Quest Diagnostics earns fees for testing patient samples and providing the results to doctors, hospitals and patients. In the third quarter of 2026, new hospital and dialysis work helped lift revenue 10.0% to $3.10 billion. The expansion is adding profit, but a shift toward customers who take longer to pay has kept cash growth behind earnings. Collecting those bills and controlling the cost of serving larger contracts are now central to turning the expansion into cash available for further investment.
Research cutoff: October 25, 2026, New York time. The latest company financial filing used is dated October 23; the separate cybersecurity disclosure describes conditions as of October 22.
Source: Quest Diagnostics third-quarter 2026 Form 10-Q, statements of operations, p. 2, and management discussion, pp. 33–38.
1. Two large relationships explain most of the increase in testing orders
Hospital and dialysis relationships supplied most of the quarter’s volume growth. Quest’s main laboratory business, Diagnostic Information Services, generated 98% of quarterly revenue. Its sales rose to $3,035 million from $2,755 million a year earlier. The much smaller insurance-services and healthcare-technology businesses together contributed $62 million, compared with $61 million.
Quest measures testing volume using requisitions: orders accompanying patient samples that identify the tests to perform and whom to bill. An order can include several tests, so an increase in orders does not mean the same increase in individual tests or patients.
Corewell Health’s hospital relationship and expanded testing for Fresenius Medical Care’s U.S. dialysis clinics accounted for 9.5 percentage points of the quarter’s 14.5% increase in orders. Excluding those relationships, volume still grew 5.0%. That provides evidence of growth beyond the two large implementations, while showing how much the headline depends on them.
| Laboratory operating measure | Third quarter 2026 versus third quarter 2025 | First nine months 2026 versus first nine months 2025 |
|---|---|---|
| Growth in total requisitions | 14.5% | 12.9% |
| Contribution from Corewell and Fresenius relationships | 9.5 percentage points | 8.6 percentage points |
| Requisition growth excluding those relationships | 5.0% | 4.3% |
| Change in revenue per requisition | −4.2% | −2.8% |
| Change in revenue per requisition excluding those relationships’ mix effects | 1.7% | 2.4% |
The new work contains a larger share of routine tests. This reduces the average revenue from an order even as total laboratory revenue rises. Outside those relationships, revenue per order increased in the quarter mainly because each order contained more tests. The evidence therefore supports a change in the work being performed, rather than treating the lower average as a company-wide price cut.
The growth pattern has also changed from last year. Quest’s organic measure excludes the growth it assigns to acquisitions. In the third quarter of 2025, total requisitions grew 12.5%, while Quest classified 3.9% as organic growth. In the third quarter of 2026, those measures were 14.5% and 14.4%. Quest’s organic category includes the expansion of major service relationships; it should not be read as growth solely from an unchanged set of customers.
Source: Third-quarter 2026 Form 10-Q, Note 12, pp. 24–26, and management discussion, pp. 28–34. Operating measures and the exclusions above are company disclosures; percentage-point contributions express the disclosed volume-growth split.
Fresenius shows why Quest wants this routine work. When announcing the arrangement’s implementation in August 2025, Quest said its laboratories would perform dialysis testing during daytime hours when they had lower volumes. Using available laboratory capacity can spread facility and equipment costs across more work. Quest also expected its nationwide network to shorten transportation time for some services. The filing does not disclose the Fresenius contract’s individual profit, so the measurable result is the broader laboratory business’s growth and margin, examined below.
Source: Quest’s completion announcement for the Spectra clinical-testing assets, August 5, 2025, paragraphs on the separate Fresenius laboratory-services agreement and daytime laboratory utilization.
2. Profit improved, with a substantial lift from lower special charges
Lower special charges amplified the quarter’s profit growth. Quest earned more from its larger laboratory business, and company-wide administrative spending grew more slowly than revenue. Lower legal, restructuring and other charges also made the comparison easier.
