Waters sells instruments, testing supplies, software and services to laboratories that develop medicines, check materials and diagnose disease. In the third quarter ended October 3, 2026, its acquisition of BD’s Biosciences and Diagnostic Solutions businesses helped revenue more than double to $1.767 billion. But over the first nine months, cash left after capital spending fell to $165 million as integration payments and operating cash needs increased. Waters now has a broader testing business; turning that business into cash is the next test of the acquisition.
Analysis period: third quarter and first nine months of fiscal 2026. Research cutoff: November 11, 2026, New York date; the latest company announcement examined is dated November 10.
Sources: Waters’ third-quarter 2026 Form 10-Q, consolidated statements, pp. 1–5, and acquisition and cash-flow discussion, pp. 40–49. Free cash flow here means operating cash flow less additions to property, equipment and capitalized software.
1. Existing laboratory sales grew faster than the acquired businesses
Waters’ existing business grew about 9% in the quarter; the acquired businesses grew about 1% against their own prior-year sales. The distinction matters because most of the reported 121% revenue increase came from adding businesses that Waters did not own a year earlier.
The transaction closed on February 9, 2026. It added tools for examining cells and diagnosing infections and other diseases to Waters’ established laboratory instruments. Management’s stated purpose was to expand in regulated, high-volume testing, sell more products through the combined customer network and increase repeat purchases of supplies and services.
Sources: 2026 Form 10-Q, Note 1, pp. 8–9, and MD&A, pp. 40–41; Waters’ acquisition announcement, July 14, 2025, strategic benefits.
A comparison using the businesses’ own sales histories gives a clearer picture of customer demand:
| Revenue, USD millions | Third quarter 2025 comparable businesses | Third quarter 2026 | Calculated growth |
|---|---|---|---|
| Existing Waters business | 800 | 871 | 8.9% |
| Acquired Biosciences business | 387 | 396 | 2.3% |
| Acquired Diagnostic Solutions business | 498 | 500 | 0.4% |
| Combined comparable businesses | 1,685 | 1,767 | 4.9% |
Reporting basis: The 2025 acquired-business amounts are management’s comparable historical figures, not revenue included in Waters’ 2025 consolidated accounts. Waters actually reported $800 million that quarter. The combined comparison is our calculation, not a reported GAAP growth rate. Existing Waters includes its Clinical business, now reported within Advanced Diagnostics.
Source: November 3, 2026 earnings release, filed as Exhibit 99.1, division results and revenue reconciliations.
Customers bought more of the existing business’s instruments and testing supplies. Legacy instrument revenue increased 10%, while chemistry consumables also increased 10%. The filing links the instrument growth to demand for liquid chromatography and mass spectrometry systems, which separate and identify substances. It links chemistry growth to pharmaceutical customers buying columns and application-specific testing kits. These are disclosed demand drivers; Waters does not provide a complete split between unit volumes and prices.
The regional picture was uneven. Excluding the acquired businesses, quarterly sales rose 15% in Asia and 10% in the Americas, but only 1% in Europe. Currency translation reduced overall legacy growth by about one percentage point. Thus, the improvement extended across regions, although Europe contributed much less growth.
Source: 2026 Form 10-Q, MD&A, “Revenues by Geography,” “Revenues by Product” and segment discussion, pp. 44–47.
The recovery also predates the BD acquisition. Annual revenue was almost unchanged between 2023 and 2024, then increased 7% in 2025. Instrument sales fell 6% in 2024 and recovered 5% in 2025. The current quarter therefore extends the recovery from weaker instrument sales. That history supports the demand improvement while showing how much equipment orders can change from year to year. The first nine months of 2026 also contained six more calendar days than the comparable 2025 period, helping repeat sales in the cumulative comparison.
The industry backdrop supports part of that recovery. Competitor Agilent reported 7.3% growth excluding currency and recent acquisitions or divestitures for its quarter ended July 31, 2026. Its different reporting dates and product mix prevent a direct market-share comparison, but its growth shows that improving laboratory demand is not confined to Waters.
Sources: Waters’ 2025 Form 10-K, MD&A, pp. 45–46; 2026 Form 10-Q, pp. 41 and 45; Agilent’s August 26, 2026 results, quarterly results and definition of core growth.
