Royal Philips (PHIA) reported its earnings for the second quarter of 2025, showcasing a modest growth in sales and a significant improvement in profitability. The company highlighted its strategic product launches and operational efficiencies, which contributed to a 20% increase in adjusted diluted EPS from continued operations. Despite a slow recovery in China, Philips remains optimistic about its future growth prospects.

Key Takeaways

• Comparable sales grew by 1%, with a 6% increase in order intake.
• Adjusted EBITDA margin improved by 130 basis points to 12.4%.
• Strong innovation pipeline with new AI-powered products.
• Full-year comparable sales growth outlook set at 1-3%.
• Free cash flow reached €230 million, with a leverage ratio of 2.2x.

Company Performance

Philips demonstrated resilience in Q2 2025 with a 1% increase in comparable sales, despite a challenging global environment. The company’s order intake rose by 6%, reflecting strong demand in certain segments. The adjusted EBITDA margin showed a notable improvement, increasing by 130 basis points to 12.4%, driven by operational efficiencies and cost-saving initiatives.

Financial Highlights

• Revenue: Comparable sales growth of 1%
• Adjusted EBITDA margin: 12.4%, up 130 basis points
• Adjusted diluted EPS from continued operations: €0.36, up 20% YoY
• Free cash flow: €230 million
• Net debt: Approximately €6.6 billion

Outlook & Guidance

Philips expects a full-year comparable sales growth of 1-3% and has increased its adjusted EBITDA margin range to 11.3-11.8%. The company anticipates sequential sales improvement in the upcoming quarters and plans to hold a Capital Markets Day in February 2026 to outline its strategic vision.

Executive Commentary

CEO Roy Jakobs emphasized the company’s focus on margin expansion and strategic growth initiatives. “We are building on momentum and delivery today, with a clear focus on driving underlying margin expansion,” Jakobs stated. He also highlighted the company’s trajectory towards mid-single-digit growth and mid-to-high-teens margins.

Risks and Challenges

• Slow recovery in the Chinese market could impact sales growth.
• Supply chain disruptions may pose operational challenges.
• Macroeconomic pressures and currency fluctuations could affect profitability.
• Increasing competition in the healthcare technology sector.
• Regulatory hurdles in launching new medical devices.

Q&A

During the earnings call, analysts inquired about Philips’ strategies for tariff mitigation and margin expansion. The company also provided insights into the recovery of the Chinese market and discussed its personal health investment and marketing strategies.

By focusing on innovation and operational efficiency, Philips aims to navigate the complex global landscape and achieve sustainable growth in the coming quarters.

Full transcript - Philips (PHIA) Q2 2025:

** Conference Moderator**: Welcome to the Philips Second Quarter and Semi-Annual 2025 Results Conference call on Tuesday, July 29, 2025. During the call, hosted by Mr. Roy Jakobs, CEO, and Ms. Charlotte Hanneman, CFO, all participants will be in the listen-only mode. After the introduction, there will be an opportunity to ask questions. Please note that this call will be recorded, and a replay will be available on the Investor Relations website of Royal Philips. I’ll now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, ma’am.

Durga Doraisamy, Head of Investor Relations, Royal Philips: Hello everyone. Welcome to Philips Results Webcast for the Second Quarter and Half-Year 2025. I’m here with our CEO, Roy Jakobs, and our CFO, Charlotte Hanneman. The press release and investor presentation can be accessed on our Investor Relations website. The replay and full transcript of this webcast will be available on our website after this call concludes. I want to draw your attention to our safe harbor statement on the screen and in the presentation. I will now hand over to Roy.

Roy Jakobs, CEO, Royal Philips: Thanks, Durga. Good morning, everyone. Thank you for joining us today. We entered Q2 with momentum, and we further strengthened it throughout the period. Order intake grew 6%, building on 9% last year. Comparable sales increased by 1% with strength in Personal Health, offsetting performance in Diagnosis & Treatment and Connected Care. Margin expanded by 130 basis points in the quarter to 12.4%, demonstrating that our innovation and ongoing productivity measures are driving strong gross margins. We delivered as planned in the first half of the year, and we are sustaining this momentum into Q3. We reiterate our full-year comparable sales growth outlook of 1%-3%, and we increased our 2025 adjusted EBITDA margin range to between 11.3%-11.8%. This 50 basis points increase includes recent tariff developments. We now expect full-year free cash flow to be between EUR 0.2 billion and EUR 0.4 billion.

Of course, all of the above assume that current tariff levels hold, whilst we continue to focus fully on executing our planned tariff mitigation actions, which are well underway and on track. Now, let’s look at our Q2 performance in more detail. Let’s start with orders first. Q2 order intake growth was broad-based across most regions. We saw sustained double-digit growth in North America and strong performance across growth geographies. Globally, our order book has increased in recent quarters. It’s up 7% year over year, with an improved margin profile from our latest innovations. What does this mean for our second half? This order momentum, combined with our robust order book, positions us well to deliver our full-year sales outlook. In Diagnosis & Treatment, orders grew double-digit across most regions.