Operating profit is what remains after running the business, before interest and income taxes. Net income below is the profit attributable to Quest after taxes and after excluding partners’ earnings. Diluted earnings per share (EPS) divides the available profit across the weighted share count, including potential shares from employee awards.
| Consolidated results; USD millions except margins and EPS | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Revenue | 2,816 | 3,097 | 8,229 | 9,035 |
| Reported operating profit | 386 | 479 | 1,170 | 1,337 |
| Reported operating margin | 13.7% | 15.5% | 14.2% | 14.8% |
| Net income attributable to Quest | 245 | 312 | 747 | 884 |
| Net margin attributable to Quest, calculated | 8.7% | 10.1% | 9.1% | 9.8% |
| Reported diluted EPS; USD per share | 2.16 | 2.78 | 6.57 | 7.86 |
Source: Third-quarter 2026 Form 10-Q, consolidated statements of operations, p. 2, and management discussion, pp. 31–32. Margins divide the relevant profit by consolidated revenue; net margins are calculated from the displayed amounts.
The cost of collecting, transporting and testing samples stayed close to the same share of sales: 66.4% in the quarter, against 66.3% a year earlier. Higher employee compensation and supplies spending accompanied the larger workload. Quest says its Invigorate program partly offset those increases through cost savings and productivity improvements. The program targets 3% annual savings and productivity gains, but that target is not a disclosed dollar saving achieved this quarter.
The clearer improvement appeared in selling and administrative expenses, which fell from 17.8% to 16.9% of sales even though the dollar cost increased. A larger revenue base absorbed these costs more effectively. Lower restructuring costs and a $6 million gain principally from insurance recoveries also helped. At the same time, Quest continued spending on Project Nova, its overhaul of the systems used to receive orders, deliver results, bill customers and collect payment.
The segment accounts provide a useful check. Laboratory operating profit increased by $56 million, from $482 million to $538 million. Net corporate costs fell by $37 million, while the smaller businesses’ operating profit remained $9 million. Together, those changes reconcile the $93 million increase in consolidated operating profit. The laboratory business’s own margin increased only modestly, from a calculated 17.5% to 17.7%.
Sources: Third-quarter 2026 Form 10-Q, Note 4, pp. 9–10; Note 12, p. 25; and management discussion, pp. 29–35. Segment margins are calculated before the separately reported corporate costs.
After Quest’s operating adjustments, quarterly profit was $517 million versus $458 million, and the margin was 16.7% versus 16.3%. That is a smaller improvement than the reported margin’s rise from 13.7% to 15.5%. Over the first nine months, the adjusted margin rounded to 16.2% in both years. The longer comparison supports growing profit through a larger business, with limited improvement in profit per dollar of revenue so far.
These adjustments remove the accounting cost of acquired intangible assets, restructuring and integration costs, certain other charges, and specified gains. Some removed costs recur across reporting periods. The calculation notes reproduce the full operating-profit reconciliation; the adjusted measure should not be treated as a promise of recurring profit.
Source: Third-quarter 2026 Form 10-Q, “Operating Results,” pp. 32–33; October 22 earnings release, financial-table Note 2.
Below operating profit, lower net interest expense helped the first nine months. It declined to $187 million from $200 million. Taxes also took a smaller share of pretax income: 22.5%, compared with 23.6%. The 2026 period included approximately $11 million of benefits from resolving tax uncertainties, as well as $20 million of stock-compensation tax benefits versus $15 million a year earlier. Those benefits help explain net-income growth beyond the improvement in operations.
Partly offsetting those benefits, income from businesses accounted for as investments fell to $23 million from $35 million. The earlier period included an $8 million lease-related gain, while the current period included $7 million of investment losses in that line. These amounts are separate from the profit of subsidiaries that Quest fully consolidates.
Source: Third-quarter 2026 Form 10-Q, consolidated statements of operations, p. 2, and management discussion, pp. 35–36.
3. Slower collections limited the cash available from higher earnings
Customers’ unpaid bills absorbed more cash, even as Quest earned more profit. For the first nine months, net income attributable to Quest rose about 18%, while operating cash flow increased 4.6%. After cash spending on equipment, facilities and other capital assets, free cash flow grew only 1.5%.
Quest’s average collection measure rose to 51 days at September 30, from 47 days a year earlier and 48 days at December 31. Management attributes the increase mainly to the mix of outstanding bills owed by client payers. These customers accounted for approximately 48% of receivables at September 30, compared with 43% at year-end. Client payers also supplied a larger share of quarterly revenue, 33% versus 31% a year earlier.
The practical consequence is straightforward: Quest has already performed and recorded more testing work, but more of the payment remains with customers. Receivables used $308 million of operating cash in the first nine months, compared with $153 million in the corresponding 2025 period. Quest records most testing revenue when results are reported, using estimates of contractual discounts, payer denials and patient concessions. Payment can arrive later. The separate allowance for credit losses rose to $27 million from $25 million at year-end; the longer collection period alone does not establish that customers will fail to pay.
