Agilent Technologies Q2 2025 Earnings Report

Agilent Technologies EPS Results

• Actual EPS: $1.31
• Consensus EPS: $1.26
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $1.22

Agilent Technologies Revenue Results

• Actual Revenue: $1.67 billion
• Expected Revenue: $1.63 billion
• Beat/Miss: Beat by +$41.38 million
• YoY Revenue Growth: +6.00%

Agilent Technologies Announcement Details

• Quarter: Q2 2025
• Date: 5/28/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 28, 2025
• Conference Call Time: 4:30PM ET

Agilent Technologies (NYSE:A) is a global leader in life sciences, diagnostics and applied chemical markets. Headquartered in Santa Clara, California, the company designs and manufactures analytical instruments, software, services and consumables for laboratories engaged in pharmaceutical R&D, clinical diagnostics, food safety, environmental testing and chemical analysis. Agilent’s core offerings include chromatography systems, mass spectrometers, spectroscopic analyzers, microarrays, reagents and laboratory automation solutions.

Formed in 1999 as a spin-off from Hewlett-Packard’s scientific instruments business, Agilent has expanded its portfolio through targeted acquisitions and organic innovation. In 2014 the company completed the separation of its electronic measurement segment to create Keysight Technologies, allowing Agilent to focus exclusively on the life sciences and diagnostics markets. Subsequent acquisitions and internal R&D have bolstered capabilities in genomics, cell analysis and lab informatics.

Agilent serves a broad array of customers across more than 100 countries, operating in the Americas, Europe, Middle East and Africa, and the Asia-Pacific region. Its products support applications ranging from drug discovery and biopharmaceutical production to environmental monitoring, food safety testing and semiconductor materials analysis. The company maintains regional application laboratories, customer support centers and distribution networks to ensure technical service and rapid deployment of solutions worldwide.

Under the leadership of President and Chief Executive Officer Michael R. McMullen, Agilent continues to pursue growth in high-value markets by advancing measurement science and enabling laboratories to improve productivity and data quality. The company’s commitment to innovation and customer collaboration positions it as a key partner for organizations seeking to address complex challenges in healthcare, sustainability and technology development.

Agilent Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Agilent reported record Q2 results with $1.67 billion in revenue (up 6% reported, 5.3% core) and $1.31 EPS (up 7%), marking the fourth consecutive quarter of accelerating growth.
• Broad-based demand drove all regions higher—Americas grew low single digits, EMEA mid single digits, China +10% and the rest of Asia high single digits—underscoring portfolio diversity.
• PFAS testing soared over 70% year-over-year, contributing 80 bps to quarterly growth, annualizing to >$100 million and targeting a $1 billion addressable market by 2030.
• The Ignite transformation delivered over $130 million in incremental profit for FY ’25, including 100 bps of price realization, $80 million of H2 savings and $50 million of procurement cost reductions.
• Agilent affirmed full-year guidance with 2.5–3.5% core revenue growth and $5.54–5.61 EPS while absorbing all FY ’25 tariff costs and planning full mitigation by FY ’26.

Presentation

[Operator]

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 Second Quarter twenty twenty five Agilent Technologies Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

[Operator]

After the speakers' remarks, there will be a question and answer session. Thank you. Parmita Huja, you may begin the conference.

[Parmeet Ahuja, VP, IR at Agilent]

Thank you, and welcome, everyone, to Agilent's conference call for the second quarter of fiscal year twenty twenty five. With me are Porting McDonald, Agilent president and CEO and Bob McMahon, Agilent senior vice president and CFO. Joining the q and a will be Simon May, president of the Life Sciences and Diagnostics Markets Group Angelica Ryman, President of the Agilent CrossLab Group and Mike Zhang, President of the Applied Markets Group. This presentation is being webcast live. The press release for our second 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 www.investor.agilent.com.

[Parmeet Ahuja, VP, IR at Agilent]

Today's comments will refer to non GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial 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.

[Parmeet Ahuja, VP, IR at Agilent]

As a reminder, beginning in the first quarter of fiscal twenty twenty five, we implemented certain changes to our reporting structure related to the reorganization of our three business segments. We have recast our historical segment information to reflect these changes and have provided the financial details on our website. These changes have no impact on our company's consolidated financial statements. During this call, we will also 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.

[Parmeet Ahuja, VP, IR at Agilent]

The company 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 Porek.

[Padraig McDonnell, CEO, President & Director at Agilent]

Hello, everyone, and thank you for joining today's call. Agilent delivered strong second quarter results in a highly dynamic market environment. Revenue of $1,670,000,000 for the second quarter represented growth of 6% reported and up 5.3% core compared with the second quarter of twenty twenty four. Operating margin was a solid 25.1% as we absorbed some incremental tariff costs. We also delivered EPS of $1.31, growing 7% compared with the second quarter of twenty twenty four.

[Padraig McDonnell, CEO, President & Director at Agilent]

Both revenue and EPS exceeded our expectations, marking the fourth consecutive quarter of accelerating growth. Our performance was driven by growth across markets and regions, speaking to the diversity of our business. We also saw another quarter of building momentum in instruments with our book to bill ratio again greater than one. Thank you to the Agilent team for delivering these results by tirelessly going above and beyond for our customers. No matter where I travel in the world, our customers consistently say the same thing.

[Padraig McDonnell, CEO, President & Director at Agilent]

The Agilent team is second to none, and for that reason, they want to increase their partnership and collaboration with us even more, even during a challenging macro environment. These conditions have proved the efficacy of our three year Ignite transformation, which is the execution of our strategy. We're already leveraging Ignite to create an enterprise operating model that has resulted in multiple early wins, tariff mitigation. More on that in a moment. First, let me tell you why our q two was so strong.

[Padraig McDonnell, CEO, President & Director at Agilent]

All regions grew in the quarter. Americas grew low single digits. EMEA grew mid single digits. And China led the way at 10% growth, exceeding our expectation, while the rest of Asia grew high single digits. China saw stable demand conditions sequentially while a favorable Lunar New Year comparison helped year on year growth.

[Padraig McDonnell, CEO, President & Director at Agilent]

In Asia, India delivered high teens growth. India is a long term high growth innovation driven market, which is why we've opened our first India solution center there this month. The center showcases Agilent's expertise across disciplines to deliver end to end solutions in sectors such as GLP one analysis, emerging food and environmental contaminant analysis, and PFAS detection. We also delivered mid to high single digit growth in all end markets except academia and government, which declined modestly with strong results in Asia moderating the expected softness in The US. Pharma grew 6% at the high end of expectations led by small molecule growing low double digits.

