Matt Summerville — Analyst, D.A. Davidson
Thanks. Morning. David, I was hoping you could drill deeper into the medical portfolio and their performance therein across both EIG and EMG, and how we should be thinking about kind of the medium- to long-term algorithm associated with Paragon and Rauland and some of the bigger buckets in medical. And then I have a follow-up. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Sure. It's about 21% of our business now, the broader healthcare exposure. If you look at across both groups, Paragon and Rauland, driving the results, they were up low double digits in Q4. So that was a very good quarter, up low double digits, and for the full year 2025, they were up high single digits. And we're thinking for 2026, they'll be up mid-single digits. So our initial guide is mid-single digits, more challenging comps, but still very healthy businesses and performing well. And what's the follow-up, Matt?
Matt Summerville — Analyst, D.A. Davidson
I was wondering if you could talk about how you're thinking about strategic price capture kind of going forward, you know, after passing through this multiyear period where you've had, you know, pretty meaningful inflation, and then obviously, you know, you had the tariff pressure. So what's kind of the go forward, you know, price algorithm? What does that look like for AMETEK now? Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
For the fourth quarter of 2025, we had a positive price cost spread, so our pricing offset both inflation and tariffs. So, you know, we think that that is going to be what's going to happen in 2026. So for the full year 2026, we're confident we can offset inflation and the existing known tariffs. So, you know, we have highly differentiated businesses of AMETEK product portfolio, leadership in niche markets around the globe. These are mission-critical products, and the pricing is not going backwards. It's going to stick. The vast majority of it is, you know, price increases, not just kind of offsets. So we had a good pricing situation. As I mentioned in my prepared remarks, we have a refreshed product portfolio, 30% vitality, mission-critical products.
So we really have done this for quite a while and don't see any change. So I think we'll be positive when you take into account inflation and tariffs for the year.
Matt Summerville — Analyst, D.A. Davidson
Thank you, David.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Matt.
Deane Dray — Analyst, RBC Capital Markets
Thank you. Good morning, everyone.
David Zapico — Chairman and CEO, AMETEK, Inc
Morning, Deane.
Deane Dray — Analyst, RBC Capital Markets
Hey, maybe we can step back and, Dave, do your typical run through the end markets, key platforms. It sounded like everything in medical was certainly hitting expectations, and if you could touch on any kind of regional dynamics as well. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Sure, Deane. The process businesses, start there. Overall sales for our process businesses were up mid-teens in the fourth quarter, driven by the contribution from recent acquisitions. So we acquired the FARO business, the Kern business, and we bring those in, they're lower margins, and, you know, we're improving them as we go. But that group grew low single digits organically in that quarter. So that's the first time we saw a low single digit organic growth in process. We're pretty happy with that. We saw continued improvements throughout the whole year. As I said, the most positive in the fourth quarter. We're encouraged by that finish to the year, and we talked about before, we see a very strong pipeline of growing opportunities in our broader process and analytical instrumentation markets.
For the full year 2026, we expect organic sales for our process segment to be up low single digits. Let's talk Aerospace & Defense businesses. They completed an outstanding year with low double-digit growth in both overall and organic sales in the quarter. Similar to the full year, growth was broad-based, strongest orders, strongest growth across our commercial OE and aftermarket businesses in the quarter. Our businesses are well positioned with strong and expanding content on a wide Aerospace & Defense platforms. And looking ahead, we expect another strong year, high single-digit organic growth in 2026, and really balanced across both our commercial and defense businesses. Jumping next to our power business, delivered solid growth in the quarter, both overall and organic sales were up mid-single digits.
Growth in the quarter was strongest when, within our RTDS and Power Instruments businesses, driven by global grid modernization and applications supporting the data center build out. Talked a little bit in the last meeting, we have applications in power generation, backup power, microgrids, power system simulation services, all supporting their broader data center ecosystem and delivering power to the ecosystem. Looking ahead to 2026, we expect organic sales for our power businesses to be up mid-single digits. And finally, our Automation and Engineered Solutions businesses delivered another outstanding quarter with low double-digit overall and organic sales growth. Growth was again broad-based across our Automation and Engineered Solutions businesses, with our Paragon Medical businesses delivering the strongest growth. For 2026, we expect sales for our Automation and Engineered Solutions businesses to be up mid-single digits organically.
