Royal Philips N.V. Sponsored ADR (PHG.US) Q4 performance outstanding! Sales and profits exceeded expectations, but cautious outlook for 2026 under tariff pressure.

Dutch medical technology company Koninklijke Philips N.V. Sponsored ADR (PHG.US) has announced better-than-expected financial performance for the fourth quarter of 2025. The financial report shows that Koninklijke Philips N.V. Sponsored ADR's sales in Q4 increased by 1% year-on-year to 5.1 billion euros, exceeding market expectations. Comparable sales increased by 7%, surpassing analysts' consensus expectations of 4.9%, thanks to the collective drive of major business segments - comparable sales in the diagnosis and treatment business increased by 4%, comparable sales in connected care business increased by 7%, and comparable sales in personal health business increased by 14%. In terms of profitability, adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITA) for Q4 was 770 million euros, exceeding analysts' consensus expectations of 672 million euros; the adjusted EBITA profit margin was 15.1%, an increase of 160 basis points from the same period last year. This was mainly due to sales growth, product structure optimization effects, and production efficiency improvement measures, despite some profit being offset by rising tariff costs. Net profit was 397 million euros, compared to a net loss of 333 million euros in the same period last year. Koninklijke Philips N.V. Sponsored ADR also noted that the company saved 800 million euros in costs in 2025, offsetting tariff costs of 150 million to 200 million euros. CEO Roy Jakobs of Koninklijke Philips N.V. Sponsored ADR said, "In 2025, we fulfilled our promises by providing better healthcare services to more people. While addressing the dynamic macro environment, we strengthened the company's capabilities. We achieved strong order growth at the end of the year, despite the impact of tariffs, and significantly improved profit margins, maintained a strong cash flow, and ended the year with a robust balance sheet." Looking ahead, Koninklijke Philips N.V. Sponsored ADR has revised its forecast for comparable sales in 2026 to 3% to 4.5%, lower than the previous estimate of about 4.5%; the adjusted EBITA profit margin for 2026 is expected to be between 12.5% and 13%. This cautious outlook reflects the escalating pressure of U.S. tariffs and ongoing challenges in the Chinese market. Roy Jakobs had previously stated in December last year that the impact of U.S. tariffs is expected to almost double in 2026, despite ongoing cost savings, there will still be pressure on profit margins. Additionally, Koninklijke Philips N.V. Sponsored ADR has outlined a plan to drive profit growth and achieve sustainable value, including new integrated impact targets for 2030. The plan includes three pillars: growth strategies for each business segment, innovation as a key driver of growth, and continuous disciplined execution. Koninklijke Philips N.V. Sponsored ADR has set financial targets for 2026-2028, including achieving a mid-single-digit compound annual growth rate (CAGR) for comparable sales during this period, and reaching approximately 15% adjusted EBITA profit margin in 2028; cumulative free cash flow is expected to be 4.5 to 5 billion euros during the period, with cost savings of 1.5 billion euros between 2026-2028. It is worth mentioning that in uncertain macroeconomic environment, Koninklijke Philips N.V. Sponsored ADR's mid-term goals already include known tariffs, but do not include ongoing lawsuits related to Koninklijke Philips N.V. Sponsored ADR's Respironics, including investigations by the U.S. Department of Justice.