Agilent Technologies, Inc.

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 Agilent Technologies, Inc. fourth quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Kajus, you may begin the conference.

Thank you and welcome, everyone, to Agilent's conference call for the fourth quarter of fiscal year 2025. As many of you know, I recently joined Agilent after a fun 16-year stint on Wall Street, and I'd just like to say how excited I am to be joining the team at such a pivotal time in our journey. With me on the line are President and CEO Parikh McDonald, CFO Adam Elanoff, and Rodney Gonzalez, Vice President, Controller, and Principal Accounting Officer, who served as Interim CFO until Adam's arrival. Joining the Q&A will be Simon May, President of the Life Sciences and Diagnostics Markets Group, Angelica Ryman, President of Agilent CrossLab Group, and Mike Zhang, President of the Applied Markets Group. This presentation is being webcast live. The press release for our fourth quarter financial results, investor presentation, and information to supplement today's discussion, along with a recording of this webcast, are available on our website at investor.agilent.com. Today's comments will refer to non-GAAP financial measures. You'll 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 12 months. Guidance is based on forecasted exchange rates. During this call, we will 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. Agilent assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. And now, I'd like to turn the call over to Parag.

Thanks Tejas, and hello everyone. Thank you for joining today's call. Before I talk about our results, I want to start by introducing Adam Elenos, our new CFO who officially joined Agilent last week. Adam joins us after distinguished tenure at Amgen. We advanced through a series of finance, strategy and transformation leadership roles over a total of 19 years, most recently serving as Vice President of Investor Relations and Treasurer. I'm looking forward to leveraging Adam's expertise in strategic planning and M&A and its commitment to cross-function collaboration will be invaluable to Agilent in the years ahead. Adam, would you like to say a few words?

Thanks, Porg. I'm thrilled to join Agilent at such an exciting time. My interactions with the leadership team over the past few weeks, both within the finance function as we contemplated the guide and with the broader team, have only reinforced my optimism for what lies ahead. I'm looking forward to working with the team to drive growth and innovation, advance operational excellence, and preserve Agilent's history of financial discipline.

