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laying a platform play there that actually really resonates well with our customers. And as part of that, actually, we have strong partnerships. Massimo is part of that. We don't think that actually there will be any change. That's also not what kind of has been signaled because we have the biggest access to customers globally in terms of monitoring base. So there's a real intrinsic interest to actually connect with us to the customer. And there's also mutually an interest from us to actually being providing in a vendor neutral way, consumable solutions that are out there in the market. And that has been benefiting the partnership with Massimo in past years. And we believe that will be also going forward. So we see it as at least net neutral. And I think we are excited to work also with any new owner there to kind of grow the franchise and make it work for our customers and to differentiate also first competition, because this is one of the strongholds, the combination that we have very strong cybersecurity platform with the broadest data reach with the medical device integration and the consumables actually makes it very appealing in a very complex environment for our customers to do business with us. And that has been driving all these long-term partnerships and also the shared gains in monitoring along the way.

Yeah. Thank you, Roy. Let me take your second question, Veronica, on inflation. And if I think about where we are in the year, let's first start with Q1. We had a very solid Q1 with margin expansion ahead of our expectations. So that gives us confidence that, again, we are able to not only compensate some of the headwinds we're seeing, but even expanding our margins despite that. Then of course we're seeing cost inflation, we're seeing it in freight and we see it in electronic components and in plastics, but we have already started taking mitigation actions. We started building them. Those are a little bit backend loaded and they will start coming in the second half of the year. And to take you through what we're doing, first of all, we're doubling down on bill of material productivity. We've always said there's more to go after, and we're now doing that with increased speeds. We're going after our AI-enabled efficiencies, where we've seen some early progress already in Q1, and we continue to see that as well. And then, as well, we're doing selective pricing as well. Other element is really the tariff tailwind that we're seeing a little bit, that we're seeing also in Q1, and we'll see that versus our expectations being a little bit better going forward. Now, you also know that we've been a little bit prudent in the way we've put our full year guidance out as well. So that, of course, has given us a little bit of buffer as well. So now to your question on Q2 specifically and Q2. So if we think about Q2, a couple of things that I think are important to realize. Of course, Q2 is the last quarter where we still didn't have the full impact of our tariffs in 2025. So, and you know, we've spoken about it a lot of times, the way the tariff impact flows into our P&L, which first goes into inventory and then it flows into into our P&L. So we have, again, a tough comparable from a tariff perspective. And then also we see the cost inflation, of course, starting to hit us. We have already taken the mitigation actions, but it will take a little bit of time before that starts positively impacting our P&L. So we therefore expect our mitigation impacts to be a little bit more back-end loaded.

Well, thank you. Thank you. We will now go to the next question. Your next question comes from Julian Dormois of Jefferies. Please state your question.

Good morning, Roy. Good morning, Charlotte. Thanks for taking my two questions. The first one relates to the mitigation initiative that you are taking, and you mentioned selective pricing initiatives. So could you just walk us through what are the segments where you have the more leeway and at what speed we could see those pricing initiatives contribute to margin? And the second question is more specific on enterprise informatics. You indicated that sales were down low single digits in Q1, and you mentioned the usual unevenness in revenue generation. But if you could shed more light on why that happened specifically and what we should expect for reminder of the year and maybe also in the mid-term, that would be helpful. Thank you.

Thanks, Julien. Let me take your first question on pricing. So, yeah, we've called out also last year, you might remember, selective pricing as well. And we've already put some of that in place last year. We, of course, focus there where we have leading positions, and that's where we increase our prices. So I'll give you a few examples. We're increasing our prices in image-guided therapy. We're doing that in hospital patient monitoring. We're doing that in some of our service contracts, and we're doing that in some of our timing materials. So we have a very granular plan in place to increase prices where we can. As you rightfully mentioned, some of that will flow through in 2026 and some of that will take a little bit longer as it needs some time to flow through the order book and will then benefit us in 2027. But I think it's fair to say that we've learned from COVID and also there we've been able to build up a much stronger muscle when it comes to price increases and price discipline, which is now helping us implementing that with a little bit more speed.

