Koninklijke Philips Q2 Earnings Call Highlights

Key Points

• Philips maintained its full-year outlook for 3%–4.5% comparable sales growth and a 12.5%–13% underlying adjusted EBITDA margin, despite tariffs, inflation and weak Chinese health-system demand. A tariff refund lifted the reported full-year margin outlook to 13.5%–14% and free-cash-flow guidance to €1.5–€1.7 billion.
• Second-quarter comparable sales increased 4.1%, led by Personal Health growth of 8.5% and solid performance in Connected Care and Diagnosis & Treatment. Underlying adjusted EBITDA margin was 12.2% excluding the tariff benefit, while productivity savings reached €132 million for the quarter.
• Order intake fell 1% because some large Monitoring orders shifted into the third quarter, but the equipment backlog remained at a record level. Philips expects China to remain challenging, while North America and Europe continue to support demand and third-quarter sales growth is expected at the lower end of the annual range.

Koninklijke Philips NYSE: PHG reported 4.1% comparable sales growth in the second quarter of 2026, supported by growth across all segments, while maintaining its full-year underlying sales and profitability outlook amid higher tariffs, cost inflation and continued weakness in China’s health systems market.

The company said adjusted EBITDA margin rose 400 basis points year over year to 16.4%, aided by a tariff refund received during the quarter. Excluding that benefit, underlying adjusted EBITDA margin was 12.2%, down about 20 basis points from the prior year as sales growth, mix benefits and productivity savings were more than offset by inflation and tariffs.

Philips said its second-quarter results were inadvertently published ahead of schedule because of an administrative error, prompting the company to move its webcast forward by two hours.

Outlook Maintained as Tariff Refund Lifts Reported Metrics

Chief Executive Officer Roy Jakobs said the company delivered results in line with its expectations in a “dynamic external environment.” Philips reiterated its full-year comparable sales growth target of 3% to 4.5% and its underlying adjusted EBITDA margin outlook of 12.5% to 13%, excluding the tariff refund.

Including the refund, Philips now expects adjusted EBITDA margin of 13.5% to 14% for the full year. The company also raised its reported free-cash-flow outlook to between EUR 1.5 billion and EUR 1.7 billion, while maintaining its underlying free-cash-flow forecast of EUR 1.3 billion to EUR 1.5 billion excluding the refund.

Chief Financial Officer Charlotte Hanneman said Philips received virtually all of the tariff amounts it claimed in the second quarter. Most of the refund was recognized as a reduction in cost of goods sold and therefore included in adjusted EBITDA. The benefit also included an approximately EUR 25 million impact related to annual incentive accruals tied to the higher reported full-year guidance.

Philips reported free cash flow of EUR 222 million in the quarter, broadly in line with the prior year, as higher working-capital outflows were largely offset by the tariff refund. It ended the quarter with EUR 1.8 billion in cash and EUR 5.7 billion in net debt. Its leverage ratio improved to 1.8 times net debt to adjusted EBITDA, from 2.2 times a year earlier.

Orders Dip on Timing, While Backlog Remains at Record Level

Second-quarter order intake declined 1%, ending six consecutive quarters of growth, as certain larger Monitoring orders shifted into the third quarter. Jakobs said the movement reflected timing rather than a deterioration in demand, and that equipment order backlog remained at a record level.

On a rolling 12-month basis, order intake increased 5%. Philips expects solid order growth in the third quarter, with Jakobs telling analysts that orders should return to the mid-single-digit growth range in the quarter and beyond.

Diagnosis & Treatment orders grew at a low-single-digit rate, with strength in North America and Europe partly offset by continued weakness in China. Image-Guided Therapy maintained strong North American demand, while Precision Diagnosis recorded double-digit order growth outside China, supported by recently introduced imaging products.

Connected Care’s Enterprise Informatics business posted solid order growth, particularly in Europe, while Monitoring orders declined because of the delayed North American orders. Philips said Enterprise Informatics revenue builds over time because cloud conversions and software deployments are completed in phases.

Segment Results Show Strength in Personal Health and Connected Care

• Diagnosis & Treatment: Comparable sales rose 2.4%. Image-Guided Therapy posted high-single-digit growth for its 22nd consecutive quarter, while Precision Diagnosis sales declined at a low-single-digit rate, as growth in Europe, India and Latin America was more than offset by China. Segment adjusted EBITDA margin was 13.9%, including the tariff refund, or 9.3% excluding it.
• Connected Care: Comparable sales increased 2.2%. Monitoring grew at a mid-single-digit rate, led by North America, while Sleep & Respiratory Care grew at a low-double-digit rate. Enterprise Informatics sales declined at a mid-single-digit rate due mainly to order-conversion timing. Adjusted EBITDA margin reached 17.8%, or 11.7% excluding the refund.
• Personal Health: Comparable sales rose 8.5%, with all three businesses contributing. Growth was led by North America, while China benefited from an easier comparison base. Adjusted EBITDA margin reached 23%, including the tariff benefit, and expanded 280 basis points excluding it.

Personal Health benefited from demand for premium shavers, OneBlade replacement blades and refreshed Sonicare toothbrush products. Jakobs said Philips gained U.S. market leadership in power toothbrushes with its newest Sonicare platforms, while Philips Avent childcare products continued to gain market share.

Europe and North America Offset China Pressures

Philips said North America and Europe continued to drive health systems growth. In North America, patient volumes, procedure growth and capital spending by large health systems supported demand. Europe delivered strong and increasing performance, particularly in Diagnosis & Treatment and Connected Care, as health systems invested in digitization, productivity and modernized care delivery.

China remained challenging in health systems as centralized procurement expanded and hospital investment stayed subdued. Philips now expects China to be broadly stable for the full year, with Personal Health strength offsetting continued pressure in health systems.

Jakobs said differentiated technologies, including helium-free MRI and Spectral CT offerings, remain positioned to compete in China despite procurement changes. He also cited India as an emerging contributor, saying the company is seeing double-digit growth there from premium products across consumer and health systems businesses.

For the third quarter, Philips expects comparable sales growth at the lower end of its full-year range, due to China and ultrasound. It also expects adjusted EBITDA margin to be below the prior-year level, primarily because of elevated cost inflation and unfavorable mix. Hanneman said the company expects a meaningful margin acceleration in the fourth quarter, supported by higher volumes, innovation-led gross-margin improvement, productivity actions and inflation mitigation.

Philips delivered EUR 132 million in productivity savings during the quarter, bringing the first-half total to EUR 258 million. The company said it remains on track to meet its EUR 1.5 billion three-year savings commitment and to achieve its 2028 targets of mid-single-digit sales growth and a mid-teens adjusted EBITDA margin.

About Koninklijke Philips (NYSE:PHG)

Koninklijke Philips N.V. NYSE: PHG, commonly known as Philips, is a Dutch multinational company focused on health technology. Founded in Eindhoven in 1891, the company evolved from a diversified electronics manufacturer into a specialist in healthcare products, systems and services. Philips is legally registered in the Netherlands and operates globally, supplying equipment and solutions to hospitals, clinics, healthcare providers and consumers across Europe, the Americas and Asia.

Philips' principal activities center on medical technologies and personal health.

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