Great to have you on board, Adam. I also want to take a moment to express my sincere appreciation for Rodney stepping in as interim CFO over the past four months. His long distinguished career at Agilent demonstrated he was more than capable of helping us bridge this important transition. Now let me talk about the Q4 results. It was another strong quarter. The Agilent team executed exceptionally well, delivering the solutions our customers need in a market that is showing continuing signs of normalization. In the fourth quarter, Agile reported $1.86 billion in revenue, growing 7.2% on a core basis, our sixth consecutive quarter of core growth acceleration. This performance came in above the high end of our guidance. Our customer-first approach is paying dividends, with excellent top-line results that compare very favorably with our peers. Momentum remains broad-based across the portfolio, supported by strong LC and LCMS demand and share gains, CDMO upside, solid double-digit contributions in key regions, and a replacement cycle that continues to accelerate. These trends reflect our structurally resilient portfolio and performance that tracks above the broader market. At the same time, our Ignite operating system continues to improve the effectiveness and efficiency of our organization. Ignite has delivered more than 200 basis points of sequential margin improvement compared with last quarter, while funding incremental performance-driven variable pay. The bottom line results was four quarter earnings per share of $1.59 above the midpoint of our guidance. Simply stated, in a dynamic environment that continues to evolve, the Agilent team delivered for our customers and our shareholders. As we close the 2025 fiscal year, I want to highlight four key dimensions where we made exciting progress this year and that will drive our growth for the future. First, the innovative products and services that we develop with a customer lens to create differentiated value. Second, the extraordinary customer intimacy and trust our unified sales and service organization creates that unlocks high quality lead generation and funnel conversion. Third, the increased capabilities and level of talent throughout Agilent. Fourth, the Ignite operating system that enables us to effectively combine these elements to drive long-term growth and maximize value for customers, shareholders, and employees. Let's start with innovative products and services. The success of our customer-focused innovation was on display throughout the year with products and services that differentiate us from the competition and drive our growth by solving real customer problems. This includes our next-generation Infinity Tree that is delivering as much as 30% improvement in productivity for our customers. Infinity Tree drove double-digit ELSI growth in the second half of the year. That is underpinned by customers returning to buy large volumes of additional units because of their great experiences. Our ProIQ LCMS also has seen an amazing ramp. Its unique value proposition for pharma and biotech is driving strong customer interest, as well as sales that are well ahead of our already robust expectations. The summer launch of our ProIQ drove overall single-quad LCMS growth of more than 50% in the first full quarter. And last month, we introduced our Alturo BioInert column. Customers are rapidly adopting the Alturo column, and the columns ramp is an order of magnitude greater than past column launches. This is a clear indication of just how important increased sensitivity and resolution are in key applications that support oligos and GLP-1s. These results also highlight new product launch excellence across the organization. When it comes to artificial intelligence, we are actively using AI to accelerate our innovation engine and drive operational excellence. For example, AI generates 80% of our engineering drawings based on product specifications and customer needs, thereby increasing design productivity and reducing custom design cycle times by 75% for our GC products. In our operations, our order fulfillment team is leveraging agentic AI for testing, inspection, and control to eliminate redundant shifts, reduce downtime, and improve quality. Our second key dimension, extraordinary customer intimacy, centers on a cornerstone of continued success, leveraging our unified sales and service model to maintain lasting customer relationships. Our commercial team members are uniquely positioned as trusted customer partners. Agilent's commercial model is a unified end-to-end organization that provides pre-sales consultation, a modern and easy-to-use e-commerce platform, and a highly experienced deep technical post-sales service and support that ensures customer success. Our field service engineers build long-term relationships with our customers by partnering with them to solve their most critical problems. Those relationships provide highly valuable insights that fuel a vital and growing portion of our demand generation programs. Insights from our service team now accounts for 30% of all sales leads, and these leads come with an order conversion rate that is more than double that associated with the rest of the sales funnel. Because of our uniquely deep connection with our customers, it will come as no surprise that they consistently rate Agilent services as best in class. We don't take this privileged position for granted. That's why we continuously implement new ways to enhance customer intimacy. In terms of AI and customer intimacy, we're working to deploy AI within our CRM to support our sales team with predictive insights, automating tasks, and proposing personalized content in service of our customers. We're also using virtual agents to complement onsite support in select markets to resolve customer issues more quickly. The third dimension is our increased capabilities and level of talent throughout Agilent. We've leveraged our deep bench of in-house talent and complemented it with external hires that bring fresh perspective and domain expertise. At an executive level, in addition to Adam, we brought on Megan Henson to lead our HR team to help us build on our strong culture. August Specht, who joined us from Thermo Fisher as our Chief Technology Officer, brings deep scientific knowledge in analytical technologies and a proven ability to lead innovative R&D teams. And most recently, Jaydeep Ganguly joined from Gilead to drive world-class manufacturing while leveraging our global scale to realize increased efficiencies. While these individuals are important and visible additions to our leadership team, all Agilent employees are focused on accelerating the pace of innovation, driving superior execution, and most importantly, delighting our customers. Finally, we are bringing together these foundational strands through our Ignite operating system, our fourth key dimension. We launched Ignite at the start of the year to improve the pace and quality of our execution and to usher in a new mindset that leverages the power of the enterprise to maximize both growth, and stakeholder value. Some examples of Ignite's early success include enhanced top-line growth through the creation and implementation of an enterprise pricing program that drove performance across the year, more than doubling our price growth compared with FY24, faster decision-making and improved efficiency by reducing layers of bureaucracy, meaningful procurement cost savings through globalization of vendor contracts that leveraged increased scale for additional negotiating power. And we saw the power of Ignite in real time this year as it enabled the immediate creation of our Tariff Task Force to drive a rapid and coordinated response to global tariff changes. The Cross-Functional Task Force rapidly developed a unified strategy and executed a suite of interconnected projects that greatly accelerated our tariff mitigation efforts. As a result, we are highly confident that we will fully mitigate current tariffs in FY26. All told, Ignite has already delivered well over $150 million in annualized savings. The Ignite operating system is able to quickly assemble knowledge from across the organization, develop a thorough and actionable enterprise plan, and actively drive implementation and quantify outcomes. This is critical as Agilent continues to evolve. Finally, and this is important, Ignite has strengthened our organization readiness to identify, acquire, and integrate attractive assets. Our integration of BioVectra is one example. It's been a highly productive year for Agilent. We've laid a robust foundation upon which we can drive long-term differentiated growth and value. Now let me share some additional details of our Q4 results, starting with our end markets. We continue to see signs of improvement in the pharma market. The Agilent team was able to leverage those conditions and our customer-centric solutions into an excellent 12% growth during the quarter. We also saw a nice pickup in spending among our biotech customers. That spending grew in the low 20s during the quarter and low double digits ex-CDMO, which was led by our large accounts. Our customer-focused solutions for oligotherapeutic developments, peptide-like GLP-1s, and Infinity Tree drove our performance in pharma, contributing to low double-digit growth in LC and mid-teens growth in LC-MS platforms. That performance is above that of our peers and points to share gains across the replacement and greenfield opportunities. Our specialty CDMO business continues to be a differentiated growth driver. It represents nearly 20% of LDG revenue and grew more than 40% on a core basis during Q4. During the quarter, commercial programs drove 60% of our NASD revenue. The capacity increases we implemented at Biovectra in the third quarter enabled a record fourth quarter that was in line with our elevated expectations, even as the intra-quarter cadence shifted revenue to October. Chemical and advanced materials grew 7% as we continue to see strong demand in Americas and Europe. Chemicals customers continue to invest in capital equipment to meet the demand driven by reshoring of downstream customers in the semiconductor market, increasing global competition for critical resources, and an enhanced focus on regional supply chain security. Diagnostics and clinical continues to be a durable mid to high single digit performer with 7% growth in the quarter. We're excited about the upside potential here as our new DACO Omnis family penetrates medium and low throughput labs. Environmental and forensics grew 9% as the approaching implementation of a revised EU drinking water directive drives investment in new capabilities. Also, commercial labs and forensic customers in the Americas are moving quickly to spend capital budgets before year-end, even as U.S. government spending in this end market remains muted. Our market-leading PFAS business grew high single digits in Q4 and almost 40% for the year, despite meaningfully tougher comps and the U.S. EPA headwinds we mentioned last quarter. Environmental use cases remain the bulk of our PFAS revenue, though growth is increasingly coming for our end markets, such as food and cam. Our business in the food market finished a strong year with a growth of 7% in the quarter. Finally, academia and government, our smallest end market at 7% to 8% of annual revenue, declined 10% in the quarter. To no one's surprise, federal spending reductions had an increased impact on instrument spending in the US. In summary, our growth across major end markets continues to run ahead of our peers, supported by stronger LCMS adoption, healthy contributions from specialty CDMO platforms, and solid traction in applied workflows. We continue to see nice momentum in our instrument portfolio, with instrument booked to build exceeding one for the seventh consecutive quarter. We are in the early stages of a normalized replacement cycle and gaining share against the competition. Plus, the growth of our install base enables robust attach rates for our consumables and service offerings to lend meaningful durability to our top line for your strong recurring revenue. As we look to FY26, our priorities remain clear. Advance our Ignite operating system, sharpen commercial execution, capture opportunities from improving end markets, innovative new products, and a multi-pronged replacement cycle. In our end markets, we expect continuation of positive trends in pharma. This will be enabled by improved visibility around pricing and a stabilizing tariff environment. as well as the very early stages of pharma reshoring that we anticipate could start to materialise in orders towards the end of the year. And while it's too soon to call an inflection, the accelerating pace of M&A and improving funding environment into October bodes well for our small and mid-sized biotech customers in FY26. We remain bullish on demand outlook for our specialty CDMO pharma services, with strong market momentum in our key modalities like SIR&A and GLP-1s, We expect to drive mid-teens growth in the coming year as we get ready for opening new capacity in 2027. We expect applied markets will continue to grow as customers adapt to shifting macro conditions and structural drivers like the expansion of PFAS testing and semiconductor reshoring support durable long-term demand. In diagnostics and clinicals, we see continued strength as testing demand grows and our expanded DACO Omnis offerings enables new placement opportunities. In our smallest end market, academia and governments, we are not expecting a meaningful recovery in FY26, as ongoing US federal spending headwinds seem to be unlikely to abate soon. Putting it all together, incorporating the stronger baseline comparison for FY26, we're starting the year with an expectation of 4% to 6% core growth. We believe this range is a prudent initial guide that takes into account secular growth drivers. This includes instrument replacement cycles, demand for specialty CDMO services, with data-based specific needs in GLP-1s and PFAS, and pharma and semiconductor reassuring. This allows for an evenness in ongoing recovery dynamics across our markets. We anticipate these growth drivers reinforced by IGNITE to provide continued momentum. We also expect to deliver 75 basis points of operating margin expansion in FY26 at the midpoint. This target allows us to make critical investments to drive innovation, expand our digital commercial capabilities, and prepare for opening of our new CDMO capacity in 2027, all while absorbing incremental material costs driven by tariffs and assumptions for a steady and market recovery. This margin expansion translates into 9% operating profit growth at the midpoint, demonstrating the strong operating leverage inherent to our model. For FY26 earnings per share, we're guiding 5% to 7% that includes an EPS growth headwind of 3 percentage points from the one-time step up in tax rates reflecting the new global minimum tax regulations. Adjusted for this tax dynamic, underlying EPS growth would have been in the high single to low double digit range. Our financial discipline remains unchanged. We are deploying capital where it delivers the highest long-term value, balancing investments in innovation, M&A opportunities, as well as strategic capacity expansion while returning capital to shareholders. Now let me turn it over to Rodney, who will provide additional details on the four-quarter results and our guidance for next year.

