IQVIA三季度业绩超预期并上调全年指引，但电话会纪要属同一财报的滞后转载

IQVIA Hldgs (NYSE:IQV) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://events.q4inc.com/attendee/329174185
Summary
IQVIA Holdings reported strong financial results for the third quarter of 2026, with total revenue exceeding the high end of their guidance, showing an 8% year-over-year growth on a reported basis and 8.6% at constant currency.
The company’s strategic focus on AI and technology has driven significant momentum, with the deployment of 415 AI agents and strong recognition in the industry for innovation.
The Clinical segment saw a 15% year-over-year increase in net new bookings, reaching $3.2 billion, the highest in four years, while Commercial Solutions also experienced notable growth.
IQVIA Holdings raised its full-year 2026 guidance for revenue, adjusted EBITDA, and adjusted diluted EPS, indicating a positive outlook with continued growth expected in 2027.
Management highlighted the impact of AI on operational efficiencies and productivity, driving margin improvements and enhancing client engagement, especially in Clinical and Commercial solutions.
Full Transcript
OPERATOR
Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA third quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again.
As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Kerry Joseph, Senior Vice President, Investor Relations. Mr. Joseph, please begin your conference.
Kerry Joseph (Senior Vice President, Investor Relations)
Thank you. Good morning everyone. Thank you for joining our third quarter 2026 call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Mike Fedock, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Clarissa Willett, Senior Vice President, Financial Planning and Analysis; and Katie Ward, Vice President, Investor Relations. Today we will be referencing a presentation that will be visible during this call.
Those of you on our webcast, this presentation will also be available following this call in the Events and Presentations section of our IQVIA investor relations website at ir.iqvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company’s business which are discussed in the company’s filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings.
In addition, we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. As previously disclosed, we implemented a new segment reporting structure effective January 1, 2026. In conjunction with this change, prior period amounts have been recast to conform to this reporting structure.
I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.
Ari Bousbib (Chairman and Chief Executive Officer)
Thank you, Kerry, and good morning everyone. Thank you for joining us today to discuss our third quarter results. The team delivered great numbers. The market environment has continued to improve, but our performance improved even more. Our organic growth rates year over year accelerated meaningfully: 2x for Commercial and nearly 3x for Clinical. Our margins expanded and free cash flow was very strong. Our win rates were higher in the quarter which led to our strongest Clinical bookings in four years.
Our differentiated AI offerings are increasingly contributing to that momentum with continued adoption of our agentic solutions. In fact, IQVIA Hldgs has now deployed 415 agents to date. Earlier this month, we brought together more than 400 attendees at Tech IQ to share our latest Clinical and Commercial AI capabilities. This event is our annual customer event focused on technology, which this year took place in Boston and included our technology partners Nvidia, Microsoft, AWS, Snowflake and Veeva.
Our AI leadership continues to earn industry recognition, including multiple industry awards for AI and technology innovation across life sciences and healthcare, while we continue seeing more adoption of these capabilities across our customer base. Let me spend a couple of minutes on the results for the quarter. Total revenue for the quarter exceeded the high end of our guidance range, representing year over year growth of 8% on a reported basis. At constant currency, growth was even stronger at 8.6%. Organic revenue growth was approximately 6% year over year, well over two times the rate we delivered a year ago. Third quarter adjusted EBITDA was above the high end of our guidance as well, representing year over year growth.
Adjusted EBITDA margin as a result expanded by 20 basis points, the second consecutive quarter with margin expansion this year. Third quarter adjusted diluted EPS also exceeded the high end of our guidance range and increased 11.3% year over year. The beat was driven primarily by the stronger operational performance. Now on to segment performance. On the Clinical side, revenue grew 8.7% reported, of which 7% was organic year over year, which is nearly three times last year’s organic growth rate. We delivered $3.2 billion of net new bookings, our highest in four years and 15% above last year with notable strength in full service, and the book-to-bill was 1.2 in the quarter. More importantly, it’s a long cycle business and I’d like to highlight that our last 12-month net new bookings have now increased for five consecutive quarters, reaching $11.7 billion, which is up 14% year over year.
We think this metric is one of the best forward-looking indicators we have in support of long-term growth. Looking ahead, demand indicators are encouraging. The EBP funding environment continues to be very strong. Funding has reached $90 billion year to date, up more than 85% year over year and already above the total for all of last year according to Bioworld. Similarly, clinical trial starts year to date are up high single digits. RFP flow continued to grow at a healthy rate, up high single digits as well compared to last year.
