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Ladies and gentlemen, thank you for joining us, and welcome to the Q2 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 Rajeev Savant, Vice President of Investor Relations. You may begin.
Thank you, Corina, and welcome everyone to Agilent's conference call for the second quarter of fiscal year 2026. With me on the line are CEO Padraig McDonnell and CFO Adam S. Elinoff. Joining for the Q&A will be Simon May, President of the Life Sciences and Diagnostics Markets Group; Angelica Riemann, President of the Agilent CrossLab Group; and Mike Zhang, President of the Applied Markets Group. This presentation is being webcast live. The press release for our second quarter financial results, investor presentation, and information to supplement today's discussion, along with a recording of this webcast are available on our website at investor.agilent.com. Today's comments will refer to non-GAAP financial measures. Non-GAAP measures are supplemental and should not be considered a substitute for GAAP results. You will find the most directly comparable GAAP financial metrics and reconciliations in the press release and on our website. Unless otherwise noted, financial metrics are year over year. All references to increases or decreases in, and references to revenue growth are on a core or organic constant currency basis. All references to profitability metrics are on a non-GAAP basis. Core or organic constant currency 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 would like to turn the call over to Padraig.
Thanks, Tejas. Welcome, everyone. We delivered an excellent second quarter with stronger-than-expected revenue growth, significant margin expansion, and double-digit EPS growth. Importantly, the quarter demonstrates that the operational and P&L benefits from our Ignite operating system are increasingly becoming structurally embedded in the business. For the second quarter, Agilent reported $1.83 billion in revenue, growing 6.3% on a core basis and exceeding the high end of our guidance by 80 basis points. The strength was broad-based across our largest end markets and supported by continued replacement site momentum, innovation-led share gains, and improving operational execution. Operating margin of 26.4% for the quarter represents a year-over-year improvement of 130 basis points and a 180 basis point improvement on a sequential basis—well above our guidance despite the macro and geopolitical environment. Earnings per share of $1.49 represents 14% year-over-year growth which also exceeded the top end of our guidance by $0.07. We delivered at or above our long-term plan on all metrics: revenue growth, margin expansion, and EPS growth. As we enter the second half, I want to highlight the key dimensions of our strategy that are driving our performance. First, we continue to build on the extraordinary level of customer intimacy and trust that we have worked hard to gain and that differentiates us from the competition. This differentiation is increasingly translating into share gains across key workflows and geographies. Second, DATROS translates into insights that inform our innovation flywheel, leading to products and services that drive success for our customers and Agilent. That includes the exciting launches coming up next week at the 74th American Society for Mass Spectrometry Annual Conference in San Diego. Next, we have increased capabilities and the level of talent throughout the organization, improving speed, agility, and operational discipline. This is driving a step-function improvement in execution. And finally, the significant benefits of Ignite are increasingly plain to see. These include strategic pricing that is aiding our top-line momentum, productivity initiatives such as simplifying our structure, and generating greater value through strategic relationship management; a centralized focus on project outcomes that drives business results; and increasing supply chain agility and operational discipline that is strengthening margins and business resiliency while providing flexibility to fund our most critical innovation efforts. With our diversified and geographically balanced portfolio, and healthy momentum across key end markets, the strong foundation we have built through Ignite provides us with the resiliency to compound our success and deliver results in any environment. Importantly, we expect these operational improvements to increasingly support higher-quality and durable earnings growth. Before getting into the specifics of our second quarter results, I want to spend time on the key growth drivers going forward. These include superior commercial execution combined with improvements we are seeing across our end markets, the instrument replacement cycle, our exciting slate of launches at ASMS, and our recent agreement to acquire Biocare—and how Ignite is fueling Agilent's performance. We are seeing continued health in our key end markets, aligned with our expectations at the start of the year. Combined with commercial execution, our differentiated portfolio, and best-in-class service, that health is driving our results. Pharma continues to deliver with 6% growth in the quarter. This includes another quarter of low double-digit growth in biotech led by large caps, while positive demand signals from small to mid caps begin to emerge. Chemical and advanced materials grew a robust 8%, fueled by strong semiconductor demand and healthy chemical CapEx investments in the Americas. Diagnostics and clinical grew 11% driven by the strong performance of expanding cancer and diagnostics offerings. And finally, our unique technology is helping us win outsized shares in forensics, where we delivered greater than 50% growth in the quarter. That includes the TSA security contract we mentioned during the last call, as well as multiple competitive large tender wins in Asia and Europe. Regarding the TSA contract, we