Source: Third-quarter 2026 Form 10-Q, cash-flow statement, p. 5; Note 13, pp. 26–27; and “Cash Flows from Operating Activities,” p. 38.
More expenses also remained unpaid, partly offsetting the cash tied up in customer bills. Changes in accounts payable and accrued expenses added $244 million to operating cash, versus $113 million a year earlier. The cash reconciliation also adds back costs that did not require cash in the period, including depreciation, acquired-asset amortization and share compensation. These items explain why operating cash exceeded consolidated net income; the excess alone is not evidence that collections improved.
Deferred tax expense added $155 million to the reconciliation, compared with $118 million. This reflects differences between when accounting records tax expense and when tax payments fall due. Actual cash income taxes paid increased to $142 million from $112 million. The prior year also included receipt of a $46 million employee-retention payroll tax credit.
Source: Third-quarter 2026 Form 10-Q, cash-flow statement, p. 5, and Note 10, p. 21. The complete profit-to-cash reconciliation appears in the calculation notes.
The cash remaining after investment still covered dividends and buybacks comfortably, but the amount left after those payments declined.
| Cash allocation; USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Operating cash flow | 1,421 | 1,486 |
| Cash capital expenditures | 369 | 418 |
| Free cash flow, calculated | 1,052 | 1,068 |
| Cash dividends paid | 263 | 279 |
| Cash purchases of treasury shares | 150 | 252 |
| Remainder after capital expenditures, dividends and treasury-share purchases | 639 | 537 |
Calculation notes: Free cash flow here means operating cash flow less the cash-flow statement’s capital expenditures. The last row deducts paid dividends and paid treasury-share purchases from that free cash flow. It is before acquisitions, debt transactions and other investing or financing flows. Purchases of treasury shares are shares bought back by the company.
Source: Third-quarter 2026 Form 10-Q, consolidated cash-flow statement, p. 5.
Cash increased from $420 million to $797 million after all cash flows. Net acquisitions consumed only $39 million, and borrowing proceeds were slightly below debt repayments. The company therefore built its cash balance while funding investment and shareholder payments. Maintaining that flexibility will depend partly on collecting the growing client balances without allowing payment delays to keep lengthening.
4. Michigan adds scale, while new facilities and systems still need to be delivered
The Corewell partnership expanded Quest’s business with a relatively small cash payment, but it also shares the resulting profit. Quest obtained control of the Michigan laboratory venture in January 2026. Quest owns 51%, and Corewell owns 49%. Control requires Quest to include the venture’s full revenue, assets and liabilities in its consolidated accounts; the partner’s share of earnings is then excluded when calculating net income attributable to Quest.
The transaction involved $38 million of cash and a 49% interest in the venture valued at $253 million. That ownership interest was part of the transaction consideration, not cash raised by Quest. The preliminary accounting added $179 million of goodwill and $124 million of customer-related intangible assets. Goodwill represents value assigned to expected benefits such as combining operations and retaining an assembled workforce. It does not provide cash with which to pay bills.
This helps explain why Quest’s balance sheet grew much more than its cash acquisition spending suggests.
| Consolidated assets; USD millions | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 420 | 797 |
| Customer receivables, after credit-loss allowance | 1,408 | 1,712 |
| Inventories | 189 | 218 |
| Property, plant and equipment, after depreciation | 2,203 | 2,275 |
| Operating lease rights to use property and equipment | 657 | 670 |
| Goodwill | 8,945 | 9,112 |
| Other acquired intangible assets, net | 1,636 | 1,634 |
| Total assets, including other assets not separately listed | 16,225 | 17,221 |
Goodwill and other acquired intangible assets together represented a calculated 62.4% of total assets at September 30. The Corewell transaction was a major source of additions, while amortization reduced intangible assets by $112 million during the first nine months. The large balance makes retaining customers and realizing the benefits of past acquisitions important to future earnings. It also explains why simply removing amortization from profit leaves out a substantial cost associated with Quest’s acquisition strategy.
Quest also recorded $103 million of future acquisition payments that depend on contractual conditions, up from $96 million at year-end. For Haystack Oncology, the purchase agreement allows up to $100 million tied to revenue benchmarks through 2028 and another $50 million tied to Medicare reimbursement coverage. The recorded $103 million covers contingent payments across acquisitions, rather than the maximum Haystack payment alone. Successful commercialization can therefore bring additional cash obligations as well as revenue.
