Charles River's Q2 2026 revenue fell 2.7% to $1.00B after selling its CDMO, Cell Solutions and some European sites, but organic revenue grew 0.1% and safety-testing bookings hit a near-four-year high; a $63.7M divestiture loss left a $0.03 GAAP loss per share as non-GAAP EPS guidance was raised.
Revenue
$1.0B
-2.7% YoY
Net income
-$1.5M
Diluted EPS
$-0.03
Operating margin
11.9%
Overview
Charles River Laboratories runs the lab tests drug companies must complete before a new medicine can be given to people — mainly safety ("toxicology") studies — and breeds the research animals used in that work. In the second quarter of 2026 (13 weeks ended June 27, 2026) revenue fell 2.7% to $1,004.1 million and the company posted a small GAAP net loss of $1.5 million ($0.03 per diluted share), against a $52.3 million profit ($1.06) a year earlier.
Both of those headline numbers are mostly about the company shrinking itself on purpose, not about weaker demand. In May it sold its contract drug-manufacturing (CDMO) and Cell Solutions businesses to GI Partners and several European Discovery Services sites to IQVIA. Strip out those sales, acquisitions and currency swings and "organic" revenue — the like-for-like growth of the businesses it still owns — rose 0.1%, which the earnings release calls the best organic figure since Q3 2023. The loss comes from a $63.7 million loss on the CDMO/Cell Solutions sale ($1.40 per share, per the release) plus an unusually heavy tax bill.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$1,004.1M
$1,032.1M
-2.7%
Organic revenue growth*
+0.1%
—
—
Operating income (GAAP)
$119.9M
$100.1M
+19.7%
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Net income (loss) attributable to common shareholders
-$1.5M
$52.3M
n/m
Diluted EPS (GAAP)
-$0.03
$1.06
n/m
Diluted EPS (non-GAAP)*
$3.02
$3.12
-3.2%
DSA backlog (period end)
$2.0B
$1.9B (Dec 27, 2025)
up slightly
*Non-GAAP and organic figures are from the company's Q2 earnings release (8-K Exhibit 99.1, Aug 5, 2026), not the 10-Q. n/m = not meaningful because of the swing from profit to loss.
First half (six months to June 27, 2026): revenue $1,999.9M (-0.8%); GAAP operating income $239.8M, a 12.0% margin vs. 8.7%; net loss attributable to common shareholders $16.3M vs. net income of $77.8M; diluted EPS -$0.34 vs. $1.55; non-GAAP diluted EPS $5.07 vs. $5.45 (release). The first-half loss is driven by $181.7M of pre-tax losses on the CDMO/Cell Solutions divestiture, $118.0M of which was booked in Q1 when the businesses were classified as held for sale.
Takeaway: Ignore the GAAP loss and the rising GAAP margin — both are artifacts of the divestitures. What matters is that underlying demand for safety testing turned from shrinking to flat, with the highest DSA net book-to-bill in nearly four years, while underlying profitability fell: the non-GAAP operating margin dropped from 22.1% to 20.5% on higher study costs and corporate spending. The guidance raise is a demand story, not yet a margin story.
Segment performance
Segment
Q2 2026 revenue
Reported change
Organic change*
GAAP op. margin (Q2 2025)
Non-GAAP op. margin* (Q2 2025)
Discovery & Safety Assessment (DSA)
$606.5M
-1.9%
+0.2%
20.5% (19.9%)
25.6% (27.4%)
Research Models & Services (RMS)
$209.5M
-1.8%
-1.4%
17.3% (16.8%)
24.5% (25.3%)
Manufacturing Solutions
$188.1M
-6.3%
+1.3%
34.9% (6.0%)
37.8% (32.8%)
Total
$1,004.1M
-2.7%
+0.1%
11.9% (9.7%)
20.5% (22.1%)
*From the earnings release.
DSA (60% of revenue) — the safety-testing business that matters most. Reported revenue fell $11.5M because of the European Discovery sale; the 10-Q says this was "partially offset by higher revenue for regulated safety assessment services," i.e. more of the regulator-required toxicology studies drug candidates need before human trials. The GAAP margin rose 60 bps mainly because of lower amortization (the sold sites carried intangible assets), lower legal costs tied to the now-concluded U.S. government investigations into the non-human primate (NHP) supply chain, and fewer asset impairments. On the non-GAAP view, though, the margin fell 180 bps, "primarily driven by higher study-related direct costs" per the release.
RMS — organic revenue fell 1.4% on fewer small research models (lab rodents) sold in North America and lower research model services, partly offset by growth in China. The 10-Q cites "lower sales volume and an unfavorable geographic mix" (more of the sales coming from lower-margin regions) as pressure; the reported GAAP margin still edged up because the sold Cell Solutions business no longer carries amortization.
Manufacturing — organic revenue grew 1.3%, led by Microbial Solutions (endotoxin testing products used to check that injectable drugs are free of bacterial contamination). The jump in GAAP margin from 6.0% to 34.9% is almost entirely the CDMO exit: segment amortization fell from $46.3M to $2.1M and cost of revenue fell 23.2%. The CDMO business had been dragging this segment's margin down; without it Manufacturing is the company's highest-margin segment.
