Agilent Technologies, Inc. Q1 FY2026 Earnings Call

Ladies and gentlemen, thank you for joining us and welcome to the Q1 2026 Agilent Technologies Inc. earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. I will now hand the conference over to Tejas Savant, Vice President, Investor Relations. Tejas, please go ahead.

Thank you and welcome, everyone, to Agilent's conference call for the first quarter of fiscal year 2026. With me on the line are CEO, Parik McDonnell, and CFO, Adam Elenoff. Joining for the Q&A will be Simon May, president of the Life Sciences and Diagnostics Markets Group, Angelika Ryman, president of the Agilent CrossLab Group, and Mike Zeng, president of the Applied Markets Group. This presentation is being webcast live. The press release for our first 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.agilan.com. Today's comments will refer to non-GAAP financial measures. Non-GAAP measures are supplemental and should not be considered a substitute for GAAP results. You'll find the most directly comparable GAAP financial metrics and reconciliations in the press release and 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. All references to profitability metrics are on a non-GAAP 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 refer to the company's recent SEC filings for a more detailed description of the risks and other factors that would cause our performance to differ from these forward-looking statements. And now, I'd like to turn the call over to Parikh.

Thanks, Tejas, and welcome, everyone. It was a solid start to the year with the Agilent team executing well in a generally improving, albeit dynamic, market environment. For the first quarter, Agilent reported $1.8 billion in revenue, growing 4.4% on a core basis within our November guidance range. End market conditions were largely consistent with our expectations, with top-line results affected by the winter storm in the US during the last week of January. The storm drove roughly a 10 million dollar revenue impact with the majority recovered at the beginning of february the impact primarily came from our logistic providers not being able to ship products from our main america logistics center in memphis tennessee for three days this is typically the busiest shipping week of the quarter despite the weather operating margins of 24.6 were in line with our expectations setting a solid jumping off point for the remainder of the fiscal year moving forward we anticipate benefiting from leverage on increasing volumes and we expect to see tariff headwinds continuing to decrease as well as incremental benefits from our ignite operating system that together will drive sequential margin improvements throughout the rest of the year first quarter eps of 1.36 also was within expectations adjusted for the impact of the storm our first quarter revenue operating margin and eps all would have been above the midpoint of our November guidance ranges, a healthy underlying outcome. Throughout the quarter, the Agilent team remained as always committed to delivering for our customers. Before getting into the specifics of our first quarter results, I want to share my thoughts on three key business initiatives that are fueling our growth. These include our highly differentiated service organization that reinforces our customer intimacy, a theme you've heard me talk about frequently, an update on recent innovations and finally how the ignite operating system continues to drive agile's transformation i want to start by talking about our differentiated customer intimacy last quarter i highlighted our field service engineers outsized contribution to our deal funnel and conversion rates this time i want to focus on our enterprise services business where we had several marquee customer wins with major pharma accounts our enterprise services offerings allow us to cement our extraordinary customer intimacy and is a key strategic differentiator for Agilent that unlocks significant downstream value. This business represents roughly 10% of our total services revenue today and has grown nicely at a low double-digit CAGR. Beyond a direct revenue contribution, the relationship we build with our customer creates tremendous long-term value for Agilent and uniquely position us to gain wallet share over time. The offering includes embedding our expert on-site support technicians in customer sites and leveraging digital capabilities through CrossLab Connect that provide monitoring, alerting, and performance analytics. This allows us to gain unique insights and visibility into lab operations and critically deliver improved efficiency and economics for our customer labs. These successful outcomes position us as a trusted partner, one customers can count on to provide critical data and insights that inform their future technology needs and instrument purchasing decisions. We have agreements with nearly all of the top 20 biopharma companies. In addition, we've won 18 competitive displacements across our end markets over the past three years. Early customer feedback from a recent marquee win reinforces the value of having our specialists on site, including faster response times, improved parts availability, and better advice in consumable and system usage. The insights that we gain from our leading services team are a key success factor in driving customer-focused innovation that underpins durable long-term growth at above market rates. I want to highlight seven recent examples that are resonating particularly well with our customers starting with our altura ultra inert column portfolio in october we launched our first altura column to support biopharma workflows including glp ones already 50 of the top 20 biopharma companies have ordered these columns since we launched and altura has more than doubled our bio column growth to over 30 percent a testament to the altura's compelling performance just last month we launched our next column in Altura family focused on improving PFAS workflows. These columns are specifically developed to solve key workflow challenges and address new EU regulations, plus the double throughput for customers by enabling separation of both short and long chain PFAS in a single workflow. The launch is off to an excellent start with strong demand out of the gate and extremely positive customer feedback versus competitor offerings. You can expect continued expansion of the Altura family for new use cases later this year and beyond. Next I want to highlight the ProIQ LC-MS which continues to build momentum since its midsummer launch. We're seeing a robust uptake with growth of our single quad family exceeding 40% in a quarter. The value proposition of an advanced single quad LC-MS with expanded mass range is resonating and is particularly compelling for pharma customers who are transitioning from small molecule to biologics and monoclonal antibodies. Our cancer diagnostics business also is innovating to meet customer needs. Last quarter, I talked about the expansion of our most advanced automated platform, Omnis, to a broader set of customers. This launch is off to a very strong start, offering medium-throughput labs access to the latest technology with attractive economics. Also within cancer diagnostics is our new S540MD slide scanner system, which we announced in late January as part of our continued effort to enable the latest digital tools for our cancer-diagnostic customers. Finally, early in the quarter, our market-leading spectroscopy