Q4 2025 Earnings Call Transcript

Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agilent Technologies, Inc. Fourth Quarter 2025 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd 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 one again.

Thank you. Tejas, you may begin the conference.

Thank you, and welcome, everyone, to Agilent's conference call for the fourth quarter fiscal year 2025. As many of you know, I recently joined Agilent after a fun senior stint in Wall Street. And I'd just like to say how excited I am to be joining the team at such a pivotal time in our journey. With me on the line are President and CEO, Padraig McDonnell, CFO, Adam Alanoff, and Rodney Gonzalez, Vice President, Controller, and Principal Accounting Officer who served as interim CFO until Adam's arrival. Joining the Q&A will be Simon May, President of the Life Sciences and Diagnostics Markets Group, Angelica Riemann, President of Agilent CrossLab Group, and Mike Zhang, President of the Applied Markets Group.

This presentation is being webcast live. The press release for our fourth quarter financial results, investor presentation, and information to supplement today's discussion along with the recording of this webcast are available on our website at investor.agilent.com. Today's comments will refer to non-GAAP financial measures. You'll find the most directly comparable GAAP financial metrics and reconciliations on our website.

Unless otherwise noted, all references to increases or decreases in metrics are year over year, and references to revenue growth are on a core basis. Core revenue growth is adjusted for the impact of currency exchange rates and any acquisitions and divestitures completed within the past twelve months. Guidance is based on forecasted exchange rates. During this call, we will make forward-looking statements about the financial performance of the company.

These statements are subject to risks and uncertainties and are only valid as of today. Agilent assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risk and other factors. And now I'd like to turn the call over to Padraig.

Thank you for joining today's call. Before I talk about our results, I want to start by introducing Adam Alanoff, our new CFO, who officially joined Agilent last week. Adam joins us after a distinguished tenure at Amgen. We advanced through a series of finance, strategy, and transformation leadership roles, over a total of nineteen years.

Most recently serving as Vice President of Investor Relations and Treasurer. I'm looking forward to leveraging Adam's expertise in strategic planning and M&A, and his commitment to cross-function collaboration will be invaluable to Agilent in the years ahead. Adam, would you like to say a few words?

Thanks, Padraig. I'm thrilled to join Agilent at such an exciting time. My interactions with the leadership team over the past few weeks both within the finance function as we contemplated the guide, and with the broader team, have only reinforced my optimism for what lies ahead. I'm looking forward to working with the team to drive growth and innovation, advance operational excellence, and preserve Agilent's history of financial discipline.

Great to have you on board, Adam. I also want to take a moment to express my sincere appreciation for Rodney stepping in as interim CFO over the past four months. His long distinguished career at Agilent demonstrated he was more than capable of helping us bridge this important transition. Now let me talk about the Q4 results.

It was another strong quarter. The Agilent team executed exceptionally well, delivering the solutions our customers need in a market that is showing continuing signs of normalization. In the fourth quarter, Agilent reported $1.86 billion in revenue, growing 7.2% on a core basis. Our sixth consecutive quarter of core growth acceleration.

This performance came in above the high end of our guidance. Our customer-first approach is paying dividends with top-line results that compare very favorably with our peers. Momentum remained broad-based across the portfolio supported by strong LC and LCMS demand and share gains, CDMO upside, solid double-digit contributions in key regions, and a replacement cycle that continues to accelerate. These trends reflect our structurally resilient portfolio and performance that tracks above the broader market.

At the same time, our Ignite operating system continues to improve the effectiveness and efficiency of our organization. Ignite helped deliver more than 200 basis points of sequential margin improvements compared with last quarter, while funding incremental performance-driven variable pay. The bottom line result was fourth-quarter earnings per share of $1.59, above the midpoint of our guidance. Simply stated, in a dynamic environment that continues to evolve, the Agilent team delivered for our customers and our shareholders.

As we close the 2025 fiscal year, I want to highlight four key dimensions where we made exciting progress this year and that will drive our growth for the future. First, the innovative products and services that we develop with a customer lens to create differentiated value. Second, the extraordinary customer intimacy and trust our unified sales and service organization creates that unlocks high-quality lead generation and funnel conversion. Third, the increased capabilities and level of talent throughout Agilent.

Fourth, the Ignite operating system that enables us to effectively combine these elements to drive long-term growth and maximize value for customers, shareholders, and employees. Let's start with innovative products and services. The success of our customer-focused innovation was on display throughout the year with products and services that differentiate us from the competition and drive our growth by solving real customer problems. This includes our next-generation Infinity 3 that is delivering as much as 30% improvement in productivity for our customers.

Infinity 3 drove double-digit healthy growth in the second half of the year. That is underpinned by customers returning to buy large volumes of additional units because of their great experiences. Our Pro IQ LCMS also has seen an amazing ramp. Its unique value proposition for pharma and biotech is driving strong customer interest, as well as sales that are well ahead of our already robust expectations.

The summer launch of our Pro IQ drove overall LCMS growth of more than 50% in the first full quarter. And last month, we introduced our Alturo BioInert column. Customers are rapidly adopting the Alturo column, and the column's ramp is an order of magnitude greater than past column launches. This is a clear indication of just how important increased sensitivity and resolution are in key applications that support oligos and GLP-1s.

These results also highlight new product launch excellence across the organization. When it comes to artificial intelligence, we are using AI to accelerate our innovation engine and drive operational excellence. For example, AI generates 80% of our engineering drawings, based on product specifications and customer needs, thereby increasing design productivity and reducing custom design cycle times by 75% for our GC products. In our operations, our order fulfillment team is leveraging Agilent AI for testing, inspection, and control to eliminate redundant shifts, reduce downtime, and improve quality.

Our second key dimension, extraordinary customer intimacy, centers on a cornerstone of continued success. Leveraging our unified sales and service model to maintain lasting customer relationships. Our commercial team members are uniquely positioned as trusted customer partners. Agilent's commercial model is a unified end-to-end organization to provide presales consultations, a modern and easy-to-use e-commerce platform, and a highly experienced deep technical post-sale service and support that ensures customer success.

