Earnings Call Transcript - IQV Q4 2025

Operator, Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Kerri Joseph, Senior Vice President, Investor Relations and Treasury

Thank you, operator. Good morning, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call. With me today are Ari Bousbib, our Chairman and Chief Executive Officer, Ron Bruehlman, our Executive Vice President and Chief Financial Officer, Eric Server, our Executive Vice President and General Counsel, Mike Pita, our Senior Vice President of Financial Planning and Analysis, and a member of our Senior Investor Relations team. We will reference a presentation that will be available during this call for those on the webcast. This presentation will also be accessible in our filings under the Events and Presentations section of our investor release website. Before we start, I want to remind listeners that some information discussed by management during this call will contain forward-looking statements. Actual results may differ significantly from those stated or implied by these forward-looking statements due to risks and uncertainties, which are outlined in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. Additionally, we will talk about certain non-GAAP financial measures in this call; these should be viewed as a supplement, not a replacement, for financial measures prepared according to standard guidelines. A reconciliation of these non-GAAP measures to the corresponding GAAP measures is included in the press release and presentation. Now, I would like to hand the call over to our Chairman and CEO, Ari Bousbib.

Ari Bousbib, Chairman and Chief Executive Officer

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2025 results. We closed 2025 with a strong fourth quarter resulting in full year revenue growth of 6%, adjusted diluted earnings per share growth of 7%, and free cash flow of $2.1 billion, representing about 100% of adjusted net income. As I reflect on our accomplishments in 2025, I'm proud of the results delivered by the IQVIA team, given that our industry faced significant challenges with heightened uncertainty around macroeconomic and government policy, as well as continued pressure from interest rates. This macro environment led to slower customer decision-making and tempered biotech funding. This impacted R&D bookings and revenue earlier in the year. But as the year progressed, the environment stabilized somewhat, and demand indicators became more favorable, and funding increased. Despite the environment, we at IQVIA continue to invest in developing innovative offerings and more integrated solutions to advance development programs and drive commercial success. Examples of the depth and breadth of our clinical and commercial offerings and significant investments in 2025 include increasing our Phase I trial capabilities to test new drugs in healthy volunteers with the acquisition of a facility in the UK, expanding our science management organization with the acquisition of Next Oncology—a network of specialized sites serving patients enrolled in early-stage oncology trials. Helping clients advance critical programs, ranging from global Phase III oncology and obesity trials to launching innovative treatments in rare and underserved patient communities. We're seeing great demand among large and midsized pharma clients for our DAS solution—Data as a Service—which provides AI-ready data as a single harmonized source, simplifying customers' data management, and building a strong foundation for AI analytics. This offering integrates global to local data, highlighting IQVIA's unique ability to combine proprietary data assets with third-party data assets within a compliant scalable framework. Advancing the digitization of patient support programs to streamline workflows for treatment access and adherence with the research launch of the IQVIA Patient Experience platform, which has already attracted six new customers. Working with the same vaccine institute to provide more than 640 additional vaccine doses for a Phase II trial during the nation's first outbreak of a new virus, partnering with local health authorities to evaluate safety and efficacy. Winning our first full-service commercial outsourcing deal in Asia with a large pharma client. A last example, enhancing our capabilities in patient solutions and payer analytics with the acquisition of Federate Technologies in the fourth quarter. Let us now turn to the results for the quarter. Revenue for the quarter came in above the high end of our guidance range, representing year-over-year growth of 10.3% on a reported basis and 8.1% at constant currency. Acquisitions represented about 2 points of this growth. Fourth quarter adjusted EBITDA increased 5% versus the prior year. Fourth quarter adjusted diluted EPS of $3.42 increased 9.6% year-over-year. On the clinical side, net bookings totaled over $2.7 billion, growing 7% year-over-year and 5% sequentially. This resulted in a net book-to-bill ratio of 1.18, reflecting the continued improvement in customer trends as well as solid execution from our sales teams. I should point out that in the fourth quarter, our cancellations, while still within a normal range, were slightly above normal due to specific idiosyncratic aspects of certain trials that had to be canceled. Demand metrics for the quarter continued to be positive. Our qualified pipeline is about 10% higher year-over-year, with growth across all customer segments. RFP flow grew double digits year-over-year, with growth across all segments, with the largest gains in large pharma and in Europe. Our win rates improved year-over-year by several percentage