Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding growth opportunities, including for revenue and our end markets, strength and drivers of the markets into which we sell, sales funnels, our strategic direction, new product and service introductions and the position of our current products and services, market demand for and adoption of our products, the ability of our products and solutions to address customer needs and meet industry requirements, our focus on differentiating our product solutions, improving our customers’ experience and growing our earnings, future financial results, our operating margin, mix, our investments, including in manufacturing infrastructure, research and development and expanding and improving our applications and solutions portfolios, expanding our position in developing countries and emerging markets, our focus on balanced capital allocation, our contributions to our pension and other defined benefit plans, impairment of goodwill and other intangible assets, the impact of foreign currency movements, our hedging programs and other actions to offset the effects of tariffs and foreign currency movements, our future effective tax rate, tax valuation allowance and unrecognized tax benefits, the impact of local government regulations on our ability to pay vendors or conduct operations, our ability to satisfy our liquidity requirements, including through cash generated from operations, the potential impact of adopting new accounting pronouncements, indemnification, source and supply of materials used in our products, our sales, our purchase commitments, our capital expenditures, the integration and effects of our acquisitions and other transactions, our stock repurchase program and dividends, macroeconomic environment and geopolitical uncertainties, interest rate and inflationary pressures, and the potential or anticipated direct or indirect impact of COVID-19 on our business that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Basis of Presentation

The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations, comprehensive income (loss) or cash flows. Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal periods.

Executive Summary

Agilent Technologies, Inc. ("we," "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

COVID-19 Pandemic

While conditions related to the COVID-19 pandemic have improved in fiscal 2023 compared to 2022, conditions varied by geography. During the first quarter of 2023 many businesses and countries, including China where we maintain significant operations, continued responding to the evolving nature of the spread of the virus. We will continue to actively monitor any effects of the pandemic.

Actual Results

Net revenue of $1,717 million and $3,473 million for the three and six months ended April 30, 2023 increased 7 percent and 6 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 4 percentage points, respectively, when compared to the same periods last year. Net revenue for the three and six months ended April 30, 2023 increased in all our segments, geographic regions and most of our end markets. Net revenue growth in Asia Pacific for the three and six months ended April 30, 2023 was led by strong demand in China compared to the same periods last year. Revenue generated by our life sciences and applied markets business in the three and six months ended April 30, 2023 increased 8 percent and 7 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023, had an overall unfavorable impact on revenue growth of 3 percentage points and 4 percentage points, respectively, when compared to the same periods last year. Revenue generated by our diagnostics and genomics business for the three and six months ended April 30, 2023 increased 1 percent in both periods when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall

unfavorable impact on revenue growth of 2 percentage points and 3 percentage points, respectively, when compared to the same periods last year. Revenue generated by our Agilent CrossLab business in the three and six months ended April 30, 2023 increased 10 percent and 8 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 5 percentage points, respectively, when compared to the same periods last year.

Net income for the three and six months ended April 30, 2023 was $302 million and $654 million, respectively, compared to net income of $274 million and $557 million, respectively, for the corresponding periods last year. In the six months ended April 30, 2023, cash provided by operations was $694 million compared to cash provided by operations of $538 million in the same period last year.

Dividends. During the three and six months ended April 30, 2023, we paid cash dividends of $0.225 per common share or $66 million and $0.450 per common share or $133 million, respectively, on the company's common stock. During the three and six months ended April 30, 2022, we paid cash dividends of $0.210 per common share or $63 million and $0.420 per common share or $126 million, respectively, on the company's common stock.

On May 17, 2023, our board of directors declared a quarterly dividend of $0.225 per share of common stock or approximately $66 million which will be paid on July 26, 2023 to all shareholders of record at the close of business on July 3, 2023. The timing and amounts of any future dividends are subject to determination and approval by our board of directors.

2021 Repurchase Program. During the three and six months ended April 30, 2023, we repurchased and retired 162,399 shares for $24 million and 661,739 shares for $99 million, respectively, under this authorization. During the three and six months ended April 30, 2022, we repurchased and retired 1.751 million shares for $234 million and 4.658 million shares for $681 million, respectively, under this authorization. On March 1, 2023, the 2021 repurchase program was terminated and the remaining authorization of $339 million expired.

2023 Repurchase Program. On January 9, 2023, we announced that our board of directors had approved a share repurchase program (the "2023 repurchase program") designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The 2023 repurchase program authorizes the purchase of up to $2.0 billion of our common stock at the company's discretion and has no fixed termination date. The 2023 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. The 2023 repurchase program commenced on March 1, 2023, and also terminated and replaced the 2021 repurchase program. During both the three and six months ended April 30, 2023, we repurchased and retired 443,690 shares for $61 million under this authorization. As of April 30, 2023, we had remaining authorization to repurchase up to approximately $1.939 billion of our common stock under the 2023 repurchase program.

Looking forward, we remain focused on improving our customers’ experience, differentiating product solutions and productivity. We expect to continue to face interest rate and inflationary pressures which we will continue to mitigate through targeted pricing and various other strategies. While we anticipate a challenging macroeconomic environment in fiscal year 2023, we remain optimistic about our long-term growth opportunities in all of our key end markets.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. The preparation of condensed consolidated financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, retirement and post-retirement benefit plan assumptions, valuation of goodwill and purchased intangible assets and accounting for income taxes. There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements.