Our strong performance of course reflects an improving market environment, but we also had good operational execution with win rates that continue to tick up 2.3 points. In Commercial Solutions, revenue grew 6.9% of which 4% was organic, which is double last year’s organic growth rate. We had good growth across our three sub-segments: information offerings which help our clients understand the market; analytics and consulting offerings which help our clients plan their go-to-market strategies; and our other commercial solutions that help them engage with patients, healthcare providers, payers and channels. We’ve now delivered four consecutive quarters of strong revenue growth in Commercial and our pipelines remain at record levels.
Looking forward, the demand outlook remains favorable with new drug launches up more than 40% year to date, our own pipeline showing healthy growth, and decision timelines continuing to shorten. Now I usually give you some color on the business activity in the quarter, and today I’d like to do that but focus on examples where AI was a clear differentiator. Let’s start with Clinical. Our predictive clinical development capabilities utilize AI to help sponsors design better studies, identify risks earlier and bring new therapies to patients faster. Here are a few examples of how this is playing out in some recent awards: a large pharma client needed to deliver multiple Phase 3 studies in the same autoimmune indication across nearly 50 countries.
Here, our AI-enabled country and site modeling solution optimizes patient identification and enrollment, shortening the overall program timeline by nine months. In another example, an EDP selected IQVIA for a Phase 3 oncology program. Critical to winning this award was our AI-enabled protocol and site optimization tools which accelerate timelines and reduce operational risk. Finally, IQVIA was selected by an EBP for a Phase 3 cardiovascular outcomes study.
This is exactly where our scale and integrated AI capabilities make a big difference. We are layering AI agents to bring together clinical delivery, laboratory services and electronic patient assessments under one model to identify issues earlier, reduce handoffs and proactively mitigate execution risk. Switching to examples in Commercial, we continue to evolve the way we partner with clients. Successful adoption of our AI offerings in commercial organizations within our clients is deepening client trust in IQVIA. And as that trust grows, clients are increasingly looking to us to bring more of our AI-enabled capabilities to our organizations. For example, a top five pharma client selected IQVIA to build and maintain an agentic platform that provides on-demand insights from complex real-world healthcare data.
This will help the firm make faster market access decisions and adjust commercial models nearly real time as prescribing patterns and patient outcomes evolve. We are also seeing AI help expand our role in patient services. A top 10 pharma company selected IQVIA to deliver an integrated support program for its rare disease portfolio. Our AI-powered solutions adapt and shape interactions by factoring in patient mood and sentiment that allows, in turn, the client to automate tasks such as benefits verifications and case management.
The program allows patients to gain access to the therapy, start treatment sooner and better adhere to the treatments over time. Another example, a large pharma client deployed a recently launched IQVIA Explorer solution. Explorer uses agentic AI workflows that integrate disparate data sources to answer complex questions spanning areas such as which cohorts of patients are taking the therapy, how therapies are being utilized in patient treatment, and help measure adherence by patient segment.
The client can now execute commercial activities in minutes compared with weeks or months previously. Let me now turn it over to Mike for more detail on our financial performance.
Mike Fedock (Executive Vice President and Chief Financial Officer)
Thank you, Ari, and good morning, everyone. As a reminder, we implemented the new segment reporting structure effective January 1, 2026. In conjunction with this change, prior-period segment amounts have been recast to conform to this reporting structure. Now let’s start by reviewing revenue. Third quarter revenue of $4,428,000,000 grew 8% on a reported basis and 8.6% at constant currency. Organic revenue growth within the quarter was strong at approximately 6%. Commercial Solutions revenue for the third quarter was $1,789,000,000, up 6.9% on a reported basis and 7.9% at constant currency. R&D Solutions third quarter revenue was $2,639,000,000, up 8.7% on a reported basis and 9.1% at constant currency.
Year to date, total company revenue was $12,947,000,000, up 8.4% on a reported basis and 7.7% at constant currency. Organic revenue growth was strong at over 5%. Commercial Solutions revenue was $5,336,000,000, up 9% reported and 8.3% at constant currency, and R&D Solutions revenue was $7,611,000,000, up 8% on a reported basis and 7.4% at constant currency. Now, moving down the P&L, third quarter adjusted EBITDA was $1,032,000,000, representing growth of 8.7% year over year, while year to date adjusted EBITDA was $2,958,000,000, and in the quarter adjusted EBITDA margins expanded by 20 basis points. Third quarter GAAP net income was $350,000,000 and GAAP diluted earnings per share was $2.10. Year to date GAAP net income was $880,000,000, or $5.24 of earnings per diluted share. Third quarter adjusted net income was $557 million.
