Agilent at Wells Fargo Conference: Strategic Growth Amid Challenges

On Wednesday, 03 September 2025, Agilent Technologies (NYSE:A) presented at the Wells Fargo 20th Annual Healthcare Conference 2025, highlighting its strategic growth and challenges. The company reported robust top-line growth driven by the Pharma and CAM sectors, despite facing tariff-related margin pressures. Agilent remains optimistic about future growth through innovation and strategic investments.

Key Takeaways

• Agilent reported a core revenue growth of 6%, with strong contributions from Pharma and CAM sectors.
• Tariffs impacted margins, but mitigation strategies are in place, with improvements expected by 2026.
• The company anticipates continued growth driven by downstream QA/QC in Pharma and reshoring activities in the U.S.
• Agilent’s service business satisfaction scores exceeded 90%, reflecting strong customer relationships.
• The company is strategically positioned in China, with local manufacturing and competitive pricing strategies.

Financial Results

Agilent showcased a solid financial performance in its third quarter:

• Core revenue growth was 6%, with double-digit growth in Pharma.
• CDMO saw a 20% increase, with bookings extending into 2026.
• Tariffs resulted in a 200 basis point decline in margins, but a 230 basis point increase is expected from Q3 to Q4.
• China contributed $300 million in revenue this quarter.

Operational Updates

Agilent highlighted significant operational progress:

• The Affinity III chromatography instrument experienced mid-teens growth, driven by productivity gains.
• The 8,850 GC instrument replacement cycle has begun, indicating potential for future growth.
• The NASD platform grew over 20% in Q3, with bookings secured into 2027.
• BioVectra has been booked well into 2026 and beyond.

Future Outlook

Agilent remains optimistic about its future prospects:

• Tariff impacts are expected to decrease through 2026, potentially becoming a tailwind.
• Long-term growth is anticipated from QA/QC in Pharma and U.S. reshoring efforts.
• The company expects steady improvement in China, with a strong win rate in the country’s stimulus programs.

Q&A Highlights

The conference call addressed several key topics:

• Strategies to mitigate tariff impacts, including potential surcharges.
• Insights into chromatography instrument replacement cycles and growth potential.
• Updates on the performance and strategic importance of NASD and BioVectra.
• Agilent’s competitive positioning and market dynamics in China.
• The company’s disciplined M&A strategy and capital allocation priorities.

In conclusion, Agilent Technologies demonstrated strong execution and strategic alignment at the Wells Fargo Conference. Readers are encouraged to refer to the full transcript for a comprehensive understanding of the company’s performance and outlook.

Full transcript - Wells Fargo 20th Annual Healthcare Conference 2025:

Brandon Couillard, Analyst: All right. Good morning. Thanks, everyone, for being here. I’m Brandon Couillard. I cover Life Science Tools and Diagnostics here at the firm.

Thrilled to have Agilent with us at the conference this year, joining us for this conversation, Pory McDonnell, CEO as well as Rodney Gonzalez, who’s the Interim CFO and Principal Accounting Officer. So thank you both for being here.

Pory McDonnell, CEO, Agilent: Thanks, Brian. Thanks for being here.

Brandon Couillard, Analyst: Coming fresh off of earnings last week. I mean you just reported third quarter last week. Really strong top line growth, 6% core, kind of top tier in tools. Pharma and CAM were particularly strong. Just kind of unpack some of the key themes and takeaways and trends you saw in the quarter, and we’ll go back

Pory McDonnell, CEO, Agilent: to Yes. So we upped our guide for 25% on the revenue side. So I think it was really driven broad based growth driven with pharma. CAM and CDMO actually was one of the key drivers in the quarter. And it really was execution by the team.

We saw markets improve. Innovation really had their null Tree, the ProIQ plus on the LC MS side and the 8,008 and 50 innovations are really resonating with us. And our Service business, of course, with satisfaction scores greater than 90% provides real intimacy with customers, which is important in this environment. And I think if you go through the quarter, pharma, we were very strong. We saw it was small molecule QAQC led the way.

