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Introduction & Market Context
Masimo Corporation (NASDAQ:MASI) released its third-quarter 2025 earnings presentation on November 4, showcasing solid financial performance despite new tariff challenges. The medical technology company's stock closed up 2.75% at $144.96 following the announcement, though it experienced a slight 0.66% decline in aftermarket trading.
The company's results exceeded analyst expectations, with adjusted earnings per share of $1.32 surpassing the forecast of $1.20, and revenue of $371 million coming in above the anticipated $366.85 million.
Executive Summary
Masimo reported non-GAAP revenue of $371 million for Q3 2025, representing 8% growth on a constant currency basis compared to the same period last year. Non-GAAP operating profit reached $101 million, a 29% increase, while earnings per share jumped 38% to $1.32.
The company highlighted that new tariffs had a significant impact on its bottom line. Excluding these tariffs, operating profit would have reached $106 million (36% growth) with earnings per share of $1.40 (46% growth).
"We are confident in our ability to deliver on our goals for 2025 and beyond," said CEO Katie Szyman in the earnings call that followed the presentation.
Quarterly Performance Highlights
The presentation revealed divergent performance between Masimo's business segments. Capital equipment revenue surged 67% year-over-year to $55 million, demonstrating strong market demand for the company's medical devices. However, consumable and service revenue showed more modest growth of just 1%, reaching $316 million.
As illustrated in the following chart, while overall revenue growth remained robust, the composition of that growth has shifted significantly toward capital equipment:
The company's profitability metrics showed mixed results. Non-GAAP gross margin decreased slightly by 70 basis points to 62.2%, likely impacted by the new tariffs. However, non-GAAP operating margin improved substantially, rising 450 basis points to 27.1%, reflecting effective cost management and operational efficiency.
Masimo also reported shipping 66,000 technology boards and instruments during the quarter, securing new contracts with an incremental value of $124 million. The company's unrecognized contract revenue stood at $1.714 billion, with $507 million expected to be recognized within the next 12 months.
Impact of Tariffs and Mitigation Strategies
A significant portion of the presentation addressed the impact of new tariffs on Masimo's business operations. The company disclosed that updated 2025 guidance incorporates an increase of $16-$17 million to cost of sales due to these tariffs, representing a 110 basis point impact to margin and a 22-24 cent reduction in earnings per share.
The presentation detailed the specific tariff impacts by country, with new rates ranging from 25-30% for Mexico, 19% for Malaysia, and 20-44% for China. The annualized impact of these new tariffs is estimated to be approximately 200-260 basis points.
Masimo outlined several mitigation strategies already implemented, including supply chain process adjustments, qualification of products for USMCA exemption, and reductions in cost of goods sold. The company indicated that additional mitigation measures could potentially reduce the annualized impact of tariffs by up to 50% over time.
Updated Guidance and Outlook
Despite the tariff challenges, Masimo raised its full-year guidance for 2025. The company now expects non-GAAP revenue between $1,510 million and $1,530 million, representing 8.5-10.0% growth on a constant currency basis.
Non-GAAP operating profit is projected to reach $412-$424 million, with earnings per share between $5.40 and $5.55. Excluding the impact of new tariffs, the company would have expected even stronger results, with operating profit of $428-$440 million and earnings per share of $5.62-$5.79.
The following slide details the company's updated guidance compared to previous projections:
CFO Micah Young emphasized the company's financial strength during the earnings call, noting, "Our business's exceptional earnings power remained evident." The company also highlighted its shareholder-friendly capital allocation, having returned $350 million to shareholders through stock repurchases.
Masimo plans to provide more details on its long-term strategy at its upcoming Investor Day scheduled for December 3, 2025, where analysts expect further insights into the company's growth initiatives and tariff mitigation plans.
The strong quarterly performance, despite external tariff pressures, demonstrates Masimo's operational resilience and positions the company well for continued growth in the healthcare technology sector.
Full presentation:
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