Thanks, Poreg, and good afternoon, everyone. In my comments today, I'll provide additional detail on revenue in the quarter, as well as walk through the income statement and cover other key financial metrics. I'll then cover our new full-year and first-quarter guidance. Q4 revenue was $1.86 billion above the high end of our guidance. On a core basis, we posted growth of 7.2%, while reported growth was 9.4%. Currency had a favorable impact of 0.9%, while M&A contributed 1.3%. The BioVectra acquisition is reflected in core growth starting in October. At a business segment level, LDG grew 11%, well ahead of guidance, bolstered by the strong performance in our LC and LC-MS instruments and robust CDMO results. AMG grew 3% as expected, led by high single-digit growth in GC and GC-MS, as we see increasing benefit from the instrument replacement cycle in those platforms as well. ACG grew 6%, in line with our guidance, with high single-digit growth in the rest of the world, offset by mid-single-digit declines in China. On a geographical basis, both the Americas and Europe saw healthy 11% growth with broad in-market strength outside of academia and government. China declined 4%, and the rest of Asia ex-China grew 4%. Results in China were below our low single-digit growth expectations, though revenue contributions remained stable around $300 million per quarter. India grew in the high teens in Q4 with double-digit growth in pharma and greater than 20% growth in each of our applied markets. This balanced strength across our geographies, which saw us deliver double-digit growth ex-China, remains a key differentiator of our performance profile. Gross margins in Q4 improved sequentially by 100 basis points and came in at 54.1%. On a year-over-year basis, they were down 100 basis points due to tariff headwinds. Operating margins was 27.2%, up more than 200 basis points sequentially, driven by leverage on volume, strong pricing, and tariff mitigation. We delivered this result despite absorbing an incremental 60 basis point sequential headwinds from performance-driven variable pay. Absent the variable pay dynamics that reflect better business conditions and our strong execution, operating margins would have expanded by 270 basis points over the prior quarter, well above our guide of 230 basis points of sequential expansion. On a year-over-year basis, operating margins were down only slightly due to tariffs. Now, moving below the line, we had $10 million in other income, while our tax rate of 12% was as expected. Finally, we had 284 million diluted shares outstanding in the quarter. Putting it all together, key for earnings per share was $1.59. That was above the midpoint of our guidance and grew 9% from a year ago. Now let me turn to cash flow and the balance sheet. Operating cash flow was $545 million in the quarter, and we invested $93 million in capital expenditures. We purchased $85 million in shares and paid $70 million in dividends during the quarter. More recently, we increased our industry-leading dividend by 3%. And we ended the quarter with a net leverage ratio of 0.8, pointing to our robust balance sheet that leaves ample room for capital deployment optionality. Now let me share some additional details on the outlook for next year and the guidance for our first quarter. We expect FY26 revenue to be in the range of $7.3 to $7.4 billion on a reported basis. This represents an increase of 4 to 6% on a core basis as currency is expected to be a 1% tailwind during the year. To help with your models, I want to provide you with additional details on expectations for growth in our end markets during the year. Starting with pharma, we anticipate high single-digit growth, improving market conditions, and the strength of our offerings in key high-demand applications create a favorable environment. In the applied markets, we expect mid-single-digit growth in chemical and advanced materials, low single-digit growth in environmental and forensics, and flat growth from food, where we have an especially difficult year-on-year compare against a strong China stimulus tailwind in FY25. In diagnostics and clinical, we anticipate mid-single-digit growth. In academia and in government, we are guiding to a low single-digit decline as we don't foresee meaningful recovery in the U.S. By business segment, we are guiding both the life science and diagnostics markets group and the Agilent Cross Labs group to grow mid-single-digit and the applied markets group to grow low single-digit in FY26. Finally, by geography, we expect the Americas to lead the way with mid to high single-digit growth, while Europe and Asia ex-China grow mid-single digits, building on the momentum we saw in the back half of the year. In China, we are incorporating a flat assumption for FY26, consistent with what we saw in China this year. Based on our latest expectations around stimulus timing, we are taking a prudent approach and substantially moving stimulus benefits from our FY26 revenue guidance. Moving down the P&L, we expect to deliver 75 basis points of operating margin expansion in FY26 at the midpoint. We anticipate a more gradual start given typical seasonality and the lack of tariff headwinds in the first half of FY25. with momentum building through the year. Reflecting the latest global tax regulations, we see our tax rate increasing to 14.5%, a 2.5% increase compared with last year. We also expect $30 million in other income, and we are planning anti-dilutive repurchases to maintain 284 million diluted shares outstanding for the year. Putting this all together, FY26 non-GAAP earnings per share are expected to be between $5.86 and $6, representing earnings growth of 5% to 7%. For your P&L modeling, let me share some additional expectations we have incorporated into our guidance for the year. Because of IGNITE, we expect pricing to continue to improve, with an opportunity to grow well above 100 basis points This guidance also incorporates achieving full mitigation of existing tariffs over the course of the year using cost savings and pricing actions. As is typical, we expect to see substantial sequential improvement in operating margins over the course of the year. Finally, we anticipate operating cash flow will be in the range of $1.6 to $1.7 billion and expect to invest $500 million in capital expenditures. To help with phasing, we are expecting revenue seasonality similar to FY25. Meanwhile, earnings will be slightly more biased towards the second half given the tariff impact on the P&L in the first half. Now moving to the first quarter, we expect our reported revenue to be in the range of $1.79 to $1.82 billion. This represents an increase of 4% to 6% on a core basis, while currency is expected to be a 2.5% tailwind. First quarter EPS guidance is $1.35 to $1.38, with 285 million diluted shares outstanding. Now I'd like to turn the call back to Poreg for closing comments. Poreg?

