Agilent raises 2025 revenue outlook to $6.91B–$6.93B as core growth accelerates to 6.1% in Q3

Earnings Call Insights: Agilent Technologies (A) Q3 2025

MANAGEMENT VIEW

* CEO Padraig McDonnell highlighted, "Agilent delivered outstanding results of $1.74 billion in revenue in the third quarter, exceeding our guidance, while continuing to transform our enterprise operating model in a highly dynamic environment. We also delivered $1.37 earnings per share in the quarter." McDonnell emphasized, "our fiscal 2025 third quarter marks our fifth consecutive quarter of sequential core revenue acceleration," and announced a raised full year revenue guidance to $6.91 billion to $6.93 billion, representing a core growth of 4.5% at the midpoint.
* McDonnell noted, "Our momentum is broad-based and led by our 2 largest end markets, Pharma and Chemicals & Advanced Materials. In Q3, both grew 9% and 10%, respectively." He cited strong adoption of the Infinity III LC platform and robust uptake in GC and GC/MS platforms as key product drivers.
* The CEO reported, "We streamlined the enterprise by reducing management layers by more than 15%. That didn't just remove cost. It gave us speed. We're making decisions faster and empowering our teams to be agile." He also described Ignite as "a differentiating growth driver for Agilent."
* Interim CFO Rodney Gonsalves stated, "Q3 revenue was $1.74 billion, above the high end of our guidance. On a core basis, we posted growth of 6.1%, while reported growth was 10.1%. Currency had a favorable impact of 2.1%. M&A contributed 1.9%, in line with our expectations. Gross margins in Q3 came in at 53.1%, down year-on-year, driven by currency, tariffs and the impact of downtime to expand capacity of BIOVECTRA."
* Gonsalves added, "Putting it all together, Q3 earnings per share were $1.37. That was at the high end of our expectations and grew 4% from a year ago."

OUTLOOK

* McDonnell communicated, "Given this strength, we are raising our fiscal 2025 full year revenue guidance to the range of $6.91 billion to $6.93 billion, representing a core growth of 4.5% at the midpoint. This is a $150 million increase from our prior range at the midpoint and 1.5 percentage points of additional core growth."
* Gonsalves guided, "We expect Q4 revenue to be in the range of $1.82 billion to $1.84 billion. This represents an increase of 4.8% to 6% on a core basis and 7.1% to 8.3% on a reported basis."
* Fourth quarter non-GAAP EPS is projected to be between $1.57 and $1.60. Full year non-GAAP EPS guidance is now $5.56 to $5.59, representing a year-on-year increase of 5.1% to 5.7%.
* Management stated the company expects full tariff mitigation by fiscal 2026.

FINANCIAL RESULTS

* Agilent reported Q3 revenue of $1.74 billion and non-GAAP EPS of $1.37. Core revenue growth was 6.1%, with reported growth of 10.1%. Currency contributed a 2.1% tailwind, while M&A added 1.9%.
* Gross margins were 53.1%, impacted by currency, tariffs, and BIOVECTRA downtime. Operating margin stood at 25.1%.
* Operating cash was $362 million. Capital expenditures were $103 million. The company purchased 85 million shares and paid $71 million in dividends. Net leverage ratio was 0.9.
* Gonsalves stated, "We are targeting a sequential operating margin improvement of approximately 230 basis points" for Q4.

Q&A

* Daniel Gregory Brennan, TD Cowen, asked for details on margin factors and returns from variable pay and commercial spend. McDonnell answered, "As the tariffs along with related logistics costs were the biggest single impact that we had in '25...the headwind will peak in Q4 and the net impact in dollars will trend downwards at the start of '26, and we'll fully mitigate tariffs in '26."
* Tycho W. Peterson, Jefferies, inquired about reduced dependency on executive sign-offs in Pharma and PFAS softness in the U.S. McDonnell responded, "We've really noted that across all geographies...replacement cycle that we've talked about...the velocity has improved." On PFAS, he noted, "In Americas, we were down 20%, and that was really around the U.S. EPA changes that drove impact."
* Rachel Marie Vatnsdal Olson, JPMorgan, pressed on 2026 expectations. McDonnell replied, "Revenue in the second half of '25 was meaningfully stronger than the first, and that provides a really positive indication momentum into '26."
* Michael Leonidovich Ryskin, Bank of America, asked about tariff impacts on margin. Gonsalves said, "We recognized about $35 million...in tariff costs in the third quarter. That's up about $10 million. And we expect the same level in the fourth quarter. So $70 million for the second half."
* Jack Meehan, Nephron Research, questioned trade tariff influences on buying behavior. McDonnell said, "We have seen no pull forward. We've seen nothing in terms of stocking. We monitor that quite closely."

SENTIMENT ANALYSIS

* Analysts adopted a neutral to slightly positive tone, focusing on sustainability of margin improvements, tariff mitigation, and end-market strength.
* Management maintained a confident tone during prepared remarks, emphasizing "confidence in delivering another step-up in revenue into Q4," and responded with transparency in Q&A, while occasionally signaling caution about cost pressures and macro environment.
* Compared to the previous quarter, management's tone showed increased confidence regarding revenue growth but continued to address tariff headwinds and margin concerns.

QUARTER-OVER-QUARTER COMPARISON

* Revenue growth accelerated from 5.3% core in Q2 to 6.1% in Q3. Gross margins declined year-on-year due to tariffs, currency, and downtime, while operating margin remained steady at 25.1%.
* Full year revenue guidance was raised by $150 million at the midpoint, while EPS guidance remains unchanged at the midpoint. Tariff cost assumptions increased to $20 million net cost for the year, up from minimal impact previously guided.
* Management continues to stress full tariff mitigation by 2026. Analysts’ focus shifted further toward the sustainability of margin improvements and clarity on 2026 growth.
* Commercial investments and variable pay were cited as incremental cost factors in Q3. Ignite’s enterprise impact and product-driven growth remain central themes.

RISKS AND CONCERNS

* Tariff expenses were higher than prior expectations, with additional $10 million impact in Q3 and similar levels projected for Q4.
* Margin pressures persisted due to tariffs, variable pay, and commercial investments. Management’s mitigation strategy includes supply chain reorganization, pricing actions, and Ignite-driven efficiencies.
* Uncertainty remains around U.S. EPA regulatory changes, especially impacting PFAS-related capital spending in the Americas.
* Biopharma capital budgets remain conservative, influenced by macroeconomic conditions and interest rates.

FINAL TAKEAWAY

Agilent management emphasized durable momentum in core revenue growth, led by strength in Pharma and Chemicals & Advanced Materials, while elevating full-year revenue guidance. The company continues to execute on its Ignite operating model, targeting margin improvement and full tariff mitigation by 2026. Product innovation, commercial investments, and cost discipline are expected to support continued market share gains and operational resilience into the next fiscal year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/a/earnings/transcripts]

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