are delighted to be able to share more details as you might have seen in our recent press release. The TSA would apply our new bulk alarm resolution technology at airport security checkpoints at the FIFA World Cup host cities in the U.S. This unique technology provides the ability to screen larger quantities of liquids, powders, and solids. With implementation going very well, we are excited about the opportunities to apply this technology more broadly. We also had another very strong quarter of instrument revenue, resulting in high single-digit growth. This included market-leading low double-digit growth in LC and LCMS, and in GC. Our replacement site momentum continued. That plus share gains driven by the customer-centric innovation that is embedded in our new Infinity III LC and our 8895 GC are delivering exceptional growth. As customers are looking to upgrade their fleets, you see how new instruments solve their most challenging workflow problems while improving efficiencies. Looking ahead, we see continued instrument strength. Our commercial excellence delivered a book-to-bill above 1.0 again this quarter, marking the ninth consecutive quarter where instrument orders met or exceeded revenue. Even as recent launches like the Infinity III LC and Omnis family continue to drive growth, we are looking forward to our next wave of innovation that will further support our durable growth, strengthen our install base, and support recurring consumables and services pull-through. We will showcase these new launches at ASMS next week. Starting in spectroscopy, we are introducing a revolutionary new 9,500 triple quad ICP-MS. This launch brings advanced triple quad capabilities to a broader customer base by directly addressing key customer pain points around throughput, workflow complexity, and operating costs. The 9,500 solves these challenges with a patented dual-cell system that provides increased throughput; a revolutionary air mode that eliminates the need for dedicated oxygen gas, lowering operating costs; and an intelligent OpenLab ICPMS that reduces complexity and automates method migration, lowering the technical expertise required to operate the system. This versatile instrument will be relevant across our customer base in advanced materials, mining, food, and environmental labs. Importantly, the innovations embedded in the 9,500 were a direct result of customer feedback about their most pressing problems, and will serve as a differentiated architecture for ICP-MS growth well into the future. Moving to our gas-phase business, we are launching upgraded flagship GCs. These launches further strengthen our position in high-productivity analytical workflows where our customers increasingly prioritize efficiency, automation, and total cost of ownership. Highlights of our new GCs include improved performance with up to 30% faster oven cool-down and higher throughput; built-in intelligence features to monitor performance, track parameters, and assist in proactive maintenance; and technology to conserve or eliminate helium gas, with real-time gas and power usage tracking. We have been a long-standing leader in providing helium alternatives for GCs in response to customer needs in the current helium supply environment. These productivity and resource efficiency benefits are becoming increasingly valuable for our customers. Turning to our consumables portfolio, our Altura Ultra Inert LC columns continue to see strong traction. They grew more than 50% sequentially, reaching 75% of the top 20 biopharma accounts. This rapid adoption reinforced the strength of our innovation engine and unified commercial organization. We will continue to build on that strong initial momentum with additional waves of column launches. Our newest Altura columns debuting at ASMS are targeted to address workflows for protein and peptide therapeutics, large oligos, gene therapy, and vaccines. On the software front, we are also expanding our capabilities in OpenLab CDS with version 3.0. This important release provides a unified platform to support analysis for chromatography, mass spec, and spectroscopy systems across our portfolio, including for the first time our high-resolution mass spec. The continued expansion of OpenLab further strengthens workflow integration across our portfolio and enhances the strategic value of our install base. We are also delighted to announce that we are building upon our long history in China with the launch of our China Innovation Center. Leveraging the country's deep base of technical talent and a vibrant innovation ecosystem, we intend to strengthen our R&D capabilities across multiple emerging areas, including digital, AI, and automation to better support our customers. We are particularly excited about automation, where we see excellent potential to build on our in-house capabilities with unique automation development expertise in China. Turning to the fourth pillar of our strategy, I want to provide an update on the impact of our Ignite operating system that is building enterprise capabilities and driving a culture of accountability and execution excellence. Ignite had a significant impact on the business, on both the top and bottom lines during the quarter, and is poised to deliver compounding benefits in the years to come. Our strategic pricing capability delivered approximately 200 basis points of pricing in Q2, putting us on a path to exceed our initial full-year goal of 100 basis points. We also reached an important milestone during Q2, with the tariff task force achieving full mitigation of the incremental tariffs that began in late spring. The combination of strategic manufacturing moves and targeted price adjustments have now fully offset the operating profit impact of these tariffs. This task force also helped us build a playbook for addressing trade and geopolitical challenges, which has been a critical resource in navigating the current Middle East