I think you asked about the geography also, Deane?
Deane Dray — Analyst, RBC Capital Markets
Yeah.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, we had, you know, both U.S. and international sales were up mid-single digits. So it was, you know, kind of good strength across the board. In the U.S., we were up mid-single digits, driven by strength in our Automation and Engineered Solutions business. In Europe, we were up low single digits, driven by strength in aerospace and our automation businesses. And Asia was up 10%. We were very pleased. China was up low double digits for us, driven by our process, power, and automation businesses. And again, Asia was up 10. If we take China out of Asia, Asia was up high single digits, so Asia was pretty much strong across the board. So pretty good performance geographically across the board.
Deane Dray — Analyst, RBC Capital Markets
That's all good to hear. Just a quick follow-up. You talk about record backlog. You know, what kind of conversion should we expect in 2026 of backlog? I mean, I know typically, you're at like a 30% conversion, but with the recent kind of expansion, it's been closer to 50%. How does that shape up for 2026?
David Zapico — Chairman and CEO, AMETEK, Inc
It's in the same ballpark. It's with our long cycle Aerospace & Defense business, with our process businesses, some of those are multiyear, but there's plenty for us to ship near term. So we're pretty optimistic about the order pipelines. We had good orders throughout the quarter. December was the strongest quarter. December was the strongest record quarter for us in one month, and we also started the year strong. So you know, orders are good. We're, you know, there's, again, the backlog is, you know, with our multiple industries, it's a little bit difficult, but you're right, it's between that 30%-50% number. But we're in good shape and it's feeling good with the strength.
Deane Dray — Analyst, RBC Capital Markets
Great to hear. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Dave.
Andrew Buscaglia — Analyst, BNP Paribas
Hey, good morning, everyone.
David Zapico — Chairman and CEO, AMETEK, Inc
Morning, Andrew.
Andrew Buscaglia — Analyst, BNP Paribas
I just wanted to focus on EIG. Just that, you know, it sounds like, you know, that our organic growth of 2%, a little bit below kind of what you had expected, because you expected the full year to grow year-over-year. So, I imagine in process and analytical instrumentation, that maybe growth didn't come to fruition the way you thought it would. What are your expectations into 2026 for that segment and/or subsegment and project activity converting?
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, just, if you, if you go back to the beginning of 2025, we actually had negative organic growth in the first couple of quarters in our process businesses, and those improved. So we actually were positive in Q4. So we were pretty pleased with the performance of EIG turning positive in Q4 on the back of the process business performance. If I look at 2026, you know, we have our overall sales, I already mentioned in the prepared remarks, is up mid- to high-single-digits, with organic up low- to mid-single-digits. And we think both of our businesses will have low- to mid-single-digit organic growth.
So both EIG and EMG overall will be up mid- to high single digits, and both will have organic growth of low- to mid single digits.
Andrew Buscaglia — Analyst, BNP Paribas
Okay, got it. And, you know, that outlook in EMG, you know, your sales were so strong in Q4. Was there something, I don't know, out of the ordinary, unusual that would drive that 15% growth that just won't repeat going forward?
David Zapico — Chairman and CEO, AMETEK, Inc
No, I think that, as I mentioned in the prepared remarks, every division within EMG had double-digit growth in sales. So there's really a lot of strength there. I mean, we, you know, if you, you know, gonna get some tougher comps next year, but, but, we're performing well. We have strong execution, disciplined operations. We're gaining momentum in the portfolio. EMG recovered nicely. Automation and med tech are solid. A&D remains strong with good backlogs. So I think what you might be seeing there is, the guide's a little bit prudent, or this early in the year, but, we feel good about, EMG in 2026.
Andrew Buscaglia — Analyst, BNP Paribas
All right. Fair enough. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Andrew.
Brett Linzey — Analyst, Mizuho
Hey, good morning, all.
David Zapico — Chairman and CEO, AMETEK, Inc
Good morning, Brett.
Brett Linzey — Analyst, Mizuho
Hey, I wanted to just come back to the kind of pricing dynamic. I know there's a lot of fits and starts on tariffs last year and subsequent pricing. Any signs of pre-buy or pre-build in some of those channels as maybe some of that destock has turned to restock and customers are maybe looking to get ahead of some of the price last year?
