What Koninklijke Philips (PHG) Said on Its Q3 Earnings Call

Key Points

• Philips reported solid Q3 performance: Comparable sales grew 3%, equipment order intake rose 8%, adjusted EBITA margin expanded 70 basis points to 13%, and free cash flow increased to €384 million from €172 million a year earlier.
• Growth was led by Personal Health and Connected Care, which posted 8% and 5% comparable sales growth, respectively. Diagnosis & Treatment sales were flat despite nearly 20% order-intake growth, as lower China sales and ultrasound shipment delays offset strength in Image-Guided Therapy.
• Philips reaffirmed its 2026 outlook for 3%–4.5% comparable sales growth, a 13.5%–14% adjusted EBITA margin and €1.5–€1.7 billion in free cash flow. The company also recorded a €288 million provision related to a proposed Respironics agreement with the U.S. Department of Justice.

Koninklijke Philips NYSE: PHG reported third-quarter comparable sales growth of 3%, an 8% increase in equipment order intake and a 70-basis-point expansion in adjusted EBITA margin to 13%, as growth in Personal Health and Connected Care offset flat sales in Diagnosis & Treatment.

Chief Executive Officer Roy Jakobs said the company’s order growth reflected sustained customer demand and increased traction for recently launched products. Free cash flow totaled €384 million during the quarter, compared with €172 million a year earlier.

Philips also recorded a €288 million provision tied to an agreement in principle between its Respironics business and the U.S. Department of Justice. Jakobs called the agreement “an important step” toward resolving consequences of the sleep and respiratory care recall.

Orders Build Across Diagnosis & Treatment

Equipment order intake rose 8%, matching the growth rate from the prior-year quarter. Diagnosis & Treatment order intake increased by nearly 20%, supported by double-digit growth at both Image-Guided Therapy and Precision Diagnosis.

Jakobs said North America was particularly strong in Image-Guided Therapy, where Philips has secured vendor-of-choice positions at major U.S. health systems. The company said its integrated platform of systems, devices, software and artificial intelligence has helped it win accounts where competitors had long-standing relationships.

Precision Diagnosis order momentum was led by CT and MR systems. Philips said the order book for its spectral CT platforms, including CT 7500 and AI-enabled Verida, rose by double digits from a year earlier, while the order book for its CT 5300 system nearly doubled. About 70% of the company’s MR systems shipped year-to-date were helium-free, it said.

Despite the strong order trends, Diagnosis & Treatment sales were broadly flat in the quarter. Chief Financial Officer Charlotte Hanneman said mid-single-digit growth in Image-Guided Therapy was offset by a mid-single-digit decline in Precision Diagnosis.

The decline included lower China sales and delays in ultrasound shipments related to manufacturing process improvements. Production began ramping late in the third quarter, and Philips expects the affected ultrasound sales to be recognized in the fourth quarter and early 2027. Diagnosis & Treatment adjusted EBITA margin increased 50 basis points to 12.3%.

Jakobs said the Precision Diagnosis order book has expanded for three consecutive quarters and has reached a point where new orders can begin converting into sales at more normalized levels. He said the company expects the combination of ultrasound recovery and order-book conversion to support sales momentum into 2027, though it did not provide formal guidance for next year.

Connected Care Sales and Margin Improve

Connected Care comparable sales grew 5%, driven by mid-single-digit growth in monitoring, mid-single-digit growth in sleep and respiratory care, and high-single-digit growth in enterprise informatics.

Monitoring revenue benefited from conversion of a strong order book, particularly for IntelliVue hospital monitors and consumables. Revenue from Enterprise Monitoring as a Service nearly doubled from a year earlier, according to Hanneman.

Connected Care order intake declined by a mid-single-digit percentage, against a comparison of more than 20% growth in the prior-year quarter. Philips said orders that shifted from the second quarter were booked early in the third quarter, while some large enterprise-wide monitoring agreements shifted into the fourth quarter because of longer negotiation and contracting cycles.

The company cited several long-term monitoring agreements, including an arrangement with Avera Health to support standardized patient monitoring across 24 U.S. hospitals. Ontario Health selected Philips’ Enterprise Imaging Vendor Neutral Archive for infrastructure intended to support more than 20 million imaging studies annually across more than 150 hospitals and 50 imaging clinics.

Connected Care adjusted EBITA margin rose 190 basis points to 13.3%. The prior-year figure included a 150-basis-point gain from the remeasurement of a minority investment. Excluding that prior-year benefit, margin expanded 340 basis points, driven by higher sales, gross-margin improvement, mix and productivity measures, partially offset by inflation.

Personal Health Extends Growth

Personal Health delivered 8% comparable sales growth, following double-digit growth in the prior-year quarter. Growth was broad-based across businesses and regions, with Europe and growth geographies, including China, leading the increase.

Philips cited premium shavers, OneBlade, Sonicare ProPower toothbrushes and Avent infant-feeding products as contributors. Jakobs said the business was gaining market share and outgrowing its markets, with growth driven mainly by increased consumer reach and unit volumes rather than pricing.

Personal Health adjusted EBITA margin increased 60 basis points to 17.7%. Hanneman said higher sales and productivity measures more than offset increased advertising and promotion spending to support product launches and demand.

Guidance Reaffirmed as Productivity Savings Rise

At the group level, Philips said higher sales, gross-margin improvement, a greater contribution from higher-margin innovations and productivity measures supported the adjusted EBITA expansion. The company reported €170 million of productivity savings in the third quarter and €427 million year-to-date, maintaining its goal of €1.5 billion in savings by the end of 2028.

Adjusted earnings per share rose more than 10% from a year earlier to €0.40. Net financial expenses were €42 million, down from €57 million, and Philips reduced its full-year expectation for net financial expenses to about €230 million from a previous range of €240 million to €260 million.

The company ended the quarter with €2.8 billion in cash and net debt of €5.4 billion. Its net-debt-to-adjusted-EBITDA ratio declined to 1.7 times from 2.2 times a year earlier. In August, Philips issued a €650 million EU Green Bond that it said was 2.7 times oversubscribed.

Philips reiterated its 2026 outlook for comparable sales growth of 3% to 4.5%, adjusted EBITA margin of 13.5% to 14%, and free cash flow of €1.5 billion to €1.7 billion. The margin outlook includes an approximately 1% benefit from a U.S. tariff refund, while the free-cash-flow outlook includes a net tariff-refund benefit of approximately €200 million.

The outlook assumes payment of the DOJ settlement in the first quarter of 2027, subject to final documentation, and excludes other ongoing Respironics-related proceedings, including an investigation by U.S. state attorneys general.

About Koninklijke Philips (NYSE:PHG)

Koninklijke Philips N.V. is a Netherlands-based health technology company that develops products, services and software for healthcare providers, patients and consumers. Its portfolio includes diagnostic imaging systems, such as magnetic resonance imaging, computed tomography and X-ray equipment; ultrasound systems; image-guided therapy technologies; patient monitoring and hospital informatics solutions; and connected care products.

Philips also serves consumers through personal health products, including electric toothbrushes, oral healthcare systems, mother and child care products, and sleep and respiratory care devices.

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