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    GEHC
    Earnings call· Jun 2025(Q2 FY25)

    GE HealthCare Technologies Q2 FY25 earnings call GEHC

    Jul 30, 2025 Source

    Executive summary

    GE HealthCare Q2 FY25 — Strong Orders and Raised Full-Year Guidance

    GE HealthCare delivered a solid Q2 FY25, marked by robust customer demand and strong order growth, leading to a record backlog. The company raised its full-year organic revenue and adjusted EPS guidance, reflecting confidence in its operational execution and strategic collaborations. Despite ongoing tariff headwinds and segment-specific margin pressures, management highlighted significant progress in mitigation efforts and an exciting innovation pipeline expected to drive future growth and margin expansion.

    Highlights

    5

    • Orders grew 3% YoY in Q2 and 7% in H1, reflecting healthy customer demand.

    • Record backlog reached $21.3 billion, up $2.2 billion YoY and $700 million sequentially.

    • Organic revenue grew 2% in Q2, hitting the high end of the expected range.

    • Adjusted EPS was $1.06, up 6% YoY, despite tariff impacts.

    • Full-year 2025 organic revenue guidance raised to approximately 3%, and adjusted EPS guidance raised to $4.43-$4.63.

    Concerns

    4

    • Adjusted EBIT margin declined 80 basis points YoY, primarily due to tariff impacts.

    • Adjusted gross margin decreased 180 basis points YoY, driven by tariff expenses and new product investments.

    • Patient Care Solutions organic revenue was flat YoY, and its EBIT margin declined 240 basis points due to inflation and unfavorable portfolio mix.

    • Pharmaceutical Diagnostics EBIT margin fell 200 basis points YoY, impacted by planned investments, Nihon Medi-Physics, and FX headwinds.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2025 Organic Revenue Growth
    approximately 3%
    high materiality
    High
    Full-year 2025 FX Tailwind to Revenue
    50 basis point tailwind
    medium materiality
    High
    Full-year 2025 Adjusted EBIT Margin
    15.2% to 15.4%
    high materiality
    High
    Full-year 2025 Adjusted Effective Tax Rate
    20% to 21%
    medium materiality
    High
    Full-year 2025 Adjusted EPS
    $4.43 and $4.63
    high materiality
    High
    Full-year 2025 Free Cash Flow
    at least $1.4 billion
    high materiality
    High
    Q3 2025 Organic Revenue Growth
    2% to 3%
    medium materiality
    High
    Q3 2025 Adjusted EBITDA
    decline high single digits
    medium materiality
    High
    2026 Adjusted EPS Impact from Tariffs
    less than $0.45
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Imaging
    Organic revenue growth driven by strong execution in EMEA and the U.S., largely offset by China headwinds. Segment EBIT margin declined due to tariff pressure, partially offset by productivity improvements. Excluding tariffs, margin would have increased.
    		—1%—-110 bps
    Advanced Visualization Solutions
    Organic revenue growth with continued strong performance in the U.S. as customers invest in AI-enhanced ultrasound solutions. Segment EBIT margin increased due to productivity and volume.
    		—2%—+20 bps
    Patient Care Solutions
    Organic revenue growth in monitoring solutions was offset by life support solutions, which faced a difficult year-over-year comparison. Segment EBIT margin declined primarily due to inflation and unfavorable portfolio mix, partially offset by productivity actions.
    		—flat—-240 bps
    Pharmaceutical Diagnostics
    Solid organic growth against a difficult comparison in Q2 2024 (14% organic growth). EBIT margin declined due to planned U.S. radiopharmaceutical investments, Nihon Medi-Physics, and FX headwinds, partially offset by price.
    		—5%—-200 bps

    Operational metrics

    15
    New product introductions as % of sales
    over 50%
    Q2 FY25

    Demonstrates the success of R&D investments.

    Backlog
    $21.3 billionup $2.2 billion YoY, up $700 million sequentially
    Q2 FY25 end

    Reflects continued customer investment in capital equipment.

    Share repurchase
    $100 million
    Q2 FY25

    Opportunistically repurchased shares due to dislocation in share price relative to intrinsic value.

