Fortrea (NASDAQ:FTRE) reported second-quarter 2026 revenue of $678.2 million and adjusted EBITDA of $58.7 million, while raising its full-year revenue and adjusted EBITDA outlook. Management said results reflected stronger clinical pharmacology performance, cost-savings initiatives and improving commercial activity, particularly among biotechnology clients.
Revenue declined 4.5% from the prior-year quarter, primarily because of lower passthrough costs in the company’s clinical pharmacology and clinical development businesses, as well as continued functional service provider, or FSP, headwinds. Those declines were partly offset by service-fee growth in clinical pharmacology, driven by higher net new business and a more favorable study mix.
Bookings and Market Conditions
Chief Executive Officer Anshul Thakral said the company is seeing a more constructive demand environment across pharmaceutical and biotechnology customers. He cited strengthening biotech funding, increasingly normalized procurement processes at large pharmaceutical companies and higher volume and value of requests for proposals.
“The environment has become more supportive, but our results are not simply the result of market recovery,” Thakral said, attributing the performance to changes in commercial execution, including improved global coordination, a sharper focus on opportunities where the company can compete effectively and a clearer approach to serving distinct customer segments.
Thakral said Fortrea’s clinical pharmacology services business was a particular area of strength. Because that business typically converts awarded work to revenue faster than later-stage programs, its momentum supported revenue conversion during the quarter, he said.
Management said the company has not seen a material shift in its therapeutic-area mix. Oncology remains its strongest therapeutic area, according to Thakral. He also said Fortrea has not taken on very large vaccine studies or large phase III GLP-1 studies, which has contributed to a relatively stable mix.
Margins, Cash Flow and Balance Sheet
Adjusted EBITDA rose from $54.9 million in the prior-year period to $58.7 million, driven primarily by cost-savings initiatives and operational efficiencies, as well as lower credit-loss provisions. The company reported a net loss of $13.2 million, compared with a net loss of $374.9 million a year earlier, when results included a non-cash pretax goodwill impairment charge.
Adjusted net income was $22.7 million, up from $17.6 million in the prior-year quarter. Adjusted diluted earnings per share were $0.23, while adjusted basic earnings per share were $0.24.
Former Chief Financial Officer Jill McConnell said direct costs fell 6.6% year over year, reflecting lower passthrough costs, stock-based compensation and headcount-related personnel costs. Selling, general and administrative expenses declined 18.2%, primarily due to lower IT and personnel costs, partially offset by higher variable compensation expense.
- Operating cash flow was $28.9 million, compared with $21.8 million a year earlier.
- Free cash flow was $19.9 million, compared with $14.3 million in the second quarter of 2025.
- Backlog was $7.8 billion, with cancellations in line with historical trends.
- Backlog burn was 8.6%, higher sequentially due to clinical pharmacology service-fee growth and higher passthrough revenue.
- Available liquidity exceeded $500 million, including the undrawn revolver.
McConnell said Fortrea generated $18 million of new gross cost savings and $10 million of new net cost savings during the quarter. Year-to-date gross savings totaled $34 million, while net savings totaled $19 million. Net savings were partly affected by a higher-than-expected variable compensation accrual rate, she said.
The company’s top 10 customers accounted for 55.4% of quarterly revenue, while its largest customer represented 16.8%. Fortrea said it has paid down approximately 35% of its original debt since becoming an independent company.
Raised 2026 Outlook and Leadership Transition
Fortrea increased its full-year 2026 guidance and now expects:
- Revenue of $2.62 billion to $2.69 billion.
- Adjusted EBITDA of $205 million to $220 million.
- Positive free cash flow for the remainder of 2026 and for the full year.
Thakral said the revised outlook reflects first-half performance, an improving mix in backlog and continued operational optimization. He said the company expects relatively stable performance in the second half, but did not provide separate third- and fourth-quarter forecasts.
Fortrea also disclosed that newly appointed CFO Jason Knoblauch is not currently able to act in the role because of an ongoing proceeding involving restrictive covenants with his former employer. Thakral said the company believes it acted appropriately in appointing Knoblauch and plans to support him while the matter is addressed.
Board member David Smith is serving as interim CFO. Smith had been Fortrea’s audit committee chair and previously served as CFO of contract research organization Charles River Laboratories. Smith has stepped down from his board committee assignments during the interim role, and Erin L. Russell will chair the audit committee.
Technology and Commercial Strategy
Management also highlighted Fortrea Intelligent Technology, or FIT, its clinical-trial intelligence ecosystem combining data, analytics, machine learning, risk analytics and artificial intelligence. The company launched FIT externally in April and said it is expanding its use in active studies and new project starts.
Thakral said the company’s CRI Mobile application is deployed in more than 50 countries. In one study in Spain, the tool reduced site-visit preparation time by nearly 30 minutes per visit, he said.
While most customer requests for proposals now ask about AI capabilities, Thakral said customers are not yet selecting contract research organizations primarily on the basis of AI. He said AI is currently a competitive differentiator when supported by a credible roadmap and early results, but meaningful commercial and operational effects will take time in the highly regulated clinical-development environment.
Fortrea has equipped nearly 14,000 employees with Microsoft Copilot and launched a companywide AI literacy program. Thakral said the company views the technology as a tool to improve productivity and outcomes rather than replace employees.
About Fortrea (NASDAQ:FTRE)
Fortrea, Inc is a global contract development and manufacturing organization (CDMO) that provides integrated solutions for pharmaceutical and biotechnology companies. Established as a spin-off from Thermo Fisher Scientific’s Pharma Services business in October 2023, Fortrea leverages a legacy of scientific expertise and manufacturing scale to support drug development from early-stage research through commercial production. The company’s comprehensive offerings address the complex needs of both small-molecule and biologics programs, making it a single source for clients seeking to accelerate timelines and manage costs.
Fortrea’s core services encompass analytical and formulation development, process optimization, clinical and commercial manufacturing, and packaging services.