In particular, there is strong demand for our recently launched innovations, which drove order intake growth in both Image-Guided Therapy and Precision Diagnosis. Let me share some examples. Our leadership in minimally invasive procedures was underscored in Q2 by a multi-year nationwide agreement with the Indonesian Ministry of Health. This will expand access to Image-Guided Therapy using our industry-leading Azurion platform. Millions of patients with cardiac, stroke, and cancer conditions across all of the country will benefit from it. Additionally, this partnership marks a significant step in strengthening Indonesia’s healthcare infrastructure for high-impact disease areas. It extends beyond equipment to services. It includes training, scalable digital solutions, and service hubs. It will deliver nationwide long-term care. Meanwhile, in the area of Image-Guided Therapy innovation, our award-winning Azurion Neuro BiPAIN R3, which we introduced last year, is fueling double-digit year-on-year order growth.

This new innovation is also contributing to higher win rates across all our BiPAIN systems. In Precision Diagnosis, we experience also strong year-on-year order intake growth in both diagnostic imaging as well as in ultrasound, led by North America. This is another great example of momentum driven by strong demand, recently launched innovations, and improved commercial execution. In MR, we were the first and remain the only company to offer a commercially available white board OneHalf helium-free system, and this is gaining traction. Customer feedback is positive, and all OneHalf MRI orders today are now from our helium-free BlueSeal system. This breakthrough innovation saves 1,500 liters of helium per system, significantly reducing installation costs over lifetime, while offering full flexibility in facility placement. It is setting MR free. We also strengthened our position as an AI leader with the FDA 510(k) clearance of MR SmartSpeed Precise Dual AI software.

This AI solution delivers three times faster scanning and up to 80% sharper images, all in just one click. CT growth was driven by strong demand for the CT 5300, our AI-enabled productivity workhorse, and the clinically advanced Spectral CT 7500. By the end of the second quarter, these two systems alone accounted for more than half of all CT order intake value. It clearly demonstrates the clinical and operational impact of these recent launches for our customers who need to deliver better outcomes but as much need to increase access to imaging. Moving to connected care. Following exceptional growth of over 20% in the prior year, underlying order intake remained very resilient, declining slightly. Demand for our solutions in hospital patient monitoring remained strong. This is fueled by significant customer partnerships, including six major U.S. agreements finalized in just Q2 alone. This includes dislodging incumbents. How?

Because we drive efficiencies as we streamline operations across care settings and across hospital systems. IntelliVue Patient Monitors, plus our AI-powered Virtual Patient Information Center, work together to create a comprehensive and efficient patient monitoring and information management system. With a strong and growing order book, up year on year and improving sequentially, and the increasing momentum, D&T and connected care are well positioned to accelerate growth and margin in the second half of the year. Now, let’s move to personal health. All three businesses within the segment grew, driven by strong traction from new innovations and enhancements to our core products, supported by targeted investments. These innovations are resonating not just with customers, but also with high-performing partners such as Amazon, Costco, Walmart, MSH, JD.com, and Douyin, along with local accelerators. Why?

Because they are driving measurable increases in sellout, category growth, and share, and they are accelerating access to consumers in our key growth markets. In Q2, sellout trends remained robust across Europe and most growth geographies, supported by these partnerships. China continued to lag due to subdued consumer sentiment. In the U.S., sentiment has remained relatively stable, but we are maintaining a close watch on evolving consumer dynamics. More broadly, we are continuously tracking consumer sentiment and spending across all regions to ensure agility in our response. We continue to execute on our priorities, from enhancing patient safety and supply chain resilience to simplifying our operations. Here are some key highlights in the quarter.

Firstly, with quality embedded in our businesses, innovation, and our culture, we have simplified and strengthened our quality management system and CAPA processes, completed deep reviews of post-market survey signals, and accelerated our response to newly emerging post-market signals. As a result, we have reduced field actions and product updates by approximately 20% year to date, following a 20% reduction in 2024 compared to 2023. This reflects a sustained improvement in overall quality performance. Moving to supply chain. Through continued product simplification and operational focus, our teams delivered our products to hospitals and patients with greater speed and reliability. In Q2, service levels reached an all-time high of 86%, an improvement of more than 10 percentage points year on year. Improved supply chain reliability and agility support our progress in executing tariff mitigation in line with our plan.

Lastly, we continue to identify and execute opportunities with a new operating model to reduce complexity and better align our resources to where growth is happening, resulting in strong and continued productivity improvements. Charlotte will discuss this further. The fundamentals of the markets we serve remain strong, though their dynamics continue to vary by region. Let me take a moment to reflect on what we’re hearing from our customers. Starting with North America. We continue to see steady fundamental hospital demand. Customer pull for productivity solutions remains strong. They seek smarter ways to manage increasing workload and navigate resource constraints whilst having to serve more patients. We are well positioned to meet this need as an innovation and productivity partner, as evidenced by the double-digit order intake growth in 2024 and the first half of this year.