points. Backlog reached a new record of $32.7 billion at the end of the quarter, growing 5.3% compared to the prior year. Encouragingly, EVP funding was strong in Q4, reaching $33 billion, indicative of the health of our clients. On the commercial side, Pharma continued to perform exceptionally well in the fourth quarter, achieving better-than-expected results despite the anticipated tougher year-over-year comparisons. We delivered growth in revenue of 9.8% reported and 7.1% at constant currency, highlighting the resilience of our broader commercial portfolio. A few highlights of business activity in the fourth quarter include announcing the strategic collaboration with Amazon Web Services, namely AWS, as our preferred strategic partner to accelerate the industry's digital transformation. With the world's largest pharmaceutical companies already relying on IQVIA and AWS, we believe this partnership will provide significant revenue potential across life sciences, medical affairs, and healthcare analytics, enabling faster delivery of life-saving treatments to patients worldwide. IQVIA was recognized by the Everest Group for our AI leadership, being the only clinical research organization to receive the #1 ranking for generative AI leadership in life sciences. You will recall that we started on this AI journey quite a while ago. Specifically, a little more than a year ago, we announced a partnership with NVIDIA, and we've been working with them for over a year to build AI capabilities into our workflows, both in clinical and commercial, and we have made significant progress to date. In commercial, demand for our AI-driven innovations is gaining momentum with our clients, especially in large pharma. A few examples include a top 20 pharma client selecting IQVIA to provide comprehensive AI-enabled information and analytic solutions for a major U.S. gastroenterology franchise. The top 15 pharma clients chosen IQVIA as their strategic partner for a multi-year program to deliver analytics and AI solutions across their organization. Another pharma selected IQVIA to deploy our AI-enabled patient relationship manager solutions for rare disease hub services, improving patient engagement and therapy adherence. On the clinical side, I would like to share some key wins in the quarter, focusing on large pharma and biotech companies with emphasis on our AI capabilities. A top 50 pharma client selected IQVIA for a major respiratory development program, where our ability to integrate AI-driven planning tools to accelerate timelines and improve efficiency was key to securing the win. A large pharma client chose IQVIA to manage a large full-service program of multiple studies, utilizing AI-enhanced planning tools and advanced recruiting strategies. IQVIA was selected to manage a pivotal oncology study with end-to-end services while leveraging our AI-enabled technology solutions, including patient randomization and drug supply optimization. Now I would like to take a moment to share how we are simplifying our organization in 2026 to strengthen collaboration, enhance efficiency, and support continued growth. Our goal is to better align our teams with how our operating model has evolved to adapt to the new ways our clients are purchasing our capabilities. In the clinical space, clients are incorporating real-world evidence earlier in clinical development programs. In the commercial space, as I mentioned in prior calls, we are seeing clients increasingly looking to outsource integrated commercialization programs that utilize IQVIA’s full suite of capabilities from analytics to field-based sales and medical forces. Accordingly, we implemented a simplified organization that consists of two reporting segments: Commercial Solutions and R&D. Under this new reporting model, the CSMS segment, which has become more closely integrated into our commercial offerings, is incorporated into the Commercial Solutions segment. Additionally, certain offerings reported in the R&D segment, such as real-world and late-phase offerings that have become more closely aligned with the clinical trial business, are linked to the R&D segment. This organizational change aligns with industry evolution and the company's operating model. It has a negligible impact on segment growth rates, as you can see on the chart. We believe our growth and differentiated capabilities position us well to pursue enterprise-wide partnerships across these two segments as clients continue to consolidate vendors. I want to take another moment to acknowledge and congratulate our employees around the world for the ninth consecutive year. IQVIA was named one of the world's most admired companies in Fortune's annual survey, and importantly, for the fifth consecutive year, IQVIA was named the #1 most admired company in our category. Finally, this is the last earnings call for our long-time CFO, Ron Bruehlman. I want to take a moment to acknowledge Ron. I've been working with Ron for the last three decades. He is an extraordinary world-class leader who has played an instrumental role in shaping and executing our company's financial strategy and transformation. Ron’s steady leadership and long-term strategic vision have been essential in building a high-performing global finance organization and helping IQVIA remain resilient through unprecedented times. On behalf of the entire IQVIA team, I want to thank Ron for his exceptional service. The good news is he is not going anywhere and will be transitioning into a senior advisory role, assuming he returns from his upcoming trek in Nepal. And now, I will turn it over to Ron for more details on our financial performance.