conflict. Our digital initiative is driving accelerated growth of our e-commerce platform, delivering ease of use for customers and lower cost per transaction for Agilent. In Q2, new digital orders grew 9%, including more than 20% ex-China. Ignite has transformed our supply chain capabilities, making it a competitive advantage. A recent example of this is our quick response to the logistics challenges and material shortages arising out of the conflict in the Middle East. Ignite is providing incremental procurement savings and supply chain resilience that gives us confidence as we work to absorb inflationary cost pressures during the remainder of the year. On the M&A front, we were excited to announce the Biocare acquisition in March. I am confident that the robust long-term growth, strong strategic fit, and opportunities for synergy realization make the financial returns on this transaction highly attractive. Ignite is driving our pre-close preparations for the Biocare integration, ensuring we are ready to hit the ground running as soon as the transaction closes. I look forward to welcoming our new colleagues to Agilent later this year. While it has been tremendously satisfying to see Ignite's impact to date, there is a lot more to come. This includes our push for manufacturing excellence, where we are being front-footed in building resilience across our business and setting up the organization to deliver durable long-term growth. We built our AI-enabled supply chain control tower to create greater prediction and adaptive calibration of our supply and demand plans, leading to inherent resiliency, faster issue response times, and much higher schedule attainment. After implementing this new capability, we have seen continued meaningful improvements in scheduled plan attainments, order conversion ratios, and overall cycle times. We have also reconfigured our operations organization to add greater depth in planning, lean manufacturing, and digital engineering. All of this contributes to improved delivery, greater agility, and optimized cost structure. That, in turn, reduced manufacturing overhead by more than 50 basis points versus last year. The 9,500 ICP-MS we are featuring at ASMS is a great demonstration of how our Ignite operating system is accelerating our innovation—expediting the launch by a full quarter. Our optimized approach to innovation enabled faster decisions and more focused capital allocation. We clearly established the 9,500 as the top priority, and dynamically reallocated resources to accelerate timelines and outcomes. We reinforced this through focused discipline and cross-functional execution across sales, R&D, and manufacturing teams. The teams worked closely to accelerate technology transfer and improve yields, pulling our production readiness forward. Last but not least, AI is a key FY 2026 enterprise focus area for us. AI has the potential to be a tremendous growth driver for the life sciences industry. Pharma customers are leaning into AI to accelerate drug development and reduce the odds of expensive late-stage failures. There is a growing need for large-scale multimodal datasets to train AI models, which will require significant investments in the wet lab. By moving the needle on drug development ROI, AI holds the promise of putting our largest customer constituency on a better footing. A higher number of approvals coming through the drug pipeline should be a strong tailwind for us given our leading position in downstream manufacturing QA/QC workflows. In light of the regulatory and patient safety aspects of commercial scale drug manufacturing, we believe this part of the value chain will meaningfully benefit from AI use upstream. Beyond being accretive to our top line in the medium term, we are also deploying AI within our own business. I look forward to sharing more details on our AI efforts very soon. Now let me share some additional details on our Q2 results, starting with our end markets. As I mentioned earlier, pharma grew 6% this quarter, marking the fifth consecutive quarter of growth in the mid single-digit to low double-digit range. Within pharma, biotech grew low double digits for the third consecutive quarter, while small molecule grew low single digits. Our GLP-1 momentum continues, delivering about 20% growth year to date, with a robust contribution from the analytical lab business in the second quarter. We also remain engaged with our large pharma customers about their plans to reshore operations to the U.S. We continue to expect initial orders at the end of our fiscal year with revenue starting in FY27. CAM grew 8% and C&EM grew 11%, both exceeding expectations. Environmental forensics delivered 13% growth compared to the low single-digit guide, with the upside in forensics, as I mentioned earlier. Environmental delivered low single-digit growth against a challenging double-digit year-over-year compare. Food, our second smallest end market, declined 3% with softer-than-expected results in Asia due to funding delays in China and India. Academia and government, our smallest end market, declined 5% in line with expectations. Most importantly, our customer-centric approach is working, and we continue to win against the competition in all major geographies with share expansion, again validated by industry market share data. Turning to updated guidance. Building on an excellent second quarter, and with the outlook for end markets broadly consistent with our original expectations, we now expect core growth of 4.5% to 6.0% for the full year. At the midpoint, this represents an increase of 30 basis points versus our prior guide. We are also increasing our expectations on the bottom line, with updated EPS guidance of $6.00 to $6.10 for the full year, an increase of $0.08 at the midpoint. And with that, let me hand it over to Adam, who will provide additional details on the quarter and our financial outlook for the remainder of the year.