business announced the release of our RAM and Insight BRT series alarm resolution system. The new system offers next-generation throughput and sensitivity to hand safety and streamline operations at April's security checkpoints. This new instrument helped secure a $9 million dollar TSA contract during the quarter, and we are confident that we are well positioned to win larger aviation security tenders in the coming years. The last topic I want to focus on is our Ignite operating system. As you know, we launched Ignite at the beginning of 2025 to drive execution excellence, accelerate decision making, and unlock the full value of Agilent as an integrated enterprise. Over the past year, Ignite has evolved into our enterprise operating system, a core differentiator that aligns strategy resources and accountability to drive sustainable growth margin expansion and long-term shareholder value ignite has already delivered clear financial results in its first 12 months including doubling our pricing realization generating substantial procurement savings simplifying our organizational structure and launching our tariff mitigation program also ignite demonstrated its effectiveness in mna execution through the successful bio vector integration establishing a repeatable playbook to accelerate value capture in future transactions in this fourth quarter alone ignite delivered nearly 200 basis points of pricing continued tariff expense reductions and a very successful launch of our new agilent.com website that helped drive growth in digital orders at more than two times of our overall order book looking ahead to the remainder of fy26 we are expanding ignite into new value creation work streams and leveraging a portion of savings to reinvest in the business these work streams include increasing returns and innovation investments by improving speed to market advancing digital and e-commerce capability to enhance commercial productivity and applying targeted artificial intelligence initiatives with clear roi to enhance customer insights automate routine work and compress manufacturing cycle times we are also accelerating software development and enhancing our supply chain capabilities by executing no regret investments that improve efficiency resilience and proximity to customers in an evolving geopolitical environment now let me share some additional details about our q1 results starting with our end markets the improvement that we saw in our end markets across last year was generally maintained throughout the first quarter overall we are seeing underlying momentum in our markets Importantly, secular trends in our largest end markets remain on a strong footing. That includes reshoring of pharma and semiconductor manufacturing, GLP-1 uptake and LC and GC instrument replacement cycles. Pharma growth was 7% in line with our expectations, with double-digit growth in the biotech space supported by increased funding and M&A activity late in the calendar year. Mid-single-digit small molecule growth was also solid, showing continued momentum from 2025. The quarter saw a modest benefit from continued normalization in the calendar year-end budget flush in line with our expectations. We delivered excellent GLP-1 growth of 50% with healthy contributions coming from our specialty CDMO as well as our analytical lab business. Our specialty CDMO business grew low double digits during the quarter and we continue to expect mid-teens growth for the year. We saw continued strength in chemicals and advanced materials market the nine percent growth in cam was above our expectations with exceptional strength on the material side of the business with growth more than 20 percent this strong result in advanced materials demonstrates our leadership in providing solutions for the top semiconductor manufacturers globally the current shortage of memory chips and a global effort to achieve semiconductor supply chain independence has driven investment by these firms in our leading atomic spectroscopy tools. With support from the recent Omnus family launch, the diagnostics and clinical business continued to perform well, growing at 7% again this quarter. Environmental forensics was flat, with continued softness in government funding in the US and China offset by growth in the rest of Asia and Europe. In Q1, the food business declined 4%, which outperformed their expectations with strong low double-digit growth ex-China. As a reminder, the food market was the primary beneficiary of the large China stimulus that boosted growth in the first quarter of FY25. And finally, academia and government, our smallest market, was down 8%, more than expected in the quarter. Academia and government conditions in the U.S. continue to be soft, with customers using available funding to keep their labs running as opposed to investing in new capital equipment. Excluding academia and government, our instruments grew at a healthy mid-single digit rate. Our instrument booked to bill has now been at or above one for the eighth consecutive quarter. The Infinity Tree HPLC continues to delight our customers. The LC instrument replacement cycle momentum built by our differentiated Infinity Tree system during FY25 continued through the first quarter of FY26 and with LC growth in the high single digits we are gaining share globally versus our competition. On the DC side of the replacement cycle we saw low single digit growth a strong result considering the tough year-over-year compare from significant volumes associated with last year's Chinese stimulus. Ex-China GC instrument growth was mid single digits in line with our expectations of around 100 basis points of lift during the GC replacement cycle. And even with these strong results the upside from pharma reassuring has yet to impact our numbers. We're seeing increased activity in in US-based pharmaceutical manufacturing as companies rethink resilience and capacity. Based on announced investments and recent customer activity, we estimate this will represent a billion-dollar addressable market opportunity through 2030. We continue to expect the first orders from reshoring to book late this year, and the revenue impact from those orders to bolster top-line growth in FY27 and beyond. As we look to the rest of the year, our priorities remain unchanged. advance or ignite operating system further enhance commercial execution and capture opportunities from improving end markets innovative new products and a multi-pronged replacement cycle with a solid start to the year and the outlook for end markets broadly consistent with our original expectations we are maintaining our expected core growth range of four to six percent for the full year we now expect between five dollars and ninety cents and six dollars and four cents of earnings per share in FY26, with a four cent increase due to favorable currency impact. For Q2, early trends are encouraging, and we are expecting core growth of approximately 4 to 5.5%, which includes a majority of the $10 million storm impact from late in the first quarter. EPS is expected to be between $1.39 and $1.42, representing a seven percent growth at the midpoint of our range we remain highly disciplined around capital deployment investing for organic growth through innovation and capacity expansion simultaneously we are focused on emanate targets that are both a strategic fit and financially attractive now let me hand it over to adam who will provide details on the quarter and our financial outlook