Ronald Bruehlman, Executive Vice President and Chief Financial Officer

Thanks for your kind words, Ari, and I promise I will make it back. Good morning, everyone. Let's start by digging into the numbers a little bit more. Starting with the fourth quarter: Fourth quarter revenue was $4.34 billion. That was up 10.3% on a reported basis and 8.1% at constant currency. Excluding all COVID-related work, revenue grew over 8% at constant currency. This included approximately 2 points of contribution from acquisitions. Technology & Analytics Solutions revenue for the fourth quarter was $1.821 billion, which is up 9.8% reported and 7.1% constant currency. R&D Solutions fourth quarter revenue of $2.33 billion was up 9.1% reported and 8.2% at constant currency, and excluding the step-down in COVID-related work, R&D Solutions revenue grew over 8.5% at constant currency. Finally, our Contract Sales and Medical Solutions (CSMS) fourth quarter revenue of $210 million increased 18.6% reported, 15.3% at constant currency, with about 5 points of that growth due to the acquisition mentioned in the third quarter call. For the full year, revenue was $16.31 billion, up 5.9% reported and 4.8% constant currency. That included Technology and Analytics Solutions revenue of $626 million, which grew 7.6% reported and 6.2% constant currency. R&D Solutions full-year revenue was $8.896 billion, up 4.3% reported and 3.5% at constant currency. Finally, full-year CSMS revenue was $788 million, up 9.7% reported and 8.2% at constant currency. Now moving down to P&L. Fourth quarter adjusted EBITDA was $1.046 billion, representing growth of exactly 5%. Full-year adjusted EBITDA was $3.788 billion, up 2.8% year-over-year. Fourth quarter GAAP net income was $514 million, and GAAP diluted earnings per share was $2.99. Full-year GAAP net income was $1.360 billion or $7.84 of earnings per diluted share. Adjusted net income was $580 million for the fourth quarter, and adjusted diluted earnings per share was $3.42, which was up 9.6%. This brought the full-year adjusted net income to $2.68 billion or $11.92 per share, up 7.1%. As already noted, we had strong net new bookings growth this quarter, confirming the improved demand environment that we observed starting in the second quarter. The R&D Solutions backlog at December 31 was $32.7 billion, up 5.3% year-over-year, while the next 12 months revenue from backlog was $8.3 billion at year-end. Now turning to the balance sheet. As of December 31, cash and cash equivalents totaled $1.980 billion, and gross debt was $15.724 billion, resulting in net debt of $13.745 billion. Our net leverage ratio ended the year at 3.63x trailing 12-month adjusted EBITDA. Cash flow from operations in the fourth quarter was $735 million, and capital expenditures were $174 million, which translated into free cash flow of $561 million. For the full year, free cash flow was $2.51 billion, representing 99% of our full year adjusted net income. In the quarter, we repurchased $212 million of shares, bringing our full-year share repurchase activity to $1.244 billion at an average price of $159 per share. Now I will turn it over to Mike Fedock, who will provide details on our 2026 guidance.

