2025 was a year of disappointment for CSL Ltd (ASX: CSL) shares and shareholders.
The biotechnology leader was amongst the worst performers on the S&P/ASX 200 Index (ASX: XJO) with a decline that shocked the investment world.
The question now is whether this high-quality laggard from last year can outperform that benchmark in 2026 as fundamentals stabilise and sentiment improves.
Looking ahead, I believe the setup is quietly improving, which raises a genuine case for CSL to outperform the ASX 200 Index.
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Why CSL shares fell so hard in 2025
At a headline level, CSL's FY25 result was not a disaster. Group earnings came in slightly ahead of expectations, helped by lower tax and operating costs. The problem was where the growth came from, and where it didn't.
The market had been positioning CSL Behring, the key plasma therapies division, as the engine room of long-term growth.
Instead, that business barely grew in the second half of FY25. Revenue at CSL Behring increased just 1% in the second half, with flagship immunoglobulin sales declining by 1%. This was deeply disappointing given that Behring had been expected to drive double-digit earnings per share growth for much of the coming decade.
Adding to the pain, management cut its FY26 guidance in the following months, reducing expected revenue growth to around 3% and net profit growth to roughly 6% at the midpoint. The key driver was weaker-than-expected influenza vaccination rates in the US, which weighed on the Seqirus vaccines business. CSL also delayed plans to demerge Seqirus, choosing to wait for conditions in the US vaccine market to improve, and warned of albumin weakness in China.
The core of the investment case remains intact
At its heart, CSL is a plasma powerhouse. It is one of just three tier 1 plasma therapy companies globally, along with Grifols and Takeda, operating in an oligopolistic and highly consolidated market. Plasma collection is the key constraint in production, and CSL is exceptionally well-positioned, owning roughly 30% of global plasma collection centres after years of heavy investment.
That scale matters. It creates high barriers to entry, supports pricing power, and allows CSL to benefit disproportionately as plasma supply conditions normalise.
Encouragingly, plasma efficiency initiatives are already underway with the Horizon project. Management expects plasma gross margins to recover meaningfully by 2028, with the bulk of that improvement driven by faster and larger plasma collections. These benefits have not yet fully flowed through earnings, which means 2026 could mark the beginning of visible margin recovery.
Why 2026 could look better than 2025
For CSL to outperform the ASX 200 in 2026, it doesn't need everything to go right. It just needs less to go wrong.
Expectations are now firmly lower. The vaccines business is now a smaller part of the earnings mix than many assume. Plasma margins are likely to improve as efficiency initiatives take hold. And long-term demand drivers for immunoglobulins remain intact.
I don't think sentiment needs to return to peak optimism for CSL shares to beat the index. A combination of stabilising earnings, early signs of margin recovery, and improved sentiment could be enough to drive relative outperformance from a reset base.
What could still go wrong
That said, CSL is not without risk. Gene therapy remains the biggest long-term threat to plasma-derived treatments, aiming to cure rather than treat disease. Adoption may be slow due to cost, but the risk is real. Competition in haemophilia and hereditary angioedema also continues to pressure certain segments.
And research and development (R&D) outcomes are, by nature, uncertain.
However, I believe that CSL's long track record of disciplined capital allocation and commercial-focused R&D reduces the risk of further value destruction.
Foolish Takeaway
If the ASX 200 delivers a solid return in 2026, I think CSL shares have a credible path to doing better.
The business remains a global leader with competitive advantages, improving plasma economics, and long-term growth drivers that have not gone away.
After a painful reset in 2025, expectations are lower, its valuation is more reasonable, and the risk-reward looks more balanced. I wouldn't expect fireworks. But if margins begin to recover and sentiment improves even modestly, CSL shares could beat the ASX 200 in 2026 and remind investors why the company has been a long-term winner in the first place.