Our field service engineers build long-term relationships with our customers by partnering with them to solve their most critical problems. Those relationships provide highly valuable insights that fuel a vital and growing portion of our demand generation programs. Insights from our service team now account for 30% of all sales leads. And these leads come with an order conversion rate that is more than double that associated with the rest of the sales funnel.

Because of our uniquely deep connection with our customers, it will come as no surprise that they consistently rate Agilent services as best in class. We don't take this privileged position for granted. That's why we continuously implement new ways to enhance customer intimacy. In terms of AI and customer intimacy, we are working to deploy AI within our CRM to support our sales team with predictive insights, automating tasks, and proposing personalized content in service of our customers.

We're also using virtual agents to complement on-site support in select markets to resolve customer issues more quickly. The third dimension is our increased capabilities and level of talent throughout Agilent. We've leveraged our deep bench of in-house talent and complemented it with external hires that bring fresh perspective and domain expertise. At an executive level, in addition to Adam, we brought on Megan Henson to lead our HR team to help us build on our strong culture.

August Beck, who joined us from Thermo Fisher as our Chief Technology Officer, brings deep scientific knowledge and analytical technologies and a proven ability to lead innovative R&D teams. And most recently, Jaidip Ganguly joined from Gilead to drive world-class manufacturing while leveraging our global scale to realize increased efficiencies. While these individuals are important and visible additions to our leadership team, all Agilent employees are focused on accelerating the pace of innovation, driving superior execution, and most importantly, delighting our customers. Finally, we are bringing together these foundational strengths through our Ignite operating system, our fourth key dimension.

We launched Ignite at the start of the year to improve the pace and quality of our execution and to usher in a new mindset that leverages the power of the enterprise to maximize both growth and stakeholder value. Some examples of Ignite's early success include enhanced top-line growth through the creation and implementation of an enterprise pricing program that drove performance across the year, more than doubling our price growth compared with FY '24. Faster decision-making and improved efficiency by reducing layers of bureaucracy, meaningful procurement cost savings through globalization of vendor contracts, that leverage increased scale for additional negotiating power.

And we saw the power of Ignite in real-time this year as it enabled the immediate creation of our tariff task force to drive a rapid and coordinated response to global tariff changes. The cross-functional task force rapidly developed a unified strategy and executed a suite of interconnected projects that greatly accelerated our tariff mitigation efforts. As a result, we are highly confident that we will fully mitigate current tariffs in FY '26. All told, Ignite has already delivered well over $150 million in annualized savings. The Ignite operating system is able to quickly assemble knowledge from across the organization, develop a thorough and actionable enterprise plan, and actively drive implementation and quantify outcomes.

This is critical as Agilent continues to evolve. Finally, and this is important, Ignite has strengthened our organization's readiness to identify, acquire, and integrate attractive assets. Integration of BioVectra is one example. It's been a highly productive year for Agilent.

We've laid a robust foundation upon which we can drive long-term differentiated growth and value. Now let me share some additional details of our Q4 results starting with our end markets. We continue to see signs of improvement in the pharma market. The Agilent team was able to leverage those conditions in our customer-centric approach into an excellent 12% growth during the quarter.

We also saw a nice pickup in spending among our biotech customers. That spending grew into the low twenties during the quarter, and low double digits ex CDMO, which was led by our large accounts. Our customer-focused solutions for oligotherapeutic developments, peptide-like GLP-1s, and Infinity 3 drove our performance in pharma to low double-digit growth in LC, and mid-teens growth in LCMS platforms. That performance is above that of our peers and points to share gains across the replacement and greenfield opportunities.

Our specialty CDMO business continues to be a differentiated growth driver. It represents nearly 20% of LDG revenue and grew more than 40% on a core basis during Q4. During the quarter, commercial programs drove 60% of our NASD revenue. The capacity increases we implemented at BioVectra in the third quarter enabled a record fourth quarter that was in line with our elevated expectations. Even as the intra-quarter cadence shifted revenue to October.

Chemical and advanced materials grew 7%, as we continue to see strong demand in the Americas and Europe. Chemicals customers continue to invest in capital equipment, to meet the demand driven by reshoring of downstream customers in the semiconductor market, increasing global competition for critical resources, and an enhanced focus on regional supply chain security. Diagnostics and clinical continues to be a durable mid to high single-digit performer with 7% growth in the quarter. We're excited about the upside potential here as our new Dako Omnis family penetrates medium and low throughput labs.

Environmental and forensics grew 9%, as the approaching implementation of a revised EU drinking water directive drives investment in new capabilities. Also, commercial labs and forensic customers in the Americas are moving quickly to spend the capital budgets before year-end. Even as US government spending in this end market remains muted. Our market-leading PFAS business grew high single digits in Q4 and almost 40% for the year, despite meaningfully tougher comps and the US EPA headwinds we mentioned last quarter.

Environmental use cases remain the bulk of our PFAS revenue, though growth is increasingly coming from our end markets such as food and CAM. Our business in the food market finished a strong year with a growth of 7% in the quarter. Finally, academia and government, our smallest end markets, at 7-8% of annual revenue, declined 10% in the quarter. To no one's surprise, federal spending reductions had an increased impact on instrument spending in the US.

In summary, our growth across major end markets continues to run ahead of our peers supported by stronger LC and LCMS adoption, healthy contributions from specialty CDMO platforms, and solid traction in applied workflows. We continue to see nice momentum in our instrument portfolio, with instrument book-to-bill exceeding one for the seventh consecutive quarter. We are in the early stages of a normalized replacement cycle and gaining share against the plus the growth of our installed base enables robust attach rates for consumers and service offerings to lend meaningful durability to our top line for your strong recurring revenue.