We grew double digits. And in fact, in Europe, we grew mid teens in pharma QAQC. And what’s driving pharma? I think you’re seeing consolidation of supply chains and manufacturing downstream. You’re also seeing some greenfield sites with ADCs, GLP-1s that we’re winning a good share in.

And we see these drivers coming off. And most importantly, we never talked about a super cycle, but we’ve seen a steady replacement of null And null Tree grew 15% in the quarter, and we’re seeing that we’re gaining share. It also kicked off on that side. And CAM, broad based, 10% on the chemicals and 10% on the applied on the Advanced Materials side. And again, replacement cycle kicking off, also greenfield sites in some areas and also supply chain reconfiguration with areas on it.

And CDMO, great quarter, again, 20% growth, booking well into 26%. And I think strong performance from India and China, stable. So you put it all together, it was a very, very strong quarter. And I think what was different about this quarter, Brandon, is that when we went through the quarter sequentially from month one, month two, month three, we were ahead all the way through. And that’s a big, big change.

That goes back to the days pre COVID where we generally see a hockey stick at the end of the quarter, but this was a very steady progression of the quarter. So it was great.

Brandon Couillard, Analyst: Are you saying that the instrument mix was not so heavily weighted to the last month?

Pory McDonnell, CEO, Agilent: Yes, it was steady. It was steady through the quarter, and that’s a change. And I think yes, we’re very pleased with that. Okay. I want to

Brandon Couillard, Analyst: touch on margins, which has they’ve been variable in certainly the last several quarters. And gross margins have been surprisingly soft. And there’s a lot, I think, behind that, of course. Could you just kind of unpack the impact of tariffs, mix? You’ve got the BioVectra business.

NASD grew a lot in the third quarter, but that’s dilutive to kind of the gross margin profile. But you did sort of give you

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: were

Brandon Couillard, Analyst: expressed a lot of confidence, let’s say, the fourth quarter sequential improvement, I think being up like two thirty basis points. Correct. So Rodney, just kind of help us understand some of those moving parts. And do you think that the third quarter is kind of the low point for gross and operating?

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: Yes. I think so Brandon, when we look at the third quarter, we do think it was really the low point. And the biggest issue hitting us has been tariffs. And so third quarter was the first quarter we saw a full effect of tariffs on our quarterly results. And that on a year on year basis, incremental tariffs drove about 200 basis point margin decline.

So tariffs have been a pretty significant hit to the overall business. And we’ve got mitigations in place. So in the fourth quarter, we think tariffs will also still be high, similar to what we saw in the third quarter. And then we will we expect to see those tariff costs and mitigants to those tariffs coming down through 2026. And so as we go into 2026, we think this will ultimately be a tailwind versus the strong headwind that we’re getting hit with this year.

Now the other kind of key points, we our margins did finish below our own expectations, our own internal expectations, And there were three real drivers. One was tariffs did come in higher than we expected. And that was a bit more because of revenue, but it was also we had a lot of LC business that those ship of Germany, and so they were taking tariffs into The U. S. So our mix was a little bit heavier on a tariff basis coming into The U.

S. And we’ve also we also built some inventory, which we think will kind of start working down over the next quarter and beyond. The other areas, we made more investments additional investments into our commercial. We expanded our coverage model. We’re seeing the opportunities of growth, and we’re taking advantage of that.

And then the third area is just variable pay. And so the bonus plans for our employees overall, as the business has picked up, we have we’ve actually adjusted our year to date accrual, and we ultimately are accruing more variable pay or more bonuses in the third quarter than what we originally expected. So those are the big kind of the big drivers. Now if I think of we are making a pretty strong expectation from on an operating margin going from Q3 to Q4, as you said, about a two thirty basis point increase. But if I look at the pieces, I don’t have another tariff step up.

We’re much there. And so when I look at my revenue growth from Q3 to Q4, it’s almost $100,000,000 step up in revenue, excluding any tariff effects. So we get we’ll get strong flow through related to that increase. And then we also will see some further improvements related to our Ignite program in the fourth quarter. So I look at these things and again, the big issue is we don’t have these additional headwinds hitting us going into the fourth quarter.