Adjusted earnings per share was $3.34, representing growth of 11% year over year. Year to date adjusted net income was $1,576,000,000, or $9.38 per diluted share, up 10.4%. Now, looking at R&DS bookings, the R&D Solutions net new bookings in the quarter were $3.2 billion, a 15% increase year over year, resulting in a 1.2 book-to-bill. I should also note that cancellations remained in the historical range, and as we noted during the last earnings call, the company conducted a detailed review of inactive trials in our backlog, resulting in an adjustment to backlog of approximately $2.1 billion. This backlog adjustment has no impact on historical financial results. 2026 guidance: net new bookings or next 12 months revenue from backlog. Obviously, should any of these things change, the value will be added back to backlog and will not be included in future bookings or book-to-bill metrics. As of 9-30-2026, R&DS contracted backlog was $32.6 billion, and the next 12 months revenue from this backlog was $9.4 billion, which is up 10% versus the prior year. And as discussed, given the long-cycle nature of the business, it is more meaningful to focus on the longer-term booking trends.
For the quarter, the last 12 months net new bookings were $11.7 billion, an increase of 14% year over year, and importantly, this metric has been steadily increasing each of the past five quarters and equates to continued momentum in our business. Now, as of September 30th, cash and cash equivalents was $2,249,000,000 and gross debt was $16,067,000,000, resulting in net debt of $13,818,000,000. Our net leverage ratio ended the quarter at 3.45 times trailing twelve-month adjusted EBITDA. Third quarter cash flow from operations was $825,000,000 and capital expenditures were $158,000,000, resulting in free cash flow of $667,000,000, representing 120% of adjusted net income.
Let’s now turn to guidance. We are raising our full-year 2026 guidance for revenue, for adjusted EBITDA, and for adjusted diluted earnings per share. We now expect revenue to be between $17,350,000,000 and $17,500,000,000, representing year-over-year growth of 6.7% to 7.3%, and reflecting over 1 point constant currency organic revenue growth acceleration versus prior year. This revenue guidance now assumes approximately 200 to 250 basis points of contribution from acquisitions, based on acquisitions completed to date and acquisitions we expect to have completed by the end of the year.
The guidance also includes approximately 20 basis points of tailwind from exchange, which is unchanged from our prior update. And by the way, this implies there’s an approximately 70 basis point headwind from foreign exchange to Q4 revenue. We are also raising adjusted EBITDA to be between $4,025,000,000 and $4,055,000,000, growing 6.3% to 7% year over year, reaffirming flat margins year over year at approximately 23.2%. Given the mathematical distortion from pass-through revenues on quarter margins, I would also want to take this opportunity to remind everyone to focus more on the EBITDA dollars, as it is a more meaningful measure of operational performance. We are confident in our EBITDA dollar guidance irrespective of the contributions to our reporting.
And finally, we are also raising adjusted diluted EPS to be between $12.90 and $13.90, up 9.1% versus prior year, or 8.6% at the midpoint. And as we close out 2026, I’m sure you want some insight into 2027 expectations, so I want to take this opportunity to formally invite you to our upcoming Investor Day on December 1st. As we normally do, we will share a broad framework of what we see shaping up for next year, and as always, we will provide detailed guidance for 2027 concurrent with the release of our full-year 2026 and fourth quarter earnings in February 2027.
But in the meantime, to help you with your models, I want to share the run-rate assumptions we see exiting the fourth quarter. For below-the-line items, we expect net interest expense for the fourth quarter to be around $210 million. We expect just over $160 million in depreciation and amortization for the quarter, and we are expecting our weighted average diluted share count to be approximately 169 million shares. And just as a reminder, Q4 compare is very difficult, so the implied growth rates should not be interpreted as a deceleration in our business, and we are confident in the momentum that the metrics that we highlighted previously provide for the future. And this guidance assumes that foreign currency rates as of October 26th continue for the balance of the year.
