Welcome to our pre-close catch-up for Q2 fiscal year 2026, which was recorded on March 23rd, 2026. This content will neither be amended nor updated at any time. With this Q2 episode of our pre-close catch up, we aim at having everyone on the same page regarding our coming Q2 fiscal year 2026, before we go into silent period. We sum up and repeat relevant topics which were communicated in public as potentially relevant for the upcoming quarter and address current macro topics, for example, foreign exchange. Obviously, we are before closing and therefore have no indications on our Q2 actuals with the quarter ending on March 31st. Before we start with this episode, let me remind you of the Safe Harbor statement on our website for this recording. I'll start with some comments on the translational foreign exchange impacts on revenue.
As you know, we always refer to organic revenue growth numbers. As usual, we try to triangulate the translational impact from the latest foreign exchange movements to align the absolute revenue and organic growth numbers in the models. In Q1, we saw a translational headwind of around 5%. In Q2, the U.S. dollar was on average weaker than in Q1. At the same time in prior year, Q2, the dollar was the strongest during the last fiscal year. It would be fair to assume that the translational headwind in Q2 will be more than the 5% headwind in Q1. This brings me to the two major headwinds on adjusted EBIT in fiscal year 2026, foreign exchange and tariffs. Foreign exchange, we assume a headwind of around EUR 0.15 on EPS incrementally compared to fiscal year 2025.
As a rule of thumb, roughly EUR 200 million-EUR 250 million incremental headwind on EBIT in fiscal year 2026. The majority of the FX headwind impacts Imaging and Advanced Therapies EBIT. The latter within the Precision Therapy segment. In Q1, around EUR 0.04 of these EUR 0.15 materialized. For tariffs, we assume a headwind of EUR 400 million in group EBIT after mitigation. This compares to a headwind of EUR 200 million in fiscal year 2025, where it only impacted the second half of fiscal year 2025. Incrementally another EUR 200 million headwind in fiscal 2026 or around EUR 0.15, mainly impacting H1. Also here, the majority of the tariff headwinds impacts Imaging and Advanced Therapies EBIT, the latter within the Precision Therapy segment. EUR 0.06 of these EUR 0.15 materialized in Q1.
These dynamics in mind, let me quote our CFO with our view on Q2 segment performance as outlined in the Q1 earnings call. Quote start: "We expect Imaging and Precision Therapy growth in Q2 to be around the assumptions for fiscal year 2026, which means mid-single digits and mid- to high-single-digit, respectively. Due to tariff and foreign exchange, we expect margins in all segments in Q2 to be below the prior year quarter. Bear in mind that the Imaging margin in Q2 2025 was the highest in the last fiscal year with the disclosed tailwind from a positive special item. Also, when you look at margins sequentially this year, Precision Therapy margin in Q1 also had a positive special item.
We would expect a margin decline in Precision Therapy year-over-year due to tariffs and foreign exchange and quarter-over-quarter due to the special item in Q1." Regarding the remark on the growth range of mid- to high-single digits in Precision Therapy for Q2. Varian had a strong revenue quarter in Q2 last year, both in absolute terms and in organic revenue growth. Specifically on Diagnostics, we said, "Similarly, as in Q1, we expect Diagnostics to continue to face market challenges in China in Q2, resulting in a revenue decline also in Q2. In Q2, we additionally face tough comps in China. Diagnostics revenue in China rose strongly in prior year's Q2, the only quarter in China last year with growth in Diagnostics.
Due to these tough comps in China, we expect the revenue decline of the segment to be even more pronounced in Q2 than in Q1. For Diagnostics, we would expect sequential margin improvement from normalizing mix. However, with missing conversion from a year-over-year declining revenue due to ongoing market challenges in China and tariff headwinds, still a clear margin decline year-over-year." Quote end. Putting all of it together, we said regarding the group revenue growth in Q2, quote start, "We expect revenue growth for the group in Q2 to be below our outlook range of 5%-6%." Quote end. For the below the line items, in absence of any further color given on roadshows or conferences, for central items and financial income net, a pro rata of the midpoints of the respective full year assumptions for the full year would be the best approach.
Also, for the tax rate, the midpoint of the 24%-26% assumption would be the best approach. In both cases, the same approach as the last pre-close catch-up, i.e. pre Q1. Before wrapping up, let me address the obvious question, how the current crisis in the Middle East affects us. Regarding revenue first, we do not expect the conflict to have a significant impact on our revenue in the current quarter's business. Service business should remain stable, and while the equipment segment may see effects in certain markets, the most impacted countries, Iran, Lebanon and Israel, represent only a small portion of our overall business.
Regarding supply chain headwinds, which could impact earnings via cost inflation, which include headwinds from the Middle East crisis and the current memory chip supply situation, we have hedging in place, storage and long-term supplier contracts to manage cost increases in the short term. Hence, we are rather well protected for the running quarter. However, it is unclear how long the Middle East crisis and the chip situation will persist. If both persist for longer, we would expect an impact from cost inflation. In the recent inflation scenario, 2022-2023, we have shown that we can over time mitigate cost inflation with pricing measures. If the current situation persisted throughout the remaining fiscal year, we would at this point and before mitigation, see a potential headwind on EBIT of up to EUR mid- to high double-digit million in fiscal year 2026.
Obviously, there are always many moving parts, and this is now an isolated dynamic, assuming all things of the current situation will remain equal until the fiscal year end. For example, the euro-U.S. dollar exchange rate has been moving in our favor since the crisis started. As always, the investor relations team is available until our silent period starts on April 6th. With this final note, I shall close up pre-close catch-up. Stay safe and healthy. Bye-bye.