On Thursday, May 7th, the medical technology giant Siemens Healthineers adjusted its financial outlook for the fiscal year 2026. The main reason cited was the structural contraction in the Chinese diagnostic market, coupled with global inflation increasing cost pressures. This development reflects the challenges faced by the diagnostic sector in the Chinese market, despite the steady performance of its imaging and cancer treatment businesses.
According to the latest financial forecasts, Siemens Healthineers expects revenue growth for the fiscal year 2026 to range between 4.5% and 5.0%, lower than the previously estimated 5% to 6% range. Additionally, the company has revised its annual adjusted earnings per share (EPS) outlook from 2.20 to 2.40 euros to 2.20 to 2.30 euros.
In the recently released second-quarter financial report, the adjusted earnings before interest and taxes (EBIT) were 8.36 billion euros, falling short of analysts’ expectations of 8.68 billion euros. Revenue stood at 56.8 billion euros, also below the market expectation of 57.7 billion euros.
With the Chinese market accounting for approximately 10% of the company’s total revenue, it is currently facing significant challenges. Siemens Healthineers pointed out that due to China’s “volume-based procurement” policy and declining medical insurance reimbursement rates, both product prices and sales volumes have declined, severely impacting the diagnostic sector.
Data shows that revenue in the diagnostic sector has decreased by 6.5%, with the profit margin plummeting from 6.3% in the same period last year to a mere 0.9%.
Furthermore, the sustained increase in supply chain costs has eroded profits. CFO Jochen Schmitz highlighted during a press conference that due to the impact of memory chips, raw materials, and logistic costs, “additional costs in the supply chain are expected this year, with an estimated impact of around 5 cents per share.”
Despite the challenges faced by the diagnostic business, Siemens Healthineers’ other core sectors continue to maintain growth momentum. The imaging business saw a revenue growth of 6.1%, exceeding expectations, while its subsidiary Varian’s cancer treatment business achieved a 7.5% growth.
CEO Bernd Montag stated in a release, “Although the environment remains challenging, our synergistic core business comprising imaging and precision therapy is progressing as planned and demonstrating strong momentum.”
He further emphasized that the company is taking follow-up steps to “create more options” for the future of the diagnostic sector and optimize the leadership team structure.
Investors should take note that while operating profits fell short of expectations, the adjusted earnings per share for the quarter unexpectedly exceeded market consensus.
However, this was not a result of a breakthrough in the business segment but rather reflected the short-term financial effects of a lower tax rate of 20.4% (compared to 26.5% in the same period last year).