Thermo Fisher Scientific has a knack for thriving even in challenging markets. While the company isn’t entirely immune to today’s global headwinds, slower biopharmaceutical spending, tighter budgets in academic labs, and muted demand in China, it has weathered the storm far better than most of its peers.
The reason?
A combination of unmatched scale, an almost encyclopedic product catalog, and a distribution network so vast it can reach nearly twice as many customers as its largest competitors.
Even in the current spending-constrained environment, which we expect to linger through this year, Thermo Fisher continues to gain market share. And when industry growth normalizes in 2026, the company looks poised to accelerate well beyond the pace of the life sciences market as a whole.
Key Points
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A $50B acquisition spree made Thermo Fisher the go-to life sciences supplier.
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Four dollars out of five of revenue comes from recurring consumables and services.
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At a substantial discount to fair value, Thermo Fisher is set for 5–6% annual growth from 2026.
A Decade-Long Shopping Spree That Built a Moat
Interestingly, these acquisitions, once a drag on returns on invested capital (ROIC), are now finally paying off. As integration efficiency has improved, Thermo Fisher’s returns have started to climb, while its competitive position has only gotten stronger.
Thermo Fisher’s consumables and services revenue (excluding instruments) is roughly equal to the next three largest suppliers combined. Its salesforce is four times larger than its biggest peer. And once a lab installs Thermo Fisher equipment, switching is costly, both financially and operationally, creating sticky, long-term relationships.
This stickiness is even more pronounced in regulated markets like biopharma, where changing a critical instrument mid-drug cycle can trigger regulatory re-approval, a headache no company wants.
Capital Discipline
The PPD acquisition briefly pushed net debt/EBITDA close to 4x, but Thermo Fisher’s robust cash flows, driven by recurring consumables and service sales, which now make up over four fifths of revenue, mean leverage is already trending down toward a more comfortable 2x.
The dividend remains token-sized, with management preferring to deploy cash into acquisitions and share buybacks. While we think the buyback program has been more value-neutral than accretive, the reinvestment policy has clearly enhanced the company’s moat.
Thermo Fisher’s acquisition integration process is unusually fast and disciplined. Most large deals flounder when it comes to extracting revenue synergies, but Thermo Fisher’s scale and distribution reach mean new products often accelerate growth once folded into the existing sales channels.
Where Growth Comes Next
Looking beyond 2025, several growth levers stand out:
With PPD in the fold, Thermo Fisher can offer cradle-to-commercialization services, a compelling pitch for pharmaceutical companies looking to simplify vendor lists.
The company’s strong footprint in high-growth geographies like India and Brazil is likely to deepen, especially as these markets invest heavily in biotech and healthcare infrastructure.
While mature, this segment still offers opportunity in premium technologies like mass spectrometry and chromatography, fields where Thermo Fisher’s brand and technical leadership mirror the moat dynamics of Agilent and Waters.
And with labs under pressure to “do more with less,” the shift toward recurring consumable and service revenue will make Thermo Fisher’s earnings less cyclical and more predictable.
Now What?
We expect organic growth to return to the 5–6% range from 2026 onward, with margin expansion fueled by a better product mix, efficiency gains, and ongoing low-cost-region manufacturing shifts.
Thermo Fisher has already proven it can deliver record results in historically tough economic conditions. In a normalized environment, that resilience, combined with an unparalleled product ecosystem, makes it one of the most strategically advantaged names in the life sciences sector.
For long-term investors, this is a rare opportunity to buy a global market leader with a wide moat, visible growth catalysts, and a discount valuation, something that doesn’t come around often in the high-quality healthcare tools space.