As we look to FY '26, our priorities remain clear. Advance our Ignite operating system, sharpen commercial execution, capture opportunities from improving end markets, innovative new products, and a multipronged replacement cycle. In our end markets, we expect continuation of positive trends in pharma. This will be enabled by improved visibility around pricing, and a stabilizing tariff environment.

As well as the very early stages of pharma reshoring that we anticipate could start to materialize in orders towards the end of the year. And while it's too soon to call an inflection, the accelerating pace of M&A and improving funding environment into October bodes well for our small and midsized biotech customers in FY 2026. We remain bullish on demand outlook for specialty CDMO pharma services, with strong market momentum in our key modalities like siRNA and GLP-1s. We expect to drive mid-teens growth in the coming year as we get ready for opening new capacity in 2027. We expect applied markets will continue to grow as customers adapt to shifting macro conditions, and structural drivers like the expansion of PFAS testing and semiconductor reshoring support durable long-term demand.

In diagnostics and clinical, we see continued strength as testing demand grows and our expanded Dako Omnis offerings enable new placement opportunities. In our smallest end market, academia and governments, we are not expecting a meaningful recovery in FY '26. As ongoing US federal spending headwinds seem to be unlikely to abate soon. Putting it all together, incorporating the stronger baseline comparison for FY '26, we're starting the year with an expectation of 4% to 6% core growth. We believe this range is a prudent initial guide that takes into account secular growth drivers.

This includes instrument replacement cycles, demand for our specialty CDMO services, with that of these specific needs in GLP-1s and PFAS, and pharma and semiconductor reshoring. This allows for unevenness in ongoing recovery dynamics across our markets. We anticipate these growth drivers reinforced by Ignite to provide continued momentum. We also expect to deliver 75 basis points of operating margin expansion in FY 2026 at the midpoint.

This target allows us to make critical investments to drive innovation, expand our digital commercial capabilities, and prepare for the opening of our new CDMO capacity in 2027. All while absorbing incremental material costs driven by tariffs and assumptions for a steady end market recovery. This margin expansion translates into 9% operating profit growth at the midpoint, demonstrating the strong operating leverage inherent to our model. For FY '26 earnings per share, guiding 5% to 7% that includes an EPS growth headwind of three percentage points from the one-time step-up in tax rate reflecting the new global minimum tax regulations.

Adjusted for this tax dynamic, underlying EPS growth would have been in the high single to low double-digit range. Our financial discipline remains unchanged. We are deploying capital where it delivers the highest long-term value. Balancing investments and innovation, M&A opportunities, as well as strategic capacity expansion while returning capital to shareholders.

Let me turn it over to Rodney, who will provide additional details on the fourth quarter results and our guidance for next year.

Thanks, Padraig, and good afternoon, everyone. In my comments today, I'll provide additional detail on revenue in the quarter as well as walk through the income statement and cover other key financial metrics. I'll then cover our new full-year and first-quarter guidance. Q4 revenue was $1.86 billion, above the high end of our guidance.

On a core basis, we posted growth of 7.2% while reported growth was 9.4%. Currency had a favorable impact of 0.9% while M&A contributed 1.3%. The BioVectra acquisition is reflected in core growth starting in October. At a business segment level, LDG grew 11%, well ahead of guidance bolstered by the strong performance in our LC and LCMS instruments and robust CDMO results.

AMG grew 3% as expected. Led by high single-digit growth in GC and GCMS as we see increasing benefit from the instrument replacement cycle in those platforms as well. ACG grew 6% in line with our guidance with high single-digit growth in the rest of the world, offset by mid-single-digit declines in China. On a geographical basis, both the Americas and Europe saw healthy 11% growth with broad end market strength, outside of academia and government.

China declined 4% and the rest of Asia ex China grew 4%. Results in China were below our low single-digit growth expectations, though revenue contributions remained stable around $300 million per quarter. India grew in the high teens in Q4 with double-digit growth in pharma and greater than 20% growth in each of our applied markets. This balanced strength across our geographies which saw us deliver double-digit growth ex China remains a key differentiator of our performance profile.

Gross margins in Q4 improved sequentially by 100 basis points and came in at 54.1%. On a year-over-year basis, were down 100 basis points due to tariff headwinds. Operating margins were 27.2%, up more than 200 basis points sequentially driven by leverage on volume, strong pricing, and tariff mitigation. We delivered this result despite absorbing an incremental 60 basis point sequential headwind from performance-driven variable pay.

Absent the variable pay dynamics that reflect better business conditions and our strong execution. Operating margins would have expanded by 270 basis points over the prior quarter. Well above our guide of 230 basis points of sequential expansion. On a year-over-year basis, operating margins were down only slightly due to tariffs.

Now moving below the line, we had $10 million in other income, while our tax rate of 12% was as expected. Finally, we had 284 million diluted shares outstanding in the quarter. Putting it all together, Q4 earnings per share was $1.59, that was above the midpoint of our guidance and grew 9% from a year ago. Now let me turn to cash flow and the balance sheet.

Operating cash flow was $545 million in the quarter, and we invested $93 million in capital expenditures. We purchased $85 million in shares and paid $70 million in dividends during the quarter. More recently, we increased our industry-leading dividend by 3%. And we ended the quarter with a net leverage ratio of 0.8 pointing to our robust balance sheet that leaves ample room for capital deployment optionality.

Now let me share some additional details on the outlook for next year and the guidance for our first quarter. We expect FY '26 revenue to be in the range of $7.3 to $7.4 billion on a reported basis. This represents an increase of 4% to 6% on a core basis as currency is expected to be a 1% tailwind during the year. To help with your models, I want to provide you with additional details on expectations for growth in our end markets during the year.

Starting with pharma, we anticipate high single-digit growth improving market conditions, and the strength of our offerings in key high-demand applications create a favorable environment. The applied markets, we expect mid-single-digit growth in chemical and advanced materials, low single-digit growth in environmental and forensics, and flat growth from food, where we have especially difficult year-on-year compare against a strong China stimulus tailwind FY '25. In Diagnostics And Clinical, We Anticipate Mid Single Digit Growth In Academia And In Government, We Are Guiding To A Low Single Digit Decline, As We Don't Foresee Meaningful Recovery In The US.