So to summarize, IQVIA Hldgs delivered outstanding financial results, with third quarter revenue, adjusted EBITDA, and adjusted diluted EPS exceeding the high end of our guidance. Organic revenue growth rates accelerated year over year across both Commercial and Clinical segments as demand continued to rise. AI continues to be a tailwind to our business, and our win rates continue to improve. Adjusted EBITDA dollars grew 9%, and we expanded adjusted EBITDA margins 20 basis points in the quarter, with strong free cash flow performance representing 120% of adjusted net income.
R&DS net new bookings reached $2 billion, growing double digits year over year, with another quarter of very strong full-service bookings. We raised our full-year 2026 guidance for revenue, adjusted EBITDA, and adjusted earnings per share. We look forward to seeing you in person on December 1st at our Investor Day. And with all that, let me hand it back to the operator for Q&A.
OPERATOR
Thank you. At this time I would like to remind everyone, in order to ask a question, press star and the number one on your telephone keypad. We request that you please limit yourself to just one question so that others in the queue may participate as well. We’ll pause for a moment to compile the Q&A roster. Your first question comes from the line of Shlomo Rosenbaum with Stifel. Your line is open. Please go ahead.
Shlomo Rosenbaum (Analyst)
Hi, thank you very much for the question here. Ari, I wanted to ask you if you could go into a little bit more about the uniqueness of IQVIA Hldgs’ ability to deploy data and technology in an agentic world. And you touched on some of the examples, but can you just talk about things that other competitors just can’t do because they don’t have the data, whereas IQVIA Hldgs can do some of these things? And then also maybe discuss how your clients view this and how you think about this in terms of being able to charge for this differentiation.
Ari Bousbib (Chairman and Chief Executive Officer)
Okay, well, look, this would be the subject of a very long conversation. But look, how can I put it? AI is not just another technology. From our point of view, it’s a new way of doing business. It’s changing the way customers engage with their own activities and how they engage with IQVIA Hldgs. So, stepping back, to successfully deploy AI, there are three… if you understand AI simply as an opportunity to do business a different way. Meaning, first, content is important. You need the proprietary information that powers AI. That means you need the globally sourced, de-identified, curated, fit-for-purpose, integrated, interoperable, compliant with regulatory privacy, et cetera, and ready-for-extraction data. Now, we’ve got all of that.
Second, in addition to content, you need context. I think people are realizing that to deploy AI effectively you need context. You need deep expertise in life sciences to understand that information. We’ve got that too. And thirdly, importantly, you need to comprehend what you’re looking at. That is, you need to interpret what the information is telling you and know how to apply it to make decisions faster and more accurately. So when you think about AI agents, it’s not that you can use an AI tool, whether it comes from Anthropic or OpenAI or anywhere. AI agents are constructs that operate a workflow in lieu of humans. We build them using all these tools. We don’t have to invent the tools — there are tools that are available. We spend money with all of these companies. They have generic tools that we utilize to construct agents depending on the use case. Obviously, again, the agent is only one part.
You need the content, you need the context, and you need the interpretation and the insights that enable you to construct the agents and operate them, and very often because of all the specific issues related to operating workflows in healthcare — the transparency, the traceability of the data, etc., etc. — and the compliance aspect, you do need humans in the loop, as you do in many other industries, but in our industry in particular. So that, I think, is what makes… And by the way, we’ve been at this for a while, as you know. So it’s not that we’re trying to catch up; we don’t need headlines. We’re working with our clients, and it’s slowly but surely changing the way we do business and changing the relationship with our clients and making us even more integrated within our clients’ workflows. Thank you.
OPERATOR
Your next question comes from the line of Elizabeth Anderson with Evercore ISI. Your line is open. Please go ahead.
Elizabeth Anderson (Analyst)
Hi guys, good morning and thanks so much for the question. I wanted to dig in a little bit to the gross margin improvement. Obviously that was a highlight, particularly given the higher pass-through mix. So can you talk to us maybe in a little bit more detail about the pushes and pulls — how much is the pass-through mix sort of causing degradation of that, and what are the levers on the upside — so we make sure we understand that trajectory properly?
Thank you.
Mike Fedock (Executive Vice President and Chief Financial Officer)
Yeah, thank you for the question, Elizabeth. Yes, you’re absolutely right, and thank you for pointing out the improvement in gross margins. The pass-throughs across the enterprise were certainly a headwind on the gross margin line, probably about 70 basis points. So it really highlights the underlying strength in our operational execution.
