Hi Multis
TransMedics (TMDX) reported Q2 2026 on August 4. I was on holiday so I couldn’t do the analysis back then. That’s why I’m doing this article now. But sometimes, often, actually, some delay is good. It cuts out the noise and highlights the really important things.
The stock initially fell, but recovered and now it’s up about 10% since the earnings.
In my last update, in May, I gave a Valuation Score of 10/10 and I called it a STRONG BUY at $64. Since then, the stock is up more than 40%.
So, is it still a buy today? Let’s find out.
The Numbers
Revenue: $189.9 million, +20.7% YoY, +9.2% QoQ.
Product revenue: $111.2 million, +15.7% YoY, +3.0% QoQ.
Service revenue: $78.8 million, +28.6% YoY, +19.4% QoQ.
Gross margin: 59.6%, up 140bps QoQ.
Adjusted operating margin: 13.6%, up from 10.4% in Q1, down from 23.2% a year ago.
Adjusted EPS: $0.44 versus consensus of about $0.48.
Cash: $472.7 million.
Guidance: low end raised, now $737-757 million, 22-25% growth.
Here you have an overview from the Q2 2026 earnings call slide deck.
Source: Fiscal AI. You can find all transcripts there, earnings slides, the consensus estimates, financial data, charts, and so much more. Get a 15% discount through this link.
The Main Reason?
In the Q1 article, adjusted margins were 18.5%, or $112.2 million of adjusted operating income on $605 million of revenue. In May, the company guided for gross margins of about 16%, because of the investments it was making. But those margins are now seen as lower. CFO Gerardo Hernandez on the Q2 earnings call:
We now expect full-year adjusted operating margin, excluding the impact of PAD Aviation, of approximately 12.5%-14%. The range primarily reflects potential variability in revenue performance, while the reduction from our prior expectation primarily reflects the higher planned investment in OCS Kidney.
So margins went from 18.5% last year to a guidance of 16% for the whole year in May, and now to a guidance of about 13% for the whole year. The market doesn’t like that.
At Canaccord Genuity’s 46th Annual Global Growth Conference, CFO Gerardo Hernandez gave more context:
The way we should see or expect for the future years is we should not see an increase in operating expenses similar to the one that we had in 2026. This year was really the step up. In 2027, we will see some increase, probably more around the low teens, which certainly will help us to continue to expand our operating margin.
Hernandez added that there will be margin improvement next year, combined with a growth acceleration. On top of that, both Hernandez and founder and CEO Waleed Hassanein repeated their long-term goal of the old promise of about 30% operating margin at 10,000 transplants. To remind you, that goal has been set by management for the end of 2028 and it’s one of the Selling Rules I set.
In other words: 2026 is the investment year, but then it should get better next year and thereafter.
It may look like a detail, but TransMedics’ management raised the low end of the guidance. That detail is more important than you might think, because it points to a reacceleration in revenue growth. Let’s do the math together. In the first half of this year, revenue came in at $363.9 million. The guidance range of $737-757 million means that in the second half, the company has to have revenue of $373 to 393 million. If you know that in the second half of 2025, revenue was $304.6 million, that implies revenue growth of 22.5% to 29%. In the first half of this year, it was ‘just’ 20.9%. It’s good to see this, but management shouldn’t be shy about sharing this.
In my last update, I called TransMedics a STRONG BUY at $64. The stock is up more than 40% since.
Below: the numbers management shared about the company’s biggest potential market, why I’m removing a Selling Rule for the first time ever, why margins jumped when I expected them to fall, and whether the stock is still a buy after the run. Don’t want to miss the valuable insights? Subscribe now!