Castle Biosciences Beats Estimates, Eyes New Markets Amid Strategic Shift

FRIENDSWOOD, Texas – February 26, 2026 – Castle Biosciences posted robust fourth-quarter and full-year 2025 financial results that surpassed analyst expectations, signaling strong momentum in its core diagnostic tests even as the company undergoes a significant strategic realignment. Full-year revenue exceeded guidance to reach $344.2 million, buoyed by a 37% surge in test reports for its flagship dermatologic and gastrointestinal products.

However, the year's success was coupled with a reported net loss of $24.2 million, a stark contrast to the $18.2 million net income of 2024. This bottom-line figure was heavily influenced by the company’s decisive moves to discontinue its IDgenetix test, a change in Medicare coverage for its DecisionDx-SCC test, and a related one-time amortization charge. The results paint a picture of a company in transition, shedding less profitable assets to double down on high-growth franchises and expand into lucrative new markets.

“We closed out an outstanding year with a strong fourth quarter, reflecting the strength of our innovative test portfolio, disciplined execution and the dedication of the entire Castle team who continue to deliver meaningful impact for patients and clinicians every day,” said Derek Maetzold, president and chief executive officer of Castle Biosciences, in the company's earnings announcement.

Following the report, the company's stock (Nasdaq: CSTL) saw a positive reaction in after-hours trading, rising 3.34%. This suggests investors are looking past the GAAP loss and focusing on the underlying operational growth and forward-looking strategy, a sentiment echoed by Wall Street analysts who largely maintain a “Strong Buy” consensus on the stock.

Core Products Fuel Impressive Growth

The engine behind Castle's top-line performance remains its core diagnostic portfolio. The company’s TissueCypher Barrett’s Esophagus test was a standout performer, with test report volume rocketing up by an impressive 86% in 2025 compared to the prior year, delivering 39,014 reports. Having now surpassed 80,000 total orders, the test’s adoption is accelerating, supported by its inclusion in American Gastroenterological Association (AGA) guidelines and a recently published meta-analysis confirming its ability to identify patients at higher risk of developing esophageal cancer. With management estimating a current patient penetration of only 11%, TissueCypher appears to have a substantial runway for future growth.

Similarly, the company’s cornerstone DecisionDx-Melanoma test continued its steady expansion, delivering over 39,000 reports in 2025, a 9% increase year-over-year. The test's clinical value was recently reinforced by an independent expert consensus paper that endorsed it as a best-practice tool for guiding management decisions in cutaneous melanoma. This growing body of evidence, combined with a base of nearly 17,000 ordering clinicians, solidifies its leadership position in skin cancer diagnostics.

This growth in core franchises was a key factor in the company’s ability to generate $344.2 million in revenue for the year, a 4% increase over 2024. When excluding the revenue from the discontinued IDgenetix and the impacted DecisionDx-SCC tests, the company's underlying revenue growth was a much more vigorous 34%.

A Calculated Pivot: Navigating a Shifting Portfolio

While top-line growth was strong, the company’s profitability was impacted by strategic decisions and external factors. The shift from a net income of $18.2 million in 2024 to a net loss of $24.2 million in 2025 was driven by several key items. A primary factor was a one-time, non-cash acceleration of amortization expense of approximately $20.1 million related to the discontinuation of the IDgenetix test in May 2025.

Furthermore, a change in Medicare coverage for the DecisionDx-SCC test, effective April 24, 2025, negatively affected revenue and prompted the company to refocus its commercial efforts. These two events, while creating a drag on the year's financial statements, represent a deliberate pivot. By trimming these assets, Castle is concentrating its resources on its most promising and profitable tests, aiming for a more efficient and scalable business model moving forward.

This strategic pruning is reflected in the company's adjusted metrics. While the GAAP gross margin fell to 69% for 2025, the Adjusted Gross Margin, which accounts for certain non-cash items and revenue adjustments, stood at a healthier 80%. This demonstrates management's focus on maintaining strong underlying profitability in its ongoing operations as it navigates this period of portfolio optimization.

Expanding Horizons: The Push into Atopic Dermatitis

Looking to the future, Castle Biosciences is not just optimizing its current portfolio but also aggressively expanding its total addressable market. In late 2025, the company executed a limited access launch of AdvanceAD-Tx™, a novel gene expression profile test designed to guide treatment for patients with moderate-to-severe atopic dermatitis. This move marks Castle’s entry into a massive new market, with some estimates placing the total addressable market for atopic dermatitis at over $30 billion.

The early reception for AdvanceAD-Tx has been promising. In just a few months since its launch, the company has processed approximately 500 orders from an initial group of around 150 clinical accounts. While the company anticipates immaterial revenue from the test in 2026, it expects a material contribution to begin in 2027 and 2028 as reimbursement pathways are established and commercial adoption expands. The test is designed to predict which patients are more likely to respond to a specific class of drugs known as Janus kinase inhibitors (JAKi), offering a powerful tool for personalizing care in a field with complex treatment decisions.

Balancing the Books and Investor Outlook

Despite the net loss reported for 2025, Castle Biosciences maintains a robust financial position. The company ended the year with $299.5 million in cash, cash equivalents, and marketable investment securities, providing substantial capital to fund its growth initiatives, including the commercial rollout of AdvanceAD-Tx and continued research and development.

For the year ahead, management has issued 2026 revenue guidance in the range of $340 million to $350 million. This forecast suggests continued confidence in the growth trajectory of its core tests and reflects the company's new, more focused portfolio. The guidance anticipates mid-to-high teens growth when normalized for the discontinuation of the IDgenetix and DecisionDx-SCC revenue streams.

Investors appear to be buying into this forward-looking narrative. The positive stock movement following the earnings release, combined with strong analyst price targets, indicates that the market is valuing the company's strategic vision and growth potential over the short-term impact of its portfolio realignment. With a strong cash position, expanding core franchises, and a promising new market entry, Castle Biosciences appears well-positioned to capitalize on its long-term opportunities in the evolving landscape of precision medicine.