Adoption of New Pronouncements

See Note 2, “New Accounting Pronouncements,” to the condensed consolidated financial statements for a description of new accounting pronouncements.

Foreign Currency

Our revenues, costs and expenses, and monetary assets and liabilities and equity are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. Foreign currency movements for the six months ended April 30, 2023 had an overall unfavorable impact on revenue of 4 percentage points when compared to the same period last year. When movements in foreign currency exchange rates have a negative impact on revenue, they will also have a positive impact by reducing our costs and expenses. We calculate the impact of movements in foreign currency exchange rates by applying the actual foreign currency exchange rates in effect during the last month of each quarter of the current year to both the applicable current and prior year periods. We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short term and anticipated basis. We do experience some fluctuations within individual lines of the condensed consolidated statement of operations and balance sheet because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our hedging program is designed to hedge currency movements on a relatively short-term basis (up to a rolling twelve-month period). We may also hedge equity balances denominated in foreign currency on a long-term basis. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

Results from Operations

Net Revenue

			Three Months Ended												Six Months Ended												Year over Year Change
			April 30,												April 30,												Three						Six
			2023						2022						2023						2022						Months						Months
			(in millions)
Net revenue:
Products			$	1,274					$	1,204					$	2,597					$	2,467					6%						5%
Services and other			443						403						876						814						10%						8%
Total net revenue			$	1,717					$	1,607					$	3,473					$	3,281					7%						6%

Net revenue of $1,717 million and $3,473 million for the three and six months ended April 30, 2023 increased 7 percent and 6 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six

months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 4 percentage points, respectively, when compared to the same periods last year. In the three and six months ended April 30, 2023, net revenue increased in all of our segments, geographic regions and in most of our end markets when compared to the same periods last year. Net revenue growth in Asia Pacific for the three and six months ended April 30, 2023 was led by strong demand in China compared to the same periods last year.

Revenue from products for the three and six months ended April 30, 2023 increased 6 percent and 5 percent, respectively, when compared to the same periods last year. Product revenue growth in the three months ended April 30, 2023 was driven by our liquid chromatography, nucleic acid solutions, gas chromatography and consumables businesses. Product revenue growth in the six months ended April 30, 2023 was driven by our liquid chromatography, nucleic acid solutions, spectroscopy, gas chromatography and cell analysis businesses.

Services and other revenue for the three and six months ended April 30, 2023 increased 10 percent and 8 percent, respectively, when compared to the same periods last year. Services and other revenue consist of contract repair, preventative maintenance, compliance services, relocation services, installation services and consulting services related to the companion diagnostics and nucleic acid solutions businesses. For the three and six months ended April 30, 2023, service revenue increases reflected strong growth from the majority of the services portfolio.

Net Revenue By Segment

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
						(in millions)
Net revenue by segment:
Life sciences and applied markets						$	968					$	896					$	2,001					$	1,872					8%						7%
Diagnostics and genomics						362						358						704						697						1%						1%
Agilent CrossLab						387						353						768						712						10%						8%
Total net revenue						$	1,717					$	1,607					$	3,473					$	3,281					7%						6%

Revenue in the life sciences and applied markets business for the three and six months ended April 30, 2023 increased 8 percent and 7 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 4 percentage points, respectively, when compared to the same periods last year. For the three and six months ended April 30, 2023, we saw revenue growth across most of our end markets led by strong revenue growth within the chemicals and advanced materials, the food and the academia and government markets when compared to the same periods last year.

Revenue in the diagnostics and genomics business for the three and six months ended April 30, 2023, increased 1 percent in both periods when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 2 percentage points and 3 percentage points, respectively, when compared to the same periods last year. For the three months ended April 30, 2023, we saw strong revenue growth in the pharmaceutical market led by our nucleic acid solutions business, and modest revenue growth in the diagnostics and clinical market was led by our pathology business. Revenue growth was partially offset by a decline in our academia and government markets. For the six months ended April 30, 2023, revenue growth in the pharmaceutical market was strong led by our nucleic acid solutions business which was partially offset by a decline in the academia and government markets.

Revenue generated by Agilent CrossLab in the three and six months ended April 30, 2023, increased 10 percent and 8 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 5 percentage points, respectively, when compared to the same periods last year. For the three and six months ended April 30, 2023, we saw revenue growth across all of our end markets led by strong revenue growth from the chemicals and advanced materials, the pharmaceutical and food markets when compared to the same period last year.

Operating Results

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
(in millions, except margin data)
Total gross margin						53.8		%				53.6		%				54.5		%				54.0		%				—						1 ppt
Research and development						$	126					$	115					$	249					$	232					9%						7%
Selling, general and administrative						$	415					$	386					$	834					$	803					7%						4%
Operating margin						22.3		%				22.4		%				23.3		%				22.4		%				—						1 ppt
Income from operations						$	383					$	360					$	809					$	736					6%						10%

Total gross margin for the three and six months ended April 30, 2023 was flat and increased 1 percentage point when compared to the same periods last year. Gross margin for the three and six months ended April 30, 2023 was impacted by higher sales volume, targeted sales price increases, and lower shipping and logistics costs and intangible amortization expense partially offset by unfavorable impact of currency movements, higher wages and inventory charges.

