China Recovery and Advanced Materials Strength Prompt Agilent to Raise FY26 Guidance; Goldman Sachs Lifts Price Target to $175

Overview

This report reviews Agilent's 3Q26 results and analyzes how the recovery in the Chinese market, advanced materials demand, and the Advanced Therapeutics business support FY26 guidance and subsequent growth. Goldman Sachs believes the quarter's better-than-expected performance reduced uncertainty surrounding the fourth-quarter margin ramp and CDMO demand, prompting it to raise its valuation multiple and price target.

Core views

Agilent's 3Q26 results exceeded expectations across the board. Revenue was $1.878 billion, above the FactSet consensus estimate of $1.841 billion and Goldman Sachs' estimate of $1.848 billion; non-GAAP EPS was $1.62, above both consensus and Goldman Sachs' estimate of $1.49. Core revenue grew 7.3%, exceeding not only consensus of 5.4% and Goldman Sachs' estimate of 5.7%, but also the upper end of the company's previous quarterly guidance range of 4.4% to 5.9%. The upside was mainly driven by pharma, Chemical and Advanced Materials, and the Chinese market; operating margin was also approximately 80 basis points above implied guidance. Based on the third-quarter performance, the company narrowed and raised its FY26 core revenue growth guidance from 4.5% to 6.0% to 5.8% to 6.0%, increasing the midpoint by 65 basis points. This reflected both the third-quarter beat and an approximately 20-basis-point increase in implied fourth-quarter expectations. FY26 EPS guidance was raised from $6.00-$6.10 to $6.18-$6.21, increasing the midpoint by $0.15; reported revenue guidance was raised from $7.39-$7.49 billion to $7.49-$7.51 billion, increasing the midpoint by $60 million. The new guidance incorporates a 1.6% foreign-exchange tailwind, below the previous assumption of 1.8%, while operating cash flow guidance remains $1.6-$1.7 billion. The company expects 4Q26 revenue of $1.98-$2.00 billion, above Goldman Sachs' and consensus's previous expectations of approximately $1.97 billion. This corresponds to core revenue growth of 5.2% to 6.2% and includes a 0.1% foreign-exchange headwind. 4Q26 EPS guidance of $1.71-$1.74 is broadly in line with Goldman Sachs' and consensus's previous estimate of $1.72. Goldman Sachs believes the third-quarter margin outperformance reduced investor concerns about the magnitude of the margin ramp from the third to the fourth quarter. The Advanced Therapeutics segment, the CDMO business comprising NASD and Biovectra, grew approximately 30% in the third quarter, broadly in line with expectations but accelerating markedly from high-single-digit growth in the second quarter. Because the business will face an approximately 40% comparison base in the fourth quarter, it is expected to be roughly flat in 4Q26 and grow approximately 12% to 13% for the full year. Fourth-quarter performance partly depends on several regulatory submissions that customers are expected to make in the latter half of the quarter, creating timing uncertainty beyond Agilent's control. Nevertheless, management remains positive on medium-term CDMO demand; approximately 75% of the new Train C capacity scheduled to commence operations in spring 2027 has already been booked, supporting utilization following the expansion. Addressing concerns triggered by a major customer's reduction in FY26 guidance, Goldman Sachs notes that the customer accounts for less than 20% of NASD revenue and less than 1% of Agilent's total revenue, while the magnitude of its guidance reduction was only approximately 4%. It therefore does not expect a material impact on Agilent's 2026 or 2027 results. Goldman Sachs believes commentary indicating that Advanced Therapeutics demand will extend into 2027 should help alleviate market concerns about the sustainability of NASD growth. The Chemical and Advanced Materials (CAM) end market grew 7% in the third quarter, above expectations. Within the segment, Advanced Materials delivered double-digit growth, while Chemical & Energy recorded low-single-digit growth despite a higher year-over-year comparison base. Advanced Materials benefited from semiconductor manufacturing reshoring and AI infrastructure development, with the semiconductor end market accounting for approximately 3% to 4% of Agilent's total revenue. Chemical & Energy growth slowed from mid-single digits in the second quarter due to a higher comparison base and slight weakening in EMEA and specialty chemicals demand caused by geopolitical disruptions. Goldman Sachs believes the gradual onset of the gas chromatography instrument replacement cycle, together with structural drivers in advanced materials, will continue to accelerate CAM growth; the business has historically lagged trends in the industrial segment data of the Goldman Sachs Tools Tracker. The company also raised its 2026 growth guidance for this end market from mid-to-high single digits to high single digits. The Chinese market grew 9% in the third quarter, accelerating significantly from the prior quarter and far exceeding the previous guidance for approximately flat growth. Multiple end markets, including pharma and food, performed strongly, and growth received limited support from stimulus policies, leading management to believe the recovery is more sustainable. Pharma benefited from global pharmaceutical companies increasing investment in local Chinese biotechnology innovation, which in turn boosted demand from CRO and CDMO customers; the company also secured an important competitive order from a leading commercial testing laboratory in the PFAS testing market. The company consequently raised its FY26 Chinese market growth guidance from flat to mid-single digits. Goldman Sachs believes China historically served as a source of incremental growth for the scientific instruments industry, and recent trends suggest that this role may gradually return. Looking to next year, Goldman Sachs identifies four growth drivers: continuation of the liquid chromatography instrument replacement cycle, the onset of the gas chromatography instrument replacement cycle, reshoring in the pharma and advanced materials industries, and the release of new Advanced Therapeutics capacity. On valuation, after updating its peer group and rolling forward the forecast period, Goldman Sachs raised its Q5-Q8 EV/EBITDA target multiple from 19x to 20x and increased its 12-month price target from $155 to $175; the current rating is Buy.