The acquisition has nevertheless changed what customers buy from Waters. Consumables and services supplied 70.1% of quarterly revenue, versus 57.3% a year earlier. Laboratories use up testing materials and need equipment support, creating opportunities for repeat orders. Those opportunities depend on actual testing activity and renewals: this category is broader than revenue guaranteed by long-term contracts.
Source: 2026 Form 10-Q, Note 13, p. 32, and revenue recognition, pp. 15–17. Mix calculations use consumables plus services divided by total revenue.
2. Acquisition accounting explains much of the profit decline, but existing margins also weakened
Large acquisition charges depressed reported profit, while Analytical & Materials Sciences earned little extra segment profit from higher sales. Both findings matter when judging the enlarged company.
| Consolidated results, USD millions except EPS and margins | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Revenue | 800 | 1,767 | 2,233 | 4,678 |
| Gross margin, calculated | 59.0% | 50.3% | 58.5% | 47.2% |
| Operating profit / (loss) | 192 | 128 | 532 | −6 |
| Operating margin | 24.0% | 7.2% | 23.8% | −0.1% |
| Net profit / (loss) | 149 | 81 | 417 | −127 |
| Net margin, calculated | 18.6% | 4.6% | 18.7% | −2.7% |
| Diluted EPS, USD | 2.50 | 0.82 | 7.00 | −1.37 |
Source: 2026 Form 10-Q, consolidated statements of operations, pp. 2–3. The 2026 cumulative amounts include the acquired businesses only from February 9.
Direct product and service costs took a larger share of sales, leaving a lower gross margin—the share of revenue remaining after those costs. Buying a business also changes the expenses recorded afterward. Waters assigned new accounting values to the acquired inventory, equipment, technology and customer relationships. As inventory is sold and assets are used, parts of those values become expenses. In the first nine months, acquisition-related inventory and equipment revaluation added $333 million to expense, while purchased-intangible amortization rose by $604 million. Amortization spreads the recorded cost of technology and customer relationships over their estimated useful lives.
These expenses do not require the same amount of cash to be paid again in the current period. However, the cost does not disappear immediately. Waters estimates total intangible amortization of $1.078 billion in 2027, reflecting assets whose benefits are expected to last for years. Excluding amortization can help examine current operations, but it does not make the acquisition cost irrelevant.
Source: 2026 Form 10-Q, Notes 4–5, pp. 18–24, and MD&A, p. 42.
Management’s adjusted quarterly operating profit was $532 million, with a 30.1% margin, versus $242 million and 30.3% a year earlier. Its adjustments remove acquisition accounting charges, acquisition-related costs, restructuring and other items, and expenses for the new business-management software system. The full pretax and after-tax reconciliation appears in Calculation note 2. Even this adjusted comparison shows a slightly lower margin, and the businesses being compared changed substantially.
Source: November 3 earnings release, reconciliation of GAAP to adjusted non-GAAP financials.
The clearest evidence of pressure within the established operations is Analytical & Materials Sciences. Its quarterly revenue rose from $736 million to $796 million, but segment operating profit moved only from $279 million to $281 million. Its margin fell from 37.9% to 35.3%. Waters attributes this to currency movements, the mix of sales, employee pay increases and additional product-development costs offsetting higher sales volumes.
The acquired segments generated positive operating contributions before centrally reported expenses. But their segment figures exclude costs that the company must still bear. Total quarterly segment profit of $578 million becomes consolidated operating profit of $128 million after corporate and other expenses, acquisition accounting charges and stock compensation. Treating the segment total as company profit would therefore greatly overstate the result.
Source: 2026 Form 10-Q, Note 13, pp. 35–39, and MD&A, pp. 46–47.
Financing and taxes also changed the final result. Quarterly net interest expense rose from $22 million to $53 million. A $7 million tax benefit then lifted $74 million of pretax profit to $81 million of net profit. Waters links its unusual negative quarterly tax rate to specific tax benefits, mainly involving transaction and restructuring costs, and to where income was earned. That benefit should not be treated as the normal tax burden of the enlarged business.
Finally, the acquisition spread earnings across more shares. Waters issued 38.542 million shares to BD shareholders; quarterly diluted weighted-average shares rose from approximately 60 million to 99 million. Lower total profit and the larger share count together explain why reported EPS fell more sharply than net profit.
