Agilent Q1 FY2026: Revenue Up but Profits Down, Reinforcing Valuation Caution

What happened

Agilent Technologies reported first-quarter fiscal 2026 revenue of $1.80 billion, with 7.0% reported growth and 4.4% core growth year-over-year. GAAP net income declined to $305 million, or $1.07 per share, from $318 million, or $1.11 per share, in the prior-year quarter, indicating margin compression. Non-GAAP net income was $386 million, or $1.36 per share, a figure management emphasized amid the GAAP weakness. This mixed performance aligns with DeepValue's HOLD thesis, which cites rich valuation at 34x P/E and risks from biopharma funding softness and tariffs. The results show resilience in top-line growth but fail to address concerns over free cash flow normalization and high share prices.

Implication

The revenue increase suggests Agilent's business model retains some strength, but falling GAAP net income points to potential cost inefficiencies or market pressures. Core growth of 4.4% is modest and unlikely to justify the stock's premium valuation, keeping the margin of safety thin. Non-GAAP adjustments may obscure underlying profitability challenges, requiring deeper analysis of operational trends. Persistent headwinds like biopharma funding softness and tariff risks, noted in the report, could further pressure earnings in coming quarters. Thus, with no clear improvement in orders or free cash flow, the HOLD stance remains prudent until more sustainable catalysts emerge.

Thesis delta

The HOLD thesis is reinforced, as revenue growth is offset by profit decline and high valuation multiples persist. No shift to BUY or SELL is indicated without evidence of sustained order momentum or free cash flow recovery. Ongoing risks from end-market softness and execution challenges keep the investment case unchanged.