While we have not observed significant shifts in capital expenditure plans, we are closely monitoring the environment. In China, stimulus activity is picking up and tender activity is increasing, although from a low base. That said, we have not yet seen a significant change in market dynamics. Therefore, we continue to maintain a cautious view on China in our full-year outlook. Globally, hospital capital expenditure remains solid. We are seeing increasing demand in Europe and Latin America. India and Saudi Arabia are investing in healthcare infrastructure and digitization, representing high-growth geographies to us, as also evidenced by the Shahram Deal in Indonesia. Staying close to our customers and partners is more important than ever.

They are navigating an increasingly complex environment, facing rising demand, resource constraints, and shifting priorities. That is why we’re focused on innovating with purpose to deliver better and more care, solving their most pressing challenges through smart, scalable, and AI-enabled solutions. I’m proud of how our teams are stepping up and delivering impact where it matters most. Charlotte will now discuss our second-quarter performance and our outlook for 2025. Thank you, Roy. I will start with segment-level performance. In Diagnosis and Treatment, comparable sales decreased by 1% in the quarter, as expected, on the back of a high two-year comparison base. Image-Guided Therapy continued its solid top-line performance, driven primarily by higher installations of our flagship Azurion systems in Europe and growth geographies, along with strong performance in coronary devices. Precision Diagnosis sales declined in the low single digits year over year.

This was mainly due to a particularly high comparison base in magnetic resonance. As we noted in Q1, this elevated base was driven by prior years’ improvements in the supply chain and persisted into Q2. D&T adjusted EBITDA margin improved by 130 basis points to 13.5%. Recently launched innovations such as next-generation BlueSeal MR, CT 5300, and Azurion Neuro BiPAIN continue to contribute to the improvement of the gross margin. The improvement in adjusted EBITDA was further supported by productivity measures, improved operational efficiency, and favorable mix effect. There was contribution from services, which was partially offset by cost inflation. In Connected Care, comparable sales declined 1% in the quarter, mainly due to a low single-digit decline in monitoring. Similar to Diagnosis & Treatment, our hospital patient monitoring business faced a high two-year comparison base globally, following prior period supply chain improvements.

As Roy said, we continue to see solid demand in hospital patient monitoring, driven by large partnerships in North America. Connected Care adjusted EBITDA margin improved by 160 basis points to 10.4%. This was mainly driven by productivity measures, improved operational efficiency, and a low comparable base, partially offset by cost inflation. Personal Health delivered strong growth in Q2 across most geographies. This strong performance was partially offset by a decline in China, reflecting the impact of inventory restocking, which concluded in the quarter as anticipated. Personal Health adjusted EBITDA margin declined by 170 basis points to 15.2%. Higher sales and productivity measures were more than offset by mix, cost inflation, and advertising and promotion spend to drive long-term demand and support our recent launches. These included the AI-powered i9000 electric shaver range and Sonicare range of toothbrushes.

Finally, sales in the Other segment were in line with the previous year, and adjusted EBITDA for this segment increased by EUR 24 million year on year, mainly driven by lower cost and higher royalty income. Turning to our group results and operating highlights in the quarter, comparable sales growth for the group was 1%. Geographically, overall growth was supported by growth geographies. This was mostly offset by a decline in China, as expected, mainly due to the decline in Personal Health. Adjusted EBITDA margin increased by 130 basis points to 12.4%, driven by productivity measures, improved gross margin from innovation, favorable mix effect, and improved operational efficiency. This was partially offset by advertising and promotion spend in Personal Health, cost inflation, including the initial impact of increased tariffs, currency headwinds, and lower sales in China. Tariffs remain dynamic.

We have largely completed short-term mitigation actions, such as optimizing inventory locations and flow of goods, leveraging special programs, and pursuing exceptions. We made solid progress on midterm initiatives, including supplier network and manufacturing location optimization to enhance cost efficiency and operational agility. This process is carefully managed to balance regulatory, operational, and customer considerations. Our disciplined approach to cost management and productivity initiatives has delivered EUR 2.1 billion in savings since the start of our three-year plan in 2023. These savings have contributed meaningfully to adjusted EBITDA expansion. In Q2, we delivered EUR 197 million in savings, bringing the year-to-date total to EUR 344 million. We remain on track to achieve EUR 800 million in productivity savings in 2025. One of the key levers supporting this multi-year delivery is product simplification and SKU reduction across portfolios. These efforts reduce complexity and cost in R&D, procurement, and supply chain.

