Agilent Technologies, Inc. (A) Q4 2025 Earnings Call Transcript
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Overview
The earnings call shows strong financial metrics, with raised revenue and EPS guidance for 2025, positive market growth expectations, and strategic product launches. The Q&A reveals robust bookings and capacity expansion, with positive analyst sentiment. Despite some declines in specific markets, overall guidance remains optimistic. No major negative factors were highlighted. Given the lack of market cap information, a 'Positive' sentiment rating is appropriate.
Key Financial Performance
Revenue $1.86 billion, growing 7.2% on a core basis. Reasons for growth include strong LC and LC/MS demand, share gains, CDMO upside, solid double-digit contributions in key regions, and an accelerating replacement cycle.
Earnings per Share (EPS) $1.59, above the midpoint of guidance, with a 9% year-over-year growth. Reasons include sequential margin improvement, performance-driven variable pay, and strong pricing.
Gross Margins 54.1%, down 100 basis points year-over-year due to tariff headwinds but improved sequentially by 100 basis points.
Operating Margin 27.2%, up more than 200 basis points sequentially but slightly down year-over-year due to tariffs. Sequential improvement driven by volume leverage, strong pricing, and tariff mitigation.
Operating Cash Flow $545 million in the quarter. No specific year-over-year comparison or reasons provided.
Life Sciences and Diagnostics Markets Group (LDG) Revenue Grew 11%, driven by strong LC and LC/MS instrument performance and robust CDMO results.
Applied Markets Group (AMG) Revenue Grew 3%, led by high single-digit growth in GC and GC/MS, benefiting from an instrument replacement cycle.
Agilent CrossLab Group (ACG) Revenue Grew 6%, with high single-digit growth in the rest of the world offset by mid-single-digit declines in China.
China Revenue Declined 4%, with revenue contributions stable around $300 million per quarter.
India Revenue Grew in high teens, with double-digit growth in pharma and greater-than-20% growth in applied markets.
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Operating Highlights
Infinity III: Delivering as much as 30% improvement in productivity for customers, driving double-digit LC growth in the second half of the year.
Pro iQ LC/MS: Strong customer interest and sales well ahead of expectations, with single-quad LC/MS growth of more than 50% in the first full quarter post-launch.
Altura bio-inert column: Rapid adoption with ramp significantly greater than past column launches, highlighting importance in oligos and GLP-1 applications.
Pharma market: 12% growth during the quarter, with low 20s growth in biotech spending and low double-digits ex-CDMO.
Specialty CDMO business: Grew more than 40% on a core basis during Q4, representing nearly 20% of LDG revenue.
Environmental and Forensics: 9% growth driven by EU drinking water directive and year-end capital spending in Americas.
China market: Declined 4% in Q4, with stable revenue contributions around $300 million per quarter.
Ignite Operating System: Delivered over $150 million in annualized savings, improved efficiency, and enabled rapid response to global tariff changes.
AI in operations: Increased design productivity and reduced custom-design cycle times by 75% for GC products, and improved quality in order fulfillment.
Leadership changes: New CFO Adam Elinoff and other key hires to enhance strategic planning, innovation, and operational excellence.
M&A and integration: Integration of BIOVECTRA as an example of readiness to acquire and integrate assets effectively.
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Risk or Challenges
China Market Performance: Revenue contributions from China remained stable but declined 4% in Q4, below expectations. The company has adopted a flat assumption for FY '26, indicating no meaningful recovery in the region.
Academia and Government End Market: This segment, which represents 7%-8% of annual revenue, declined 10% in Q4 due to federal spending reductions in the U.S. The company does not expect a meaningful recovery in FY '26.
Tariff Headwinds: Tariffs have negatively impacted gross margins, with a 100 basis point decline year-over-year. The company is working on mitigation strategies but expects incremental material costs in FY '26.
