biocentre biobank acquired in March 2026 (about 3 points), so most of the growth came from the existing business.
• Gross margin 44.9%, down from 46.2%. Gross margin is the share of revenue left after the direct cost of making the product or delivering the service. Sample Management's fell from 51.8% to 44.3%; Multiomics' rose from 39.6% to 45.6%.
• Operating cash flow of just $1M in the quarter. After $7M of equipment spending, free cash flow was about –$5M, even as the company spent $50M buying back its own shares.

Key figures

n/m = not meaningful, because the figure changed sign. Source: Form 10-Q for the quarter ended June 30, 2026, and the company's August 4, 2026 earnings release.

Segment by segment

Sample Management Solutions: sales up, profit down

Revenue rose 14% to $88.3 million (9% organic). The 10-Q attributes the gain to "higher revenue in Sample Storage and Consumables and Instruments, as well as revenue contributions from the acquired UK Biocentre business, partially offset by lower revenues in Core Products, particularly in Automated Stores." Automated Stores are large robotic freezers that store and retrieve sample tubes automatically; they are sold as one-off equipment projects, unlike the storage services, which bill every month.

Profit went the other way. The segment's gross margin fell 7.5 percentage points, to 44.3%, and its adjusted operating income (the company's own measure of segment profit, before amortization and one-time charges) dropped from $10.7 million to $4.9 million, taking the adjusted operating margin from 13.8% to 5.6%. The filing gives three reasons: fewer Automated Stores sold, so factory overhead was spread over fewer units ("lower fixed-cost absorption"); "increased rework costs associated with Automated Stores projects"; and "higher excess and obsolete inventory reserves", meaning write-downs on parts the company no longer expects to use. The earnings release also mentions "quality remediation" in Automated Stores. In short, the recurring storage business grew, and fixing problems on already-sold freezer projects ate most of that segment's profit.

Multiomics: close to breakeven for the first time in a while

Revenue rose 10% to $72.9 million (8% organic), "driven by revenue growth in Next Generation Sequencing and Gene Synthesis services, offset by a decline in Sanger Sequencing services". Sanger sequencing is the older method that reads one DNA fragment at a time; it is a high-volume, low-price service that has been losing share for years. Gross margin improved six points to 45.6%, which the 10-Q puts down to "revenue growth and enhanced operational efficiencies," and the segment's adjusted operating loss shrank from $4.0 million to $0.3 million. That is a sharp turn from the previous quarter, when this segment's gross margin was 39.2%. Over nine months the picture is less good: the Multiomics adjusted operating loss was $14.8 million, worse than $11.8 million a year earlier, because the first half was hurt by weaker Sanger volumes in North America.

Portfolio changes this year

• B Medical Systems sold. The sale of the vaccine-refrigerator business to Thelema, a company majority-owned by B Medical's own CEO (who is also an Azenta vice president), closed on July 1, 2026, three months late because the buyer could not get financing in time. The price was $63 million: $28 million in cash, already received before June 30, and $35 million as a three-month loan from Azenta to the buyer. The 10-Q flagged that loan as a risk, but a September 4, 2026 filing says the buyer repaid it in full, with interest, on September 3. Azenta now has all $63 million in cash.
• UK Biocentre bought in March 2026 for about $27.5 million. It is a UK sample storage and processing operation and now sits in Sample Management, adding about 3 points of growth this quarter.
• $149.1 million goodwill write-down in the previous quarter (fiscal Q2): $112.4 million on Multiomics and $36.6 million on Sample Management. Goodwill is the premium paid for past acquisitions above the value of their assets; writing it down is an admission that those businesses are worth less than paid. It is non-cash, but it explains why the nine-month loss from continuing operations is $163.7 million.
• Leadership change after the quarter. CEO John Marotta, who in the earnings release called the quarter "an encouraging step forward" in a turnaround that "continues", resigned on August 22, 2026, less than three weeks later. Dr. Martin Madaus was named interim CEO. A new Chief Accounting Officer started on August 31.