Analysis framework

The report first compares third-quarter revenue, core growth, EPS, and margin with consensus expectations, Goldman Sachs forecasts, and the company's original guidance on an item-by-item basis. It then breaks down the sources of upside in Advanced Therapeutics, Chemical and Advanced Materials, and the Chinese market, using these findings to assess the FY26 guidance revisions and implied fourth-quarter requirements. Goldman Sachs further examines customer concentration, regulatory submission timing, capacity bookings, instrument replacement cycles, and industrial data from the Goldman Sachs Tools Tracker to evaluate the sustainability of growth. Finally, after updating the peer group and rolling forward the forecast period, it applies a Q5-Q8 EV/EBITDA target multiple to estimate the price target.

Methodology notes

• Event-Driven Strategy and Behavioral FinanceExpectation Gap/Expectation Management

  Comparison of actual results with consensus expectations, Goldman Sachs forecasts, and company guidance

  The report compares actual revenue, core growth, EPS, and margin with multiple sets of expectations to identify the magnitude of the third-quarter beat and assess whether the new full-year guidance and fourth-quarter requirements are more achievable.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Breakdown of core revenue growth by business and end market

  The report breaks down overall growth into contributions from Advanced Therapeutics, China, pharma, Advanced Materials, and Chemical & Energy to determine whether growth is driven by short-term stimulus or more sustainable demand and replacement cycles.

• Industry/Sector Analysis Framework

  Goldman Sachs Tools Tracker industrial segment leading indicator

  Goldman Sachs uses the estimated fourth-quarter rolling average from the industrial segment of the Goldman Sachs Tools Tracker as a leading reference for Agilent's CAM business to help assess the business cycle direction and growth ramp.

• Valuation MethodEV/EBITDA valuation

  Q5-Q8 EV/EBITDA target multiple valuation

  After updating the peer group and rolling forward its forecasts, Goldman Sachs raised its Q5-Q8 EV/EBITDA target multiple from 19x to 20x, thereby increasing its 12-month price target from $155 to $175.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Agilent Technologies Inc. (A.US)

  The report believes the company benefits from the recovery in the Chinese market, advanced materials demand, instrument replacement cycles, and CDMO capacity expansion, and maintains a Buy rating.

  Strengths

  Third-quarter revenue, core growth, EPS, and margin all exceeded expectations; China grew 9%; Advanced Therapeutics grew approximately 30%; approximately 75% of Train C's available capacity has already been booked.

  Weaknesses

  Advanced Therapeutics faces an approximately 40% comparison base in the fourth quarter, and some revenue depends on the timing of customer regulatory submissions; Chemical & Energy slowed sequentially.

  Comparison

  Third-quarter core growth of 7.3% exceeded consensus of 5.4%, Goldman Sachs' estimate of 5.7%, and the upper end of company guidance at 5.9%.

  Risks

  Weaker spending by large pharmaceutical companies, local competition and geopolitical issues in China, global macroeconomic weakness, and cancellations of NASD and siRNA/mRNA projects could all weaken growth.