David Zapico — Chairman and CEO, AMETEK, Inc
No, I think it seems like we've, you know, there's a lot of macroeconomic things we're dealing with and uncertainties and related to the broader deglobalization. But I think all that stuff happened in 2025, and I think we're, you know, we're more of a more normalized, feels like it's more normalized now, where you're not, you don't have buy ahead, you don't have things like that. And so it feels more normal than it did in 2025, at the beginning of 2026.
Brett Linzey — Analyst, Mizuho
Okay, great. Then just to follow-up on price and cost, maybe discuss your actual pricing expectation for 2026. Then how are you thinking about price cost spread for the year? I know we're getting a little bit of metals inflation here.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, we're not giving a specific target, but what we will say is in the fourth quarter, as I mentioned to Matt, we offset price offset inflation plus tariffs, plus in about 50 basis points. So it was very strong. I expect a similar kind of performance next year. That's our target. So there's in our different businesses there are different levels of inflation, there's dynamics, but we have a strong history because of the product portfolio and the special place in the value chain we have with our customers, and being able to offset price offset inflation and tariffs with price. So that's gonna continue.
Brett Linzey — Analyst, Mizuho
All right, great. Thanks, Dave.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you.
Andrew Obin — Analyst, Bank of America
Good morning.
David Zapico — Chairman and CEO, AMETEK, Inc
Hello, Andrew.
Andrew Obin — Analyst, Bank of America
Can we just get an update on FARO acquisition? What are you seeing? What's the progress has been? What are the key learnings?
David Zapico — Chairman and CEO, AMETEK, Inc
Good question. Remember, everybody, it's designs and develops advanced 3D metrology and digital reality solutions. These include product families like measurement arms, laser scanners, laser trackers, integrated process and analytics software, and it's an excellent strategic fit with our Creaform business. So we have a business that's complementary to it and complements our metrology capabilities. So it's... And we acquired the business, and we think we can add meaningful value to FARO. So along with the elimination of the public company cost and the integration of, in the AMETEK's global infrastructure, we think there's a tremendous amount of synergy.
So we acquired the business for about 2.7x, and we feel that the cost synergies will allow us to more than double EBITDA margins from the current, you know, mid-teens level to a 30% level and achieve a 10% return on invested capital by year three. And that was the plan going in, and it's still, we're more confident than ever we're gonna be able to do that. We have made moves on integrating the business. We formed two business units. One's more the metrology business unit, and one's more the digital reality business. So those are people coming from legacy AMETEK and FARO in both businesses, and that's going extremely well.
You'll see in the press release we put out, we have some one-time charges with that. It was about $17.6 million, I believe. So that's allowing us to get the kinds of improvements that we're getting in the business, and that's why there's, you know, quite a big gap between our core margins that I mentioned and the reported margins. You got the along with being a, you know, a less profitable business, and we did, we're doing some work on improving the business. But, you know, I, I'm very, very bullish with the business. I mean, there's a great coverage throughout the world. We didn't have overlap in capability. We're really complementary, and the team is extremely motivated.
The AMETEK leadership style is having a positive effect on FARO, so we're very pleased with it.
Andrew Obin — Analyst, Bank of America
Thank you. Then, you know, 2025 was a year where I think we're all waiting for a short cycle recovery that never happened. And, you know, you've clearly stressed that your orders improved into the year and then continued to be strong in January. What kind of conversations are you having with your customers? Do you feel better that what's happening right now is not maybe a flash in the pan, but maybe more of a substantive recovery? Would appreciate any color. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah. If you go back and listen to our last couple of conference calls, we were feeling better through the quarters, too. We could see momentum building, and it seems to continue to build. And you know, we've had a fantastic pipeline of opportunities, and more of those are starting to happen. And I just, you know, you had three years of negative PMI prints, and it's. I think it's changing. Feels good for us, and you know, you have a lot of, you know, we got the positive segments that we talked about, and then we got the power business now is well positioned, and it's gonna benefit from the build-out of power capacity. The process business is seeing steady improvements, and we're managing a strong pipeline.
Our future project activity remains extremely healthy. You look at the, you know, a little bit of macro uncertainty around the broader deglobalization, but at the same time, conditions remain constructive. Interest rate policies are positive. M&A environment looks favorable. You know, the industrial renaissance across the West should help us offset any kind of drag from the tariffs. So, you know, we're building our business, and we're feeling pretty good right now. So you never know if it's long lasting, but right now, it feels solid, and we're certainly being prudent with our guide because, you know, something like you mentioned happens, and it weakens later in the year, but we don't see it right now.
