Updates on the impact of tariffs and Respironics’ comeback were front and center in Philips’ (NYSE: PHG) second-quarter 2025 earnings call.
Philips CEO Roy Jakobs lauded the company’s growing momentum during the July 29 presentation.
“We entered Q2 with momentum, and we further strengthened it throughout the period,” Jakobs reported. “Order intake grew 6%, building on 9% last year.”
Sales for the Amsterdam-based company’s Connected Care division were down 1% for the quarter, “mainly due to a low single-digit decline in Monitoring,” Durga Doraisamy, Philips’ head of investor relations, reported.
Connected Care is the business unit that includes Respironics’ product lines.
Doraisamy also discussed product simplification and a reduction of SKUs across Philips’s divisions. “These efforts reduce complexity and costs in R&D, procurement and supply chain,” she said. “Also, this enables us to focus resources on areas with the highest growth potential.”
Respironics continues its comeback
Doraisamy said those 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.” For the quarter, she said adjusting items included €54 million ($62.28 million American) “related to Respironics’ field action and consent decree remediation.”
In June 2021, Philips Respironics issued a recall for certain ventilators, BiPAP, and CPAP systems that featured polyester-based polyurethane foam, which could break down during use and become a hazard. Philips entered into a consent decree with the U.S. Food & Drug Administration (FDA) in April 2024.
She added that Philips’ 2025 free cash flow “includes the €1 billion [$1.153 billion U.S.] 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 Department of Justice.”
In response to a Q&A session question about Q2 performance from the Connected Care division, Jakobs said, “The sales declined 1%, primarily driven by low single-digit drop in monitoring. … If you look to the Respironics 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, where the new launches are gaining traction, and we are working our way back into the markets that we are reentering. So we are also looking forward to the second half of the year, where we see Connected Care momentum growing on the basis of order momentum that we have been seeing. And we are confident that will also then showcase itself in Q3 and Q4 performance.”
Jakobs said it was still “too early to call specific market-share numbers” for Respironics, but added, “We are kind of rebuilding the momentum. And that’s going in line with plans. We are staying the course on that and see that the customers are welcoming us back.”
Tallying the impact of tariffs
Jakobs said Philips continues to expect full-year comparable sales growth in the 1% to 3% range, “and we increased our 2025 adjusted EBITA margin range to between 11.3% and 11.8%.” The increase, he explained, “includes recent tariff developments.”
“We now expect full-year free cash flow to be between €200 million and €400 million [$230.6 million and $461.3 million U.S.]. 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.”
“Tariffs remain dynamic,” Doraisamy said. “We have largely completed short-term mitigation actions, such as optimizing inventory locations and flow of goods, leveraging special programs and pursuing exceptions. 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 tariff levels, Doraisamy noted, “The estimated net impact for 2025 is between €150 million and €200 million [$173.18 to $230.9 million U.S.], down approximately €100 million from the previous estimates. 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 EBITA margin to decline year over year, primarily due to tariffs and the timing of royalty income in the Other segment.”
What’s coming up next for Philips
Jakobs announced that Philips will host a Capital Markets Day in February 2026.
“The event will mark the completion of the three-year plan I launched when I became CEO,” he said. “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.”
