LH Q3 Deep Dive: Labcorp Sees Diagnostic Growth, Eyes Specialty Testing and Efficiency Initiatives

Healthcare diagnostics company Labcorp Holdings (NYSE:LH) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 8.6% year on year to $3.56 billion. Its non-GAAP profit of $4.18 per share was 1% above analysts’ consensus estimates.

Is now the time to buy LH? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Labcorp’s third quarter results met Wall Street’s revenue expectations, but the market responded negatively, reflecting investor concerns about profitability and future growth levers. Management attributed the quarter’s performance to robust organic growth in its Diagnostics segment—especially through increased demand for specialty and genetic testing platforms like Invitae. CEO Adam Schechter explained that "margin for the quarter improved 100 basis points, driven by Diagnostics," and highlighted the positive impact of recent acquisitions and expanded partnerships. The company also initiated site consolidations in lower-performing areas of its Biopharma Laboratory Services to streamline operations and improve future income.

Looking ahead, Labcorp’s updated guidance reflects an emphasis on expanding specialty testing in oncology, women’s health, neurology, and autoimmune diseases, as well as leveraging artificial intelligence (AI) and automation to enhance efficiency. Management slightly raised full-year adjusted EPS guidance, but flagged ongoing uncertainties related to policy changes such as the PAMA reimbursement cuts. Schechter noted ongoing investments in consumer-driven platforms and digital tools, stating, "We are using technology, robotics, and AI to accelerate growth, enhance the customer experience, and improve operational efficiency."

Key Insights from Management’s Remarks

Management cited organic Diagnostics growth, the integration of acquisitions like Invitae, and ongoing operational improvements as key drivers of the quarter’s performance, while also addressing headwinds in early development services.

• Diagnostics momentum: The Diagnostics business continued to grow, supported by higher test volumes and the integration of specialty offerings like Invitae, which contributed both to organic growth and margin improvement.
• Specialty and esoteric testing: Labcorp saw rapid uptake in specialty areas such as oncology, neurology, and women’s health, with management underscoring that these segments are growing "2 to 3x faster than the overall diagnostic market."
• Operational restructuring: In response to persistent softness in Early Development within Biopharma Laboratory Services, Labcorp began divesting or consolidating noncore sites, impacting about $50 million in annual revenue but expected to slightly improve operating income.
• M&A and partnership activity: The company executed multiple acquisitions and partnership agreements, including the purchase of clinical laboratory assets in the New York Tri-State area and select oncology testing assets, aiming to strengthen its market position and test menu breadth.
• AI and digital investments: Labcorp launched new AI-driven tools like the Labcorp Test Finder and collaborated with partners such as Roche and Amazon Web Services to digitize and automate pathology and cytology workflows, improving both efficiency and turnaround times.

Drivers of Future Performance

Labcorp expects future performance to be shaped by continued expansion in specialty testing, efficiency gains from AI and automation, and the impact of external policy shifts.

• Growth in specialty testing: Management sees ongoing expansion in oncology, neurology, and women’s health testing as central to driving revenue, with these services benefiting from increased clinical demand and advances in genetic profiling.
• Operational efficiency initiatives: The company is prioritizing cost reduction and margin improvement through its LaunchPad initiative, AI-driven automation, and digital platforms, aiming to offset headwinds such as rising labor costs and regulatory uncertainty.
• Policy and reimbursement risks: Labcorp is preparing for a potential $100 million annual impact from PAMA (Protecting Access to Medicare Act) reimbursement cuts in 2026, with mitigation strategies focused on cost control and acceleration of AI-enabled efficiencies.

Catalysts in Upcoming Quarters

As we look forward, the StockStory analyst team will be closely watching (1) the pace of specialty test adoption and Labcorp’s ability to further expand partnerships with health systems and regional labs, (2) the successful execution and integration of recent acquisitions and site consolidations, and (3) progress on AI-driven operational efficiency initiatives aimed at offsetting cost and reimbursement pressures. Regulatory developments, particularly surrounding PAMA, will also be critical to monitor.

Labcorp currently trades at $260.51, down from $275.54 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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