[Padraig McDonnell, CEO, President & Director at Agilent]

Biopharma continues to recover at a slower pace, growing low single digits as we continue to see funding challenges in small and mid sized biotech, primarily in The US. Within biopharma, NASD was a standout growing high single digits in q two, and we're looking forward to double digit growth from NASD in the second half of the year. In addition, while not yet part of core growth, our BioVectra business performed well, exceeding guidance. BioVectra's capabilities are in the sweet spot of tremendous markets. For example, GLP ones and complex chemistries with terrific medium and long term growth potential.

[Padraig McDonnell, CEO, President & Director at Agilent]

We are very excited about the combined offerings of NASD and BioVectra. Diagnostics and clinical grew 8% ahead of expectations on strong performance of our pathology business in The Americas and Europe. Environmental and forensics grew 6% on strong PFAS testing demand globally. PFAS testing remains strong for Agilent globally, and we see it continuing to expand into other end markets such as food and chemical and advanced materials. In q two, PFAS grew more than 70 year over year globally with Europe and China more than doubling their business.

[Padraig McDonnell, CEO, President & Director at Agilent]

PFAS provided an incremental 80 basis points to our growth in the quarter and is now annualizing to well over a hundred million dollars. We continue to be very optimistic about the long term growth prospects globally in PFAS as regulations and standards continue to be put in place. For PFAS testing, our Infinity Tree and our sixty four ninety five d system is the most sensitive and robust solution. The Agilent team has deep understanding of customer challenges and how we can help them with their testing needs through delivering integrated workflow solutions, productivity, and new Model ID application development. We are tracking over 350 regulations globally and are very confident in the continued momentum in this emerging $1,000,000,000 addressable market by 2030.

[Padraig McDonnell, CEO, President & Director at Agilent]

In chemicals and advanced materials, revenue grew 4% with high single digit growth in advanced materials, while chemical and energy was up low single digits globally. Overall, we saw growth ex China offset by low single digit decline in China. Lower oil prices are net positive to the CAM business given it drives lower input prices through our chemical business, which is four times bigger than energy. Food grew 8% benefiting from strength in Asia through government funded technology refresh. Our smallest end markets, academia and government declined only 2% in the quarter, better than expected performance in The US and globally.

[Padraig McDonnell, CEO, President & Director at Agilent]

Given we were ahead of others talking about potential US funding impacts in our first quarter earnings call and did better than expected in q two, we feel we already have adequately captured any variability looking forward. When looking holistically across Agilent, we continue to make investments in our digital ecosystem, such as our next generation ecommerce platform, so that we can offer an outstanding customer experience. Those investments are paying off as we grew digital orders by 12% year over year to $295,000,000. I also want to highlight ACG's nine percent growth this quarter, which exceeded expectations. ACG's performance was led by strong growth in automation, services, and consumables.

[Padraig McDonnell, CEO, President & Director at Agilent]

For the first time in several quarters, we saw both on demand and installation services return to growth. These results keep us on track with the long term commitments we outlined at our analyst and investor day in December, including 5% to 7% core revenue growth, expanding margins 50 to 100 plus basis points annually, and driving double digit EPS growth. We have momentum at Agilent. Over the past twelve months, my first year as CEO, the Agilent team has accomplished a lot. We built a formidable senior leadership team that is working in lockstep to maximize Agilent's resources to drive shareholder value.

[Padraig McDonnell, CEO, President & Director at Agilent]

We've evolved our enterprise strategy to be market first and realigned our businesses to our markets. We acquired BioVectra for roughly $1,000,000,000 to expand our CDMO capabilities, and we have moved from planning to execution on Ignite. Before providing further details on Ignite, I want to pause here and thank our Agilent team members for how quickly they have adapted to change and the company's higher ambition. It is no small feat to transform a company, and I've been impressed by our colleague's passion for our mission and vision and their increased seals to delight customers so that Agilent continue to win in the market. These team members are leading Ignite, an initiative that is already yielding incredible results.

[Padraig McDonnell, CEO, President & Director at Agilent]

Those incredible results include strengthening our strategic pricing capabilities and implementing enterprise wide pricing initiatives. In six months, we already have exceeded the full year price contribution from last year and are expecting at least 100 basis points of price realization in 2025 with expectations for an even greater impact in 2026 and beyond. Improving organization agility and efficiency by flattening management layers and increasing spans of control by 30% to improve our organization health and become a nimbler company. Additionally, we expect this to deliver annualized savings of about $80,000,000 starting in the second half of the fiscal year. Centralizing our procurement under a chief procurement officer and adopting an integrated enterprise wide approach to vendor management, we already see strong momentum exceeding our internal savings targets, ramping in the second half of this year while being essential in mitigating tariff expense with our suppliers.

[Padraig McDonnell, CEO, President & Director at Agilent]

This is with projected procurement annualized savings exceeding $50,000,000 by the end of twenty twenty five and establishing a strong foundation for additional gains in 2026. Ignite has become the backbone of our operating system, enabling faster decision making, more scalable growth, and over a hundred and $30,000,000 of profit for fiscal year twenty twenty five. It is our institutional engine for long term value creation. Center to value creation is our continued commitment to innovation. I'm proud to share three impactful new products that demonstrate that commitment.

[Padraig McDonnell, CEO, President & Director at Agilent]

In our cell analysis portfolio, we just launched the Seahorse XF Flex analyzer. With its world class leading sensitivity, versatility, intuitive design, and compatibility with three d models, the XX Flex empowers more researchers than ever before to explore cellular metabolism with confidence. And at the seventy third ASMS conference next week, we will launch our latest innovation in liquid chromatography mass detection. Our new InfinityLab Pro IQ series offers unparalleled sensitivity, speed, and efficiency, making it the ideal choice for customers analyzing complex biomolecules in settings where performance and lab productivity are key. At ASMS, we will also showcase our enhanced eighty eight fifty GC now coupled with the power of our market leading DCMS that enables our customers to do more with less.

[Padraig McDonnell, CEO, President & Director at Agilent]

We've reduced the 88 fifty's footprint by 50% and increased throughput up to five times while lowering its energy usage by 45% compared with a conventional benchtop GC. We also continue to have success with our Infinity Tree LC in orders, funnel, and our attach rates of service and consumables. We're seeing this success both geographically with robust growth in India, a particular highlight, and across all end markets with our top customers calling out the Infinity Tree superior performance, intelligence, and task automation capabilities. To help further drive Agilent's internal and external innovation engine, I'm delighted to announce August Specht is joining Agilent next month as our chief technology officer. August has spent over twenty five years in senior r and d roles in the life sciences industry.

