Philips Q2 Earnings and Revenues Increase Year over Year, Shares Down

Comparable order intake declined 1% after growing 6% in the prior-year quarter. The decrease was due to certain large Connected Care orders in North America shifting into the third quarter rather than weaker underlying demand.

Growth geographies recorded a 13% increase, driven by Central Eastern Europe, Latin America and the Indian subcontinent. Comparable sales in Mature geographies increased 1%. North America grew 3%, partly offset by a 2% decline in Western Europe and a 1% decrease in Other mature geographies. Philips noted that customer demand remained healthy despite an uncertain macro environment.

Philips’ stock lost 0.19% in pre-market trading.

PHG’s Segmental Update

Diagnosis & Treatment sales were nearly flat at €2.09 billion. Comparable sales increased 2%, as high-single-digit growth in Image Guided Therapy was partly offset by a low-single-digit decline in Precision Diagnosis. Adjusted EBITA margin rose 40 basis points to 13.9%, including the tariff refund benefit.

Connected Care sales declined 6.9% year over year to €1.18 billion, although comparable sales increased 2%. Mid-single-digit growth in Monitoring drove the improvement. Adjusted EBITA margin expanded to 17.8% from 10.4%, helped by the refund, productivity measures and operational improvements.

Personal Health sales increased 5.5% year over year to €909 million. Comparable sales grew 8% year over year, driven by double-digit growth in Growth geographies and mid-single-digit growth in Mature geographies. Adjusted EBITA margin jumped to 23% from 15.2%, supported by higher sales, productivity and favorable product mix. 

Other segment sales amounted to €182 million, up 51.7% on a year-over-year basis.

PHG’s Operating Details

Gross margin contracted 30 basis points (bps) on a year-over-year basis to 49.3% in the reported quarter.

General & administrative expenses, as a percentage of sales, were 3.5%, which was in line on a year-over-year basis. Moreover, selling expenses decreased 80 bps year over year to 24.2%. Research & development expenses decreased 190 bps to 9.2%.

Restructuring, acquisition-related and other items amounted to €20 million compared with €86 million a year ago. Philips remains on track to deliver its three-year €1.5 billion productivity program, with €132 million in savings achieved in the second quarter.

Philips’ adjusted EBITA increased 32.8% year over year to €717 million. The adjusted EBITA margin expanded 400 basis points to 16.4%, including a 420-basis-point benefit from the U.S. tariff refund. Adjusted EBITA, excluding the tariff refund, slightly decreased, mainly due to cost inflation and higher tariffs, partly offset by higher sales and productivity measures.

Philips Cash Flow Improves and Balance Sheet Stays Solid

As of June 30, 2026, Philips’ cash and cash equivalents were €1.79 billion compared with €2.79 billion as of Dec. 31, 2025.

Total debt was €7.46 billion compared with €8.08 billion as of Dec. 31, 2025, mainly due to bond repayments.

Operating cash flow was €376 million compared with €387 million in the year-ago quarter. Higher working capital outflows were partly offset by the receipt of the U.S. tariff refund.

Free cash flow was €222 million compared with €230 million a year earlier, as the tariff refund largely offset higher working capital outflows.

Philips Raises 2026 Profit and Cash Flow Outlook

Philips reiterated its 2026 comparable sales growth outlook of 3%-4.5%. The company continues to expect Connected Care and Personal Health growth near the upper end of the range and Diagnosis & Treatment near the lower end.

Including the tariff refund, management raised its adjusted EBITA margin outlook to 13.5%-14% from 12.5%-13%. The free cash flow forecast increased to €1.5-€1.7 billion from €1.3-€1.5 billion.

Excluding the refund, the underlying margin and free cash flow outlooks were unchanged. The guidance incorporates currently known tariffs but excludes ongoing Philips Respironics-related proceedings.

PHG’s Zacks Rank & Stocks to Consider

Philips currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Zacks Medical sector include Agilent Technologies A, Evolent Health EVH, and DexCom DXCM. Each stock currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Agilent Technologies have gained 3.3% in the year-to-date period. Agilent Technologies is set to report the third quarter of fiscal 2026 results on Aug. 26.

Evolent Health shares have lost 6.5% in the year-to-date period. Evolent Health is scheduled to report its second-quarter 2026 results on Aug. 06.

DexCom shares have gained 12.8% in the year-to-date period. DexCom is set to report its second-quarter 2026 results on July 30.

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