Thanks, Padraig. Good afternoon, everyone. In my comments today, I will provide additional details on revenue in the quarter, walk through the income statement, and cover other key financial metrics. I will then cover our updated full-year and third-quarter guidance. Revenue was $1.83 billion in Q2. On a core or organic constant currency basis, we posted growth of 6.3%. Reported growth was 10%. Currency had a favorable impact of 3.7%, a slightly larger tailwind than our February guidance. At a business segment level, AMG revenue grew 11% in the quarter on a core basis, well ahead of expectations. Growth was again led by double-digit performance in spectroscopy. That business continues to see strong demand for its market-leading tools to support semiconductor production at the fabs and with their downstream supply chain. During the quarter, AMG also benefited from the TSA airport security contract that Padraig discussed earlier. LDG revenue grew 9% on a core basis, nicely ahead of expectations. Low double-digit growth in LC and LCMS and in our cancer diagnostics business drove the upside. We also saw high single-digit growth from specialty CDMO, which we recently rebranded as our Advanced Therapeutics division. We continue to expect our Advanced Therapeutics division to deliver mid-teens growth in fiscal year 2026, with our production schedule set up to deliver a pickup in growth in the second half. Notably, we recently achieved mechanical completion of our Train C build-out, positioning us well to begin revenue generation at the new facility next spring. Our cancer diagnostics business, including our clinical pathology products and companion diagnostic services, grew low double digits this quarter. This growth was led by the performance of our new Omnis family, which continues to gain traction. We also saw strong double-digit growth in pathology reagents driven by our expanding instrument installed base. This business is performing extremely well and will get even stronger with the addition of Biocare's clinically focused antibody menu. ACG grew 2% in the quarter on a core basis, in line with guidance due to Lunar New Year timing and a challenging consumables compare driven by pre-tariff stocking in China last year. Ex-China, ACG grew at the high end of mid-single digits and consumables grew high single digits. On a geographic basis, we saw our strongest results in the Americas with 11% revenue growth. We saw broad high single-digit-plus results in all end markets except academia and government. Europe and Asia ex-China revenue grew high single digits, with excellent diagnostics momentum in Europe, while pharma and semiconductor investments were strong in Asia ex-China. China declined 9%, a bit more than we had expected. On a first-half basis, China was roughly flat, very much in line with our full-year guide. Q2 gross margins were 55.0%. On a year-over-year basis, gross margins increased by 90 basis points from nice leverage on incremental volumes, Ignite momentum, and favorable regional mix. Operating margin was 26.4%, an increase of 130 basis points year over year—well ahead of guidance—driven by our healthy gross margin performance and continued realization of Ignite operating system efficiencies. Moving below the line, we had $11 million of other income, while our tax rate of 14.5% was as expected. Finally, we had 283 million diluted shares outstanding in the quarter, in line with expectations. Putting it all together, Q2 earnings per share were $1.49 and grew 14%—a reflection of our superior execution and operational excellence. Now let me turn to cash flow and the balance sheet. Operating cash flow was $277 million in the quarter, and we invested $76 million in capital expenditures. Q2 cash flow reflects a tax deposit that will largely be offset by a related refund anticipated around the end of the fiscal year. We purchased $65 million in shares and paid $72 million in dividends in Q2. We ended the quarter with a net leverage ratio of 0.7 turns, maintaining our strong balance sheet. Now let me share some additional details on the updated outlook for the full year and the guidance for the third quarter. Based on the strong performance, we now expect fiscal year 2026 revenue to be in the range of $7.39 billion to $7.49 billion on a reported basis. This range represents growth of 4.5% to 6.0% on a core or organic constant currency basis—an increase of 30 basis points at the midpoint versus the prior guide. Currency is now expected to be a 1.8% tailwind during the year. Turning to our end markets, business segment, and geographic growth assumptions: we continue to expect high single-digit growth in pharma and a low single-digit decline in academia and government. Based on strong results in the first half and our outlook for the remainder of the year, we are raising our expectations for chemicals and advanced materials as well as diagnostics and clinical from mid-single digit to mid-to-high single-digit growth. With our momentum in forensics providing upside, we are raising our guidance for environmental and forensics from low single digit to low-to-mid single digit growth. In food, we are lowering our guide from roughly flat to a low single-digit decline due to delays in government funding in China and India and inflationary headwinds related to the Middle East conflict. We now expect mid-single digit growth for all three business segments, increasing AMG from low single digit to mid single digit to reflect the strong Q2 performance. Regionally, our only update to our prior full-year guidance is in Asia ex-China, where we are increasing our assumptions from mid single digit to mid-to-high single digit growth. Moving down the P&L, we are also raising our full-year operating margin expansion target to 85 basis points at the midpoint of our revenue guidance, driven by continued operational momentum. Our expected tax rate is unchanged at 14.5%, and we now expect $31 million in other income and 283 million diluted shares outstanding for the full year. Fiscal year 2026 earnings per share are now expected to be between $6.00 and $6.10, an increase of $0.08 at the midpoint, representing earnings growth of 7% to 9%. For your modeling, let me share some additional expectations we have incorporated into our guidance for the year. The Middle East conflict and demand for memory chips puts upward pressure on our costs; we are confident that the Ignite operating system will deliver meaningful efficiencies and help absorb those inflationary impacts within our H2 outlook. There is no change to our operating cash flow range of $1.2 billion to $1.7 billion. We are now expecting to invest approximately $450 million in capital expenditures, down $50 million versus our prior guidance. Now moving to the third quarter, we expect our reported revenue to be in the range of $1.83 billion to $1.85 billion. This represents growth of roughly 4.4% to 5.9% on a core or organic constant currency basis, while currency is expected to be approximately a 0.6% tailwind. Our guide assumes 283 million diluted shares outstanding in the third quarter. EPS guidance for the quarter is $1.48 to $1.50, representing growth of 8% to 9%. While our second-half core growth guidance is roughly similar to our first-half performance, it comes against the backdrop of increasingly tougher comps. The sequential quarterly two-year stack growth implied by our guidance demonstrates our accelerating momentum through the year. Finally, I wanted to be clear that our guide does not include the impact of Biocare nor any benefit from potential tariff refunds. With that, I will turn the call back over to Padraig for closing comments.