Source: Third-quarter 2026 Form 10-Q, balance sheet, p. 4; Notes 5–6, pp. 11–14; and Note 10, p. 21. The acquisition allocation remains preliminary; the asset table is not an acquisition-only reconciliation.
The venture’s next step is operational. Corewell’s August 24 update said construction was underway on a 100,000-square-foot laboratory in Southfield, with a planned opening in the first quarter of 2027. It also described phased migration of clients, systems and services. Until the new laboratory operates, the partners continue using existing laboratories. Bringing work into the new facility offers a path to more efficient service, but the benefit depends on moving testing reliably while maintaining turnaround times and clinical quality.
Sources: Corewell Health, “Diagnostic Lab of Michigan Update”, August 24, 2026, construction and migration sections; third-quarter 2026 Form 10-Q, Note 5, p. 11. The opening date is a plan, not a completed event.
Across the company, cash capital spending increased to $418 million from $369 million in the first nine months. Management’s approximately $550 million full-year plan principally covers laboratory equipment, facilities, automation and information technology. The disclosed plan combines support for existing operations with expansion; it does not quantify those portions separately.
Project Nova serves a related purpose: replacing fragmented processes for orders, results, billing and collections. Quest’s October earnings release said the project had moved into building the new systems, with the first laboratory deployment planned for fall 2027. The 2025 annual report put overall completion in 2031–2032. Benefits may arrive during implementation, but the program is a multi-year execution commitment, not an immediate cure for this quarter’s longer collection times.
Sources: Third-quarter 2026 Form 10-Q, “Requirements and Capital Resources,” pp. 39–40; October 22 earnings release, “Recent Highlights”; 2025 Form 10-K, “Our Strengths,” Project Nova discussion, p. 5.
Quest also expanded its Alzheimer’s blood-test menu and announced a future test-panel purchasing channel through Apple Health. These broaden its services and access, but the release does not quantify their separate sales or profit contribution.
Competition remains active in the same areas. Labcorp’s July 30 results described buying outreach laboratory services from Parkview Health, expanding consumer testing, and extending its Epic collaboration. Quest’s broad network is useful, but hospital partnerships and easier digital access are also priorities for a major rival. Reliable implementation, service and cost therefore matter more than announcing the strategy alone.
Sources: Quest’s October 22 earnings release, “Recent Highlights”; Labcorp’s second-quarter 2026 results, July 30, 2026, strategic-priorities discussion. Labcorp is used as evidence of competing business initiatives, not as a directly comparable consolidated margin benchmark.
5. Refinancing improved near-term flexibility, while principal debt barely changed
Quest removed a near-term bond maturity, but most of the decline in recorded debt came from accounting adjustments. In May, it issued $500 million of notes due in 2036 and used the proceeds plus cash to repay $500 million due in June 2026. That extended the repayment date by ten years.
The extension carries a higher contractual interest cost. The new notes pay 5.00%, compared with 3.45% on the retired notes. On $500 million of principal, that means $25 million of annual coupon payments instead of $17.25 million, a calculated increase of $7.75 million before issuance-cost amortization and any other financing effects.
Recorded debt, including finance leases, fell from $5,671 million to $5,550 million. However, the principal maturity total increased from $5,696 million to $5,707 million. Quest uses contracts called interest-rate swaps to exchange fixed interest payments for variable ones. Accounting updates both these contracts and the related bonds as rates change. Those updates reduced the recorded bond values by $127 million, while the swap contracts moved from an asset to a liability. Quest did not repay $127 million of borrowings through that accounting change.
| Principal repayments, including finance leases; USD millions | Amount due as of September 30, 2026 |
|---|---|
| Remainder of 2026 | 3 |
| 2027 | 409 |
| 2028 | 5 |
| 2029 | 1,103 |
| 2030 | 801 |
| 2031 | 551 |
| Thereafter | 2,835 |
| Total contractual principal maturities | 5,707 |
Sources: Third-quarter 2026 Form 10-Q, Notes 7–8, pp. 15–18; 2025 Form 10-K, Note 13, pp. F-33–F-35. The maturity table reports principal, not the balance-sheet carrying amount, and excludes operating leases and future interest payments.
