Varex Imaging’s Q2 FY2026: A Clearer View on Revenue, Non-GAAP EPS and the Road Ahead

Overview: A Quarter with Modest Progress and a Cautious Outlook

Varex Imaging Corporation (Nasdaq: VREX) reported its second quarter of fiscal 2026 with revenue of $216 million. The company tallied a GAAP gross margin of 34% and a Non-GAAP gross margin of 34%, while GAAP operating margin stood at 7% and Non-GAAP operating margin at 9%. On the earnings line, GAAP net loss amounted to $0.19 per diluted share, versus Non-GAAP net income of $0.21 per diluted share. In short, the headline EPS figures show a split between GAAP and non-GAAP measures that’s familiar for a capital-intensive, instrument-heavy business, not a single tidy headline.

The company also noted cash dynamics: cash outflows from operations of about $2 million, and a cash, cash equivalents, and marketable securities position of $88 million at quarter end, down from $155 million at the end of fiscal 2025. The swing reflects a debt redemption and refinancing completed in March and a build in working capital to support anticipated demand and future shipments. These cash-flow nuances matter for the stock’s multiple set, especially when you’re juggling capex, inventory, and a portfolio that weaves from medical imaging to industrial sensors.

Key Highlights

• Revenues: $216 million for the quarter, with Medical segment at $156 million and Industrial at $60 million.
• Margins: GAAP gross margin 34%; Non-GAAP gross margin 34%; GAAP operating margin 7%; Non-GAAP operating margin 9%.
• EPS: GAAP EPS of -$0.19 per diluted share; Non-GAAP EPS of $0.21 per diluted share.
• Cash & Balance Sheet: Ended quarter with ~$88 million in cash and equivalents; ongoing effect from debt refinancing and higher working capital.
• Management sentiment: Solid demand in both Medical and Industrial lines, supported by CT systems, cargo systems, and photon counting detectors.

The emphasis on non-GAAP results and the delta between GAAP and non-GAAP profitability patterns a familiar tale for high-precision equipment suppliers: the core business is steady, but non-cash or non-operating items, and revenue timing, can dominate the “bottom line” in GAAP terms.

Management Commentary

In the release, Sunny Sanyal, Chief Executive Officer, framed the quarter as evidence of sustained demand across medical and industrial applications. “Demand remained solid in the second quarter, with continued momentum across both our Medical and Industrial businesses driven by global CT, cargo systems and photon counting detectors,” Sanyal said. He added that looking into the second half of fiscal 2026, the company expects favorable demand trends to help grow revenue year-over-year.

The tone suggests a balance sheet strategy that prioritizes near-term liquidity while investing to support next-gen imaging capabilities. The company also flagged that while tariff refunds have been applied for, no IEEPA tariff refunds are assumed in the guidance.

Outlook and Guidance

For the second half of fiscal 2026, Varex projects revenue to be up about 3% versus the second half of fiscal 2025. The full-year revenue forecast is laid out at $860 million to $880 million, with non-GAAP EPS guidance of $0.80 to $1.00 for the year.

Guidance for the third quarter of fiscal 2026 calls for revenue between $210 million and $225 million, and non-GAAP net earnings per diluted share between $0.15 and $0.30. The company cautions that the non-GAAP framework excludes certain reconciling items, whose amounts and timing are uncertain and could materially affect GAAP results; this caveat is a reminder that non-GAAP figures are forward-looking and not a locked-in reconciliation.

Notes on Non-GAAP Measures and What It Means for the Sector

The press release emphasizes the use of non-GAAP financial measures and acknowledges that reconciliation to GAAP is not always feasible without significant uncertainty. In practice, this means investors should read the non-GAAP EPS and margin figures as part of a broader narrative about operating efficiency, cash management, and the ability to fund working capital for a growth-oriented imaging business.

This quarter’s mix—distinct improvements in non-GAAP profitability alongside a GAAP net loss—opens interesting questions for sector peers. If demand in CT and photon-counting detectors remains robust, and if similar cash-management strategies hold, other imaging and detector makers could see a similar tug-of-war between GAAP losses and non-GAAP profitability. The absence of a stated EPS consensus in the release makes the earnings surprise angle less about beating a street estimate and more about how investors price the trajectory of 2H FY2026 growth versus prior-year baselines.

Implications for VREX and Sector Peers

A 2H growth trajectory of roughly 3% hints at steady but not dramatic recovery in a market sensitive to capital expenditure cycles in healthcare and industrial automation. The company’s debt refinancing and inventory build to meet demand suggest a phase of deliberate capital allocation—one that peers in the imaging, X-ray, and detector spaces may mirror if they’re optimizing cash flow while expanding high-margin product lines.

Tariff-related uncertainties remain a factor, and the decision not to bake in any IEEPA tariff refunds into guidance is a reminder that macro policy shifts can tilt the economics of equipment suppliers. In the broader context, investors will be watching whether the firm can translate higher working capital into revenue growth without pressuring margins, particularly as non-GAAP profitability hinges on the management of reconciling items.

Bottom Line

Varex’s Q2 FY2026 results show a company executing in a steady demand environment, with a clear path to mid-cycle revenue growth and a non-GAAP earnings framework that suggests improving operational discipline. The explicit guidance for 2H revenue growth and a full-year non-GAAP EPS target provides a roadmap that investors can test against quarterly prints. For sector peers, the takeaway is that demand drivers in medical imaging and related industrial sensors continue to matter—so long as the balance sheet stays flexible enough to fund next-gen technology and inventory buffers without sacrificing the ability to harvest cash when the wind shifts.