Source: 2026 Form 10-Q, Notes 4, 7 and 11, pp. 19, 27 and 30, and statements of operations, p. 2.
3. Integration payments and unsettled collections left less cash after investment
Waters generated positive operating cash, but the amount left after capital spending fell 60%. The larger business required cash for integration, inventory and amounts not yet collected or settled.
Less cash remained after capital spending
| Cash generation, USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Cash from operating activities | 488 | 315 |
| Capital spending, shown as a positive cash use | 74 | 150 |
| Free cash flow, calculated | 414 | 165 |
Reporting basis: Capital spending includes the cash-flow statement’s additions to property, plant, equipment and capitalized software. Free cash flow is our subtraction of that spending from operating cash flow; it differs from management’s adjusted free-cash-flow measure.
Source: 2026 Form 10-Q, consolidated cash-flow statement, p. 5. Calculation note 3 explains the difference from the preliminary earnings release.
Waters paid $142 million for acquisition closing, integration and transformation, plus $46 million for restructuring during the first nine months. These are cash costs already included in operating cash flow. Removing them from a profit presentation does not restore the money available to repay debt.
Collections also mattered. The cash-flow statement records a $260 million use of cash from receivables. Management attributes most of that movement to a $183 million increase in receivables due from BD since the acquisition. BD still collects from customers and pays some vendors on Waters’ behalf during the transition. A sale can therefore be recorded before the related money reaches Waters.
Waters reported collection days of 75, versus 85 a year earlier, although the acquisition changed the mix of customers and sales. This measure provides some counterevidence to a broad deterioration in customer payments. Settlement arrangements with BD are the clearer disclosed reason for much of the cash tied up in receivables.
Source: 2026 Form 10-Q, Note 1, p. 11, and “Cash Flow from Operating Activities,” p. 48.
Inventory used another $85 million of operating cash. Waters says tariffs raised material costs and that it held more safety stock to protect against supply disruptions. Holding that stock may help keep laboratories supplied, but it leaves less cash available elsewhere until the goods are sold and paid for.
The largest other use was a $540 million increase in other current assets. The filing connects broader movements in other assets and liabilities to payment timing, prepaid income taxes, provisions and accruals, without providing a complete breakdown of this line. The cash was committed during the period; a forecast of rapid recovery would require more detail about what is owed and when it will be settled.
Source: 2026 Form 10-Q, cash-flow statement, p. 5, and MD&A, p. 48.
Customer prepayments provided a partial offset. Operating cash benefited by $83 million from deferred revenue and advances. Waters generally bills service contracts at their start and then records revenue while providing the service. These payments finance some operations in advance, but also leave Waters responsible for future work.
The reported net loss therefore does not describe the cash result on its own. Adding back $1.213 billion of noncash charges and deferred-tax adjustments, then subtracting $771 million of net changes in operating assets and liabilities, takes the $127 million loss to $315 million of operating cash. The business produced cash despite the accounting loss, but collection and payment timing absorbed much of the benefit from those noncash adjustments.
Source: 2026 Form 10-Q, p. 5 and Note 2, p. 17. The complete cash bridge is in Calculation note 3.
4. The larger balance sheet depends on benefits expected from the acquisition
The acquisition created a much larger balance sheet, with goodwill and intangible assets making up 73.2% of total assets. Its financial success will depend heavily on the acquired businesses delivering the sales and earnings expected when those amounts were recorded.
| Consolidated financial position, USD millions | December 31, 2025 | October 3, 2026 |
|---|---|---|
| Cash and cash equivalents | 588 | 593 |
| Receivables, net | 829 | 1,464 |
| Inventory | 572 | 1,324 |
| Other current assets | 159 | 744 |
| Property, plant and equipment, net | 642 | 1,458 |
| Intangible assets, net | 558 | 8,294 |
| Goodwill | 1,340 | 9,369 |
| Total assets | 5,077 | 24,115 |
| Total liabilities | 2,515 | 8,824 |
| Shareholders’ equity | 2,562 | 15,291 |
Source: 2026 Form 10-Q, consolidated balance sheets, p. 1. Selected asset rows are not intended to sum to total assets; leases and other noncurrent assets are included in that total.