Thank you. Let me then go to EI. So in EI, we see a couple of trends, as we also alluded to when we had the capital market trade. One is actually we see continued order uptake. We saw that picking up strongly in the second half of last year. We also saw it again in the first quarter. And we have a very good funnel. So we see that there's healthy demand. That's also on the back of the cloud migration and the cloud offering that we have. but also the integrated diagnostics trend that we see coming out in the market is really generating increased interest. Now, if you then look at the sales trend, this is even more patchy. Sales thrills orders quite a bit in the EI. Furthermore, you see that if customers migrate in or out, those give quite big hiccups because actually the lumpiness that's kind of inherent to that business The other part is that you also see that the orders that we are taking now more and more also go into a SaaS model where you see that kind of revenue flows in over a longer period of time. And that actually gives you a more recurring, attractive revenue stream for the longer run. But of course, it gives a bit of a hiccup in these quarters. So we see positive interest. We see the integrated diagnostics story really picking up. with customers and of course fueled by AI and the data play and we are really working how we can tap into that and we see the funnel growing also supported with what we're doing with Amazon and then lastly you saw also sort of kind of on the monitoring side the capsule and HPM combination is already working so you see also this kind of combination play really driving impact so we are kind of positive on that notion as well and that that will come through in due course of the year.

Thank you very much. Thank you. We will now go to the next question. Your next question comes from Hugo Silve of BNP Paribas. Please state your question.

Hi, guys. Thanks for taking my questions. I have two, please, quick ones. On margin, first short term, shout out on the Q2 margin. Could you maybe just clarify your earlier comment? Is there a scenario where margin in Q2 be within the full year guidance range? And second, a bit more long-term, when we think about the full year 2028 targets, all in you have around 600 to 700 bps of buffer for wage, input cost, tariff, macro, and so on. What's the level of confidence that this buffer can accommodate for higher input cost given where they are at the moment? Thank you.

Yeah, thank you very much, Hugo. So let me start with your first question on Q2 margin. So based on what I just said, first of all, the incremental tariffs weren't in effect in Q2 2025, as well as the cost inflation that we're seeing with the mitigation timing being back and loaded. I expect the Q2 margins to be lower year on year in Q2. I also feel very confident that in the back end of the year, we will be able to get those mitigation factors in because we have very, very strong plans in place, very granular plans in place to start offsetting that. But Q2 in that sense will be a little bit of a lower quarter from a margin perspective. Now, to your second question on the longer term margin outlook, as we said in February, of course, as we stood there in February, we knew that the world was a turbulent place. We didn't quite know how turbulent it would get, but we absolutely did take into account that there would be something that we would be seeing. So as a result, and we were also very transparent about the buffer that we took at that point in time, especially given the ability we have to also step up from a mitigation perspective, I don't I feel equally confident, as I was in February, that we'll be able to get to the mid-teens adjusted EBITDA margin by the end of 2028, based on what we know today.

Thank you very much, and congrats on the print.

Thank you. We will now go to the next question. And your next question comes from Aishar Noor of Morgan Stanley. Please state your question.

Hi. Thanks so much for fitting me in at the end. My question is just on BNT and your competitive outlook in Europe following the launch of an ultrasound by United Imaging in this space, and as well on the recent launch of Verita for you, just how that's progressing and how we should be thinking about the sales contribution for 2026. Thank you.

Yeah, thank you, Aisha. And I already called out Europe actually picking up and performing well in Q1. And that's also in particularly for D&T, where we see actually that, and then within D&T also, PD actually is doing really well in Europe. So we see a few trends. One, MR already was picking up strong. So we see that continued. And also if you look to the blue seal penetration now, actually that's really kind of going well. And we see a good funnel on the MR side. Then also with the new Vrida launch, actually we see very strong interest in Spectral and how that now with a better workflow is really helping to support high volume throughput at high quality imaging. We've secured the first order already. We have an installation ongoing. So actually very good reference as well. Very strong clinical support. So actually we have a kind of good expectation that Frida will be doing really well in Europe. And we see the first proof points of that coming through. Then lastly, Ultrasound. Ultrasound actually is also doing well. Indeed, we had some competitors as well in this space, but actually Ultrasound in Europe has been already starting last year, picking up very strongly. After we kind of came out with our latest Epic Lounge and also the Flash, we have good order momentum of Ultrasound in Europe, strong positioning. So actually, we are quite excited about the momentum in Europe, how that is increasing, and especially also how our AI-based, but also I would say high productivity and performance solutions really hit the mark in a market that needs to be also kind of conscious of the spend in the environment that we are in. But that seems to work well.

