The Inflection Beyond CDMS#
Waters Corporation's presentation at the Jefferies London Healthcare Conference on November 18, 2025, exposed a company at an inflection point far broader than its October announcement of the Xevo Charge Detection Mass Spectrometer. Chief Executive Udit Batra articulated a cohesive growth thesis centered on three independent drivers, each with distinct market opportunities and execution timelines. The CDMS platform is entering a $350 million addressable market with management's conviction to capture the majority within five to ten years. The BD Diagnostics integration, closing in March 2026, will deliver three significant platform launches spanning cell-therapy diagnostics, microbiology automation, and HPV testing. And the Empower software platform is pivoting from a capital-expenditure model to a per-user subscription model with explicit potential to reach $1 billion in annual revenue within a ten-year horizon. Taken together, these developments signal that Waters is repositioning itself from a mature, commoditized liquid-chromatography vendor toward a diversified player commanding premium margins in three distinct ecosystems: gene-therapy analytics, diagnostic instrumentation, and enterprise software.
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The CDMS Market Quantification and Commercial Confidence#
Batra's description of the Xevo CDMS development journey crystallizes the company's commitment to a technology addressing a genuine market bottleneck. The instrument began, he noted, as a "Frankenstein experiment" on the side of a wall at Waters' Wilmslow facility, festooned with high-voltage signs and laboratory pumps. That prototype, which by 2022 had already attracted customer interest for its capability to analyze molecules at scales—viral vectors, lipid nanoparticles, and protein complexes exceeding 150 megadaltons—that conventional mass spectrometry cannot reliably measure, has now been engineered into what Batra termed "a sleek-looking box that sits on a bench top." This transformation, spanning three years of disciplined capital investment, serves as evidence that Waters' management views the CDMS not as a tactical marketing initiative but as foundational infrastructure in the gene-therapy ecosystem.
The addressable market is no longer speculative. Batra quantified current analytical techniques—ion-mobility mass spectrometry, native mass spectrometry, and electron microscopy—as generating approximately $350 million in annual revenue, growing at high single- to double-digit rates. The CDMS technology, which uses 100 times less sample than existing methods and delivers results in minutes rather than hours or days, is positioned to displace incumbents across that market as gene-therapy and cell-therapy manufacturing scales globally. More notably, Batra stated that Waters expects "chances are we will take most of it over the next five to ten years," a statement that moves beyond cautious positioning into explicit market-capture conviction. This level of confidence implies internal modeling supporting penetration rates and customer adoption trajectories that the company views as achievable.
Geographic Validation and 2026 Ramp Signal#
The first commercial shipment of the Xevo CDMS has already been delivered to a customer in China, a detail with strategic significance that extends beyond routine customer service. This placement signals that demand for the technology is geographically diverse and that Waters' commercial distribution network is already capable of serving the global biotech and CDMO ecosystem beyond North America and Western Europe. China's emergence as a significant source of in-licensing and CDMO activity—with approximately one-third of global in-licensing now originating from China, according to Batra—indicates that the CDMS opportunity has immediate runway in a geography that Waters has identified as a structural growth engine.
Batra's language regarding 2026 timing was deliberately measured but optimistic. He stated that CDMS will "start to pick up" next year, language suggesting gradual adoption momentum without the inflection curves that characterize breakout products. This cadence is realistic for an entirely new instrument category; customers developing gene-therapy programs require time to validate CDMS in their workflows, integrate it into their quality-assurance protocols, and justify capital expenditure to internal stakeholders. The significance lies not in near-term revenue contribution, which will remain immaterial to consolidated results through at least 2026, but in the establishment of Waters as the sole credible commercial provider of a proprietary technology in a market with structural tailwinds from gene-therapy manufacturing expansion and regulatory pressures for improved characterization methods.
BD Integration: Product Launches, $300+ Million Market Opportunity, and MALDI-TOF Internalization#
Three Platforms Entering the Market in 2026#
The November 18 presentation provided the first concrete timeline and market context for product launches and opportunities emerging from Waters' July 2025 acquisition of BD Diagnostics, with closing expected in March 2026. Batra identified three significant new platforms entering the market within the next twelve months. The FACSDiscover S8, a 50-parameter flow cytometer with imaging technology that is currently the only instrument in the industry with this capability, will be joined by a simplified version designed specifically for cell-therapy clinical applications and expected in 2026. The FXI microbiology incubator, a product that has been in BD's pipeline for some time, will launch in Q1-Q2 2026 and is positioned against a backdrop of roughly 20,000 instruments requiring replacement globally in the microbiology laboratory automation market—a replacement cycle that Waters has historically proven adept at capturing. The BD COR high-throughput HPV testing system is expected to achieve regulatory approval, with Batra emphasizing that it is "the only one with home collection, especially in the U.S.," a feature that positions it favorably in a market increasingly focused on patient convenience and at-home diagnostic adoption.
