Guardant Health, Inc. (GH) Q3 2025 Earnings Call Transcript

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Overview

The earnings call summary and Q&A indicate strong revenue growth and optimistic guidance, particularly in oncology and Shield revenues. Despite some uncertainties in FDA timelines and 2026 growth, the positive reception of MCD and Guardant360's growth drivers, along with raised revenue guidance and improved margins, suggest a positive outlook. The market cap indicates a moderate reaction, leading to a 'Positive' sentiment prediction for the stock price over the next two weeks.

Key Financial Performance

Revenue Q3 revenue grew 39% year-over-year to $265 million. This growth was driven by strong performance across oncology, screening, and biopharma and data businesses.

Oncology Revenue Oncology revenue increased 31% year-over-year to $184 million. This was primarily driven by a 40% increase in oncology test volumes to approximately 74,000 tests, reflecting continued positive momentum across the portfolio.

Screening Revenue Screening revenue from Shield totaled $24.1 million, generated from 24,000 tests. Shield ASP was approximately $880, above expectations, reflecting a focus on Medicare-covered patients.

Biopharma and Data Revenue Revenue increased 18% year-over-year to $54.7 million, including milestone revenue from 2 companion diagnostic approvals achieved during the quarter.

Gross Margin Non-GAAP gross margin increased to 66% in Q3 2025 compared to 63% in the prior year period. This improvement was driven by a reduction in Reveal COGS and progress in Shield gross margin.

Adjusted EBITDA Loss Adjusted EBITDA loss was $45.5 million, an improvement of $10.7 million compared to a loss of $56.2 million in Q3 2024. This reflects disciplined cash management and operational improvements.

Free Cash Flow Burn Free cash flow burn was $45.8 million, improving by $9.5 million compared to the prior year period. Excluding the screening business, Guardant generated positive free cash flow during the quarter.

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Operating Highlights

Guardant360 Liquid: Achieved fifth consecutive quarter of accelerating growth with volumes up more than 30%.

Shield Multi-Cancer: Now available nationwide through clinical data collection initiative, with strong real-world performance data.

Reveal: Fastest-growing oncology product, benefiting from CRC surveillance reimbursement and strong performance in breast and lung cancer indications.

Strategic collaboration with Quest Diagnostics: Expands Shield access in the U.S., providing connectivity to 650,000 clinician and hospital accounts and logistical infrastructure.

Partnership with PathGroup: Expands Shield's reach to more than 250 health systems across 25 states.

Revenue Growth: Achieved 39% year-over-year revenue growth, reaching $265 million in Q3 2025.

Cash Flow Milestone: Core business became cash flow positive one quarter earlier than expected.

Gross Margin Improvement: Non-GAAP gross margin increased to 66% in Q3 2025, driven by cost reductions in Reveal and Shield.

FDA Submission for Guardant360 Liquid: Potential to streamline portfolio with a single flagship FDA-approved liquid biopsy for therapy selection.

Shield CRC V2: Demonstrated improved sensitivity for stage I colorectal cancer, enhancing clinical performance.

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Risk or Challenges

Regulatory Risks: The company is awaiting FDA approval for Guardant360 Liquid, which is critical for streamlining its portfolio and accelerating adoption. Delays or denials could impact strategic goals and market positioning.

Economic and Financial Risks: Despite achieving positive cash flow in core business, the screening business remains a significant cash burn, with free cash flow burn projected at $225-$235 million for 2025. This could strain financial resources if not managed effectively.

Competitive Pressures: The company faces intense competition in the oncology and screening markets. Its ability to maintain technical leadership and market share depends on the successful rollout of new applications and partnerships.

Operational Risks: The company is heavily investing in scaling its Shield commercial infrastructure and partnerships, which could face execution challenges or delays, impacting revenue growth.

Reimbursement Risks: While Shield has achieved Medicare coverage, broader reimbursement from private payers and Medicare Advantage remains uncertain, which could affect revenue projections.

Supply Chain and Scalability Risks: The company is expanding its commercial infrastructure, including partnerships with Quest Diagnostics and PathGroup. Any disruptions in these partnerships or logistical challenges could hinder growth.

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Guidance & Outlook

Revenue Guidance: Guardant Health has raised its full-year 2025 revenue guidance to a range of $965 million to $970 million, representing approximately 31% growth compared to 2024. This is an increase of $47.5 million versus the prior range.

Oncology Revenue Growth: Oncology revenue is now expected to grow approximately 25% year over year, up from prior guidance of 20%. Total oncology test volume is forecasted to grow more than 30%, compared to the previous expectation of greater than 27%.

Shield Revenue Guidance: Shield revenue guidance has been increased to $71 million to $73 million, up from $55 million to $60 million. Shield test volume is expected to reach 80,000 to 82,000 tests, compared to prior guidance of 68,000 to 73,000 tests.

Gross Margin Improvement: Full-year non-GAAP gross margin guidance has been raised to 64% to 65%, up from 63% to 64%, driven by continued improvement in gross margins.

Cash Flow and Financial Roadmap: Guardant Health remains committed to reducing cash burn each year and achieving company-wide cash flow breakeven by the end of 2027. For 2025, free cash flow burn is expected to be $225 million to $235 million, an improvement from $275 million in 2024.

Shield Commercial Expansion: The company plans to reinvest incremental screening gross profit to accelerate commercial expansion, particularly for Shield.

Strategic Partnerships: Strategic collaborations with Quest Diagnostics and PathGroup are expected to expand Shield's reach and accelerate adoption. Shield is expected to be available for physician order through Quest in Q1 2026.

