Hassan Al-Wakeel

Hassan Al-Wakeel asked about the key drivers for accelerating EBIT growth from flat in 2026 to a 3-7% CAGR by 2028, and the reliance on same-market treatment growth. He also inquired about quantifying the drag from China tender modifications and delays on Care Enablement in Q4 2025 and its expected persistence in 2026.

Answer

CEO Helen Giza explained that 2026 is an investment year for HDF and systems platforms, with regulatory impacts from TDAPA and ACA. She highlighted underlying operational work, business growth from rate and mix, revenue cycle improvements, and accelerated FME25+ as drivers. For same-market treatment growth, she noted a flat outlook for 2026 due to December mistreatments but anticipates a gradual improvement to 2%+ from mortality improvements. Regarding China, Ms. Giza stated it represents 7-10% of Care Enablement revenue, with a EUR 50 million EBIT impact in 2025, expecting a lower impact in 2026.

Hassan Al-Wakeel asked about the key drivers accelerating EBIT growth from the flat 2026 guidance to the 2028 target range of 3%-7% CAGR, and how much this relies on an acceleration in same-market treatment growth. He also inquired about quantifying the drag from China tender modifications and delays on Care Enablement's Q4 2025 performance and its expected persistence in 2026.

Answer

CEO Helen Giza explained that 2026 is a year of investment in HDF and systems platforms, with regulatory impacts from TDAPA and ACA. She highlighted underlying operational work, business growth from rate and mix, revenue cycle improvements, and accelerated FME25+ savings as drivers for future growth. For China, she stated a EUR 50 million EBIT impact in 2025, expecting a lower impact in 2026, while exploring local China policies. CFO Martin Fischer added details on the FME25+ program's front-loaded costs.

Hassan Al-Wakeel of Barclays questioned the impact of weaker volume on second-half margin expectations and asked about the significant revenue growth in Value-Based Care (VBC) and its margin profile.

Answer

CEO Helen Giza stated that while softer volumes have an impact, H2 margin acceleration remains on track due to rate/mix benefits, revenue cycle improvements, and FME25 savings. CFO Martin Fischer added that VBC revenue growth was driven by expanded contracting and now expects over €1.9 billion for the year, while maintaining the slightly negative to breakeven margin outlook for the segment.

Hassan Al-Wakeel from Barclays asked for color on 2025 segment margin expectations and phasing, as well as the expected trajectory for U.S. same-market treatment growth throughout 2025, including Q1 trends and the path to a 2% exit rate.

Answer

CEO Helen Giza explained that while not providing specific 2025 segment margin guidance, both Care Delivery and Care Enablement are expected to progress within their target bands, noting Care Enablement's strong Q4 momentum. Regarding treatment growth, Giza expressed confidence in recent progress (0.5% in Q4), attributing it to operational improvements. She anticipates growth will accelerate through 2025 and return to 2% in 2026 once elevated patient mortality normalizes, adding that the impact from new weight-loss drugs on patient volumes has been minimal.

Hassan Al-Wakeel of HSBC asked for a breakdown of the factors driving the deviation from normalized volume growth, including mortality and new drug classes. He also questioned the key drivers for the 2025 margin range and whether current treatment dynamics pose a risk to next year's guidance.

Answer

CEO Helen Giza responded that the path to normalized growth involves improving internal operations (admissions, missed treatments), mortality normalization, and the continued neutral impact from SGLT2s. For 2025 margins, she noted the drivers are similar to 2024's headwinds and tailwinds, with progress in the value-based care business also contributing. Giza acknowledged that normalizing volume will help operating leverage but expressed confidence in the strategic path.

Hassan Al-Wakeel inquired about the gross margin improvement, specifically in Diagnosis & Treatment (D&T), and its expected contribution to the 2026 margin profile. He also asked for a breakdown of D&T's 5% full-year order intake by modality in Q4 and how it reconciles with the slower 2026 revenue guidance, questioning potential conservatism. In a follow-up, he asked about the buffers built into the 2026 and beyond guidance, particularly for margins, given past outperformance.

Answer

CFO Charlotte Hanneman explained that gross margin improvement is broad-based, driven by innovation and productivity, and expects continued margin expansion in D&T for 2026 despite tariff impacts, with underlying gross margin strength continuing. CEO Roy Jakobs detailed D&T order intake drivers, including strong Image-Guided Therapy (IGT) and acceleration in MR and ultrasound, noting longer conversion cycles for D&T orders compared to Connected Care. For the follow-up, Roy Jakobs stated that the 2026-2028 plan incorporates lessons from a dynamic world, emphasizing productivity and growth as key margin contributors, while building resilience and agility to adapt to an uncertain environment like tariffs.

Hassan Al-Wakeel inquired about the gross margin improvement, particularly in Diagnosis & Treatment (D&T), and how the mix benefit from the order book conversion impacted Q4 and is expected to drive the 2026 margin profile. He also asked for a breakdown of D&T order intake by modality in Q4, how it reconciles with the slower expected revenue performance for 2026, and if the guidance includes conservatism. Additionally, he questioned the buffers built into the 2026 and beyond margin guidance, given the challenging journey from 2022's 7.5% margin.