Thanks, Rodney. As you've heard, we've built excellent momentum across FY25 in a dynamic environment. Our distinct road drivers and our Ignite operating system are fuel for success. We are poised to benefit from a broadening end market recovery, win share, and deliver resilient above peer growth and margin performance over the long term. With our innovation engine accelerating, our focus on customers intensifying, and our best-in-class commercial team executing, we are entering FY26 from a position of strength. Thank you all for your attention. I'll turn it back over to Tejas for Q&A. Tejas?

Thanks, Parag. Operator, can you please share the instructions for the Q&A?

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Our first question will come from the line of Tycho Peterson with Jefferies. Please go ahead.

Hey, thanks. Jorge, I'm wondering if you can comment on BioVector. You guys had guided, I think, closer to 35 million. It came in around 22 million. So maybe just talk about, you know, dynamics there. And then you're taking CapEx up 100 million. Is that all PDMO?

Yeah, so we're very pleased with BioVector came in strong for the year, driven by GLP business. So Q4 GOAT was an easy comparable, pleasing nevertheless. So we came in against what we thought for the year. We have key molecules planned for 26. We're very, very happy about the book of business we have for BioVectra, and it was an outstanding integration from our side, which bodes well for the future, for future M&A as well. But on the CapEx side, Adam, do you want to give some color?

Sure, thanks. So the incremental $100 million investment is really around incremental NASD capacity as well as incremental consumable expansion.

Okay. And then follow up on margins, you know, obviously a focal point, you know, especially coming out of last quarter, maybe to talk on the 75 basis points you're guiding to the gives and takes there. And, you know, if the top lines ends up at the high end, you know, could you, could you do better?

Yeah, so on margin, I think we have a prudent margin for 26 set in, and we're going to go through some of the differences on the call. But Adam, do you want to go through some of the ideas you have on margin?

Sure. So if you think about the margin for 26, at the midpoint, we're guiding 75 bps improvement on a year-over-year basis, and that's really driven by Ignite pricing optimization, some operational efficiencies that you see in the number, and that includes some of the tariff mitigations. and then volume growth the other piece which i think is important which i want to highlight as this more than offsets inflationary impact and we're making incremental incremental investments in growth and innovation as well as having strategic capacity so let me just quickly talk about those incremental investments in growth, because I think it's something that Porg's talked about with our capital allocation strategy. So one, we're making digital advancements for our commercial teams and customers. The second, adding AI across the enterprise, and we're really being focused there on a number of projects. And then importantly, we're continuing to invest in our core R&D portfolio for our products. And with August coming on, we're trying to make sure that we're investing in the most high-impact projects.

Okay, I'll leave it at that. Thanks.

Our next question will come from the line of Patrick Donnelly with Citi. Please go ahead.

Hey, guys. Thank you for taking the questions. Porter, maybe just on, you know, the general tone from biopharma customers in recent months, obviously there's some big announcements. You know, it sounds like things picked up a little bit both on pharma and biotech. Can you talk about maybe specifically on the instrument side what you've been seeing? You know, again, it does sound like biotech is loosening up a little bit for you guys. Sounds like pharma is maybe a little more constructive. Maybe just talk about what you're seeing there. And then even if you get into year end here, is there already signs of what the budget flush could look like? What are you guys seeing there? Could that be a little more normal than past years? What are the conversations looking like there?