The next meaningful bond maturity is in 2027, followed by the larger 2029 repayment requirement. At September 30, Quest had $797 million of cash and $1,267 million of unused borrowing capacity across its two credit facilities. Neither facility had borrowings outstanding. Availability under the receivables facility depends on qualifying customer balances, and Quest reported compliance with its financial covenants. The receivables facility expires in November 2027; the revolving credit facility expires in April 2030.
Interest costs can still change even with those facilities unused. The swaps cover $1.8 billion of notes, making their effective interest costs variable. Company-wide gross interest expense was $200 million in the first nine months, compared with $210 million a year earlier; interest paid was $151 million versus $167 million. Lower rates on indebtedness and the prior-year repayment of another bond helped offset the more expensive 2026 refinancing.
Operating leases add a separate payment obligation. Their recorded liability rose to $735 million from $711 million, with $181 million classified as current at September 30. These amounts relate to the use of facilities and equipment and should be considered alongside bond repayments when assessing available cash.
Sources: Third-quarter 2026 Form 10-Q, balance sheet, p. 4; Notes 8 and 10, pp. 17–18 and 21; and management discussion, pp. 35 and 37–40; 2025 Form 10-K, Notes 13–14, pp. F-33–F-37.
Other long-term liabilities rose by $305 million to $1,262 million. Two major identifiable contributors were deferred income-tax liabilities, up $158 million to $512 million, and the new $112 million interest-rate-swap liability. These are different from new cash borrowings: the first records tax obligations arising from timing differences, while the second records the current value of future swap payments.
Source: Third-quarter 2026 Form 10-Q, balance sheet and Notes 8 and 10; 2025 Form 10-K, Note 2, p. F-14, for the December 2025 deferred-tax balance.
Management describes dividends and buybacks as ways of returning cash while preserving an investment-grade credit profile. Their effect on shares must be measured after employee share deliveries. During the first nine months, Quest repurchased 1.2 million shares but reissued 1.4 million treasury shares under employee programs. The financial statements continued to show approximately 162 million issued shares and 52 million treasury shares; repurchases should not be described as share retirements.
The weighted-average diluted share count nevertheless fell to approximately 112 million from 113 million in the comparable nine-month period. That helped reported EPS rise 19.6%, slightly faster than the approximately 18% increase in profit attributable to Quest. Share-based compensation expense was $63 million in each period. Most of the earnings-per-share improvement therefore came from profit growth, with a smaller benefit from the share count.
Sources: Third-quarter 2026 Form 10-Q, statements of equity, p. 6; Notes 3 and 9, pp. 9 and 20; 2025 Form 10-K, capital-deployment discussion, p. 4. Share counts are rounded; EPS uses the underlying weighted averages and the allocation of earnings to participating awards.
6. Payment rules and a newly disclosed data incident could change the outlook
The main unresolved risks concern what Quest gets paid and the consequences of unauthorized access to patient records. These risks sit alongside the practical challenge of integrating facilities and systems while handling more orders.
On October 22, Quest disclosed that it had learned the previous day of unauthorized access to Quanum LSM, a system some clients use to place orders and retrieve results. Quest believed an unauthorized party had accessed certain patient records. It engaged outside cybersecurity specialists and notified federal law enforcement. As of that disclosure, the incident had not materially disrupted operations or patient service, but its full scope remained under investigation.
The immediate operating evidence therefore showed continued service. The unresolved business exposure concerns the extent of affected data, response costs, potential claims and customer trust. The filing supplied no loss estimate, and September 30 financial balances cannot establish the eventual cost of an incident discovered in October.
Source: Quest’s October 22, 2026 Form 8-K, Item 8.01, accession 0000947871-26-000941. This is a post-quarter event disclosed before the October 23 Form 10-Q; the status above is dated October 22.
Medicare reimbursement creates a different risk. Government payers supplied approximately 16% of Quest’s revenue in both the quarter and first nine months. Under the PAMA laboratory-payment framework, there is no scheduled phase-in reduction in 2026, but the current framework permits reductions of up to 15% per test annually during 2027–2029.
CMS’s September 21 preliminary work identified 1,171 test codes with private-payer median rates below their 2026 Medicare rates. These were preliminary inputs, not final 2027 payments. They also do not reveal Quest’s exact exposure: the company’s test mix, the relevant Medicare payments and other payer contracts must be considered. A 15% limit for an individual test cannot be applied to all Quest revenue, or even mechanically to the entire government-payer category.
