GE HealthCare Technologies Inc. (GEHC) Q2 2025 Earnings Summary

Executive Summary

• GE HealthCare delivered Q2 revenue of $5.01B (+3% YoY) and adjusted EPS of $1.06, both above Wall Street consensus; EBITDA beat as well. Management raised FY25 guidance for organic growth, margins, EPS, and FCF, citing tariff easing and execution .
• Book-to-bill was 1.07x with record backlog of $21.3B, underscoring durable demand; PDx grew 14% reported (+5% organic) on radiopharmaceutical strength, while Imaging and AVS grew modestly; PCS was flat organically .
• Margins compressed YoY: adjusted EBIT margin fell 80 bps to 14.6% on tariffs; gross margin declined ~180 bps YoY as R&D shifted to COGS with programs reaching technical feasibility and service mix headwinds .
• FY25 guidance raised: Organic growth ≈3% (prior 2–3%); adj. EBIT margin 15.2–15.4% (prior 14.2–14.4%); adj. EPS $4.43–$4.63 (prior $3.90–$4.10); FCF ≥$1.4B (prior ≥$1.2B). Management now assumes net tariff EPS impact of ~$0.45 vs ~$0.85 prior .
• Near-term catalyst and caution: Q3 organic growth guided 2–3% with adjusted EPS down high-single digits YoY due to tariffs; medium-term upside tied to nuclear medicine momentum, photon counting CT, and full-body PET launches .

What Went Well and What Went Wrong

• What Went Well

  • “We secured our largest-ever order of Omni Legend PET systems in the U.S.” highlighting nuclear medicine momentum and enterprise wins (Ascension, Europe, Mexico) .
  • Strong orders and record backlog; book-to-bill 1.07x; adjusted EPS up 6% YoY, with lower tax and interest expense aiding earnings .
  • PDx outperformed (+14% reported; +5% organic) on radiopharmaceutical demand (Vizamyl, Cerianna, Flyrcado) and price resilience .

• What Went Wrong

  • Adjusted EBIT margin down 80 bps YoY (14.6%) on tariffs; gross margin down ~180 bps YoY; tariffs were “less than $50M” in Q2 but still meaningful .
  • PCS EBIT margin fell 240 bps YoY (7.7%), with inflation and unfavorable mix; organic revenue flat .
  • Imaging faced China headwinds; margin pressure from tariffs; without tariffs, Imaging margin would have increased YoY and sequentially .

Financial Results

Guidance Changes

Tariff assumptions embedded in guidance: detailed bilateral U.S.–China rates (54%/34% post Aug 12), reciprocal U.S. rates for EU/Japan (15% Aug 1), Mexico (30%) and Canada (35%) increases Aug 1; USMCA exemptions continue; other geographies return to pre-pause levels; excludes Section 232 .

Q3 2025 outlook: Organic revenue growth 2–3%; adjusted EPS to decline high-single digits YoY due to tariffs .

Earnings Call Themes & Trends

Management Commentary

• “We were pleased with solid orders and revenue performance…strong earnings…progress on tariff mitigation.” — Peter Arduini, CEO .
• “Adjusted EBIT margin…down 80 bps YoY due to tariff impacts…partially offset by lean actions and volume…free cash flow of $7M up $189M YoY.” — Jay Saccaro, CFO .
• “Total net tariff impact in our adjusted EPS guidance for 2025 is now $0.45…we expect less than $0.45 of adjusted EPS impacts from tariffs in 2026.” — Jay Saccaro .
• “We secured our largest-ever order of Omni Legend PET systems in the U.S.” — Peter Arduini .
• “We repurchased approximately $100 million of our shares…issued $1.5 billion in bonds to refinance November 2025 debt maturity.” — Jay Saccaro .

Q&A Highlights

• Capital environment remains robust; equipment book-to-bill well above 1.1x; backlog at $21.3B supports H2 acceleration .
• Tariff mitigation actions split into “no regrets” (USMCA, bonded logistics, dual sourcing) and longer-lead local-for-local manufacturing shifts; 2026 impact targeted below 2025 .
• FRCATO rollout: ~18 CMOs active vs ~25 target for 2025; coverage now by all seven MACs and >65% of commercial lives; cycle time to billing targeted from ~90 days down toward 30–40 .
• Gross margin drivers: ~$50M tariff impact (~half of 180 bps YoY); ~50 bps shift from R&D to COGS as programs hit technical feasibility; ~50 bps service mix headwind from enterprise contract startups .
• Photon counting CT: H2 filing on track; differentiated spectral resolution focus; significant potential clinical impact .

Estimates Context

*Values retrieved from S&P Global.

Implications: A broad-based beat on revenue/EPS/EBITDA in Q2 against consensus supports the guidance raise; Q3 tariff headwinds tempers near-term EPS trajectory despite strong demand .

Key Takeaways for Investors

• Demand is resilient with record backlog and strong book-to-bill; raised FY25 guide suggests tariff clarity plus execution underpin H2 trajectory .
• Margin pressure from tariffs is well-quantified and being mitigated; 2026 tariff impact expected below 2025, supporting medium-term margin expansion narrative .
• Nuclear medicine ecosystem (PDx + PET/CT + digital) is a structural growth driver; largest Omni Legend order and FRCATO rollout are tangible catalysts .
• Upcoming high-margin launches (photon counting CT, full-body PET, vascular) can lift mix and support mid-to-high-teens EBIT margins over time .
• Near-term trading: Q3 EPS guide down high-single digits YoY may pressure the stock near the print; watch tariff policy developments and enterprise deal conversions .
• Capital allocation is balanced: $100M repurchases in Q2 under a $1B program, dividend continuity, debt refinance completed, tuck-in M&A pipeline building (e.g., NMP) .
• Monitor China: backlog conversion helped H1, but tenders remain elongated; guidance embeds muted second half assumptions—any upside could be incremental .

Appendix: Additional Relevant Press Releases (Q2 2025)

• Dividend declared: $0.035 per share, payable Aug 15, 2025 .
• New digital X-ray system (Definium Pace Select ET) for high-throughput settings, automation and AI positioning .
• AI leadership: 100 FDA AI-enabled device authorizations; continued investment across care pathways .