Answer

Charlotte Hanneman (CFO) confirmed strong gross margin development across Philips, driven by innovation and productivity, despite tariff impacts. She expects continued margin expansion in D&T for 2026, with underlying gross margin strength, citing annualizing tariffs (headwind), continued productivity, and innovation impact as key factors. Roy Jakobs (CEO) highlighted D&T's 5% order intake, driven by strong North American growth, double-digit IGT contribution, MR acceleration, and good ultrasound performance. He noted D&T's longer conversion cycles, leading to a slower sales build in 2026, starting at the lower end of the range and strengthening later in the year. For the 2026 guide, Roy Jakobs (CEO) emphasized diligent execution, focus on controllables (productivity), and growth as a bigger margin contributor, while maintaining an agile and resilient organization to adapt to dynamic environments like tariffs.

Hassan Al-Wakeel from Barclays Investment Bank inquired about the drivers of the Diagnosis & Treatment (D&T) margin expansion, the rationale for not raising full-year margin guidance beyond the tariff benefit, and the specifics behind the sales decline in the Connected Care segment, including market share in Europe.

Answer

CFO Charlotte Hanneman attributed the 130 basis point D&T margin expansion to gross margin improvements from new innovations like BlueSeal MR and Spectral CT, productivity measures, and favorable mix. She explained the margin guidance reflects the need to accelerate performance in H2 while absorbing significant tariff impacts, particularly in Q3. CEO Roy Jakobs noted the Connected Care decline was against a high comparison base and that underlying demand, especially in US monitoring, remains strong. He stated it was too early to provide specific European S&RC market share numbers but confirmed they are rebuilding momentum.

Hassan Al-Wakeel of Barclays Investment Bank inquired about the drivers of the Diagnosis & Treatment (D&T) margin improvement, the rationale for the conservative margin guidance update, and the specifics behind the sales decline in the Connected Care segment.

Answer

CFO Charlotte Hanneman attributed the 130 basis point D&T margin expansion to strong gross margins from new innovations like BlueSeal MR and productivity gains. She explained the guidance reflects the need for significant second-half acceleration while absorbing tariff impacts, with Q3 margins expected to decline year-over-year. CEO Roy Jakobs noted the Connected Care decline was primarily in monitoring, which faced a very high comparison base, but underlying demand remains strong with major new U.S. partnerships.

Hassan Al-Wakeel requested a breakdown of the tariff impact by business division and asked about the outlook for Q2. He also questioned the Personal Health segment's performance, asking about potential sales pull-forward due to tariffs and the role of pricing in its strategy.

Answer

CFO Charlotte Hanneman stated that Diagnosis & Treatment and Personal Health are most affected by tariffs due to U.S.-China trade flows, while Connected Care is less exposed. She confirmed the Q2 outlook for modest improvement remains unchanged from February. On Personal Health, she noted strength came from international regions, not a pull-in, continuing momentum from late 2024. CEO Roy Jakobs added that the company is prioritizing A&P spending over price hikes to drive growth while maintaining margin resilience.

Hassan Al-Wakeel asked for the specific drivers of the high single-digit order growth in Diagnosis & Treatment (D&T) and the growth rate excluding China. He also requested a breakdown of the 2025 margin bridge and an update on 2024 margins for key businesses.

Answer

CEO Roy Jakobs attributed the double-digit ex-China D&T order growth to strong performance in IGT, the newly launched AI-driven helium-free MR, and the cardiac Ultrasound business. CFO Charlotte Hanneman detailed that the 2025 margin expansion will be driven by growth in high-margin businesses, improvements in DI, Enterprise Informatics, and S&RC (which both returned to profitability in 2024), and an increased productivity savings target.

Hassan Al-Wakeel of Barclays inquired about the drivers of strong North American order intake, the outlook for the Personal Health business in China and globally, and the rationale for not raising full-year margin guidance despite a strong first half.

Answer

CEO Roy Jakobs attributed North American strength to a robust market, customer consolidation favoring trusted partners, and strong demand for software and AI solutions. For Personal Health, he noted continued weakness in China but expects growth in other regions to compensate, alongside strong profitability actions. Regarding guidance, both Jakobs and CFO Abhijit Bhattacharya stated they prefer to maintain confidence in the full-year plan mid-year, noting H1 performance was within the guided improvement range.

Hassan Al-Wakeel of Barclays Investment Bank asked if the procedure slowdown was seen beyond knees, about weaker OUS hip performance, if Skin Subs growth was driven by physician behavior ahead of reimbursement changes, and about the bolt-on M&A pipeline.

Answer

CEO Deepak Nath clarified the procedure slowdown was mainly in knees and that the buyback does not constrain their ability to execute on a healthy M&A pipeline. CFO John Rogers added that on an average daily sales basis, global hips grew about 5% and 7.5% ex-China, with a strong H2 expected as China impacts reverse.

Hassan Al-Wakeel of Barclays Investment Bank asked if the procedural slowdown was isolated to knees, sought color on weaker OUS hip performance, questioned if skin substitute growth was driven by behavior changes ahead of new LCDs, and inquired about the bolt-on M&A pipeline.

Answer

CEO Deepak Nath clarified the procedure slowdown was mainly in knees and that OUS hip performance is strong despite quarterly volatility. He noted that while physician behavior had some impact on skin subs growth, it was not the dominant factor. He also affirmed that the buyback does not constrain the company's ability to pursue bolt-on M&A. CFO John Rogers added that on an ADS basis, global hips grew ~5% and ex-China grew 7.5%, with a strong H2 expected.