We’ve really taken the brunt of it in the third quarter. And I think from here on, we will be in better shape as we move forward. And on the

Pory McDonnell, CEO, Agilent: gross margin point, Brandon, I think it’s an important one. If you think about NASD, it’s about 15 points lower than the on the gross margin side than the company average, but the operating margin is on the company average. So it’s a different profile of a business. So I think what we need to do is educate as we go in more into CDMO gross margin, we’ll have a different profile going forward. Yes.

Got

Brandon Couillard, Analyst: I do want to circle back to those businesses. But maybe just starting with chromatography. You mentioned the Affinity III. You got this new 8,850 GC instrument. Just talk about where we are in the replacement cycle for those two areas and kind of the legs that kind of remain for, let’s say, improved growth or elevated growth for those two products?

Pory McDonnell, CEO, Agilent: Yes. So null Tree, we’ve we’re I would say, the start of that replacement cycle, we saw a gradual improvement from launch in this quarter, a step up to mid teens growth. And what we’re seeing is people that have bought the null three, maybe four or five systems are coming back for multiple systems because of the productivity gain of about 2015% to 20%. And what we’re seeing is with the replacement cycle in LC, there is no super cycle. You have a big topology in your installed base.

You’ve got competitors installed base. So as CapEx is released and people are expanding capability, we have an opportunity in our installed base with 1100s, 1260s and 1290s, but also competitor installed base. So I would say we’re in the early innings. Eight fifty GC, we’re in the even earlier innings because our Chemical installed base is huge. That installed base is much older than our LC installed base.

It’s just typically older with the GC side. So we’ve seen that kick off. So I think you’re going to see it continuing it’s going to continue an improvement into 2026 on both of those replacement cycles.

Brandon Couillard, Analyst: When was the last time you had a GC replacement cycle? And can you put any numbers around how elongated that installed base?

Pory McDonnell, CEO, Agilent: Yes. I mean if you think about an LC replacement cycle of about seven years, GC is ten plus years. The last time we saw anything like that was really around the Ultivo launch. Do remember that about? Yes.

It’s been a while. It’s been a while. So that’s we saw a little bit of emotion on that. We think this is going to be bigger and more pervasive because of some of the tailwinds that are coming in about reshoring and so on. So it’s about ten years, and I think we’re seeing the early signs of that now.

Brandon Couillard, Analyst: Let’s shift gears over to some of the end markets. A and G, not unlike many others, I feel like held up a lot better. So it’s hardly a disaster in the quarter. I think it was actually up for you overall. You’re kind of forecasting it down mid singles in the fourth quarter.

Is that just an abundance of conservatism in that assumption? And what do you see geographically Yes. Throughout A and G end

Pory McDonnell, CEO, Agilent: I mean if you split it’s a tale of two cities. If you split out A and G outside, first of all, it’s about 8% of the company. So it’s a small part of our business, 1% linked to with NIH. But if you look outside of Americas, we’re pretty stable. You saw mid- to high single digit growth in Europe.

You saw actually 20% growth in China and A and G, even though it’s a smaller market. So pretty stable across it. America is very, very challenged with, of course, the funding, which we’ve seen some changes this week, and we don’t expect that to improve dramatically. But I will say that our services and our consumables business, even in The U. S, is high single digits, so we’re seeing lab activity.

So we’re I would say we have a good degree of prudence in Q4, but I think it’s necessary given this macro environment, particularly in The U. S.

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: Yes. I’d also say seasonally, we do more business for the U. S. Government in the fourth quarter, and so that will have a weighted factor on the downside. Okay.

Brandon Couillard, Analyst: Maybe shifting gears over to pharma. Tariffs, MFN, top of mind for investors, maybe you’re not the best comp, right, because there is a replacement cycle in LC that’s going to be independent, right, of maybe some of the exact. But to what extent is that coming up in customer conversations? To what extent is it holding back their spend or budgets, if at all?