[Padraig McDonnell, CEO, President & Director at Agilent]

Welcome, August. Ignite also gave us a significant head start on tariff mitigation, enabling the immediate creation of our tariff task force that has allowed us to make changes that will maintain our market strength regardless of tariff rates. We are proactively managing tariff exposure by taking several targeted actions, including focusing on specific product lines and production sites rather than adopting a one size fits all approach, further diversifying our supply chain by leveraging our extensive global sourcing capabilities and manufacturing network, ensuring we're geographically even closer to customers, implementing strategic pricing initiatives around the globe that protect our market competitiveness. While we remain vigilant amid geopolitical developments, our localized manufacturing, proactive tariff mitigation, and a diversified customer base gives us greater resilience and agility globally than many of our peers. Through our tariff task force enabled by our Ignite operating model, we feel that we are able to mitigate most of the impact in 2025 and fully mitigate in 2026 even when considering recent developments on The US EU tariffs.

[Padraig McDonnell, CEO, President & Director at Agilent]

With the task force, we can create targeted analytics in a matter of hours, not days, that identify key supply chain and commercial opportunities that will allow us to maximize our tariff mitigation efforts. Our top priority is ensuring we minimize tariff impacts on our customers and that our customers have the trusted Agilent products, solutions, and services they need. Looking ahead, we are confident that the long term fundamentals and secular growth drivers of our markets remain strong. For the year, we are maintaining our core growth rate of 2.5 to 3.5% while incorporating favorable currency movements. By leveraging our Ignite program, we are fully absorbing all unmitigated FY '25 tariff costs and maintaining our full year EPS guidance.

[Padraig McDonnell, CEO, President & Director at Agilent]

While our results this quarter exceeded expectations, we believe it's important to remain disciplined in our outlook given the ongoing uncertainty in the macro environment and geopolitical landscape. We are committed to maintaining guidance that is both credible and achievable, and we continue to prioritize long term value creation. Bob will now share further details about our Q2 and guidance. Bob?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Thanks, Porig, and good afternoon, everyone. In my remarks today, I'll provide additional details on revenue in the quarter as well as take you through the income statement and other key financial metrics. I'll then cover our full year and third quarter guidance. As Porek mentioned, q two revenue was $1,670,000,000 above the high end of our guidance. On a core basis, we posted growth of 5.3%, while reported growth was 6%.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Currency had a negative impact of 1.6, which was half a point better than estimated as the dollar weakened during the quarter. M and A also contributed 2.3%, coming in nicely ahead of expectations. Now let me talk about our performance by business group. The Agilent CrossLab Group reported revenue of $713,000,000 growing 9%, which was ahead of our expectations. Double digit growth in consumables and automation and high single digit growth in services drove ACG's performance.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Our life sciences and diagnostics market group reported revenue of $654,000,000 in the quarter, growing 3%. Core growth was driven by our pathology business and NASD, both which delivered high single digit growth, and our LC and LCMS instruments that grew mid single digits. Our cell analysis business returned to growth, up low single digits. Performance was partially offset by an expected mid single digit decline in our NGS business. And our applied markets group reported $3.00 $1,000,000 in the quarter, flat versus last year on a core growth basis.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Growth in spectroscopy and GCMS was offset by some timing related declines in gas chromatography. Before getting into the rest of the p and l, I'm going to cover additional details on Q2 revenue that were influenced by the April tariff announcements, primarily in China. While there was no revenue impact to Agilent overall, we did see some shifts by group in the quarter. Specifically, we saw roughly 15,000,000 of in country ACG lab consumables revenue pulled forward into q two from q three. However, this was offset by longer processing time through customs on some select instrumentation in both AMG and LGG.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Again, this did not impact our overall revenue for q two or our q three outlook, but we have taken that into account by group looking forward, which I'll talk to in a minute. It is also important to note we've seen a return to normal customs processing times here in May. Now let's move on to the rest of the p and l. Gross margin was 54.1% in the quarter, roughly in line with our expectations after accounting for 55 basis points of incremental tariff costs. It is down versus last year with the delta being equally distributed among tariffs, currency, and product mix.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

We drove operating margins of 25.1%. While flat versus last year, excluding the 55 basis points of incremental tariffs, it would have been an increase year on year. So overall, a strong showing. Below the line, we had $2,000,000 of income, while our tax rate of 11.5 was better than expected. And we had $285,000,000 diluted shares outstanding in the quarter.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Putting it all together, q two earnings per share were $1.31 That was ahead of our expectations and up 7% from a year ago, growing faster than core revenue. This is a very good result in the face of the dynamic macro environment, which is a testament to the Agilent team forging close collaborative partnerships with our customers. Now let me turn to cash flow and the balance sheet. Operating cash flow was $221,000,000 in the quarter, and we invested a hundred and $14,000,000 in capital expenditures. We purchased a hundred and $65,000,000 in shares and paid out $70,000,000 in dividends during the quarter.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

And we ended the quarter with a net leverage ratio of one, so we continue to have a very strong balance sheet. Now let's move on to our outlook for the fiscal year and third quarter. As Porig mentioned earlier, we are maintaining our core growth outlook for the year and increasing our reported revenue guidance by $50,000,000 to reflect incremental FX benefit since our last guide. This results in an increase to our full year reported revenue to be in the range of 6,730,000,000.00 to $6,810,000,000 increasing reported growth to 3.4% to 4.6. Currency is now expected to represent a 1.1 percentage point headwind for the year versus a prior 1.9% headwind, while our M and A guidance is unchanged at plus 2% to 2.2% revenue impact for the year.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Core growth is still expected to be between 2.5 to 3.5% for the year. We believe this is a prudent way to manage considering the dynamic macro environment. Now to help you with your models, I wanted to provide some additional perspective on our end markets. In pharma, we are monitoring the progress of US pricing policy proposals but are not seeing a change in customer behavior. As a result, we continue to expect low to mid single digit growth for the year, with the second half of the year continuing to show steady improvement versus the first half.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

For diagnostics and clinical, given q two's performance, we now expect growth to be towards the upper end of mid single digits. And we expect growth for both chemicals and advanced materials and food to continue to be in the range of low to mid single digits, while the environmental and forensics market is a solid mid single digit growth on PFAS strength. And lastly, as a reminder, academia and government is our smallest market at 8% of total revenue with NIH related research representing only about 1% of revenue. We are maintaining our outlook from q one of a mid single digit decline in total with The US market being the driver. While we performed much better than we expected in q two, we feel this is a prudent approach for the year.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