thanks porig and good afternoon everyone in my comments today i will provide additional details on revenue in the quarter, as well as walk through the income statement and cover other key financial metrics. I'll then cover our updated full year and second quarter guidance. Starting with Q1, revenue was $1.8 billion. On a core basis, we posted growth of 4.4 percent, while reported growth was 7 percent. Currency had a favorable impact of 2.6 percent, in line with our November guidance. At a business segment level, ACG grew six percent. That's in line with expectations, driven by strong consumables growth in the high single digits, solid performance in services, and balanced growth globally with all regions growing mid-single digits or better. AMG grew four percent ahead of expectations. Growth was led by double-digit performance in spectroscopy, fueled by the excellent results in the semiconductor space that Porig mentioned earlier. LDG grew 3%, a bit below expectations. In addition to the weather impact, we saw softness in academia and government that challenged our cell analysis and genomics results. On a geographic basis, we saw our strongest growth in Asia, with China growing 6%, and the rest of Asia growing a robust 13%. Europe was a bit slower than expected, with 4% growth as transient discussions around on higher tariffs caused some customers to slow purchasing decisions late in the quarter. America's growth of 1% was directly impacted by the weather, as well as pockets of softness in our smaller end markets. Q1 gross margin for 53.7%. On a year-over-year basis, they were down by 100 basis points, primarily due to tariff headwinds. Operating margin was 24.6%, in line with our expectations, and down 50 basis points year-over-year on increased tariff expenses and normalized performance-based pay in the current year. Now, moving below the line, we had $10 million of other income, while our tax rate was 14.5% as expected. Finally, we had 284 million diluted shares outstanding in the quarter, slightly better than expected with some incremental share repurchases during the quarter. Putting it all together, Q1 earnings per share were $1.36 and grew 4%. percent. Adjusted for the weather, we would have been above the midpoint of our first quarter guidance range. We are confident we will see improved earnings growth through the remainder of the year, driven by improving volumes and easier tariff and performance-based pay compares. Now let me turn to cash flow and balance sheet. Operating cash flow was $268 million in the quarter, and we invested $93 million in capital expenditures. We purchased $152 million in shares and paid $72 million in dividends during the quarter. And we ended the quarter with a net leverage ratio of 0.8 turns, maintaining our strong balance sheet. Now let me share some additional details on the updated outlook for the year and the guidance for our second quarter. Because of changes in FX, we now expect fiscal year 26 revenue to be in the range of $7.3 to $7.5 billion on a reported basis. This continues to represent growth of 4% to 6% on a core basis, as currency is now expected to be a 1.5% tailwind during the year. This revenue guidance embeds full-year business segment, end market, and geographic growth assumptions that are consistent with what we shared in November. Our largest end markets, pharma, CAM, and diagnostics and clinical, are all off to a strong start. Across our smaller end markets, we saw some pockets of softness relative to our expectations in the first quarter, especially in our cell analysis business where academic customer budgets are most heavily indexed to government funding. Going forward, we continue to expect low single-digit full-year decline in academia and government, flat performance in food, and low single-digit growth in environmental and forensics, partially helped by easier comps for the remainder of the year. Moving down the P&L, we continue to expect to deliver 75 basis points of operating margin expansion at the midpoint. And while we continue to evaluate the evolving tariff situation in light of recent developments, this guide does not incorporate material changes in tariff rates relative to our view at the start of the year. While we still await the details, we do not expect a meaningful change to our outlook based on the high-level proposals that have been discussed. Our expected tax rate for fiscal year 26 is unchanged at 14.5%. We also expect $22 million of other income and 283 million diluted shares outstanding for the year. Fiscal year non-gap earnings per share are now expected to be between $5.90 and $6.04, representing earnings growth of 5.5 to 8%, with the 4 cent increase due to a favorable currency outlook versus our original guide. For your modeling, let me share some additional expectations we have incorporated into our guidance for the year. We continue to expect pricing growth of at least 100 basis points, supported by Ignite. Although the tariff situation is evolving, we expect a fully offset tariff impact over the course of the year through a combination of cost-saving and pricing actions. The tariff dynamics will drive a modestly more than typical sequential improvement in operating margin over the course of the year. As we have said before, this translates into a slight second half weighting on operating profit and EPS versus what we typically see. There is no change for operating cash flow range of $1.6 to $1.7 billion, and we are still expecting to invest approximately $500 million in capital expenditures. Now moving to the second quarter, we expect our reported revenue to be in the range of $1.79 to $1.82 billion. This represents growth of roughly 4% to 5.5% on a core basis, while currency is expected to be approximately a 3% tailwind. This outlook includes weather-delayed revenue from Q1. It also assumes our academia and government end market declines in the mid-single digits in Q2. We expect our operating margin to improve by approximately 100 basis points relative to the first quarter. Our guide assumes 283 million diluted shares outstanding in the second quarter. Second quarter EPS guidance is $1.39 to $1.42, representing growth of 6% to 8%. With that, I'll turn the call back over to Porig for closing comments.

we are well positioned to benefit from the instrument replacement cycle and continuing recovery across our largest end markets to win share and deliver resilient above pure growth and margin performance over the long term i also wanted to take this opportunity to express my gratitude to the agilent team for their exceptional efforts throughout the quarter i especially want to recognize our global operations and logistics colleagues who worked tirelessly to meet the challenges presented by the weather and deliver for our customers thank you for your attention and turn it back over to Tejas for Q&A. Tejas? Thanks, Parag.

Nicole, can you please share the instructions for the Q&A?

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tycho Peterson with Jeffries. Your line is open. Please go ahead.

Yeah, hi. This is Jack on for Tycho. Thanks for the question. Just wanted to walk through the impact of the snowstorm and expectations for catch-up there. Appreciate you said $10 million in revenues. Just curious if that's already in hand for 2Q or something that's still being recouped. And then, you know, any color on margin impact that would have had in the quarter, you know, gross margins and operating. if it would have been without the snowstorm. Thanks. Yeah. So I'll start off and I'll hand

it over to Adam. So first of all, you know, a really solid finish overall with a 4.4% growth and high single digits in our tree markets. But Adam, can you give some color around the weather?