    Bonds issued
    $1.5 billion
    Q2 FY25

    Issued to refinance November 2025 debt maturity.

    R&D growth
    17%
    FY23

    Robust investment internally, leading to pipeline acceleration.

    R&D growth
    9%
    FY24

    Robust investment internally, leading to pipeline acceleration.

    R&D reclassification to COGS impact on gross margin
    50 bps
    Q2 FY25

    Represents a shift from R&D to cost of goods sold as programs approach launch, indicating pipeline progress.

    Service business negative mix impact on gross margin
    50 bps
    Q2 FY25

    Initial lower margin on new multi-vendor service contracts, expected to improve as accounts convert to GE HealthCare products.

    Flyrcado manufacturing footprint
    18
    Q2 FY25

    On track or slightly ahead of goal to meet manufacturing needs for Flyrcado.

    Flyrcado Medicare coverage
    all 7
    Q2 FY25

    All Medicare administrative contractors are covering Flyrcado.

    Flyrcado commercial coverage
    over 65%
    Q2 FY25

    Percentage of commercially insured beneficiaries covering Flyrcado.

    Flyrcado customer onboarding time
    90 days
    Q2 FY25

    Efforts underway to reduce the time from customer engagement to being up and running with reimbursement and billing.

    Total engineering and product spending
    flat
    Q2 FY25

    Overall spending remained flat despite reclassification of some R&D to COGS.

    Total net tariff impact
    $0.45vs $0.85 prior guidance
    FY25

    Reflects significant remediation work and easing of tariffs.

    Tariff impact
    less than $50 million
    Q2 FY25

    Impact from tariffs in the second quarter.

    Industry KPIs

    7
    MetricValueDetails
    Tariff impact$0.45USD/share
    New product launch rampNew anesthesia platform launched; full refresh in ultrasound coming; next-generation MR, Photon Counting CT, full body PET coming
    Procedure volume growthhealthy
    FCF conversion leverage guidanceFree cash flow: $7 millionUSD
    Segment franchise organic growthImaging: 1%, Advanced Visualization Solutions: 2%, Patient Care Solutions: flat, Pharmaceutical Diagnostics: 5%%
    Indicated addressable patient populationPET expected to outpace other modalities
    Pivotal trial clinical evidence milestonesFlyrcado clinical abstract award; Photon Counting CT regulatory filing on track

    Product announcements

    6
    ProductTypeDetails
    New anesthesia platformlaunch
    Ultrasound platform refreshroadmap
    Next-generation MRroadmap
    Full body PETroadmap
    Mammography productsroadmap
    CareIntellect productsroadmap

    Deals & partnerships

    3
    Ascensionstrategic collaborationup to $90 millionfirst year

    Secured a strategic collaboration in the U.S.

    one of the largest providers in Mexicolong-term relationship

    Broadened an existing long-term relationship.

    European partnercollaboration$250 million5-year

    Secured a 5-year collaboration in Europe.

    Risks & headwinds

    5
    Tariff impactsQ2 FY25 and FY25

    Adjusted EBIT margin down 80 bps YoY; adjusted gross margin down 180 bps YoY; $0.08 EPS impact in Q2; total net tariff impact for FY25 is $0.45

    Mitigation: Implementing 'no-regrets' moves like USMCA exemptions and dual sourcing; longer-term supply chain restructuring to move manufacturing to tariff-friendly geographies; expected 2026 adjusted EPS impact from tariffs to be less than $0.45.

    China market recoveryH2 FY25

    Market recovery taking longer; tender cycles extended

    Mitigation: Reflecting a slightly more conservative back half for China in total company guidance; new leadership in China team to bring new ideas and drive future growth with new product launches.

    Inflation and unfavorable portfolio mixQ2 FY25

    Patient Care Solutions EBIT margin declined 240 bps

    Mitigation: Focus on new product introductions (monitoring, anesthesia, labor delivery solutions) to drive growth and improve margin over time; productivity actions.

    Planned investments, Nihon Medi-Physics, and FX headwindsQ2 FY25

    Pharmaceutical Diagnostics EBIT margin declined 200 bps

    Mitigation: Confidence in growth outlook given continued strength in global imaging procedures and consistent growth of radiopharmaceuticals.

