Quest Diagnostics (DGX) Q2 2025: Acquisitions Boost Revenue and Profitability

Quest Diagnostics, a leading provider of diagnostic testing services, recently released its financial results for the second quarter of 2025. In this post, we'll dive into the numbers from their latest 10-Q filing to understand what’s driving their performance and what it tells us about the company's health and strategy. The big picture? Strong revenue growth fueled by a busy acquisition strategy, leading to improved profitability.

Acquisitions Power Strong Revenue Growth

Quest reported impressive top-line growth, with net revenues for the second quarter reaching $2.76 billion, a significant 15.2% increase from the $2.40 billion reported in the same quarter last year.

The engine for this growth is the company's core Diagnostic Information Services (DIS) segment, which handles the clinical testing services you're likely familiar with. This segment saw its revenue jump 15.7% to $2.7 billion. The key driver here isn't just more people getting tests; it's acquisitions.

• Total requisition volume (the number of test orders) increased by a massive 16.3%.
• However, organic volume growth was a more modest 2.1%.
• The remaining 14.2% of volume growth came directly from recent acquisitions.

This clearly shows Quest's strategy of growing by acquiring smaller labs and integrating them into its massive network.

From Billions in Revenue to Millions in Profit

While growing revenue is great, turning it into profit is what really counts. Quest succeeded here as well, with net income attributable to the company rising 23.1% to $282 million ($2.47 per diluted share), up from $229 million ($2.03 per share) in Q2 2024.

To see how Quest's revenue flows through its various costs to arrive at its net income, have a look at this visualization of their Q2 2025 income statement.

A key indicator of efficiency, the company's operating margin, improved to 15.9% from 14.8% a year ago. This was achieved even as expenses rose. Cost of services—the direct costs of performing tests—grew by 14.1%, but crucially, this was slower than revenue growth, indicating good cost control. As expected with recent acquisitions, amortization of intangible assets (the accounting cost of acquired assets like customer lists) increased by $10 million.

Strong Cash Flow and Prudent Capital Use

Beyond the income statement, Quest's cash flow performance was particularly strong. For the first six months of 2025, the company generated $858 million in cash from operations, a substantial increase from $514 million in the first half of 2024.

Quest has been putting this cash to work strategically:

• Paying Down Debt: The company made debt repayments totaling $1 billion in the first half of the year, including paying off a $600 million batch of senior notes that matured in March. This strengthens the balance sheet.
• Acquisitions: While acquisition spending was much lower in the first half of 2025 ($17 million) compared to the same period in 2024 ($248 million), the revenue impact from prior-year deals is now being fully realized.
• Share Buybacks: Quest did not repurchase any of its common stock in the first half of 2025, despite having $0.9 billion remaining in its authorization. This suggests a current focus on using cash for acquisitions and debt reduction.

Final Thoughts

Quest Diagnostics delivered a very solid second quarter. The company is successfully executing a growth-by-acquisition strategy, which is common in the competitive clinical laboratory industry where scale is a major advantage. More importantly, it is translating that top-line growth into improved profitability and powerful cash flow.

Looking ahead, the key challenge for Quest will be to continue smoothly integrating its newly acquired businesses while also fostering momentum in its organic growth. The company's disciplined approach to paying down debt while expanding its footprint positions it well for the future.