A Q3 Deep Dive: Pharma and Materials Demand Drive Growth, Margin Pressures Persist

August 28, 2025 at 09:56 AM EDT

A Cover Image

Life sciences tools company Agilent Technologies (NYSE: A) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.1% year on year to $1.74 billion. On top of that, next quarter’s revenue guidance ($1.83 billion at the midpoint) was surprisingly good and 3.4% above what analysts were expecting. Its non-GAAP profit of $1.37 per share was in line with analysts’ consensus estimates.

Is now the time to buy A? Find out in our full research report (it’s free).

Agilent (A) Q2 CY2025 Highlights:

Revenue: $1.74 billion vs analyst estimates of $1.67 billion (10.1% year-on-year growth, 4.3% beat)
Adjusted EPS: $1.37 vs analyst estimates of $1.37 (in line)
Adjusted EBITDA: $509 million vs analyst estimates of $488.2 million (29.3% margin, 4.3% beat)
Revenue Guidance for Q3 CY2025 is $1.83 billion at the midpoint, above analyst estimates of $1.77 billion
Management reiterated its full-year Adjusted EPS guidance of $5.57 at the midpoint
Operating Margin: 20.7%, in line with the same quarter last year
Organic Revenue rose 5.7% year on year vs analyst estimates of 3.3% growth (245.9 basis point beat)
Market Capitalization: $33.66 billion

StockStory’s Take

Agilent’s third quarter was shaped by robust demand in its pharmaceutical and chemicals and advanced materials end markets, which management cited as primary drivers behind the company’s double-digit revenue growth. CEO Padraig McDonnell highlighted that investments in semiconductor and chemical sectors, as well as strong adoption of the Infinity Tree LC platform and Pro IQ LCMS system, contributed to this momentum. Management also pointed to improved capital spending by customers and a gradual replacement cycle for aging lab instruments as factors supporting the quarter’s performance.

Looking ahead, Agilent’s outlook is underpinned by expectations of continued strong demand in pharma and advanced materials, as well as further traction for recently launched products. Management emphasized that upcoming investments in manufacturing capacity and commercial capabilities will support future growth, while efforts to mitigate tariff-related costs are ongoing. CFO Rodney Gonzalez noted that the company expects sequential margin improvement in the next quarter, supported by planned operational efficiencies and the full implementation of Agilent’s Ignite program.

Key Insights from Management’s Remarks

Management attributed the quarter’s growth to a combination of strong customer demand in key end markets, successful new product launches, and ongoing operational initiatives aimed at supporting scalability and resilience.

Pharma demand rebounded: Agilent saw 9% growth in its largest end market, pharmaceutical, driven by stronger downstream quality assurance and control (QAQC) activity and increased adoption of the Infinity Tree LC platform. Early adopters returned for larger purchases, indicating customer satisfaction with product performance.
Chemicals and advanced materials strength: The chemicals and advanced materials segment grew 10%, with management citing increased capital investment in the sector and robust demand from semiconductor and energy customers. The broad uptake of Agilent’s GC and GCMS platforms was a key contributor.
Product innovation impact: The Pro IQ LCMS system outperformed launch forecasts, winning major accounts in the pharmaceutical industry and expanding application possibilities. The newly launched DACO OMDAS platform broadened Agilent’s reach in automated pathology, helping to capture new market segments.
Geographic expansion and market diversity: Asia (excluding China) and EMEA (Europe, Middle East, Africa) delivered strong growth, with India standing out due to local manufacturing investments and safety regulations. China’s results were stable, and management expects further improvement with anticipated government stimulus.
Operational efficiency and tariff management: The Ignite enterprise operating model enabled cost savings through streamlined management and procurement. However, higher tariff expenses and increased commercial investment impacted margins, with management focused on mitigating these costs through supply chain adjustments and targeted pricing actions.

Drivers of Future Performance

Agilent expects continued momentum from pharma and advanced materials, with key risks stemming from tariffs and cost pressures impacting margins.

Tariff mitigation and margin recovery: Management believes that the full benefits of tariff mitigation will materialize next year, as supply chain shifts and pricing adjustments take effect. The Ignite program is expected to further drive operational efficiencies and support margin expansion.
Commercial investment and product launches: Agilent is increasing its investment in commercial capabilities and rolling out new products like the Infinity Tree LC and Pro IQ LCMS systems. Management expects these initiatives to drive market share gains and support revenue growth from both replacement cycles and new applications.
End-market variability and macroeconomic risks: While management anticipates continued strong demand in key end markets, they acknowledged that capital spending trends in biopharma, government funding in academia, and changes in environmental regulations could introduce variability. The company’s outlook assumes only modest improvement in these areas, with greater upside possible if macroeconomic conditions stabilize.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory analyst team will monitor (1) the pace of margin recovery as tariff mitigation and operational efficiencies scale, (2) sustained demand and replacement cycles in pharma and chemicals, and (3) the adoption and revenue contribution of new products like Infinity Tree LC and Pro IQ LCMS. Updates on government stimulus in China and trends in customer capital spending will also be important indicators of Agilent’s ability to maintain its current growth trajectory.

Agilent currently trades at $122.47, up from $118.71 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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