Net profit dragged down by a provision of 288 millions euros for settlement, but Philips (PHG.US) Q3 core earnings indicators still beat expectations

According to Zhicheng Finance APP, thanks to higher sales and stricter cost controls, Philips (PHG.US) reported third quarter 2026 earnings above expectations. The financial report shows that the company generated sales of 4.393 billion euros, a nominal growth of 2% and comparable growth of 3%, which is slightly below market expectations of about 4.41 billion euros; adjusted diluted earnings per share were 0.40 euros, compared to 0.36 euros in the same period last year.

Comparable orders grew 8%, driven by broad demand in the Diagnosis & Treatment business; adjusted EBITA was 569 million euros with a profit margin of 13.0%, an increase of 70 basis points year-on-year and significantly above market expectations of 11.9%; operating cash flow was 544 million euros, and free cash flow was 384 million euros, both showing a substantial improvement from the previous year.

One-off items significantly weighed on profit for the quarter: subsidiary Respironics reached a principle agreement with the US Department of Justice regarding the ventilator recall, and the company made a provision of 288 million euros, causing operating profit to fall to 165 million euros and net profit to drop to 28 million euros.

CEO Roy Jakobs described this as an "important step" in addressing the consequences of the recall event, and the settlement payment is expected to be made in the first quarter of 2027. In addition, the Amsterdam Court of Appeal’s Enterprise Chamber in October rejected a request from some investors to launch a corporate governance investigation in relation to the recall incident.

By business segment, comparable sales in Diagnosis & Treatment were flat, as growth in Image-Guided Therapy was offset by a decline in Precise Diagnosis, which the company attributed mainly to the sales rhythm in Ultrasound and lower sales in the Chinese market. Connected Care posted 5% comparable growth; Personal Health achieved 8% comparable growth.

The company reiterated its full year 2026 guidance: comparable sales growth of 3% to 4.5%, adjusted EBITA profit margin of 13.5% to 14.0% (including about one percentage point from US tariff refunds), and free cash flow between 1.5 billion and 1.7 billion euros.