Elizabeth Anderson (Analyst)
Okay. And then just in terms of that, we just think of that broadband.
Ari Bousbib (Chairman and Chief Executive Officer)
I just want to give, I mean, you asked about gross margins. Adjusted in the margin, which was also, which expanded 20 bps. With the non-operational items, which is the 70 bps that Mike highlighted. We also had, I guess, 10 bps of currency impact. So let’s all say 60 or so bps of net non-operational headwind to our margins was more than offset by 80 bps of operational improvements. So that’s, again, the cost containments, the AI identification of our own processes, productivity programs, et cetera, everything that we do that contributed in aggregate.
So you see that underlying our margin, if you eliminate pass-throughs and if you— you know, without the pass-throughs, just on the old, based on the service margin would have improved 8 margins 8 years. Obviously it’s significantly higher than the delivery margin of the 25 point. While it should be more in the high 20s, about 30%.
Elizabeth Anderson (Analyst)
Yeah, that’s super helpful, thank you for that context. Thank you.
OPERATOR
Your next question comes from the line. Jailendra Singh with Truist Securities, your line is open. Please go ahead.
Jailendra Singh (Analyst)
Thank you and thanks for taking my questions. And congrats on a strong quarter. I want to go back to bookings in the quarter. Very strong booking strength despite the normal seasonality you generally see in 3Q. Was there anything unusual in the timing or mix of 3Q awards in 3Q or was it just broad-based market strength or your win rate improving? Just trying to understand if we should expect a normal seasonal step-up in Q4 from a bookings point of view.
Ari Bousbib (Chairman and Chief Executive Officer)
Yeah, no, thank you for the question. It really was broad based. You know that earlier this year there were all these concerns that you guys all voiced about, well, that’s it, it’s over, full service is over, everyone is going FSP, people are insourcing, and so on and so forth. We warned you that that is not the case and that the pendulum swings back and forth. But long term, the outsourcing trend is absolutely intact. And this is, again, the second quarter in a row that we see very, very strong bookings in full service.
In fact, year over year they were up by a lot. I don’t even want to give you the numbers because it’s so big. Now the flip side obviously from an optic standpoint is full service comes with pass-throughs. And so, you know, back to the Elizabeth question, we then have an impact on reported margins and I caution you to make sure you look under the covers and you understand operational improvements there. But yeah, to your question, really good strength across the board and really that was true for large pharma where we see continued uptick in win rates and consequent on all the strategic partnerships that we have structured over the past two years, which we’ll talk about at length in prior calls.
All of those are now starting to continue to be bundling a growing stream of RFPs and continue to win more and more of those opportunities with large pharma and, again, with EBP. Similarly, we talked about our strategy there and also is continuing to grow. The bookings were very strong. Again, if you look at—point you to our LTM net new bookings which at the end of this past quarter was $11.7 million, and you look at that number each of the past five quarters, that number has continued to grow consistently and it was up 14% year over year.
This is an excellent metric to focus on in terms of managing. Just needs long-term growth in the business and, again, broad source, broad strength in FSO, FSP, strong outsourcing. Any other comments, Michael?
Mike Fedock (Executive Vice President and Chief Financial Officer)
No, I think just no other changes expected in.
Ari Bousbib (Chairman and Chief Executive Officer)
Nothing unusual, you know, therapeutically or otherwise. Really good. Excellent quarter from a booking standpoint. Thank you.
Jailendra Singh (Analyst)
Great. Thanks a lot.
OPERATOR
Your next question comes from the line of Eric Caldwell with Baird. Your line is open. Please go ahead.
Eric Caldwell (Analyst)
Thanks very much. Good morning. I think my only concern that I’ve had here recently is just the below-the-line items and you gave us an insight into your view on the fourth quarter. Should we be taking that 210 million, I think you said, and just annualizing that into 2027 at this point? Or are there other parameters or dynamics to consider as we think about interest expense modeling for next year? And then just one other quick one, I am curious if you can give us the parameters for the backlog scrub—what exactly made the cut or didn’t make the cut in terms of your review when you looked at what to remove for now, if you could give us those details would be appreciated. Thanks very much.
Ari Bousbib (Chairman and Chief Executive Officer)
I guess. Yeah, maybe I’ll give that to Mike. But just, you know, the review of the backlog—and Mike, you can add any details you want—is basically trials that have been in the backlog for a long time. We reviewed that in detail, and long time means long time. It is over 18 months process. I think that was kind of one of the criteria, and in conversation with customers there was, you know, no reason to assume that the work was going to resume in the near term.