By business segment, we are guiding both the life science and diagnostics markets group, and the Agilent CrossLab's group to grow mid-single digit and the applied markets group to grow low single digit in FY 2026. Finally, by geography, we expect The Americas to lead the way with mid to high single-digit growth while Europe and Asia ex China grow mid-single digits. Building on the momentum we saw in the back half of the year. In China, we are incorporating a flat assumption for FY 2026, consistent with what we saw in China this year. Based on our latest expectations around stimulus timing, we are taking a prudent approach and substantially moving stimulus benefits from our FY 2026 revenue guidance.

Moving down the P&L, we expect to deliver 75 basis points of operating margin expansion in FY 2026 at the midpoint. We anticipate a more gradual start given typical seasonality and the lack of tariff headwinds in the '25. With momentum building through the year. Reflecting the latest global tax regulations, we see our tax rate increasing to 14.5%, a 2.5% increase compared with last year. We also expect $30 million in other income and we are planning any dilutive repurchases to maintain 284 million diluted shares outstanding for the year.

Putting this all together, FY '26 non-GAAP earnings per share are expected to be between $5.86 and $6. Representing earnings growth of 5% to 7%. For your P&L modeling, let me share some additional expectations we have incorporated into our guidance for the year. Because of Ignite, we expect pricing to continue to improve. With an opportunity to grow well above 100 basis points.

This guidance also incorporates achieving full mitigation of existing tariffs over the course of the year. Using cost savings, and pricing actions. As is typical, we expect to see substantial sequential improvement in operating margins over the course of the year. Finally, we anticipate operating cash flow will be in the range of $1.6 to $1.7 billion and expect to invest $500 million in capital expenditures.

To help with phasing, we are expecting revenue seasonality similar to FY '25. Meanwhile, earnings will be slightly more biased towards the second half given the tariff impact on the P&L in the first half. Now moving to the first quarter, we expect our reported revenue to be in the range of $1.79 to $1.82 billion. This represents an increase of 4% to 6% on a core basis, while currency is expected to be a 2.5% tailwind. First-quarter EPS guidance is $1.35 to $1.38, with 285 million diluted shares outstanding.

Now I'd like to turn the call back to Padraig for closing comments. Padraig?

Thanks, Rodney. As you've heard, we built excellent momentum across FY '25 in a dynamic environment. Our distinct growth drivers under the Ignite operating system are fuel for success. We are poised to benefit from a broadening end market recovery, win share, and deliver resilient above-peer growth and margin performance over the long term.

With our innovation engine accelerating, our focus on customers intensifying, and our best-in-class commercial team executing, we are entering FY '26 from a position of strength. Thank you all for your attention, I'll turn it back over to Tejas for Q&A. Tejas?

Thanks, Padraig. Operator, can you please share the instructions for the Q&A?

At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Our first question will come from the line of Tycho Peterson with Jefferies. Please go ahead.

Hey, thanks. Padraig, I'm wondering if you can comment on BioVectra. You guys had guided, I think, closer to $35 million and came in around $22 million. So maybe just talk about dynamics there. And then you're taking CapEx up $100 million. Is that all CDMO?

Yeah. So we're very pleased with the BioVectra coming in strong for the year, driven by GLP business. So Q4 growth was a good was a was an easy compare but pleasing nevertheless. So we came in against, what we thought for the year.

We have key molecules planned for 2026. We're very, very happy about the book of business we have for BioVectra, and it was an outstanding integration from our side, which bodes well for the future for future M&A as well. But on the CapEx side, Adam, do you wanna give some color?

Sure. Thanks. So the incremental $100 million investment is really around incremental NASD capacity as well as incremental consumable expansion.

Okay. And then follow-up on margins. You know, obviously, a focal point especially coming out of last quarter. Maybe just talk on the 75 basis points you're guiding to the gives and takes there. And if the top line ends up at the high end, could you do better?

Yeah. So on margin, I think, you know, we have a prudent margin for 26 set in, and we're gonna go through some of the differences on the call. But, Adam, do you wanna go through some of the ideas you have on margin?

Sure. So if you think about the margin for 26, at the midpoint, we're guiding 75 bps improvement on a year-over-year basis. And that's really driven by Ignite, pricing optimization, some operational efficiencies that you see in the number, and that includes some of the tariff mitigations. And then volume growth.

The other piece which I think is important, which I wanna highlight as this more than offsets inflationary impact, and we're making incremental investments in growth and innovation as well as adding strategic capacity. So let me just quickly talk about those incremental investments in growth because I think it's something that Padraig talked about with our capital allocation strategy. So one, we're making digital advancements for our commercial teams and customers. The second, adding AI across the enterprise, and we're really being focused there on a number of projects.

And then importantly, we're continuing to invest in our core R&D portfolio for our products. And with August coming on, we're trying to make sure that we're investing in the most high-impact projects.

Okay. I'll leave it at that. Thanks.

Our next question will come from the line of Patrick Donnelly with Citi. Please go ahead.

Hey, guys. Thank you for taking the questions. Padraig, maybe just on the general tone from biopharma customers in recent months. Obviously, there's some big announcements.

It sounds like things ticked up a little bit both on pharma and biotech. Can you talk about maybe specifically on the instrument side, what you've been seeing? Again, it does sound like biotech is loosening up a little bit for you guys. Sounds like pharma is maybe a little more constructive.

Maybe just talk about what you're seeing there. And then even if you get into year-end here, is there already signs of what the budget flush could look like? What are you guys seeing there? Could that be a little more normal than past years?

What are the conversations look like there?

Yeah. Thanks, Patrick. So pharma, largest market, grew 12% overall in the quarter. And what we're seeing is the MFN tariff deals have really reduced uncertainty for our customers.