Yeah, thanks, Patrick. So far our largest market grew 12% overall in the quarter. And what we're seeing is the MFN tariff deals have really reduced uncertainty for our customers. You know, our biotech grew in the low 20s, or I would say low double digits, ex-CDMO. And the U.S. biotech recovery is starting in well-funded large caps, releasing capital spend. I think what you're seeing in the small to mid biotech, you're seeing improved funding backdrops. And you're seeing that with recent M&A exits, although it really is too early to call it an inflection point on that side. But what's driving this is really, I would say, our really strong momentum and our innovation around Affinity Tree. is coming in extremely well. And ProIQ LCMS resonating extremely well. We had 50% growth for the single quad in Q4. And all of these things lead both well for the future. And that was backed up with our Alturo buyer in our column. So I would say in terms of the budget flush, we have good visibility and it's more of a typical calendar year in budget flush. So we're expecting that to be more normalised.

Okay. That's helpful. Um, and then maybe on the NASD business, you know, it sounds like that's doing well, double digit growth, pretty safe for 26, I guess, given what you're seeing. Can you just talk about the visibility there? Is that fully booked out through 26? And then you talked about the expansion, the capacity expansion plans as the year goes. Can you talk about, I think it's train C and train D when those come online, where those are leaning towards in terms of market need, market indications? Is there an impact to margins of those ramps? I know NASB is accretive on the op margin side, but as those trains open up, does that change anything? I know there are a few questions on NASB in there, but that color would be great. Thank you, guys.

Yeah, thanks, Patrick. So I'm going to start off and hand it over to Simon. So we're really pleased with our CDMO results in FY25, and we're excited how the book of business is building for 26 with recent wins, and we're seeing movements towards commercial programs. But Simon, do you want to give some more color on that?

Yeah, again, I think we've had a very strong year here in FY25. We've been very pleased with the execution, very pleased with the way that the order book has been developing. We've seen a lot of further reasons to validate the SI RNA modality. Just in the last couple of weeks, there was another FDA approval. So we think that we are really well positioned here in coinciding the strength of the modality, the future outlook of the modality, and our competitive position in the market. So as we look ahead to FY26, I'd say we've got a very robust order book as we enter the year for pretty much the full year. So I think it's mainly a case of execution on existing capacity in fy26 but then as the question indicated we've got the capacity expansion starting to see the finish line coming to site there towards the end of 26 and we're looking to go live in early mid part of 27 with train c And as is always the case with the capacity expansion, there'll be dynamics there around amortization and growing into the skin. I think we've got the basis pretty well covered there in 26. And we're well ahead in our thinking where that's in that respect in 27.

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

Thank you. My first question is on China. Can you talk about the downside variance on China in the quarter? What were the drivers of that and performance by ad market, perhaps?

Yeah, thanks, Dan. So Q4 in China, we're down 4%, and that was below our low single-digit August guide. But all markets were down low to mid-singles, except A&G, which was up 5%, benefiting from some academic stimulus. But compwood peers, I think, were in line with key peers. But mix, I think, is an important factor, Dan. So first of all, we saw growth in biopharma and CAM, but we saw declines in food and environmental. And I would say pharma, small molecule, was stable. But overall, you know, it's a very stable business. You're going to have quarters, some swings or variance between quarters, but we're seeing sustainable $300 million growth. per quarter as we go forward and we expect FY26 to be flat like FY25 was flat. I will say though, if you look at our business, given our long-standing customer relationships, our recent win rates and our scale and our visibility into our direct channel, we're very confident in terms of what our market share being stable in 25 and of course we're going to continue with that in 26.

appreciate that and then a follow up for a guy I think you mentioned that there were some pharma reshoring assumption in your guidance for twenty twenty six how important is that to your forecast any way to put some context or dimensions around that thank you yeah so we're we're we're in in a lot of conversations with some key pharma companies around reshoring and

talking about what it means for their R&D and tech investments. They're focusing on shovels in the ground and their lab equipment needs, and we expect by the end of 26 that we'll get some orders in that area. So we're estimating the opportunity of about $1 billion by 2030, but we're limited in seeing the order benefited at the end of 26. We see an overall $1 billion addressable market opportunity for Agilent by 2030, and we expect about one-third of that. But overall, I think there's upside in the forecast around reshoring.

Thank you very much.

Our next question comes from the line of Doug Schenkel with Wolf Research. Please go ahead.

Good afternoon, and thank you for taking the questions. I just wanted to start on GLP-1s. How big is this business? I'm thinking it's probably around $100 million coming out of last year, and then I guess if that's right, how much of it is LC versus services? What's your positioning with generics coming online in different geographies like in India and China, Canada, just to name a few, and how should we think about the growth outlook for 26th?

Yeah, thanks, Doug. So Agilent's GLP benefit really comes for two forms. Our CDMO business, Larger Round BioVectra, where we're working on synthetic peptide manufacturing and our analytical tools like our LC-MS and Altura columns supporting QA QC solutions and so we're actively involved with many of the GLP-1 manufacturers and of course on the analytical tools side infinity tree is a really key component if you look at Q4 revenue was about 40 million for GLP-1 that split about 60% for biovector and 40% for the analytical lab and and I would say we saw about a 20% growth rate in the analytical lab in Q4, and BioVector added about 25 million. If you look overall in 25, I think the GLP-1 revenue is about 130 million, split evenly between both the BioVector and the analytical lab. And if you think about the analytical lab, we grew 40% in the analytical lab and the GLP-1, Altura columns really helping towards the end and of course the infinity tree. So overall it's a really important business for us and we're seeing a long runway into 26 on both sides of the business. India is a particularly interesting part of where you see the GLP-1, where you see the patent lift coming and we've been doing a lot of investment in India around our experience center for customers.

workflow and workflow help for our customers so we expect in india uh we're going to take a lot of share as it goes into it goes into 26. all right super uh super helpful porg um one more on a completely unrelated topic the academic and government and market i think you guys were down 10 constant currency in the quarter if i updated the model right I think this is a little bit surprising given seasonality and the fact that there was a little more certainty about the funding environment. Maybe the offset was the government shutdown. I'm just curious if you could tell us a little bit about what you saw over the course of the quarter and heading into calendar year end. Thanks again and happy Thanksgiving, everyone.