Yeah. So thanks. And I'd first like to say, I didn't think I'd be on this call talking about the weather. So it's always fun to do that. So when you think about the impact of the weather, we said it was about $10 million. We've already seen that come back or the majority of it. There's some pieces of it that will take a little longer and that's really related to services and things like that that don't happen instantly so we've already recovered the vast majority of it then to your second question related to margin it would have been a very modest impact to margin so what what we delivered in the quarter was a region reasonable proxy for what we actually uh the

actual performance okay that's helpful um and then sticking on margin um appreciate you still guiding the 75 bits for the year can just give a little bit more color on the cadence from here in the bridge to that improvement after being down a little bit in 1Q? I think you said slight second half waiting. I guess there's what's baked in for 2Q versus the second half. And then what do you see as the biggest swing factors to that step up? Thanks. Yeah, so I'll take this one. So

from a year over year basis, we expect the second quarter to be a 50 basis point improvement. And that's really driven by pricing, volume, and then ignite savings. And then that's offset by performance-based pay and once again, the tariffs. And as you know, the tariffs, or as we've talked about, the tariffs are fully mitigated by the second half of the year. Then when you move through the rest of the year, that's where you start to see the acceleration in our margin expansion. And then that's driven by continued volume and leverage, volume leverage, pricing in Ignite. And then it's slightly offset by some of the people costs and growth investments that

we're making through the year. Your next question comes from the line of Vijay Kumar with Evercore or ISI. Your line is open. Please go ahead. Hey, guys. Thank you for taking my question.

Maybe, Porik, my first one, high level, when I look at, you know, this cadence for the year rate, first half versus back half, your guidance for first half implies, you know, slightly less than five and back half, hit the midpoint, you know, needs to be above five. Can you just talk about what drives the back half step up, comps to get tougher? Is this some new product cycles or is Is there something else that's going on in the business that gives us this back half visibility?

Yeah, I mean, the underlying, we see a really strong underlying momentum in our businesses and our key biggest markets. You can see that in pharma where, you know, driven by GLP-1s, but also the replacement cycle going extremely well. You see our infinity tree number growing in double digits, I think. And we're seeing from our latest market share report that we're taking oversized share in that area. And then, of course, you can go down through our cam markets as well, where you can see a lot of secular drivers. We grew 20% in advanced materials from the semiconductor onshoring and so on. So underlying momentum in the markets, we have very good visibility in funnels. We're seeing very strong wind loss rates. And, of course, we're going to watch that as we go forward. But we see that continued momentum to improve.

And then I would just jump in. The step up between the first half and the second half isn't that big. It's really 49 in the first half and then 51 in the second half on revenue.

Maybe one on tariffs, just given the Supreme Court ruling. How are you thinking about the tariff assumptions rate? Are you assuming now a global minimum of 15% and how does that change versus your prior assumptions?

I don't want to give this one to you. So I guess the first thing is, one, the situation continues to be dynamic. And, you know, we don't know that much information about what the 15% would look like and exactly how it's going to play out. But if you assume that the 15% is on the surface, what it says across all different markets, what I would say is we wouldn't change our guide on it. And it really comes down to a couple of things. One, we made a series of no-regret moves, and that was really about leveraging our supply chain, bringing our manufacturing closest to the customer. So that wouldn't change. The second is we've been utilizing pricing and surcharges, you know, really as appropriate and been very thoughtful about that. So that also helps us. And I guess the third piece I would add is in any dynamic market and any dynamic market conditions, as you see and we're living in. What gives me a confidence is I look at how the Ignite operating system has been able to allow us to react and be resilient as things change. So right now, we wouldn't change any of our guide based on what we know. That said, we're ready to react and we're ready to respond as things evolve.

And I would just close it off by saying the actions we've taken to bring manufacturing close to our customers and strengthen supply chains are no regrets moves. We have that planned for a long time now. And outside of storage charges, we would not expect to reverse them in any way.

Your next question comes from the line of Doug Schengel with Wolf Research. Your line is open. Please go ahead.

Good afternoon, guys, and thank you for taking my questions. Two topics I wanted to address. One is the capital equipment environment, and then the second is M&A. So on the first topic, how would you describe demand month by month going back to, you know, say November and December and through the beginning of the calendar year? I ask because some of your peers have suggested that demand may have slowed a bit over the past several weeks, and I'm just trying to get at whether or not this is just kind of normal, typical seasonality, or if there's anything you're seeing from an environmental standpoint, meaning uncertainty related to things from a policy dynamic that are flaring up again and slowing things down, or again, whether this is just kind of normally what you would see going from calendar Q4 to calendar Q1. And the second question is, our second topic is really on M&A and simply put, how would you describe the environment, your readiness and your appetite to do a multi-billion dollar

Thanks, Doug. I'll take the first one and Adam can take the second one. So if you look at a proxy of pharma and you look at our replacement cycle, we had a very strong quarter, Biotech led that business. And of course, what we saw was a reasonable budget flush. It wasn't over-the-top budget flush, but a reasonable budget flush at the end of December. I think January, you saw, we talked about some of the disruption we saw intra-quarter in Europe, for example, and the weather impact. But I would say it's been very, very steady. You know, we've seen our funnels continue to be steady in a lot of cases growing. And why is that? I think CapEx conditions continue to improve with the MFN deals reducing the tariff uncertainty. That's been very big for our farmer customers. You see the strong GLP-1 growth and our CDMO, you know, the base in CDMO growing extremely well. And I think, you know, we're very pleased to see how the trajectory of orders continue to go on the CapEx side. Now, of course, we're watching our funnels as we go forward on it. So I wouldn't say there's anything that we see any deterioration in terms of CapEx. So the capital allocation, which is a big question, I'm sure we get it a few times today. I'm going to get Adam to answer that one.