Pory McDonnell, CEO, Agilent: Not at all. I mean the MFN thing has been, for a number of quarters, we’ve been expecting a lot more noise around it than tariffs, but we really haven’t seen it affect that market at all and more so on the tailwind. So if you look at Europe in small molecule, QAQC, we grew 15 in the quarter in Europe. And you might say, well, how has Europe grown 15%? Because you’re seeing replacement cycle happening in the installed base and labs.

You’re also seeing consolidation of supply chain and new capabilities around ADCs and new capacity needed. You’re putting it all together, I think there’s going to be a steady gradual improvement. And what we’re seeing in our funnels, Brandon, we’re seeing the velocity improve. We’re seeing the overall funnel rate grow and our velocity improve, and we expect to see that through the end of Q4, and we have pretty good visibility on that. And thinking about the long term drivers in pharma, I mean, we’re right at the sweet spot of downstream QAQC.

So we think that’s going to be a really particularly good growth driver over the next few years and particularly as we wait for reshoring in The U. S, which we think is about two years away from a CapEx side.

Brandon Couillard, Analyst: Lastly, pharma, one of things you mentioned last quarter is that the approval, I don’t know, time lines or hurdles to getting final sign off on CapEx orders shortening, it’s lower barriers, that, that cycle is getting easier. Is that, you think, unique to Agilent? Is it tied to the LC replacement cycle where there’s probably good consensus agreement as opposed to how much of that is like company specific? And what’s behind that?

Pory McDonnell, CEO, Agilent: Yes. So first of all, there’s a lot of pent up demand. There’s a lot of fleets that are aging. I mean there’s 1100s out there. You have twelve sixty, 1290s.

So people have to refresh their fleets. And there was a point in time over the last number of years, which was very difficult. Sometimes you had a CEO approving a CapEx budget for a multinational company in a region. Now you’re seeing the site manager improve it or the lab manager improve it, and that’s a big change. I’m not saying that we have strength.

We still have some areas of softness. But in general, that has been a very positive trajectory change. And I think if you go into any laboratory globally, and I visit customers every quarter, the one thing that they’re absolutely consistently focused on is productivity in a lab. So you can have the best system to get the results out, but is it going to be productive over time? And that’s because of the null Tree, the 15% roughly how we can improve productivity is resonating on repeat purchases.

Brandon Couillard, Analyst: Maybe switching gears over to the CMO, let’s say, platform. NASD, as you mentioned, performing very well, north of 20% growth in the third quarter. You kind of raised the full year outlook kind of, I think, to maybe low double digits Just kind of unpack what you’re seeing in the order book and how much of that is coming from clinical versus commercial programs and update on what that mix looks like Yes. 20

Pory McDonnell, CEO, Agilent: So we were really I mean, I wouldn’t be expecting 20% growth next year, but I think 20% in the quarter was extremely strong. And you see the number of public indications that are coming out with some of our pharma partners. We don’t go into detail about it. But that’s switching a lot to commercial batches, and we are booked well into 2026. In fact, we’re booking into 2027.

And one of the really important parts of this business is that we invested about €700,000,000 over three years ago in capacity. That capacity is coming on line in Q4 twenty twenty six, which is going to be at the right time for a lot of these indications. So it’s extremely sticky. We have really good line of sight because of these cardiovascular indications, these unique disease state indications. So we have we’re feeling very good about ’26.

Brandon Couillard, Analyst: Is how much of that new capacity is already kind of signed up for?

Pory McDonnell, CEO, Agilent: Do you want to talk about that one? So in terms of bookings, we’re actually booking into that capacity at the 2026. We don’t give out exact numbers, but we don’t give out a percentage. But I will say that capacity is coming at the right time. We’re booking to 2026.

Brandon Couillard, Analyst: Just an update on the commercial versus clinical mix. I mean for a very long time, it skewed very much clinical. Where does it kind of sit right now?

Pory McDonnell, CEO, Agilent: Yes. I mean it in the last few years, we had a difficult ’23, but that was far more clinical batches, less commercial, right? You had a lot of repurposing of supply chains. We’re actually about fifty-fifty now in commercial and clinical, and we expect the commercial number to grow into next year.