Research and development expenses for the three and six months ended April 30, 2023 increased 9 percent and 7 percent, respectively, when compared to the same periods last year. Research and development expenses for the three and six months ended April 30, 2023 increased due to higher wages and program costs in our life sciences and applied markets and diagnostics and genomics businesses partially offset by the favorable impact of currency movements.

Selling, general and administrative expenses for the three and six months ended April 30, 2023 increased 7 percent and 4 percent, respectively, when compared to the same periods last year. The increase in the three and six months ended April 30, 2023, was due to higher wages offset by lower intangible amortization expense, sales commissions and the favorable impact of currency movements. Selling, general and administrative expenses for the three and six months ended April 30, 2022 included a credit in expenses related to the decrease in the fair value of a contingent consideration liability.

Total operating margin for the three and six months ended April 30, 2023 was flat and increased 1 percentage point when compared to the same periods last year. Operating margin for the three months ended April 30, 2023 was flat due to offsetting increases in sales volume and expenses. Operating margin for the six months ended April 30, 2023 increased primarily due to higher sales volume.

Income from operations for the three and six months ended April 30, 2023 increased $23 million or 6 percent and $73 million or 10 percent, respectively, on a corresponding revenue increase of $110 million and $192 million, respectively.

At April 30, 2023, our headcount was approximately 18,400 as compared to approximately 17,400 at April 30, 2022. The increase in headcount was to address the increase in business.

Other income (expense), net

In the three and six months ended April 30, 2023 other income and expense, net includes a net loss on equity securities of $4 million and $15 million, respectively. In the three and six months ended April 30, 2023 other income and expense includes $3 million and $7 million, respectively, of income related to the defined benefit retirement and post-retirement benefit plans (interest cost, expected return on assets, and amortization of net actuarial (gain) loss). In the three and six months ended April 30, 2023 other income and expense, net also includes income of $3 million and $6 million, respectively, related to the provision of site service costs to, and lease income from Keysight Technologies, Inc. The costs associated with these services are reported within income from operations.

In the three and six months ended April 30, 2022 other income and expense, net includes net loss on equity securities of approximately $16 million and $62 million, respectively. In the three and six months ended April 30, 2022 other income and expense, net also includes income of $2 million and $5 million, respectively, related to the provision of site service costs to, and lease income from Keysight Technologies, Inc. The costs associated with these services are reported within income from operations.

Income Taxes

For the three and six months ended April 30, 2023, our income tax expense was $75 million with an effective tax rate of 19.9 percent and $133 million with an effective tax rate of 16.9 percent, respectively. Our effective tax rate increased in 2023 compared to 2022, primarily due to the mandatory capitalization of research and development expenses, which became effective for Agilent in the first quarter of 2023, due to a change in tax law from the Tax Cuts and Jobs Act of 2017. For the three months ended April 30, 2023, there were no significant discrete items. For the six months ended April 30, 2023, our effective tax rate and the resulting provision for income taxes were also impacted by the excess tax benefits from stock-based compensation of $13 million along with the expiration of various foreign statutes of limitations which resulted in the recognition of previously unrecognized tax benefits of $9 million.

For the three and six months ended April 30, 2022, our income tax expense was $59 million with an effective tax rate of 17.7 percent and $95 million with an effective tax rate of 14.6 percent, respectively. For the three months ended April 30, 2022, there were no significant discrete items. For the six months ended April 30, 2022, our effective tax rate and the resulting provision for income taxes were also impacted by the excess tax benefits from stock-based compensation of $17 million along with the expiration of various foreign statutes of limitations which resulted in the recognition of previously unrecognized tax benefits of $8 million.

In the U.S., tax years remain open back to the year 2018 for federal income tax purposes and for significant states. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2013.

With these jurisdictions and the U.S., it is reasonably possible there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement which will be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

Segment Overview

We continue to have three business segments comprised of life sciences and applied markets, diagnostics and genomics and Agilent CrossLab.

Life Sciences and Applied Markets

Our life sciences and applied markets business provides application-focused solutions that include instruments, consumables and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular and cellular level. Key product categories include: liquid chromatography ("LC") systems and components; liquid chromatography mass spectrometry ("LCMS") systems; gas chromatography ("GC") systems and components; gas chromatography mass spectrometry ("GCMS") systems; inductively coupled plasma mass spectrometry ("ICP-MS") instruments; atomic absorption ("AA") instruments; microwave plasma-atomic emission spectrometry ("MP-AES") instruments; inductively coupled plasma optical emission spectrometry ("ICP-OES") instruments; raman spectroscopy; cell analysis plate based assays; flow cytometer; real-time cell analyzer; cell imaging systems; microplate reader; laboratory software for sample tracking; information management and analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement technologies. Our consumables portfolio is designed to improve customer outcomes. Most of the portfolio is vendor neutral, meaning Agilent can serve and supply customers regardless of their instrument purchase choices. Solutions range from chemistries to supplies. Key product categories in consumables include GC and LC columns, sample preparation products, custom chemistries, and a large selection of laboratory instrument supplies.