You know, our biotech grew in the low twenties or, I would say, low double digits ex CDMO. And the US biotech recovery is starting in well-funded large caps releasing capital spend. Think what you're seeing in the small to mid biotech, you're seeing improved funding backdrop. And you're seeing that with, like, recent M&A exits, although it really is too early to call an inflection point on that side.

But what's driving this is really, I would say, our really strong momentum and our innovation around Infinity 3. It's coming in extremely well, and ProIQ LCMS resonating extremely well. We had 50% growth for the single quad in Q4. And all of these things bode well for the future, and that was backed up with our Alturo BioInert column. So I would say in terms of the budget flush, we have good visibility and it's more of a typical calendar year-end budget push. So we're expecting that to be more normalized.

Okay. That's helpful. And then maybe on the NASD business, it sounds like that's doing well, double-digit growth, pretty safe for 26%, I guess, given what you're seeing. You just talk about the visibility there?

Is that fully booked out through '26? And then you talked about the expansion, the capacity expansion plan as the year goes. Can you talk about, I think it's Train C and Train B, when those come online, where those are leaning towards in terms of market need, marketing indication, is there an impact to margins of those ramp? I know NASD is accretive on the op margin side.

But as those trains open up, does that change anything? I know there's few questions on ASP in there, that color would be great. Thank you, guys.

Yeah.

Thanks, Patrick. So I'm gonna start off and hand it over to Simon. So we're really pleased with CDMO results in FY '25, and we're excited about how the book of business is building for '26 with recent wins and we're seeing movements towards commercial programs. But, Simon, do you want to give some more color on that?

Yeah. Again, I think we've had a very strong year here in FY '25. We've been very pleased with the execution, very pleased with the way the order book has been developing. We've seen a lot of further reasons to validate the siRNA modality. Just in the last couple of weeks, there was another FDA approval.

So we think that we are really well positioned here in coinciding the strength of the modality, the future outlook of the modality, and our competitive position in the market. So as we look ahead to FY 2026, I'd say we've got a very robust order book as we enter the year for pretty much the full year. So I think it's mainly a case of execution on existing capacity in FY '26. But then as the question indicated, we've got the capacity expansion starting to see the finish line coming to sight there towards the end of '26, and we're looking to go live in '27 with Train C. As is always the case with the capacity expansion, there'll be dynamics there around amortization and growing into the skin.

I think we've got the basis pretty well covered there in '26. And we're well ahead in our thinking where that's in that respect in '27.

Our next question will come from the line of Dan Leonard with UBS. Please go ahead.

Thank you. My first question is on China. Can you talk about the downside variance on China in the quarter? Were the drivers of that and performance by end market perhaps?

Yes. Thanks, Dan. So, yes, Q4 in China was down 4%, and that was below our low single-digit August guide. But all markets were down low to mid singles except A&G, which was up five benefiting from some academic stimulus.

But a comp with peers, I think, was in line with key peers. But mix, I think, is an important factor, Dan. So first of all, we saw growth in biopharma and CAM. But we saw declines in food and environmental.

And we say pharma small molecule was stable. But overall, you know, it's a very stable business. You're gonna have quarters, some swings or variance between quarters, but we're seeing sustainable $300 million per quarter as we go forward, and we expect FY '26 to be flat, like FY 2025 was flat. I will say, though, if you look at our business given our long-standing customer relationships, our recent win rate scale and our scale and our visibility into our direct channel, we're very confident in terms of what our market share being stable in '25. And, of course, we're gonna continue with that in '26.

Appreciate that. And then a follow-up, Padraig. I think you mentioned that there were some pharma reshoring assumptions in your guidance for 2026. How important is that to your forecast? Any way to put some context or dimensions around that? Thank you.

Yeah. So we're in a lot of conversations with some key pharma companies around reshoring and talking about what it means for their R&D and tech investments. They're focusing on shovels in the ground under lab equipment needs, and we expect by the '26 that we'll get some orders in that area. So we're estimating the opportunity of about $1 billion by 2030. But we're limited in seeing the order benefited at the '26. We see an overall $1 billion addressable market opportunity for Agilent about in '20 by 2030, and we expect about one-third of that.

But overall, I think so there's upside in the forecast around reshoring.

Thank you very much.

Our next question comes from the line of Doug Schenkel with Wolfe Research. Please go ahead.

Afternoon, and thank you for taking the questions. I just wanted to start on GLP-1s. How big is this business? I'm thinking it's probably around $100 million coming out of last year.

And then I guess if that's right, how much of it is LC versus services? What's your positioning with generics coming online in different geographies, like in India and China, Canada, just to name a few? And should we think about the growth outlook for '26?

Yeah. Thanks, Doug. So Agilent's GLP benefit really comes from two forms, our CDMO business, largely around BioVectra, where we're working on synthetic peptide manufacturing, and our analytic tools like our LCMS and Altura columns supporting QA, QC solutions. And so we're actively involved with many of the GLP-1 manufacturers, and of course, on the analytical tool side, Infinity 3 is a really key component.

If you look at Q4, revenue was about $40 million for GLP-1. That split about 60% for BioVectra and 40% for the analytical lab. And BioVectra added about $25 million. If you look overall in '25, and I would say we saw about a 20% growth rate in the analytical lab in Q4. I think the GLP-1 revenue is about $130 million. 50 split evenly between both the bio and the analytical lab. And if you think about the analytical lab, we grew 40% in the analytical lab in GLP-1. Alturo columns really helping towards the end and, of course, the Infinity 3. So overall, it's a really important business for us, and we're seeing a long runway into '26 both on both sides of the business.

India is a particularly part of where you see the GLP-1, where you see the patent cliffs coming. We've been doing a lot of investment in India around our experience center for customers. Workflow helper customers. So we expect in India we're gonna take a lot share as it goes into '26.

Alright. Super, super helpful, Padraig. One more on a completely unrelated topic, the academic and government end market. I think you guys were down 10% constant currency in the quarter, if I updated the model right.