Andrew Obin — Analyst, Bank of America
Thanks so much.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Andrew.
Jamie Cook — Analyst, Truist Securities
Hi, good morning. I guess my first question, Dave, can you just obviously did FARO, you did Kern, just sort of an update on how you're thinking about, you know, the M&A pipeline in 2026, and are there any sort of sizable, deal, deals that are out there? And then my, my second question, just on the, you know, implied margins for 2026 relative to the top-line guide. You know, we talked about priced costs being positive. Obviously, I think FARO is still gonna weigh on margins a bit. Is there any other factors that we should consider as we're thinking about margins across, your segments, that are unusual? Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
No, I think, Jamie, I'll take the margin question first. I mean, we're firing on all cylinders in terms of margins. You know, if you look at our core operating margins, we're up 100 basis points in the quarter. So if you back out all the things you mentioned, they're very strong. Both groups, EIG was up 50 basis points. EMG on a core margin was up 310. And if you look at incrementals, our you know, core incrementals were 45% in Q4. So, you know, that's very strong. And for 2026, we've been a little more conservative. We're saying, you know, 35% reported incremental margins and 30 basis points of margin expansion.
So 30 basis points of margin expansion, which is pretty typical for us going into each year, and we're thinking we can get 35, 35% incrementals. And that'll be a little bit less than we got in 2025, but it's more prudent. We're feeling good about it. There shouldn't be any surprises. With a business like ours, we, I think we 31% EBITDA. Every time we acquire businesses, they're coming in at a lower profit margin. So yeah, that's why we try to give the core margins, and we communicate them, and we go through it all, and you have to think about it a little. But if we add a business that has a lot lower margins, like Zygo had essentially 15% EBITDA...
I mean, FARO had essentially 15% EBITDA margins, so there's gonna be initial dilution, but we have a tremendous capability of bringing those margins up, and the best way to look at that long term is our return on capital. If you look at our balance sheet, it doesn't lie. We had between a 12% and 13% return on capital, and that's how we know we're creating value for our shareholders.
Jamie Cook — Analyst, Truist Securities
Okay, so that was the genesis of my question. So it's just-
David Zapico — Chairman and CEO, AMETEK, Inc
Okay.
Jamie Cook — Analyst, Truist Securities
you being prudent versus anything else?
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, I think so. It really is. And then you talked about M&A, and, you know, we're excited about the businesses that we got done because we really can add a lot of value to FARO and Kern. But we really have the opportunity to differentiate our performance with M&A in the next year or two, because with our ability to operate businesses, our discipline and really a key change in the pipeline, we really have a strong pipeline of deals right now. And, as Dalip said, we have a balance sheet ready to act, ready to put the work. And, the pipeline remains strong. We're actively looking at a number of high-quality deals. We could spend $5 billion, and still maintain our investment-grade credit rating.
So the team is active, and we're excited, and it's really gonna be a way for us to differentiate our performance over the next couple of years.
Jamie Cook — Analyst, Truist Securities
Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you.
Nicole DeBlase — Analyst, Deutsche Bank
Yeah, thanks for the question. Good morning, guys.
David Zapico — Chairman and CEO, AMETEK, Inc
Hi, Nicole.
Nicole DeBlase — Analyst, Deutsche Bank
Maybe just circling back on China, really encouraging to see it turn positive and nicely positive in the quarter. Dave, do you think we're seeing a turn in that market? If we could maybe double click on, you know, what you're seeing in the individual businesses there and what your expectation is for 2026 as well?
David Zapico — Chairman and CEO, AMETEK, Inc
Right. China's a little different for us. I mean, we have, we have, first of all, we have a fantastic team over there. We have just great, great, long-term AMETEK employees over there, and they do a great job of managing it. And we have products that are used by our customers in China to improve their manufacturing processes, you know, high-value manufacturing processes. We have products that they use to automate their processes. We have products that make their environment cleaner. We have products that, to help them build out their nuclear power infrastructure. We have products that help them test their electric vehicle industry. So a lot of our products are really suited to our customer base over there. So, it's, it's, you know, the, the overall, you know, the overall market, the overall country, I think you're seeing some deflation.
