Koninklijke Philips (NYSE:PHG) reported fourth-quarter and full-year 2025 results that management said reflected consistent delivery against commitments, improving order momentum, and continued margin expansion despite tariff headwinds. CEO Roy Jakobs and CFO Charlotte Hanneman also provided 2026 guidance calling for an acceleration in comparable sales growth and further margin improvement, while outlining new productivity actions and ongoing mitigation efforts related to tariffs.
Fourth-quarter performance: orders and sales accelerate
Jakobs said Philips delivered a “strong fourth quarter,” highlighted by order intake growth of 7% and comparable sales growth of 7% year over year. He characterized the order intake improvement as sustained over the past year and said the growing order book increased visibility into 2026 and beyond.
Philips pointed to strength across its businesses:
- Diagnosis & Treatment (D&T): Comparable sales rose 4% in Q4; Image-Guided Therapy delivered double-digit growth, while Precision Diagnosis sales were stable.
- Connected Care: Comparable sales grew 7% in Q4, driven by double-digit growth in monitoring and mid-single-digit growth in enterprise informatics, supported by order book conversion in North America.
- Personal Health: Comparable sales increased 14% in Q4 with broad-based contributions across businesses and geographies.
Full-year 2025: margin expansion and cash generation amid tariffs
For 2025, Philips reported comparable sales growth of 2.3%, which Hanneman said was in line with the company’s outlook. Adjusted EBITDA margin for the full year increased 80 basis points to 12.3%, which Jakobs said exceeded the company’s outlook despite incremental tariffs.
Order intake grew 6% for the full year, and Jakobs said equipment order intake rose 7% in Q4 with broad-based growth across D&T and Connected Care, supported by sustained double-digit growth in North America. For the year, he said D&T order intake increased 5% and Connected Care increased 7%, with the order book up 5% year over year.
Hanneman said Philips delivered EUR 248 million in productivity savings in Q4, bringing total 2025 productivity savings to EUR 850 million. She added that since 2023 the company’s cost management and productivity initiatives delivered more than EUR 2.5 billion, exceeding its original outlook of EUR 2 billion by the end of 2025.
Tariffs remained a prominent theme. Hanneman said incremental tariff headwinds came in slightly better than Philips’ expected EUR 150 million to EUR 200 million range, citing mitigation actions including inventory management, supplier network optimization, specialty programs, and selective regionalization. She said Philips is confident it can fully mitigate tariff headwinds through disciplined execution by 2028.
On cash generation, Hanneman said Philips generated EUR 1.2 billion of free cash flow in Q4, though that was EUR 85 million lower year over year due to a tougher comparison that included a EUR 367 million Respironics insurance receipt in Q4 2024. Full-year free cash flow was EUR 512 million, which she said was ahead of outlook, after roughly EUR 1 billion of cash payments in the first quarter related to U.S. medical monitoring and personal injury settlements.
Philips ended the quarter with approximately EUR 2.8 billion in cash and net debt of approximately EUR 5.3 billion. Hanneman said the leverage ratio improved to 1.7x net debt to adjusted EBITDA, and reiterated the company’s commitment to maintaining a strong investment-grade credit rating. She also said shareholders would be offered the option to receive dividends in shares or cash.
Business updates: innovation, partnerships, and portfolio actions
Management repeatedly emphasized innovation and platform execution as drivers of growth and margin. Jakobs highlighted launches including the “world’s helium-free 3T MRI,” the “always-on spectral CT system,” and LumiGuide, described as a real-time AI-enabled light-based 3D navigation solution integrated with Azurion.
In D&T, Jakobs said Image-Guided Therapy order intake was strong and Precision Diagnosis returned to growth, citing demand for Azurion 7, EPIQ CVx ultrasound for cardiovascular imaging, and a ramp-up of CT 5300. He also said Philips expanded its relationship with Mercy Health into a 10-year collaboration spanning more than 80 interventional labs.