Multi-Cancer Detection (MCD) Expansion: Shield Multi-Cancer Detection (MCD) is now available nationwide through a clinical data collection initiative, expected to reach hundreds of thousands of participants. This initiative aims to generate large-scale prospective evidence for early cancer detection.

Long-Term Growth Drivers: Guardant Health anticipates durable long-term growth driven by commercial initiatives, Smart platform applications, and expanded MRD offerings, including an ultra-sensitive tissue-informed MRD assay.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What are the Shield ASP dynamics exiting the year and the expected trends until 2028?

A:The Shield ASP is currently at $900, with Medicare rates at $1,495. The majority of volume is skewed towards Medicare and Medicare Advantage, which pay at the $1,495 rate. Commercial patients currently contribute little to ASP. By 2028, ASP is expected to decrease to $700 due to a higher proportion of commercial patients in the mix. The company is confident in maintaining the $1,495 Medicare rate for at least the next two years.

Q:Is guideline inclusion by ACS for Shield a real possibility by year-end, and what is the expected impact?

A:ACS guideline inclusion is a possibility, but it is not included in this year's guidance. Inclusion would initially improve appeal success rates and eventually lead to product coverage and contracting successes. The company is optimistic but not counting on immediate financial impact.

Q:What is the outlook for Shield's growth in 2026 and the early reception of MCD?

A:The company is confident in the long-term outlook for Shield but considers it too early to comment on 2026 growth. Early reception of MCD is positive, but specific attach rates were not disclosed.

Q:What is the timeline for NCD FDA approval for MCD based on Shield's trajectory?

A:It is too early to provide a specific timeline for FDA approval for MCD. The company is optimistic about building evidence through access to extensive patient data but will provide updates as confidence grows.

Q:What progress has been made in increasing tests per patient for Reveal, and what are the key catalysts for the product?

A:The company has implemented capabilities to pull in subsequent test orders, leading to an increase in tests per patient. Key catalysts include ongoing studies, additional tumor types, and the launch of therapy monitoring based on Reveal.

Q:What are the views on PEGASUS data and its impact on MRD-driven therapy management?

A:PEGASUS data showed potential to spare 75% of patients from chemotherapy, reducing toxicities. The study used an older version of Reveal, and the company is looking forward to larger datasets and newer versions like TRACC to refine thresholds for therapy management.

Q:What is driving the growth of Guardant360, and what inning is the company in regarding new growth drivers?

A:Growth is driven by market penetration, share gains, and the potential for concurrent testing to become standard. The company estimates moving from 1 test per patient per lifetime to 4-5 tests per year, indicating significant growth potential.

Q:What is the status of Reveal volumes and the growth outlook for MRD?

A:Reveal is the fastest-growing product in oncology, with significant investments planned for data generation. The company is optimistic about the tumor-informed side of MRD and expects Reveal Ultra to set new standards in sensitivity and performance.

Q:What is the expected sequential growth for Shield in Q4, and what are the potential catalysts?

A:The company expects an 8,000 test sequential growth in Q4. Catalysts include collaborations with Quest and PathGroup, guideline inclusion, and the build-out of the commercial team.

Q:What is the status of Reveal Ultra and its potential impact?

A:Reveal Ultra is in development and expected to offer significantly improved sensitivity. The company is making good progress but has not disclosed a specific launch timeline.

Q:What are the KPIs for Shield's performance, and how is gross margin progressing?

A:Key KPIs include increasing breadth and depth of ordering and high adherence rates. Shield's gross margin is 55%, with ASPs close to $900 and costs below $500. Reveal's gross margin is slightly lower but improving.

Q:What is the status of ADLT status and breast Medicare coverage for Reveal?

A:ADLT status and breast Medicare coverage are still in progress, with potential milestones expected in early next year.

Q:Does advanced adenoma sensitivity data from competitors pose a threat to Shield?

A:The company is confident in its leadership position and technology stack, with a significant head start in CRC and multi-cancer testing. It continues to refine its technology to maintain competitiveness.

Q:What is the focus of the increased OpEx, and how is the sales and marketing team structured?

A:Increased OpEx is focused on sales and marketing, with over 250 salespeople for screening and a larger team for oncology. The company plans to continue investing in commercial build-out while keeping R&D and G&A relatively flat.

Q:What is driving the acceleration in Guardant360's growth, and what are the key growth drivers?

A:Acceleration is driven by share gains, penetration into new cancer types, and the potential for longitudinal testing. The test's capabilities, such as determining cancer type and subtyping, are also contributing to growth.

Q:What is the reimbursement status for Reveal in colorectal cancer?

A:Reveal is reimbursed for all CRC tests performed for Medicare at $1,640. Medicare Advantage and commercial payments are improving, and the company anticipates further reimbursement growth in other indications.

Q:Review of Unclear Management Responses

A:Management avoided providing specific timelines for FDA approval for MCD and the launch of Reveal Ultra. They also refrained from commenting on 2026 growth for Shield and provided limited details on early attach rates for MCD.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Guardant Health, Inc. (GH) Q3 2025 Earnings Call Transcript

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The earnings call summary reveals strong financial performance with significant improvements in gross profit and reduced cash flow burn. The strategic collaboration with Pfizer and raised revenue guidance are positive indicators. The Q&A section highlights growth in key products and strong market positioning, despite some uncertainties around Shield V2 data and payer coverage. The market cap suggests moderate volatility, leading to a positive prediction for the stock price movement over the next two weeks.

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Despite positive revenue growth and improved gross margins, the company's increasing cash burn and lack of a share buyback program raise concerns. The Q&A section shows optimism about product development and market expansion, but management's unclear responses about market share and trial timelines add uncertainty. Given the company's market cap, the stock price is likely to remain stable, resulting in a neutral sentiment.

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