Philips: Sales Up 4% in Q1 2026, Margin at 9% Despite Tariff Rates
Philips records a first quarter of 2026 marked by a 4% like-for-like sales increase and a margin expansion of 40 basis points to 9%, boosted by demand in North America and Europe and by the launch of AI innovations. However, this operational improvement remains fragile: the impact of tariff rates and cost inflation continues to weigh on results, forcing the company to accelerate its productivity measures to preserve its 2026 targets.
Orders Up, Moderate Sales Growth
Comparable order intake has increased by 6%, driven by the two major divisions (Diagnosis & Treatment and Connected Care) and by strong momentum in North America and the international region. The group records a revenue of 3.9 billion euros, up 4% on a like-for-like basis, with growth spread across all segments. Personal Health shows the most significant increase at 9%, while Diagnosis & Treatment and Connected Care are up 2% and 3%, respectively.
Operating income reaches 241 million euros. Operational cash flow stands at 188 million euros, with free cash flow of 28 million euros.
Margins Expand, But Unevenly Across Divisions
The consolidated Adjusted EBITA margin gains 40 basis points to settle at 9.0%, primarily supported by higher volumes and gross margin improvement, fueled by recently launched innovations and productivity gains. Personal Health records the most significant expansion with an increase of 60 basis points to 15.8%, while Diagnosis & Treatment advances 30 basis points to 9.8%.
Connected Care, on the other hand, sees its margin decrease by 60 basis points to 2.9%, a direct reflection of the impact of tariff rates and cost inflation, partially offset by productivity gains. The group generated 126 million euros in productivity savings for the quarter and remains on track to achieve 1.5 billion euros over the 2026-2028 period.
2026 Guidance Maintained Despite Macroeconomic Uncertainty
Philips reiterates its full-year 2026 target: like-for-like sales growth of 3% to 4.5%, Adjusted EBITA margin of 12.5% to 13.0%, and free cash flow of 1.3 to 1.5 billion euros. The guidance incorporates the currently known impact of tariff rates in an uncertain macroeconomic context, but excludes potential tariff reimbursements under the IEEPA Act and ongoing proceedings related to Respironics.
In terms of capital allocation, Philips will proceed with the repurchase of up to 4 million shares (approximately 91 million euros at the current rate) during the second and third quarters of 2026, with delivery expected in the fourth quarter of 2028.