Michael Fedock, Senior Vice President, Financial Planning and Analysis

Thank you, Ron. For full-year 2026, we expect revenue to be between $17.159 billion and $17.359 billion. This includes about 150 basis points of contribution from M&A and approximately 100 basis points of tailwind from foreign exchange versus the prior year. Our adjusted EBITDA guidance is $3.975 billion to $4.25 billion, and our adjusted diluted EPS guidance is $12.55 to $12.85. Now let me provide some color on the below-the-line costs. This guidance includes approximately $610 million of operational depreciation and amortization, net interest expense of approximately $760 million, which is about $80 million higher than in 2025. This increase reflects the full-year impact of the senior notes issued in June 2025, swap maturities, and refinancing activity we expect to complete in 2026, partially offset by the lower interest rate on our variable debt. And finally, our guidance assumes an effective income tax rate of just over 17% and an average diluted share count of just over 171 million, assuming that foreign currency rates as of February 4 continue for the balance of the year. Now let's look at revenue at the new segment level. As Ari mentioned, we will start reporting 2026 under two segments: Commercial Solutions and R&D Solutions. This change is intended to better align and simplify our operations to the evolving market landscape. We will provide a full recast of relevant historical financials for the two segments, starting with the first quarter 10-Q and the 2026 10-K. In the meantime, we have included a recast of 2025 and 2024 revenue in the press release that accompanies this earnings presentation. On a recast basis, 2025 full-year revenue for the two new segments has Commercial Solutions at $6.730 billion and R&D Solutions at $9.570 billion. With this new reporting, Technology & Analytics Solutions transfers $674 million of real-world late phase and real-world clinical-related offerings to R&D Solutions and Commercial Solutions receives the full $788 million of Contract Sales and Medical Solutions revenues. For full-year 2026, we expect Commercial Solutions revenue to be between $7.2 billion and $7.3 billion, which represents growth of approximately 7% to 9%. R&D Solutions revenue is expected to be between $9.9 billion and $10 billion, which is a little over 4% growth year-over-year at the midpoint. Now let's review our first-quarter guidance. For the first quarter, we expect revenue to be between $4.50 billion and $4.15 billion. Adjusted EBITDA is expected to be between $920 million and $940 million. Adjusted diluted EPS is expected to be between $2.77 and $2.80. Now before we move to Q&A, I just want to take a moment to thank Ron for his support and guidance throughout the years. I've enjoyed working with Ron over the last nine years, first as CFO of the lab business, then as CFO of R&D Solutions, and most recently leading the corporation's finance function. I am grateful for everything he has shared with me along the way. Now, with that said, let me hand it back to the operator for Q&A.

Operator, Operator

Your first question comes from Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum, Analyst

Ari, maybe you could just talk about the concerns everyone is having in the market about the potential for AI to disrupt various established businesses. And if you could just talk about why you think your business is insulated or why it would be hard to disrupt it? And then why you think AI is really more of an enabling technology for the business versus anything that investors should be concerned about?