And so for clarity and cleanliness and more accuracy in visibility, we thought it was a good idea, similar to what the competitor has done, to just simply remove it. You know, in the past, we would have just left them there. We know that they are inactive. We wait for resumption possibly of this, but, you know, it kind of becomes stale and so it’s better. And as Mike indicated in his introductory remarks, if those trials come back, which sometimes they do, by the way, even when they’ve been around inactive for a year plus, they come back.
Which is why, by the way, we extend. We looked at way more than a year—18 months, two years—type of inactivity. And. But when they do come back, if they do come back, then we will simply add them back to the backlog directly. We certainly take that back as a booking. So that’s the way we decided to make the adjustments. I hope that gives you more color. And then the first question was on
Mike Fedock (Executive Vice President and Chief Financial Officer)
just about the below the line. So, Eric, your team actually does a pretty good job at reviewing our debt stack and looking at what’s coming up for next year with refinances and swaps and things like that. I would focus mainly there. There’s nothing else below the line on depreciation or tax or anything really to call out there.
Ari Bousbib (Chairman and Chief Executive Officer)
Right. But I mean, your question was that kind of that run rate more or less what we expect for that. And the answer is about yes, you know, about yes. And we have some.
Mike Fedock (Executive Vice President and Chief Financial Officer)
We have some issues a year from now.
Ari Bousbib (Chairman and Chief Executive Officer)
Right? Yeah, but that’s, that’s the. I think it’s a good. It’s a good number.
Mike Fedock (Executive Vice President and Chief Financial Officer)
Yes. Yeah, it’s a good number to start with. And obviously we use just whatever the publicly available forward curves are to do the projections. Thanks, Eric.
Eric Caldwell (Analyst)
Thanks, guys. Appreciate it.
Ari Bousbib (Chairman and Chief Executive Officer)
Okay, thanks, Eric.
OPERATOR
Your next question comes from the line of Luke Sergit with Barclays. Your line is open, please go ahead.
Luke Sergit (Analyst)
Great. Thanks for the question, guys. Just two quick ones here. Unrelated, on the Commercial Solutions you guys have been talking about. You’ve had record backlog and strong bookings there over the last couple of quarters. Understand that it bounces around a little bit, but saw a little bit of a decent 3Q. Just trying to figure out when the timing of this is, the conversion still elongated and how that’s shrinking and what we can start to see this accelerate growth.
And the second one is on the backlog and the adjustments. Just to follow up on Eric’s question, I guess as you think about what’s been in the backlog, are you guys getting any more stringent on what you’re deciding to include there? Is it like something that’s going to start to progress within the next 12 months and just be, you know, so you can avoid these adjustments?
Ari Bousbib (Chairman and Chief Executive Officer)
Okay, so now I guess everyone has two questions. Thank you, Eric, for the—thank you for setting the precedent. Okay. You know, just a very difficult question. On Commercial, yeah, I mean, look, we don’t get backlog for Commercial. As you know, Commercial is more of a—not short term necessarily, but it’s a shorter cycle than R&D. So, I mean, looking at backlog there, that makes—obviously we have performance obligations in some of the longer-term contracts that we have on commercial execution, for example, commercial outsourcing. But no, even the data contracts are typically, you know, one-year, renewable, evergreen type, and so on.
So we don’t put that in backlog. You know, most of the business in our Commercial Solutions is not backlog. So we don’t refer to that as backlog. No conversion, none of that. What we speak about is pipelines. I mean, you know, there are projects that request for proposals and our pipelines, as I mentioned, are at record levels and our win rates are also up and the decision timelines are shortening, which—these are the kind of the main demand indicators that we look at from a forward-looking perspective—and we see those to be very strong.
I also mentioned from a market standpoint that— approvals are up 40%, we said, year over year. And again, drug approvals typically are followed within six months to a year or thereabouts by product launches. And product launches are the bread and butter of what we do. This is where we are spending a lot of time with our clients, helping them with their launch strategy, with their pricing, with their interactions with the channels, with their marketing to HCPs, with their promotional programs, multichannel marketing programs, with their interactions with payers, providers, country access, market access.
