Agilent Technologies, Inc. Q2 FY2026 earnings call

- Overall Q2 Performance * Delivered $1.83 billion in total revenue, 6.3% core growth (80 bps above the high end of prior guidance) * Non-GAAP operating margin of 26.4%, up 130 bps year-over-year and 180 bps sequentially, well above guidance * Non-GAAP EPS of $1.49, 14% year-over-year growth, 7 cents above the high end of prior guidance * Achieved or exceeded long-term plan targets for all key metrics: revenue growth, margin expansion, and EPS growth

- Strategy and Core Differentiators * Deep customer intimacy and trust drives consistent share gains across key workflows and geographies * Customer insights feed an innovation flywheel that delivers products aligned with customer needs, with a major wave of new launches scheduled for the upcoming ASMS conference * Expanded organizational talent and capabilities improve speed, agility, and operational discipline * The Ignite operating system is now structurally embedded in the business, delivering compounding top- and bottom-line benefits

- Operational Progress from Ignite * Delivered ~200 bps of net pricing in Q2, putting the company on track to exceed the full-year initial target of 100 bps * The Tariff Task Force achieved full mitigation of incremental tariff impacts that took effect in late spring, via strategic manufacturing moves and targeted price adjustments, and created a playbook for future trade challenges * Digital e-commerce orders grew 9% quarter-over-quarter (over 20% ex-China), improving customer experience and lowering per-transaction costs * Transformed supply chain capabilities became a competitive advantage, with an AI-enabled supply chain control tower improving schedule attainment, order conversion, and cycle times, reducing manufacturing overhead by over 50 bps year-over-year * Pre-integration preparations for the announced Biocare acquisition are underway, with closing expected later in 2026 * The 9500 triple quad ICP-MS launch was accelerated by a full quarter via dynamic resource reallocation under the Ignite framework

- Key Growth Drivers and Innovation * End market growth: Pharma grew 6% (third consecutive quarter of mid-single digit to low double-digit growth, with 20% year-to-date growth from GLP-1-related demand); Chemical and Advanced Materials (CAM) grew 8%; Diagnostics and Clinical grew 11%; Environmental & Forensics grew 13% (driven by >50% growth in forensics including the TSA contract); Food declined 3% (funding delays in China/India); Academia & Government declined 5% (in line with expectations) * Instrument revenue grew high single digits, with low double-digit growth in LC, LC-MS, and GC, driven by replacement cycle momentum and share gains from new innovative products; instrument book-to-bill has been above 1 for 9 consecutive quarters * Upcoming ASMS launches include: the 9500 triple quad ICP-MS (with patented dual-cell technology and lower operating costs for broader customer access); upgraded flagship GCs (with 30% faster oven cool down, built-in performance monitoring, and helium conservation capabilities); new Altura Ultra inert LC columns targeted at protein/peptide therapeutics and gene therapy/vaccine workflows; and OpenLab CDS 3.0 (unified software platform for all Agilent analytical systems including high-resolution mass spec) * Launched a new China Innovation Center to leverage local technical talent for R&D in digital, AI, and automation, particularly for automation development * AI is a FY26 enterprise focus: AI-driven drug development will increase downstream drug approval volumes, creating a long-term tailwind for Agilent's leading QA/QC workflow position; Agilent is also deploying AI internally to improve operations

Agilent reported total Q2 2026 revenue of $1.83 billion, with 6.3% core year-over-year growth and 10% reported growth. There are three operating segments: 1. Applied Markets Group (AMG): Revenue grew 11% core year-over-year, outperforming expectations. Growth was led by double-digit expansion in spectroscopy, driven by strong semiconductor production and downstream supply chain demand, plus contribution from the TSA airport security contract. AMG contributes 35-40% of total company revenue. 2. Life Sciences and Diagnostics Markets Group (LDG): Revenue grew 9% core year-over-year, exceeding expectations. Upside was driven by low double-digit growth in liquid chromatography (LC) and LC-mass spectrometry (LC-MS), plus low double-digit growth in the cancer diagnostics business. High single-digit growth was also delivered by the Advanced Therapeutics (formerly specialty CDMO) division, which remains on track for full-year mid-teens growth. LDG contributes approximately 45-50% of total company revenue. 3. Agilent CrossLab Group (ACG): Revenue grew 2% core year-over-year, in line with guidance. Results were impacted by Lunar New Year timing and challenging year-over-year comparables from pre-tariff stocking in China in the prior year. Ex-China, ACG grew at the high end of mid-single digits, with consumables growing high single digits. ACG contributes roughly 10-15% of total company revenue.