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The product pipeline reflects Waters' strategic intent to position BD as a comprehensive diagnostic platform serving distinct market segments simultaneously. Each product addresses a specific customer cohort with differentiated purchasing criteria: cell-therapy manufacturers purchasing simplified cytometry tools for point-of-care clinical testing; microbiology laboratories seeking laboratory automation to improve throughput and reduce manual handling errors; and healthcare systems implementing HPV screening programs with patient-friendly collection methodologies. This segmented approach reduces cannibalization risk and distributes execution dependencies across multiple commercial and technical teams, lowering the probability of an all-or-nothing outcome if a single product launch encounters delays.
Microbiology QA/QC and the $300 Million Beachhead#
Beyond the three named product launches, Batra exposed a market opportunity that had not been emphasized in earlier BD integration commentary with comparable specificity. Waters plans to apply its dominant position in pharmaceutical quality-assurance and quality-control instrumentation to penetrate the pharmaceutical microbiology sterile-testing market, currently dominated by BioMérieux. That market represents approximately $300 million in annual sales and is growing at double-digit rates. The strategic logic is compelling: Waters' commercial footprint is already embedded in pharmaceutical manufacturers' QA/QC operations for small-molecule testing. Extending that relationship to include microbiology workflows—spanning sample preparation, rapid identification of microbes, and antibiotic susceptibility testing—represents a natural adjacency with limited sales friction and high switching costs once implemented.
This market opportunity carries strategic importance beyond its $300 million standalone value. A meaningful penetration of the pharmaceutical microbiology market would position Waters as a systems vendor offering integrated workflows for QA/QC operations, a positioning that elevates the company's relationship from consumables supplier to operational partner. That shift in relationship intensity typically yields superior retention, pricing power, and opportunities for ancillary software and service revenue. Batra's framing of this opportunity as a positive surprise during the BD integration planning process suggests that management is discovering even more value creation potential in the transaction than was modeled at announcement.
MALDI-TOF Internalization and Supply Chain Independence#
The MALDI-TOF (matrix-assisted laser desorption/ionization time-of-flight mass spectrometry) opportunity deserves equal attention. Currently, BD sources this critical technology from a competitor, creating both a supply-chain vulnerability and a gross-margin headwind. Waters has existing prototypes and is operating multiple workstreams to develop proprietary MALDI-TOF capability with the goal of internalizing supply within a defined timeframe. If successful, internalization would eliminate external supply dependencies, improve gross margins on BD's existing and future microbiology offerings, and strengthen the competitive moat around the microbiology ecosystem by reducing the potential for customers to integrate competitive point-solution technologies.
The execution risk is real and should be acknowledged. Waters has attempted to build proprietary analytical platforms in the past, and some of those efforts have experienced extended development timelines or technical hurdles. However, the financial incentive for success is compelling: each percentage point of gross margin improvement on a $300+ million microbiology business base yields $3 million in operating leverage. Moreover, the technical foundation already exists—Waters' mass spectrometry expertise is among the deepest in the instrumentation industry, and the company's manufacturing and supply-chain capabilities are proven at scale. The probability of success is elevated relative to a greenfield technology development effort.
Empower Software: Subscription Transition and the Path to $1 Billion Revenue#
The $300 Million Platform and Its Critical Installed Base#
Perhaps the most underappreciated revelation from the Jefferies presentation is the strategic pivot of Empower, Waters' laboratory information management system (LIMS). The platform is not a niche offering; it is currently embedded in approximately 450,000 users globally and is used to submit quality-assurance and quality-control data for 80 percent of drug applications filed to the FDA, European Medicines Agency, and China's National Medical Products Administration. This installed base represents an extraordinary competitive moat: regulators have reviewed and approved data generated through Empower workflows, creating high switching costs and network effects. Customers cannot easily migrate to competitor platforms without risking regulatory scrutiny or requiring revalidation of historical data.