Net Revenue

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
						(in millions)
Net revenue						$	968					$	896					$	2,001					$	1,872					8%						7%

Life sciences and applied markets business revenue for the three and six months ended April 30, 2023 increased 8 percent and 7 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 4 percentage points, respectively, when compared to the same periods last year.

Geographically, revenue for the three months ended April 30, 2023 decreased 3 percent in the Americas with no currency impact, increased 4 percent in Europe with a 3 percentage point unfavorable currency impact and increased 21 percent in Asia Pacific with a 5 percentage point unfavorable currency impact led by strong demand in China compared to the same period last year. For the three months ended April 30, 2023, revenue growth in all regions was driven by our liquid chromatography, gas chromatography and consumables businesses when compared to the same period last year.

Revenue for the six months ended April 30, 2023 increased 1 percent in the Americas with no currency impact, increased 3 percent in Europe with a 6 percentage point unfavorable currency impact and increased 14 percent in Asia Pacific with a 7 percentage point unfavorable currency impact compared to the same period last year. For the six months ended April 30, 2023, revenue growth in all regions was driven by our by our liquid chromatography, gas chromatography and spectroscopy businesses when compared to the same period last year.

For the three months ended April 30, 2023, revenue by end market was strong across most end markets. Revenue growth in the chemicals and advanced materials market was mainly driven by strength in our spectroscopy, gas chromatography, liquid chromatography and consumables businesses. Revenue growth in the food market was primarily driven by our liquid chromatography mass spectrometry, liquid chromatography, consumables and cell analysis division businesses. Revenue growth in the academia and government market was mainly driven by liquid chromatography and spectroscopy division businesses. Revenue growth in the pharmaceutical market declined modestly primarily driven by weakness in our cell analysis businesses partially offset by growth in our liquid chromatography and gas chromatography division businesses when compared to the same period last year.

For the six months ended April 30, 2023, revenue by end markets was strong across chemicals and advanced materials, food and academia and government end markets, moderate in diagnostics and clinical and environmental and forensics markets while modest in the pharmaceutical market. Revenue growth in the chemicals and advanced materials market was mainly driven by strength in our spectroscopy, liquid chromatography and gas chromatography businesses. Revenue growth in the food market was strong primarily driven by our spectroscopy and liquid chromatography businesses. Revenue growth in the academia and government market was mainly driven by strength in our liquid chromatography, gas chromatography and spectroscopy businesses. Revenue in the diagnostics and clinical market was moderate and mainly driven by strength in our cell analysis business partially offset by weakness in our liquid chromatography mass spectrometry business. Revenue growth in the environmental and forensics market was moderate mainly driven by our liquid chromatography, cell analysis and liquid chromatography mass spectrometry businesses partially offset by weakness in our spectroscopy business when compared to the same period last year.

Looking forward, despite the challenging macroeconomic environment and geopolitical uncertainties, we are optimistic about our long-term growth opportunities in the life sciences and applied markets as our broad portfolio of products and solutions are well suited to address customer needs. While we anticipate volatility in our markets, we expect long term growth across most end markets as we continue to invest in expanding and improving our applications and solutions portfolio.

Operating Results

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
(in millions, except margin data)
Gross margin						59.9		%				59.0		%				60.6		%				59.8		%				1 ppt						1 ppt
Research and development						$	78					$	72					$	155					$	146					8%						6%
Selling, general and administrative						$	238					$	229					$	479					$	463					4%						4%
Operating margin						27.3		%				25.5		%				28.9		%				27.3		%				2 ppts						2 ppts
Income from operations						$	264					$	228					$	578					$	510					16%						13%

Gross margin for products and services for the three and six months ended April 30, 2023, increased 1 percentage point in both periods when compared to the same periods last year. Gross margin for the three and six months ended April 30, 2023 was impacted by higher sales volume, targeted price increases and lower logistics cost partially offset by higher wages, inventory charges and warranty costs and the unfavorable impact of currency movements.

Research and development expenses for the three and six months ended April 30, 2023, increased 8 percent and 6 percent, respectively, when compared to the same periods last year. Research and development expenses for the three and six months ended April 30, 2023 increased due to higher wages and program investments in digital lab platform technology.

Selling, general and administrative expenses for the three and six months ended April 30, 2023, increased 4 percent in both periods when compared to the same periods last year. Selling, general and administrative expenses for the three and six months ended April 30, 2023, increased mostly due to higher wages partially offset by favorable impact of currency movements.

Operating margin for products and services for the three and six months ended April 30, 2023 increased 2 percentage points in both periods when compared to the same periods last year. Operating margin for the three and six months ended April 30, 2023 was impacted by higher sales volume with improved gross margins partially offset by higher wages and currency movement.

Income from operations for the three and six months ended April 30, 2023, increased $36 million or 16 percent and $68 million or 13 percent, respectively, on a corresponding revenue increase of $72 million and $129 million, respectively. Income from operations for the three and six months ended April 30, 2023 increased primarily due to higher sales volume with improved gross margins partially offset by higher wages, investments in digital lab platform technology and the unfavorable impact of currency movements.