Most of the increase in receivables, inventory and equipment came with the acquired operations, rather than from spending by the old Waters business alone. The purchase allocation included $386 million of receivables, $977 million of inventory and $885 million of property and equipment. Acquired equipment included production assets and $116 million of instruments placed at customer locations. The ending inventory balance also reflects goods sold after acquisition and the higher safety stocks discussed above.
Waters recorded $8.384 billion of identifiable acquired intangibles, mainly customer relationships and developed technology. It recorded another $8.037 billion as goodwill—the purchase amount assigned to benefits such as the assembled workforce and expected gains from combining the businesses, rather than separately identifiable assets. These are not funds available to pay lenders. Weaker future earnings could require accounting write-downs, while useful technology and retained customers can support years of testing sales.
Source: 2026 Form 10-Q, Notes 3–5, pp. 18–24. The purchase allocation remained preliminary.
The transaction also explains much of the liability growth. Long-term deferred tax liabilities rose from $37 million to $1.602 billion; the purchase allocation itself included $1.638 billion. Such balances reflect differences between asset values used in financial reporting and tax calculations. They are distinct from a current tax bill or financing debt. Supplier payables rose from $104 million to $377 million, while employee compensation accruals rose from $100 million to $224 million as Waters took on the larger operations.
Equity grew mainly because Waters issued shares to complete the acquisition. It did not grow through retained profit: retained earnings fell by the $127 million nine-month loss. Additional paid-in capital—the equity recorded above shares’ nominal value—rose by $12.928 billion. Treasury shares—shares repurchased and held by the company—increased by $15 million at cost. Other comprehensive losses increased by $57 million, mainly because of currency translation; these changes were recorded directly in equity rather than in net profit. Calculation note 4 reconciles these movements.
Source: 2026 Form 10-Q, pp. 1 and 7, Note 4, p. 21, and Note 12, p. 31.
5. Borrowing capacity covers the next maturity, but debt still claims a large share of cash
Waters had funding available for its next major repayment, while higher interest costs made stronger cash generation more valuable. The company replaced a large short-term acquisition loan with bonds, spreading repayments across several years.
At October 3, Waters owed $5.155 billion of debt principal. The balance sheet shows $5.133 billion after deducting $22 million of borrowing costs not yet charged to expense. It had $593 million of cash and approximately $1.3 billion available under its revolving credit facility, a bank line that can be borrowed and repaid repeatedly. This supports management’s statement that it could fund the $650 million September 2027 maturity with cash and available credit.
| Debt principal due, USD millions | Amount outstanding at October 3, 2026 |
|---|---|
| 2027 | 650 |
| 2028 | 425 |
| 2029 | 900 |
| 2030 | 530 |
| 2031 | 1,150 |
| 2033 | 750 |
| 2036 | 750 |
| Total | 5,155 |
Reporting basis: The 2028 amount is the SpinCo term loan due February 4. The 2030 amount is the drawn revolver, which matures in May. The table excludes future interest and operating leases.
Source: 2026 Form 10-Q, Note 6, pp. 24–27, and liquidity discussion, p. 43.
Access to a credit line can fund a maturity, but using it replaces one borrowing with another. Reducing debt requires cash left after operating and investment needs. Waters’ first-nine-month debt repayments exceeded new borrowing proceeds by $253 million. Nevertheless, total debt rose sharply from year-end because Waters assumed $4 billion with the acquired business. Cash repayment flows and the change in the debt balance measure different things here.
The fixed-rate notes alone require approximately $185.4 million of annual contractual cash interest at their outstanding principal amounts. That excludes variable interest on the $425 million term loan and $530 million revolver, fees and hedging effects. Actual nine-month net interest expense was $150 million, versus $42 million a year earlier. Currency swaps reduced that 2026 expense by approximately $12 million; the benefit is already included and should not be subtracted again.
Source: 2026 Form 10-Q, Note 6, pp. 25–27, cash-flow statement, p. 5, and MD&A, p. 49. Coupon inputs are provided in Calculation note 5.
Waters reported compliance with all debt covenants, the rules in its lending contracts. These rules limit debt relative to earnings and require earnings to cover interest by a set multiple, using definitions specified by the lenders. Its revolver generally limits the contract-defined leverage ratio to 3.5 times, with a conditional acquisition-related increase to 4.25 times, and requires interest coverage of at least 3.5 times. Older private notes also have 3.5-times leverage and interest-coverage tests. The filing does not disclose actual covenant ratios, so compliance can be established, but the precise room remaining under those limits cannot be calculated from GAAP operating profit alone.