The historical business model, however, has constrained revenue potential. Under the capital-expenditure paradigm, customers pay a substantial upfront sum and then incur annual service fees for maintenance and support. That structure has created a perverse incentive: customers with large organizations can purchase excessive seat licenses at deployment, significantly leveraging the cost per user. Moreover, because billing is tied to purchased licenses rather than actual usage, customers can substitute users without triggering incremental charges, a dynamic that has suppressed revenue per user growth. Batra acknowledged this constraint with specific examples, noting that Waters had identified customers who had purchased 500 licenses but were utilizing 1,000 users—a direct reflection of the model's inability to enforce true per-user economics.
Per-User Subscription and Revenue Model Transformation#
Waters is now transitioning Empower toward a per-user, per-instrument subscription model, fundamentally altering the economics and incentive structures. Under the new approach, each unique user becomes an individually billed subscriber, and each instrument version triggers a separate subscription obligation. The commercial model transformation is material: the old paradigm yielded approximately $1 in upfront revenue followed by $0.20 in perpetual annual service fees; the subscription model targets $0.35 to $0.40 per subscriber annually, "covering all upgrades," according to Batra. This shift removes the capital-intensity of the traditional model, improves cash flow predictability for customers (who prefer operational-expense treatment), and dramatically increases revenue recognition and lifetime value for Waters.
The transition is already underway with early adoption among small and mid-market pharmaceutical companies, which have relatively limited instrument networks and find the subscription model operationally simpler than managing capital leases and service contracts. Batra stated that two "very large pharma companies" are currently in "late-stage conversations" regarding migration to the subscription model. Even conservative assumptions regarding adoption rates from these two megacustomers would unlock material incremental revenue, as a large pharmaceutical company operating 500+ Empower-connected instruments could generate $175,000 to $200,000 in additional annual revenue under the new model compared to the legacy approach. That dynamic creates a clear financial incentive for aggressive sales execution and migration support.
Platform Ecosystem Expansion and Switching Cost Intensification#
Overlaid on the subscription model transition is a parallel strategy to expand Empower's technical footprint by integrating new instruments into the platform's workflow layer. Today, most bioanalytical instruments—flow cytometers, light-scattering systems, capillary electrophoresis, and mass spectrometry tools—are not natively compatible with Empower. Waters has begun systematically remedying this constraint by building integration modules that make these instruments compatible with the platform, thereby allowing customers to centralize data management, audit trails, and regulatory submission workflows through a single interface. Batra noted that capillary electrophoresis has already been integrated, mass spectrometry integration is underway, and flow cytometry is next in the development pipeline. As the company expands the instrument ecosystem within Empower, it converts the $300 million platform into a compounding asset with increasing switching costs and reduced customer optionality.
The value-creation loop is explicit: each new instrument integration increases the value proposition of an Empower subscription, reduces the cost-benefit ratio of switching to a competitor platform, and creates opportunities for application-level upsells and services. Batra articulated the vision with clear precision: it is "not unreasonable" to think that Empower could reach $1 billion in annual revenue within a ten-year horizon, implying a low double-digit compound annual growth rate from the current $300 million base. That target appears achievable through the combination of three levers: subscription model uplift (the per-user transition alone could double revenue per user over time), platform ecosystem expansion (adding instruments increases total addressable spending per customer), and geographic penetration (international markets have historically lagged North American adoption).
Chemistry Division: Structural Growth Acceleration from Biologics Innovation#
Q3 Growth Rate Inflection and Product Momentum#
The November presentation also disclosed a significant structural acceleration in Waters' chemistry division, the consumables business centered on liquid-chromatography columns and separation media. In the third quarter of 2025, chemistry growth reached 13 percent, a rate materially above the company's long-term historical baseline of 6-7 percent. That acceleration is not a cyclical recovery or the result of temporary supply constraints in competitor offerings. Rather, it reflects the fruition of deliberate product innovation and market positioning toward biologics applications, a strategy Waters articulated and began executing approximately five years ago. The company has reoriented approximately 70 percent of its research-and-development spending toward large-molecule applications, yielding three products with adoption curves that exceed any in Waters' product portfolio history.
The three products driving acceleration are MaxPeak Premier columns, which employ bio-inert surfaces suitable for all large-molecule separations; SEC (size exclusion) columns, which have achieved "incredible growth" according to Batra; and Protein A columns, which attach antibodies to particles for antibody isolation and have shown the fastest adoption trajectory of any new product Waters has launched. These products are not incremental refinements of existing platforms; they represent fundamental advances in the company's ability to serve the biologics and cell-therapy markets. As development and manufacturing of monoclonal antibodies, antibody-drug conjugates, and viral vectors have accelerated globally, Waters' positioning as the preferred supplier of separation media for these applications has strengthened substantially.
