A
Earnings call · Apr 2025 (Q2 FY25)

AGILENT TECHNOLOGIES Q2 FY25 earnings call A

May 28, 2025 Source

Executive summary

Agilent Q2 FY25 — Strong Revenue and EPS Exceed Expectations, Driven by Broad-Based Growth and Ignite Transformation

Agilent delivered strong Q2 FY25 results, with revenue and EPS exceeding expectations, driven by broad-based growth across regions and end markets, particularly China and PFAS testing. The company's Ignite Transformation program is yielding significant savings and tariff mitigation efforts, positioning Agilent for continued outperformance despite ongoing macro and geopolitical uncertainties. Management remains confident in its full-year commitments and long-term growth trajectory.

Highlights

6

  • Revenue of $1.67 billion, up 5.3% core, exceeded expectations.

  • EPS of $1.31, up 7% YoY, exceeded expectations.

  • Book-to-bill ratio greater than 1, indicating building momentum in instruments.

  • China revenue grew 10%, exceeding expectations.

  • PFAS testing revenue grew over 70% YoY, annualizing to over $100 million.

  • Agilent CrossLab Group (ACG) grew 9%, led by double-digit growth in consumables and automation, and high single-digit growth in services.

Concerns

4

  • Operating margin was impacted by 55 basis points of incremental tariff costs.

  • Biopharma recovery was slower than expected, growing low single digits due to funding challenges in small and mid-size biotech.

  • Academia and government market declined modestly by 2%, with the U.S. market being the primary driver of a mid-single-digit decline outlook for the year.

  • Gross margin was down YoY due to tariffs, currency, and product mix.

