Pre-close call

Sep 29, 2026

Summary

Q4 FY26 revenue growth is expected to accelerate in imaging and precision therapy, while diagnostics continues to decline. FX provides a revenue tailwind, but inflation and other costs weigh on earnings; FY27 inflation is expected to be offset by pricing and cost measures.

Welcome to our pre-close catch-up for Q4 fiscal year 2026, which was recorded on September 29, 2026. Its content will neither be amended nor updated at any time. With this Q4 episode of our pre-close catch-up, we aim at having everyone on the same page regarding our upcoming Q4 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 Q4 actuals quarter ending on September 30. Before we start with this episode, let me remind you of the safe harbor statement on our website for this recording. As always, I will start with some comments on the translational foreign exchange impacts on revenue. 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 Q3, we saw a translational headwind of around 1 percentage point. In Q4, we expect this to turn into a translational tailwind with the US dollar and other currencies like the Chinese renminbi so far being stronger in this year's Q4 compared to last year's Q4. Assuming that on average in Q4, the US dollar would be around 1% stronger than in the prior year quarter, and assuming, for simplification purposes, only a 50% US dollar exposure, this would mean roughly a translational tailwind of around half a percentage point on nominal revenue growth. Equally, with the Chinese renminbi being around 5% stronger than in prior year quarter and assuming a 10% renminbi exposure, this would roughly mean another half a percentage point of translational tailwind on nominal revenue growth, amounting to a translational tailwind of roughly 1 percentage point for the group in Q4. Now to the effects on earnings, where the major tailwinds on adjusted EBIT and EPS in fiscal 2026 are foreign exchange, tariffs, and additional inflation. As you know, we left our assumptions for the full fiscal year unchanged for the FX and tariff headwinds. For FX, we assume a headwind of around EUR 0.15 on EPS incrementally compared to fiscal year 2025. The majority of that FX headwind impacts imaging and advanced therapies EBIT, the latter within precision therapy segment. In Q3 to date, around EUR 0.13 of these EUR 0.15 had materialized. So we would expect still year-over-year earnings headwind from FX in Q4, driven by translational effects due to hedging roll-off. For tariff costs, we also assume a headwind of around EUR 0.15 on EPS incrementally compared to fiscal year 2025, not including refunds. Also here, the majority of the tariff headwind impacts imaging advanced therapies EBIT, the latter within the precision therapy segment. EUR 0.12 of these EUR 0.15 had materialized in Q3 to date, and since in Q4, tariff costs were already in the comparable prior year period, the year-over-year impact in Q4 this year is expected to be not material. For the additional inflation in the supply chain, we continue to assume a headwind in H2 fiscal 2026 of around EUR 0.05 on EPS incrementally compared to H2 fiscal 2025. With around 1 cent of year-over-year inflation headwind having materialized in Q3, it would be fair to assume a year-over-year headwind of around 4 cents in Q4. As you know, we said that around 5 cents are equivalent to a mid to high double-digit million EUR EBIT headwind in H2. With these dynamics in mind, let me quote our CFO with our view on Q4 segment performance as outlined in the Q3 earnings call. Quote start, "We expect a clear acceleration of revenue growth in the synergetic core with imaging accelerating into the higher single digits and precision therapy continuing growth in the higher single digits, not fully at the 9% level like in the current quarter." Quote end. The growth acceleration in imaging is due to revenue shifts from a softer Q3 to Q4 and due to an expected very good growth momentum in CT. Now to some context regarding margins in Q4. Quote start, "On margins, we expect an imaging sequential margin expansion compared to the Q3 margin ex refunds from the accelerated growth. In precision therapy, year-over-year margin expansion will be tough against the very high prior year quarter of 17%, but we expect a good sequential improvement with a 14% margin ex tariff refunds from Q3 this year." Quote end. Specifically on diagnostics, we said, quote start, "In diagnostics, we expect continuous decline at mid-single digit percentage level also in Q4. In diagnostics, we continue to expect a significant year-over-year margin decline, however, at least sequentially flat compared to the Q3 margin ex refunds." Quote end. Please bear in mind in Q3, margins were positively impacted by tariff refunds in all three reporting segments. As a reminder, the adjusted EBIT margins in Q3 ex refunds were imaging 21.6%, precision therapy 14.1%, diagnostics 2.9%, and the group 15.4%, all for numbers approximate. Again, please bear in mind when looking at the margin developments in Q4 that the inflation headwind is expected to accelerate in Q4 versus Q3. In Q4 to a mid double-digit million EUR EBIT headwind. For the below-the-line items, in absence of any further color given on road shows or conferences. As a reminder, our current assumption for fiscal year 2026 for central items is between -250 to -200 million EUR EBIT and for financial income net, around -330 million EUR. For central items, the remainder to the midpoint assumption for the full year would be the best approach. Also, for financial net income, the remainder to the -330 million EUR would be the best approach. Q4 financial income is expected to be more negative than Q3, also because in Q3, we received a refund for interest related to the tariff refunds. For the tax rate, the full fiscal year is expected to be closer to 23%, coming from the initial assumption of between 24% and 26%. With the average tax rate in the first three quarters being 22.6%, this would indicate a Q4 tax rate within the initial assumption of 24% to 26%. Before I close our pre-close catch-up, let me briefly reiterate our fiscal year 2027 earnings bridge, one of the most discussed topics in September when we were on the road. In a nutshell, the messaging has not changed since our Q3 earnings release. The jump-off basis in fiscal 2026 for the underlying operational double-digit EPS growth should be ex refunds, so between €2.20 and €2.30 in 2026. The additional inflation in the supply chain in FY 2027, particularly for memory chips, certain raw materials, and logistics costs, is expected to be in the same ballpark as our mitigation measures from pricing and cost program in 2027. On the road, we got frequently asked if there was an update regarding inflation in fiscal 2027 since our Q3 earnings release. There was not. In this context, we discussed that our current assumption for inflation also considers forward pricing, for example, for memory chips. We continue to assume a wash between headwind from inflation and mitigation measures in 2027. Finally, the more technical topics of a normalizing tax rate, normal cost of refinancing, which has nothing to do with the Siemens AG deconsolidation, and recurring separation costs from Siemens AG will add up to EUR 0.15 of EPS headwind in FY 2027. In our discussions on the road, the maths then ended up at a mid 230-ish EPS number in FY 2027, which should be broadly reflected in the sell side models by now. With this final note, I shall close our pre-close catch-up. As always, the investor relations team is available until our silent period starts on October 5th. Stay safe. Stay healthy. Bye-bye.