In Connected Care, Jakobs said demand for monitoring and enterprise informatics was strong, especially in North America, as large health systems invested in enterprise platforms, patient intelligence, and cybersecurity. He referenced an “Enterprise Monitoring as a Service model” and said Philips signed multiple strategic partnerships in the U.S., including Atrium Health and UNC Rex. He also described a radiology partnership to standardize a cloud-based imaging informatics platform hosted on Amazon Web Services across 27 hospitals, supporting more than 4 million imaging studies annually.
Philips also closed the acquisition of SpectraWave in January, which Jakobs said strengthens Philips’ innovation leadership in cardiology interventions through high-definition intravascular imaging and angio-based physiological assessment.
On portfolio simplification, Hanneman said Philips completed the sale of the emergency care business in Q4, in line with the previously communicated timeline.
Regional commentary: strength in North America, caution in China
Jakobs said market fundamentals remain supportive, particularly in North America, where hospital demand remains strong but increasingly segmented. He said rising costs and workforce shortages are driving consolidation among larger health systems, increasing demand for secure, productivity-enhancing platforms.
China remained a point of caution. Jakobs said tender activity increased gradually in 2025 from a low base, but expanding centralized procurement led to longer processing times and tougher competition, reducing the translation of bidding activity into meaningful growth. For 2026, Philips expects China sales growth to be stable. In Q&A, management described a “differentiated picture” in China, with step-by-step improvement in Personal Health sell-out, while the health system side remains less predictable due to tender conversion dynamics.
In Personal Health, management said demand was resilient in the U.S., while consumer sentiment in China remained cautious and demand subdued, though slightly improved from the prior year. Hanneman also said the company reduced China trade inventory in Personal Health to roughly three months from six months a year earlier, bringing it in line with market averages.
2026 outlook: higher growth, modest margin expansion, and new productivity program
Philips guided for 2026 comparable sales growth of 3% to 4.5% and adjusted EBITDA margin of 12.5% to 13%. Hanneman said all businesses are expected to contribute to growth, driven by order intake momentum, innovation, and improved commercial execution.
Tariffs are expected to remain a headwind in 2026. Hanneman said tariff costs will be fully annualized, with a net impact of EUR 250 million to EUR 300 million in 2026, net of mitigation, assuming current tariff levels remain in place throughout the year. She said margin is expected to slightly decline in Q1 2026 as operational improvements are more than offset by incremental tariff headwinds that were not in effect in Q1 of the prior year, and later suggested the decline in Q1 2025 could be a reasonable proxy.
Hanneman also announced an additional EUR 1.5 billion productivity program for 2026-2028. She said adjusting items are expected to be around 200 basis points in 2026, down from 300 basis points in 2025. Restructuring costs are expected to be roughly 80 basis points, with other charges around 120 basis points, mainly related to the Respironics Consent Decree, field actions, and other quality- and acquisition-related charges.
Free cash flow is expected to be EUR 1.3 billion to EUR 1.5 billion in 2026, driven by higher earnings and lower adjusting items, partially offset by higher capital expenditures, regionalization, and higher income tax payments. The company said the outlook excludes any effects of ongoing Philips Respironics-related proceedings, including a U.S. Department of Justice investigation.
In Q&A, management also addressed a U.S. Section 232 investigation, saying it had not been concluded and that Philips would not speculate on outcomes, while noting it could represent an alternative mechanism to tariffs.
About Koninklijke Philips (NYSE:PHG)
Koninklijke Philips N.V. (NYSE: PHG), commonly known as Philips, is a Dutch multinational company focused on health technology. Founded in Eindhoven in 1891, the company evolved from a diversified electronics manufacturer into a specialist in healthcare products, systems and services. Philips is legally registered in the Netherlands and operates globally, supplying equipment and solutions to hospitals, clinics, healthcare providers and consumers across Europe, the Americas and Asia.
Philips’ principal activities center on medical technologies and personal health.