Also, this enables us to focus resources on areas with the highest growth potential. As a result, we’re accelerating innovation and structurally improving our margin profile. Roy mentioned earlier that we are continuing to find opportunities to reduce complexity and further align with our new operating model. This requires making tough but necessary choices about what we stop doing, freeing up our teams to focus externally on customers and competitive dynamics. These simplification efforts are already delivering results, contributing to productivity savings in Q2 and sharpening our commercial focus, creating the space for our teams to accelerate growth. Restructuring and acquisition-related costs continue to require close attention. In the quarter, adjusting items amounted to EUR 86 million, of which EUR 54 million were related to Respironics field action and consent agreement remediation.

This is below our Q2 2025 outlook range of EUR 150 million, mainly driven by cost phasing within the year. Adjusted diluted EPS from continued operations was EUR 0.36 in the quarter, up 20% year on year, which benefited from improved gross margin. Free cash flow in the quarter was EUR 230 million, driven by higher earnings offset by working capital outflows due to seasonal phasing. Moving to the balance sheet, we ended the quarter with approximately EUR 1.8 billion of cash and net debt of approximately EUR 6.6 billion. Our leverage ratio remained in line with Q1 2025 and last year at 2.2 times on a net debt-to-adjusted EBITDA basis. We successfully raised EUR 1 billion this quarter through a well-supported notes offering, with the five- and ten-year tranches oversubscribed, more than three and four times respectively. We remain committed to maintaining a strong investment-grade credit rating.

Now turning to the outlook, our comparable sales growth outlook remains unchanged at 1%-3%, with a greater weighting towards the fourth quarter, as previously expected. As Roy mentioned, the strength in our order book across both Diagnosis & Treatment and Connected Care, as well as our Personal Health sales momentum, positions us well to drive accelerated growth in the second half of the year. This is further supported by a lower prior-year comparison in China. We continue to expect sequential improvement in comparable sales through the second half of 2025, with Q3 projected to come in slightly above the full-year range of 1%-3% and further improvement anticipated in Q4. The tariff landscape remains dynamic. There have been two notable revisions since the outlook we provided on May 6. Tariffs on U.S.-China bilateral trade and tariffs on imports from the European Union into the U.S.

are both expected to be lower than our previous assumptions. At current levels, the estimated net impact for 2025 is between EUR 150 million and EUR 200 million, down approximately EUR 100 million from the previous estimate. We now expect adjusted EBITDA margin to be between 11.3% and 11.8%, which is 50 basis points above our May outlook. We estimated the current impact of tariffs using the same consistent approach as before, based on announced measures and a net of substantial mitigation actions, which we are actively executing on with agility. As mentioned during our earnings call in May, the tariff impact will be more pronounced in the second half of the year, reflecting the timing lag between higher inventory costs and the recognition of the impact in the P&L.

As a result, we expect Q3 adjusted EBITDA margin to decline year over year, primarily due to tariffs and the timing of royalty income in the other segment. Moving to free cash flow. At current tariff levels, we now expect free cash flow for the full year to range between EUR 0.2 billion and EUR 0.4 billion, up from slightly positive previously. As a reminder, our 2025 free cash flow includes the EUR 1 billion outflow related to the Respironics settlement paid in Q1. Our Q3 and full-year 2025 outlook excludes potential wider economic impact and the ongoing Philips Respironics-related proceedings, including the investigation by the U.S. Department of Justice. With that, I would like to hand it back to Roy for his closing remarks. Thank you, Charlotte. Before we conclude, I would like to share that we will host a Capital Markets Day next February.

The event will mark the completion of the three-year plan I launched when I became CEO. It will provide an opportunity to reflect on the fundamental progress we have been delivering since. It also sets the stage to outline the next phase of our strategy. Accelerating profitable growth, unlocking the full potential of our segments, and enabling better care for more people. Now and into the future. This positions us to continue building towards our trajectory of mid-single-digit growth and mid-teens margins beyond 2025. We look forward to that discussion. To sum up, in the second quarter, we delivered solid order intake growth, sales growth, and strong margin improvement. As we have said from the start of the year, our performance is weighted towards the second half, and we are on track to deliver.

Our confidence is underpinned by order intake momentum and robust order book, providing clear visibility into second-half sales conversion. We are seeing encouraging uptake of our innovations in healthcare settings and sales momentum in personal health. All while the tariff landscape continues to evolve. We keep execution on track and actively adapt our mitigation measures accordingly. These dynamics position us well to execute and deliver against our full-year outlook and operational priorities, and allowed us to increase our full-year outlook for adjusted EBITDA margin and free cash flow, including currently announced tariffs, whilst we reiterate our comparable sales growth outlook for the year. We achieved what we set out to do in the first half while navigating a complex and, in several ways, uncharted global environment. Looking ahead to the second half, we are confident in our ability to do the same.