I think you're seeing you still have a real estate hangover, but in the places that we're playing, we still have strong positions, and you know, we're being conservative how we're looking at that business, but it was good to see the change and get a level low double-digit growth and driven by our process businesses, our power businesses, and our automation businesses, all firing on all cylinders in China.
Nicole DeBlase — Analyst, Deutsche Bank
That's great. Thanks, Dave. And then just maybe following up on Jamie's question on M&A. It sounds like you're pretty fired up about the pipeline. Would you say, like, if you kind of think about your time running AMETEK and compare today's pipeline versus what you've seen over the years, is this like a stronger pipeline than normal, or is it just, okay, our pipeline is always strong, and this has been a focus of AMETEK for some time? Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, the pipeline has always been strong, but I think right now the pipeline is filled with a good mix of normal quality deals and larger deals. So I think there's probably more larger deals than have been in our pipeline in a while, and larger deals, you know, we're not looking to buy a business that's our size or even half our size, or even a quarter of our size. I mean, we don't think you add value that way, but there's a good bunch of businesses there that are of good chunky sizes for us. So as we get bigger, we've expanded the types of businesses we're looking at, and, you know, we're very pleased with...
I mean, we're very disciplined, so what looks good today may not happen tomorrow because we're not gonna overpay. But at the same time, if we buy a business, you know we're gonna get the returns on capital, and we're optimistic. We're working very hard. We have a great team in M&A. We have about 11 people dedicated to M&A. There are very few companies in the industrial world that have those dedicated people to it, and all of our operators are also involved. So we have a good process.
It's well-defined processes, the processes that work on deal sourcing, deal modeling, diligence, integration, and I think the secret sauce of AMETEK is we have very strong business operators, well-ingrained in the AMETEK culture, well-ingrained in the AMETEK business system, providing ownership for the delivery of financial metrics for each individual deal. And we learn something new from every deal. It's, we're experienced at it, but we're humble, and we learn something new from every deal, and we share the knowledge, and it just makes us better.
Nicole DeBlase — Analyst, Deutsche Bank
Thank you, Dave. I'll pass it on.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Nicole.
Chris Snyder — Analyst, Morgan Stanley
Thank you. I wanted to follow-up about the 2026 margin guide. It seems like on the math, that Q1 margins would be down year-on-year again. I'm just looking at the 10% top line growth versus or EPS up mid to high singles. So I guess, does that reflect some of the M&A headwinds still coming through in that year-on-year compare? And, you know, obviously, you guys are guiding margins up for the year. So do you think they will, you know, turn back to expansion in Q2, or is that more of a back half event? Any just color on the trajectory there would be helpful. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, yeah, Chris, I think in Q1 specifically, we got overall sales of 10%, and you got FARO in there that's running at a lower margin, pretty sizable deal, running at a lower margin. So if you just look at Q1 and you look at the year-on-year increase in sales, and you apply a mid-20s contribution margin to it, you'll get. It'll work out to our guide. I mean, I think below the line, items essentially offset, and we're getting mid-20s on the contribution margin on the incremental business, and that'll be right in line with what we did.
Dalip Puri — EVP and CFO, AMETEK, Inc
Yeah, Chris, if you adjust for the acquisitions and look at core margins, we do expect Q1 margins to expand, like we guided for the full year in that same ballpark.
Chris Snyder — Analyst, Morgan Stanley
Thank you. I appreciate that color. And then just to follow-up on staying on margins, and I guess maybe, you know, the, the inorganic margin opportunity or maybe the, the synergy opportunity on FARO and Paragon is a better way to phrase it. Can you talk about where we are on that? You know, FARO, I think you guys said, comes on mid-teens EBITDA. You guys see a pathway to, I think, double that to about 30. You know, any color on the path? And then Paragon is obviously closer to final state margins, but I think you guys have talked about maybe another 500 basis points or so there. Can you just maybe kind of provide any sort of timeline on, you know, how those businesses are progressing against those targets? Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, I'll start with Paragon. Paragon is, is already at EBITDA margins that are now in line with AMETEK. So it's a very positive work by the people that are doing the work in that business, very happy with them. But there's more room to go. So I, I think there's a, a whole next leg of, you know, margin improvement in Paragon that are just gonna occur over the next 12, 18 months, and it's gonna, it's gonna, occur incrementally. We do things incrementally at low risk, and that's gonna happen. And then with Faro, you know, we're kind of in the, you know, beginning stages of it, and, you know, you'll, you're, you saw some pretty heavy, restructuring done early in the year. We're still doing some organizational work.
