Philips' largest diagnosis and treatment business saw flat sales in the third quarter, yet it was the main driver of the group's new order growth.
On November 3, Royal Philips NV (NYSE: PHG) released its third-quarter 2026 financial report. Group sales for the quarter reached 4.39 billion euros, up about 2% year on year, or 3% on a comparable basis. Group comparable new orders rose 8% year on year, with the diagnosis and treatment business showing the strongest order intake. Sales growth for the quarter mainly came from the personal health and connected care businesses.
The diagnosis and treatment business covers CT, MRI, ultrasound and image-guided therapy equipment, and contributed about 48% of Philips' sales last year. In the third quarter, the image-guided therapy business within this segment posted sales growth, but the precision diagnosis business was affected by the timing of ultrasound product sales and declining sales in the Chinese market, offsetting that increment.
Changes in demand are more evident in new products. Philips CEO Roy Jakobs said customers showed strong demand for the new-generation CT platforms Verida and Rembra, as well as the Alturion ultrasound system launched in July. Taking Alturion as an example, this device is aimed at departments with high examination volumes and can automatically complete some abdominal ultrasound measurements, reducing the steps doctors need to manually adjust the equipment. It can also share probes with two of Philips' existing ultrasound systems, making it easier for hospitals to allocate equipment across departments.
The hospital-facing business also includes monitoring equipment, software and long-term services. In the third quarter, Philips extended its monitoring partnership with a large U.S. healthcare system to 2034, with the agreement covering both equipment and services. In Canada, Ontario's health agency selected Philips' medical image archiving system. Under the project plan, more than 150 hospitals and 50 imaging clinics will share examination data through the system, involving more than 20 million imaging exams each year.
The connected care business posted 5% comparable sales growth in the quarter, while the personal health business grew 8%, making it the fastest-growing of the three major segments. In the quarter, Philips launched new electric toothbrushes, a home hair removal device with real-time operating guidance, and a wearable breast pump in the oral care, beauty and mother-and-baby care areas. Sales growth and cost control pushed adjusted profit margins higher year on year across all three segments. The group achieved 170 million euros in net savings for the quarter, with the adjusted EBITA margin rising to 13%, up 0.7 percentage points year on year.
The respiratory device recall matter still weighed on reported profit. Subsidiary Philips Respironics reached an agreement in principle with the U.S. Department of Justice over criminal and civil investigations related to the recall, and the group recorded a provision of 288 million euros in the third quarter for this. Net profit for the quarter fell to 28 million euros from 187 million euros a year earlier. The settlement documents are still subject to finalization, and the company expects to make payment in the first quarter of 2027.
Philips maintained its full-year 2026 guidance, expecting comparable sales growth of 3% to 4.5%, an adjusted EBITA margin of 13.5% to 14%, and free cash flow of 1.5 billion to 1.7 billion euros. The company said its operating performance in the first three quarters and its existing order backlog are the basis for maintaining its full-year expectations.
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