Philips beats Q3 profit forecasts and reaches agreement in principle with US DOJ over Respironics
The Dutch health technology group kept its 2026 outlook, beat the consensus for core profit and took a EUR 288 million provision for a proposed settlement with the US Department of Justice.
Royal Philips reported third-quarter 2026 results on 3 November with group sales of EUR 4.4 billion, 3% comparable sales growth and an 8% rise in comparable order intake, led by its Diagnosis & Treatment businesses. Adjusted EBITA rose to EUR 569 million and the margin improved by 70 basis points to 13.0%.
According to Reuters, the adjusted EBITA figure beat a consensus estimate of EUR 522 million published on the company's website. Philips also said its Respironics unit had reached an agreement in principle with the US Department of Justice to resolve criminal and civil investigations linked to its sleep and respiratory device recall.
What Philips reported
Income from operations was EUR 165 million in the quarter. Operating cash flow rose to EUR 544 million and free cash flow to EUR 384 million, which Philips attributed mainly to higher cash earnings and lower working capital outflows. The company said margins expanded in all three business segments, helped by higher sales, better gross margins and productivity measures, partly offset by cost inflation.
Segment by segment
Diagnosis & Treatment had flat comparable sales. Growth in Image Guided Therapy was offset by a decline in Precision Diagnosis, which Philips linked to the phasing of ultrasound sales and lower sales in China, as it had flagged at the second quarter. The segment's adjusted EBITA margin rose 50 basis points to 12.3%.
Connected Care grew comparable sales by 5%, with growth in all of its businesses, and lifted its margin by 190 basis points to 13.3%. Personal Health, which includes oral care and grooming products, grew comparable sales by 8% and reached a margin of 17.7%, up 60 basis points despite higher advertising and promotion spending.
Chief executive Roy Jakobs said in the statement that the company delivered "an excellent 8% comparable order intake" and pointed to customer demand for AI-enabled products, including its Verida and Rembra CT platforms, the Alturion ultrasound system and its HealthSuite Imaging cloud service.
The Respironics agreement
Philips Respironics reached an agreement in principle with the DOJ to resolve the previously disclosed criminal and civil investigations related to the recall. Philips booked a provision of EUR 288 million in the third quarter. The settlement still needs final documentation, and payment is expected in the first quarter of 2027, according to the quarterly report.
Reuters reported that the company did not say whether the agreement would include an admission of wrongdoing. "We cannot provide details qualitatively at this point in time," Jakobs told journalists, adding that the agreement in principle was reached "in the last few days". Dutch news agency ANP, via Ground News, also reported the expected payment.
Philips also said that in the third quarter the Enterprise Chamber of the Amsterdam Court of Appeal denied requests from certain investors for an investigation into the company's affairs related to the recall. The outlook excludes other ongoing Respironics proceedings, including an investigation by US State Attorneys General.
Outlook and capital
Philips reiterated its full-year 2026 outlook: comparable sales growth of 3% to 4.5%, an adjusted EBITA margin of 13.5% to 14.0% and free cash flow of EUR 1.5 billion to 1.7 billion. The margin range includes a US tariff refund benefit of about one percentage point, and the cash flow range a net tariff refund benefit of about EUR 200 million.
Net productivity savings reached EUR 170 million in the quarter and EUR 427 million year to date, and Philips said it remains on track for EUR 1.5 billion of savings under its 2026 to 2028 programme. During the quarter it also issued EUR 650 million of notes due 2034, which it described as the healthcare industry's first EU Green Bond under the new European Green Bond Standard, 2.7 times oversubscribed.
What it means for European founders and investors
Large medtech groups are buyers and partners for health startups. Philips is pushing AI, robotics and cloud software into imaging and image-guided therapy, and it said it is investing EUR 50 million in AI, robotics and advanced imaging in the Netherlands, alongside more than EUR 100 million from the Dutch government and EUR 150 million in private financing from Invest-NL and institutional investors. That kind of public-private setup creates room for Dutch and European suppliers, research spin-outs and software companies.
Regulatory risk is priced in medtech. The Respironics recall has cost Philips years of litigation and market value. For founders building connected devices, it is a reminder that quality systems and post-market surveillance are not optional extras: they decide whether a product line survives. Investors in device startups increasingly look for this discipline early.
China remains a drag. Philips again pointed to lower sales in China in Precision Diagnosis. European healthcare companies, including Sanofi and AstraZeneca, have been reshaping costs and portfolios this quarter, and the same focus on productivity runs through Philips' figures. For a wider view of how Dutch tech groups are performing, see our coverage of ASM International and Adyen.
What happens next
Philips said it will show its next innovations at the RSNA radiology conference later in November. The DOJ settlement still needs to be finalised, and the company expects to pay it in the first quarter of 2027.
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