Guidance & targets

CategoryTargetConfidence
Full-year core revenue growth
2.5% to 3.5%
high materiality
High
Full-year reported revenue
$6.73B to $6.81B
high materiality
High
Full-year reported revenue growth
3.4% to 4.6%
high materiality
High
Full-year EPS
$5.54 to $5.61
high materiality
High
Full-year EPS growth
4.7% to 6%
high materiality
High
Full-year currency impact on revenue
-1.1% headwind
medium materiality
High
Full-year M&A impact on revenue
+2% to +2.2%
medium materiality
High
Q3 revenue
$1.645B to $1.675B
high materiality
High
Q3 core growth
1.7% to 3.6%
medium materiality
High
Q3 reported growth
4.2% to 6.1%
medium materiality
High
Q3 currency impact on revenue
0.6% tailwind
low materiality
High
Q3 M&A impact on revenue
1.9% benefit
low materiality
High
Q3 non-GAAP EPS
$1.35 to $1.37
high materiality
High
Q3 non-GAAP EPS growth
2.3% to 3.8%
medium materiality
High
Long-term core revenue growth
5% to 7%
high materiality
High
Long-term margin expansion
50 to 100-plus basis points annually
high materiality
High
Long-term EPS growth
double-digit
high materiality
High
Price realization
at least 100 basis points
medium materiality
High
Annualized savings from organizational agility
$80 million
medium materiality
High
Annualized procurement savings
exceeding $50 million
medium materiality
High
Ignite total profit contribution
over $130 million
high materiality
High
Tariff impact mitigation
most of the impact mitigated
high materiality
High
Tariff impact mitigation
fully mitigate
high materiality
High
NASD growth
double-digit growth
medium materiality
High
Pharma end market growth
low to mid-single-digit growth
medium materiality
Medium
Diagnostics and Clinical end market growth
upper end of mid-single digits
medium materiality
High
Chemicals and Advanced Materials end market growth
low to mid-single digits
low materiality
Medium
Food end market growth
low to mid-single digits
low materiality
Medium
Environmental and Forensics end market growth
mid-single-digit growth
medium materiality
High
Academia and Government end market decline
mid-single-digit decline
low materiality
Medium
Full-year tax rate
12%
low materiality
High
Full-year other income and expenses
$15 million in income
low materiality
High
Full-year diluted shares outstanding
285 million
low materiality
High
Q3 ACG core growth
low single digits
medium materiality
High
Q3 LDG core growth
mid-single digits
medium materiality
High
Q3 AMG core growth
low single digits
medium materiality
High
PFAS addressable market
$1 billion
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Agilent CrossLab Group (ACG)
Ahead of expectations, led by strong growth in consumables, automation, and services. Fundamentals remain strong for the rest of the year.
Consumables growth: double-digitAutomation growth: double-digitServices growth: high single-digitOn-demand services: returned to growthInstallation services: returned to growth
$713M9%——
Life Sciences and Diagnostics Market Group (LDG)
Core growth driven by pathology, NASD, LC/LC/MS instruments, and cell analysis, partially offset by NGS decline.
Pathology business growth: high single-digitNASD growth: high single-digitLC and LC/MS instruments growth: mid-single digitsCell analysis business growth: low single digitsNGS business decline: mid-single digits
$654M3%——
Applied Markets Group (AMG)
Growth in spectroscopy and GC/MS was offset by some timing-related declines in gas chromatography.
Spectroscopy growth: statedGC/MS growth: statedGas chromatography: timing-related declines
$301MFlat (core)——
Americas (Geography)
All regions grew in the quarter.
—low single digits——
EMEA (Geography)
All regions grew in the quarter.
—mid-single digits——
China (Geography)
Led the way, exceeding expectations. Saw stable demand conditions sequentially, with favorable Lunar New Year comparison.
—10%——
Rest of Asia (Geography)
India delivered high teens growth, with the opening of the first India Solution Center.
India growth: high teens
—high single digits——
Pharma (End Market)
At the high end of expectations, led by small molecule. Biopharma recovery slower due to funding challenges in small/mid-size biotech.
Small molecule growth: low double digitsBiopharma growth: low single digits
—6%——
Diagnostics and Clinical (End Market)
Ahead of expectations on strong performance of pathology business in Americas and Europe.
—8%——
Environmental and Forensics (End Market)
Strong PFAS testing demand globally, with Europe and China more than doubling business. PFAS provided 80 bps incremental growth.
PFAS testing growth: >70% YoY globally
—6%——
Chemicals and Advanced Materials (End Market)
Growth ex-China offset by low single-digit decline in China. Lower oil prices net positive to CAM business.
Advanced materials growth: high single-digitChemical and energy growth: low single-digit
—4%——
Food (End Market)
Benefiting from strength in Asia through government-funded technology refresh.
—8%——
Academia and Government (End Market)
Declined modestly, better-than-expected performance in the U.S. and globally. Smallest end market at 8% of total revenue.
—-2%——

Operational metrics

Operating margin
25.1% Flat YoY (excluding tariffs)
Q2 FY25

Solid operating margin, absorbing incremental tariff costs. Would have increased YoY excluding 55 bps tariff impact.

Gross margin
54.1% Down YoY
Q2 FY25

Roughly in line with expectations after accounting for incremental tariff costs.

Tax rate
11.5% Better than expected
Q2 FY25

Q2 FY25 tax rate.

Diluted shares outstanding
285 million
Q2 FY25

Q2 FY25 diluted shares outstanding.

Capital expenditures
$114M
Q2 FY25

Q2 FY25 capital expenditures.

Share repurchases
$165M
Q2 FY25

Q2 FY25 share repurchases.

Dividends paid
$70M
Q2 FY25

Q2 FY25 dividends paid.

Net leverage ratio
1
Q2 FY25

Ended the quarter with a strong balance sheet.

Core revenue growth
5.3%
Q2 FY25

Q2 FY25 core revenue growth, adjusted for currency and M&A.

Reported revenue growth
6%
Q2 FY25

Q2 FY25 reported revenue growth.

Currency impact on revenue
-1.6% 0.5 point better than estimated
Q2 FY25

Negative impact due to currency exchange rates.

