Philips (PHG) shares hit a 52-week low on Tuesday, even after the company reported second-quarter earnings that beat analyst expectations. The culprit? Weak order intake and persistent challenges in China, which overshadowed a headline earnings beat.

The healthcare technology company reported adjusted earnings of $0.57 per share, well above the consensus estimate of $0.40. Sales came in at $5.068 billion (€4.36 billion), slightly above the expected $5.040 billion, with comparable sales up 4% across all segments.

But here's the catch: a €186 million U.S. tariff refund gave reported profitability a nice boost, masking underlying margin pressure in the Diagnosis & Treatment unit. That unit is dealing with cost inflation, tariffs, and an unfavorable sales mix — all of which would have made the numbers look less rosy without that one-time refund.

Order Intake: The Canary in the Coal Mine

Comparable order intake declined 1% in the quarter. While Diagnosis & Treatment saw growth, it was offset by the timing of certain large Connected Care orders shifting into the third quarter. That's a polite way of saying some big deals didn't close when expected, which raises questions about near-term revenue visibility.

Adjusted EBITA came in at €717 million, with the margin improving to 16.4% — but that includes the tariff refund benefit of effectively 4.2 percentage points. Strip that out, and adjusted EBITA actually decreased slightly, thanks to cost inflation and higher tariffs, partially offset by higher sales and productivity gains.

Segment Performance: Mixed Bag

Diagnosis & Treatment sales hit €2.085 billion, with comparable sales up 2%. Image Guided Therapy posted high-single-digit growth, but Precision Diagnosis saw a low-single-digit decline. During the earnings call, executives pointed to weakness in China, where centralized procurement and subdued hospital investment continue to pressure margins.

Connected Care revenues were €1.184 billion, with comparable sales up 2%, driven by mid-single-digit growth in Monitoring.

Personal Health was the standout, with sales of €909 million and comparable sales up 8%, fueled by double-digit growth in emerging markets and mid-single-digit growth in mature regions.

Guidance: A Rose-Tinted Upgrade

Philips reiterated its 2026 outlook for comparable sales growth of 3% to 4.5%, but with a caveat: Diagnosis & Treatment is tracking at the lower end, while Connected Care and Personal Health are at the upper end. Greater China sales are expected to remain broadly stable — which, given the current headwinds, is probably the best they can hope for.

The company raised its reported adjusted EBITA margin outlook to 13.5%–14.0% from 12.5%–13.0%, and its free cash flow outlook to €1.5 billion–€1.7 billion from €1.3 billion–€1.5 billion. But both upgrades reflect the U.S. tariff refund. Excluding that, the underlying outlook remains unchanged.

Price Action: Philips shares were down 1.80% at $24.57 at the time of publication on Tuesday, hitting a new 52-week low. The market is clearly focused on the order book and China headwinds, not the one-time accounting boost.