So thanks for the question. And I think it's important that we always start with our capital allocation priorities, which aren't changing. So, one, we're prioritizing investments in growth, and that's through innovation, internal innovation. Second thing is M&A, and the third is investments in strategic capacity expansion. And at the same time, we're going to continue to return excess capital to shareholders, and that's through a growing dividend in share repurchases. The next thing I want to say as context is we like our organic business and we like our plan. We don't need to do any transformative deals or any transformative transactions to achieve those growth ambitions. Now, we don't have any arbitrary size filter on our deal funnel, but I want to be very, very, very deliberate about this. The bar is very high for a transformative deal, and there aren't that many of those out there. So we're really focused on making sure that any deal that we do is aligned to our enterprise pillars, that we're focused on opportunities where we have a right to win, where we're able to integrate whatever asset we're buying and that we pay the right price for it so that we're generating cash-on-cash returns above our hurdle rate. So, you know, we think the market out there, there's some nice opportunities and we're continuing to evaluate those, but we're looking at them against the filter that I just said. And once again, you know, we like our organic business and we don't need to do any kind of transformative transaction to achieve our ambitions.

Thank you again.

Your next question comes from the line of Patrick Donnelly with Citi. Your line is open. Please go ahead. Hey, guys. Thank you for taking the questions.

Porig, I want to focus on the LDG segment. I understand the weather impact. It did come in light, even backing that out. It sounds like it's around the cell analysis and genomics piece, maybe some softer purchasing in Europe. It does sound like LCMS and the CDMO overall held it well. Can you just expand on what you saw there? And then also staying in the LDG segment, just the profitability probably for Adam. What drove the softness there? Is that just mixed with the cell analysis want to get a little more color there yeah thanks patrick and i think

you know ldg grew three percent of the quarter was a bit below our our mid mid to high digit expectations and i think in addition to the weather impact we saw softness i think in academia and government uh that challenged our cell analysis and genomics business um but our larger end markets you know pharma biotech and diagnosis group grew high single digits but uh simon do you want to of some more colour on the LDG, what you saw in the quarter, particularly on those businesses?

Yeah, thanks, Parig. As Parig already mentioned there, we were challenged by the weather situation and also the ongoing softness that we're seeing in academic research markets, most notably in the US. And in our sell analysis portfolio as well, we've got a relatively lower portion of recurring revenue mix than we have elsewhere in our portfolio. And we've got a bit more exposure on the smaller capital equipment side there. So as we think about the macro situation going forward, the exposure to academic and government is always going to be there. And we still see a lot of cautious spending, but we also think we've got reasons to believe we're at or near the bottom. US academic science budgets appear to be plateauing. Europe is more stable. I think we're anticipating some modest incremental improvement in academia and government in Europe. And also the feedback I've been getting from the teams as I've been seeing customers and attending the sales meetings over the past few weeks is that there's a sense of optimism in the field. We've got a strong portfolio. We've got very strong conviction in the portfolio on a medium long-term basis. And I think we'll see that improvement begin to unfold as time passes.

The only thing I'd add on margin is beyond the weather, the academic and government softness is there's the CDMO batch cadence that also impacts the margin in the first quarter. With CDMO, obviously, a batch is not a batch is not a batch. They're all a little bit different and have different revenue profiles and different timing. So just given the cadence we had in Q1, that also impacted the margin.

Okay, that's helpful. And then, Adam, I wanted to pick up right there in terms of the CDMO. Can you guys just talk about NASD, BioVectra, what you saw in the quarter? It sounded like overall it was low double-digit growth to the specialty CDMO. Can you just give a bit more color? And again, it sounds like the mid-teens still very much on the table. So just the visibility and pacing of those businesses as we work our way forward. Thank you, guys.

Yeah, so I'll start off and then I'll pass it over to Simon if he has anything to add. But yeah, absolutely. So we saw low double-digit growth in the first quarter as expected. And once again, it really is about the batch cadence. And it's the normal kind of quarter-over-quarter revenue variance that you'd expect. We continue to expect mid-teens growth for the full year. And that's based on our production schedule. and the demand dynamics we're currently seeing in the market. And I guess the only other thing I would add that may be helpful for you is our mix of business and NASD continues to skew toward larger commercial batches with about 60% coming from commercial programs. And then on the other hand, commercial programs represent about only one-third of the bio-vectoral revenue. So they have a little bit different profile. But, you know, we expect, based on what we have now, that it will continue to ramp through the year.

I think Adam covered most of it there. Just to add a couple of points, we did see strong year-over-year order intake in the first quarter. As Adam said, NASD continues to skew favorably towards commercial programs. And as we look to the rest of the year, we've got good visibility to the pipeline and we see revenue ramp in the second half of the year. Great. Thank you, guys.

Your next question comes from the line of Dan Brennan with TD Cowan. Your line is open. Please

go ahead. Great. Thank you. Maybe just to start off, you know, I understand if you back out the 10 million you know the growth would have been right in line with the five percent and you kind of walk through all the puts and takes but just kind of stepping back you guys have been on a pretty consistent pace of like coming in ahead of guidance uh five percent growth is so solid in this environment just wondering um how we might think about the rest of your guidance in terms of you know what would drive you to the higher end to lower end you know given that trend of you know consistently beating numbers and now it looks like more in line this quarter yeah yeah i think

I just talking at a high level, we're really set up for success, Dan. You know, you look at the innovative products really going extremely well, Infinity 3 and the replacement cycles, ProIQ, you know, the strong commercial team, you know, good connection with customers and our enterprise service capabilities that I talked about in my prepared remarks. And I think it was a solid Q1, an excellent, excellent growth despite the weather, you know, and a top line. We're confirming it. I think it's prudent, but appropriate, given the macro uncertainty that's around as always. And I think the operating profit growth of 10% and 75 bps margin expansion at the midpoint is really well. I have to say, you know, we've had a number of sales kickoffs around the globe in the last month. Funnels are very robust. The thing we've seen almost our best market share report that we've seen to date. So everything is moving in the right direction. So that gives us positivity as we go through the year. Got it. Thank you. Oh, go ahead. Sorry.