Thanks, Doug. So, academia and government declined about 10% for Q4. That was a slightly bigger decline that we put out in guidance. I would say ex-US, very stable sequentially, and however, I think we faced tougher year-over-year comps with Americas down mid-teens, and I would say the rest of the world was down mid-single digits. US federal spending reductions was really the material impact. The instruments were down mid-20s for the Americas, while I would say chemistries and services were resilient, low single digits for the Americas, so we're seeing a reasonable lab usage. I would say on the US government shutdown that you described there Doug, we saw no material impact from that and we're expecting continued softness in FY26 in Americas as US federal spending reductions continue as we go forward, but I will say it's our smallest market.

um and it's about um one percent of our overall business in in the u.s and the nih spending our next question will come from the line of brandon couillard with wells fargo please go ahead hey thanks good afternoon um porg i mean if we look at the acg business you said all all reasons that ex-china grew high single digits in the fourth quarter but i think you only talked about mid single digit growth in 26. you expect to see a little bit of it as the instrument cycle continues to escalate next year, or are you just sort of being conservative here, kind of unpack how you're thinking about ACG in 2016?

Yeah, thanks for the question. I'm going to kick it off, and I'm going to hand it over to Angelica. So we saw healthy high single-digit growth ex-China in ACG. We continue growth in our install base and ramping attachment rates, and we're confident that ACG is well positioned to really sustain the long-term recurring revenue ramp. It was really a solid quarter, and we saw 6% growth in Q4 at the high end of our guidance, and that was 8% ex-China. But, Angelica, you want to give some more color?

Yeah, sure. Hi, Brandon. So you know we're very excited by the continued growth that we're seeing an ACG largely driven by the size of our installed base, but also the customers utilization of assets in their laboratory we've. we've seen some great adoption of our recent chemistry launch the altar column. We also launched recently a remote plus services offering which allows us to support customers and build stronger relationships with customers that may have capabilities in-house but want to leverage the capabilities and the know-how of the Agilent Field Service Engineers to be able to get them back up and running when they have unplanned or unexpected downtime. And we're still seeing a great amount of interest in improving lab productivity. So we're seeing continued adoption of our open lab chromatography data system and our enterprise content management capabilities as customers are looking to better manage the data coming out of their instruments. And we're seeing some good growth in our automation. When you look across the portfolio, we have a lot of things to take as momentum going into FY26. And certainly, as we see tech refresh and we see replacements of instruments in the laboratory, those provide long-term growth as those instruments continue to be used and we'll be connecting to those with our recurring revenue streams accordingly.

That's great. Thanks. And then I'm not sure if this is better for Rodney or Adam. Just a clarification, what was net pricing in the fourth quarter? And I think you talked about 100 basis points in fiscal 26, but that there could be upside to that, maybe from some of the AI tools. Can you just clarify what you're penciling in for pricing next year?

Thanks. North of 100 basis points.

In the fourth quarter, Robbie?

In the fourth quarter, we were closer to 150 basis points. Thanks.

Our next question will come from the line of Vijay Kumar with Evercore ISI. Please go ahead.

Hi, Paul. Thanks for taking my question, and congrats on the nice sprint here. My first one on order commentary here in the quarter, how did orders in a backlog grow? I'm curious, I know last quarter you were speaking about stimulus, China-related stimulus, maybe some pharmacopoeia updates out there. So I'm curious if any of that is showing up in orders.

Yeah, so I can talk, you know, our book-to-bill was greater than one. You know, orders continue to, I would say, continue to be positive as we go through the quarter. It's been very stable through the quarter in terms of our order rate and, of course, our win-loss ratio, etc., I will talk a little bit about Siemens. The first one, the SAMR tender, it shifted, I would say, from Q1 to later in the year in 26. And we're expecting roughly about 10 million GACC orders in Q1 of 26, which was smaller than expected. But that is excluded from our 26 guide. I think in the abundance of caution, we're excluding it from the 26 guide. So if anything comes in on that side, it will be upside. And I will say that we have a very strong track record and a win rate with stimulus in China, winning 50% of the first round tenders. So we're seeing how the year plans out and staying very close to our customers on that.

That's helpful. Then maybe my follow-up on margins, gross margins is a little light in Q4. What do you see for gross margins in fiscal 26? Should we see gross margin expansion? Could you just quantify what is tariff versus FX dynamics on gross margins?

Rodney, you want to take this one?

Yeah, I'll take this one. So we're not guiding gross margins, but we should see gross margin expansion. Again, from a tariff standpoint, we do think we'll be fully mitigated on tariffs in the second half, and that'll be a mix of both pricing and cost reduction activities. So that in itself will be helping help the margin picture along with pricing and leverage. The other thing that was an impact for this year has been BioVectra. Now that that's been annualized, it won't be necessarily the impact, a drag to the gross margin line.

Thank you.

Our next question will come from the line of Jack Meehan with Nefron Research. Please go ahead.

Thank you. Good afternoon. I had a couple of questions, just wanted to unpack some of the competitive dynamics going on in the LC business. So the first one is in LDG, there were a few stats thrown around. I think I heard double digit growth in the second half for LC, LC-MS instruments. What was the fourth quarter number? Was it also double digit? And I heard the pharma data point. Can you just talk about how that business is doing in some of the other end markets?