If payment for a test falls while collecting and processing the sample still requires similar work, Quest must offset the lost revenue through efficiency, other growth or lower costs. This makes Invigorate and the economics of the new routine-testing work especially relevant to the 2027 operating plan.
Sources: CMS, CLFS and PAMA reporting resources, 2026 statutory update; CMS preliminary 2027 laboratory payment-rate fact sheet, September 21, 2026, “Key Statistics” and “Phase-In of Payment Reductions”; third-quarter 2026 Form 10-Q, Note 13, p. 27. The cost-and-payment explanation is a business implication, not a quantified forecast of Quest’s 2027 loss.
Existing legal matters also require attention. Legal reserves increased to $32 million from $20 million at year-end. Separate general and professional liability reserves were $180 million, compared with $178 million. These include claims about testing services, including Irish cervical-screening litigation. Quest bears a significant portion of these claims itself despite maintaining insurance. The old AMCA collection-agency data incident had reached an agreement in principle to settle civil matters, while state investigations remained relevant. Quest also disclosed a Texas Medicaid billing investigation and a settlement with the New Jersey U.S. Attorney accompanied by a Corporate Integrity Agreement.
For the proceedings described in the note, Quest could not estimate the ultimate loss or range of loss. Its statement that material legal losses were not considered probable does not remove that uncertainty. Separately, legacy property leases could create contingent obligations of several hundred million dollars after defaults by other parties; management considers payment remote and has recorded no liability. The legal reserves and these older exposures should not be presented as an estimate of the new Quanum incident.
Sources: Third-quarter 2026 Form 10-Q, Note 11, pp. 21–24; 2025 Form 10-K, Note 18, “Contingent Lease Obligations,” p. F-46.
7. Quest can fund its expansion, but execution will determine the cash payoff
Quest has expanded profitably and retained funding flexibility; the next test is turning the larger workload into stronger cash generation. Growth outside the two major implementations, higher laboratory profit and unused credit facilities support that assessment. The smaller improvement in adjusted margins and the longer wait for client payments show where the business still has work to do.
Management’s October 22 outlook raised expected full-year revenue to $12.065–$12.105 billion, from $11.95–$12.05 billion. It also raised expected operating cash flow to approximately $1.90 billion from $1.80 billion, while keeping capital spending at approximately $550 million. Those are forecasts. Together, the cash assumptions imply about $1.35 billion of full-year free cash flow under this report’s definition, or approximately $282 million beyond the amount generated in the first nine months.
Source: October 22 earnings release, “Updated Guidance for Full Year 2026”; third-quarter 2026 Form 10-Q, cash-flow statement, p. 5. Implied free cash flow is calculated from management’s rounded forecasts, not separately promised by management.
The operating opportunity is clear: use Quest’s network more fully, make hospital partnerships work reliably, and simplify the path from a test order to payment. The assessment would strengthen if collections stabilize while the Michigan laboratory and software deployments deliver their intended efficiencies. It would weaken if payment delays persist, implementation costs consume the gains from volume, or the reimbursement and data-security exposures impose material new costs. Quest’s larger testing business provides the earnings base; disciplined delivery and collection will determine how much cash it produces.
Reporting basis: Quest Diagnostics Incorporated and subsidiaries, CIK 0001022079, ticker DGX. The selected filing is Form 10-Q, accession 0001022079-26-000108, filed October 23, 2026, for the quarter ended September 30, 2026. Quarterly comparisons cover July 1–September 30 in 2026 and 2025; nine-month comparisons cover January 1–September 30 in those years. Balance-sheet comparisons are September 30, 2026 and December 31, 2025. Accounts are consolidated, unaudited and prepared under U.S. GAAP. The Corewell venture is consolidated because Quest controls it; earnings belonging to partners are distinguished from earnings attributable to Quest. The research cutoff is October 25, 2026; the dated disclosures cited above define the verified information, rather than implying that every development through that date has been checked.
Sources: SEC filing history, selected Form 10-Q, and SEC company XBRL facts. Company identity, filing date, accession, periods and selected financial facts were checked against SEC records. XBRL dollar and per-share units and quarterly versus cumulative contexts were matched to the statements. The total-profit facts include partner earnings; the parent-attributable profit facts exclude them.