M&A impact on revenue
2.3% Ahead of expectations
Q2 FY25

Contribution from acquisitions and divestitures.

Digital orders growth
12% YoY
Q2 FY25

Digital orders reached $295 million.

Orders growth
low single digits
Q2 FY25

Overall orders growth in Q2 FY25.

Orders growth
mid-single digits
H1 FY25

Overall orders growth for the first half of the fiscal year.

PFAS revenue
>$100M
Annualized

PFAS testing business is annualizing to well over $100 million.

PFAS growth
>70% YoY
Q2 FY25

Strong growth in PFAS testing, contributing significantly to overall growth.

NASD commercial program mix
60%
Q2 FY25

Revenue mix evolving towards commercial programs, up from 50-50.

Academia and Government market share
8%
Q2 FY25

Smallest market for Agilent.

NIH-related research revenue
1%
Q2 FY25

NIH-related research represents only about 1% of total revenue.

Incremental tariff exposure
$50M
H2 FY25

Gross incremental tariff exposure based on currently in-place rates, on top of $10M absorbed in H1.

Potential additional tariff exposure (US-EU)
$40M
H2 FY25

Estimated if tariffs on EU-sourced products increase to 50% as early as July 9. Anticipated minimal net impact due to mitigations.

China consumables pull-forward
$15M
Q2 FY25

In-country ACG lab consumables revenue pulled forward into Q2 from Q3 due to anticipated tariffs.

Industry KPIs

MetricValueDetails
Revenue EPS guidanceFY Core Growth: 2.5% to 3.5%; FY Reported Revenue: $6.73B to $6.81B; FY Adjusted EPS: $5.54 to $5.61
China revenue exposure10% %
Pricing price realizationat least 100 bps %
Diagnostics testing demandPathology business growth: high single-digit %
M a contribution synergies2.3% %
Segment organic revenue growthACG: 9%; LDG: 3%; AMG: Flat %
Bioprocessing orders book to bill>1
Reshoring US manufacturing tailwindmoving LC production into the U.S.
Instruments vs consumables services mixConsumables growth: double-digit; Services growth: high single-digit %
Organic core revenue growth by end marketPharma: 6%; Diagnostics and Clinical: 8%; Environmental and Forensics: 6%; Chemicals and Advanced Materials: 4%; Food: 8%; Academia and Government: -2% %

Product announcements

ProductTypeDetails
Seahorse XF Flex Analyzerlaunch
InfinityLab Pro iQ Serieslaunch
Enhanced 8850 GC coupled with GC/MSupdate

Deals & partnerships

BIOVECTRA Acquisition to expand CDMO capabilities roughly $1 billion

Acquired BIOVECTRA to expand CDMO capabilities, complementing NASD business.

Risks & headwinds

Incremental tariff costs FY25, FY26

55 bps impact on gross margin in Q2 FY25; $50M gross incremental exposure in H2 FY25; potential additional $40M gross exposure from US-EU tariffs if implemented July 9.

Mitigation:Ignite operating model, tariff task force, supply chain diversification (e.g., moving LC production to US), strategic pricing initiatives, surcharges, inventory build-up, Ignite-driven savings. Expects full mitigation in FY26.

Funding challenges in small and mid-size biotech Ongoing

Biopharma growing low single digits.

Mitigation:Not explicitly stated, but focus on diverse end markets and strong performance in other areas like small molecule pharma and diagnostics.

Macro environment and geopolitical landscape uncertainty Near-term

Not quantified directly, but cited as reason for disciplined outlook.

Mitigation:Credible and achievable guidance, long-term value creation focus, resilience from diversified supply chain and customer base.

Longer customs processing times in China Q2 FY25 (returned to normal in May)

Impacted select instrumentation in AMG and LDG in Q2 FY25.

Mitigation:Implied resolution as processing times returned to normal in May.

What to watch in Q3 FY25

NASD growth

H2 FY25
Current High single digits (Q2 FY25)
Target Double-digit growth

Why it matters

Indicates continued recovery and commercialization success in a key CDMO business, with orders already in hand.

