Clinical research company Medpace Holdings (NASDAQ:MEDP) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 14.2% year on year to $603.3 million. The company’s full-year revenue guidance of $2.47 billion at the midpoint came in 13% above analysts’ estimates. Its GAAP profit of $3.10 per share was 3.5% above analysts’ consensus estimates.
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Medpace (MEDP) Q2 CY2025 Highlights:
- Revenue: $603.3 million vs analyst estimates of $542 million (14.2% year-on-year growth, 11.3% beat)
- EPS (GAAP): $3.10 vs analyst estimates of $3.00 (3.5% beat)
- Adjusted EBITDA: $130.5 million vs analyst estimates of $117 million (21.6% margin, 11.5% beat)
- The company lifted its revenue guidance for the full year to $2.47 billion at the midpoint from $2.19 billion, a 12.8% increase
- EPS (GAAP) guidance for the full year is $14.15 at the midpoint, beating analyst estimates by 11%
- EBITDA guidance for the full year is $530 million at the midpoint, above analyst estimates of $473.7 million
- Operating Margin: 20.9%, up from 19.9% in the same quarter last year
- Free Cash Flow Margin: 23.6%, up from 19.6% in the same quarter last year
- Organic Revenue rose 14.2% year on year, in line with the same quarter last year
- Market Capitalization: $8.96 billion
Company Overview
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ:MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Medpace’s sales grew at an impressive 20.4% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers, a helpful starting point for our analysis.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Medpace’s annualized revenue growth of 15.5% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
Medpace also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Medpace’s organic revenue averaged 15.7% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Medpace reported year-on-year revenue growth of 14.2%, and its $603.3 million of revenue exceeded Wall Street’s estimates by 11.3%.
Looking ahead, sell-side analysts expect revenue to decline by 2.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Medpace has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average operating margin of 19.4%.
Analyzing the trend in its profitability, Medpace’s operating margin rose by 2.8 percentage points over the last five years, as its sales growth gave it operating leverage. The company’s two-year trajectory shows its performance was mostly driven by its recent improvements. These data points are very encouraging and shows momentum is on its side.
In Q2, Medpace generated an operating margin profit margin of 20.9%, up 1 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Medpace’s EPS grew at an astounding 36.7% compounded annual growth rate over the last five years, higher than its 20.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Medpace’s earnings can give us a better understanding of its performance. As we mentioned earlier, Medpace’s operating margin expanded by 2.8 percentage points over the last five years. On top of that, its share count shrank by 21.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
In Q2, Medpace reported EPS at $3.10, up from $2.75 in the same quarter last year. This print beat analysts’ estimates by 3.5%. Over the next 12 months, Wall Street expects Medpace’s full-year EPS of $13.45 to shrink by 8.1%.
Key Takeaways from Medpace’s Q2 Results
We were impressed by how significantly Medpace blew past analysts’ expectations across all key metrics this quarter. We were also excited it lifted its full-year guidance. Zooming out, we think this was a solid print. The stock traded up 46% to $451 immediately following the results.
Medpace had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.