Philips Shares Slide 10% Despite Earnings Beat as Weak Orders Raise Growth Concerns

Philips (NYSE: PHG) shares fell nearly 10% in early Tuesday trading after investors focused on slowing order growth and weaker-than-expected performance in its largest business segment, overshadowing stronger quarterly earnings and an improved full-year outlook.

The Dutch healthcare technology company reported second-quarter comparable sales growth of 4% to €4.4 billion, exceeding analysts’ expectations of 3.8% growth to €4.26 billion. Philips also posted an adjusted EBITA margin of 16.4%, comfortably ahead of the 12.1% consensus forecast, supported by a 4.2% benefit from U.S. tariff refunds.

Despite the earnings beat, investor sentiment weakened after comparable orders declined 1% during the quarter. Low-single-digit growth in the Diagnosis & Treatment (D&T) segment was offset by a mid-single-digit drop in Connected Care orders due to timing-related order phasing.

Diagnosis & Treatment, Philips’ largest division, generated €2.09 billion in revenue, reflecting 2% organic growth. Strong demand for Image-Guided Therapy helped offset a decline in Precision Diagnosis, where continued weakness in China weighed on performance. The segment reported an adjusted EBITA margin of 13.9%, or 9.3% excluding the tariff refund, falling short of analyst expectations and highlighting ongoing profitability challenges.

Philips, one of the European companies most affected by U.S. import tariffs, said it largely completed the U.S. tariff refund process during the quarter. CEO Roy Jakobs noted that the company continues to navigate inflationary pressures and broader macroeconomic challenges while benefiting from the tariff reimbursement.

Looking ahead, Philips raised its full-year adjusted EBITA margin forecast to 13.5%–14.0%, up from the previous 12.5%–13.0% range, including an estimated 1% contribution from U.S. tariff refunds. The company maintained its comparable sales growth guidance of 3.0%–4.5% and increased its free cash flow outlook to €1.5 billion–€1.7 billion from the prior €1.3 billion–€1.5 billion.

Bernstein analysts said the headline earnings beat masked softer underlying trends. They noted that, excluding the one-time tariff refund, both revenue and profitability only modestly exceeded expectations. The firm also pointed out that growth was driven mainly by the Personal Health division, while Diagnosis & Treatment margins disappointed and overall order growth weakened, raising concerns about Philips’ momentum in the second half of the year.