Calculation notes:
A. What management removes from operating profit. All amounts below are USD millions, except margins. These are pretax operating adjustments, so they do not include income-tax adjustments, interest, or income and losses recorded below operating profit.
| Operating-profit reconciliation | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Reported operating profit | 386 | 479 | 1,170 | 1,337 |
| Add restructuring and integration charges | 11 | 3 | 37 | 14 |
| Add other specified operating charges | 22 | 4 | 52 | 9 |
| Remove specified operating gains | 0 | −6 | −46 | −6 |
| Add acquired-intangible amortization | 39 | 37 | 117 | 112 |
| Management-adjusted operating profit | 458 | 517 | 1,330 | 1,466 |
| Management-adjusted operating margin | 16.3% | 16.7% | 16.2% | 16.2% |
The 2025 other-charge totals include legal costs and asset impairments; the 2026 amounts principally relate to changes in estimated future acquisition payments. The first-nine-month 2025 gain removed here is the $46 million payroll tax credit. The 2026 gain is principally insurance recoveries. The separate $8 million prior-year lease gain was recorded below operating profit and is therefore absent from this table. Each margin divides the adjusted operating profit by that period’s consolidated revenue. Adjusted operating profit still includes ordinary labor, supplies, administrative costs and ongoing project spending not identified as adjustments.
Sources: Third-quarter 2026 Form 10-Q, pp. 32–35; October 22 earnings release, financial-table Note 2.
B. How recorded profit becomes operating cash. The starting profit includes earnings attributable to subsidiary partners because the cash-flow statement uses the same consolidated scope. All amounts are USD millions; positive adjustments add cash relative to profit, while negative adjustments reduce it.
| Profit-to-cash reconciliation | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Consolidated net income, including partner earnings | 790 | 924 |
| Depreciation and amortization | 425 | 440 |
| Credit-loss provision | 2 | 5 |
| Deferred tax expense | 118 | 155 |
| Share-based compensation | 63 | 63 |
| Other reconciliation adjustments | 37 | 22 |
| Increase in customer receivables | −153 | −308 |
| Accounts payable and accrued-expense changes | 113 | 244 |
| Income-tax-payable changes | −1 | −24 |
| Other operating-asset and liability changes | 27 | −35 |
| Operating cash flow | 1,421 | 1,486 |
The year-over-year cash improvement reconciles as $134 million more consolidated profit, plus $40 million more noncash and other reconciliation adjustments, less $109 million from the combined changes in operating balances, giving $65 million more operating cash. These cash-flow movements need not equal simple changes between two balance sheets: acquisitions and items classified in financing can also change those balances.
For 2026, opening cash of $420 million plus $1,486 million from operations, less $455 million used in investing, less $652 million used in financing and less $2 million from exchange-rate movements equals $797 million. For 2025, the corresponding calculation is opening cash of $549 million, plus $1,421 million from operations, less $440 million from investing, less $1,101 million from financing, plus $3 million from exchange rates, giving $432 million. The cash-flow statement includes restricted cash in its caption; its opening and closing totals equal the cash-and-cash-equivalents balances for the dates used here.
Other financing uses in 2026 included a $163 million reduction in bank overdrafts. The cash-flow statement records $252 million of treasury-share purchases, while the equity statement and repurchase note record $250 million of repurchases. Cash allocation uses the paid cash-flow amount. Similarly, $279 million of dividends were paid, whereas $285 million were declared and reduced retained earnings.
Source: Third-quarter 2026 Form 10-Q, cash-flow and equity statements, pp. 5–6, and Notes 9–10, pp. 20–21.
C. Why equity increased and the balance sheet balances. All amounts are USD millions. Retained earnings are accumulated profits kept in the business after dividends. Paid-in capital records capital associated with shares and employee awards. Noncontrolling interests represent subsidiary ownership held by partners. Negative treasury-share balances represent the cost of shares held by Quest; other comprehensive loss includes currency translation changes outside net income.
| Equity account | December 31, 2025 | September 30, 2026 | Change |
|---|---|---|---|
| Common stock | 2 | 2 | 0 |
| Additional paid-in capital | 2,381 | 2,397 | 16 |
| Retained earnings | 9,994 | 10,593 | 599 |
| Accumulated other comprehensive loss | −27 | −66 | −39 |
| Treasury shares at cost | −5,180 | −5,294 | −114 |
| Noncontrolling interests within equity | 36 | 318 | 282 |
| Total stockholders’ equity | 7,206 | 7,950 | 744 |
Retained earnings increased by $884 million of Quest-attributable profit less $285 million of declared dividends.