We are building on momentum and delivery today, with a clear focus on driving underlying margin expansion. Thank you, and we are now ready for your questions. Thank you, sir. If any participant would like to ask a question, please press star followed by two times one on your telephone. Due to the time, please limit yourselves to one question and one follow-up. This will give more people the opportunity to ask questions. There will be a short pause while participants register for questions. We will now take our first question from the line of Hassan Al-Wakil from Barclays. Please state your question, Hassan. Good morning, and thank you for taking my questions. I have three, please. Firstly, can you talk about the improvement in D&T margins and the underlying expansion here?

I know that you highlighted gross margin as a driver, but can you quantify how much of that was driven by gross margin and within gross margin, whether it’s price or mix or both, and whether you see yourself at an inflection in the D&T margin? Secondly, on the margin guidance. Why have you only banked the tariff improvement and not the EBITDA beat in the quarter? Is this conservatism on your part, or do you see, or do you not see the margin improvement as sustainable? And then finally, can you please help us unpack the decline in Connected Care in the quarter by segment, particularly monitoring and SNRC? What is driving this? How is the share gain opportunity being realized in Europe in SNRC? And then in monitoring, I can see that there was a decline this quarter, and that comes against a flat performance last year.

I’d love to get the detail behind that. Thank you. Thank you, Hassan. Let me start with your first question on the D&T margin. We’re indeed very pleased with the D&T margin expansion in the quarter of 130 basis points. As I said in my prepared remarks, a lot of that is indeed related to gross margin expansion on the back of the great innovations that we’ve been bringing to market, including our BlueSeal MR, our Spectral CT 7500, and as well as our Azurion Neuro BiPAIN R3. We really see strength across the modalities. In addition to that, we’ve also continued to focus on productivity. You heard me talk about in my prepared remarks about the portfolio simplification as well as the SKU reduction, and we start seeing the impact of that in our gross margin as well.

Lastly, we also saw favorable mix impacts that have helped on the back of also solid IGT sales, as well as increased contribution from our services portfolio as well. There is a lot to be pleased about in the second quarter there. If I then continue on to your second question on the full-year margin guidance, again, I’d say that, first of all, we’re happy with our outlook revision to include the current tariff levels that have gone down, both from a U.S.-China perspective as well as from an EU-U.S. perspective. What I would just remind you of, though, is that if we look back at the first half, we are at minus 1% sales growth and 30 basis points of expansion.

In order to deliver on this guidance, we have to accelerate our margin expansion in the second half of the year whilst absorbing the tariff impact that will hit us in earnest in the second half of the year because of the way that flows into our P&L. Of course, also, we have potential FX headwinds to take into account. That is also what we’re taking into account. What I would add on top of that is, specifically on Q3, we expect adjusted EBITDA margins to go down as a result of that tariff impact impacting our P&L. Thank you, Hassan. On connected care, if you look at connected care, the sales declined 1%, primarily driven by a low single-digit drop in monitoring. As you know, this business grew low single digits last year following the strong 20% plus growth in 2023 after earlier supply chain improvements that we realized.

It is coming from this high base. As we also have seen in the order intake growth and the strength there, actually momentum in monitoring is very strong. Also, monitoring represents 6% of the total revenue. The demand for monitoring solutions remains strong, especially also with the U.S. demand. We concluded six big partnerships there with major healthcare systems. If you look to the Respironics and the SRC performance, we had, of course, a very strong pickup last year. Now, we see a bit slower pickup this year, also on the back of that strong uptake last year. We have strong momentum in the masks, as we have shared before, where the new launches are gaining traction, and we are working our way back into the market that we are re-entry.

Actually, we are also looking forward to the second half of the year where we see actually connected care momentum growing on the basis of the order book and order momentum that we have been seeing. We are confident that that will also then showcase itself into Q3 and Q4 performance. That’s really helpful. If I can just follow up, where are you in the European market on the system side versus where you are prior to the recall, please? In share terms. I would hardly kind of say exactly in share terms, Hassan. As said, we are now back in all markets. We’re also expanding in the markets. We also are working closely with the big partners in these markets. Of course, we’re still working our way back in. I think it’s too early to call specific market share numbers on that. We are kind of rebuilding the momentum.

Actually, that’s going in line with plan. We are staying the course on that. I see really that the customers are welcoming us back, as we said earlier. Thank you very much. Thank you. We will now take our next question from the line of Graham Doyle from UBS. Please state your question, Graham. Morning. Thanks for taking my questions. Just a couple really relating to China and one quick one on tariffs. Just in terms of the destock for personal health. How far to the quarter did that actually kind of complete? Would you be able to give us some color on what you’re seeing in terms of the medical equipment side of things on tenders and how that’s translating into orders and hopefully at some point revenues?

