Charles River Laboratories Reports Mixed First-Quarter 2026 Results While Reaffirming Full-Year Outlook
Charles River Laboratories reported first-quarter 2026 revenue of $995.8 million, reflecting a 1.2% increase compared with $984.2 million in the same quarter last year. Despite posting a GAAP loss per share of $(0.30), the company delivered non-GAAP earnings per share of $2.06 and reaffirmed its 2026 guidance for both organic revenue growth and non-GAAP EPS.
The company also highlighted significant strategic actions during the quarter, including the completion of the divestiture of its CDMO and Cell Solutions businesses, as well as an aggressive share repurchase program that saw $200 million in common stock bought back during the first quarter.
Revenue Growth Supported by Currency Tailwinds
Charles River’s reported revenue growth was positively impacted by foreign currency translation, which contributed approximately 2.8% to total revenue. However, divestitures reduced revenue by 0.1%, and on an organic basis, revenue declined 1.5%.
The company said growth in its Manufacturing Solutions segment partially offset weaker performances in its Research Models and Services (RMS) and Discovery and Safety Assessment (DSA) divisions.
Management emphasized that the quarter unfolded largely in line with internal expectations, particularly within the DSA business, where bookings and client demand remained stable.
GAAP Results Impacted by Divestiture Charges
The company reported a GAAP operating margin of 12.0% for the first quarter, a notable improvement from 7.6% in the prior-year period. The increase was mainly attributed to lower accelerated amortization expenses tied to certain CDMO client relationships.
However, Charles River posted a GAAP net loss available to common shareholders of $14.8 million, or $(0.30) per diluted share, compared with net income of $25.5 million, or $0.50 per diluted share, in the first quarter of 2025.
The decline was primarily driven by a substantial loss related to assets held for sale associated with the CDMO and Cell Solutions divestiture. The charge totaled $118 million, equivalent to approximately $1.53 per share.
Non-GAAP Earnings Decline on Higher Costs
On a non-GAAP basis, the company’s performance weakened compared with the previous year. Non-GAAP operating margin fell to 16.3% from 19.1% in the first quarter of 2025.
The margin compression was mainly caused by:
- Higher study-related direct costs in the DSA segment
- Unfavorable revenue mix in the RMS segment
- Increased stock-based compensation expenses tied largely to executive transition activities
Non-GAAP net income declined 14.6% year over year to $101.7 million, compared with $119.1 million in the prior-year quarter.
Similarly, non-GAAP diluted earnings per share fell 12.0% to $2.06 from $2.34 a year earlier.
Management attributed the earnings decline primarily to lower operating profitability rather than weakening overall demand.
CEO Highlights Strategic Transformation
Chief Executive Officer Birgit Girshick said the company remains confident in its long-term direction despite near-term operational pressures.
According to Girshick, Charles River’s DSA demand environment continues to track in line with company expectations, resulting in healthy bookings during the quarter.
She also stressed that the organization is executing a refreshed strategy aimed at modernizing operations, improving customer experience, and focusing on core scientific strengths.
The CEO stated that Charles River intends to sharpen its emphasis on regulated drug development testing and other areas where it believes it has differentiated expertise and competitive advantages.
Girshick added that the company’s operational foundation has strengthened significantly and positioned the organization for future growth and enhanced shareholder value creation.
RMS Segment Faces Continued Pressure
The Research Models and Services segment generated revenue of $208.4 million during the quarter, representing a 2.2% decline from $213.1 million in the first quarter of 2025.
Foreign exchange movements added 3.3% to reported revenue, but organic revenue fell 5.5%.
The decline was mainly caused by:
- Lower small research model revenue in North America
- Reduced large research model demand
These declines were partially offset by stronger small research model sales in China.
The RMS segment’s GAAP operating margin improved to 23.9% from 20.5% last year, primarily due to a gain from the sale of real estate in Massachusetts.