What the headline numbers hide

• Interest on the cash pile is doing the heavy lifting. Operations lost $4.2 million. Net interest income of $3.8 million and $1.2 million of other income turned that into a $0.8 million pre-tax profit, and then $2.4 million of income tax expense turned it back into a $1.5 million loss. The tax bill is larger than the pre-tax profit, which usually means tax is owed in profitable countries while losses elsewhere can't be offset. A business that only reaches pre-tax profit because of interest on $529 million of cash and securities is not yet earning its keep from operations.
• Cash conversion is weak. Operating cash flow was $1 million in the quarter. For the nine months it was $35.8 million, half last year's $70.0 million; after $20.2 million of capital spending, that leaves about $15.6 million of free cash flow against $44.0 million a year earlier. (The cash-flow statement includes B Medical, so it is not a perfect match for continuing operations.) Management still guides to full-year free cash flow up 10–15% from fiscal 2025, which needs a much stronger September quarter.
• The GAAP vs. adjusted gap is mostly amortization. Non-GAAP EPS of $0.16 versus GAAP –$0.03 (continuing). Of the $0.19 difference, $0.13 is amortization of intangible assets from past acquisitions, $0.05 is merger and acquisition costs (deal fees for the B Medical sale and UK Biocentre), and $0.02 is restructuring and transformation costs. These are fairly standard exclusions. Adjusted EPS fell from $0.17, so even on the company's preferred measure profit per share went down.
• Inventory and quality. Inventory rose to $79.1 million from $75.0 million at September 30, 2025, while the company also booked higher obsolete-inventory reserves. Receivables were flat at $143.7 million while sales grew, so collections are not a concern.
• Buybacks are only starting to show up. Azenta bought 2.3 million shares for $50.0 million (average $21.33) in May and June under a new $250 million authorization. The diluted share count for the quarter was only about 1% lower than a year ago, so the buyback had almost no effect on this quarter's EPS. Shares outstanding were 43.8 million at June 30, down from 45.9 million at September 30, so it will matter more from next quarter on.
• Controls still flagged. Two material weaknesses in internal financial controls, covering cash-flow statement review and account reconciliations, remained open at June 30. A material weakness is an auditor-level warning that errors might not be caught. The company says it fixed a third one, on expense classification. Prior-year figures in this quarter were revised for an "immaterial classification error" among cost of revenue, R&D and SG&A, which is why some year-ago numbers differ slightly from what was originally reported.

Takeaway: Revenue growth is back (+9% organic), but it came with lower margins, not higher. Sample Management, the segment that should carry Azenta's profit, saw its adjusted operating margin fall from 13.8% to 5.6% on Automated Stores rework, while the recovery in Multiomics is one quarter old. With the CEO gone weeks after the call, the September quarter has to show that the freezer-project problems are contained.

Outlook

Management's guidance from the August 4 release (continuing operations):

The full-year revenue range was narrowed and its midpoint raised, and the Multiomics outlook improved from a mid-single-digit decline to roughly flat. But the fourth-quarter guide implies the growth fades: after nine months of $454.6 million, the full-year range implies September-quarter revenue of about $158–163 million, with organic sales down low single digits against last year. The company did not say which segment drives that slowdown.

Our read: fiscal Q3 is better than the first half on revenue, but the profit problems have moved to a different segment rather than gone away. Three things to watch in the fiscal 2026 10-K (due around late November): whether Sample Management's adjusted operating margin recovers toward its 13.8% level from a year ago, which would show the Automated Stores rework was a one-off; whether Multiomics holds near breakeven for a second quarter; and whether the interim CEO keeps the guidance or resets it. On the balance sheet, Azenta has about $529 million in cash and marketable securities (plus the remaining $35 million of B Medical proceeds received in September), no borrowings on the balance sheet, and $200 million left on its buyback authorization, so it has time. What it has not shown yet is a quarter of operating profit.