Very briefly, just on tariffs for 2026, should we effectively take what we’re looking at for the second half and sort of annualize that? Thank you. Thank you, Graham, on China destocking. Indeed, we completed the destocking program in the second quarter. At the same time, I think we have been spending behind the continued strong sellout. That combination was important because we built on the momentum that we see. Step-by-step rebuilding in China. We had an 186 festival where we actually saw an improvement for the first time also in sellout coming in. We ranked number one on JD.com in our category. It was good performance. We see China playing out as we planned. We’re still cautious on the full year, but we do see it strengthening. That’s also what we’ll take in the second half. As you know, we also get the comparable then supporting us.

Also on the underlying sellout, we see that actually we are rebuilding the momentum in the market, and that goes with the demand that step-by-step is increasing. On the medical side, we see also in line with our outlook, as we said earlier, that there’s a slow recovery. Tenders are coming into the market. It’s a competitive situation, and the process is still prolonged. That’s also something that we see. Therefore still hitting us in the second quarter and with slower growth from China on the medical side. But in the second half, we also expect that to improve, although from a low base and, of course, also at a slow pace. I think China is fully baked in the guidance that we have now put out there for the full year. In that sense, I think we feel comfortable with what we are planning for.

We remain very close to the market. I was there two weeks ago myself again, talking to customers and the government. They really want to strengthen the Chinese market, and we continue to believe in the longer-term prospects of it, but it does take time. I think that’s still fair to say. We are gaining in that market. Good momentum with the market base. That is something that we also see then continuing into 2026. We do not expect that this is a short-term hiccup. We expect structural improvement. Step-by-step, we expect China to come back into the mid-single digit ranges that have been before, and that’s what we’re working towards. Yeah, thank you, Graham. Maybe to your next question on the 2026 tariffs. Maybe first to give you a little bit of context.

As we started seeing those tariffs, we’ve established a multifunctional SWOT team a few months ago, really going through all the different scenarios that we see. As a result, we’ve been able to digest the latest dynamic updates. If we then particularly go into 2026 and also what Roy said in his prepared remarks around us building towards our trajectory of mid-single digit growth and mid-teens margins beyond 2025, that incorporates the new tariff reality. That is the best I can say at this point in time. Awesome. That’s really clear. Thanks a lot, guys. Appreciate it. Thank you. We will now take our next question from the line of Veronica Dubadrova from Citi. Please state your question, Veronica. Hi, guys. Good morning. Thank you, Roy and Charlotte, for taking my questions. I will keep it to two, please.

One, just was hoping you could elaborate on the strength you’re seeing in personal health. In particular, I think you alluded to high single, low double digit growth rates in Europe and the United States. Obviously, that’s quite at odds with a lot of the other consumer data points that we’re seeing out there. Roy, maybe you can give us a little bit of color on sort of how you’re thinking, what’s driving that, how sustainable that might be. I guess the guidance for the year where you’re looking for growth that is above the 1-3%, just curious if it’s mid or high single digits, kind of what’s realistic because the comps do get easier in the back half of the year, and clearly China’s better. That’s my first question. Appreciate there’s a lot of moving parts. Then my second question is just on the order strength.

Roy, I would love for you to elaborate a little bit on the modalities in particular where you think you’re doing better. Maybe you’ve touched upon the regional color in terms of North America, but if there are any other regions you’d call out there as well, that would be helpful. Thank you so much. Thank you, Veronica, for your questions. Let me start on pH. As we actually saw in due course of the year, we see the consumer momentum for our solutions in particular strengthening. We saw that in Q1. We saw a further step up in Q2. We actually expect that to continue into the second half, that momentum that we have been building. That was, in particular, of course, outside of China. We saw strong US and also strong Europe and rest of the world. I think we mentioned that this is quite broad-based.

We see good uptake about our new grooming and beauty ranges. In particular, we launched the new high-end shaver, the i9000, really doing really well. That’s generating not only good sales but also good margins. That’s a very important launch that is generating traction. We had the mid-range in Sonicare that we launched that actually is also making good headway in China, but also in the rest of the world. We see an uptake that supports it. Also in our mother and childcare business that is actually doing well. We see that our AI-powered Evan baby monitor, but also natural feeding bottles are doing well. We see that there is a structural support for our solutions. We see the growth from a regional perspective in North America, in Western Europe, and especially outside of China. In the second half, we do expect China to further pick up.

I just mentioned it. We see sellout strengthening quarter over quarter in China. Of course, we have to compare some base because of destocking comes out of our numbers. If you then look at the guidance for the year, indeed, we said we would be probably slightly above the range. We still have a second half to go, so we want to be kind of also prudent on that outlook. We see a sustained support for the demand that we have been seeing increasing. That’s the outlook. We remain, of course, also cautious on the consumer sentiment, staying on top of it. For the moment, we are confident on pH outlook. Secondly, on the orders in health systems, actually also there we saw it was quite broad-based. Starting with the strongest, which was IGT, which saw double-digit order intake growth. That was coming from various places.