Ari Bousbib, Chairman and Chief Executive Officer

Well, I don’t know where to start. I wish we could spend the next few moments talking about our great results for the year and our great guidance for 2026. We're very excited about how business is going. But an article was published a couple of days ago, and all of a sudden, it's the end of the world. I don't know why it was news to people. It certainly is not news to us. We started on this AI journey a long time ago. Specifically, I mentioned again, we've been working with NVIDIA for over a year to build AI tools into our workflows, and we've made a lot of progress. We've seen this opportunity for our business very early. And again, I stress, it's an opportunity, not a challenge. There really is nothing new here for us other than, obviously, I want to take the opportunity to clarify what I believe are fundamental misunderstandings of both what our business is and why we're not at risk. There are three requirements for AI tools to succeed. Number one, significant ready-to-consume data ingredients at scale. Number two, domain expertise. And number three, technology, meaning the AI tools everybody talks about and the processing capabilities that enable these AI agents to work. Now the first two are absolutely necessary, meaning the data ingredients and the domain expertise. The third one can be bought, and it's typically a combination of tools that constitute a tech stack from a variety of ecosystem players. I want to focus on these first two requirements. Let's start with the data. First, our data is proprietary. You need to understand that our data is not readily available on the web. It's proprietary. It's not just aggregating data; it's more complex than that. Our data is sourced, de-identified, cleansed, and curated, integrated into comprehensive data lakes that enable precise extraction algorithms to work effectively. We do this at a significant cost and on a massive scale, and we have been doing this for decades. Many have tried to replicate it; no one has ever duplicated it. Second, healthcare data is dynamic; it changes with every moment and needs to be updated constantly. It's not static like a legal case, which remains unchanged forever. Healthcare data requires extensive regulatory compliance and privacy frameworks that vary across countries and geographies. Do you really think that Germany is going to allow an entity to access individual healthcare data? Finally, healthcare data has to meet interoperability, relevance, completeness, traceability, reliability, and linkability standards under countless ontologies at a scale and complexity that has no comparison to any other industry. Sixth, the data that we sell to our clients is for specific defined uses. We do not sell all the data we source; we sell the final products, not the ingredients. The ingredients that have much higher latency and higher levels of granularity are what you need to train specialized AI agents. Obviously, as we go on and on about why healthcare IQVIA bears no resemblance to data in any other industry. But let me switch to the second important requirement for AI identification, which is domain expertise. In some industries, a couple of lawyers can interpret a case. Not so in healthcare. To build the algorithms required to develop AI agents, you must understand and interpret highly complex data sets in their context, enabling agents to perform workflows with a level of precision, accuracy, trust, and compliance required by healthcare regulators. This is what we've been calling 'healthcare-grade AI.' That is why our clients trust us to work with them on their AI journey. On one hand, it helps us differentiate in clinical research and win more business. On the commercial side, we’ve seen an uptick in demand for AI-enabled analytical offerings. Most of the work we do with our pharma clients is being discussed as a partnership with IQVIA. Bear in mind that our agents have been training on our data assets for over a year now, and to date, we have deployed over 150 agents covering over 30 use cases across the clinical and commercial businesses. Now, for each of these tasks, we select the model that's best suited to each job. The workflow might involve 10, 15, or 20 agents working together under the oversight of an orchestration agent that sits on top. The goal is to optimize the overall cost as some of these tools can be quite expensive. Here is where deep domain expertise is critical to selecting and fine-tuning each model on proprietary domain-specific data to optimize performance. The investment required to integrate all of this is quite significant and is only justified if you have the scale across both clinical and commercial segments globally to make the economics worthwhile. We sell to over 10,000 clients, which provides us that scale. That's why we exist in the first place, long before AI became topical. Everything our clients do, they can outsource to us, which is more economically rational. To summarize, I would say that AI identification is positive for our business across both clinical and commercial segments. I understand that it’s hard to distinguish between us and other CROs or information service providers. Our proprietary data assets, which are not replicable by generic AI models, are more valuable than ever. Our services are differentiated because they leverage expert insights that few, if any, organizations possess in-house. Yes, some lower-level consulting work may be displaced, but at the same time, we see increasing demand for new offerings, including next-generation information management solutions that I spoke about in my introductory remarks. By the way, these introductory remarks were prepared long before the AI drama erupted a couple of days ago. So I hope that addresses your question, Shlomo.

Operator, Operator

Your next question comes from Eric Coldwell with Baird.

Eric Coldwell, Analyst

Thanks very much, and I was hoping to dig into the latest acquisition, Cedar Gate. Perhaps help us better understand holistically what the value and driver of that acquisition is for the organization and how it fits into the total IQVIA ecosystem. Additionally, could you provide any color on the specific revenue and profit contribution of that business? Is it accretive, dilutive? Maybe give us a sense of the margin profile. If you could, that would be very helpful.