Sure. No, I can just give you a little bit more detail on what would be pushes to the upside versus pushes to the downside of the guide, if that's helpful. And it's really around three things. One is a pickup in the small and mid-cap biotech sector. All of the green shoots are still there, but then there's that time lag between, you know, how does all the incremental investment, IPOs and M&A, convert into actual spending and The second is academia and growth. If we start to see more stability there, that can push us to the upside. And then the third, while China remains stable, we believe it will be stable about that $300 million per quarter run rate. If there was a stimulus, a bigger stimulus toward the end of the year, that would be an upside. What I will say is there was a small stimulus in the first quarter, which we did very well in that offering. And so that would give us confidence if there was a second SAMR stimulus that happened later in the year, we would perform well in that. So that's what pushes us to the upside. The downside is just then the opposite. If small and mid-cap remain pressured, academia and government continues to get worse. And then China, we see decline in the low single-digit range versus our flat assumption.

And maybe a second one, just on CAM, obviously, super important business, really strong quarter. You gave some color, but just a little bit more there in terms of why it came in better. I know you addressed it in the prepared remarks, maybe a little bit more color and how you're thinking about that going forward for the rest of the year. Thank you.

yeah it's sometimes an underappreciated part of our business you know it's our core business our heritage is in the applied markets and cam you know nine percent growth uh and of course the advanced materials sub segment which grew at 20 percent we saw really robust demand and because of our our leading our leading position around the semiconductor you see there's a lot of reshoring going on on that i think our spectroscopy and our gcms tools are critical in that manufacturing supply chain, and of course, for chemical plants that are around helping on that. So the ongoing reshoring really helps in that space. And I think, you know, also the increased clarity on tariff policies, you know, if there is that in East US, China tensions, and, you know, strong demand for memory chips. And we're number one by a long way in the cam market by far, you know, our leadership positions and our market shares are unmatched than that. So you put it all together. It's a very important secular driver for us. And we could

see that continuing throughout the year. Your next question comes from the line of Dan Leonard

with UBS. Your line is open. Please go ahead. Thank you for taking the question. And I'll pick up right where you left off, Porig. Porig, you talked about atomic spectroscopy upside in the quarter due to the memory shortage. It's not something you talk about a lot. So how are you

framing that opportunity yeah i mean it's not just the memory shortage but it's the reshoring of fabrications fabs that you see that globally you know you even see in india where fabs are being set up also in asia and and the americas so i think that has been it's been really a mix of all that together and a lot of demand on that side also on the chemical side you know you have downstream processes that are needed for ai that supports that in terms of it and that really bolsters a lot of demand. And just to give a bit of color, our chemical business is about two thirds advanced materials, about one third of the cam business. So we expect that to continue to see that growing. And of course, the energy business where we're working on the battery side is naturally head against oil volatility as well. So we continue to see good strength in that. So

it's a mixture of all of the above. Thank you. And just to follow up on what you're seeing in pharma. You mentioned a mid-single-digit growth in small molecule. Is that all GLP-1s? And can you talk about the situation in pharma outside of GLP-1s? Yeah. So, you know, biotech kind of grew

low double-digit for us. That's really around, you know, our specialized CDMO core growth of low double-digits. What we see is the U.S. biotech recovery is starting in well-funded large caps. We see that continuing. Small and big caps. Improved funding backdrop is really, really helping is really helping and breaking it down you know if you look at our solid if you look at our small molecule business which is very solid at mid single digit growth you kind of see asia leading the way in small molecules with low double digit growth we see that continuing and of course we're very well hedged on the glp1 side both from our cdmo side but also our analytical side we were testing both on the orals and on the injectable side and as as we go forward on And then GLP grew at 50% in the quarter, and that was 7% for the analytical labs. And on the CDMO side, 120% growth. So I think, you know, you underpin all of that in the market conditions, and then you look at our replacement cycle moving forward, 40% growth in our single quad, which is right at the sweet spot of QAQC. So it's a really, really strong momentum in that market as we see that continuing for the rest of the year.

Your next question comes from the line of Michael Riskin with Bank of America. Your line is open. Please go ahead.

Hey, guys. Thanks for the question. I hope you can hear me. I want to follow up on what I think Patrick was asking about earlier about some of the moving pieces in the quarter, especially with the 10 million weather shift. I just want to make sure we're understanding the dynamics correctly. My read of it is it sounds like you've had a slightly slower start to the year than you anticipated in select markets like cell analysis, like A&G specifically. maybe a little bit on food. I just want to make sure I'm understanding that correctly. You know, again, don't want to blow it out of proportion, but especially with the 10 million shift, just want to make sure we get that. And then a follow-up to that is, you know, obviously you're maintaining your full year core guide. Is there something that's offsetting that where, you know, you talk about GLPs, you talk about camp. Is the strength there offsetting it? It's just sort of like you had buffer in the model built in and you're absorbing some of these hits. You expect to recoup it later in the year. Maybe an easier way to ask all of this is, you know, you've given us sort of, you typically give us an end market breakout for the year in terms of core growth. If you could run through that compared to where you were a quarter ago,

that might be helpful. Thanks. Adam, you want to take this one? I'll take the second part of that

question. Yeah. So I think just in the dynamics of the quarter, there was minor differences in our small markets, but our key markets actually performed quite well. So if you think about pharma, CAM, and then our diagnostics business, they all performed very well. And then we had small pockets of uh slight differences from where we guided um and overall we were actually doing quite well um and then the unfortunate was the the storm hit in the last three days of the quarter which are our biggest days of the quarter and we weren't able to to recognize the revenue which we've since recognized you know the following actually monday so um and then i'll pass it over