We had North America double-digit growth of orders. We had the Indonesia deal that you saw in Asia. We also had good growth in Europe. We see that IGT is resonating. We had the new launch of the Neuro Biplane that actually is really coming in strong. Also, the base platform is still generating a lot of interest and expanding its position. That is in IGT. Then in PD, we also had high single-digit growth, actually nicely contributed by both from MR and CT perspective. I mentioned that actually we see now that all our kind of one-off PRs are coming from the BlueSeal. That is actually making really good inroads. Including in China, actually, we see good support for that platform.

Also in our CT range, the 5300 that we launched, the AI-enabled kind of platform that really drives 80% lower radiation and lower image noise, does really well in the market. Also, a spectral in volumes actually is picking up. We saw also a nice step up in Q2 versus Q1 from a CT perspective. Ultrasound, not to forget, came in strong as well. We had a good contribution from ultrasound. We launched some new innovations with the EPIQ, the Affiniti, also a new point of care offering came into play. From a DMT perspective, strong pull from across regions. Connected care, I already alluded to that we were very pleased actually that based on a more than 20% exceptional growth in Q2 2024 with a big deal in North America, we now saw good growth coming in with a slight decline in Q2.

Again, fueled strongly from North America, also kind of strong growth there with six big partnerships. Also outside of North America, we see good momentum. We see the need for more patient monitoring really strengthening and doing that in an efficient manner. That is what our platform really provides into and provides for. We kind of saw that momentum also doing well. Overall, we have an auto momentum and also the funnel that actually supports us with the momentum into the second half. We have strong visibility into that. Actually, we see that the new innovations are generating the traction that we were hoping for. That gives us also the underpinning not only for the order intake outlook, but also for, of course, sales in the second half. That is super helpful. Thank you so much, Roy. Thank you.

We will now take our next question from David Atlington from JPMorgan. Please state your question, David. David, your line is open. Hey, Morgan, guys. Questions two, please. Firstly, on personal health, it sounds like you have invested quite a lot. Hello, can you hear me? We can hear you now, yes. Yep, we can hear you now, yep. Hello? Yep. Yes, we can. Okay, perfect. Hey, guys. Yeah. Just on personal health. You’ve invested quite a lot in advertising and promotional spend in pH in the quarter. I just wondered if you could pull out how much of that was in price, maybe just talk about pricing dynamics. And then secondly, as you look into 2026. US hospital markets potentially going to face some challenges in 2026. I just wanted to have your early conversations with customers and how they’re thinking about the market in 2026. Thank you. Yep.

Thank you, David. So let me take the first question on personal health. Indeed, we fueled the innovations that we’ve done and that Roy spoke about. We fueled that with advertising and promotion spend, and we’ve invested quite heavily also, particularly in China, as we are finalizing the destocking that we spoke about of the inventory. We were investing behind the sellout by putting marketing campaigns and investing in influencer campaigns there. That is driving part of the investment there. What I would tell you from a pricing perspective in personal health, it’s broadly flat. We are not reducing our prices to gain market share or to drive sales. This is really a marketing campaign to drive the great innovations that Roy just spoke about. On the second question, US CapEx conversion, maybe over to you, Roy. Yeah. We see continued strength in the demand in North America.

I think we see the patient volumes are strong. Procedures are still up. I think what is important to segment over systems kind of where we see specific demands. Because on one hand, you see kind of the bigger systems still consolidating, and we can provide them with really platforms that make them more efficient because they’re really looking for productivity, able to serve more patients, but at a lower cost because they also face cost pressures. At the same time, they also want to have more ambulatory solutions to also serve patients outside of the hospital system. We see that also ongoing. In part, we saw also that kind of in the deals that we have, there are some monitoring as a service deal still in place. Also the OpEx is being used to kind of convert that demand. We continue to see strong demand in North America.

It has been fueling now six and one-half years actually of double-digit growth in orders. We do not see an immediate trend breach. Of course, we stay on top of it. We also are very close to our customers, discussing how we can support them. We are actually looking forward to continue to grow in North America. We have been strengthening our position there, both in terms of our commercial position. We also, of course, continue to support the supply position in line with the trend in the world. That is something that kind of supports our win rate in North America. Most importantly, we see demand also for next year as strong. Therefore, we continue to fuel the North American market with our innovations. Yep. That’s clear. Thank you. Thank you. Our next question comes from the line of Ed Riley Day from Rothschild & Co Redburn.

Please go ahead, Ed. Good morning. Thank you. Yes. Firstly, on ultrasound, could you just give us further color on the growth in the ultrasound revenue in the quarter? And also a follow-up in terms of D&T more broadly. If you could either give the China decline or give us more color on the performance of D&T excluding China, that would be helpful. And then a quick follow-up on the monitoring question from earlier. In terms of your market share in monitoring, one of your competitors has been struggling in recent years. Do you consider that you are still taking share in the particularly US market? So on ultrasound, growth in ultrasound. We have been slightly declining in ultrasound growth. That was on the back of strong order intake growth that we’re seeing coming in. Actually, for the second half, we see ultrasound performance strengthening.