There's an international infrastructure that we haven't dealt with yet in terms of duplication. So I think you'll see some benefits from Paragon in this year. And you know, Faro is gonna improve, but it's gonna take us a couple of years to get it to 30. And you know, it's gonna be in some chunky improvements, but it's gonna take us a couple of years to get it there.
Chris Snyder — Analyst, Morgan Stanley
Thank you, Dave. Appreciate that.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you.
Julian Mitchell — Analyst, Barclays
Hi, good morning.
David Zapico — Chairman and CEO, AMETEK, Inc
Good morning.
Julian Mitchell — Analyst, Barclays
Good morning. Just wanted to start with the orders sort of trends in recent months. You know, as you said, things felt better into year-end. December was good, but I suppose the absolute organic orders growth rate was, I think, steady year-on-year in the third and the fourth quarters at about 7%. So were there things sort of maybe help us understand, were there things moving around on specific markets within the orders or something geographically? Any color as to how maybe orders looked different in the fourth versus the third quarter?
David Zapico — Chairman and CEO, AMETEK, Inc
I think it was pretty broad-based. I mean, we had, when I look at the fourth quarter, we had organic orders of 7%, as you said. Both groups were up, so EIG and EMG, so it was broad-based, and it was a similar pattern from Q3, and the book-to-bill of AMETEK was 1.02, and it was pretty broad-based.
Julian Mitchell — Analyst, Barclays
Thanks very much. And when we're looking at the organic sale-
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah.
Julian Mitchell — Analyst, Barclays
Oh, yeah.
David Zapico — Chairman and CEO, AMETEK, Inc
I think what you see is the EMG businesses picked up first, and the EIG businesses, the process part of the EIG businesses, are following later, and that's a typical pattern that we've had throughout history. So there's some time during the 2026 when we think the EIG, the process part of EIG is really gonna inflect positive, and historically, we've had great contribution margins when that happens. But that's how it's happening. EMG happens first, EIG happens later. When you look at aerospace, it's been strong all along, and you look at that separately.
Julian Mitchell — Analyst, Barclays
That's helpful. And Dave, just wanted to follow-up on your points just now on thinking about the phasing of the segments. So when we look at organic sales growth for AMETEK in 2026, maybe clarify, you know, what degree of sort of deceleration, just from tougher comps, you're dialing in organic growth through the year, with that prudent framework in mind? And are we assuming then that the EIG business kind of exits the year, maybe organically growing a little bit faster because of that later pickup?
David Zapico — Chairman and CEO, AMETEK, Inc
I don't know what's gonna happen exactly because we're looking a long way out, but I think if you get into the second half of the year, EIG organics could be stronger, and EMG organics could have a tougher comp.
Julian Mitchell — Analyst, Barclays
Perfect. Thank you.
Joe Giordano — Analyst, TD Cowen
Hey, good morning, guys.
David Zapico — Chairman and CEO, AMETEK, Inc
Good morning, Joe.
Joe Giordano — Analyst, TD Cowen
Apologies if someone asked this. I'm kind of multitasking here a bit, but Dave, can you... On the guide for process, I know you like to be cautious in the beginning of the year, and market's far from certain here, but feels a little conservative, low single digits coming off like an acceleration throughout the year and now going positive. Can you kind of frame maybe the puts and takes that's driving that view on initial view on process?
David Zapico — Chairman and CEO, AMETEK, Inc
I can see that. I mean, it was we grew low single digits in Q4, and we guided low single digits for the year. So, the Q4 was the first quarter process at positive low single digits. So, it's we're being a bit prudent, but you know, one quarter does not make a year.
Joe Giordano — Analyst, TD Cowen
Is there a big spread in that segment between, like, what's getting better and what's kind of stable but not accelerating? Can you maybe if there's a little bit more granularity we can get there?
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, I think in that segment, what you see is, you know, the semiconductor business is positive, and the instrumentation sold to metals businesses are positive, and the Rauland business that we talked about earlier is positive. So a lot of things are positive. And then the places that are the oil and gas and the research are a little bit less than those positive segments.