You know, I think this is a little bit surprising given seasonality and the fact that there was a little more certainty about the funding environment. Maybe the ops was the government shutdown. I'm just curious if you could tell us a little bit about what you saw over the course of the quarter and heading into calendar year-end? Thanks again, and happy Thanksgiving, everyone.

Yeah. Thanks, Doug. So academia and government declined about 10% for Q4. That was a slightly bigger decline than we put out in guidance. I would say ex US, very stable sequentially, and, however, we faced tougher year-over-year comps with Americas down mid-teens, and I would say the rest of the world was down mid-single digits.

US federal spending reductions were really the material impact. You know, the instruments were down mid-twenties for the Americas. While I would say, chemistries and cons or chemistries and services were resilient, at low single digits for the Americas. So we're seeing reasonable lab usage.

I would say on the US government shutdown that you described there, Doug, we saw no material impact from that. We're expecting continued softness in FY '26 in Americas as US federal spending reductions continue. As we go forward. But I will say it's our smallest market and it's about 1% of our overall business in the US and the NIH spending.

Our next question will come from the line of Brandon Couillard with Wells Fargo. Please go ahead.

Hey, thanks. Good afternoon. Padraig, I mean, if we look at the ACG business, you said all regions ex China grew high single digits in the fourth quarter, but I think you only talked about mid-single-digit growth in '26. Do you expect to see a halo benefit as the instrument cycle continues to escalate next year? Or are you just sort of being conservative here to kind of unpack how you're thinking about HCG in 2016?

Yeah. Thanks for the question. I'm gonna kick it off, and I'm gonna hand it over to Angelica. So we saw healthy high single-digit growth ex China in ACG.

We continue growth in our installed base and ramping attachment rates and we're confident that ACG is well-positioned to really sustain the long-term recurring revenue ramp. It was really a solid quarter, and we saw 6% growth in Q4. At the high end of our guidance, and that was 8% ex China. But, Angelica, you wanna give some more color?

Yeah. Sure. Hi, Brandon. So, you know, we're very excited by the continued growth that we're seeing in ACG, largely by the size of our installed base, but also the customer's utilization of assets in their laboratory.

We've seen some great adoption of our recent chemistry's launch, the Altura column. We also launched recently a remote plus services offering, which allows us to support customers and build stronger relationships with customers that may have capabilities in-house. But want to leverage the capabilities and the know-how of the Agilent field service engineers to be able to get them back up and running when they have unplanned or unexpected downtime. And we're still seeing a great amount of interest in improving lab productivity.

We're seeing continued adoption of our open lab chromatography data system and our enterprise content management capabilities as customers are looking to better manage the data coming out of their instruments, and we're seeing some good growth in our automation. So when you look across the port we have a lot of things to take as momentum going into FY '26. And, certainly, we see tech refresh and see we see replacements of instruments in the laboratory, those provide long-term growth as those instruments continue to be used in we'll be connecting to those with our recurring revenue stream accordingly.

That's great. Thanks. And then, I'm not sure if this is better for Rodney or Adam. Just a clarification. What was net pricing in the fourth quarter? And I think you talked about 100 basis points in fiscal '26, but that there could be upside to that. Maybe from some of the AI tools. Can you just clarify what you're penciling in for pricing next year? Thanks.

North of 100 basis points.

In the fourth quarter, Rodney?

In the fourth quarter, we were closer to 150 basis points.

Our next question will come from the line of Vijay Kumar with Evercore ISI. Please go ahead.

Hi, Padraig. Thanks for taking my question, and congrats on the nice sprint here. Hey, my first one on order commentary here in the quarter. How did orders in a backlog grow? I'm curious. I know last quarter you were speaking about stimulus, China-related stimulus, maybe some pharmacopoeia updates out there. So I'm curious if any of that is showing up in orders?

Yeah. So I can talk, you know, our book-to-bill was greater than one, you know, orders continue to, I would say, continue to be positive. As we go through the quarter. It's been very stable through the quarter in terms of our order rate.

And of course, a win-loss ratio, etcetera. I will talk a little bit about Syminas. You know, the first one, the SAMR tender, it shifted, I would say, from Q1 to later in the year in '26, and we're expecting roughly about $10 million GACC orders in '26, which was smaller than expected, but that is excluded from our '26 guide. Anything on the I think in the abundance of caution, we're excluding it from the '26 guide.

So if anything comes in on that side, it will be upside. And I will say that we have a very strong track record and a win rate with stimulus in China. Winning 50% of the first-round tenders. So we're seeing how the year plans out and staying very close to our customers on that.

That's helpful. Then maybe my follow-up on margins. Gross margins were a little light in. What are you assuming for gross margins in fiscal 2026? Should we see gross margin expansion? Could you just quantify what is tariff versus FX dynamics on gross margins?

Rod, do you want to take this one?

Yeah. I'll take this one. So we're not guiding gross margins, but we should see gross margin expansion. Again, from a tariff standpoint, we do think we'll be fully mitigated on tariffs in the second half, and that'll be a mix of both pricing and cost reduction activities.

So that in itself will be helping help the margin picture along with pricing and leverage. The other thing that we the other thing that was impact for this year has been BioVectra now that that's been annualized. It won't be a it won't be necessarily the impact a drag to the gross margin line.

Understood. Thank you.

Our next question will come from the line of Jack Meehan with Nephron Research. Please go ahead.

Thank you. Good afternoon. I had a couple of questions. Just wanted to unpack some of the competitive dynamics going on in the LC business.

So the first one is in LDG. Were a few stats thrown around. I think I heard double-digit growth in the second half. Or LCLS CMS instruments.

What was the fourth-quarter number? Was it also double-digit? And I heard the pharma data point. Can you just talk about how that business is doing and some of the other end markets?

Yeah. So in the fourth quarter, we saw low double-digit growth in LC and, actually mid-teens growth in LCMS, so a very strong performance. And as we talked about the replacement cycle before, we're in the early innings of a replacement cycle, and that accelerating with a lot of adoption of the Infinity 3 some initial purchases a number of quarters ago, and customers coming back for more on that one. I would say when you look at the independent market share data, we're gaining share in both those areas, so that's very good to see as we go forward on it.