- Full-year fiscal 2026 core revenue growth guidance is raised to 4.5%-6%, an increase of 30 bps at the midpoint versus prior guidance; reported revenue is expected to be $7.39-$7.49 billion, with a 1.8% forecasted currency tailwind - Full-year non-GAAP EPS guidance is raised to $6.00-$6.10, an increase of $0.08 at the midpoint versus prior guidance, representing 7%-9% full-year EPS growth - End market guidance updates: Chemical and Advanced Materials and Diagnostics and Clinical raised from mid-single digit to mid-high single digit growth; Environmental and Forensics raised from low single digit to low-mid single digit growth; Food lowered from flat to low single digit decline; Pharma and Academia & Government guidance maintained at high single digit growth and low single digit decline, respectively - Segment guidance: All three segments are now expected to deliver mid-single digit full-year growth, with AMG raised from low single digit to reflect strong Q2 performance - Geographic guidance: Asia ex-China full-year growth raised from mid-single digit to mid-high single digit growth; full-year China guidance maintained at roughly flat - Full-year operating margin expansion target raised to 85 bps at the midpoint; capital expenditure guidance lowered by $50 million to ~$450 million for the full year; operating cash flow guidance maintained at $1.6-$1.7 billion - Q3 2026 guidance: reported revenue of $1.83-$1.85 billion, core growth of 4.4%-5.9% with a 0.6% currency tailwind; EPS of $1.48-$1.50, representing 8%-9% year-over-year growth - All guidance excludes the impact of the Biocare acquisition and any potential tariff refunds

- Inflationary cost pressures and logistics disruptions from the ongoing Middle East conflict put upward pressure on operating costs, though management believes Ignite efficiencies will fully absorb these impacts within current guidance - Delays in government stimulus and funding in China and India have created near-term headwinds for food and end markets and academia & government, with stimulus-related revenue now expected to shift to FY27 - Small and mid-cap biotech funding remains constrained, though early positive demand signals are starting to emerge - Academia & government funding globally remains muted, with lingering uncertainty around multi-year grant disbursement - Geopolitical trade tensions and tariffs create ongoing cost and supply chain uncertainty, though management has established mitigation frameworks to offset these impacts

Q: With strong double-digit growth for LC-MS and GC, cell analysis remains weak. What are current A&G (Academia & Government) trends, and how sustainable is CAM's strong Q2 performance amid Middle East uncertainty? / A: CAM delivered 8% Q2 growth (beating guidance), with low teens growth ex-China, driven by strong semiconductor capex and downstream demand from material industries like semiconductors and batteries. The Middle East conflict has not meaningfully impacted current demand momentum, and the funnel remains strong. A&G delivered the expected 5% Q2 decline, but US academic instrument demand is starting to stabilize as OMB funds are being disbursed, and the segment is expected to remain in a steady muted state. (312 characters)

Q: Q2 margins significantly beat guidance even with only modest volume upside. What drove this strong margin performance, and what is the expected margin trajectory through Q4? / A: The margin beat was driven by three main factors: over 200 bps of net pricing from the Ignite program, broad operational and procurement efficiencies, and favorable geographic mix with a larger Q2 skew toward higher-margin Americas. Sequentially, margins are expected to be flat Q2 to Q3 as mix normalizes and inflationary pressures offset ongoing Ignite gains, then expand ~220 bps from Q3 to Q4 in line with historical seasonal patterns. The H1 to H2 operating profit ramp is fully aligned with historical norms. (398 characters)

Q: Advanced Therapeutics (formerly specialty CDMO) delivered high single-digit Q2 growth and is guided to mid-teens full-year growth with a second half acceleration. How much visibility is there into this second half uptick, and what is the status of the new Train C facility? / A: Management has strong visibility into the second half growth acceleration, with production schedules already locked in to deliver strong year-over-year growth in Q3 and Q4 that adds up to full-year mid-teens growth despite a tough Q4 compare. Mechanical completion of the Train C expansion was achieved in Q2, with commercial go-live scheduled for spring 2027, and there is already strong line of sight to demand for the new capacity for most of FY27. (392 characters)

Q: Diagnostics delivered an exceptional 11% Q2 growth, but the full-year guide only implies a deceleration. Was there anything unsustainable in Q2 performance, and what is driving the growth? / A: The strong Q2 performance is durable: diagnostics is a core enterprise growth opportunity that has received increased investment over the past 18 months, and the Omnis family of instruments is ramping very well across all regions. The quarter also saw strong double-digit growth in both instruments and assays, plus healthy demand for companion diagnostics for modalities like antibody drug conjugates. While second half compares are more challenging, the core growth trajectory remains intact, with upside potential from tariff refunds and Middle East normalization that are not included in guidance. (412 characters)

Q: China declined 9% in Q2, but first half was roughly flat in line with guidance. What is driving the softness and what is the long-term outlook? / A: The Q2 decline was driven by larger-than-expected Lunar New Year impacts and delayed government funding for food and academic end markets, but the full-year guidance of flattish revenue remains on track. Biotech pharma in China is growing at a high teens rate, which is a bright spot. Agilent remains committed to the Chinese market, with a new innovation center investment, and expects mid-single to high single-digit long-term growth aligned with China's five-year plan priorities for healthcare, green development, and advanced materials. (361 characters)