Demand: backlog and bookings
The 10-Q describes "a cautious, but improving, spending environment from our client base, principally within our DSA segment," and reports DSA backlog — signed work not yet performed — rising slightly to $2.0 billion at June 27, 2026 from $1.9 billion at year-end 2025. In the earnings release, CEO Birgit Girshick said the company "recorded the highest net book-to-bill in nearly four years" and that the improvement was "broad based across our global biopharmaceutical and small and mid-sized biotechnology clients." (Net book-to-bill is new orders, net of cancellations, divided by revenue — above 1.0 means the order book is growing.) Neither document gives the ratio itself, so the size of that improvement can't be quantified from the filings.
On the regulatory shift away from animal testing, neither the 10-Q nor the release discusses FDA policy this quarter. The 10-Q describes DSA as spanning in vitro (non-animal), in vivo and in silico (computer-modelled) studies, and the release highlights related moves: joining Eli Lilly's TuneLab AI/ML platform, an in vitro next-generation-sequencing collaboration with Arovella Therapeutics enabled by the PathoQuest acquisition, and an AI-enabled digital pathology workflow.
Portfolio reshaping: divestitures and acquisitions
CDMO and Cell Solutions → GI Partners (May 6, 2026): Charles River paid the buyer $12.4M net, may have to fund up to $45.0M of the businesses' future EBITDA losses and capital spending over four years (which it expects GI to use in full), and could earn up to $50.0M of contingent payments (valued at $15.7M). Pre-tax loss: $63.7M in Q2, $181.7M year to date.
European Discovery Services sites → IQVIA (May 22, 2026): $125.2M in cash (preliminary), plus up to $10.0M contingent; a $0.3M gain.
Cambodian NHP supplier (January 14, 2026): preliminary price $507.3M, including $172.3M of deferred consideration, of which $105.0M was still owed at June 27. The deal secures a supply of non-human primates, a key input for DSA's safety studies.
PathoQuest (April 17, 2026): an additional 79% stake for $67.6M, added to Manufacturing.
Wilmington, MA real estate (March 2026): sold for $60.1M net and leased back, producing a $38.5M pre-tax gain inside SG&A — one reason first-half GAAP operating margin looks so much better than last year's.
Below the operating line: why a better operating profit became a loss
GAAP operating income rose $19.8M, but items below it wiped that out:
Other expense of $37.4M vs. $0.2M of other income a year ago: the $63.7M divestiture loss, partly offset by an $18.9M gain on life-insurance policies (vs. $5.4M) and $9.5M of venture-capital and strategic investment gains.
An effective tax rate of 101.4% (tax of $53.9M on $53.2M of pre-tax income) vs. 26.2%, which the 10-Q attributes to the tax effects of the divestitures, non-deductible transaction costs and higher accrued interest on acquired uncertain tax positions.
Within operating income, unallocated corporate costs rose 50.9% to $106.4M (10.6% of revenue vs. 6.8%) on acquisition, integration and divestiture costs and consulting fees for the efficiency program. Restructuring charges were $23.1M in the quarter ($54.6M year to date). Management expects its cost programs — workforce reductions, site consolidation, procurement and a global business-services model — to reach about $300M of cumulative annualized savings by the end of 2026, of which more than $175M benefited 2025.
Cash and balance sheet
Operating cash flow for the first half was $220.8M vs. $376.3M, which the 10-Q attributes to higher annual bonus payouts in Q1 and deal-related payments. After $87.0M of capital spending (vs. $94.6M), that leaves roughly $134M (our calculation) vs. about $282M a year earlier. Total debt and finance leases rose to $2,637.4M from $2,152.2M at year-end, funding the NHP and PathoQuest deals alongside $300.0M of buybacks in the half ($100.0M in Q2, at an average $174 per share per the release); $700.0M remains on the $1.0B authorization.
Guidance and outlook
The August 5 release raised 2026 guidance, and the company reaffirmed it in its September 24, 2026 Investor Day release (8-K Item 7.01):
2026 guidance
Current (Aug 5)
Prior (May 7)
Reported revenue growth
-3.5% to -2.5%
-5.5% to -4.0%
Organic revenue growth
0.0% to 1.0%
-1.5% to -0.5%
GAAP EPS
$3.05 – $3.35
$5.35 – $5.85
Non-GAAP EPS
$11.15 – $11.45
$10.80 – $11.30
The GAAP EPS cut is driven by the divestiture losses (the acquisition- and divestiture-cost adjustment roughly doubled, to ~$4.75 per share from ~$2.30); the non-GAAP increase reflects "improving demand trends in the DSA segment and better-than-expected performance in the Manufacturing segment." The company adds that Q2's deferred-compensation investment gains ($0.19 per share in the quarter) should be largely offset by a higher tax rate over the year.
Our read: With $5.07 of non-GAAP EPS in the first half, the new range implies about $6.08–$6.38 in the second half (our arithmetic) — a clear step up that depends on DSA's stronger bookings turning into revenue and on the cost program lifting margins back from 20.5%. The backlog and book-to-bill commentary support the revenue half of that. The margin half is less proven: the non-GAAP margin fell year over year in RMS and DSA, and Manufacturing improved mainly because the CDMO business was sold. What to watch in Q3: whether DSA organic growth moves clearly above zero, and whether the non-GAAP margin holds above 20% as deal and study costs settle after the divestitures.