Key data

• 3Q26 Revenue$1.878 billionAbove FactSet consensus of $1.841 billion and Goldman Sachs' estimate of $1.848 billion
• 3Q26 Non-GAAP EPS$1.62Above consensus and Goldman Sachs' estimate of $1.49
• 3Q26 Core Revenue Growth7.3%Above consensus of 5.4%, Goldman Sachs' estimate of 5.7%, and the upper end of company guidance at 5.9%
• Third-Quarter Operating Margin PerformanceApproximately 80 basis points above implied guidanceReduced concerns about the fourth-quarter margin ramp
• FY26 Core Revenue Growth Guidance5.8% to 6.0%Previously 4.5% to 6.0%, with the midpoint raised by 65 basis points
• FY26 EPS Guidance$6.18 to $6.21Previously $6.00 to $6.10, with the midpoint increased by $0.15
• FY26 Reported Revenue Guidance$7.49 billion to $7.51 billionPreviously $7.39 billion to $7.49 billion, with the midpoint raised by $60 million
• FY26 Foreign-Exchange Impact Assumption1.6% tailwindPreviously assumed a 1.8% tailwind
• FY26 Operating Cash Flow Guidance$1.6 billion to $1.7 billionUnchanged
• 4Q26 Revenue Guidance$1.98 billion to $2.00 billionCorresponds to core growth of 5.2% to 6.2% and a 0.1% foreign-exchange headwind
• 4Q26 EPS Guidance$1.71 to $1.74Broadly in line with Goldman Sachs' and consensus's previous estimate of $1.72
• Advanced Therapeutics Third-Quarter GrowthApproximately 30%Accelerated markedly from high-single-digit growth in the second quarter
• Advanced Therapeutics Full-Year Growth ExpectationApproximately 12% to 13%Facing an approximately 40% comparison base in the fourth quarter, with growth expected to be roughly flat
• Train C Capacity Booking RateApproximately 75%New capacity is expected to come online in spring 2027
• CAM Third-Quarter Growth7%Advanced Materials grew at a double-digit rate, while Chemical & Energy grew at a low-single-digit rate
• Semiconductor End-Market Revenue ContributionApproximately 3% to 4%Share of Agilent's total revenue
• Chinese Market Third-Quarter Growth9%Significantly above the previous guidance for approximately flat growth
• Valuation Target Multiple20x Q5-Q8 EV/EBITDAPreviously 19x
• 12-Month Price Target$175Previously $155

Impact & implications

Goldman Sachs believes the third-quarter beat and full-year guidance raise have improved visibility into Agilent's growth recovery and reduced concerns surrounding the fourth-quarter margin ramp and developments involving a major NASD customer. The recovery in China, semiconductor and advanced materials demand, liquid and gas chromatography replacement cycles, and new Advanced Therapeutics capacity in 2027 collectively support the next phase of growth; these factors also support Goldman Sachs' increases to its valuation multiple and price target.

Risks

• If additional agreements related to most-favored-nation drug pricing fail to materialize, large pharmaceutical companies may further reduce spending and capital expenditures, causing the instrument replacement cycle to be shorter than expected.
• Local Chinese competitors may take market share from Agilent, while adverse geopolitical effects could also weigh on growth in the Chinese business.
• Further deterioration in the global macroeconomic environment could undermine Goldman Sachs' positive view on a cyclical recovery in Applied end markets.
• Weakness in the NASD business and additional cancellations of siRNA or mRNA projects could cause significant volatility in organic growth.
• Part of Advanced Therapeutics' fourth-quarter growth depends on customers making regulatory submissions in the latter half of the quarter, and the timing is beyond Agilent's control.

What to watch

• Monitor whether Advanced Therapeutics demand can extend into 2027 and capacity utilization around Train C's planned commencement of operations in spring 2027.
• Monitor whether 4Q26 margin can achieve the sequential ramp implied by company guidance.
• Monitor the actual timing of customer regulatory submissions and their impact on fourth-quarter revenue recognition for Advanced Therapeutics.
• Monitor whether the Chinese market's 9% growth is sustainable and whether FY26 guidance for mid-single-digit growth is achieved.
• Monitor the continuation of the liquid chromatography replacement cycle and progress in the onset of the gas chromatography replacement cycle.
• Monitor the boost to the CAM business from semiconductor manufacturing reshoring, AI infrastructure development, and reshoring in the pharma and advanced materials industries.
• Monitor capital expenditures by large pharmaceutical customers, NASD orders, and cancellations of siRNA/mRNA projects.