Thanks, Adam. I could not be prouder of the way our team executed in the second quarter, once again demonstrating our ability to perform in all market environments. In the near term, our improved full-year outlook reflects healthy demand in our key end markets and stronger underlying operational performance across the business. This includes pricing realization, productivity gains, and replacement cycle momentum. Longer term, our broad and diverse portfolio across end markets and geographies provides differentiated resiliency and enables multiple avenues to success, with a market-leading services team that cultivates unparalleled customer intimacy, a deep bench of talent, an impressive cadence of innovation launches, and our Ignite operating system that has come into its own and is delivering compounding results. Agilent will continue to sustainably outperform the competition. Before we close, I want to take a moment to thank our customers for their trust and express my gratitude to the Agilent team for delivering fantastic results. And with that, I will turn the call back to Tejas for the Q&A. Tejas?
Thanks, Padraig. Karina, can you please share the instructions for the Q&A?
分析師問答
Thank you. 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 in to today's call, please press star-9 to raise your hand, and star-6 to unmute. Your first question comes from the line of Vijay Kumar with Evercore. Your line is open. Please go ahead.
Hi, guys. Thank you for taking my question. And, Padraig, congrats on the fine print share. Maybe on my first one, if you look at some of the moving pieces here, CAM was a standout for us. On the instrument side, LCMS, GC double digits was standout. It looks like overall instruments, high singles, implies the academia and government was still down. So maybe talk about is that A&G, what are you seeing in A&G trends and on the CAM side? And I know with the Middle East situation, there has been some talks about end-market concerns. Maybe talk about how CAM progressed and your confidence in that CAM outlook.
Great. Thanks, Vijay. First of all, we are delighted with the results—a really strong result from the team where we are taking share across the board and Ignite is really running on all cylinders. CAM was 8% growth in Q2, which beat our mid-single-digit guide. We are mid-single digits in chemicals, high mid-single digits and low double digits in advanced materials, and we had actually low teens CAM growth ex-China. After a strong high-single-digit growth in H1, we are going to see how it plays out with the Middle East going forward. It is really driven by a number of things. I think increased CapEx spending, likely returns late in the calendar year, and continued investment in the semiconductor space continue to be a real sweet spot for us. What we are seeing is substantial leadership in our key platforms. When you look ahead, there are multiple factors: the chemical sector is driven by demand from downstream material industries like semiconductors and batteries; continued investment in semiconductor and supply chains. Overall, really strong across the board. We do not read too much into the Middle East in terms of what is happening; we are going to see how that goes. But we are seeing good momentum in our funnels continuing on the CAM side. On academia and government, you had a question there: we expected a decline and we had a decline of minus 5% in Q2. Americas was flat. Americas instruments comps started to ease actually, and we see a return to stability on that side. You see that the OMB requirement to fully redistribute appropriate funds is starting to happen. So overall, we see a continued steady state—ongoing muted A&G, but overall an extremely strong result.
That is helpful. Maybe, Adam, one for you on the margins. Pretty impressive margin print here. It looks like volumes were slightly above the high end of your guidance, but the leverage was pretty impressive. How much was pricing? Maybe talk about what drove margins and how you are thinking about progression here. It looks like Q4 we are looking at a pretty big quarter for margins—any visibility into the Q4 ramp?
Yeah. So thanks, Vijay. A couple points. The margin beat this quarter was driven by a couple things. One, Ignite, and I say that in the broadest sense of the word. That includes pricing—you heard over 200 basis points of pricing in there—as well as execution excellence from the team in structural improvements we are seeing, specifically in operations as well as productivity from our procurement team. So all of the Ignite savings are really starting to run through the P&L now. Then there is volume leverage. The other piece I would point out is the geographic mix, as we had a larger skew in Q2 toward the Americas, which helps our margin. Looking ahead, what you see is two things. One, you see a flat sequential Q2 to Q3, and that is really driven by a couple of pieces: you see the favorability that we have in Ignite—which, again, is a broad set of improvements—and then that is partially offset by some inflationary pressure that we are seeing and geographic mix normalizing. But then you see expansion again from Q3 to Q4, up about 120 basis points, which is very normal from what we have seen in previous years. When I look at it and take a step back, our H1 to H2 ramp from an operating profit perspective is about 53 basis points, and this is very much normalized to what we would normally see H1 to H2. So the ramp here is fully in line with historical norms. Feel very confident about it and really excited about the second half of the year.