Pricing Power in Biologics and Structural Margin Opportunity#
The pricing environment for chemistry products differs materially between small-molecule and biologics applications. For traditional small-molecule chemistry, Waters achieves a 5 percent annual price increase with 100 percent customer acceptance, yielding approximately 100 basis points of incremental revenue growth (representing 20 percent of the chemistry segment's growth rate). For biologics applications, where Waters is solving genuinely difficult separation problems—isolating viral vectors, separating antibody-drug conjugates with minimal payload damage, and purifying complex vaccine formulations—the pricing opportunity is "much more significant and much stickier," in Batra's precise characterization. This pricing leverage reflects the reality that customers are willing to pay premium prices for solutions that materially improve manufacturing efficiency, reduce losses, and accelerate development timelines.
Combined with the product-volume growth acceleration from biologics adoption, Batra indicated that chemistry growth should sustainably move from the historical 6-7 percent range toward "high single digits to low double digits," a structural upside to consensus modeling. This guidance represents a meaningful repositioning of the chemistry business from a mature, slow-growth consumables operation toward a growth-oriented division serving high-margin markets experiencing double-digit secular expansion. The implication for investors is significant: if chemistry represents 20-25 percent of Waters' consolidated revenue and grows at even the midpoint of Batra's range (9-10 percent), the division would contribute 200-250 basis points to consolidated organic revenue growth, more than accounting for the guidance midpoint of 6-8 percent.
Growth Drivers and Catalyst Sequencing#
Idiosyncratic Growth Drivers: Performance Validation#
Batra provided updated metrics on three idiosyncratic growth drivers that have historically outperformed management expectations. GLP-1 testing revenue doubled year-over-year, with the company now "specced into" the two largest GLP-1 providers, late-stage oral compounds in development, and generic alternatives. This positioning suggests that GLP-1 testing represents a durable growth driver extending beyond the 2025 boom cycle for obesity and diabetes therapeutics. PFAS (per- and polyfluoroalkyl substances) testing has grown 40 percent on a year-to-date basis, operating ahead of internal targets and expanding from a $55+ million annual base as environmental regulations tighten globally. And India, which Waters had modeled for 70-100 basis points of incremental accretion at its Investor Day, is delivering high-teens revenue growth, demonstrating that the company's market share gains in emerging markets are sustaining beyond initial expectations.
Each of these growth drivers contributes to consolidated results while also serving as a leading indicator for the company's commercial execution capabilities and market positioning relative to competitors. The fact that Waters is winning share in GLP-1 testing against established diagnostic vendors speaks to the company's scientific credibility and customer relationships. The outperformance in PFAS testing validates the company's ability to anticipate regulatory trends and develop compliant solutions ahead of mandated deadlines. And the sustained growth in India demonstrates that the company's commercial infrastructure and product portfolio are competitively differentiated in emerging markets. As these drivers mature, Batra noted, they will "get into the baseline," providing a higher growth foundation from which the new BD-driven initiatives and software transitions can generate incremental value.
The Catalyst Calendar: 2026 Resolution Points#
The timing of Waters' strategy announcements and the expected resolution of multiple execution initiatives create a notably dense catalyst calendar for the next four to six quarters. Q4 2025 and Q1 2026 will serve as the first validation points for CDMS early-stage customer adoption, with management expected to disclose early order trends and customer qualitative feedback. The GLP-1 and PFAS growth drivers will be measured against the high baselines established in 2025, with any continued outperformance validating the secular nature of these markets. Q1-Q2 2026 mark the formal commercial entry of three major BD products—FACSDiscover S8 simplified, FXI microbiology incubator, and BD COR HPV testing—each into validated, established markets with identifiable customer bases and replacement cycles. The Empower subscription transition will be ramping during this period, with large-pharma customer conversions likely to close in the first half of 2026, providing the first quantitative evidence of the revenue uplift model.
By Q3 2026, Waters will have accumulated seven to nine quarters of CDMS shipment data, allowing management to refine its market-capture narrative from "chances are we will take most" toward concrete win rates, customer pipeline metrics, and revised addressable-market estimates. At that juncture, the investment community will have visibility into whether CDMS adoption is tracking to management's expectations or whether the product is experiencing slower ramp or competitive headwinds. Similarly, the BD integration story will be partially resolved: management can report on product launch execution, early commercial traction in the $300 million microbiology market, and progress on MALDI-TOF internalization. These resolution points create a natural rhythm for investors to reassess the risk-reward profile and expected returns from the company's strategic initiatives.