Leases add operating commitments beyond financing debt. Recorded lease liabilities were $366 million, up from $84 million, largely because the acquisition brought $296 million of leases. Undiscounted rent commitments total $452 million, including $65 million in 2027. Also, $557 million of quarter-end cash was held by foreign subsidiaries; the consolidated total should not be read as a U.S. bank balance.
Source: 2026 Form 10-Q, Notes 1, 6 and 9, pp. 10 and 26–29.
Waters is not currently using substantial cash for shareholder distributions. It paid no dividends and made no open-market share repurchases in the first nine months. The $15 million spent on treasury shares related to restricted-stock vesting. Stock compensation expense was $67 million, versus $40 million a year earlier, while employee stock plans supplied $26 million of cash. These arrangements remain a source of dilution, though the acquisition share issuance was by far the larger change in ownership.
Source: 2026 Form 10-Q, cash-flow statement, p. 5, equity policy, p. 16, and MD&A, pp. 49 and 51.
6. Cost savings are arriving before the transition is finished
Workforce savings are measurable, but Waters is still paying to operate and separate the combined businesses. The original acquisition plan called for manufacturing, supply-chain and administrative savings, alongside continued research and commercial investment. The important question is how much of those savings remains after transition costs.
The 2026 workforce reduction affected approximately 3% of employees. Waters reported $39 million of salary-related savings through the third quarter and expected $67 million for full-year 2026, with approximately $120 million of annual savings when fully realized. The nine-month severance charge was $64 million, of which $46 million had been paid and $18 million remained accrued. The savings are an operating benefit already beginning to appear, while severance explains part of the near-term cash burden.
Sources: July 14, 2025 acquisition announcement, cost-savings purpose; 2026 Form 10-Q, restructuring policy, p. 16, and MD&A, p. 42.
Waters also pays BD to keep essential functions running during integration, including order fulfillment, accounting, information technology and human resources. This transition-services agreement can last up to three years and costs approximately $90 million annually; Waters incurred $58 million through October 3. Ending the arrangement could reduce payments to BD, but Waters must first provide or replace those services. The full fee is therefore not automatically a future profit saving.
Some transfers also remained incomplete, principally in China and Italy. Waters records the associated sales and expenses because it controls the goods or services supplied to customers, while certain underlying assets and liabilities remain with BD pending legal transfer. This helps explain why legal ownership, reported revenue and cash settlement do not move together during integration.
Source: 2026 Form 10-Q, Note 1, p. 9, and Note 10, p. 29.
The new global enterprise resource planning system, which coordinates business processes, is another investment in operating the company. Waters had spent $108 million against an estimated $130 million project cost by October 3. Of the cumulative spending, $64 million was recorded as assets and $44 million as expenses. The remaining $22 million against the current estimate is a project-budget calculation, not a separately disclosed contractual obligation. Implementation also carries disruption risk while the company integrates BD’s operations.
The system is intended to replace legacy software with a global cloud-based platform. Its business benefit depends on completing that transition without interrupting orders, production or accounting. The project’s mix of recorded assets and expenses also means its total cost should not be equated with the capital-spending line.
Sources: 2026 Form 10-Q, Note 10, p. 29, cash-flow statement, p. 5, and operational risks, pp. 52–53; earnings release, non-GAAP reconciliation footnote (d), platform purpose.
7. New diagnostic channels offer growth, with different launch dates and cash needs
Customer partnerships provide a concrete route to more repeat testing sales, while product launches and another acquisition extend the investment period. These developments concern future operations; they did not generate the third-quarter results shown above.
Labcorp announced on October 23 that it intended to offer the BD Onclarity HPV assay through its laboratory network beginning in late 2026. Quest’s October 20 collaboration targets broader access to the Onclarity home-collection option starting in 2027. Quest plans to process samples using the BD COR automated laboratory system. If these channels bring more samples into the laboratories, Waters can sell more assays and related supplies through equipment already used in testing workflows.