We are also maintaining our full year EPS guidance of 5.54 to $5.61 while covering the incremental tariff costs that I'll explain in more detail in a moment. This represents a year on year increase of 4.7% to 6%. For clarity, let me briefly summarize the tariff assumptions we've incorporated into our FY '25 guidance. Based on the tariff rates that are currently in place, we estimate that the gross incremental tariff exposure in the second half of our fiscal year is $50,000,000 This is on top of the roughly $10,000,000 we have already absorbed in the first half of our fiscal year. 30% of the exposure is represented by trade between The US and China, about evenly split.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Of the remaining 70%, thirty percentage points is from The EU into The US, and the remaining 40% is from the rest of the world into The US. As Porig mentioned, we have mobilized our team using the IGNITE operating model to quickly move our procurement and supply chains to minimize the tariffs and build inventory. We're using a combination of supply chain moves, like moving LC production into The US, surcharges, and some of the Ignite driven savings that Porig previously highlighted to offset the incremental costs. Importantly, we expect our actions to fully mitigate the costs in fiscal twenty twenty six. The tariff landscape continues to be dynamic and hard to predict.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

However, given the recent news of potentially increasing tariffs on EU sourced products to 50% as early as July 9, we felt it important to frame that exposure. If implemented on July 9, we estimate that would add another $40,000,000 in gross exposure in the second half of the year. But through additional pricing mitigations and the inventory we've built up, we anticipate the net impact would be minimal for the year. This is the power of our tariff task force. It enables us to address tariffs at the enterprise level and align Agilent's key senior leaders so we can quickly leverage our strong and diverse supply chain footprint and adjust to the market driven approach of our unified commercial team.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Finally, for your modeling, we are now projecting an increase in other income and expenses to $15,000,000 in income along with a 12% tax rate for the year and February diluted shares outstanding. Moving to the third quarter, we are guiding to revenue of $1,645,000,000 to $1,675,000,000 This range represents an increase of 1.7% to 3.6% growth on a core basis and an increase of 4.2% to 6.1% growth on a reported basis. Currency is a 0.6% tailwind, and M and A impact is expected to be a 1.9% benefit in the quarter. Again, while the Q2 stocking and logistics dynamics I mentioned earlier do not affect the total revenue in Q3, we do see it playing out differently by group. For that reason, we thought it helpful to provide a perspective on group core growth guidance in Q3.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Given the Q2 impacts, we see LDG growing mid single digits and both ACG and AMG growing low single digits. Third quarter non GAAP earnings per share are expected to be between $1.35 and $1.37 representing growth of 2.3% to 3.8%. Now I'd like to turn the call back to Porig for closing comments. Porig?

[Padraig McDonnell, CEO, President & Director at Agilent]

Thanks, Bob. Before I close, I want to thank our retiring board member, Heidi Koons, for many years of service with Agilent, And I want to welcome Pascal Sorius and Judy Golic Brown to the board. Pascal is CEO of AstraZeneca, and Judy is currently founder and CEO of Downtown Advisory after holding senior leadership positions at Amgen and Perrigo. Both bring decades of global leadership experience from the pharmaceutical, biotechnology, and health care sectors with a proven track record in strategy, innovation, operations, and finance. I look forward to working with you both.

[Padraig McDonnell, CEO, President & Director at Agilent]

It's an exciting time to be part of the Agilent growth story, to be part of building on our foundational strengths of being an established leader in $80,000,000,000 markets driven by secular growth, having leading market share and sustainable competitive advantage through our intense customer focus, and reaccelerating growth through innovation and market share gains. And we continue to look at the long term. As Bob mentioned, we have a strong balance sheet and remain focused on augmenting our internal innovation with external growth opportunities. We have a robust pipeline of opportunities of all sizes that are aligned with our strategy we explained in December and will further build this great company. In a highly dynamic macro environment, Agilent is excelling.

[Padraig McDonnell, CEO, President & Director at Agilent]

We remain confident in our ability to deliver on our full year 2025 commitments and in our long term trajectory towards financial framework we explained at Investor Day. With Ignite scaling and our pace of innovation accelerating, Agilent is well positioned to outperform regardless of the near term market dynamics. After one year as CEO, I'm even more energized by what we were accomplishing at Agilent, and we're only getting started. Thank you for your attention. I'll now hand it over to Parmit to kick off our q and a. Parmit?

[Parmeet Ahuja, VP, IR at Agilent]

Thanks, Boric. Regina, if you could please provide instructions for q and a now.

[Operator]

Our first question comes from the line of Patrick Donnelly with Citi. Please go ahead.

[Patrick Donnelly, Managing Director at Citi]

Hey guys. Thank you for taking the questions. Maybe one just on the order trends that you guys saw in the quarter. Can you just give us some color how those progressed as the quarter progressed? I mean, you guys are as unique with the timing, probably saw a little bit of the pharma tariffs, the actual tariffs come in.

[Patrick Donnelly, Managing Director at Citi]

Just curious if you're willing to talk about April, certainly, May would be welcomed as well. But what you saw on the order front, did you see any pull forward around the pharma tariffs? I know you talked about the ACG pull forward on the consumables. But just curious what you're hearing from customers? And again, what you thought on the order front versus the revenue side would be helpful as well.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. Thanks, Patrick. So I can I can start here? So first of all, our book to bill was greater than one, and our orders grew low single digits in q two. And overall for the for the first half, orders grew mid single digits.

[Padraig McDonnell, CEO, President & Director at Agilent]

So in terms of any pull forward from pharma, we haven't seen anything. We've seen actually very stable business, across across the regions. Of course, as Bob talked about in the script, we did see a pull forward in consumables, but that comes out in the wash given some of the issues we had with customs, etcetera, in April, but that's back to normal now. So what I would say is peak pharma customers are in particular still spending on key projects, and replacement cycle continues, so no changes there. And we do expect this gradual recovery to continue in the second half.

[Patrick Donnelly, Managing Director at Citi]

Okay. That's helpful. And then maybe just on the NASD bio vector piece, it sounds like those performed quite well in the quarter. Can you talk about, I guess, expectations for the rest of your it sounds like NASD is maybe creeping a little bit higher, which is great. Can you talk about the visibility there?

[Patrick Donnelly, Managing Director at Citi]

I know sometimes you get orders well out a few quarters. I mean, you into '26 on some of these order books? Maybe just talk about the visibility and what you're seeing in those businesses would be helpful. Thank you, guys.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. I'll start, and I'll hand it over to Simon. So first of all, really, really pleased by the progress in our CDMO business and, NAIC with high single digit digit growth and we buy a veteran to high teens. You know, we're seeing the combination of these businesses right in the sweet spot of of, really important therapeutic areas coming together. But I'll I'll hand it over to Simon for more color on that.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

Yeah. I'd say overall in the CDMO businesses, we were pleased on a couple of major fronts for the quarter just past. We saw progression of some early commercial programs in the NASD business. We've talked about that a few times previously. We're now starting to see the revenue mix there evolve more from fifty fifty towards sixty forty in favor of commercial.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

We think that bodes well for the future. And then in the BioVectra business, there was also some really noticeable progress. Our GLP one manufacturing programs, we saw a successful scale up there. We saw some nice process efficiency gains, and that's now beginning to become a pretty meaningful contributor to the CDMO business overall. As we think about going forward in the near term, I'd say we're pretty confident about the second half of the year as we look at NASD.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

In particular, we've got very clear line of sight to the double digit growth that was mentioned in the script. I'd say we've got the orders in house that we need to fulfill that. And then longer term, we we continue to think we're extremely well positioned in this space. And, again, these combined capabilities of NASD and BioVectra really put us in the sweet spot of advanced therapeutic modalities and particular areas that really excites us like oligos and antibody drug conjugates. And bioconjugation generally is a really high growth area where we've got real strong capability in BioVectra.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

So a lot to be pleased about in the quarter. As always, I'd caveat it. This business is lumpy. It will continue to be lumpy, but we're on a clear upward trajectory here. We feel like we're nicely positioned, and we got a good line of sight to the rest of the year.