Diagnostics and Genomics

Our diagnostics and genomics business includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses.

Our diagnostics and genomics business is comprised of six areas of activity providing active pharmaceutical ingredients ("APIs") for oligo-based therapeutics as well as solutions that include reagents, instruments, software and consumables, which enable customers in the clinical and life sciences research areas to interrogate samples at the cellular and molecular level. First, our genomics business includes arrays for DNA mutation detection, genotyping, gene copy number determination, identification of gene rearrangements, DNA methylation profiling, gene expression profiling, as well as next generation sequencing ("NGS") target enrichment and genetic data management and interpretation support software. This business also includes solutions that enable clinical labs to identify DNA variants associated with genetic disease and help direct cancer therapy. Second, our nucleic acid solutions business is a contract and development manufacturing organization that provides services related to and the production of synthesized oligonucleotides under pharmaceutical good manufacturing practices ("GMP") conditions for use as API in a class of drugs that utilize nucleic acid molecules for disease therapy. Third, our pathology solutions business is focused on product offerings for cancer diagnostics and anatomic pathology workflows. The broad portfolio of offerings includes immunohistochemistry ("IHC"), in situ hybridization ("ISH"), hematoxylin and eosin ("H&E") staining and special staining. Fourth, we also collaborate with a number of major pharmaceutical companies to develop new potential tissue and liquid-based pharmacodiagnostics, also known as companion diagnostics, which may be used to identify patients most likely to benefit from a specific targeted therapy. Fifth, the reagent partnership business provides clinical flow cytometry reagents for routine cancer diagnostics. This business also provides bulk antibodies as raw materials and

associated assay development services to IVD manufacturers, biotechnology and pharmaceutical companies. Finally, our biomolecular analysis business provides complete workflow solutions, including instruments, consumables and software, for quality control analysis of nucleic acid samples. Samples are analyzed using quantitative and qualitative techniques to ensure accuracy in further genomics analysis techniques including NGS, utilized in clinical and life science research applications.

Net Revenue

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
						(in millions)
Net revenue						$	362					$	358					$	704					$	697					1%						1%

Diagnostics and genomics business revenue for the three and six months ended April 30, 2023 increased 1 percent in both periods when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 2 percentage points and 3 percentage points, respectively, when compared to the same periods last year.

Geographically, revenue for the three months ended April 30, 2023 increased 6 percent in the Americas with no currency impact, decreased 4 percent in Europe with a 3 percentage point unfavorable currency impact and decreased 6 percent in Asia Pacific with an 8 percentage point unfavorable currency impact compared to the same period last year. For the three months ended April 30, 2023, the revenue increase in the Americas was driven by strong performance in our nucleic acid solutions and companion diagnostics businesses and was partially offset by declines in our biomolecular analysis and genomics businesses. In Europe, the decline was driven by our biomolecular analysis and genomics businesses and was partially offset by strong performance in our pathology business. The unfavorable currency impact in Asia Pacific was partially offset by strong results in China. On a worldwide level, our genomics business was impacted by a challenging macroeconomic environment, customers delaying purchasing decisions and a general softness in next generation sequencing test markets in comparison to significant revenue growth in our second quarter of fiscal year 2022.

Revenue for the six months ended April 30, 2023 increased 6 percent in the Americas with no currency impact, decreased 3 percent in Europe with a 6 percentage point unfavorable currency impact and decreased 11 percent in Asia Pacific with a 9 percentage point unfavorable currency impact compared to the same period last year. For the six months ended April 30, 2023, the increase in the Americas was driven by strong performance in our nucleic acid solutions, pathology and reagent partnership businesses. In Europe, the unfavorable impact of currency on revenue was partially offset by strong growth in our pathology and reagent partnership businesses. The decline in Asia Pacific revenue was driven by our biomolecular analysis and genomics businesses.

For the three months ended April 30, 2023, revenue growth in the pharmaceutical market was driven by strong performance in our nucleic acid solutions business. Revenue growth in the diagnostics and clinical market was driven by strong results in our pathology and companion diagnostics businesses. The revenue in the academia and government markets declined due to our biomolecular analysis and genomics businesses. For the six months ended April 30, 2023, revenue growth in the pharmaceutical market was driven by our nucleic acid solutions business. Our diagnostics and clinical market revenue growth was flat while the revenue in the academia and government markets declined due to our biomolecular analysis and genomics businesses.

Looking forward, despite the challenging macroeconomic environment and geopolitical uncertainties and the short-term unfavorable market conditions affecting our genomics business, we are optimistic about our long-term growth opportunities in our end markets and continue to invest in expanding and improving our applications and solutions portfolio. We remain positive about our growth in our end markets as our product portfolio around OMNIS and PD-L1 assays continues to gain strength with our customers in clinical oncology applications, and our next generation sequencing related solutions continue to be adopted. Market demand in the nucleic acid solutions business related to therapeutic oligo programs continues, and with the planned expansion of our nucleic acid solutions production facility in Frederick, Colorado, we are well positioned to serve more of the market demand. We are expanding our capabilities in NGS-based cancer diagnostics and will provide innovative technology to further serve the needs of the fast-growing precision medicine market. We will continue to invest in research and development and seek to expand our position in developing countries and emerging markets.