All of those activities that are the bread and butter of our commercial business are really associated with launches. So the fact that we have product approvals that are up over 40% is a strong indicator that the overall market is strong. So that bodes well for our commercial business. Yeah, I mentioned the third quarter. The quarter is up very nicely organically, double the rate that we had a year ago. The third quarter I wouldn’t look at, you know, sequential.
Yeah, especially third quarter, to be honest. Third quarter is very volatile. So it’s like up and down a few points sequentially, always, if you go back many, many years. And that’s just typical of the third quarter. Very much a very large business in Europe. Not that Americans don’t take any vacation in August, but the Europeans for a long time. And typically it’s just a slower thing in Europe that creates more volatility. But I wouldn’t read more into it.
The business, again, is doing very well. You had a question?
Mike Fedock (Executive Vice President and Chief Financial Officer)
Yeah, Luke, about the backlog. Nothing changed. The short answer is no. We’re comfortable with what we put into our backlog and in fact, being on an as-contracted basis, we feel that that’s best-in-class practice. So you’ll change that?
Ari Bousbib (Chairman and Chief Executive Officer)
Yeah. Only contracted for, you know, bookings are bookings. Otherwise we don’t. We wait for contracts to be signed. And sometimes, you know, because the time a customer awards something to us that’s in the R&DS business, then, you know, it could take a month, two months sometimes before they do the things they—you know, all the dots and T’s are crossed and so on and so forth, and the contract is actually signed and executed, and only at that time do we put it into our backlog.
And there’s nothing changed to that. Thank you.
Luke Sergit (Analyst)
Great. Thanks for questions.
OPERATOR
Your next question comes from the line of David Windley with Jefferies. Your line is open. Please go ahead.
David Windley (Analyst)
Good morning. Thanks for taking my question, Ari. I wanted to ask a kind of R&D Solutions horizon question, if I could. It seems like the industry has been through a couple years’ worth, maybe ’24 and ’25 or ’23 to ’25, a heavy reprocurement cycle among larger clients, and that brought on a lot of focus on FSP. And then biotech funding was low, and so the absence of them with FSO, you know, was also painful. And as we’re coming back, biotech funding is helping them to come back to FSO, and between the reprocurements, the big pharmas are also, you know, doing some FSO. I wonder if you agree with that — if biotech has been kind of a leader out of that trough. Is pharma starting to catch up, and are you still seeing reprocurement activity go on? Is there still wallet share opportunity for you, and how is that playing out? Thanks. Apologize for the multi-parter.
Ari Bousbib (Chairman and Chief Executive Officer)
Yeah, no, I mean, it’s a great question, but, you know, yeah, I mean, look, the answers to your question are in your question. You know the industry — you’re one of the best observers of the industry — so you hit all the correct points. I mean, look, we’re just coming out of a two- to three-year period of multiple headwinds. First, we had the post-COVID bubble deceleration, both at large pharma and in terms of the EBP funding. Second, we had the IRA, which introduced those concerns about drug pricing negotiations and so on and so forth, which kind of started slowing down large pharma for sure, in terms of their discretionary spend first — which we observed in our commercial business immediately — and then sort of pausing large capital investments and new programs. And then we had the next administration bringing up drug prices again through the MFN. Then we had the tariffs.
Then we had all of that drama. All of that drama created huge uncertainty. That uncertainty caused large pharma to pause their decision-making. We saw decision timelines extend dramatically — I mean by a lot — and all of that caused significant demand constraints. Now, during that time period, pharma took the opportunity to step back and renegotiate their strategic partnerships — to reopen their strategic partnerships. Exactly after a year, year and a half, maybe literally every single pharma did that, and it was over not too long ago. We feel very good about that process and what happened. We came out ahead of where we were before in terms of the scope, the number of partnerships we are in, and the scope of all those partnerships, including within the large pharmas where we were in.
So, you know, I said this before and I’ll say it again: it has further segmented our own industry into essentially, let’s say, three groups — the largest ones, and then the small/mid ones, and then you have a long tail of little players that are not part of this conversation. But the largest ones essentially emerged ahead. We believe we emerged more ahead than the others on the back, I believe, of our broad spectrum of capabilities, AI, et cetera, and that’s been proving out in our win rates today.
