Philips: orders up 8% in the third quarter, adjusted EBITA margin raised to 13%
In the third quarter of 2026, Philips recorded an 8% increase in comparable order intake, driven by the Diagnosis & Treatment segment, while comparable sales in that same segment remained flat. Group revenue reached €4.4 billion, up 3% on a comparable basis, supported by Personal Health and Connected Care.
The adjusted EBITA margin gained 70 basis points to 13.0%, with an increase in each of the three segments. The quarter also included a €288 million provision linked to the agreement in principle reached by its subsidiary Respironics with the U.S. Department of Justice, and the group confirmed its annual targets.
Orders accelerate in imaging, where sales remain flat
The gap between orders and sales is first visible in Diagnosis & Treatment. This segment drove the 8% growth in the group's comparable order intake, but its own comparable sales did not grow over the quarter.
The rise in Image Guided Therapy was offset by the decline in Precision Diagnosis. This decline is mainly linked to the timing of ultrasound sales and lower sales in China, a point the group had flagged when publishing its second-quarter results.
Roy Jakobs, chief executive officer, pointed to broad-based order momentum in this segment and demand for the latest AI-integrated innovations, including the Verida and Rembra scanners and the Alturion ultrasound system. He said that year-to-date results and the order backlog reinforce the group's confidence in its annual targets.
Adjusted EBITA margin rises in all three segments
At group level, the adjusted EBITA margin improved thanks to higher sales, a better gross margin and productivity measures, partly offset by cost inflation. These measures generated net savings of €170 million in the quarter and €427 million since the beginning of the year.
The sharpest increase concerns Connected Care, whose adjusted EBITA margin gained 190 basis points to 13.3%, with comparable sales up 5%. Personal Health recorded the strongest comparable sales growth, at 8%, and an adjusted EBITA margin up 60 basis points to 17.7%.
In Diagnosis & Treatment, the adjusted EBITA margin rose 50 basis points to 12.3%, despite flat sales. The group mainly attributes this to gross margin from innovation and productivity measures, partly offset by cost inflation.
Operating cash flow increased to €544 million, reflecting higher cash earnings and lower outflows related to working capital. Free cash flow also rose, to €384 million.
A €288 million provision for Respironics, 2026 targets maintained
The group's reported operating income for the quarter came to €165 million. Over the same period, Philips booked a €288 million provision following the agreement in principle reached by Respironics with the U.S. Department of Justice to close the criminal and civil investigations related to the recall of its subsidiary's products.
The agreement remains subject to finalization of the documentation, and payment is expected in the first quarter of 2027. During the quarter, the Enterprise Chamber of the Amsterdam Court of Appeal also rejected requests from certain investors seeking an investigation into Philips' management in connection with this recall.
Philips confirmed its 2026 targets: comparable sales growth of 3% to 4.5%, an adjusted EBITA margin of 13.5% to 14.0%, including an impact of about 1 point from the refund of U.S. customs duties, and free cash flow of €1.5 to €1.7 billion, including about €200 million net related to this refund.
These targets assume payment of the agreement with the Department of Justice in the first quarter of 2027 and exclude other proceedings related to Respironics, including the investigation by the attorneys general of U.S. states. The group also indicates it remains on track with its €1.5 billion savings target under its 2026-2028 productivity program.
The quarter thus combines an adjusted EBITA margin up in all segments, orders ahead of sales in imaging, and a milestone in resolving the Respironics matter.