Operating Results

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
(in millions, except margin data)
Gross margin						51.8		%				56.0		%				51.5		%				54.4		%				(4) ppts						(3) ppts
Research and development						$	39					$	35					$	76					$	69					11%						11%
Selling, general and administrative						$	76					$	74					$	155					$	151					2%						2%
Operating margin						20.2		%				25.5		%				18.8		%				22.9		%				(5) ppts						(4) ppts
Income from operations						$	73					$	91					$	132					$	159					(20)%						(17)%

Gross margin for products and services for the three and six months ended April 30, 2023, decreased 4 percentage points and 3 percentage points, respectively, when compared to the same periods last year. Gross margin for the three and six months ended April 30, 2023 decreased due to unfavorable market conditions in our genomics business which impacted our overall business mix, higher wages and infrastructure costs and unfavorable impact of currency movements.

Research and development expenses for the three and six months ended April 30, 2023, increased 11 percent in both periods when compared to the same periods last year. Research and development expenses for the three and six months ended April 30, 2023 increased primarily due to higher wages, additional expenses related to an acquisition and program investments in multiple next generation platform projects.

Selling, general and administrative expenses for the three and six months ended April 30, 2023, increased 2 percent in both periods when compared to the same periods last year. Selling, general and administrative expenses for the three months ended April 30, 2023 increased due to higher wages, higher infrastructure costs and additional expenses related to an acquisition which were partially offset by the favorable impact of currency movements. Selling, general and administrative expenses for the six months ended April 30, 2023 increased due to higher wages, higher infrastructure costs and additional expenses related to an acquisition which were partially offset by the favorable impact of currency movements.

Operating margin for products and services for the three and six months ended April 30, 2023 decreased 5 percentage points and 4 percentage points, respectively, when compared to the same periods last year. The decrease in operating margin for the three and six months ended April 30, 2023 was primarily due to higher cost of sales and operating expenses.

Income from operations for the three and six months ended April 30, 2023 decreased $18 million or 20 percent and $27 million or 17 percent, respectively, on corresponding revenue increase of $4 million and $7 million, respectively. Income from operations for the three months ended April 30, 2023 decreased due to unfavorable impact of currency movements, unfavorable business mix, acquisition costs and higher wages. Income from operations for the six months ended April 30, 2023 decreased due to unfavorable impact of currency movements, unfavorable business mix, acquisition costs and higher wages.

Agilent CrossLab

The Agilent CrossLab business spans the entire lab with its extensive services portfolio, which is designed to improve customer outcomes. The majority of the portfolio is vendor neutral, meaning we can serve and supply customers regardless of their instrument purchase choices. The services portfolio include repairs, parts, maintenance, installations, training, compliance support, software as a service, asset management, consulting and various other custom services to support the customers' laboratory operations. Custom services are tailored to meet the specific application needs of various industries and to keep instruments fully operational and compliant with the respective industry requirements.

Net Revenue

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
						(in millions)
Net revenue						$	387					$	353					$	768					$	712					10%						8%

Agilent CrossLab business revenue for the three and six months ended April 30, 2023 increased 10 percent and 8 percent, respectively, when compared to the same periods last year. Foreign currency movements for the three and six months ended April 30, 2023 had an overall unfavorable impact on revenue growth of 3 percentage points and 5 percentage points, respectively, when compared to the same periods last year.

Geographically, revenue for the three months ended April 30, 2023 increased 12 percent in the Americas with no currency impact, increased 6 percent in Europe with a 4 percentage point unfavorable currency impact and increased 10 percent in Asia Pacific with a 7 percentage point unfavorable currency impact compared to the same period last year. For the three months ended April 30, 2023, revenue growth in all three regions reflected consistent high demand for repair services, compliance services, installation services and consultative services across the entire portfolio.

Revenue for the six months ended April 30, 2023 increased 14 percent in the Americas with no currency impact, increased 3 percent in Europe with a 7 percentage point unfavorable currency impact and increased 5 percent in Asia Pacific with a 9 percentage point unfavorable currency impact compared to the same period last year. For the six months ended April 30, 2023, revenue growth in all three regions reflected consistent high demand for repair services, compliance services, installation services and consultative services across the entire portfolio.

For the three and six months ended April 30, 2023, we saw strong revenue growth across all of the end markets. Revenue growth in the academia and government markets was mainly driven by demand across the entire portfolio of services on the biomolecular and liquid chromatography platforms when compared to the same period last year. Revenue growth in the pharmaceutical market was broad-based across the entire portfolio of services and across the majority of platforms when compared to the same period last year.

Looking forward, Agilent CrossLab services are well positioned to continue their success in our key end markets by supporting a growing installed base of instruments. Digital and remote capabilities will continue to be a key factor in improving the service quality and the customers' experience. Geographically, the business is well diversified across all regions to take advantage of local market opportunities and to hedge against weakness in any one region.