These are meaningful distribution routes, but the announcements do not disclose guaranteed order volumes or Waters’ profit per test. The next commercial evidence is actual laboratory adoption and testing volume. Competition also remains: the FDA approved Roche’s cobas HPV test for specified self-collected samples in healthcare settings in May 2024. That is a different collection setting from Waters’ new home option, but shows that laboratories have competing HPV testing systems.
Sources: Labcorp’s October 23, 2026 announcement; Waters and Quest’s October 20 announcement; FDA’s Roche cobas approval overview, approval dated May 14, 2024.
On November 10, Waters announced FDA clearance for its BD OneFlow LST and B-CLPD T1 tests, which help identify certain blood cancers. The company plans U.S. commercial availability in spring 2027. The ready-to-use tests combine reagents and standardized procedures, offering laboratories a way to reduce manual preparation. This expands the acquired Biosciences business’s product offering, with the sales benefit dependent on laboratories adopting the tests after launch.
Source: Waters’ November 10, 2026 OneFlow announcement, product clearance and availability. This is a company-issued original release distributed through PR Newswire.
Waters is also investing beyond the BD portfolio. It bought MOBILion Systems on November 2 for $108 million in cash, subject to customary adjustments. MOBILion’s technology separates molecules by size, shape and charge. Waters intends to combine it with mass spectrometry to improve the study of proteins, with possible clinical uses over a longer period.
That purchase is substantial relative to the $165 million of free cash flow generated in the first nine months. It was completed after the balance-sheet date, so its cash payment is absent from the October 3 cash balance and nine-month cash-flow statement. The acquisition adds a technology-development opportunity while using funds that could otherwise support integration or debt reduction; the filing does not supply a revenue contribution forecast for MOBILion.
Sources: 2026 Form 10-Q, Note 1, “Subsequent Event,” p. 17; Waters’ November 3 MOBILion announcement, intended technology applications. The later filing supplies the purchase price omitted from the announcement.
Management’s November 3 outlook calls for 2026 revenue of $6.479 billion–$6.497 billion, including approximately $3.050 billion from the acquired businesses during the period owned. It expects fourth-quarter legacy growth of 7%–9% excluding currency effects. These are forecasts. The acquired businesses’ modest third-quarter comparable growth and the lower margin in Analytical & Materials Sciences remain the strongest evidence that new products and integration must produce further improvements before the enlarged company can turn sales growth into stronger margins and cash.
Source: November 3 earnings release, full-year and fourth-quarter guidance; 2026 Form 10-Q, segment discussion, pp. 46–47.
Other disclosed exposures also matter to cash planning. Waters made a $5 million litigation payment during the first nine months and recorded no new litigation provision, an expense for expected case costs; management did not expect current cases to have a material effect. The filing provides no quantified reasonably possible loss range. The latest annual tax disclosure reported $15.211 million of tax benefits not recognized because their acceptance was uncertain, excluding interest and penalties. That balance is dated December 31, 2025, not October 2026. The quarterly filing reports no material effect from global minimum-tax rules or the 2025 U.S. tax legislation. It also had not recognized material tariff refunds because recovery and timing remained uncertain. No refund inflow is assumed in this analysis.
Sources: 2026 Form 10-Q, Notes 7–8, pp. 27–28, and tariff discussion, p. 40; 2025 Form 10-K, Note 9, pp. 92–93.
8. Waters has a broader business, but the acquisition’s cash benefits are still developing
The business case is supported by growing legacy demand and new testing channels; the cash benefits of combining the businesses remain incomplete. Waters has increased repeat-sales opportunities and begun realizing salary savings. It also has borrowing capacity to manage the next debt maturity.
The decisive improvement would be for acquired-business sales to accelerate while BD settlements, transition costs and integration spending consume less cash. That would allow customer growth to support debt reduction and further product investment. If existing margins remain under pressure or the transition takes longer, the same borrowing capacity can provide time, but more operating cash would still be needed to reduce debt. This makes execution across collections, cost savings and diagnostic launches the central business issue for the coming year.
Sources: 2026 Form 10-Q, Notes 6 and 10 and MD&A, pp. 42–49; customer and product announcements cited in section 7.