Brandon Couillard, Analyst: Got you. Okay. The it’s been a little under a year since you acquired BioVectra. It sounds like that business is doing well. Just talk about some of the drivers there, how the expected synergies within ASD are playing out.

And one thing in the quarter, talked about a facility shutdown related to, I think, a single customer. What behind was behind that? And what does it mean for business next year

Pory McDonnell, CEO, Agilent: from So let me last go from the last question to the first one. So generally, when you have a customer ask when we do a shutdown for a process improvement with a customer, it’s a customer requested process change. This went on two weeks longer than we expected, but again, requested by the customer because their capacity is up for next year, and this process needs to improve the capacity. So even though we had a hit in the quarter, we were actually very happy with that because it bodes well for next year. And we’re in really fast growing spaces, GLP-1s inside for two major suppliers and also ADCs, and it’s very complementary to NASD.

So the synergies between it is, first of all, we have a lot of expertise on both sides. We can improve wallet share, both on the siRNA side and the oligo side and people then want to expand into the bio vector side. And of course, it takes us a while to get the quality systems up to speed and so on. But because that was a private equity company, we bought it as a strategic. We’re getting a lot of, I would say, interest because of our long term expertise.

So we’re very excited about it, we’re booked well into 2026 and beyond. Got you.

Brandon Couillard, Analyst: Switching over to CAM segment, one of your strongest end markets in the quarter, is in contrast to some other, I think, peers who kind of play in that more industrial ecosystem. Called out strength in semis, mini batteries. Can you just unpack some of the drivers there? And is onshoring are you already seeing investments from onshoring perspective from that end market?

Pory McDonnell, CEO, Agilent: Yes. So if you break it down, I mean, we saw 10% growth on the chemical and the advanced materials, 10% as well. And what we’re seeing is, first of all, we have the largest installed base of anybody, right? So we have a lot of surface area opportunity with a very aged installed base. So the 8,850, again, helps us with that replacement cycle.

You’re seeing some greenfield investments and actually consolidation of supply chains around the globe on the chemistry side. And you might say, well, what’s driving that? It’s actually the downstream usages in semiconductor and advanced materials. So those two businesses are very serendipitous with each other. So we see that as a tailwind going forward and across geographies.

And then in the Advanced Materials side, semicon reshoring and fabs in each region. I was in India three weeks ago, four weeks ago, and they’re now starting to build the infrastructure for semicon with high purity chemical plants, which is feeds into it where we have a big opportunity. And of course, sustainability in Advanced Materials is something that we see growing long term. So it’s our position in the market with a very high market share. It’s a very tight connection with customers, so we know when customers want to spend, and then you have these tailwinds driving it.

So it was a fantastic quarter.

Brandon Couillard, Analyst: Just remind us what you kind of last said as far as kind of end market breakdown within CAM and what that looks like, I don’t know, maybe semi ZDs versus legacy?

Pory McDonnell, CEO, Agilent: Yes. So CAM is about 21% of the company, and it breaks down probably twothree chemicals and then onethree semicon and advanced materials, of course, growing at

Brandon Couillard, Analyst: a faster rate. Got you. Okay. I want to touch on China for a minute. Obviously, big market for you.

You’ve been local there forever, right? What’s your state of the union on China? Different companies have kind of talked about seeing different things as far as What are you seeing there? And kind of what’s the kind of macro picture look like for China right now?

Yes.

Pory McDonnell, CEO, Agilent: If we zoom off to the macro picture, I mean, it’s a very it’s been a very stable business for us, not what it was, but $300,000,000 a quarter. We had an oversized win in the last stimulus order, about 50% win rate, 35,000,000. And we have a large stimulus coming. But if you look at let me break down the markets. If you look at pharma and biopharma in China, about €50,000,000,000 of out licensing this year in pharma molecules, which is double what it was last year.