Thank you very much. Thank you. Due to the time, the last question today comes from Graham Doyle of UBS. Please state your question.

Morning, guys. Thanks for taking questions. Just two, please. Charlie, just the first one, just on inflation again, just to get some context on this. Obviously, you guided in Feb, and there's been obviously volatility, but is there any How meaningful is the incremental headwind? So is it something that was comfy within your buffer or are you doing other things to sort of mitigate? And then Roy, just on China, you've mentioned a few times at the CMD and then today about kind of playing to win in certain segments. Is there any way within reason that you kind of identified to us the areas where you understand that perhaps you can't win and therefore you built it into your guidance that you you kind of know that there's areas where you're probably deprioritizing. Is that possible to maybe contextualize that for us? Thank you.

Yeah. Hi, Graham. Thanks. Let me take your first question on the inflation. So indeed, we got it in February, only three months ago, although a lot has happened. So as I said before, we are seeing an incremental headwind in plastics, in also freight, it's good to know as well that that energy we have hedged for for 2026 so we will not see any impact from higher energy direct highly energy prices and there are a few components here right it's first of all we did already better in q1 than we thought so we are a little bit ahead of where we thought we would be which is giving us confidence the second component is We are, after the Supreme Court struck some of the tariffs in February, we're seeing some tailwinds as a result of that, that we are taking into account as well, which is offsetting some of the inflation. And then the third component is we have launched already additional mitigation activities, including bill of material price reductions, including also optimize the way we look at freight and where we use air freight versus boat, in order to also optimize the spend there, and also leaning in even harder in what we know and do very, very well, which is driving further cost discipline. We've always said there's more to go after, so we're doing that now with double speed as well. And putting that also in the context of what I said earlier, that we have put a prudent guide out, all of that actually comes to a place where we can reiterate our guidance of 12.5% to 13% for the full year.

Thank you, Graeme. And then on China, indeed, I think the differentiated play is becoming more important. And to give you some examples where we see that actually we have really a right to play and to win, I call out MR. Actually, we have one of the biggest installed bases of the healing free already in China. And we just call also the notion that we have a green path support from the regulatory body and pma to kind of get an accelerated approval for the 3t because they're so excited about the new innovation that this will bring to china so that's a good example on mr igt is also really doing well and we have a kind of good momentum and we see that also well in demand in the market and ultrasound i called out there's different dynamics you see that the Cardiovascular, we are still unique, but it's, of course, a smaller segment in totality. And you see quite brutal competition on GI. The same with CT. CT spectral, actually, we have, again, one of the stronger installed bases of CT spectral is in China. But if you look to the more generic CT, that's really very strong competition. So that's kind of where we said that's not our gameplay. And then we exited DXR because we said that's so commoditized, that's not our game in China. We also exited the value play in China, which is the lowest price segment, because that will be very strongly locally favored and also at price points that are not attractive to us. So we made distinct choices. Actually, within those segments, we also see that we are really trending with market or even kind of doing well within the market momentum. But yeah, there is just a subdued overall market environment that we have to operate in. But I think we have been making the right choices. We stick to that. It's also in line with the plan. And also, as we showed in the results, it's also in line with the results that we have in Q1 and also for the full year expectation. So in that sense, I think we de-risked China in our plan. We're playing there to tap the opportunity that we have. And last but not least, China is not only a demand market, Of course, there's also innovation happening in China that we want to stay close to, including AI innovation that's going very rapid. Robotics is developing very rapidly in China. And then, of course, there's also still components and sourcing that we get from China. So China for us is a wider market than demand only. And that's why we kind of keep a strong footprint there. But in line with demand, we have kind of opted for a more selective go to market.

Okay, awesome. Thanks a lot, guys. I really appreciate those answers.

Thank you all. That was the last question. Mr. Jacobs, please continue.

Yeah, thank you all for attending the call. As you saw, we have a strong start to the year with growth, orders and sales, and margin expansion despite a very turbulent environment we operate in. We have the confidence reiterated of full year guidance, Of course, a lot of work to be done, but we have the actions in place, the plan in place, and the team that is working it. So thank you for your attention again. Have a further great day.

This concludes the Royal Philips first quarter 2026 results conference call on Wednesday, 6th of May, 2026. Thank you for participating. You may now disconnect.