Reporting basis and calculation notes
Reporting basis: This analysis uses Waters Corporation and its consolidated subsidiaries, under U.S. GAAP, rather than the separate debt-guarantor accounts. The selected filing is Form 10-Q, CIK 0001000697, accession 0001193125-26-455594, filed November 10, 2026. The quarter runs July 5–October 3, 2026, compared with June 29–September 27, 2025. The cumulative periods run January 1 through those respective quarter-end dates. Balance-sheet comparisons use December 31, 2025. The annual historical source is the 2025 Form 10-K, accession 0001193125-26-062604, filed February 23, 2026. The research cutoff is November 11, 2026; reviewed developments extend through the November 10 OneFlow release, without asserting that every event through the cutoff was examined.
Sources: SEC filing history; selected 10-Q, cover and Note 1; SEC company financial facts. Cross-checks selected the filing’s accession and matching dates, using consolidated U.S. GAAP facts in dollars, or dollars per share for EPS. Dollar amounts were converted to millions.
Calculation notes:
- Growth and margins. All dollar inputs here are USD millions. Existing-business quarterly growth is $871 ÷ $800 − 1 = 8.9%. Acquired-business growth is $896 ÷ $885 − 1 = 1.2%. Combined comparable growth is $1,767 ÷ ($800 + $885) − 1 = 4.9%. Recurring-category shares are ($806 + $433) ÷ $1,767 = 70.1% for 2026 and ($158 + $300) ÷ $800 = 57.3% for 2025. Gross margin is revenue less direct product and service costs, divided by revenue: ($1,767 − $879) ÷ $1,767 = 50.3% in the 2026 quarter, versus ($800 − $328) ÷ $800 = 59.0%. First-nine-month inputs are ($4,678 − $2,470) and ($2,233 − $926), producing 47.2% and 58.5%. Operating and net margins divide the respective profit by the same period’s revenue. Calculations use published rounded figures; company percentages may use more precise underlying amounts.
Sources: 10-Q, pp. 2–3 and 32; earnings release, comparable-revenue reconciliation.
- What management removed from quarterly earnings. The table shows additions to reported pretax and net profit, with tax effects already reflected in the after-tax columns. These are management’s non-GAAP adjustments, not a claim that every excluded cost immediately ends.
| Quarterly earnings reconciliation, USD millions | 2026 pretax | 2026 after tax | 2025 pretax | 2025 after tax |
|---|---|---|---|---|
| Reported profit | 74 | 81 | 170 | 149 |
| Purchased-intangible amortization and acquisition asset revaluations | +323 | +259 | +12 | +9 |
| Restructuring and certain other items | +20 | +16 | +1 | +1 |
| ERP implementation and transformation | +7 | +5 | +6 | +5 |
| Acquisition-related costs | +54 | +44 | +31 | +28 |
| Financing costs | 0 | 0 | +14 | +11 |
| Difference from adding rounded disclosed amounts | 0 | −1 | +1 | 0 |
| Management’s adjusted profit | 478 | 404 | 235 | 203 |
The rounding row makes the displayed arithmetic agree with management’s published totals; it is not another economic adjustment. The reported tax benefit of $7 million in 2026 becomes a $74 million tax expense on management’s adjusted basis. For 2025, tax expense changes from $21 million to $32 million. Adjusted diluted EPS is $4.10 versus $3.40. The 2026 adjustment leaves quarterly net interest expense of $53 million in place. The $20 million restructuring-and-other adjustment is broader than the $12 million severance charge shown separately in the income statement.
Source: earnings release, quarterly GAAP-to-adjusted reconciliation and footnotes (a)–(h). The table preserves management’s combined $323 million acquisition-accounting adjustment. Adding individual rounded expense lines can differ from the disclosed combined amount by $1 million.
- Profit, cash and investment reconcile. This table checks why cash remained positive despite the reported loss. Positive adjustments add to operating cash; negative amounts reduce it.
| Profit-to-cash reconciliation, USD millions | First nine months 2026 |
|---|---|
| Reported net loss | −127 |
| Stock compensation | +67 |
| Deferred-tax adjustment | +5 |
| Depreciation | +106 |
| Intangible amortization | +702 |
| Acquisition inventory and equipment revaluation expense | +333 |
| Receivables movement | −260 |
| Inventory movement | −85 |
| Other current assets movement | −540 |
| Other assets movement | −2 |
| Supplier payables and other current liabilities movement | +104 |
| Deferred revenue and customer advances movement | +83 |
| Other liabilities movement | −71 |
| Operating cash flow | 315 |
The five noncash and tax adjustments total $1,213 million. The remaining operating-asset and liability movements use $771 million net. Acquisition-date balances are separate from these operating cash movements.