[Patrick Donnelly, Managing Director at Citi]

Great. Thank you, guys.

[Padraig McDonnell, CEO, President & Director at Agilent]

Thanks, Patrick.

[Operator]

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

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Thank you. Good afternoon. Wanted to follow-up on Patrick's first question just around the in quarter impact you saw on ordering just around the tariffs. The $15,000,000 of consumables that got pulled forward, what were you hearing from customers as to just the reason for why that happened? Just curious about that.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

And then on the instrument side, does the guide assume you recapture that in the fiscal third quarter? Or do you think that could come later in the year?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. Hey. Hey, Jack. This is Bob. I'll I'll take that.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

And as you can imagine, in in China, given the high tariff rates that were were being proposed at the time at mid April, there was a desire to try to get, ahead of that from some of our customers, and we had inventory in in in country. And so we just we just saw some stocking of orders that would normally be throughout q three being pulled into q two and and and being, delivered. On the flip side, because of the changing tariffs, there were a number of longer delivery times and logistics, activities that were happening at the ports in China as well that primarily impacted our instrument business cause if we bring those in. And so that offset in total that in, in China. And so when we look at that, we would expect, no change.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

We didn't see any change to our overall revenue in q two. Just some some moves between instruments and consumables, and that will reverse itself, we expect, here in q three. But, again, in total for q two and q three, the total results, are fine.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Got it. That makes sense. And I think that explains where I was gonna go with my second question as to why China was much better than I was thinking. So I I do have one other follow-up, which is, Bob, just can you boil it all down now on the margin side for the year, kind of what the guide implies for operating margins?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So the margin, given obviously the cost associated with the incremental tariffs, we are covering that with a a combination of of tariff mitigation activities as well as some pricing surcharges and then some of the ignite. But given the impact of that, it'll be closer to flat versus year ago. If you took that out, we would still be on track for the margin expansion similar to what we saw here in q two as an example. So we were flat year on year. But if you took out that 55 basis points, we've been right on track.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So we still feel good about that cadence going forward, particularly when we talk about twenty twenty six. When we when we talk about mitigations, that means that we will eliminate the gross impact of the tariffs through some of the supply chain moves that are already ongoing.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Okay. Thank you.

[Operator]

Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

[Elizabeth Koslosky, Global Investment Research Associate at Goldman Sachs]

Hi, this is Evie on for Matt. Thanks for taking my questions. So the first one, in the past you've noted that the majority of your exposure within your pharma business is in clinical versus earlier research. Have you seen any differences between the ordering patterns of these two applications, especially with the recent uncertainty in the research spend from these customers?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yes. No, I would say the lion's share of our business is actually on the QAQC and development side, and we saw small molecule actually grow 10% in the quarter was which was a fantastic result. So we we see across pharma that actually that's the part that's more resilient, currently, particularly in the future where you see potential reshoring that may happen over over a few years. Of course, QAQC testing benefits from that and, of course, benefits, by the way from from supply chain changes with pharma around the globe as they look to mitigate things themselves. So overall, I would say a very strong quarter on that side and we continue to expect.

[Padraig McDonnell, CEO, President & Director at Agilent]

We do actually, of course, serve our customers on the R and D side and the development side, but the vast majority would be on the QAQC side.

[Elizabeth Koslosky, Global Investment Research Associate at Goldman Sachs]

Okay. Great. And then, within PFAS, we've seen some potential easing of regulation within water in The US. Have you seen this impact orders as customers work through the uncertainty? And then how much can growth in food and product testing offset potential weakness in the water regulation?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yes. So first of all, just a tremendous result in PFAS in q two. We grew 75% year over year and also saw tremendous growth around consumables and connect rates with our systems. Just to give a little bit of color as well, Europe and China led, really, really grew well and, of course, with EMEA. So lots to like about us.

[Padraig McDonnell, CEO, President & Director at Agilent]

If you think about some of the recent announcements, it's it's actually, very, very it's sometimes it's hard to get some of the details in those announcements with the restructuring that's going on. But I think you're gonna see waters, water the water, testing continue over the next few quarters, especially in in, especially in the broader area outside The US. I think the larger part of our p f PFAS business in The US over the next year or the next half, it's gonna come from industrial based testing that's around wastewater, silent discharges. That's where you see people worried about litigation. You're you'll see a lot from the EPA EPA coming out, you know, to pay for, any infringements.

[Padraig McDonnell, CEO, President & Director at Agilent]

So so we also see that, material testing globally and water testing in EMEA, APAC to drive business over the next two quarters. So I would say we're very, very, we're expecting very strong results for the year, but beyond the year, extremely extremely strong as well. There's also one emerging thing that's coming up, quite a bit is that PFAS testing is gonna start more into air and volatile PFAS, which is right in our sweet spot for GCMS. Currently, that's about, I would say, two to 3% of the market. But over the next twelve to eighteen months, we expect that to go to 18 to or sorry, eight to 12% of the market where we will have a very high market share win rate on that. So that gives a color on PFAS.

[Elizabeth Koslosky, Global Investment Research Associate at Goldman Sachs]

Great. Super helpful. Thank you.

[Operator]

Our next question comes from the line of Rachel Badenstahl with JPMorgan. Please go ahead.

[Rachel Vatnsdal, Senior Equity Research Analyst, Healthcare at JPMorgan Chase]

Great. Good afternoon. Thanks so much for taking the questions. So I want to follow-up on your comments there on Evie's question regarding reshoring. You've had a few of your peers call this out as a potential tailwind just given the number of capacity announcements that we've heard from pharma companies in recent months.

