Danaher's New CEO Montgomery Reframes the Playbook Around "Unambiguous Share Gain," While Guiding to a Flat 4% to 5% Core Growth Starting Point for 2027
Q3 2026 earnings call, October 21, 2026: first quarter under CEO Julie Montgomery
Danaher used its first earnings call under Julie Montgomery to signal a shift in emphasis from portfolio reshaping to commercial execution. Montgomery said the portfolio transformation is "largely complete" and that the company's "true report card" is "unambiguous share gain." She also conceded that growth "over the past several years has not consistently reflected the full potential of our portfolio." That is a notable admission from a company whose operating system has been the subject of business school case studies.
The quarter itself was better than planned. Sales were $6.6 billion, and core revenue growth excluding respiratory was 5.5%, a 100 basis point acceleration from the second quarter. Adjusted operating margin was 29%, up 110 basis points, helped modestly by tariff refunds. Adjusted EPS of $2.11 rose about 11.5%. Free cash flow was $1.6 billion, bringing the year-to-date total to $4 billion, or 128% of net income. Management raised its full-year adjusted EPS guidance to $8.57 to $8.62 from $8.45 to $8.60.
2027: A 4% to 5% Starting Point That Analysts Found Conservative
CFO Matt Gugino offered an early view of 2027, saying 4% to 5% core growth excluding respiratory "is the right starting point as we sit today," with formal guidance due in January. Core growth ex-respiratory has averaged that range in recent quarters. The figure drew pushback. Jefferies' Tycho Peterson noted that bioprocessing orders and resin delays should convert to revenue, China volume-based procurement is no longer a headwind, and biotech and academic demand are recovering. He asked why growth would not accelerate and whether 4% to 5% was a floor.
Montgomery declined to characterize it as a floor. She said it was "a reasonable starting point for 2027 based on the current end market conditions" and that the company wants to complete its normal Q4 planning process first. Given her few weeks in the role, the reluctance to raise the bar before the budget work is done is understandable. Even so, the guidance leaves little room for the improvement the company itself described in bioprocessing, diagnostics and academic markets.
For the fourth quarter, Danaher expects core growth ex-respiratory of 4% to 5%, a respiratory headwind of about 150 basis points, and an adjusted operating margin of about 29.5%.
Respiratory: Planning for a "Down-the-Middle" Season at $1.5 Billion
Respiratory revenue was about $350 million in the quarter. It was down year over year but modestly ahead of expectations as customers bought ahead of the season. It was a roughly 250 basis point headwind to Danaher's core growth and about 650 basis points for diagnostics. Danaher is planning for $1.5 billion of respiratory revenue this year and sees that as the right base for 2027. Peterson asked why the company is cutting another $100 million when the data are starting to turn. Montgomery said the aim is "to create an expectation for a down-the-middle-of-the-road flu season." She said season-to-season variability can put "a couple hundred million dollars of bookends" around that number. She also noted that it is too early to call the season until influenza-like illness rates exceed 3%, which typically happens in late November or early December.
Excluding respiratory, the diagnostics picture was strong. Segment core growth was 7%. Beckman Coulter Diagnostics posted its best core growth quarter in more than two years, helped by the DxI 9000 and fading China policy headwinds. Cepheid's non-respiratory business grew at a low double-digit rate, led by Group A Strep, virology and sexual health assays. Leica Biosystems showed momentum in digital pathology and advanced staining.
Connected Danaher: Cross-Company Selling With Early Evidence
The most concrete evidence for the new strategy came from diagnostics, where Danaher has put leaders from several operating companies in the same room with key customers. Montgomery said this has "created several hundred millions of dollars of opportunity in a short time." She contrasted today's customers with those of the era of the famous case studies: "When that Harvard case study was written, our businesses were lower growth markets and our customers typically bought from a single operating company. We are in a very different situation today," with customers now buying "across 3, 6, 12 operating companies." She added that she still meets customers "who are surprised to learn that company XYZ is part of Danaher."
Responding to Melius Research's Scott Davis on incentives, Montgomery said that when a solutions team meets with a customer, "no one's incentives are ever hurt," and that she is "happy to double pay on incentives" given the share-of-wallet opportunity. She also described a "commercial standard condition," a stripped-down application of the Danaher Business System to sales expectations, and said the company is testing AI to simplify sales coaching and inspection. The approach is being extended to life sciences, where it is being applied to the new AI-native "TechBio" drug developers. The concept is credible, but the evidence so far is anecdotal. Management quantified it only as opportunity, not as booked revenue, and the cross-company model must be shown to produce share gains in reported numbers.
