Healthcare company Baxter International (NYSE:BAX) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 5% year on year to $2.84 billion. Next quarter’s revenue guidance of $2.81 billion underwhelmed, coming in 6.5% below analysts’ estimates. Its non-GAAP profit of $0.69 per share was 15.4% above analysts’ consensus estimates.
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Baxter (BAX) Q3 CY2025 Highlights:
- Revenue: $2.84 billion vs analyst estimates of $2.88 billion (5% year-on-year growth, 1.4% miss)
- Adjusted EPS: $0.69 vs analyst estimates of $0.60 (15.4% beat)
- Adjusted Operating Income: $423 million vs analyst estimates of $440.9 million (14.9% margin, 4.1% miss)
- Revenue Guidance for Q4 CY2025 is $2.81 billion at the midpoint, below analyst estimates of $3.00 billion
- Management lowered its full-year Adjusted EPS guidance to $2.38 at the midpoint, a 3.8% decrease
- Operating Margin: 6.1%, in line with the same quarter last year
- Free Cash Flow Margin: 4.4%, down from 8.6% in the same quarter last year
- Constant Currency Revenue rose 2% year on year (4% in the same quarter last year)
- Market Capitalization: $11.52 billion
“I joined Baxter because it’s a global healthcare leader – an iconic brand with an essential portfolio that touches more than 350 million patients every year,” said Andrew Hider, president and CEO.
Company Overview
With a history dating back to 1931 and products used in over 100 countries, Baxter International (NYSE:BAX) provides essential healthcare products including dialysis therapies, IV solutions, infusion systems, surgical products, and patient monitoring technologies to hospitals and clinics worldwide.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Baxter struggled to consistently increase demand as its $11.02 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Baxter’s annualized revenue declines of 1.6% over the last two years align with its five-year trend, suggesting its demand has consistently shrunk. 
We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 3.9% year-on-year growth. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for Baxter. 
This quarter, Baxter’s revenue grew by 5% year on year to $2.84 billion, missing Wall Street’s estimates. Company management is currently guiding for a 2% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.7% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will spur better top-line performance.
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Adjusted Operating Margin
Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Baxter has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average adjusted operating margin of 15.9%.
Analyzing the trend in its profitability, Baxter’s adjusted operating margin decreased by 3 percentage points over the last five years. Even though its historical margin was healthy, shareholders will want to see Baxter become more profitable in the future.
In Q3, Baxter generated an adjusted operating margin profit margin of 14.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for Baxter, its EPS declined by 4.3% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
We can take a deeper look into Baxter’s earnings to better understand the drivers of its performance. As we mentioned earlier, Baxter’s adjusted operating margin was flat this quarter but declined by 3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q3, Baxter reported adjusted EPS of $0.69, down from $0.80 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Baxter’s full-year EPS of $2.62 to shrink by 1.7%. This is unusual as its revenue and operating margin are anticipated to increase, signaling the fall likely stems from "below-the-line" items such as taxes.
Key Takeaways from Baxter’s Q3 Results
It was good to see Baxter beat analysts’ EPS expectations this quarter. On the other hand, its full-year EPS guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 13.5% to $19.39 immediately following the results.
The latest quarter from Baxter’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.