Operating Results

						Three Months Ended												Six Months Ended												Year over Year Change
						April 30,												April 30,												Three						Six
						2023						2022						2023						2022						Months						Months
(in millions, except margin data)
Gross margin						47.0		%				47.1		%				47.8		%				47.3		%				—						1 ppt
Research and development						$	8					$	7					$	17					$	15					11%						8%
Selling, general and administrative						$	71					$	72					$	144					$	144					(1)%						—
Operating margin						26.6		%				24.6		%				26.8		%				24.9		%				2 ppts						2 ppts
Income from operations						$	103					$	87					$	206					$	178					18%						16%

Gross margin for the three and six months ended April 30, 2023 was flat and increased 1 percentage point, respectively, when compared to the same periods last year. Gross margin for the three and six months ended April 30, 2023 was impacted by higher sales volume and targeted price increases that improved margins, which were partially offset by higher wages, travel and service delivery and parts costs and unfavorable impact of currency movements.

Research and development expenses for the three and six months ended April 30, 2023 increased 11 percent and 8 percent, respectively, when compared to the same periods last year. Research and development expenses for the three and six

months ended April 30, 2023 increased mainly due to higher wages partially offset by the favorable impact of currency movements.

Selling, general and administrative expenses for the three and six months ended April 30, 2023 decreased 1 percent and were flat, respectively, when compared to the same periods last year. Selling, general and administrative expenses for the three months ended April 30, 2023 decreased primarily due to lower commissions and a favorable impact of currency movements partially offset by higher wages. Selling, general and administrative expenses for the six months ended April 30, 2023 were flat primarily due to lower commissions and a favorable impact of currency movements fully offset by higher wages.

Operating margin for products and services for the three and six months ended April 30, 2023 increased 2 percentage points in both periods when compared to the same periods last year. Operating margin for the three and six months ended April 30, 2023 increased mostly driven by higher sales volume with improved gross margins in addition to minimal growth in expenses.

Income from operations for the three and six months ended April 30, 2023 increased $16 million or 18 percent and $28 million or 16 percent, respectively, on a corresponding revenue increase of $34 million and $56 million, respectively. Income from operations for the three and six months ended April 30, 2023 increased primarily due to higher sales volume partially offset by the unfavorable impact of currency movements.

FINANCIAL CONDITION

Liquidity and Capital Resources

We believe our cash and cash equivalents, cash generated from operations, and ability to access capital markets and credit lines will satisfy, for at least the next twelve months and beyond, our liquidity requirements, both globally and domestically, including the following: working capital needs, capital expenditures, business acquisitions, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations.

Our financial position as of April 30, 2023 consisted of cash and cash equivalents of $1,175 million as compared to $1,053 million as of October 31, 2022.

We may, from time to time, retire certain outstanding debt of ours through open market cash purchases, privately-negotiated transactions or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Net Cash Provided by Operating Activities

Net cash inflow from operating activities was $694 million for the six months ended April 30, 2023 compared to cash inflow of $538 million for the same period in 2022. Net cash from operating activities in 2023 was helped in part by deferring estimated U.S. tax payments to our fiscal fourth quarter due to the payment deferral relief made available by the IRS to taxpayers in designated counties in California. Net cash paid for income taxes in the six months ended April 30, 2023 was approximately $128 million compared to income taxes paid of $134 million for the same period in 2022. Other assets and liabilities, for the six months ended April 30, 2023, had cash inflow of $36 million compared to cash outflow of $7 million for the same period in 2022.

In the six months ended April 30, 2023, accounts receivable provided cash of $49 million compared to cash used of $108 million for the same period in 2022. Days’ sales outstanding ("DSO") as of April 30, 2023 was 73 days when compared to 69 days as of April 30, 2022. The increase in DSO was due to higher shipments near the end of the quarter. Cash used for inventory was $71 million for the six months ended April 30, 2023 compared to cash used of $124 million for the same period in 2022. Inventory days on-hand was 125 days as of April 30, 2023 compared to 113 days as of April 30, 2022 mainly due to increased inventory levels to meet customer needs and to compensate for long lead time in ordering from our suppliers. In the six months ended April 30, 2023, accounts payable used cash of $101 million compared to cash provided of $54 million for the same period in 2022.

The employee compensation and benefits liability used cash of $110 million for the six months ended April 30, 2023 compared to cash used of $144 million for the same period in 2022. This was largely due to a decrease in variable and incentive

payments which were $185 million in 2023 compared to $201 million in 2022. In addition, the lower use of cash was due to an increase in the vacation liability.

We contributed approximately $9 million and $8 million to our defined benefit plans in the six months ended April 30, 2023 and 2022, respectively. Our annual contributions are highly dependent on the relative performance of our assets versus our projected liabilities, among other factors. We expect to contribute approximately $9 million to our defined benefit plans during the remainder of 2023.

Net Cash Used in Investing Activities

Net cash used in investing activities was $181 million for the six months ended April 30, 2023 as compared to net cash used in investing activities of $155 million in the same period of 2022. In the six months ended April 30, 2023, cash used of $51 million was related to two acquisitions.