U.S. Federal Spending Reductions: Federal spending reductions have impacted instrument spending in the U.S., particularly in the Academia and Government segment, with no expected recovery in FY '26.
China Stimulus Benefits: The company has substantially removed stimulus benefits from its FY '26 revenue guidance, reflecting uncertainty in the timing and impact of such measures.
Material Costs and Tariffs: Incremental material costs driven by tariffs are expected to persist, impacting operating margins in FY '26.
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Guidance & Outlook
Revenue Growth: Agilent expects FY '26 revenue to be in the range of $7.3 billion to $7.4 billion, representing 4% to 6% core growth. Q1 revenue is expected to be $1.79 billion to $1.82 billion, with 4% to 6% core growth.
Operating Margin Expansion: The company anticipates 75 basis points of operating margin expansion in FY '26, translating to 9% operating profit growth at the midpoint.
Earnings Per Share (EPS): FY '26 non-GAAP EPS is expected to be between $5.86 and $6, reflecting 5% to 7% growth. Q1 EPS guidance is $1.35 to $1.38.
Capital Expenditures: Agilent plans to invest $500 million in capital expenditures in FY '26.
Operating Cash Flow: Operating cash flow is expected to be in the range of $1.6 billion to $1.7 billion for FY '26.
End Market Growth: Pharma is expected to grow high single digits, Applied Markets mid-single digits, Diagnostics and Clinical mid-single digits, and Academia and Government to decline low single digits. China is expected to remain flat.
Specialty CDMO Services: The company expects mid-teens growth in specialty CDMO services in FY '26, with strong market momentum in key modalities like siRNA and GLP-1s.
Tariff Mitigation: Agilent plans to fully mitigate existing tariffs over the course of FY '26 through cost savings and pricing actions.
Innovation and Product Launches: The company will continue to focus on innovative products, including the next-generation Infinity III and Pro iQ LC/MS, and prepare for new CDMO capacity opening in 2027.
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Shareholder Return Plan
Dividend Increase: Agilent increased its industry-leading dividend by 3%.
Dividend Payment: Agilent paid $70 million in dividends during the quarter.
Share Repurchase: Agilent purchased $85 million in shares during the quarter.
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Key Q&A
Q:Can you comment on BIOVECTRA's performance and the $100 million CapEx increase?
A:BIOVECTRA came in strong for the year, driven by GLP business, with key molecules planned for 2026. The $100 million CapEx increase is for incremental NASD capacity and consumable expansion.
Q:What are the drivers behind the 75 basis points margin improvement guidance for 2026?
A:The 75 basis points improvement is driven by Ignite pricing optimization, operational efficiencies, tariff mitigations, and volume growth. Investments in digital advancements, AI projects, and R&D portfolio are also contributing factors.
Q:What is the general tone from biopharma customers, particularly in the instrument side?
A:Pharma grew 12% in the quarter, with reduced uncertainty from MFN tariff deals. Biotech grew in low double-digits, with U.S. biotech recovery starting in well-funded large caps. Budget flush is expected to be more normalized.
Q:Can you provide visibility on the NASD business and capacity expansion plans?
A:The NASD business has robust bookings for 2026, with capacity expansion (Train C) expected to go live in early to mid-2027. The business is accretive to operating margins.
Q:What caused the downside variance in China in Q4?
A:China was down 4% in Q4, with low to mid-single-digit declines across most markets except A&G, which grew 5%. Growth was seen in biopharma and CAM, while food and environmental declined. FY 2026 is expected to be flat.
Q:How important is pharma reshoring to the 2026 forecast?
A:Pharma reshoring is estimated to contribute $1 billion by 2030, with limited order benefits expected by the end of 2026. It represents upside potential in the forecast.
Q:What is the size and growth outlook for the GLP-1 business?
A:GLP-1 revenue was $130 million in 2025, split evenly between BIOVECTRA and analytical labs. It grew 40% in analytical labs and has a long runway into 2026, with significant opportunities in India.
