Siemens Healthineers Navigates China Headwinds as Imaging and Therapy Units Drive Solid Q1

FRANKFURT – Siemens Healthineers AG (ETR:SHL) maintained its full-year guidance after a first quarter that showcased the medical technology giant's operational resilience, even as it confronts substantial market shifts in China that are pressuring its diagnostics unit.

Group revenue grew 3.8% year-over-year, powered by a 6% increase in the combined "synergetic core" of Imaging and Precision Therapy. This core performance, described by CEO Bernd Montag as delivering "strong underlying operational momentum," largely compensated for external pressures from tariffs and foreign exchange, as well as a 3% decline in Diagnostics revenue.

"We had a good start to the fiscal year," Montag stated during the earnings call, "but we are navigating substantial headwinds, particularly in China's diagnostics landscape, which evolved more rapidly than anticipated."

The Imaging segment posted a 5.7% revenue increase, driven by advanced technologies like photon-counting CT and an expanded radiopharmaceuticals portfolio following the acquisition of Novartis's European operations. Despite a 200-basis-point drag from tariffs and FX, the division achieved a 21.6% adjusted EBIT margin through operational efficiency gains.

Precision Therapy revenue rose 5.9%, with the Varian oncology business growing 9%. The segment saw a remarkable near-400-basis-point operational margin expansion, bolstered by favorable product mix and software revenue recognition.

The primary challenge emerged in Diagnostics, where revenue fell 3%. Management squarely attributed this to structural changes in China, specifically the rapid rollout of volume-based procurement (VBP) policies. CFO Jochen Schmitz explained that these price-driven reforms are having a "one-to-one impact on profit" and are now also muting demand volume, creating a dual pressure. Outside China, the diagnostics business remained stable, with the Atellica platform showing strong traction in the Americas.

Regionally, the Americas grew 9%, continuing a streak of "excellent growth," while business in China declined 5%—a drop Schmitz said was "exclusively due to the steep decline in diagnostics." The company's Imaging and Precision Therapy units in China were roughly flat.

At the group level, adjusted EBIT margin held steady at 15%. Schmitz emphasized that operationally, the margin expanded by 200 basis points, completely offsetting the headwinds from tariffs and currency effects. Similarly, adjusted EPS declined 3%, but would have grown approximately 17% excluding those external factors.

Looking ahead, management confirmed its fiscal 2026 outlook but signaled a tougher second quarter. Group revenue growth is expected to dip below the full-year target range of 5-6%, due largely to an even steeper year-over-year comparison for Diagnostics in China. Margins across all segments are also projected to face pressure in Q2 from the persistent tariff and FX challenges.

Montag sought to frame the China diagnostics issue as "temporary and ring-fenced," noting it represents 7-8% of the unit's global revenue. The company plans to adjust its commercial footprint in China to align with the new market baseline while reaffirming its mid-term margin ambitions for Diagnostics globally. Schmitz added that the company expects to "fully mitigate the impact of tariffs over the next three years," viewing them as a temporary drag.

Analyst & Investor Commentary:

"The underlying operational story here is robust," said Michael Thorne, a medtech portfolio manager at Horizon Capital. "The ability of Imaging and Varian to deliver such strong margin expansion amidst macro pressures is a testament to the portfolio's quality. The China diagnostics overhang is a known, quantifiable risk, and management's proactive footprint adjustment is the right move."

"It's a classic tale of two companies," noted Dr. Sarah Chen, a healthcare strategist. "The high-end, innovative equipment business is firing on all cylinders, which is crucial for long-term competitiveness. The diagnostics weakness, while concentrated, exposes the vulnerability of any global player to sudden policy shifts in a major market like China."

"'Temporary and ring-fenced'? That's wishful thinking," countered Lars Bergman, a vocal critic on investment forums. "This China diagnostics debacle shows a failure in forecasting and market readiness. VBP has been on the horizon for years. To call it 'unforeseen' is an admission of poor strategic planning. They're losing profit dollar-for-dollar on price cuts—that's not a headwind, that's a hurricane in one of their key divisions."

"The guidance hold is the key takeaway," observed Priya Sharma, a senior analyst at Euronext Advisors. "It signals deep confidence in the core growth engines. The market will likely look past the noisy Q2 guide if the long-term algorithm for Imaging and Precision Therapy remains intact. The 17% operational EPS growth figure is the number to watch."