So the level of innovation is really, really high. You also have in terms of the overall molecules that are coming out of Phase three and Phase four, like 30% globally are coming out of China, so high innovation rates. And the customer or the governments have now really started looking at how they can create free trade zones around biopharma, and we’ve heard some initial plans around that. So we think that pharma, the tools are going to be needed. It’s not going to be a huge jump up, but we have a replacement cycle motion there.

But also these tailwinds of innovation is going really well. On the CAM side, I think the research in batteries is very strong. Semiconductor, as you know, is very strong. And of course, the chemical side, we have a large installed base for replacement. So overall, putting it all together, even with PFAS, we see China steadily improving next year.

And that’s without stimulus, by the way. The stimulus that we expect at the end of the year, the opportunity is 130,000,000 to €150,000,000 It’s right on our sweet spot of opportunity, and we expect to see that in our in the calendar year Q4 into Q1. So overall and it’s really important, I think, Brannen, one of the things that’s very strategically important for us is that we’re continuing to stay very close to China in terms of our manufacturing capability, true manufacturing in China for China and then tapping into innovation groups there, particularly around productivity and automation. And I think we’re going to benefit from that in the

Brandon Couillard, Analyst: next few years. Just to clarify, that stimulus number you just gave, 120,000,000, 130,000,000, is that orders that you have booked? Are those competitive bids? And is that what you anticipate falling somewhere between calendar 4Q and 1Q in terms of revenue contribution?

Pory McDonnell, CEO, Agilent: Yes. So it’s sorry, it’s

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: Yes, that’s total size of the stimulus, which we expect to get a portion of that piece.

Pory McDonnell, CEO, Agilent: It’s the overall funnel. And I wouldn’t be expecting a 50% win rate because it’s a different pathology or surface area around that, but we expect a very strong win rate in that. So we expect we’ll see that in Q1 really of calendar year. Okay.

Brandon Couillard, Analyst: Is there any baked into the fiscal 4Q for stimulus? So anything you might get in the fourth quarter would be upside? Is that how we should think about it?

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: Yes. If anything, we may get some orders, that would be it. But I don’t think we’ll ship anything in the fourth quarter.

Brandon Couillard, Analyst: Okay. One question I frequently get is just like, look, if China can backward engineer a battery car to compete with Tesla at a lower price, why can’t they backward engineer a mass spec? And so like to what extent do you see low competition in some higher end analytical instruments that has kind of remained Western markets? Is that something you see popping up out there? Is it something you spend a lot time thinking about?

Pory McDonnell, CEO, Agilent: That’s a great question. I mean we’ve been thinking about that for over decade, but I would say in the last five years, we’ve been watching this. And if you look at the first stimulus order, which I think gives you good Pareto, and we see it’s public information, about 10% of that opportunity was won by local Chinese competitors. And where we see that is more in the GC and the molecular spectroscopy side. We don’t see it on the higher end side.

So no doubt about it. It is we have competitors there. But unlike Diagnostics, because of our breadth of technologies, and this is for everybody in the space, but also the mass spectrometry barrier, I would say, on us, we expect that it’s going to be we’re going to be able to compete very well over the next few years. But if you do not have true manufacturing in China for China, if you’re only badging something, you don’t get a chance to quote for that stimulus order. So that’s really, really important as we go forward.

So maybe it exists in molecular spectroscopy GC, but you don’t see you see it you

Brandon Couillard, Analyst: see some small spec or LC. No, you

Pory McDonnell, CEO, Agilent: see some LCs, but not really gaining. And I ran the service business for a number of years before coming into this. And one of the questions that I got as well, why do Chinese local companies not just do the service? And they haven’t been able to get a foothold for two reasons. It’s the scale around our digital platforms that we can do inside and also the technical capability very close to our customers is a barrier.

Brandon Couillard, Analyst: You kind of front running kind of my next question is you have multi vendor service in China, but it’s not been historically a market that has been conducive to service contracts. What does your mix look like there? How fast is that business growing? I guess kind of just outlook for

Pory McDonnell, CEO, Agilent: No, we’ve been working a lot on our portfolio in China from a contract basis. So we have a lower contractual service rate in China versus the rest of the world, but we think we can improve that with more offerings around our productivity solutions. So we see we have a lot of headroom to grow in services in China.