[Rachel Vatnsdal, Senior Equity Research Analyst, Healthcare at JPMorgan Chase]

So can you walk us through, have you had any concrete conversations with customers revert regarding these capacity build outs? And how do we think about the timing of when we could see any tailwinds related to onshoring?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. Great question, Rachel. So having spent, you know, three decades in this industry and actually the earlier parts of those decades in Ireland when there was a lot of pharmaceutical being built, in Ireland in terms of capacity, Generally, the way these things happen, it takes it takes quite a bit of time. What we're leading with is our strategic account program. So we're at the very highest levels with our pharma customers.

[Padraig McDonnell, CEO, President & Director at Agilent]

Discussions are extremely early, so I wouldn't say any concrete out of that yet. But generally, what happens is, you know, you see the, you know, the the plans for the site being put up. You also see qualification plans for the site. Generally, construction tenders are out. And then from the construction tenders, people think about lab capacity, and that is the point which is really critical to be in.

[Padraig McDonnell, CEO, President & Director at Agilent]

And we're we're, we we feel very good about our position with the strategic accounts. Also, by the way, you hear of Metix moving early, you know, so maybe it moves from The U U EMEA to The US. So we find out from our large installed bases where those methods are going to go. But we don't expect anything. I would say you're going to see something maybe at the end of two to three years, but it will be a it will be a tailwind for us given the the amount of systems and also the proportion of QAQC in those systems.

[Rachel Vatnsdal, Senior Equity Research Analyst, Healthcare at JPMorgan Chase]

Great. And then just for my follow-up, I wanted to ask on pricing. Can you talk about your ability to pass on price in this environment given the dynamic environment that we're seeing in light of tariffs? And in general, what's embedded for pricing for the rest of the year and for guidance? Thanks.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. I'll take the fourth part and I'll give the second part to Bob on it. So we have enterprise pricing capability that we build through Ignite. So we do it in a very, we do surcharges in a very structured way. We actually we're clearly, we're looking at our competitive situation around in in different regions and making sure we're focused on the customers.

[Padraig McDonnell, CEO, President & Director at Agilent]

So based on the work we're already optimizing our pricing and, we have, it has been a it has been a it's been a it's been a quite a big part of our mitigation going forward. But, Bob, I don't know if you wanna about guide.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. Yeah. Hey, Rachel. This is Bob. To build on what Torek said, just to reiterate what we said in the prepared remarks, we've already achieved what we achieved all of last year through the first six months of this.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So a very good, performance there. If you recall in our guide, had about a hundred basis or not, we had a hundred basis points of price. We're on track for that for the year. Probably a little bit higher with that with the pricing mitigation activities that are being established as a result of tariffs. As you can imagine, depending on the competitive nature there, the type of pricing that we would have vis a vis the supply chain activities, which would be a permanent mitigation, we're balancing all all of those as well as the ignite pricing activities as well or excuse me, savings activities.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So we are not, taking all of the mitigation from tariffs out of price. We think, that is something that will help us with our customers as well And looking to move things around to have what we would call internally kinda no regrets moves to be able to to manage our our supply chain globally given the dynamic nature of how these rates are are moving back and forth. So that's kinda how we're thinking about the second half of the year. And again, in 2026, we would expect to have, all of the, tariff rates, being mitigated.

[Operator]

Our next question comes from the line of Puneet Souda with Leerink Partners. Please go ahead.

[Puneet Souda, Senior MD at Leerink Partners]

Yes. Hi, Paurav and team. Thanks for taking my question. First one on the replacement cycle. You talked about book to bill being more than one.

[Puneet Souda, Senior MD at Leerink Partners]

Just trying to understand how should we think about the Infinity three replacement cycle? How is it doing in the environmental labs versus the pharma labs? What are you seeing in the field? Early traction, maybe just help us understand how how how should we think about the anatomy of this replacement cycle for Agilent?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. I'd be happy to happy to go through some details. So the the Infinity Tree ramp continues extremely well. We see a lot of very strong adoption and customer feedback continues to be very positive. Our order form is really growing nicely with the Infinity Tree and, we we def we're we're really pleased with market acceptance.

[Padraig McDonnell, CEO, President & Director at Agilent]

What we're actually seeing with Infinity Tree on the replacement cycle is we're seeing actually a higher connect rate and service and consumers with that system, which really bodes well for the future. But overall replacement cycles on the LC side, I'll focus on that first and then maybe talk to the broader, broader portfolio. We've you know, we've been seeing a continuous ramp on that. We expect that to continue over the next few quarters. We have thousands of 11 hundreds.

[Padraig McDonnell, CEO, President & Director at Agilent]

We have twelve sixty, 12 nineties. We're moving through that that replacement cycle. But, of course, it doesn't happen in one quarter. It doesn't happen sequentially quarter after quarter. You see it gradually build.

[Padraig McDonnell, CEO, President & Director at Agilent]

And, generally, I would say the funnels to close is about, you know, six to nine months, to close an LC order. So we continue to see that increase, but very pleased with the adoption. And of course, there's a much broader continuum around our replacement cycle given our GC GCMS and our LCMS installed bases that are already, I I think, continuing to to start to replace.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. Hey, Porg. Just to build on that, just to reiterate some of the proof points that you talked about when we talk about small molecule QAQC, which is the lion's share of the installed base that grew double digits in in q two from a revenue. You know, all in inclusive of service consumables and instrumentation. So it speaks to the the full workflow solution.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

And to your question about environmental, that's our sweet spot, and we grew in PFAS over 70%. So I think it can kinda tells how well that's being adopted in the environmental space as well.

[Puneet Souda, Senior MD at Leerink Partners]

Got it. And my follow-up is, can you size how much of the China growth in the quarter was from the sort of the Lunar New Year timing perspective, how Lunar New Year played out this year versus last year versus the sort of the consumable pull forward that you saw? And what was the China stimulus in the quarter? Thank you.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. I'll I'll start, on on that, Puneet. So the the pull forward of the consumables that, that we were talking about actually had nothing to do with Lunar New Year. It was really driven by the the tariffs. So that I I think is a idiosyncratic activity that wouldn't continue.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

The Lunar New Year played out the way we expected it to for the full year guide. So there's roughly about two points of total company, when you look at the change year on year, and it kinda played out the way we we we expected it to. And so, you know, if you look at our revenue dollars in China sequentially, it's actually a very good performance, you know, still well above $300,000,000 speaks to the stability in that market. And in terms of the last question that you had around stimulus, you know, we continue to be pleased If you looked at the applied markets, we had some very good performance in in in food, some of the other implied markets.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Most of our stimulus was actually in q one, but we're very optimistic about the funnel activity right now for the next stimulus, which we are are starting to work with our our customers and putting together bids for the second half of this year, probably will be revenue in in in at the end of our calendar year here potentially in Q4. That would be upside. If it is in Q4, we haven't built that into our numbers. But feel very optimistic about our ability to do that given our made in China capabilities.

