Varex Imaging Corporation

What they do

Varex designs and manufactures X-ray tubes, flat panel and photon counting detectors, linear accelerators, image software, and other components used in medical diagnostic imaging, security inspection, and industrial quality inspection. It sells primarily to OEM customers, with a significant portion of revenue from replacement and service of an installed base of more than 160,000 X-ray tubes and 170,000 detectors. The company operates in two reportable segments: Medical and Industrial, and sells across the Americas, EMEA, and APAC.

Revenue drivers

• Medical segment — Primary segment, generating $134 million in Q3 FY2026, selling X-ray tubes, detectors, and software to OEMs for CT, mammography, and other modalities; replacement and service revenue is significant.
• Industrial segment — Generated $77 million in Q3 FY2026, with strong growth in cargo and vehicle inspection systems; includes X-ray components and systems for security and industrial quality inspection.
• Installed base and replacement — High-margin recurring revenue from replacing X-ray tubes and detectors; CT tubes typically replace every 2-6 years, and in China every 10-20 months due to high utilization.
• Geographic regions — Sales across Americas, EMEA, and APAC; China medical X-ray tube imports represented about 10% of total fiscal 2025 revenue, making tariff dynamics a key revenue factor.

Recent performance

For Q3 FY2026 (quarter ended July 3, 2026), Varex reported revenue of $211 million, up 4% year-over-year, with Medical at $134 million and Industrial at $77 million. GAAP gross margin was 36%, and GAAP EPS was $0.37; non-GAAP EPS was $0.31 versus $0.13 in the prior-year quarter. Operating cash flow was $21 million. During the quarter, the company received $17 million in U.S. Customs refunds for previously paid IEEPA tariffs, partially offset by a $7 million accrual for expected customer reimbursements, resulting in a net $10 million boost to gross profit. For fiscal year 2025, revenue was $844.6 million with a net loss of $70.3 million.

Strategy

Varex invests in R&D (about 400 product development employees) to innovate in X-ray tube and detector technology and to maintain long-term OEM relationships. Management is actively working to mitigate tariff impacts through localization of manufacturing and other practices, and has stated it is not currently planning restructuring in China. The company is pursuing growth in industrial and security inspection systems, as noted in strong Q3 FY2026 industrial growth. The proposed acquisition by Teledyne Technologies, announced August 10, 2026, is now the overarching strategic event, pending stockholder and regulatory approvals.

Risks

• Tariff and trade war exposure — U.S.-China tariffs have raised costs and reduced competitiveness, and China's MOFCOM investigations into medical X-ray tube imports could be recommenced despite indefinite suspension in November 2025.
• Customer concentration — The business depends on a limited number of OEM customers; loss of one or more would materially reduce revenue.
• Merger completion risk — The proposed Teledyne acquisition may not close on time or at all, subject to stockholder and regulatory approvals and other conditions.
• Economic and geopolitical instability — U.S. government shutdown, global economic slowdown, geopolitical conflicts, and supply disruptions could delay customer purchasing and increase costs.

Outlook

Management did not provide financial guidance due to the pending Teledyne transaction and cancelled its earnings call. They highlighted continued momentum heading into the fourth quarter, with strong Industrial growth and expansion in cargo and vehicle inspection systems. They expect tariffs to continue negatively impacting competitiveness unless de-escalation occurs, but are actively implementing mitigation measures including localization. The company's future is now largely dependent on the successful completion of the acquisition by Teledyne.