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. Maybe one on the specialty CDMO—Advanced Therapeutics now. It sounds like high single-digit growth in the quarter, pretty healthy there. Obviously you are still talking about mid-teens. I think you talked about the production schedule has an uptick in H2. Can you just talk about the visibility? Is that all kind of contracted and covered at this point? It sounds like Train C next spring, so maybe not this year. Just talk about the visibility on the second-half uptick of that business, what you saw in the quarter, how much go-forward revenue is covered by contracts you have in place here.
Thanks, Patrick, and thanks for the question. I'll start off and hand it over to Simon for more details. To ground people, we are a specialty CDMO business focused on siRNA, peptides, GLP-1s, and high-potency APIs. Q2 growth at the high end of high single digits was within expectations with back cadence resulting in a normal quarter-to-quarter variance. We see that over and over again. We continue to expect mid-teens growth for FY26 based on our production schedules and demand dynamics. Simon, some more color on the trends?
Yeah. Thanks, Padraig. This is Simon. Just to add a little bit more color: the short answer is we have really strong visibility in the second half of the year. The phasing of production schedules points towards very strong year-over-year growth in the third quarter and in the fourth quarter—we have a tough compare in Q4, but it all adds up to mid-teens growth for the year, which is what we are projecting. As you heard in the script, we had a major milestone in the second quarter with mechanical completion of Train C—very pleasing to see that—and we remain on schedule for go-live in the spring of 2027. We already have encouraging signs for demand into 2027 with strong line of sight to the bulk of FY27 demand tied to Train C, though, as always, the further out you get, the more variability there can be in bookings and production schedules.
Okay, that is really helpful. And then, Padraig, maybe one on the instrument strengths, just following up there. Nice to see low double-digit growth in LC/LCMS. Can you talk about what markets you are seeing that strength in? You have the replacement cycle going—how much of it is replacement cycle versus share gains? What are you hearing from the field on the instruments, and how durable is this kind of low double-digit growth for the rest of the year in LCMS?
Thanks. We continue to see strong momentum on LCMS and GC, low double digits for both businesses, and we expect the LC replacement cycle to be a 200–300 basis point tailwind to LC growth. We have seen the normal trajectory of the replacement cycle, but continued momentum and very strong funnels. It was actually the best market share data I've seen in some time—so not only are we replacing, but we are also taking share in competitive accounts, which continues the momentum. If you break it down, it is driven by three factors: underinvestment leading to aging fleets; favorable CapEx conditions in the U.S. and Europe; and customer-focused innovations that are compelling reasons to replace. We expect that to continue and we're seeing it across all markets. I also want to call out our GC replacement cycle—sometimes under talked about—but our GC business is low double-digit growth. The typical GC lifespan is about 10 years, and the replacement cycle there will drive a more moderate annual uplift over a longer period of time, but it's compounding. We expect that to be about a 100 basis point tailwind. Instruments are really good, funnels are strong, and CapEx is being released—none of this would be possible without a commercial team that can execute on these innovations.
Your next question comes from the line of Tycho Peterson with Jefferies. Your line is open. Please go ahead.
Hey. Thanks. Padraig, I want to probe more on the semiconductor strength. This is something you have not talked a ton about, but maybe quantify the size of the semi business today. I think you are more levered to logic than memory, if that is right. But just talk a bit about sustainability of double-digit growth in spectroscopy. How should we think about new fab construction and pricing power? I think there is a fair amount of pricing power in this market right now.
Yeah. There is really strong pricing power, and of course our systems are increasingly being specified in fabs and in downstream high-purity chemical companies around fabs. Semiconductor is about 30% of the advanced materials market as we look at it, and we are seeing continued growth in both fabs and their supply chain. We are seeing it across the board: systems being placed inside fabs and then qualified. As that cycle continues, you'll see continued growth. We are very optimistic about the durability of this demand.
And then on chemical, you did kind of buck the trend here. Are you not seeing what others are on the chemical side because of the GC replacement cycle? Is that the right way to think about it?
I think it's a mix. We have seen strong CapEx demand across regions. The GC replacement cycle is certainly a tailwind and our new innovations are resonating with customers. The chemical sector is being driven by downstream demand from materials used in semiconductors, batteries, and advanced polymers. After several years of underinvestment in CapEx, replacement momentum continues. We do not see that stopping anytime soon.
Your next question comes from the line of Puneet Souda with Leerink. Your line is open. Please go ahead.
