Siemens Healthineers (ETR:SHL) reported a “good start” to fiscal 2026 and confirmed its full-year outlook, even as executives flagged material headwinds in diagnostics tied to market changes in China. On the company’s Q1 earnings call, CEO Bernd Montag said the “synergetic” core of the portfolio—imaging and precision therapy—delivered strong underlying operational performance despite “substantial headwinds from tariffs and foreign exchange,” while diagnostics faced challenges that “we did not foresee to their full extent.”
Imaging and precision therapy post strong operational performance
Management highlighted solid momentum in the company’s imaging and precision therapy businesses. Montag pointed to 6% growth for the combined “synergetic part” of the portfolio, a “decent equipment book-to-bill of 1.12,” and operational margin expansion that largely compensated for tariff and FX pressures.
Imaging adjusted EBIT margin was 21.6%. Schmitz said margin performance reflected “strong operational margin expansion,” and he quantified the impact of external pressures, citing roughly 200 basis points of headwind from tariffs and foreign exchange. He also referenced that the prior-year quarter contained special items that negatively affected margin by roughly 50 basis points under the new reporting structure.
Precision Therapy revenue increased 5.9% against a “tougher comp” in the prior-year quarter. Schmitz said Varian contributed 9% growth, while Advanced Therapies had “a softer start” as previously disclosed. The segment posted an “outstanding” operational margin expansion of almost 400 basis points, driven by conversion and mix. He added that the segment margin benefited by about 100 basis points from special items, including a Varian catch-up booking related to software revenue recognition.
Diagnostics pressured by China procurement and reimbursement changes
Diagnostics was the primary weak spot in the quarter, with revenue down 3%. Both Montag and Schmitz cited structural shifts in China, particularly volume-based procurement (VBP), which management emphasized is “primarily price driven” and has a “one-to-one impact on profit.” Schmitz added that reimbursement reductions in China were now also affecting volume, contributing to “muted demand” and further pressure on revenue.
Outside of China, Schmitz said diagnostics posted stable revenues. Montag said the Americas diagnostic business is “operationally growing again compared to previous years,” which he attributed to Atellica gaining traction in the company’s largest diagnostics market. He also said the Atellica franchise grew roughly 20% in Q1 and now represents almost 70% of sales in the core lab solution business.
Management also discussed a large deal in Brazil. Montag said the diagnostics team renewed a contract with a “large strategic diagnostics customer” and that the customer is adding additional analyzers beyond the existing contract. Schmitz cautioned that high instrument placements can temporarily dilute profitability in the near term given the “razor, razor blade” business model.
Group results: growth in the Americas, China decline tied to diagnostics
At the group level, Schmitz said the company delivered 3.8% revenue growth, reflecting strength in imaging and precision therapy offset by the diagnostics decline. Regionally, the Americas grew 9%, extending what he described as “excellent growth” in prior quarters. China declined 5%, which Schmitz said was “exclusively due to the steep decline in diagnostics,” while imaging and precision therapy in China were “flattish with a positive prefix.”
Adjusted EBIT margin for the group was 15%, “flattish year-over-year.” However, Schmitz said that excluding the headwinds from foreign exchange and tariffs, the company’s margin expanded operationally by 200 basis points and that operational earnings performance in Q1 “offset” the tariff and FX headwinds completely.
Adjusted EPS declined 3% year-over-year, but Schmitz said excluding tariff and FX headwinds, adjusted EPS would have grown about 17%.
Tariffs and FX: headwinds concentrated in the first half
Schmitz reiterated expectations that both foreign exchange and tariffs will be headwinds in every quarter of fiscal 2026. He quantified Q1 impacts and connected them to full-year assumptions:
- Foreign exchange: about $0.04 headwind in Q1, in line with about $0.15 expected for the full year.
- Tariffs: about $0.06 headwind in Q1, also in line with about $0.15 expected for the full year. He said the year-over-year tariff headwind will “predominantly impact the first half” and should be “significantly lower” in the second half.
Management also discussed how it views tariff mitigation longer term. Schmitz said the company expects to “fully mitigate the impact of tariffs over the next three years,” describing tariffs as “a longer, but only temporary, drag on the margin.”
Outlook confirmed; Q2 expected below the annual growth range
Siemens Healthineers confirmed its fiscal 2026 outlook for revenue growth and adjusted EPS. Schmitz acknowledged a “mixed” segment picture in Q1 but said the strong imaging and precision therapy performance supported the decision to maintain the outlook.
For Q2, Schmitz said the company expects group revenue growth to be below its fiscal 2026 range of 5% to 6%. He attributed this to continued diagnostics challenges in China, along with tough comparisons: last year’s Q2 was the only quarter in China that showed diagnostics growth, leading management to expect an even more pronounced China-related diagnostics decline in Q2 than in Q1.
On margins, Schmitz said tariffs and foreign exchange are expected to push margins in all segments below the prior-year quarter in Q2. He also called out that imaging margin in Q2 of fiscal 2025 was the highest quarter last year and benefited from a positive special item, while precision therapy margin in Q1 of fiscal 2026 included positive special items that would not repeat. For diagnostics, he said sequential margin improvement is expected from normalizing mix, but a year-over-year margin decline is still anticipated due to missing conversion from lower revenue in China and tariff headwinds.
During Q&A, Montag reiterated that the China-related diagnostics issue is viewed as “temporary and ring-fenced,” noting that China represents about 7% to 8% of diagnostics revenue. He said the company expects to adjust the diagnostics go-to-market footprint in China to reflect the new baseline, while remaining confident in its midterm margin ambitions for diagnostics.
About Siemens Healthineers (ETR:SHL)
Siemens Healthineers AG, through its subsidiaries, develops, manufactures, and sells a range of diagnostic and therapeutic products and services to healthcare providers worldwide. It operates through four segments: Imaging, Diagnostics, Varian, and Advanced Therapies. The Imaging segment provides magnetic resonance imaging, computed tomography, X-ray systems, molecular imaging, and ultrasound systems. Its Diagnostics segment offers in-vitro diagnostic products and services to healthcare providers in laboratory and point-of-care diagnostics; and workflow solutions for laboratories and informatics products.