Brandon Couillard, Analyst: I think remind me, service may be 10% of the overall portfolio? And how big is it in China, kind mix or cross lab within China?

Pory McDonnell, CEO, Agilent: Services is $1,100,000,000 so it’s more than 15%, 20% of the company, I would say. And in China, we’re probably less than 10%, I would say.

Brandon Couillard, Analyst: It’s got to be in the single digits. Yes. Okay.

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: But again, lot still in China, though. It’s, again, transitioning customers more to contracts. Break fix, we’re still often in the still in those accounts doing that work.

Brandon Couillard, Analyst: Okay. Rodney, one of the things off the call is, I think you mentioned net pricing was up 100 basis points in the third quarter. I think you talked about some lag of how when it takes to actually show up in realized pricing. What does that look like for 2026? And does that include does that 100 basis points include tariff surcharges that you might be taking to offset some of those costs?

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: So the 100 basis points exclude we haven’t put in place any tariff surcharges yet. So those will go effective this in the fourth quarter. And we’re not expecting to see we’ll see a little bit of the surcharge effect probably October, but more of it will be showing up in the first quarter of next year. So the 100 basis point improvement that we saw in the third quarter on pricing was just was pure pricing excluding tariffs. And so we’ve continued to see pricing improvements.

As one of the things we mentioned, we were about a 50 basis points improvement a year ago. We’re now up to 100 basis points. And a lot of this is just to focus on from an IGNITE standpoint, working with the sales organizations and doing a better job of pricing over our portfolio and getting that price realization with our sales organization. So as we look to the future, we think we can continue to see that expand at a higher percentage, particularly as we start then adding in surcharges and other pricing. So we did a price increase in July, and then we just implemented some new surcharges in actually September.

And so again, all of this effect should start showing up again a little in the fourth quarter, more into the second or into the first half of next year.

Brandon Couillard, Analyst: Have you quantified the surcharge amount that you’re taking? And is it fair to think that net pricing adds 150 bps, maybe 200 bps in fiscal ’twenty six? Was the What

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: it what we announced?

Pory McDonnell, CEO, Agilent: Yes. I think we on the surcharge thing, it’s a point in time. But I think over next year, we feel good about 100 basis points improvement in price.

Brandon Couillard, Analyst: PFAS has been a strong growth contributor for several quarters. Seemed to maybe take a step back in the third. One of the things you called out was uncertainty around The U. S. Budget.

Just kind of unpack what you’re seeing from an EPA perspective. Are you concerned that the administration is going to roll back the PFAS regulations? And just where can this market be in two or three years?

Pory McDonnell, CEO, Agilent: Yes. So it’s kind of like, again, two situations. If you look at it globally, extremely pleased with PFAS. We grew 50% year over year across the globe. We did have a softer Americas around the EPA changes in the agency, and that’s a lot of confusion about who’s got what job and etcetera.

So CapEx has been challenged on us. I will say two things that makes us feel good about we think this is going to be a two quarter phenomenon in The U. S. How we’re going to come out of that back to the normal rates is, first of all, the regulations are set. There’s been no rollback in regulations, so they are set.

And secondly, there is an overhang of litigation. So you’ve seen some of the high profile litigations around PFAS. And when litigation comes in, testing follows with it. So I think we expect that to go back. But across the globe, regulations are changing.

We’re moving to food and air now where we have a sweet spot for GCMS. So you have this geographic expansion, regulatory changes, modality. What we’re testing is expanding. So we see it as a long term growth driver for us.

Brandon Couillard, Analyst: Have you sized the PFAS business recently? Is it somewhere in the 100 to $200,000,000 range?

Pory McDonnell, CEO, Agilent: Yes. It’s in that range. And the overall market, think, is about $500,000,000 Okay.