Hi, Padraig. Thanks for taking my questions. First, can you elaborate on how CAM improved throughout the quarter and your confidence there—is this more semi-driven or instrumentation versus overall improvement in chemical? There was the start of the conflict, but then the conflict eased a bit. Maybe just talk about the trend line and what gives you continued confidence in that core chemical business as well. Second, could you provide a view into the pharma and biotech business—how you are serving those customers from discovery versus preclinical and later stages? Are you positioned more into later stages that might be helping as capital funding returns to biotech? And along those lines, talk about biotech follow-ons and capital raises—how is that flowing into your business?
Our momentum on CAM has been steady and increasing, and we are very pleased with high single-digit growth in Q2. Our differentiation in technologies is driving share gains in advanced materials where we saw low double-digit growth. While inflationary pressures from the Middle East may affect capital spend, we expect a strong recovery and have not seen that in our numbers. We are number one in the CAM market by far with substantial leadership positions in GC, GC-MS, and spectroscopy. CAM customers tend to be more cautious in dynamic macro environments, so we are watching inflationary pressures closely, but there is prudence embedded in our H2 outlook. We expect H2 to accelerate from our H1 momentum. On pharma, our position is very much downstream in QA/QC as well as in development. We are in the sweet spot for reshoring, replacement cycles, and any capacity investments for supply chain resilience. GLP-1 momentum is a tailwind and innovation continues to resonate. Mid-sized biotech has been a bit challenged, but we are seeing encouraging investment activity that we expect to improve and convert into revenue over time. Overall, very positive across both pharma and CAM.
Your next question comes from the line of Daniel Brennan with TD Cowen. Your line is open. Please go ahead.
Thank you. Congrats on the quarter. Maybe just on diagnostics—you had a super-strong quarter. You highlighted the Omnis and some other things. I know you bumped the guide a bit, but it does imply a deceleration versus what you just printed. Mike, was there anything unusual in this quarter on the Omnis that is not going to repeat? Or walk us through a little bit because it was exceptional.
Yeah, it was exceptional, Dan. We grew 11% in the quarter, well ahead of our mid-to-high single-digit guidance, and this growth is durable. I'll bring Simon in to give more color on Omnis and diagnostics.
Thanks, Padraig. In diagnostics we have a few dynamics. First, we have identified diagnostics as one of our enterprise growth opportunities and have been focusing and investing there over the past 12 to 18 months. The Omnis family continues to ramp very well across all regions, and we are starting to see similar growth in our assay attachments. This was a very pleasing quarter because we saw double-digit growth in both instruments and assays. We continue to do very well in companion diagnostics, with demand in modalities like antibody-drug conjugates. Across pathology and companion diagnostics, we have strong execution and durable market dynamics providing a bit of tailwind right now.
Perfect. And maybe as a follow-up, Padraig, you highlighted that slide on the comps. You are bumping the guide but noting tougher comps—can you elaborate within the guide? You have left a little cushion because comps are getting more difficult—walk us through a bit how we should think about the back half of the year.
Gonna start off and hand it over to Adam to give more detail, but from a top-line perspective the confidence in Ignite drives incremental outlook for revenue growth, margin expansion, and EPS. We increased core growth 30 basis points and EPS guidance up $0.08 at the midpoint. Adam?
Yeah. When I think about confidence going into H2, four drivers give me that confidence: execution excellence, market momentum, structural improvements embedded through Ignite that will continue to compound, and innovation—we see that coming shortly. In terms of potential upsides and downsides for the full year: recall we previously highlighted small and mid-cap biotech, academia and government, and China stimulus. China stimulus now looks like orders will happen toward the end of the year but revenue will come in the first part of next year, so we are taking that off the current-year revenue upside table. What remains is conversion of green shoots in small and mid-cap into revenue, stabilization in academia and government (we're seeing signs in the U.S.), and the potential normalization of the Middle East. Tariff refunds are not embedded in our guide, so any tariff refund would be incremental upside. Overall, we are confident going into the second half of the year.
Your next question comes from the line of Michael Ryskin with Bank of America. Your line is open. Please go ahead.
Hey. Thanks for taking the question. I want to follow up on China: you called out a 9% decline in the quarter. Maybe first half is in line, but anything specific to call out? You talked about slower funding and delays in China—anything more specific than that? Is it really focused?
Thanks, Michael. We first of all see the China market stable at around $300 million per quarter. We saw larger-than-expected softness due to the Lunar New Year timing in Q2, but H1 was flattish and very much in line with our full-year guide. We are under-indexed to diagnostics and pharma in China relative to some peers and over-indexed to applied markets. Biotech in China was a bright spot, growing in the high teens, showing strong innovation in pharma. Overall, we remain committed to China and have launched a China Innovation Center to strengthen R&D across areas like digital, AI, and automation. We expect stimulus effects to be more visible into FY27, and longer term we remain optimistic given our installed base, pace of innovation, and alignment with China priorities.
