Quest Diagnostics grew Q2 2026 revenue 10.2% to $3.04B as new Corewell Health and Fresenius work lifted requisitions 13.1%, but lower-priced routine tests cut revenue per requisition 2.8% and trimmed margins; adjusted EPS rose 19.1% to $3.12, helped by a $0.10 tax benefit.
Revenue
$3.0B
+10.2% YoY
Net income
$320M
+13.4% YoY
Diluted EPS
$2.84
+15.0% YoY
Operating margin
15.1%
Headline: volume up 13%, driven by two big new lab deals, which also cut the average price per order
Quest Diagnostics' second-quarter revenue rose 10.2% to $3.04 billion, and nearly all of that growth was organic, meaning it came from the existing business rather than from buying other companies (organic revenue growth was 10.0%). Diluted EPS (earnings per share, the profit attributable to each share) rose 15.0% to $2.84 on a GAAP basis, meaning under standard accounting rules, and 19.1% to $3.12 on the company's adjusted basis. Management raised its full-year 2026 revenue and EPS guidance again.
Almost all of the growth came from two new relationships. One is a joint lab business with Corewell Health in Michigan, which started operating in January 2026. The other is expanded testing for Fresenius Medical Care's US dialysis clinics. They raised the number of lab orders sharply. They also brought in cheaper, routine tests, so average revenue per order fell. Operating margin, the share of revenue left after running the business and before interest and tax, fell as a result.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Net revenues
$3,043M
$2,761M
+10.2%
Diagnostic Information Services (DIS) revenues
$2,978M
$2,699M
+10.3%
Diagnostic Solutions revenues
$65M
$62M
+4.8%
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Quest measures its lab business with two numbers. Requisitions are the order forms that come with each patient sample; each one lists the tests to run and who pays. Revenue per requisition is the average amount Quest collects per order. Revenue growth is roughly the combination of the two. Quest reports these two figures only as percentage changes, not as absolute numbers, which is why the table shows n/a for both quarters.
Volume and pricing: what the new deals are doing
The 10-Q breaks the numbers down in more detail than the headline figures:
Volume: Requisitions rose 13.1%, and 13.0 points of that was organic. The filing says that about 9 points came from the Corewell Health Collaborative Lab Solutions relationship and from more testing at Fresenius Medical Care dialysis clinics. Excluding those two, organic volume grew about 4%. That is the best measure of underlying demand from Quest's existing physician, hospital and consumer customers.
Revenue per requisition: This fell 2.8%, "primarily driven by the business mix" of the Corewell and Fresenius work, which "include a greater proportion of routine tests than most of our clinical testing." Excluding that mix effect, revenue per requisition rose about 3%, mainly because each order included more tests.
So the headline -2.8% on revenue per requisition is misleading on its own. In the existing business, pricing and test counts per order improved. The decline comes from adding a large amount of lower-priced, routine work. The first half shows the same pattern: volume +12.0% (about 8 points from Corewell/Fresenius, about 4% underlying) and revenue per requisition -2.1% (about +2.5% excluding the mix effect).
The prior-year comparison was unusual in the opposite way. In Q2 2025, reported volume rose 16.3% but organic volume rose only 2.1%, because most of that quarter's growth came from acquisitions. This year's 13.0% organic figure is a big change from that.
The Corewell Health venture
The Michigan deal closed in January 2026. Corewell Health contributed its lab business to a new entity. Quest owns 51% and Corewell 49%, and Quest consolidates it, meaning all of its revenue and costs appear in Quest's results. Quest paid $38 million in cash, and Corewell's 49% stake was valued at $253 million. That explains why noncontrolling interests on the balance sheet (the portion of subsidiaries owned by outside partners) rose from $36 million at year-end to $303 million. The partners are running the business from their existing labs until a new Michigan laboratory opens during 2027. The filing says the acquisition is not material to consolidated results, so it gives no pro forma figures. The volume and mix disclosures above are the clearest view of its impact.
Why margins fell even as revenue grew 10%
Cost of services (collecting, transporting and testing samples) rose $198 million, or 10.9%, slightly faster than revenue. MD&A (management's discussion and analysis in the 10-Q) says this was "primarily driven by higher compensation costs and, to a lesser extent, an increase in supplies expense reflecting higher testing volumes," partly offset by savings from the Invigorate cost program. Invigorate targets 3% annual cost savings and productivity gains. Cost of services rose to 66.3% of revenue from 65.8%.