And I would say, overall, it's the new innovation, but execution by the team, but also an improving pharma sentiment, particularly with having reduced incentive certainty around the MFN and tariffs. The other thing that we're really seeing in pharma across the globe is reshoring is not just happening in the US, but supply chains are being consolidated in different People are looking for capacity expansion. We're the benefact of that in QAQC downstream testing, and that will continue, I think, through the year. And, of course, as reshoring comes online in '27. But I don't know if you wanna add any more color on that, Simon?

Yeah. I think you covered pharma really well. Padraig, a few other key end markets, mid-single-digit growth in food. We saw declines in academia and government consistent with what we've been seeing elsewhere.

Environmental and forensics was growth in the twenties. And, again, in terms of the growth drivers, all the key things that we've talked about already, the continuing traction we see with Infinity 3 is just phenomenal. Likewise, the ProIQ market acceptance is really terrific. And in terms of replacement cycle, we still see that we're kind of early to mid-inning here.

I think we've knocked off the lowest hanging fruit. But as we continue to iterate the productivity features of our lab assist software, we see that the Infinity 3 value proposition will continue to be very strong, and we think there's still plenty more legs left in that.

Great.

Next question will come from the line of Dan Brennan with TD Cowen. Please go ahead.

Great. Congrats on the quarter. Maybe for Padraig, just when you think about the guide, for 26 at a high level, the 4% to 6%, you've given a lot of color on segmenting. And customers.

But if you zoom out, you finish this year around 5%. The guide next year incorporates that at the midpoint again. You've discussed a lot of momentum building. So do you feel like the guide fairly balances the puts and takes around the globe, or do you think there's some conservatism more so baked in?

Just can you give a sense on kind of the overall kind of four to six guide?

Yeah. So I think, first of all, we're set up for success really by innovative products coming online, and the ones that have come online are unified sales and service connection with the customers. The winning team at Ignite wrapping together. So I just said we have good momentum coming out of the year.

Key markets are improving. The top line four to six is prudent, but I think is appropriate given macro uncertainty. And, of course, we're coming into some tougher compares. And I would say, you know, if you look at the high end of our guide, if you see the expecting biopharma recovery to continue and broaden, that's gonna be positive.

As I said before, the China stimulus is not in the guide, so that would be positive as well. And we're making investments in the business. Right? We've invested a lot in the business, and we're gonna continue to do that.

Particularly in innovation and digital, as Adam talked about. So, you know, but we wanna see, small to midsize cap biotechs to continue to improve. We're seeing the early shoots on that one. And, of course, A&G is academia and government is an area that we're watching.

We wanna see that stabilize and relative to our current expectations of the low single-digit decline. So overall, when you put it together, strong momentum come out of 25, and in '26, we're watching the different portions of it.

Great. Thanks for that. And then maybe just one on the GC upgrade cycle. Just your 10% growth in the quarter overall, which was solid. I think you said mid-single-digit for '26. And you gave some color. Just any more color on the upgrade cycle as it progressing versus expectations. Is it ratable in '26? Just what's, you know, what's kind of assumed on that front? Thank you.

Yeah. No. Thanks. I'm gonna start off and hand over to Mike here in the room. So first of all, I think we had high single-digit growth in GC, which was really great. We talked in the quarter about the start of a GC replacement cycle, which is generally longer replacement cycle than LC. But, Mike, do you wanna give some color on the replacement cycle?

Yeah. For Edgar, first of all, thank you, Dan, for your question. The replacement cycle for the GC and the GCMS is very important for us. And here's what we've seen.

The first four, I think the cycle is being normalized. It was under pressure for the last few years because of the global challenges and certainty. We've seen the pace is coming back and normalized. That's number one.

Number two, I just wanna let you know we are the market leader. We have a very large install base. And as you can imagine, it's actually aging, and we have a lot of, you know, kind of demand. Which will create a sustainable tailwind for us.

In the coming, you know, year. Last thing I wanna highlight, now under Ignite Transformation, we accelerate our innovation. Very excited about the new product coming out, and that will further sustain this revenue cycle. So in short, I think there are big opportunities, and the cycle has been normalized.

And we have tremendous innovation come out. I went to sustain it.

Great. Thank you.

Our next question will come from the line of Michael Ryskin with BofA. Please go ahead.

Great. Thanks for taking the question. Maybe first one on tax rate. You talked about the higher tax rate for 2026, talking about global tax.

Curious, we've been talking about tax rate potentially drifting higher. For a while. It seems like it's a pretty big jump this year. Is this something new that's developed recently?

Or is this just sort of the same global tax codes we've been talking about for a while? And then just any potential to offset that as you go through the year? Just how do we think about that going forward?

Yeah. Thanks, Michael, for the question. I'm gonna hand this one over to Adam for some commentary.

Sure. And thanks. So tax rate's increasing 250 basis points and it's really driven by a combination of things that, you know, they take time to come together, and now they have. One of them is pillar two.

The other is OB three. Then there's other jurisdictional changes. And so as we've kind of put them together, in our tax provision, we've now solidified on this 250 basis point increase. I would you know, as you think about it going forward, you know, we have no information that this would change meaningfully going forward.

But the thing I wanna highlight and point out is that we're more than offsetting this incremental tax burden, and that's really through operating performance above the line. So we'll continue to seek ways to further mitigate the P&L impact via Ignite in our global network strategy. So if you think about the business, being able to offset such an impact below the line, above the line, is really something that gives me a lot of confidence in this organization and shows the agility of the organization. To navigate.

Uncertainty.

Okay. Thanks. And then, for the follow-up, I wanna touch on M&A and capital deployment. Patrick, you talked about the health of the balance sheet and maybe looking to do a couple of more deals, bolsters from the portfolio.