Okay. And then maybe as a follow-up, can you talk about academia and government a bit more globally, including China—what are you seeing there and what are the assumptions for the remainder of the year?
China A&G is very soft in the quarter due to tightened and delayed government spend leading to lower academia stimulus. In the Americas A&G was roughly flat, and in Europe it's recovering in key markets like Germany and the UK. The U.S. A&G is a relatively small portion of our sales—about 3% to 4%—and there's uncertainty around multi-year grants. We are monitoring it and seeing signs of stabilization in the U.S., but overall it remains a muted area for now.
Your next question comes from the line of Daniel Leonard with RBC. Your line is open. Please go ahead.
Thank you. I have one. On spectroscopy: what does the replacement cycle look like there, especially on the back of a double-digit growth rate? With a new product launching, will that accelerate the growth rate further and how should we frame that?
Yeah. I'm going to bring in Mike Zhang to talk about the spectroscopy business.
Thanks, Padraig, and thanks, Daniel—great question. We have tremendous momentum in spectroscopy from multiple fronts. First, momentum in semiconductors and also data center capacity build—which is global—is driving demand. There are diverse upstream and downstream applications and significant pent-up demand because the replacement cycle was muted the last several years. We are seeing acceleration now, and this is just the beginning. We are also a trusted partner and market leader, and with new product innovations coming out, we expect this momentum to continue across regions and applications.
Your next question comes from the line of Luke Surgatt with Barclays. Your line is open. Please go ahead.
Great. Thanks. Just a follow-up on the margin commentary: you had a really strong quarter on margin and volume leverage, but you mentioned some increased investment or pull-forward on the ICP-MS launch. Can you talk about how much you pulled forward on these investments and how that shakes out for exit-rate margin opportunity and into next year in a more normalized environment?
Thanks for the question. It was a pull-forward in the innovation timeline and focus, not necessarily a pull-forward in investment spend. The investments were planned—we had indicated at the beginning of the year that we'd take some margin improvement and invest in innovation. So this was more about prioritization and accelerating timelines rather than additional unplanned spend. For the full year, we are guiding an operating margin expansion of about 85 basis points at the midpoint. That incorporates structural improvements from Ignite, expected volume leverage, offset by inflation—including logistical costs tied to the Middle East and chip-related inflation—and our growth investments. The ICP-MS launch timing was accelerated, but the investment was already planned and incorporated in our guidance. We have raised our margin guide by 10 basis points at the midpoint.
Your next question comes from the line of Catherine Schulte with Baird. Your line is open. Please go ahead.
Hey, guys. Thanks for the questions. On food, given that was the one part of the guide that came down, you talked about delays in China and India—can you unpack what you are seeing there and how you expect that to play out going forward?
Sure. Food declined 3% in Q2 against a mid-single-digit guide, primarily due to delayed government spending in Asia—China and India. The Americas and Europe grew in high single digits during the quarter. For FY26 we reduced guidance for food from flat to a low single-digit decline driven by slower government funding and tougher comps from previous stimulus. The Middle East conflict has added inflationary pressure on food shipments and testing in Asia, creating an incremental challenge. That said, long-term fundamentals for food testing remain strong—ongoing food safety regulations, demand for sustainable foods, and emerging concerns like PFAS will continue to drive testing demand. So while Q2 was challenging, the long-term outlook for food is attractive.
Your next question comes from the line of Casey Woodring with JPMorgan. Your line is open. Please go ahead.
Great. Thank you for taking my questions, and congrats on the quarter. I have two. First, curious how much of the forensic TSA one-time you called out was in the quarter—was that baked into the guide? Second, on chemical within CAM, is the strong CapEx in chemical limited to the U.S. or more broad-based across Europe and Asia as well? Maybe unpack what you are seeing ex-U.S. and what your chemical exposure is ex-U.S. Thank you.
Yeah. First on TSA: this solution is highly differentiated and provides unprecedented precision with efficient throughput. We have been successfully working with TSA and have deployed the first contract ahead of FIFA World Cup 2026. The successful deployment of the first contract and continuous collaboration positions us strongly for future addenda and larger aviation security tenders. We called out a $9 million TSA win last quarter tied to forensics; we recognized $5 million of that in this quarter. We are well positioned to continue to secure larger aviation security tenders going forward. On CAM, demand is not limited to one region; we are seeing CapEx strength across regions. We feel strong about our funnels and geographic breadth. The CapEx demand in chemicals and advanced materials is broad-based: the U.S. is active, but we also see investments in Europe and Asia tied to semiconductors, batteries, and other advanced materials.
This is all the time we have for questions today. I will turn the call back over to Mr. Tejas for closing remarks.
Thank you, everyone, for joining us. We look forward to speaking with many of you in the weeks ahead.
This concludes today's call. Thank you for attending. You may now disconnect.