to paul yeah and you know it's you know i don't want to kind of if you're looking at the academia and government side you know it's the smallest part of our our business you know nih is one percent of our funding um so it's slightly less than what we expected but but um it is really the smallest part of our business and i think i described the the real momentum we have in in the key markets you know continuing improvement in pharma we're seeing spend in biotechs glp one business continues to be extremely strong cdmo continues to move forward in cam strength and you put that all together you know with the funnels that we're seeing and our outsized growth on our on our infinity tree if you look at that compared to our peers we're almost 2x in terms of the quarter and that's driving to replace that cycle so a lot of things all of those things moving and moving together we're very uh we're very positive about the rest of the year

and then i just remind you that that for the full year we're maintaining our end market guides there we we expect them to land in roughly the same place okay okay all right appreciate it oh that

was a long one so i'll just leave it there thanks your next question comes from the line of jack

I want to follow up on the M&A question because this is the number one debate we've been fielding. You talked a lot about how Ignite has improved your capabilities around M&A execution. I was just wondering if you could elaborate on that as number one. And then number two is just from a product area, I was curious your take on diagnostic assets. You have a unique position with DACA that seems to be doing pretty well. Just where does that, like the IBD market stack up on your pecking order, you know, as kind of an industry of interest?

Yeah, Adam, maybe you can talk about Ignite and what we're seeing on the integration capability side, and I'll take the second one.

Sure. So there's a couple of pieces to why Ignite gives us the confidence that we'll be able to integrate an asset effectively. If you look at what the Ignite program is, it's really about a management system and how do you bring a bunch of different functions together to execute on a project in an efficient way. And that's exactly what an integration is. And you think about managing tariffs, that's a cross-functional activity where you need people moving in coordination and to achieve an outcome. That's what an integration is. So that'd be the first point I'd make is just running through the Ignite program and using the Ignite system that we've now implemented. It gives us confidence we can execute integration. The other piece I'd point out is BioVectra is, you know, we've leveraged that capability to integrate BioVectra into our network. And so that's another proof point to our readiness to integrate the right asset.

Yeah, I think Adam talked about our capital allocation philosophy. I won't go back over that one. But, you know, we're focused on increasing our service and recurring revenue mix. I think we've been very clear on that when you see software and automation, also content on systems, et cetera, et cetera. And we have many high growth adjacent markets where we would have examples and all of that, specifically about diagnostics. It's one of our businesses that's not excluded, of course, but it's a very durable market. We have a 7% growth in Q1 and pathologies in mid-single-digit grower, as we've seen over time with a lot of long-term growth drivers. So it's an area where we will continue to look in all those spaces. But again, where do we have a right to win? Does it link with the strategy within that segment? Does it increase our recurring revenue? That's very important to us as we go forward. And of course, then we have the Ignite operating system to allow us to integrate it very quickly as well. Thank you, guys.

Your next question comes from the line of Puneet Suda with LeeRank Partners. Your line is open. Please go ahead.

Yeah, hi, Parik and Adam and team. Thanks for taking my question. First one, again, you know, GLP-1 growth there is strong, but my question is more on the utilization on the, you know, the Oligo side, on the NASD side. any update on you know to the full utilization of train c which i think is anticipated in 2027 the question is really around the margin impact in light of this utilization where it stands today how it ramps up and how should we think about the commercial batches versus the early stage you know pipeline work that you're seeing yeah i'd start off and i'll hand it over to adam for

some more color you know we have a very strong order backlog and we're confident in the fya 26 outlook uh continuing to ramp you know of course you have month-to-month variances but we have trained cnd coming online i have to say we're delighted to have that capacity coming online where it is because we're booked out for 26 and now we're booking into 27 with larger commercial batches so is that the right time but adam do you want to give more uh color on that cadence

yeah so thanks for the question and i think you know at steady state the uh specialty cdmo business will return above our operating margin, above the corporate operating margin. So it's a good business to be in. Specific to 2027, train C and train D will be ramping through the year. And so there will be a negative margin impact. However, we'll offset that through other activities within the business.

Got it. Namely through Ignite. I see. Okay, that's helpful. And then just to follow up on, you made a comment about the small biotech capital raises and capitalization is driving growth. Just as you see that across the business, just wondering maybe if you can double-click and where are you seeing that? Is that more on the LCMS instrumentation side, cell analysis, or is it more on the CDMO side, business side of the business, where you're seeing the uptick from the emerging and small biotechs?

So let me, I think I just need to clarify because it was said in the context of what would be the upsides to the forecast. So it was really set around, hey, if we see a meaningful uptick in the small and mid-cap biotech, then we would start to see upside to our forecast. So while we have seen the capital market profile improving, we have yet to see a meaningful uptick in the small and mid-cap investments.

Yeah, if you look at small and medium-sized biotech, we have a relatively small exposure, but we're actually encouraged by the improving biotech funding and increased M&A. You see that a lot. you know if you look at the macros in january total biopharma financing rose about a 11 billion that's a two-year high so we watch that you have the patent cliff that's looming of course with heightened biopharma or pharma focus and mna and i think 25 is one of the strongest years in mna for pharma which of course i think about 240 billion but i think it's too early to cause an inflection on it and there's a lag i think between improving funding environment customer we're spending but we're extremely well placed with our tools you know if you look at the pro iql cms on that side also on our infinity tree and of course we'll see a recovery in our cell analysis business for those tools as we go forward on it so that's the way i would say it but it's really a relatively smaller smaller small um exposure for us but we're really encouraged by

the improvement funding environment your next question comes from the line of brandon coulard with Wells Fargo. Your line is open. Please go ahead.