Could you just talk about what the deal funnel looks like now, appetite for deploying cash next year, sort of what kind of deals you're looking at in terms of size and any specific areas you're focused on? Thanks.

Yeah. So we, I'm gonna start off and then hand over to Adam here. So our capital allocation priorities are not changing. And if you think about M&A, you know, we have capacity to do M&A, but we're gonna remain very disciplined.

Linked with our strategy. And we don't talk really about size. We talk about fit and shareholder return on M&A about how it's going to drive us forward. What I will say about our M&A target list, it's very it's a shorter, very high-quality list that we continue to develop.

And, of course, we continue to keep everybody updated as we go through the year, and we're looking for growth opportunities where we have a right to win. And, of course, the BioVectra integration, having been such a great integration this year, bodes extremely well for the future. But, Adam, do you wanna give some broader capital allocation color?

Sure. Thank you. So our capital allocation priorities aren't changing as Padraig said, and I think that's very important. We're gonna continue to invest in innovation as you hear in our guide.

We're gonna use our balance sheet to invest in M&A and then make strategic capacity in expansion. The other piece I'd highlight is we're gonna continue to return excess capital to shareholders as you see in our guide as well. And then the one note I would highlight in addition to what Padraig said about remaining disciplined, it's about the right opportunity. It's about making sure we understand the value drivers and how we can maximize on those.

Then it comes down to making sure that we pay the right price so that we're disciplined about price. Then focusing on integration upfront. In my experience, I've lived through integrations. And the best are those that you plan for upfront, and it's not an afterthought.

And I can assure you it won't be here. The Ignite operating system, as I've dug into it, gives me a lot of confidence. And then as Padraig said, the recent experience with BioVectra gives me more confidence. So I think we're ready to go, and you should expect to see consistency with what we've said on our capital allocation priorities.

Regina, to help us get to as many analysts as possible, could we please limit it to one question per analyst for the remainder of the call?

Our next question will come from the line of Dan Arias with Stifel. Please go ahead.

Good afternoon, guys. Thanks for the questions. Padraig, you mentioned upside potential for the Omnis franchise. Is that more of a placement comment or a pull-through comment? Where do you think the opportunity is strongest there?

Thanks. On the Yeah. So, I'm gonna hand it over to Simon for some color on the Omnis franchise.

Yeah. It's a bit of both. We've recently launched the Omnis family, and we've been very happy with the uptake from those systems. And if we look year over year across the entire Omnis Instruments franchise, we've seen double-digit growth in instrument placements.

We're also focused on menu expansion. That's a key product development initiative. Here over the next twelve to twenty-four months. And I think we're gonna see momentum from both of those.

We see momentum already on the instrument placements. So I think it bodes well for the future. We've talked a few times about this franchise now, how we see really durable mid-high single-digit growth through a combination of these portfolio investments, but also the very strong macros that underpin this business with aging populations, cancer incidents, and so on, not to mention the emerging therapeutics that are supporting diagnosis and therapy guidance. So we put all that together, and we're bullish about the future.

Our next question will come from the line of Casey Woodring with JPMorgan. Please go ahead.

Awesome. Thanks for fitting me in, guys. Appreciate it. I guess, within pharma in the quarter, excluding the CDMO, could you break down large molecule versus small molecule growth?

Last quarter, you talked about you did biopharma spend ex NASD. Sounds like that got a lot better this quarter, specifically in biotech. And then, you know, maybe what's factored into the guide for large molecule versus small molecule in 2026? Excluding the CDMO?

Thanks.

Yeah. So I think we saw growth on both sides. I would say, you know, we're equally placed both large, large molecule was about 10% growth, small molecule in around the same area in around the same growth rate. It's roughly a 50-50% split for Agilent. We saw that in the quarter. We expect that to continue.

Our next question will come from the line of Catherine Schulte with Baird. Please go ahead.

Hey, guys. Thanks for the question. I guess I'll ask the annual Lunar New Year timing question. I think that was a two-point headwind in the first quarter last year, but it's back to falling in 4% to 6% guide for 1Q, does that mean more like two to four ex Lunar New Year and know, if so, what's kinda driving that sequential slowdown there? Thanks.

Yeah. So I think, you know, if you look at our Q1 guide or we're assuming low single digits growth for China on a reduced stimulus volume. That's about a negative 700 basis point year-over-year impact and that's offset by the favorable lunar year timing, which about 800 basis points. But the Q2 will be, I would say, meaningful impact by Lunar New Year timing and, I would say, a tougher comp.

But overall, I think it balances out over those quarters.

Our next question comes from the line of Luke Surgatt with Barclays. Please go ahead.

Great. Thanks for squeezing me in. I just wanna follow-up on Donnelly's question earlier in the call about and you guys were talking about, you know, keeping the flywheel going and investing back in the R&D as the top line continues to accelerate or be strong. So, you know, after you're pretty much done, you've you guys had a pretty big launch here across many different platforms.

So give us an up where are you looking to deploy that R&D? Know, where are the new high-growth areas that you guys would like to be bigger in, or is this just kind of updating parts of the portfolio that have been underinvested?

Yeah. What I would say is that we have, you know, a very key innovation focus with our new CTO, August. And what we're looking at is really looking at our portfolio of innovation across the company. We simplified the company structure where we went from, you know, about 20 product lines to nine.

So the ability to get the right innovation dollars into the right place is much clearer and faster now. What you're gonna see is that you're gonna see that in a number of platform launches, and next coming years, but also areas where we need to accelerate in certain areas like oligos, GLP-1s, and workflows around that side. And I would say software is a key area for us. It's an area where we have a lot of focus across the company in the ACG group.

We're gonna be asymmetrically investing in our software products and also making sure we have the right software for particular workflow. So overall, I would say it's refocusing but I would very a very agile refocusing of our R&D dollars.

Hey. Just how turn the go ahead, Regina.

I'll turn the call back to you, Tejas.

Thank you. Thanks, everyone, for joining us. And, happy holidays and happy Thanksgiving.

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