We had the new launches that are really seeing a good uptake. You heard us talk about kind of the high single-digit order growth in Precision Diagnosis, and ultrasound is strongly contributing to that. We expect that also to come into sales growth of the second half. In the growth, if you see China versus ex-China, we still had a dilution effect from China coming into Q2. That’s in line with our expectation. Orders strengthening, sales also strengthening into the second half, but still negative. It will turn positive from the second half. That’s where our expectation is. That’s still up on a low base, and it’s in line with our cautious outlook. It is increasing quarter by quarter. That’s, I think, our view on the China dynamics as we see it evolving. That’s also what we expect when you look a bit further ahead into 2026.

That monitoring, we have continued strong momentum in monitoring. I think you saw it from the six deals that we took in North America. We have great momentum in the customers that we have, but also are taking, and that’s also what I mentioned, we’re dislodging some incumbents. We’re also taking order sockets. The combination of our monitors with Pick IX, with the AI solution on top, and also Capsule is really driving a very strong positioning. That’s what we continue to build and expand on. Great. Thank you very much. Thank you. Our next question comes from the line of Richard Felton from Goldman Sachs. Please state your question, Richard. Thank you very much. Good morning. Two questions for me, please. The first one is a follow-up on the D&T margin. Charlotte, you mentioned SKU reduction as one of the drivers for margin expansion in that division.

Just curious how far along you are in that process, how much more is there to go on that SKU rationalization, and within D&T, which businesses are most impacted by that? And then my second question, I suppose it’s a slightly bigger picture question. As Philips plans for a CMD in February 2026, I’d be interested to hear your thoughts on what parts of the current strategy have been working well and which areas you think there are still rooms for improvement. Thank you. Thank you, Richard. Let me take your first question on D&T margin and double-clicking a little bit on the SKU reduction that we’ve been working on. A few more color that I would give. First of all, this is really a multi-year process that we started last year. We’re making good progress, but it’s really a quarter after quarter, year after year progress.

Because as you can imagine, if we’re, for instance, reducing the number of transducers in ultrasound, which we are doing, that takes time to phase that out of the market. We are making progress. We’re on track there, but we also see this is a multi-year process as well. To your question on the number of modalities, we’re looking at all modalities in D&T. I gave you an ultrasound example. We’ve been working on IGT, reducing the number of platforms there. We’re looking at MR. It’s really across all modalities that we’re looking at this. As I said earlier, we’re seeing the initial impact with reducing complexity, which ultimately helps R&D, production, and supply chain as well as procurement. Thank you, Richard, for your second question on the CMD. We’re looking forward, of course, to give you the full update in February.

I think what we, maybe just a short kind of look back and what’s coming. In the plan that we presented, we said that we had a lot of fundamental work to do. I think as you have been seeing and also as we’re showcasing today, we have a much better control on our patient safety and quality, on supply chain, and also on the simplification and the organizational productivity. That is what has really been working well. We’ve put a lot of progress in, and we’re starting now to kind of bear the fruits because in parallel, we started to innovate and really focus our innovation on bigger platforms that have kind of scalable impact. That innovation you see now coming through in the order intake growth momentum that we have seen dialing up over the last year.

Now, if you see the 7% year-on-year growth, but in particular now also in this year, and we also take that into the second half. The profitable growth expansion will be, of course, a big theme also as part of the CMD because we want to expand our innovations and our positions, especially also building on the strongholds that we have. We’re very excited about kind of being able to do that on a stronger platform that we have been putting in place for Philips overall. That is from an innovation perspective. That is from a commercial perspective. That’s also from an operational perspective. I think you also saw how quickly we can now adjust our supply chain. I think if you would go three years back, it would have been a much bigger struggle. Now we can really quickly adapt. We have the mitigation fully in play.

We’re able to up our service levels. We have been down in quality incidents. Actually, we have been driving margin expansion across the period in a very strong way. You see that margin expansion also coming through in Q2. We also kind of intend to continue that strong operational margin expansion into the full year. Of course, we have tariffs that we have to take into account. We also will take that into account moving forward. As I also mentioned at the beginning remarks, we continue to build our trajectory into this mid-single-digit growth and these kind of mid-to-high-teens margins for the different segments that we play in. That’s something that we’re excited by and we’ll start to talk to in February. Thank you very much. Thank you. Our next question comes from the line of Hugo Sovey from BNP Paribas. Please state your question, Hugo. Hi, guys.

Thanks for taking my questions and congrats on the results. I have two quick follow-ups, please. First, on China trends, you mentioned restocking in the quarter and the follow-up to Graham’s question. On the momentum that is rebuildin