Joe Giordano — Analyst, TD Cowen
Yep. Yep, that makes, that makes sense. Could you maybe give us a little color on the new deal, like in terms of the size of the business and the margin opportunity there?
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah. Yes, it's really a technology deal, and we're not disclosing terms. We have an agreement that we're not disclosing terms. It's a smaller deal. It's a technology deal, and you know, it's a really, really interesting business. They're a leading provider of advanced eye care testing instruments, and you know, ophthalmologists are trying to find the initial signs of diabetic retinopathy, and they're doing that with you know, structural testing. And they're testing your eye, they're looking at your eye. They're trying to see things. But this is an actual electrical response, and it's in a portable device. There was a technique that you use to do the test. The test was expensive.
It was a very large piece of equipment, but the innovation was to make it a really portable instrument, and it's really gonna help a lot of people. And it's kind of a, you know, a technique that's very, very growing rapidly, small, but growing rapidly. And you know, most of the sales are in the U.S., and there's about 60 employees near D.C., in Germantown, Maryland, and it fits right into our Reichert business. Our Ultra Precision Technology business has a business that sells this type of equipment, and it's just an additional product line. So we're really happy about it. We got, it's adjacent to technology. It broadens our portfolio. It lets us leverage our channels and leverage their channels.
This business has a recurring revenue of nearly 40% from these tests, from these sensor strips that are placed on the eyes. So it's really good technology. We're pleased with it, and we're not gonna disclose the terms, though. It's a smaller deal, technology deal.
Joe Giordano — Analyst, TD Cowen
Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you, Joe.
Christian Zijlstra — Analyst, KeyBanc Capital Markets
Good morning, everyone. This is Christian Zijlstra for Steve Barger.
David Zapico — Chairman and CEO, AMETEK, Inc
Okay. Hello.
Christian Zijlstra — Analyst, KeyBanc Capital Markets
I just have one question. A few years ago, EMG operated in a mid- to high-20s percent operating margin. With the recent acquisitions and current mix, is it possible for you guys to get back there organically, or does that likely come from acquisitions? Just really trying to get any thoughts of how you're thinking about EMG broadly and what you're target- targeting over the next few years? Thanks.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, I, I think, seasonally, EMG is usually a little bit lower in Q4 than the other quarters because of some dynamics in the business. But I don't, I don't think there's any reason that we won't be operating at that level, and I think we did operate at that level in the third quarter.
Dalip Puri — EVP and CFO, AMETEK, Inc
Yeah. Yeah, I think if you go back a couple of years, like you stated, we were probably mid-20s, right, before the Paragon acquisition. And now, if you look at where we are, we've kind of retracked back maybe 60%, and I think we're on track to hit those mid-20% margins in 2026 in EMG and grow further from there.
Christian Zijlstra — Analyst, KeyBanc Capital Markets
Great. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you.
Scott Graham — Analyst, Seaport Research Partners
Hey, good morning. Thanks for taking the question. There's actually two of them. I don't remember, Dave, the last time we saw a vitality of 30%. I was hoping you would unbundle that maybe a little bit to or maybe is there some defense in there? Is there, you know, this maybe chasing some data center sales in there? Kind of tell us maybe where some of those are going, specifically, if you could, and their impact on the organic.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, 30% is a good number, Scott. We're very pleased with that. There are some data center sales on that. We talked about in the last call that we've reconfigured some of our products for that market that were sold to the defense market. Those are certainly contributing to that, but there's just an engineering capability of the company is unquestioned, and they're really developing some good things. Our customers are very pleased with them, with the uptick, and it makes us feel confident going into a strengthening market that we got the right products that you need. But it's really, it's bottom-up, as you know, so it's, it's all our businesses, and we're not, we're not telling a business to develop this or develop that.
It's organic, and there's just very, very viable product development plans, technology roadmaps, and we're optimistic about what we've done with our products and our technology.
Scott Graham — Analyst, Seaport Research Partners
Okay, thank you. The follow-up is simple. With the defense budget potentially reaching $1.5 trillion at some point next couple of years, do you need acquisitions maybe to get you a little bit more, it's more broadly exposed to, you know, sort of have dibs on some of that? Or how do you feel about your defense business role? I, I know that there's nothing specific in the budget on it, it's just a number. But how do you feel about maybe getting after some of that business? Do you need a couple of deals to help you?