    Service business negative mixQ2 FY25

    50 bps impact on gross margin in Q2

    Mitigation: Start-up costs for new multi-vendor service contracts; margin expected to improve as accounts convert to GE HealthCare products and new products with AI/digital capabilities are added to contracts.

    What to watch in Q3 FY25

    5

    China market recovery velocity

    next quarter
    CurrentActivity picking up, but pace of recovery taking longer
    TargetFaster conversion of tenders and awards

    Why it matters

    China remains a large market, and its recovery pace will significantly impact overall growth, especially given the conservative H2 outlook.

    I'd say China, we're seeing activity pick up, but the market recovery is taking a little bit longer. And so our focus there is, is that it's probably still going to take a little bit more time to evolve.

    Q&A highlights

    7

    Asked about the capital environment across regions, particularly the US, Europe, and China, and whether China has bottomed out, given the strong book-to-bill.

    Management noted a robust replacement cycle in the US, driven by an aging installed base and new clinical products. Europe is seeing recovery in capital decisions. China's activity is picking up, but market recovery is taking longer, with a more conservative outlook for H2 2025.

    “I'd say China, we're seeing activity pick up, but the market recovery is taking a little bit longer. And so our focus there is, is that it's probably still going to take a little bit more time to evolve.”

    asked by Vijay Kumar · answered by Peter Arduini

    2 min read5 chapters

    Detailed Narrative

    01

    Customer Demand and Backlog Strength

    GE HealthCare reported continued healthy customer demand, with orders growing 3% year-over-year in Q2 and 7% in the first half of 2025. The company exited the quarter with a record backlog of $21.3 billion, representing a $2.2 billion increase year-over-year and a $700 million sequential rise. This strong book-to-bill performance, consistently above 1.1x for equipment in the last three quarters, reflects sustained customer investment in capital equipment, particularly in Imaging and Advanced Visualization Solutions, and robust global procedure volumes.

    02

    Strategic Collaborations and Product Adoption

    The company secured significant wins, including its largest-ever order of Omni Legend PET/CT systems in the U.S. Strategic collaborations include a deal with Ascension valued up to $90 million in the first year, a broadened relationship with a major Mexican provider, and a $250 million 5-year collaboration in Europe. New product introductions, leveraging the D3 strategy (devices, drugs, digital, AI), generated over 50% of total sales, demonstrating the success of R&D investments and a solutions-oriented commercial approach.

    03

    Nuclear Medicine and Precision Care Focus

    Nuclear medicine is highlighted as a fast-growing sector crucial for precision care, with double-digit order growth across proprietary diagnostic imaging agents, digital tools, and equipment. The FDA recently updated the label for Vizamyl, a diagnostic PET amyloid agent, to allow for quantification and patient selection for treatment. Cerianna scans for metastatic breast cancer are seeing increased use due to updated guidelines, and the commercial ramp-up for Flyrcado, a cardiac PET agent, is progressing with broad Medicare and commercial coverage.

    04

    Tariff Mitigation Efforts and Financial Impact

    GE HealthCare has made significant progress in mitigating tariff impact🌐s, with the full-year 2025 net tariff impact🌐 now expected to be $0.45 per share, down from a prior estimate of $0.85. Mitigation actions include 'no-regrets' moves like USMCA exemptions and dual sourcing, as well as longer-term supply chain restructuring such as shifting manufacturing to more tariff-friendly geographies. These efforts are expected to further reduce the adjusted EPS impact from tariffs to less than $0.45 in 2026.

    05

    Innovation Pipeline and Future Launches

    The company is on track to deliver progress on its innovation pipeline, with many higher-margin product launches planned for the second half of 2025 and into 2026. These include a full refresh of the ultrasound platform, next-generation MR systems, advancements in Photon Counting CT (with H2 2025 regulatory filing on track), a full-body PET system, and new offerings in Patient Care Solutions like an anesthesia platform. These launches aim to fill portfolio gaps, outperform competitors, and drive differentiated growth and improved margins.

    AI-generated summary of the company’s earnings call. Not investment advice.