Free cash flow is $315 − $150 = $165, versus $488 − $74 = $414 in the comparable 2025 period. The decline is ($165 ÷ $414 − 1) × 100 = −60.1%. Closing cash reconciles as opening cash of $588 + operating cash of $315 − investing cash use of $16 − financing cash use of $279 − currency effect of $15 = $593. The statements show cash and cash equivalents without a separate restricted-cash reconciliation.
Investing cash use is $150 of capital spending + $10 of outside investments − $85 of net cash acquired − $59 from changes in the deferred-close deposit asset = $16. The $85 acquisition inflow is $144 of acquired cash less the $59 closing settlement paid to BD. The separate $59 deposit-asset inflow principally reflects collection of receivables that existed at acquisition in businesses awaiting legal transfer; it is not operating cash in the filing.
The November 3 preliminary release showed operating cash of $296 and capital spending of $131, versus $315 and $150 in the later 10-Q. Both pairs produce $165 of simple free cash flow. This report uses the later filed classifications; the cited documents do not explain the $19 million movement between categories. Management’s adjusted free cash flow of $228 additionally includes $4 of net litigation adjustments and $59 of deposit-asset cash: $165 + $4 + $59 = $228.
The transition-services note separately records $213 million due from BD and $39 million due to BD, or $174 million net. That ending settlement balance and the $183 million receivables movement discussed in MD&A have different disclosed scopes and must not be added as separate cash outflows.
Sources: 10-Q, p. 5, Note 1, p. 11, and MD&A, pp. 48–49; earnings release, preliminary cash-flow statement and adjusted free-cash-flow reconciliation.
- The balance sheet and equity movements balance. In USD millions, October 3 assets of $24,115 equal liabilities of $8,824 + equity of $15,291. At December 31, assets of $5,077 equal liabilities of $2,515 + equity of $2,562.
The following table checks each equity account. The net changes sum to $12,729 million, taking total equity from $2,562 million to $15,291 million.
| Equity account, USD millions | December 31, 2025 | Net change | October 3, 2026 |
|---|---|---|---|
| Common stock at nominal value | 2 | 0 | 2 |
| Additional paid-in capital | 2,416 | +12,928 | 15,344 |
| Retained earnings | 10,431 | −127 | 10,304 |
| Treasury shares at cost | −10,162 | −15 | −10,177 |
| Accumulated other comprehensive loss | −125 | −57 | −182 |
| Total equity | 2,562 | +12,729 | 15,291 |
Paid-in capital increased by acquisition-related equity of $12,835 million, employee share-plan entries of $27 million and stock-compensation equity of $66 million. Retained earnings fell by the reported net loss. Other comprehensive loss increased by $52 million of currency translation and $5 million of derivative losses.
The $12,835 million acquisition equity amount includes $12,807 million for common shares and $28 million for replacement employee awards attributable to pre-acquisition service. Total purchase consideration of $12,899 million also includes the $59 million working-capital settlement and $5 million of financing fees. The $4 billion of assumed debt is a separate acquired liability. The equity statement’s rounded stock-compensation and employee-plan entries differ slightly from cash-flow-statement amounts; equity entries are not substituted for paid cash.
Sources: 10-Q, pp. 1, 5 and 7 and Notes 4 and 12, pp. 19–21 and 31.
- Contractual interest and asset concentration. Annual fixed-note cash interest, in USD millions, is ($650 × 4.321%) + ($600 × 4.398%) + ($750 × 4.656%) + ($750 × 4.945%) + ($750 × 5.245%) + ($300 × 3.53%) + ($400 × 2.25%) = $185.4. This assumes the stated principal remains outstanding for a full year; it is not a forecast of total interest expense. Variable loans, fees and hedge effects are excluded. Goodwill and intangible concentration is ($9,369 + $8,294) ÷ $24,115 = 73.2%.
Source: 10-Q, balance sheet, p. 1, and debt schedules, pp. 25–27.
This report provides business and financial information for general understanding. It is not investment advice or a recommendation to buy or sell securities.