Additional paid-in capital rose by $63 million of share compensation and $12 million from option exercises, less $38 million associated with benefit-plan share issuance and $21 million associated with employee tax withholding.
Treasury-share cost changed through $250 million of repurchases and $19 million of withholding-related shares, offset by $60 million of benefit-plan reissuance and $95 million of option-related reissuance. Foreign-currency translation explains the $39 million increase in accumulated other comprehensive loss.
The $282 million increase in noncontrolling interests comprises $35 million of earnings, less $31 million of distributions, plus $278 million of contributions. Contributions include the $253 million Corewell interest recorded in the acquisition and $25 million of cash contributions. This separates the large noncash ownership entry from cash funding.
At September 30, total liabilities of $9,190 million, plus the separately classified $81 million redeemable partner interest, plus stockholders’ equity of $7,950 million equal assets of $17,221 million. At December 31, the same check is $8,939 million of liabilities, plus $80 million of redeemable partner interest, plus $7,206 million of equity, equaling $16,225 million of assets. The redeemable interest sits outside ordinary equity because its holder can require Quest to purchase it.
Source: Third-quarter 2026 Form 10-Q, balance sheet and equity statement, pp. 4 and 6, and Notes 5 and 9, pp. 11 and 20.
D. Debt values and borrowing conditions. Recorded debt differs from the amount that must be repaid. Discounts and borrowing fees are spread over the bonds’ lives; interest-rate hedges also change the recorded amount. All amounts below are USD millions.
| Principal-to-recorded-debt reconciliation | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Contractual principal | 5,696 | 5,707 |
| Remaining borrowing discount | −10 | −14 |
| Remaining issuance costs | −30 | −31 |
| Hedge-related value adjustment | 15 | −112 |
| Recorded debt | 5,671 | 5,550 |
The $127 million fall in the hedge adjustment explains more than the $121 million decline in recorded debt. Principal increased $11 million, while the combined discount and issuance-cost deductions increased $5 million.
The revolving facility normally caps its contract-defined leverage ratio at 4.25 times. The ratio compares borrowings after subtracting unrestricted cash with the previous twelve months’ earnings before interest, taxes, depreciation and amortization, subject to the agreement’s further adjustments. A qualifying acquisition can, following the required election, temporarily raise the limit to 4.75 times for the acquisition quarter and the following three quarters. Quest reported compliance. The agreement’s own definitions determine borrowing limits.
The latest annual lease maturity schedule, dated December 31, 2025, showed $823 million of undiscounted operating-lease payments, including $196 million in 2026 and $179 million in 2027. These historical scheduled payments are distinct from the updated September liability, which discounts future payments. The annual report also disclosed $514 million of noncancelable purchase commitments, mainly for services and laboratory supplies, including $217 million expected in 2026. These are future operating purchase requirements, separate from the money borrowed through bonds.
Sources: Third-quarter 2026 Form 10-Q, Notes 7–8 and management discussion, p. 40; Fourth Amended and Restated Credit Agreement, April 30, 2025, definition of “Leverage Ratio” and section 7.2; 2025 Form 10-K, Notes 14 and 18, pp. F-37 and F-45.
E. Arithmetic and rounding. Calculated growth uses the comparable prior-period amount as the denominator. The following calculations use USD millions throughout.
- Operating cash increased by $65 million from a prior-year $1,421 million. Dividing the increase by the prior-year amount gives 4.6% growth.
- Free cash flow equals $1,486 million of operating cash less $418 million of capital spending in 2026, giving $1,068 million. In 2025, $1,421 million less $369 million gives $1,052 million. The $16 million increase is 1.5% of the prior-year amount.
- Goodwill plus other acquired intangibles totals $10,746 million. Dividing by $17,221 million of total assets gives 62.4%.
- Forecast operating cash of approximately $1,900 million less capital spending of $550 million gives approximately $1,350 million of full-year free cash flow. Subtracting the actual nine-month $1,068 million leaves approximately $282 million for the remaining quarter.
Figures rounded to millions do not always reproduce the company’s growth percentages or EPS calculated from unrounded amounts. A percentage-point change measures the difference between two percentages.
This report is for information and business analysis only. It is not investment advice or a recommendation to buy, sell or hold any security.