AI: Autonomous Lab, NVIDIA and Anthropic, but Not Yet Material
Montgomery was candid that AI is "not material today," though Danaher has seen "a modest benefit to our orders and revenue," first in Beckman Coulter Life Sciences automation. Her pitch is that Danaher holds all five pieces customers need: instruments (Molecular Devices, SCIEX, Leica Microsystems), consumables (IDT, Abcam), automation (Beckman Coulter Life Sciences and the Automata partnership), software (Genedata, IDBS) and the scale to matter to frontier AI labs.
The most tangible new item is the first AI-powered autonomous lab, at Abcam. It links Cytiva, Beckman Coulter Life Sciences, Genedata, IDT and Molecular Devices in a closed design, make and test loop. Danaher says it delivers up to 8x faster idea-to-validated-reagent timelines and up to 10x higher volume. Montgomery framed it this way: "Lots of organizations can ask AI what their next experiment should be... Our autonomous lab has AI design the experiment, and then our technology makes the reagents and tests those reagents, and then the results feed the next experiment." Danaher is proving the model internally before working with customers, some of whom have already visited the Abcam facility.
The company is also collaborating with NVIDIA on edge computing for instruments and on digital twins to simulate experiments before they are run. Montgomery also disclosed work with Anthropic, including a research preview program on standards that make instruments easier to connect to other agents and instruments. The strategy is to be the integration layer for AI-driven science. The financial contribution is not yet visible, and investors should treat these partnerships as option value for now.
Bioprocessing: Orders Up Mid-Teens, Reshoring a 2028-Plus Story
Bioprocessing core revenue rose toward the high end of mid-single digits, with consumables up mid-single digits led by upstream, and equipment up low single digits. Orders grew mid-teens for another quarter, led by upstream consumables and resins. Equipment orders are running in a "strong double-digit range" year to date, and the company is building backlog. Full-year guidance for mid-single-digit growth is unchanged, but Gugino said growth rates should "continue to improve in 2027." Management reiterated a high-single-digit long-term growth view. Asked whether 2027 could reach very high single digits or low double digits, Gugino declined to quantify.
Montgomery tempered expectations on reshoring. Activity is mostly brownfield, with a modest effect on orders. Larger greenfield projects remain in planning, and she called reshoring "more of a 2028 plus event" for the P&L, though she sees a potential billion-dollar U.S. market opportunity. She cited a record number of monoclonal antibodies reaching the market, biosimilars and newer modalities such as antibody-drug conjugates, cell therapy and multispecifics as secular drivers. She also said Cytiva's process development work is helping it "win more specifications."
Life Sciences: Third Straight Beat, Academic Still Below Historic Levels
Life sciences core revenue grew 4.5%, the third consecutive quarter above internal expectations. Pall's applied filtration grew mid-single digits on aerospace and microelectronics. Instruments grew mid-single digits, led by SCIEX on pharma demand and the ZenoTOF 8600. Consumables grew only low single digits, and IDT's MRD and next-generation sequencing lines were the bright spots. Academic demand "remained below historic levels" but improved sequentially. In the biotechnology segment, discovery and medical core revenue declined low single digits because of timing in lab consumables.
Capital Allocation: M&A Remains the Bias, With No Medtech Pivot
Montgomery said M&A "remains our bias for capital allocation" and that Danaher will pursue "strategically compounding" deals under its existing return criteria. Asked by Evercore ISI's Vijay Kumar whether Masimo signals a medtech tilt, she rejected the idea: "I actually don't see that as a medtech M&A play. I see it as a continuous diagnostic that is strategically compounding with our diagnostics business... There's certainly no bias here to medtech." In response to Davis's pointed reference to past "stinkers," she acknowledged that the company has "learned from" weaker deals but said the company will not freeze on M&A.
Masimo is tracking ahead of initial expectations. It delivered high-single-digit revenue growth in its first full quarter under Danaher, completed more than 10 kaizens and received its sixth FDA clearance this year, for a smartSET atrial fibrillation detection feature. Leica Biosystems closed the StatLab acquisition in early Q4, which extends its pathology workflow and its integrated delivery network strategy. The Aldevron and Cytiva collaboration on end-to-end mRNA is an early example of cross-company product bundling.
The call set out an agenda for Montgomery's tenure, but it offered little quantification beyond the 2027 starting point. The principal markers are core growth above the 4% to 5% range, diagnostics-style cross-selling outcomes, and an M&A record that restores confidence. Montgomery herself noted that "credibility will be earned through results."