[Operator]

Our next question comes from the line of Vijay Kumar with Evercore ISI.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Congrats on a nice execution here. Maybe my first one on the guidance here. You look at ACG, think ex the pull forward, it was still a pretty healthy six plus, maybe high singles kind of number. Why is it slowing down to low singles? I think you said in 3Q.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

And when you apply that to overall company, right, I think it's stepping down by two fifty basis points sequentially. I know, like, a year on year basis, like, the comps maybe explains that. But on a stack comp basis, it looks maybe a little conservative. So maybe talk about the third quarter assumptions.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah. Thanks. I'm gonna hand over to Angelica now to give some color on that one.

[Angelica Riemann, SVP & President - CrossLab Group at Agilent]

Yeah. Thanks for the question. You know, I I think coming back to the tariff related consumables pull forward, right, we we made those adjustments. And so once we we make those adjustments for the quarter on quarter growth rates and and normalize them, you know, the guide is in the mid mid single digit range. So so that's really counting for it.

[Angelica Riemann, SVP & President - CrossLab Group at Agilent]

But when you look more holistically, the fundamentals of ACG remain incredibly strong as we look towards the rest of the year. We're we're well positioned to continue to support customers as they're maximizing the assets in their laboratory through the broad portfolio, whether that's consumables, services, as well as some of the the other offerings in the ECG portfolio. So we're we just adjusted and still a healthy growth rate across ECG for full year.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Understood. And then maybe one on the P and L. I think on the margins, I thought I heard you say gross margins was in line, but it looks like versus Street, maybe numbers came down. Sequentially, gross margins were down. Maybe talk about what happened on gross margins.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Was that a mix impact? And I think you had a restructuring charge, which wasn't there in prior quarters. Is this a new cost actions that hasn't been initiated? Thank you.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. When we were talking about the gross margins, if you look at it, year on year, we did have the, you know, unplanned tariff, activity, which was about 55 basis points in in gross margin that, that hit, in in q two. You look at it versus year ago, there was a combination of of tariffs, product mix, which we had incorporated as well as the some currency related activities. So feel good about kinda where that is. In terms of restructuring, that's probably more on a GAAP basis, Vijay, And we would have taken that out for the numbers that I was just referencing on a non GAAP basis.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

But that that would have been part of some of the organ organizational health activities that Porek had mentioned as part of Ignite.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Understood. Thanks guys.

[Operator]

Our next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.

[Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group]

Hey, thanks. I want to go back to NASD. The comps get easier here in the back half, so presumably double digit growth. Could that business be double digit for the full year, or should we think about high single digit for NASD? Also, can you talk about capacity utilization, you know, as we think about, train C and D and then also BioVectra fill finish?

[Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group]

And then, you know, third question on that is just, you know, with the onshoring theme, are you seeing more interest, you know, from pharma, given that, you know, most of that business is US and then some in Canada? Has that kind of, you know, peaked, and then picked up interest from some pharma companies?

[Padraig McDonnell, CEO, President & Director at Agilent]

I'm gonna give that to Simon.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

Yeah. So as we as we think about the back end of the year and NASD, and we've been saying all along that we envision high single digit growth and nudging double digit growth, I'd say there's a growing confidence that we think we can nudge that double digit growth as we look at the forecast that we're seeing begin to crystallize for q three and q four. And then as as far as by a vector goes, I think we're gonna see a sequential dip in the third quarter. We're looking at some planned equipment shutdowns there. And as those come online again, which we anticipate in q four, provided that all goes to plan, then I think we'll be back to firing on all cylinders where that's concerned.

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

As for train c and train d, you know, we've been through this dynamic for a while now where we were coming through the back end of the IRA impacts, and then we started to see our order insight really improve in 2024. That's continued through to 2025. Again, I think we've got pretty much all of the orders in hand now to deliver on 2025. So that utilization of train c, train d is starting to become another positive tailwind driver for us now.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yes. And I would say we haven't seen any impact at all from potential tariffs on pharma, etcetera, reshoring or shifts at all in that business in any conversations we have with

[Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent]

our behavior thus far. Watching it very closely.

[Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group]

Okay. And then follow-up on replacement cycle. I appreciate the commentary and color you gave previously. Are you able to give us what percentage of, you know, LC systems are Infinity three at this point? Is it 15%, twenty % of the mix?

[Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group]

And then you haven't talked much about the GC replacement cycle. You did kind of allude to that. How are you thinking about that as well?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yeah.

[Padraig McDonnell, CEO, President & Director at Agilent]

I mean, it's steadily growing. I mean, we're six months into the launch or a little bit more than that on the Infinity three. So it's building over time, but we don't give out the exact percentage of our installed base on that one. But I can I can assure you it's going extremely well, Tycho? And given what we're seeing on the cadence from our older systems and even up to the twelve twelve sixty and twelve nineties, customers are really voting for the Infinity Tree when they when they replace.

[Padraig McDonnell, CEO, President & Director at Agilent]

But I'm gonna ask Mike Zang here on the GC replacement cycle.

[Mike Zhang, SVP & President - Applied Markets Group at Agilent]

Yeah. Paul, I can definitely say. We're the leader in the GC and also GCMS, and we have a very large installed base. And we're working with our customers. And I can tell you, yes, we have a large install base.

[Mike Zhang, SVP & President - Applied Markets Group at Agilent]

We have some, you know, very significant in the aging install base as well. We actually very excited to see some very strong momentum with our customers. Well, you know, the GC and also GCMS. If you look at our order pace, think it's very encouraging. And we also have been exciting new innovations. We just launched the new GC and we have other exciting innovations as What I can tell is in the next few quarters, next few years, we're gonna see a significant opportunity coming to materialize.

[Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group]

Thank you.

[Operator]

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

[Brandon Couillard, Managing Director at Wells Fargo]

Hey, thanks. Good afternoon. Bob, I saw you took down the operating cash flow guide for the year. Is that driven by tariffs and maybe inventory builds? And could you quantify the impact of currency on EPS in 2Q and then what's embedded for the full year now?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yes. So, you're spot on. And from a cash flow perspective, that is, in fact, what we have done is, looked at building inventory, which is impacting our our cash flow. It's kind of a one time, activity as well as some some capital equipment, as well as building up. We didn't change our overall, capital forecast, but there is some, working capital there as well.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So, that's what, we have on in terms of the EPS, it's it's close to I'm just looking at my notes here. It's about a point or two from an EPS standpoint for the full year impact, Brandon. And we can get you the details post call.

[Brandon Couillard, Managing Director at Wells Fargo]

Okay. Thanks. And, Bert, I mean, big picture, the balance sheet is very clean right now. Are you less likely to consider a larger deal right now given the macro, tariffs, interest rate volatility? Or are you seeing more attractive valuations for assets? And how do you think about those trade offs?