However, on a non-GAAP basis, operating margin decreased to 24.7% from 27.1%.
Management said the decline reflected an unfavorable business mix, especially within North American small research models and large research models.
DSA Segment Shows Stable Demand but Margin Challenges
The Discovery and Safety Assessment segment, Charles River’s largest business unit, posted first-quarter revenue of $596.9 million, up 0.7% from $592.6 million in the prior-year period.
Currency translation contributed 2.2% to growth, while divestitures reduced revenue by 0.1%.
Organic revenue declined 1.4%, largely because of weaker discovery services revenue tied partly to prior site consolidation activities.
Despite softer organic growth, management indicated that customer demand and bookings remained stable.
The DSA segment’s GAAP operating margin improved to 17.4% from 15.9% in the first quarter of 2025.
The improvement stemmed from:
- Lower third-party legal costs related to a non-human primate supply matter
- Reduced restructuring and efficiency initiative costs
Still, non-GAAP operating margin fell sharply to 21.0% from 23.9%.
The decline was mainly caused by:
- Higher study-related direct costs
- Increased large-model sourcing expenses
- Higher study-start costs
The company suggested that these cost pressures could moderate as operational efficiency initiatives progress through the remainder of the year.
Manufacturing Segment Delivers Strongest Growth
The Manufacturing Solutions segment delivered the company’s strongest performance during the quarter.
Revenue increased 6.8% to $190.5 million, compared with $178.5 million in the first quarter of 2025.
Foreign exchange contributed 3.9% to reported growth, while organic revenue increased 2.9%.
The growth was primarily driven by strong performance in the Microbial Solutions business, though partially offset by weaker CDMO revenue before the divestiture closed.
The segment’s GAAP operating margin surged to 24.6%, compared with a negative 4.8% margin in the prior-year period.
The dramatic improvement was largely linked to reduced accelerated amortization expense associated with CDMO client relationships.
Non-GAAP operating margin also improved meaningfully, rising to 25.9% from 23.1%.
Management credited the improvement to cost savings generated through restructuring and operational efficiency initiatives.
Divestiture Strategy Reshapes Portfolio
On May 6, 2026, Charles River officially completed the sale of its CDMO and Cell Solutions businesses to GI Partners.
The company also expects to finalize the divestiture of certain European Discovery Services sites later in May 2026.
Executives described the transactions as part of a broader portfolio optimization strategy designed to sharpen the company’s focus on high-value scientific and regulatory services.
By exiting selected non-core operations, Charles River aims to prioritize businesses with stronger margins, differentiated capabilities, and long-term growth potential.
Management believes the streamlined structure will improve operational focus and create stronger synergies across the remaining business portfolio.
Share Repurchases Continue Aggressively
Charles River continued returning capital to shareholders during the quarter through significant stock buybacks.
The company repurchased approximately 1.1 million shares during the first quarter for a total cost of $200 million.
As of March 28, 2026, approximately $800 million remained available under the company’s existing $1 billion repurchase authorization approved by the Board of Directors in October 2025.
The repurchase activity reflects management’s confidence in the company’s long-term cash flow generation and strategic direction.
2026 Guidance Reaffirmed
Charles River reaffirmed its previously issued 2026 guidance for organic revenue growth and non-GAAP earnings per share.
The outlook already incorporates the expected impact of the completed CDMO and Cell Solutions divestiture, along with the planned sale of certain European Discovery Services sites.
However, the company modestly reduced its reported revenue outlook by approximately 50 basis points due to updated foreign exchange assumptions.
Additionally, GAAP earnings per share guidance was revised to account primarily for the financial effects of the divestitures completed during the year.
Despite near-term operational pressures and restructuring activity, management expressed confidence that improving execution, stable DSA demand, and strategic portfolio refinement will support stronger performance throughout the remainder of 2026.
About Charles River
Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them. To learn more about our unique portfolio and breadth of services