Ari Bousbib, Chairman and Chief Executive Officer

Yes. Thank you very much. We've been exploring the payer-provider analytics business for some time now and never at scale. Overall, even before acquiring Cedar Gate, our overall payer-provider business was just a couple of percentage points of our total revenues and mostly in the EMEA region, specifically Europe and the Middle East. In the U.S., we've looked at several assets before this acquisition, but none were of sufficient scale nor valued rationally at the time. Cedar Gate presented a great opportunity. It effectively transforms healthcare data into insights for improved patient outcomes, providing analytics to payers. It has a robust technology platform and the right scale. As for numbers, it generated about $125 million in revenue in 2024 and approximately $33 million of adjusted EBITDA, with a margin profile of around 32.7%. This acquisition will help improve patient outcomes, enhance quality of care, and reduce costs across the system. It utilizes data from its customers, impacting around 60 million lives. Additionally, it has natural synergies with our data analytics and technology offerings.

Operator, Operator

Your next question comes from Justin Bowers with Deutsche Bank.

Unknown Analyst, Analyst

All right, everyone. Ari, I may add one, if I may, but I do recall in your 2019 Investor Day where IQVIA highlighted its investments in the cloud and AI and ML. I think a lot of those investments may not have been accretive to cash flow at the time or over the course of those few years. Now is this the time where IQVIA really starts to monetize those investments while the rest of the world is catching up? But my one question, at the risk of oversimplifying, is just to understand whether this is an opportunity or risk for your business? And is it accretive, mutual, or decremental to growth, whether it's R&D or Commercial Solutions? I think your response at the end to Shlomo's question is that it's potentially accretive to the long-term growth rate of IQVIA, so I just want to confirm that that’s what you're messaging. Also, it does sound like what you're seeing in R&D is an improving business environment based on your prepared remarks. Are we on course to return to a 1.2 book-to-bill throughout 2026? Does the pipeline support that, or is it too early to tell?

Ari Bousbib, Chairman and Chief Executive Officer

Yes. Thank you. I don’t really know where to start. It’s really frustrating that all we’ve been saying has been interpreted as something else. You went back to 2019, true, but we’ve actually accelerated all of this over the past year, and we’ve been communicating it repeatedly. It’s really hard to disclose a generic assertion like 'AI is going to displace your business.' It’s actually the opposite. AI identification is a positive; it has been a positive, and it will continue to be a positive for us. IQVIA has the largest proprietary healthcare information assets in the world, which is the foundation of our value to clients. That access is simply not available elsewhere. We have access to non-public, granular, high-frequency data that nobody else can license to build the necessary AI agents. Number two, industry expertise and global presence cannot be replicated by general-purpose AI models. Our company is integral to our clients’ ecosystems. AI is likely to augment clients’ teams but not replace us. Our clients’ AI initiatives are empowered by our data services and workflows, and the scale and centralization that make IQVIA the natural healthcare AI partner are evident. I want to remind you that just a bit over a year ago, we were told that R&D investments in drug development were over, that no one was going to invest in that space anymore. I’ve said what I have to say. AI enhances existing workflows rather than replacing them. Most of what AI does meets approximately 80% of what’s needed; you still require subject matter expertise for the remaining 20%. Otherwise, you risk compounding errors and ending up with an incomplete product, especially in healthcare. You are also overlooking regulations. AI is about productivity and enabling people to accomplish more; it will not replace us; it will enhance and improve our services. Regarding bookings, demand metrics are robust and continue to show double digits in terms of pipeline growth and RFP flow. The book-to-bill ratio has improved throughout the year. Yes, we booked roughly $10 billion of business this year, in line with prior years. Demand indicators are strong, and funding has returned significantly among our large pharma clients, which creates a strong pipeline of opportunities. While I can’t specifically forecast future book-to-bill metrics, demand indicators are very positive.

Operator, Operator

Your next question comes from Elizabeth Anderson with Evercore ISI.