[Padraig McDonnell, CEO, President & Director at Agilent]

Yes. I mean we don't make any decisions based on the news that we see every week around how we're going to deploy capital going forward. But I can say a few things. We have a very, very strong list of opportunities. It's wedded in our strategy.

[Padraig McDonnell, CEO, President & Director at Agilent]

So we have done a lot of work on that. Of course, valuations are down a little bit, but of course, we're going to remain very disciplined in what we do going forward. But I will say that M and A will become a bigger part of our story over the next few years.

[Brandon Couillard, Managing Director at Wells Fargo]

Thanks.

[Operator]

Our next question comes from the line of Michael Ryskin with Bank of America. Please go ahead.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Great. Thanks for taking the question guys. I'll focus both on the margins and sort of the cadence through the year. Bob, you talked a lot about the impact of tariffs on 2Q, the 55 bps. But just looking at the gross margin guide, I think it sort of not the guide, but the implied number is kind of flat for throughout the rest of the year, maybe down 100 bps year over year.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

So the implied OpEx step up in 3Q and 4Q especially, seems like it's coming off from the SG and A side. Could you just talk through how much of that is just, whether that's volume leverage or the even high transformation coming through? And I got a follow-up.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Hey, This is Bob. Yeah. It's it's a little of both. As you could, probably imagine, if you look at our kinda normal seasonality kinda first half to second half, we do have a step up in in margin.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Some of that's related to volume. We also have more holidays and and lower spending in the in the second half of the year. And then you've got the full impact of Ignite transformation We talked about this $80,000,000 of annualized 40,000,000 of that will happen here in the second half of the year, which will help us offset, some of the tariffs. So you're right.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

More of our margin improvement in the second half, was actually going to show up in the OpEx because tariffs show up in the gross margin. And so we've got some mitigation at the gross margin side, but also the mitigation activities, in in the OpEx side as well.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Okay. And then on the tariff side, your point on, like you just said, partially offsetting as you go through the year on the gross side, but then fully offsetting in 2026. So how do we think about gross margins either as a percent or whatever for 2026? Like what's the right jumping off point? Because optically, you're going have a really easy compare of 54.5%, fifty five % for the year, but a lot of that is artificially depressed.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

So are we gonna expect like a nice gross margin jump in '26 because, those offsets and that mitigation kicks in for next year?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. I I I would say, if I could forecast what tariffs are going to be, here, by by '26, that that would be something. But that being said, if they stayed the way they are, I would expect us to be able to have an improved gross margin next year for a couple of reasons. One is exactly what you just talked about. You know, the gross will be eliminated.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

It's not just a mitigation. We'll we'll we'll eliminate it through the resourcing or or reshoring of our our supply chain. You'll have the benefit of volume and, as as well. And then we also talked about the pricing capabilities, that we would expect to have more price next year through price realization than we had here as a result of some of the pricing capabilities that Porag talked about. So still early days, so I don't want to you know, we're not giving guidance here for 2026, but but certainly, there's some opportunities more from from a tailwind perspective in gross margin going into 2026.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

All right. Thank you.

[Operator]

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

[Dan Leonard, Managing Director & Research Analyst at UBS Group]

Thank you. I was hoping you could perhaps elaborate on trends you're seeing in China by end markets. I think you mentioned industrials was down low single digits, but just elsewhere between pharma, environmental, etcetera.

[Padraig McDonnell, CEO, President & Director at Agilent]

Yes. So I think in China, we've seen a pretty very stable business. I mean, except for that pull forward on us, I would say that you see that industrials are down a little bit, but pharma is pretty stable. And I would say that there's a lot of excitement, I would say, building in China around the second phase of the stimulus, is gonna be more broader based. It's actually gonna be more much more broader based than it was the last time the funnels are looking extremely strong for that. But I would say overall, it's stable.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. I I I would agree. If you look across, Dan, pharma, academia, government, food and environmental, and and forensics were up. Diagnostics clinical to our smallest market was flat, and then CAM was down just slightly. And and some of that had to do with some of the, instrumentation delays, through customs that, happened.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Now you may ask why in China? Because actually, even though it was made in China, it has to go through a bonded warehouse, and that still has to go through customs, and it actually takes a little longer time. So no custom no no no, tariff impact from that standpoint, but it it still required, going through customs. And so we expect that to come back here in Q3.

[Dan Leonard, Managing Director & Research Analyst at UBS Group]

Okay. Thank you. And then Bob a follow-up on Q3 guidance overall. It looks like the midpoint of organic revenue growth is about 2% that is a sequential step down from the 5% you just reported. I know there's some China timing issue there, but can you walk me through the main bridge factors between the Q2 result and the lower Q3 guide?

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Yeah. So a couple of things. We're we you know, I think we're taking a prudent prudent approach given some of the still uncertainty in, you know, the the the tariff announcements here. Feel very good about our our momentum going into q four, let me be or excuse me, q three. And we also have, you know, a little little more difficult comp in in q three than we have q two.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

So I wouldn't read too any too much into it, you know, when I look at sequential numbers in Q3 versus Q2.

[Dan Leonard, Managing Director & Research Analyst at UBS Group]

You very much.

[Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent]

Thank you.

[Operator]

And Mr. Ahuja, I'll turn the call back over to you.

[Parmeet Ahuja, VP, IR at Agilent]

Thanks, Regina, and thanks, everyone, for joining the call today. With that, we'd like to end the call. Have a good rest of the day, everyone.

[Operator]

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

Participants

Executives

• Padraig McDonnell, CEO, President & Director

Analysts

• Parmeet Ahuja, VP, IR at Agilent
• Robert McMahon, Senior Vice President & Chief Financial Officer at Agilent
• Patrick Donnelly, Managing Director at Citi
• Simon May, SVP & President - Life Sciences & Diagnostics Markets Group at Agilent
• Jack Meehan, Equity Research Analyst at Nephron Research LLC
• Elizabeth Koslosky, Global Investment Research Associate at Goldman Sachs
• Rachel Vatnsdal, Senior Equity Research Analyst, Healthcare at JPMorgan Chase
• Puneet Souda, Senior MD at Leerink Partners
• Vijay Kumar, Senior Managing Director at Evercore ISI
• Angelica Riemann, SVP & President - CrossLab Group at Agilent
• Tycho Peterson, Managing Director, Global Equities at Jefferies Financial Group
• Mike Zhang, SVP & President - Applied Markets Group at Agilent
• Brandon Couillard, Managing Director at Wells Fargo
• Michael Ryskin, Managing Director at Bank of America Merrill Lynch
• Dan Leonard, Managing Director & Research Analyst at UBS Group