Outlook and Risk Management#
Strategic Positioning and Medium-Term Margin Expansion#
Waters' positioning at this inflection point recalls historical moments when industrial instrumentation vendors have successfully navigated transitions from cyclical, commoditized markets toward differentiated, high-margin platforms. The company is not executing this transition in isolation; it is pursuing three independent growth vectors, each targeting distinct customer cohorts, application markets, and revenue models. That diversification reduces the probability that a single market disappointment or competitive response will materially impair the overall strategy. The company is simultaneously addressing structural headwinds in its legacy liquid-chromatography business by expanding into higher-growth, higher-margin adjacencies (CDMS, microbiology, software).
Margin expansion is probable across all three strategic pillars. CDMS instruments are expected to generate gross margins materially superior to the company's legacy LC-MS instrument baseline, reflecting the technology's unique competitive position and pricing power. The $300+ million microbiology opportunity offers gross margins comparable to Waters' existing diagnostic platforms, creating a path to incremental operating leverage without requiring new manufacturing or supply-chain infrastructure. Empower's subscription transition systematically improves the business model by shifting from capital-intensive deployment to recurring, higher-margin SaaS economics. Chemistry's evolution toward biologics applications generates higher-margin consumables sales. Collectively, these dynamics suggest that the consensus 6-8 percent revenue guidance for 2026 represents a floor rather than a realistic expectation, and that margin expansion will likely exceed equity research consensus expectations.
Execution Risk and Competitive Dynamics#
Waters is not without execution risk, and investors should acknowledge the genuine uncertainties surrounding each pillar of the strategy. CDMS commercialization requires sustained customer validation, continued clinical success in gene-therapy programs, and manufacturing scale-up to meet demand from multiple customer segments. Manufacturing scale-up risk is material; Waters has historically managed instrument production at modest volumes, and CDMS will demand higher production rates if the company is to capture "most" of the $350 million market. BD integration demands not only cultural alignment and organizational design but also flawless product launch execution for three significant platforms entering competitive markets. The Empower subscription transition, while strategically sound, requires disciplined sales execution to convert legacy customers to recurring billing without triggering churn or competitive substitution. Chemistry's pricing expansion in biologics is predicated on continued customer willingness to adopt Waters' columns; if competitors develop materially superior offerings or if generic alternatives emerge, that pricing power could erode.
Competitive responses merit explicit consideration. If Bruker, Agilent, or other mass-spectrometry vendors develop competing CDMS technologies within 18-24 months, the market opportunity could fragment and pricing pressure could emerge. If BioMérieux or other microbiology vendors develop integrated workflows that compete directly with Waters' BD-powered offerings, market share gains may be constrained. If large-pharma customers resist the Empower subscription transition and demand to maintain legacy capital models, the revenue uplift could be deferred or reduced. None of these competitive scenarios is catastrophic to the overall strategy, but each represents a meaningful reduction in upside relative to management's internal expectations. Investors should monitor competitive announcements, win/loss metrics in the field, and early customer feedback on Empower subscription pricing as leading indicators of execution risk.
The 12-24 Month Opportunity#
For investors with a 12-24 month investment horizon, the risk-reward profile tilts toward upside as these catalysts resolve and management executes on the identified initiatives. The confluence of CDMS market entry, BD product launches, and Empower's software transition creates multiple paths to margin and revenue upside relative to consensus expectations. The chemistry division's acceleration in biologics suggests that even the company's cautious 6-8 percent guidance for 2026 may underestimate organic growth potential. The company's demonstrated ability to outperform internal targets on idiosyncratic growth drivers (GLP-1, PFAS, India) provides confidence that management execution and commercial capabilities are strong relative to peer instruments vendors.
By 2027, the magnitude of WAT's transformation—from a mature, slow-growth liquid-chromatography company toward a diversified, high-margin instrumentation and software platform—should be substantially evident in financial results and should be reflected in expanded valuation multiples if execution meets or exceeds expectations. The company's management team has articulated a clear vision, backed by concrete product development timelines and quantified market opportunities. The probability that investors will be able to reassess the strategic narrative with substantially more data points—CDMS adoption rates, BD product launch success metrics, and Empower subscription transition progress—over the next 18-24 months creates a natural window for compounding returns, contingent on execution alignment with guided expectations.