SG&A (selling, general and administrative costs) rose $43 million (8.8%), also mainly due to compensation.
One-offs in last year's GAAP number: Q2 2025 operating income included a $46 million CARES Act payroll-tax credit gain and a $24 million impairment (a write-down of certain assets) tied to exiting a business, a net benefit of about $22 million. That makes GAAP operating income growth (+4.6%) look weaker than the underlying trend. Adjusted operating income, which excludes these items plus amortization and restructuring, rose 7.8% to $502 million. Adjusted margin still fell 0.4 points to 16.5%, which fits with more lower-priced routine volume and higher pay costs.
How much of the EPS beat came from taxes
Net income grew faster than operating income for two reasons below the operating line:
Lower tax rate: The effective tax rate fell to 21.5% from 25.1%. The quarter included about $11 million ($0.10 per share) of tax benefits from "the favorable resolution of various income tax contingencies" (the settlement of past uncertain tax positions). Quest's adjusted EPS removes only the excess tax benefit from stock compensation, not this item, so the $0.10 is included in the $3.12 adjusted figure. Without it, adjusted EPS would have been about $3.02, up roughly 15% instead of 19%. That is still solid growth, but the headline figure overstates the operating improvement.
Lower interest expense: Net interest expense fell $4 million to $63 million, due to lower rates and more interest earned on cash. This will partly reverse from here: in May Quest issued $500 million of 5.00% notes due 2036 to repay $500 million of 3.45% notes that matured on June 1, so the refinanced debt carries a higher interest rate.
A slightly lower diluted share count (112 million vs. 113 million) also helped. Quest bought back 0.5 million shares for $100 million in the quarter, its first buybacks of 2026, and has $1.3 billion left under its authorization. It paid a quarterly dividend of $0.86 per share.
Cash flow
Operating cash flow was $597 million in the quarter (+9.7%). After $138 million of capital spending, that leaves about $459 million. For the first half, operating cash flow rose only 1.9% to $875 million because accounts receivable (money owed by customers and insurers) grew by $259 million, versus $115 million a year earlier. That fits with fast volume growth from new customers, because billing and collection take time. Full-year operating cash flow guidance was raised to about $1.80 billion from $1.75 billion. Capital spending guidance stays at about $550 million.
Takeaway: The 13% jump in volume mostly comes from two large new contracts that pay less per order. Quest's existing business grew about 4% in volume and about 3% in revenue per order, which is healthy. However, margins narrowed, and $0.10 of adjusted EPS came from a one-time tax benefit. Revenue growth is now well ahead of profit growth at the operating level.
Guidance and outlook
Full-year 2026 guidance
Updated
Prior
Net revenues
$11.95B - $12.05B
$11.78B - $11.90B
Revenue growth
8.3% - 9.2%
6.8% - 7.8%
Reported diluted EPS
$9.97 - $10.17
$9.58 - $9.78
Adjusted diluted EPS
$11.05 - $11.25
$10.63 - $10.83
Cash from operations
~$1.80B
~$1.75B
Capital expenditures
~$550M
~$550M
The adjusted EPS guidance midpoint rose $0.42 to $11.15. First-half adjusted EPS was $5.62, so the new range implies $5.43 to $5.63 for the second half. First-half revenue was $5.94 billion, so the revenue range implies about $6.01 to $6.11 billion for the second half. Management says that after the second-quarter tax resolution, the full-year adjusted tax rate should be in line with 2025. In other words, it does not expect the tax benefit that helped Q2 to continue.
Our read: The Corewell and Fresenius contracts give Quest a large, predictable source of volume that runs into 2027, when the new Michigan lab is due to open. But until those contracts have been in place for a full year, they will keep lowering reported revenue per requisition and adjusted operating margin. In the Q3 report, scheduled for October 22, 2026, two figures matter most. The first is organic volume growth excluding Corewell and Fresenius, and whether it holds near 4%. The second is adjusted operating margin, and whether it starts to recover as the new volume ramps and Invigorate savings add up. If margin keeps falling with no tax benefit to offset it, second-half EPS growth will be much slower than this quarter's 19%.
Source: Quest Diagnostics Form 10-Q for the quarter ended June 30, 2026 (filed July 23, 2026), and the accompanying Q2 2026 earnings release (Form 8-K, Exhibit 99.1).