Brandon Couillard, Analyst: I want to touch on 26,000,000 I know you’re not necessarily giving guidance, but you sounded really upbeat about the fourth quarter. You raised the implied fourth quarter organic to, I think, dollars 5,000,000 to 6 now. Maybe pricing is a little better. It sounds like the replacement cycle still has some legs to it. Stimulus China stimulus is there.

NASD and BioVectra is going to roll into the base. That should be accretive next year. So to what extent do you sort of feel comfortable with kind of next year being a mid single digit year, number one? And you’ll pick up the tariff benefits of the $20,000,000 on the operating line? Maybe mix is a little more favorable next year.

So is kind of 5% core, 10% EPS like a reasonable sort of base case based on kind of what you’re pointing to in the

Pory McDonnell, CEO, Agilent: fourth quarter? We’re not going to guide, Brandon. I know we got asked that everywhere a number of times. But what I can say is we feel positive going into next year, but we have anything can happen in this environment. Geopolitically, tariffs can be shocks.

You can have changes in different rates. We’re taking a very prudent approach to it. If you look at our long term plan of 5% to 7%, I think we’re going to as we go through the year, we’re going to get into that range towards the end of the year, but we’re going to be very prudent in terms of what we’re going to put out and guide because of these changes, and we’ll be guiding in three months.

Brandon Couillard, Analyst: The balance sheet is in great shape. It’s been almost a year, right, since the BioVector deal. You passed on one or two things that have So traded in the you’ve been disciplined on M and A and capital allocation. Anything holding you back on the M and A front? And just kind of how do we think about, I guess, your priorities going forward?

You’ve been active on the buyback. Should we expect that to remain the case?

Pory McDonnell, CEO, Agilent: Yes. So look, I think if you look at our new strategy around markets, our enterprise strategy, the way we realign groups with that strategy, we’re looking very much at a company level about where we can add capabilities. And nothing going to be surprising. It’s going to be right in those pillars, right, faster growing areas, recurring revenue. And I would say if you come into our discussions, we have a very small list of very high quality targets we’re talking about.

But we’re very disciplined. Looked at a number of deals that were out there this year. They didn’t fit our strategy. They didn’t fit our profile in terms of revenue or profitability. So we’re going to wait for the right one.

But I think one of the really great we feel really good about M and A going forward is we’ve seen the engine of Ignite take out significant costs. So we have a cost synergy engine that can be applied going forward on it. And we’re in a number of attractive markets where we can add on. So I think it’s going to be interesting. And we have a balance sheet is strong.

Our leverage is low, so we’re in good shape.

Brandon Couillard, Analyst: Great. Maybe just to close, Porg, I mean, you’ve sort of been in the CEO seat a little over a year now, I think, gone through some organizational changes. What do you think is misunderstood, if anything, about Agilent from a premier point of view? I mean, valuation’s kind of well below historical levels, discount to the S and P. I mean if there’s one or two things that some investors may be

Pory McDonnell, CEO, Agilent: sort Yes. Of I don’t want to talk about let me put it into context for the quarter. That quarter just doesn’t fall like it was extremely strong execution by the team. Everybody says their commercial engine is the best and they’ve reorganized commercial. But having reorganized commercial for three years before coming into this job, we have an amazing service and sales connection with customers that makes us very, very different.

And then you look at our surface area across all these markets with these sector drivers. We’re right at the heart of these areas on it. And the areas we’re going to continue to be really focused on is asymmetrically investing in innovation pipeline. The CDMO business makes us very different. It’s very sticky.

Our cross lab business makes it very sticky. Actually, our China position of where we haven’t we stayed very close makes us very sticky. So I think we’re very excited about it. And there’s been a lot of change in Agilent, I would say, in the last year. But each one of these changes has actually led to that quarter, so our applied markets and so on.

And I think Ignite is we’re in the early innings of Ignite. That’s going to roll for the next few years of really creating a lot

Brandon Couillard, Analyst: of value. Superb. Well, unfortunately, out of time, so I’ll have to leave it there. Thanks so much for being here, both of you. Everyone, have a great day.

Thanks a lot.

Rodney Gonzalez, Interim CFO and Principal Accounting Officer, Agilent: Thank you.

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