Within biopharma, NASD was a standout, growing high single digits in Q2 and we're looking forward to double-digit growth from NASD in the second half of the year.

Q&A highlights

How did order trends progress through the quarter, especially with potential pharma tariffs? Was there any pull-forward beyond consumables?

Book-to-bill was greater than 1, and orders grew low single digits in Q2 and mid-single digits for the first half. No pull-forward from pharma tariffs was observed. A $15 million pull-forward in consumables in China due to anticipated tariffs was offset by customs delays for instruments. Customs processing is now back to normal.

“our book-to-bill was greater than 1. And our orders grew at low single digits in Q2 and overall for the first half, orders grew mid-single digits.”

asked by Patrick Donnelly · answered by Padraig McDonnell

2 min read 6 chapters

Detailed narrative

Q2 Performance Highlights

Agilent reported Q2 FY25 revenue of $1.67 billion, a 5.3% core growth, and EPS of $1.31, up 7% YoY, both exceeding expectations. This marks the fourth consecutive quarter of accelerating growth, driven by a book-to-bill ratio greater than 1 and broad-based regional growth, including 10% growth in China and high teens growth in India. All regions grew, with Americas in low single digits, EMEA in mid-single digits, and Rest of Asia in high single digits. All end markets, except academia and government, delivered mid- to high single-digit growth.

Ignite Transformation Impact

The company's Ignite Transformation strategy is yielding significant results, including exceeding prior year's full-year price contribution within six months and expecting at least 100 basis points of price realization in FY25, with greater impact anticipated in 2026. Organizational agility improvements, achieved by flattening management layers and increasing spans of control by 30%, are projected to deliver $80 million in annualized savings starting in H2 FY25. Centralized procurement is expected to exceed $50 million in annualized savings by the end of FY25, contributing over $130 million to FY25 profit.

Tariff Mitigation Strategy

Agilent is proactively managing tariff exposure through a dedicated tariff task force, focusing on specific product lines and production sites, diversifying supply chains, and implementing strategic pricing initiatives. The company expects to mitigate most of the FY25 tariff impact and fully mitigate it in FY26, even with potential increases in U.S.-EU tariffs. This strategy includes supply chain moves like relocating LC production to the U.S., surcharges, and leveraging Ignite-driven savings.

End-Market Dynamics and PFAS Strength

Pharma grew 6%, led by small molecule (low double digits), while biopharma saw slower low single-digit growth due to funding challenges in small/mid-size biotech. Diagnostics and Clinical grew 8%, driven by pathology. Environmental and Forensics grew 6%, significantly boosted by over 70% YoY growth in PFAS testing, which is now annualizing over $100 million and contributed 80 basis points to Q2 growth. Academia and Government declined modestly by 2%, better than expected.

Innovation and Leadership Changes

Agilent launched new products, including the Seahorse XF Flex Analyzer for cell analysis and the InfinityLab Pro iQ Series for liquid chromatography mass detection. The company also showcased an enhanced 8850 GC with a 50% reduced footprint and 5x increased throughput. August Specht will join as Chief Technology Officer next month. Additionally, Heidi Kunz retired from the Board, and Pascal Soriot (CEO of AstraZeneca) and Judy Gawlik Brown (Founder and CEO of Downtown Advisory) were appointed as new Board members.

CDMO and NASD Performance

The CDMO business, including NASD and BIOVECTRA, performed strongly. NASD grew high single digits in Q2, with a shift towards commercial programs (60% commercial vs. 40% development), and is expected to achieve double-digit growth in H2 FY25 with strong order visibility. BIOVECTRA exceeded guidance, with successful GLP-1 manufacturing scale-up and process efficiency gains, positioning the combined offerings in advanced therapeutic modalities like oligos and antibody drug conjugates.

AI-generated summary of the company's earnings call. Not investment advice.