Philips orders rise 8% and adjusted earnings margin climbs to 13.0% in third quarter
Key Facts
Comparable orders at Philips rose 8% in the third quarter of 2026, while comparable sales increased 3% to 4.39 billion euros, according to company data. The adjusted earnings margin before interest, taxes, amortization and depreciation of intangible assets rose 70 basis points to 13.0%. The company attributed the margin improvement mainly to higher sales and gross margin, and productivity measures, with cost inflation having an offsetting effect. The results highlight growth in demand and improved margins during the quarter, alongside mixed performance across the company’s businesses. A provision related to U.S. investigations also affected income from operations, despite growth in operating cash flow.
Net cash flow from operating activities rose to 544 million euros, and free cash flow reached 384 million euros during the quarter. Philips said the increase in operating cash flow was mainly due to higher cash earnings and lower working-capital outflows. The company delivered net savings of 170 million euros during the quarter, taking savings since the start of the year to 427 million euros. It said it remains on track to achieve 1.5 billion euros in savings under its productivity program for 2026–2028. Income from operations was 165 million euros in the third quarter.
Philips recorded a provision of 288 million euros in the third quarter after its Respironics unit reached a preliminary agreement with the U.S. Department of Justice to settle previously disclosed criminal and civil investigations related to its product recall. The company said the agreement remains subject to completion of the relevant documentation, and that it expects to pay the settlement in the first quarter of 2027. The company’s outlook also assumes payment of the settlement in that quarter, but excludes other ongoing proceedings related to Respironics, including an investigation by state attorneys general. Net income fell to 28 million euros from 187 million a year earlier, affected by the provision, according to Investing.com. The decline puts net income on a different trajectory from the growth in operating cash flow and the expansion in the adjusted earnings margin during the quarter.
By segment, Personal Health led sales growth with an 8% increase on a comparable basis, while Connected Care sales rose 5%. Diagnosis & Treatment sales were flat, according to Investing.com. Within the segment, growth in Image Guided Therapy offset a decline in Precision Diagnosis, according to information in the company’s results. Philips attributed part of the decline to the timing of ultrasound equipment sales and lower sales in China. This reflects a divergence between growth in some businesses and stable sales in Diagnosis & Treatment, alongside an increase in overall orders.
Philips maintained its 2026 outlook, targeting comparable sales growth of between 3% and 4.5%, an adjusted earnings margin of between 13.5% and 14.0%, and free cash flow of between 1.5 and 1.7 billion euros. The margin outlook includes a benefit from the recovery of U.S. tariffs of about 1%, while the free cash flow outlook includes a net benefit of about 200 million euros from tariff recoveries. Chief Executive Roy Jakobs said the company’s results since the start of the year, together with the strength of its order book, give it confidence in achieving its full-year outlook and medium-term ambitions. During the quarter, the company issued 650 million euros in fixed-rate bonds due in 2034, with orders reaching 2.7 times the issue size. Jakobs and Chief Financial Officer Charlotte Hanneman were scheduled to discuss the results at an investor and analyst conference on 3 November 2026 at 10:00 a.m. Central European Time.