Robert W. McMahon
Senior Vice President and Chief Financial Officer at Agilent Technologies
Thanks, Mike, and good afternoon, everyone. In my remarks today, I will provide some additional details on revenue and take you through the income statement and some other key financial metrics. I'll then finish up with our guidance for the third quarter and the fiscal year. Unless otherwise noted, my remarks will focus on non-GAAP results.
As Mike described, we posted solid top line results in Q2 while overcoming some difficult macro challenges in the business environment. Revenue was $1.61 billion, up a reported 5.4%. In the current quarter, currency was a headwind of 2.1 points, while M&A added 20 basis points of growth. Core growth was up 7.3%, in line with expectations despite the COVID-related lockdowns in China, which primarily affected us in April. We estimate the lockdowns deferred $50 million to $55 million of revenue into future quarters, impacting growth in Q2 by roughly 350 basis points. In addition, COVID testing-related revenues were roughly a 1-point headwind in the quarter.
Our largest market, pharma, grew 13% during the quarter on top of 29% growth last year. Biopharma continued to be the main driver of results, growing 27% year-on-year, led by NASD. Investments in R&D programs and demand for instrumentation, consumables and critical components remained strong. Pharma represented 37% of our overall revenues this quarter. To put that in perspective, in Q2 2019, effectively one year before the pandemic started, pharma represented just 30% of our business. This not only highlights the strength and resilience of this market, but it also demonstrates how our innovation and investments in higher-growth markets continues to pay off.
Chemical and energy continued its strong trend of positive results, growing 9% during the quarter despite the impact of the COVID-related lockdowns in China and the conflict in Ukraine. Results were led by strong double-digit growth in advanced materials and specialty chemicals. We expect strong demand to continue in these areas, particularly in semiconductors and battery and clean energy technologies as industry-wide capacity expands. Diagnostics and Clinical grew 5% on top of 13% growth last year as year-on-year declines in COVID-related revenues and the temporary shutdowns in China muted our results.
The Academia and Government market was a nice surprise for us, growing 5% in Q2 on top of 21% growth last year. We saw an increase in spending in this market as more university labs opened up and students returned to on-campus learning. In addition, sales activity and the funding environment continues to be healthy. In the Food segment, we saw growth across all regions except for China due to the shutdowns. The higher concentration of Food business in China drove the Food segment to decline low single-digits against a very strong comparison of 22% growth last year. In rounding out our end markets, Environmental and Forensics grew 1% versus an 8% growth last year.
On a geographic basis, the Americas grew 13%, Europe grew 7%, Asia, excluding China, grew 8%, while China declined 3% in the quarter as the lockdowns affected our manufacturing and logistics operations for over a month. Regarding China, I'd like to provide some additional detail on how the quarter evolved and how we expect to see the recovery progress. First, as Mike said, demand remained strong with the order growth of about 20% despite the temporary COVID lockdowns.
Second, our business in China was tracking very well with our expectations through late March, when production in our main logistics hub in Shanghai were shut down and remain closed throughout April. We were able to partially reduce the impact of the lockdown by shifting production to other factories where possible and adjusting the shipping routes into and out of China. We expect the $50 million to $55 million in revenue to be recovered throughout the rest of the calendar year. So it is deferred, not lost.
In terms of phasing, we expect to continue to ramp our operations and anticipate modest recovery of the Q2 impact in Q3. We expect the majority of the recovery to occur in fiscal Q4 with some spillover into November and December, which is our first fiscal quarter of 2023. This phasing is baked into our updated guidance.
Now turning to the P&L. The team continues to execute at a very high level. Second quarter gross margin was 55.7%, up 30 basis points from a year ago as pricing actions and productivity helped to offset inflationary pressures tied to ongoing supply chain constraints and higher logistics costs. Operating expense leverage and strong cost management helped drive very healthy incremental improvements as we delivered an operating margin of 25.3%, up 140 basis points from last year. Our tax rate for the quarter was 50 basis points better than forecast, helping us deliver earnings per share of $1.13, up 16% versus last year and exceeding our expectations.
Looking at cash flow on our balance sheet. We generated operating cash flow of $283 million in the quarter while investing in $64 million in capital expenditures during Q2 with the year-on-year increase primarily related to the NASD expansion. Cash flow in the quarter was impacted by the transitory impact of COVID-related lockdowns in China, as well as increased inventory to fulfill strong demand in a challenging supply chain and logistics environment as expected. We're still on track to deliver our cash flow forecast for the year.
During the quarter, we again took advantage of market volatility to repurchase $234 million worth of shares. We also paid out $63 million in dividends, returning a combined total of $297 million to shareholders. Our balance sheet continues to be healthy with a net leverage ratio of 0.9 times. And earlier this month, we refinanced $600 million in senior notes opportunistically and now have no long-term debt maturing until 2025. As we stated last quarter, our approach given current market conditions is to continue to be aggressive in deploying our capital. Given our strong balance sheet and confidence in the future, we intend to deploy another $250 million in opportunistic share repurchases in Q3 while continuing to actively look at M&A opportunities.
Now let's move to our improved full year guidance and our outlook for the third quarter. Given the strong business performance in the first half of the year and our order backlog, we are raising our full year core revenue growth to an expected range of 8% to 9%, up a full point from our previous guide. This core revenue takes into account the recovery phasing in China, as well as a $35 million or 55 basis point headwind due to the conflict in Ukraine. While we've increased our core growth expectations, the dollar has again strengthened considerably since our last guide, resulting in an estimated currency headwind of $170 million for the year, up $60 million since our last guide, and the impact of M&A remains unchanged. This results in us maintaining our full year reported revenue guidance range of $6.67 billion to $6.73 billion for the full year.
We have also increased our EPS guidance for the full year to $4.86 to $4.93 per share. This is up from the previous range of $4.80 to $4.90 per share and now represents 12% to 14% growth versus fiscal year 2021. For Q3, we're expecting revenue to range from $1.625 billion to $1.650 billion. This represents core growth between 7% and 9%. We expect operations in China to ramp and be fully operational before the end of the quarter and continue to accelerate into Q4. Given the strengthening of the dollar, exchange rates are expected to have a negative impact of about 4.7 points on the reported growth in the quarter.
Closing out our guidance in Q3, non-GAAP EPS is expected to be in the range of $1.20 to $1.22, up 9% to 11% versus the prior year. This is based on a 14% tax rate and 300 million diluted shares outstanding. The Agilent team once again performed extremely well in Q2 under some very challenging circumstances. At the same time, our business remains strong, and I'm confident we will continue to deliver strong results in Q3 and through the rest of the year.
With that, Mike, I will turn it over to you for some concluding comments.