Q:What caused the decline in the Academic and Government end market in Q4?
A:The A&G market declined 10% in Q4 due to U.S. federal spending reductions, with instruments down mid-20s in the Americas. FY 2026 is expected to see continued softness in this market.
Q:What is the outlook for the Agilent CrossLab Group (ACG) in 2026?
A:ACG grew high single digits ex-China in Q4, driven by installed base growth and new product adoption. Mid-single-digit growth is expected in 2026, supported by recurring revenue streams and tech refresh.
Q:What is the pricing assumption for 2026?
A:Pricing is expected to contribute over 100 basis points in 2026, with 150 basis points achieved in Q4 2025.
Q:What is the order commentary for Q4 and expectations for 2026?
A:Book-to-bill was greater than 1 in Q4. China stimulus is excluded from the 2026 guide, representing potential upside. Orders are stable, with SAMR tender expected later in 2026.
Q:What is the gross margin outlook for 2026?
A:Gross margins are expected to expand in 2026, driven by tariff mitigations, pricing, and cost reductions. BIOVECTRA's impact has been annualized.
Q:What are the competitive dynamics in the LC business?
A:LC grew low double digits, and LC/MS grew mid-teens in Q4. Agilent is gaining market share, driven by new innovations like Infinity III and Pro iQ LC/MS.
Q:What is the guide for 2026 and its key drivers?
A:The 4%-6% growth guide for 2026 is prudent, considering macro uncertainty and tougher comps. Upside potential exists in biopharma recovery, China stimulus, and A&G stabilization.
Q:What is the GC upgrade cycle outlook?
A:The GC replacement cycle is normalizing, supported by a large installed base and new product launches. It provides a sustainable tailwind for growth.
Q:What is the tax rate outlook for 2026?
A:The tax rate is increasing by 250 basis points due to global tax changes like Pillar 2 and OB3. The impact is offset by operating performance.
Q:What is the M&A and capital deployment strategy?
A:Agilent remains disciplined in M&A, focusing on fit and shareholder return. The target list is high-quality, and BIOVECTRA's successful integration bodes well for future deals.
Q:What is the outlook for the Omnis franchise?
A:The Omnis franchise is seeing double-digit growth in instrument placements, with momentum expected from portfolio investments and strong market drivers.
Q:What is the growth outlook for large molecule vs. small molecule in 2026?
A:Both large and small molecules grew around 10% in Q4, with a roughly 50% split. Similar growth is expected in 2026.
Q:What is the impact of Lunar New Year timing on Q1 2026?
A:The favorable timing of Lunar New Year adds 800 basis points to Q1 2026 growth, offsetting a 700 basis point impact from reduced China stimulus.
Q:What are the R&D investment priorities?
A:R&D investments are focused on platform launches, oligos, GLP-1 workflows, and software development to enhance productivity and workflow solutions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the impact of reshoring on the 2026 forecast, the exact breakdown of large vs. small molecule growth in 2026, and the precise allocation of R&D investments. Additionally, they did not provide a detailed gross margin guide for 2026.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Academia Government
Agilent Ignite
Altura column
FY basis
FY midpoint
FY share
Group digit
III digit
Ignite System
LC MS
Officer
Principal
basis currency
capability level
competition
cost saving
currency tailwind
customer intimacy
customer solution
dimension
driver Ignite
employee
excellence
expansion FY
implementation
investment capability
knowledge
lead
level talent
pay
pharma
product service
quality
recovery
relationship
sale
semiconductor
specialty CDMO
support
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The earnings call shows strong financial metrics, with raised revenue and EPS guidance for 2025, positive market growth expectations, and strategic product launches. The Q&A reveals robust bookings and capacity expansion, with positive analyst sentiment. Despite some declines in specific markets, overall guidance remains optimistic. No major negative factors were highlighted. Given the lack of market cap information, a 'Positive' sentiment rating is appropriate.
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