Elizabeth Anderson, Analyst

I don't want to beat a dead horse, but have you actually seen— I think one of the fears that came out this week— and I'd just be curious your thoughts on it, that I think Pfizer and maybe some others have discussed using AI to improve trial efficiency. When I heard that, it seems somewhat aligned with what you and others have previously said about a generalized increase in that over time. Have you seen any difference in behaviors from that large pharma segment concerning what they're asking of you? Because the fear stems from whether they will need fewer FSP seats or something similar, which could impact revenue. So one, have you heard about that? Secondly, on the financial side, anything you can point to in terms of the cadence of profitability this year that would differ from previous years?

Ari Bousbib, Chairman and Chief Executive Officer

No, nothing different with respect to large pharma and AI efforts regarding the idea that clinical trials can be made more efficient by AI. We've been discussing this concept for a long time. The very creation of IQVIA was based on the idea of innovating with new tools that facilitate AI integration; we’ve always believed in that potential. In fact, with respect to AI efficiencies in clinical trials, large pharma has been working with us on their AI efforts. The current focus on AI is primarily in the discovery phase, which generally refers to identifying molecules and predicting which trials will be most successful. This doesn't impact our business model, and quite the contrary, it may imply that companies will conduct more trials successfully. Therefore, while there could be a theoretical reduction in fewer trials, this will not significantly alter demand; rather, we expect our clients to manage more trials and achieve a higher success rate due to these innovations. There is no change in demand dynamics; in actuality, we have only seen increased opportunities for productivity improvements, and our business remains stable and growing. We anticipate gaining market share as we've been executing on our strategy, and nothing has changed in our outlook because of recent developments. The trends we've witnessed in demand are consistent.

Operator, Operator

Your next question comes from David Windley with Jefferies.

David Windley, Analyst

Thanks for squeezing me in here. Ari, I wanted to ask about margin. Your margin year-over-year was down a little bit in the fourth quarter, but it looks like to us that your pass-through growth was quite high, which more than accounted for that margin pressure. Perhaps you could clarify the trajectory of pass-throughs and how we should think about how that's affecting margins. The bigger question is about how you share those productivity gains with clients. Historically, I understood the expectation to be some level of sharing. In light of your significant re-procurement negotiations, has the price pressure from pharma during those negotiations affected your ability to capture that value? Or is it more of a program-by-program discussion where strategies dictate the shared efficiencies? I’m just trying to grasp how you monetize efficiency improvements.

Ari Bousbib, Chairman and Chief Executive Officer

Yes. Regarding procurement, it is true that these negotiations can impact our pricing structure. However, you must recognize that sharing productivity gains with clients is a given. Long-term, we anticipate maintaining a level of sharing with clients, but your observation is correct that it can vary in the short term based on program considerations. Regarding pass-through costs, they represent a significant driver of gross margins, particularly in the fourth quarter, and have shown mixed impacts on our margin performance. Next year, we guide towards flat EBITDA margins, coupled with moderated pass-through growth as we enter 2026. In essence, the impacts of pass-through growth will moderate next year.

Ronald Bruehlman, Executive Vice President and Chief Financial Officer

The biggest driver affecting gross margin was indeed strong pass-through growth this quarter, along with product mix impacts. As we look ahead into next year, we are guiding towards flat performance for overall EBITDA margins, noting that pass-through growth will moderate going into 2026.

Ari Bousbib, Chairman and Chief Executive Officer

Yes, as you mentioned, it's essential to offset some of the impacts related to pass-throughs with added productivity gains. However, when pass-throughs increase, there is only so much that can be offset.

Kerri Joseph, Senior Vice President, Investor Relations and Treasury

Thank you for joining us today, and we look forward to speaking with you again during our first quarter 2026 earnings call. The team and I will be available for the rest of the day to answer any follow-up questions you may have.

Operator, Operator

This concludes today's conference call. You may now disconnect.