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, we'd love to do a deal in the defense industry, but that doesn't stop—we, we have fully developed product lines and the business cases for what we have. And I mentioned the Abaco business and the computing area. I mentioned the air technology. I mentioned our Rotron business and the advanced cooling. I mentioned our power business, selling power systems to UAVs. So we're really competitive, and... That business is doing very well, so we don't need an acquisition to continue growing. And we actually have a Aerospace & Defense business is about 18% of sales. We have a little more defense sales than commercial sales, so we're in a pretty good position there.
Legacy sensors on aircraft, selling to both commercial and defense aircraft, to some of the more lately, some of the modern, more things we've done in the recent years. So it's pretty wide range. It's the same strategy. We're focused on niche technologies, things we're really good at, and we have plenty of people knocking on our door. And as I mentioned, the European, you know, the European starting to focus on their own defense and their own protection, definitely, definitely creating opportunities for us.
Kevin Coleman — VP of Investor Relations and Treasurer, AMETEK, Inc
Thank you.
Rob Wertheimer — Analyst, Melius Research
Hi, and thanks. I know we're getting towards the end of the call. I had sort of a general question that you touched on with Andrew, I guess, but on Paragon, it seems like a lot of things have gone well, and this may be a question as much about AMETEK as about Paragon, but I wonder if you could just, you know, give us insight into what you've done and what has made the most positive improvements there as sort of a way of learning about the company again. Thanks.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah, well, I think the most important thing is we bought a very good business. And, if you remember, when we bought it, that was in the middle of a destock, and, you know, people were worried about it. We weren't worried because we knew we had a good business, we knew we had a good team, and, you know, they, the consumable surgical instruments that they manufacture are a good recurring revenue. They're a leader in implantable components. So we bought a good business. And we bought a business that, quite honestly, was undermanaged on the operation side. So we've done a lot of good work, to improve that operations, combined it with one of our businesses, who has a great capability in another part of this market.
So similar to the FARO model, we have a—we bought a business in a market we knew. We had some capability. We restructured the business to be more focused on customers, more focused on understanding the P&L, and we're bringing AMETEK's global capabilities to it. So it's a you know, kind of a playbook that we apply quite often, and Paragon's gonna lead the way, but FARO's right behind them.
Rob Wertheimer — Analyst, Melius Research
Perfect. Thank you.
David Zapico — Chairman and CEO, AMETEK, Inc
Yep, thank you.
Robert Mason — Analyst, Baird
Yes, good morning. Thanks for squeezing me in. Just one question. Dave, to go back to the process business, it does sound like your industrial business is there more likely to lead on growth.
David Zapico — Chairman and CEO, AMETEK, Inc
Yeah.
Robert Mason — Analyst, Baird
You made a comments just around some of the research areas. How are you expecting those research areas, R&D exposed areas, to play out through the year? Do you think they have a chance, you know, to be flat or even up a little this year, start to see some turn?
David Zapico — Chairman and CEO, AMETEK, Inc
I do. And there's always time for you, Rob, so we'll always squeeze you in. So, yeah, I think in the research area, what you really saw in the U.S. was there was a little bit of a... During the DOE time, there was a little bit of a, you know, little bit of dysfunction, and that's righted itself. So, in a lot of areas of research, so we happen to be particularly biased to, there's a lot of nuclear research going on. In the materials area, there's a lot of research going on to find new materials to, you know, replace other materials with, you know, the rare earth metals. There's a lot of research going on there.
So in our CAMECA business, there's high-end research, there's high-end research going into nuclear. And the other thing that caused us some problems in 2025, which has gone away, was when the tariffs originally were put in place, they caused substantial pricing disconnects for us and our customers, and now we've worked through that. So as long as tariffs stay in about the same range, that won't be an issue. So I do think that we have the potential to grow our research business in 2026, just as an answer to your question.
Robert Mason — Analyst, Baird
Very good. Thanks, Dave.
David Zapico — Chairman and CEO, AMETEK, Inc
Thank you.
Kevin Coleman — VP of Investor Relations and Treasurer, AMETEK, Inc
Thank you again, Crystal, and thanks, everyone, for joining our call today. As a reminder, a replay of the webcast may be accessed in the investor section of ametek.com. Thanks, all.