Second, the smaller tier of CRO suppliers, I think, lost out overall, and that is going to become apparent, you know, over the next two to three years, even if it’s not today. But I know that it’s going to be apparent because we know who’s out — and they’re all out, basically. And that’s what has happened with large pharma. Now, on the EBP side, much more funding — again, 85% growth in funding year to date, year over year. Eighty-five percent increase in funding — it’s a wide number. Again, you know, before COVID the annual EBP funding — and this is using consistently the same source and the same exact parameters — before COVID the annual spend was in the $50 billion range for between 2015 and 2020. It is, this year year to date (three quarters), $90 billion.
So it’s almost double what the annual rate was before COVID. This is funding an increasingly large number of opportunities. We think there are almost 17,000 EBPs around the world. It’s a vast market, it’s a great market, it’s a dynamic market. Certainly, as you said yourself in your question, EBP is growing at a much higher rate in terms of spending than large pharma. With the long-term growth rate of R&D at large pharma in the low single digits — maybe 2–3% underlying growth — long-term EBP is more in the upper single digits, right?
So, think 8–9%, and that’s clearly driving growth in our business. And, as you know, we have multiple strategies to grow that part of the business, including the expansion of our activities to early-phase engagement, and we beefed up our capabilities there. We’ve hired a large number of ex-FDAers to engage with biotech much earlier, at the regulatory stage. We have acquired discovery capabilities, acquired Phase I capabilities, and I can tell you we continue to work aggressively in that field to increase our engagement with EBPs with a set of capabilities that are required to further penetrate that customer base. Thank you for your question and the opportunity to lay out my view on what’s going on in the industry.
OPERATOR
Your next question comes from the line of Michael Cherny with Leerink Partners. Your line is open. Please go ahead.
Michael Cherny (Analyst)
Thank you. Okay, yeah, maybe just a direct follow-up there to Dave’s question regarding the market contract, in particular the role of AI. As you have developed your own AI capabilities, are you seeing the dynamics of contracting changes showing up — that is, a push and pull relative to how your pharma sponsors want to charge for your work that encompasses AI? Are there any thoughts about value-based contracting and savings over time? What do you think the role is, beyond just differentiating on winning share, AI will play in the way that you can essentially manage and contract to certain profit levels going forward?
Ari Bousbib (Chairman and Chief Executive Officer)
Thank you. Thank you. Well, look, again, big question. On the commercial side, AI is essentially an incremental revenue opportunity. Okay. We are providing our clients with new ways of doing business that enable them to automate and reduce the amount of labor that they themselves use in their operations to conduct business. So it’s a great opportunity for our clients to improve their productivity and improve their profit contributions, and for us, we’re essentially providing additional services and subscriptions or licenses.
So that’s on the commercial side, and these obviously should be at good margins. On the R&D side, I would differentiate between large pharma and EBP. EBP, as you know, is fully outsourced and, you know, it requires a lot more hand-holding from the beginning, so the relationship is different. We will be using AI here to optimize timelines, to speed up processes, to ensure that clients get to market — the product gets to market — a lot faster and to patients a lot faster. You know, I mentioned an example with a large pharma where we’re going to cut nine months out of the trial.
Nine months is huge in this business. You know, you just take a look at what one month of sales at a very, very high margin represents for a pharma company, and so nine months is huge; in comparison, the cost of the clinical trial is nothing. Now, that doesn’t mean that large pharma is no longer negotiating a contract, but large pharma essentially has negotiated, in the process I described earlier in reviewing and renewing partnerships, the rates.
Okay, so that is essentially done. Now, obviously, when we compete for a specific trial, there always are negotiations at the end with procurement and so on and so forth. Does AI play a role? No. AI is essentially an enabler of faster timelines, more accuracy, better visibility, and transparency in the process of conducting the trial. And, really, believe me, this is what the conversations around AI are. Is it going to have an impact on our productivity? Yes. We mentioned that we are deploying agents at our clients’ operations, and we are also deploying agents at our operations — there’s no question about it — from Finance to HR to a variety of other overhead activities and automated tasks that we used to standardize and perform in offshore centers. A lot of them, you know, whether it’s software development, whether it’s software testing — all of that.
Yes. So, over time, that will certainly help with our own margin expansion plans and productivity programs. Thank you.
OPERATOR
Thank you, Mr. Joseph. I turn the call back over to you.
Kerry Joseph (Senior Vice President, Investor Relations)
Thank you, operator. Thank you, everyone, for taking the time to join us today, and look forward to speaking with you again on our fourth quarter 2026 earnings call. The team will be available the rest of the day to take any follow-up questions you might have. Thank you, and have a good day.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.