Yes, so in the fourth quarter, we saw low double-digit growth in LC and actually mid-teens growth in LC-MS, so a very strong performance. And as we talked about the replacement cycle before, we're in the early innings of a replacement cycle and that's accelerating with a lot of adoption of the Infinity Tree, some initial purchases a number of quarters ago and customers coming back for more on that one. I would say when you look at the independent market share data, we're gaining share in both those areas. So that's very good to see as we as we go forward on it. And I would say overall, it's the new innovation, but execution by the team, but also an improving pharma sentiment, particularly with having reduced uncertainty around the MFN and tariffs. The other thing that we're really seeing in pharma across the globe is reshoring is not just happening in the US, but supply chains are being consolidated in different geographies. People are looking for capacity expansion.

uh we're the benefactor of that in qaqc downstream testing and that will continue i think throughout the year and of course as reshoring comes on online in 27 but i don't know if you want to add any more color on that simon yeah i think you covered pharma really well porig a few other key and markets mid single digit growth in food we saw declines in academia and government consistent with what we've been seeing elsewhere environmental and forensics was growth in the 20s And again, in terms of the growth drivers, all the key things that we've talked about already, the continuing traction we see with infinity three is just phenomenal. Likewise, the pro IQ market acceptance is really terrific. And in terms of replacement cycle, we still see that we're kind of early to mid inning here. I think we've knocked off the lowest hanging fruit, but as we continue to iterate the productivity features of our lab assist,

software we see that the infinity 3 value proposition will continue to be very strong and we think there's still plenty more legs left in that our next question will come from the line of den brennan with td cowan please go ahead great thank you uh thanks for the questions i think that's in the quarter um maybe poor access when you think about the guide for 26 at a high level of four to six percent you've given a lot of color on segments and customers but if you zoom out I think you finished this year around 5%. The guide next year incorporates that at the midpoint again. And you've discussed a lot of momentum building. So do you feel like the guide fairly balances the puts and takes around the globe? Or do you think there's some conservatism more so baked in? Just can you give a sense on kind of the overall kind of four to six guide?

Yeah, so I think first of all, we're set up for success really by innovative products coming online. The ones that have come online are unified sales and service, connection with the customers, the winning team and Ignite wrapping together. So as you said, we have good momentum coming out of the year. Key markets are improving. The top line four to six is prudent, but I think is appropriate given macro uncertainty. And of course, we're coming into some tougher compares. And I would say, if you look at the high end of our guides, If you see the expecting of biopharma recovery to continue and broaden, that's going to be positive. As I said before, the China stimulus is not in the guide, so that would be positive as well. And we're making investments in the business, right? So we've invested a lot in the business and we're going to continue to do that, particularly in innovation as digital as Adam talked about. So, you know, but we want to see small to mid-sized cap biotechs to continue to improve. We're seeing the early shoots on that one. And of course, A&G is academia and government is an area that we're watching. We want to see that stabilize and relative to our current expectations of a low single digit decline. So overall, when you put it together, strong momentum come out of 25. And in 26, we're watching the different portions of it.

Great, thanks for that. And then maybe just one on the GC upgrade cycle. Just, you know, your 10% growth in the quarter overall, which was solid, I think you said mid single digit for 26. And you gave some color. Is there any more color on the upgrade cycle as it's progressing versus expectations? Is it rateable in 26? What's kind of assumed on that front? Thank you.

Yeah, no, thanks. I'm going to start off and hand over to Mike here in the room. So first of all, I think we had high single-digit growth in GC, which was really great. We talked in the last quarter about the start of a GC replacement cycle, which is generally a longer replacement cycle than LC. But Mike, do you want to give some color on the replacement cycle?

Yeah, Porek. First of all, thank you, Dan, for your question. The replacement cycle for the GC and the GC-MS is very important for us. And here's what we've seen. First of all, I think the cycle is being normalized. It was under pressure for the last few years because of the global challenges and uncertainty, but we've seen the pace is coming back and normalized. That's number one. Number two, I just want to let you know we are the market leader. We have built a very large install base, and as you can imagine, it's actually aging, and we have a lot of independent demand, which will create a sustainable tailwind for us in the coming year. Last thing I want to highlight, now under Ignite Transformation, we accelerate our innovation. So very excited about the new product coming out, and that it will further sustain this revenue cycle. So in short, I think there are big opportunities, and the cycle is being normalized, and we have tremendous innovation coming our way to sustain it.

Great. Thank you.

Our next question will come from the line of Michael Riskin with B of A. Please go ahead.

Great. Thanks for taking the question. Maybe first one on tax rate. You talked about the higher tax rate for 2026, talking about global tax. Just curious, you know, we've been talking about tax rate potentially drifting higher for a while. It seems like it's a pretty big jump this year. Is this something new that's developed recently, or is this just sort of the same global tax, because we've been talking about it for a while, and then just any potential to offset that as you go through the year? Just how do we think about that going forward?

Yeah, thanks Michael for the question. I'm going to hand this one over to Adam for some commentary.

Sure and thanks. So our tax rates increasing 250 point basis points and it's really driven by a combination of things that you know they take time to come together and now they have one of them is pillar two. The other is OB3 and then there's other jurisdictional changes. And so as we've kind of put them together in our tax provision, we've we've now solidified on this 250 basis point increase. I would, you know, as you think about it going forward, you know, we have no information that this would change meaningfully going forward. But the thing I want to highlight and point out is that we're more than offsetting this incremental tax burden, and that's really through operating performance above the line. And so we'll continue to seek ways to further mitigate the P&L impact via IGNITE in our global network strategy. So if you think about the business, being able to offset such an impact below the line above the line is really something that gives me a lot of confidence in this organization and shows the agility of the organization to navigate uncertainty.

Okay. Thanks. And then for the follow-up, I want to touch on M&A and capital deployment. Patrick, you talked about the health of the balance sheet and maybe looking to do a couple more deals, bolsters from the portfolio. Could you just talk about what the deal funnel looks like now, appetite for deploying cash next year, what kind of deals you're looking at in terms of size and any specific areas you're focused on? Thanks.