Hey, thanks, guys. Good afternoon. The 6% growth in China, was that all stimulus-related? And it'd be helpful if you just touch on a couple of the end markets there. Curious if you're seeing any of them turn more positively or if it's really just still status quo.

Yeah, I mean, we were very pleased with our 6% growth. We're better than expected. You know, if you look at them, compared to peers, also very expected. And that's, you know, there was a slight bit of more spending before lunar year new year but not not too much and i think we saw an outside last year we saw a very strong gsc stimulus um business we saw a small one this year we won about 30 percent of that and and i think you know as we go through the year we expect it to be a 300 million dollar quarter business on it but if you look at um i think overall in the business we're we're under indexed dx and pharma we are over indexed the applied markets and we see continued strength on that side so we expect China to grow mid to high single digits over the long term and not the double digit rates we saw 10 years ago but mid to high single digits and our track record how our ability to manufacturing in China and our commercial teams very very close to the customers is really important and of course Adam talked about the larger stimulus that's looming towards the end of the year and we're not counting that in our guide but if that comes in it's going to be significantly more than the GACC stimulus and we expect an outside win in it but but to be honest if you look at the we look at very we're optimistic about China you have the largest install base look at the pace of innovation and life science and the applied markets that supports demands for instruments and our solutions is very strong and if you look at look at the Chinese the China 15 five-year plan whether it's rapid application on AI healthcare green sustainable developments and new regulations for pollutants like PFAS, we're right in the sweet spot in terms of those priorities. So we feel very good about China. That's helpful. And then Adam, it'd be

great to get some color on the ANG markets by region. I think Simon said Europe was pretty solid. So just curious where you're seeing the weakness visits all in the Americas. Any color

would be helpful by region. Thanks. Yeah. So the softness we've been seeing is really primarily in the Americas. And I guess there's reason to be optimistic. The NIH budget came in in line with flat to slightly up. The 15% cap on overhead research costs was blocked. That said, it goes back to where Simon talked about, which is we're still seeing a little bit of hesitancy in our customers to make bigger investments as they're really focused on operating their labs.

And just to clarify the Europe comment, that was a forward-looking comment that we envision more stability in Europe than in the Americas with academic and government and cautious optimism around incremental improvement. That was a forward-looking statement.

Your next question comes from the line of Casey Woodring with JP Morgan. Your line is open. Please go ahead.

Great. Thanks for fitting me in. I'll ask my two up front. The first is just on LC and LCMS pacing over the course of the year. You know, LC grew high singles in 1Q. Can you just talk about what LCMS grew in the quarter and walk through the growth phasing for LC and LCMS over the course of the year? And then secondly, Porig, you called out the three marquee enterprise service wins in ACG, and you talked a little bit about it in your script. Can you maybe just elaborate on what the financial impact could look like from those contracts and how we should think about the impact to the model and how those ramp over time? Thank you.

yeah let me talk about the enterprise services and i'll comment then on um on the lcms i think on the enterprise services side it is a really important flywheel for the future because we're really um fully fully uh working with customers under lab management and productivity you can imagine the insights we get off replacement cycle through that and how do we move forward on it so it's not just about the services it's about the consumables and it's about the instrument replacements that we can go going forward on it we've had a significant placement in competitive accounts we're kind of unique in how we're doing that in the market and we're seeing that as a as a flywheel to continue going forward and of course we see in accounts where we do have enterprise service agreement we have a higher consumer's attach rate we have a higher services attach rate and actually we have a far we have an early warning system around replacement cycles that we have early conversations about and on the elsey on the elsey side of things i think it's been a steady pace really good quarter and i think on the lcms side i don't know yeah well just to

reiterate on lc we saw high single digit growth in the quarter particular strength in china and apac and as we've mentioned already very strong performance in infinity 3 customers continue to love it and i still think we're relatively early mid on the replacement cycle there win loss rates continue to be positive notable share gains based on the industry data and we're now seeing additional tailwind there with the altora columns on the lcms side we were in line with expectations in the first quarter coming off a tough sequential and year-over-year compare it has to be said but again we were very pleased with pro iq with the 40 growth really exceptional adoption there and in lcms similar story with respect to win loss rates and the industry data which signifies some notable share gains and then beyond the pro iq which is off to a very strong start we're also very encouraged by our broader lcms innovation pipeline yeah just going back to the

enterprise services part i just want to bring in angelica because she's been very close to some of these marquee wins and the growth trajectory and what you're seeing with the customer yeah thanks

porig and thanks for the question casey you know i think we're very excited about the enterprise business and the opportunity that unlocks i think porig used the word flywheel earlier and when you think about it, it allows us to really embed our service experts into the accounts. And they're looking at managing assets across the laboratory. So not only does it give us the opportunity to help customers with their lab operations and keep their labs up and running and producing those scientific results, it gives us visibility and access more broadly in these laboratory environments so that we're not only looking at our own replacement cycles, but we're also looking at competitive displacement opportunities. We're looking for incremental wallet share opportunities. And over the course of time, the relationships that we're building, they compound. They compound from a growth perspective, but they also compound from the insights that we get from customers and how we bring that back into the innovation muscle that we have here at Agilent and how we can continually grow, evolve, and continue to serve our customers on all different levels, whether Either it's lab operations, it's scientific outcomes, or it's ongoing value over time.

Your final question comes from the line of Evie Kozlowski with Goldman Sachs. Evie, please limit yourself to one question. Your line is open. Please go ahead.

Operator, if Evie's not there, I think we can leave it there. It's all the time we have for this afternoon. And thank you to everyone for joining us. We look forward to speaking with you soon.

This concludes today's call. Thank you for attending. You may now disconnect.