Robert W. McMahon
Senior Vice President, Chief Financial Officer at Agilent Technologies
Thanks, Mike, and good afternoon, everyone. In my remarks today, I will provide some additional details on revenue in the quarter and the year as well as take you through the income statement and other key financial metrics. I'll then finish up with our guidance for fiscal year 2023 and the first quarter. Unless otherwise noted, my remarks will focus on non-GAAP results. We are extremely pleased with our Q4 performance and finished the year on a very strong note, exceeding our expectations on both revenue and earnings per share. Q4 revenue was $1.85 billion, up 17.5% core and 11.4% on a reported basis.
During the quarter, we saw the dollar continue to strengthen. Currency exchange rates were a 6.2 point headwind to growth or $103 million. The contribution from M&A was as expected, adding one-tenth of a point to reported growth. Our performance was again broad-based as all end markets and regions grew during the quarter. Orders also grew again during the quarter, while outstanding execution from our order fulfillment and supply chain teams enabled us to start working down our record backlog. As we enter FY '23, our backlog is still elevated and helps provide good visibility and confidence in our outlook going forward.
Now I'd like to share additional details on our end markets. Results in our largest market pharma were very strong. This market represents 37% of Agilent's revenue and grew 20% in the quarter. Biopharma grew 18% and small molecule was up 21%. Looking forward, we expect the pharma end market to grow high single digits in FY '23. Chemicals and Advanced Materials led growth for us during the quarter at 27%. This compares with 11% growth in Q4 of last year. All three submarkets, Chemicals, Advanced Materials and Energy had strong growth in the quarter. All regions grew as well, led by China. Demand continues to be driven by investments in advanced materials, driving secular growth opportunities in batteries, alternative energy and semiconductors while not immune to macro uncertainties.
We believe these secular drivers in Advanced Materials will continue, helping to drive mid-single-digit growth for this market next year. We delivered growth of 20% in the food market led by China as our results continue to benefit from the recovery of revenue delays due to COVID-related shutdowns in Q2. During FY '23, we expect the food market to normalize and grow in the low single digits after two years of very strong growth. The environmental and forensics market posted 18% growth with particular strength in the Americas. This result was driven by increased governmental spending helping to drive technology refresh for newer applications like PFAS testing.
Europe and China also posted impressive double-digit growth in the quarter. We see PFAS-related funding and demand continuing to be a driver for this end market and expect mid-single-digit growth next year. Our business in the diagnostics and clinical market grew 6% against an 11% compared last year. Growth was led by Europe and China, while Americas grew low single digits. We also expect to see mid-single-digit growth in this market in FY '23. The academia and government market grew 3%, led by continued strength in our service business. This market grew 3% overall for the year as well and looking forward, we expect similar growth in 2023.
On a geographic basis, China led the way with phenomenal 44% growth in Q4, driven by underlying demand across multiple end markets and our continued ability to quickly recover deferred revenue from Q2. As we have discussed in the last two quarters, the COVID-related lockdowns in China earlier this year deferred an estimated $50 million to $55 million in revenue from Q2 into future quarters. This recovery started last quarter, and our team in China continued their outstanding work to ramp production and shipments quickly in Q4.
We've now fully worked through this deferred revenue a full quarter earlier than originally anticipated back in Q2, a true testament to the entire team. We estimate this recovery had a mid-single-digit positive impact to China's Q4 growth. So even excluding this, our business performance in Q4 was very strong. Now looking ahead to next year, we expect China will continue to be a key growth driver for us. And as Mike mentioned, Europe grew a very solid 14%, which exceeded our expectations. We also posted 8% growth in the Americas, driven by Pharma, Chemicals and Advanced Materials and strong growth in the environmental forensics market, partially offset by academia and government.
And lastly, the rest of Asia grew 12%. Now turning to the rest of the P&L; our team continues to execute at a very high level. Fourth quarter gross margin was 56.3%, up 40 basis points from a year ago. Volume leverage, along with pricing, helped overcome continued inflationary pressures and higher logistics costs. Our operating margin was 29.1% in Q4, up 260 basis points from last year. Below the line, our tax rate was 14% for the quarter as expected, and we had 298 million diluted shares outstanding. Putting it all together, earnings per share were $1.53 for the quarter, up 26% from a year ago, as Mike mentioned.
So in summary, Q4 ended with 17% core topline growth and 26% EPS growth, a very strong finish to the year, where we had revenue growth of 12% and EPS growth of 20%. Now some metrics on our cash flow and balance sheet; in Q4, we generated operating cash flow of $448 million, while investing $70 million in capital expenditures. The capex spending is driven by our continued scale-up of Train B for our NASD expansion. And in the quarter, we also paid out $62 million in dividends and repurchased shares valued at $135 million. For the year, we returned almost $1.4 billion to shareholders through $250 million in dividends and a bit more than $1.1 billion in share repurchases.
And as we've indicated before, given the ongoing strength of the business, we believe these share repurchases represent a very good long-term investment. Our balance sheet continues to remain healthy as we end the fiscal year with a net leverage ratio of 0.8. Now let's move to our outlook for the upcoming fiscal year and first quarter. Now looking forward to 2023, we entered the year with business momentum and a very healthy backlog. We also acknowledge the increasingly uncertain macro environment, rising interest rates and currency headwinds and have reflected that in our thinking based on what we know today.
For fiscal year 2023, we expect revenue in the range of $6.9 billion to $7 billion as we have significantly greater currency headwinds since the last we spoke. Core growth is expected to be in the range of 5% to 6.5%, in line with our long-range goals. Currency will negatively affect reported growth by 430 basis points or roughly $295 million during the year based on fiscal year-end rates. And to help with your modeling at a business group level, this revenue guidance assumes mid-single-digit core growth for LSAG, mid- to high single-digit growth for DGG and high single-digit growth for ACG.
And despite the ongoing currency headwinds and a continued inflationary environment, we are expecting operating margin expansion for FY '23. Now below the line, we expect $40 million to $50 million of net expense a tax rate of 13.75%, which is slightly below this year and 297 million shares outstanding. Fiscal 2023 non-GAAP EPS is expected to be in the range of $5.61 to $5.69. This range represents a growth rate of 7.5% to 9% versus the prior year and incorporates an estimated four percentage point headwind due to currency net of our hedging activities.
We are also expecting $1.4 billion to $1.5 billion in operating cash next year and capex of roughly $300 million based on currently approved expansion projects, primarily Train B for NASD. We have also announced raising our dividend 7%, providing our shareholders with another source of value. And finally, for Q1 2023, we expect revenue in the range of $1.68 billion to $1.70 billion. Core growth is expected to be in the range of 6.8% to 8%, while currency will be a 6.6 point headwind to reported growth.
This outlook for the quarter incorporates the impact of the timing of Lunar New Year this year. First quarter 2023 non-GAAP earnings per share expected to be between $1.29 and $1.31. Mike will speak to this further in just a minute, but our diversified business model and the strength of our team are key assets for Agilent. These two elements produced an outstanding Q4 and a full year 2022 and they have put us in an excellent position to again deliver strong results in the coming year.
And now I will turn the floor back over to Mike for some closing comments. Mike?