Yeah, so I'm going to start off and then hand over to Adam here. So our capital allocation priorities are not changing. And if you think about M&A, you know, we have capacity to do M&A, but we're going to remain very disciplined, linked with our strategy. And we don't talk really about size. We talk about fit and shareholder return and M&A, about how it's going to drive us forward. What I will say about our M&A target list, it's a shorter, very high quality list that we continue to develop. And, of course, we continue to keep everybody updated as we go through the year, and we're looking for growth opportunities where we have a right to win. And, of course, the BioVector integration, having been such a great integration this year, bodes extremely well for the future.

But, Adam, do you want to give some broader capital allocation color? Sure. Thank you. So our capital allocation priorities aren't changing, as Parag said, and I think that's very important. We're going to continue to invest in innovation, as you hear in our guide. We're going to... use our balance sheet to invest in M&A, and then make strategic capacity expansion. The other piece I'd highlight is we're going to continue to return excess capital to shareholders, as you see in our guide as well. And then the one note I would highlight in addition to what Poreg said about remaining disciplined, it's about the right opportunity. It's about making sure we understand the value drivers and how we can maximize on those. Then it comes down to making sure that we pay the right price so that we're disciplined about price And then focusing on integration up front. In my experience, I've lived through integrations, and the best are those that you plan for up front, and it's not an afterthought, and I can assure you it won't be here. The Ignite operating system, as I've dug into it, gives me a lot of confidence. And then, as Poreg said, the recent experience with BioVectra gives me more confidence. So I think we're ready to go, and you should expect to see consistency with what we've said on our capital allocation priorities.

Regina, to help us get to as many analysts as possible, could we please limit it to one question per analyst for the remainder of the call?

Our next question will come from the line of Dan Arias with Stifel. Please go ahead.

Thanks for the questions. Borg, you mentioned upside potential for the Omni franchise. Is that more of a placement comment or a pull-through comment? Where do you think the opportunity is strongest there?

Thanks. On the Omnus, yeah, so I'm going to hand it over to Simon for some colour on the Omnus franchise.

yeah it's a bit of both we've recently launched the omnis family and we've been very happy with the uptake from those systems and if we look year over year across the entire on this instruments franchise we've seen double digit growth in instrument placements we're also focused on menu expansion that's a key product development initiative here over the next 12 to 24 months and i think we're going to see momentum from both of those we see momentum already on the instrument placements so i think it bodes well for the future we talked a few times about this franchise now how we see really durable mid-high single-digit growth through a combination of these portfolio investments but also the very strong macros that underpin this business with aging populations cancer incidents and so on not to mention the emerging therapeutics does supporting diagnosis and therapy guidance so we put all that together and we're bullish about the future

Our next question will come from the line of Casey Woodring with JP Morgan. Please go ahead.

Awesome. Thanks for fitting me in, guys. Appreciate it. I guess within pharma in the quarter, excluding the CDMO, could you break down the large molecule versus small molecule growth? You know, last quarter you talked about you did biopharma spend, XNASD. Sounds like that got a lot better this quarter, specifically in biotech. And then, you know, maybe what's factored into the guide for large molecule versus small molecule in 2026, excluding the CDMO? Thanks.

Yeah, so I think we saw growth on both sides. I would say, you know, we were equally placed, both large molecule was about 10% growth, small molecule in around the same growth rate. It's roughly a 50% split for adjutant. We saw that in the quarter. We expect that to continue.

Our next question will come from the line of Catherine Schulte with Baird. Please go ahead.

Hey guys, thanks for the question. I guess I'll ask the annual Lunar New Year timing question. I think that was a two-point headwind in the first quarter last year, but it's back to falling in February this year. So if we think about the 4% to 6% guide for 1Q, does that mean more like 2% to 4% ex-Lunar New Year? And if so, what's kind of driving that sequential flow down there? Thanks.

Yeah, so I think, you know, if you look at our Q1 guide, we're assuming low single digits growth for China on a reduced stimulus volume. That's about a negative 700 basis point year over year impact. And that's offset by the favorable lunar year timing, which is about 800 basis points. But the Q2 will be, I would say, meaningfully impacted by lunar new year timing and I would say a tougher comp. But overall, I think it balances out over those quarters.

Our next question comes from the line of Luke Sirgod with Barclays. Please go ahead.

Great. Thanks for squeezing me in. I just want to follow up on Donnelly's question earlier in the call about, and you guys were talking about keeping the flywheel going and investing back in R&D as the top line continues to accelerate or be strong. After you're pretty much done, you guys had a pretty big launch here across many different platforms. So give us an update. Where are you looking to deploy that R&D? What are the new high growth areas that you guys would like to be bigger in? Or is this just kind of updating parts of the portfolio that have been underinvested?

Yeah, what I would say is that we have, you know, a very key innovation focus with our new CTO August. And what we're looking at is really looking at our portfolio of innovation across the company. We simplified the company structure where we went from, you know, about 20 product lines to nine. So ability to get the right innovation dollars into the right place is much clearer and faster now. So what you're going to see is that you're going to see that in a number of platform launches over the next year, next coming years, but also areas where we need to accelerate in certain areas like oligos, GLP-1s and workflows around that side. And I would say software is a key area for us. It's an area where we have a lot of focus across the company in the ACG group. We're going to be asymmetrically investing in our software products and also making sure we have the right software for particular workflows. So overall, I would say it's a refocusing, but a very agile refocusing of our R&D dollars.

Hey, everyone.

Go ahead, Regina.

I'll turn the call back to you, Tejas.

Thank you. Thanks, everyone, for joining us, and happy holidays and happy Thanksgiving.

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