Investments in property, plant and equipment were $133 million for the six months ended April 30, 2023 compared to $139 million in the same period of 2022. These continued investments in property plant and equipment are primarily due to the planned expansion of our nucleic acid solutions production facility in Frederick, Colorado. In January 2023, we announced that we will be investing $725 million to further expand our manufacturing capacity for production of nucleic acid based therapeutics in Frederick, Colorado. We expect that total capital expenditures for the current year will be approximately $500 million. Some of our investment may be eligible to qualify for reimbursement incentives, which will not fully be known until the expansion is substantially complete.

Net Cash Used in Financing Activities

Net cash used in financing activities for the six months ended April 30, 2023 was $407 million compared to net cash used in financing activities of $669 million for the same period of 2022.

Treasury Stock Repurchases

Our 2021 repurchase program authorized the purchase of up to $2.0 billion of our common stock at the company's discretion and had no fixed termination date. During the six months ended April 30, 2023 and 2022 we repurchased and retired 661,739 shares for $99 million and 4.658 million shares for $681 million, respectively, under this authorization. On March 1, 2023, the 2021 repurchase program was terminated and the remaining authorization of $339 million expired.

On January 9, 2023, we announced that our board of directors had approved a share repurchase program (the "2023 repurchase program") designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The 2023 repurchase program authorizes the purchase of up to $2.0 billion of our common stock at the company's discretion and has no fixed termination date. The 2023 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. The 2023 repurchase program commenced on March 1, 2023, and also terminated and replaced the 2021 repurchase program. During the six months ended April 30, 2023, we repurchased and retired 443,690 shares for $61 million under this authorization. As of April 30, 2023, we had remaining authorization to repurchase up to approximately $1.939 billion of our common stock under the 2023 repurchase program.

Dividends

During the six months ended April 30, 2023 and 2022, we paid cash dividends of $0.450 per common share or $133 million, and $0.420 per common share or $126 million, respectively, on the company's common stock.

On May 17, 2023, our board of directors declared a quarterly dividend of $0.225 per share of common stock or approximately $66 million which will be paid on July 26, 2023 to all shareholders of record at the close of business on July 3, 2023. The timing and amounts of any future dividends are subject to determination and approval by our board of directors.

Contingent Consideration Payment

During the six months ended April 30, 2023, we paid $65 million in contingent consideration payments related to the achievement of a certain technical milestone associated with our acquisition of Resolution Bioscience. Of the $65 million payment, $3 million is included as an outflow in cash from operations.

Credit Facilities and Short-Term Debt

On March 13, 2019, we entered into a credit agreement with a group of financial institutions which, as amended, provided for a $1 billion five-year unsecured credit facility that will expire on March 13, 2024 and incremental term loan facilities in an aggregate amount of up to $500 million. On April 21, 2021, we entered into an incremental assumption agreement, pursuant to which the aggregate amount available for borrowing under the revolving credit facility was increased to $1.35 billion and the aggregate amount available for incremental facilities was refreshed to remain at $500 million. During the six months ended April 30, 2023, we borrowed and repaid $175 million under the credit facility. As of April 30, 2023, we had no borrowings outstanding under both the credit facility and the incremental facilities. We were in compliance with the covenants for the credit facility during the six months ended April 30, 2023.

Commercial Paper

Under our U.S. commercial paper program, the company may issue and sell unsecured, short-term promissory notes in the aggregate principal amount not to exceed $1.35 billion with up to 397-day maturities. At any point in time, the company intends to maintain available commitments under its revolving credit facility in an amount at least equal to the amount of the commercial paper notes outstanding. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The proceeds from issuances under the program may be used for general corporate purposes. During the six months ended April 30, 2023, we borrowed $1,412 million and repaid $1,447 million. As of April 30, 2023, we had no borrowings outstanding under our U.S. commercial paper program.

Long-Term Debt

On April 15, 2022, we entered into a term loan agreement with a group of financial institutions, which provided for a $600 million delayed draw term loan that will mature on April 15, 2025. As of April 30, 2023, we had $600 million borrowings outstanding under the term loan facility and had a weighted average interest rate of 5.81 percent.

There have been no changes to the principal, maturity, interest rates and interest payment terms of the Agilent outstanding senior notes in the six months ended April 30, 2023 as compared to the senior notes as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

Other

Our commitments for indirect material and services decreased by $19 million from $139 million as reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022. These commitments are related to a variety of suppliers including IT support service providers. Our commitments to contract manufacturers and suppliers decreased by $157 million as supply issues improved from $1,043 million as reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022. These commitments are related to a variety of suppliers, and we use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These open purchase orders with our suppliers have not yet been received and our agreements usually provide us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the firm orders being placed. There were no other substantial changes from our Annual Report on Form 10-K for the fiscal year ended October 31, 2022 to our contractual commitments in the first six months of fiscal year 2023. We have no other material non-cancelable guarantees or commitments.

Other long-term liabilities as of April 30, 2023 and October 31, 2022 include $187 million and $216 million, respectively, related to long-term income tax liabilities. Of these amounts, $99 million related to uncertain tax positions as of both April 30, 2023 and October 31, 2022, respectively. We are unable to accurately predict when these amounts will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitations or a tax audit settlement. As of April 30, 2023 the remaining $88 million in other long-term liabilities relates to the U.S. transition tax payment which is due in installments over the next two years.