Executive Summary / Key Takeaways

• GE HealthCare is successfully executing its precision care strategy, leveraging a strong portfolio of medical technology, pharmaceutical diagnostics, and digital solutions to secure large enterprise deals and drive organic growth, particularly in the robust U.S. market.
• Despite near-term headwinds from China market volatility and significant new tariffs, the company demonstrated strong Q1 2025 performance with robust organic revenue growth (4%), record orders growth (10%), and solid Adjusted EBIT margin expansion (30 bps), reflecting underlying demand and operational efficiency.
• GE HealthCare's differentiated technology, including advanced AI-enabled imaging, innovative PET/SPECT systems, and a growing radiopharmaceutical pipeline (notably Flyrcado with >$500M annual revenue potential), provides a competitive moat and is expected to be a key driver of future growth and margin expansion, especially as favorable reimbursement changes take effect.
• The company is aggressively pursuing mitigation actions against tariff impacts, expecting less than the estimated $0.85 Adjusted EPS headwind in 2026 under the current structure, while maintaining focus on cost productivity through its lean culture.
• While 2025 guidance reflects the significant tariff impact ($3.90-$4.10 Adjusted EPS, $1.2B+ Free Cash Flow), GE HealthCare remains confident in achieving its medium-term financial targets, supported by a strong backlog, ongoing innovation, and strategic capital allocation including a new $1 billion share repurchase program.

A Precision Care Powerhouse Forges Ahead

GE HealthCare Technologies Inc., forged from the spin-off from General Electric (GE) in January 2023, has rapidly established itself as a focused leader in the global healthcare technology landscape. Transitioning from its legacy as primarily an imaging equipment provider, the company has strategically pivoted to become a comprehensive healthcare solutions partner, centered on a "precision care" strategy. This involves integrating cutting-edge medical technology, a growing pharmaceutical diagnostics business, and cloud-first, AI-enabled digital solutions and services to improve patient outcomes and operational efficiency for healthcare providers.

The company operates across four key segments: Imaging, Advanced Visualization Solutions (AVS), Patient Care Solutions (PCS), and Pharmaceutical Diagnostics (PDx). This structure aligns its diverse offerings, from MRI and CT scanners to patient monitors and radiopharmaceuticals, to serve distinct clinical pathways and customer needs. GE HealthCare boasts a significant global footprint, manufacturing in 20 countries and serving customers in over 160 nations.

In a competitive arena populated by formidable rivals like Philips (PHG), Siemens Healthineers (SHL), Fresenius (FRE), and Medtronic (MDT), GE HealthCare distinguishes itself through its deep installed base, strong customer relationships, and a commitment to innovation that spans hardware, software, and pharmaceuticals. While competitors like Philips emphasize integrated digital ecosystems and Siemens Healthineers focuses on R&D prowess, GE HealthCare's unique strength lies in its ability to offer an end-to-end solution across diagnostic and therapeutic pathways, particularly highlighted by its growing PDx business and integrated imaging portfolio.

GE HealthCare's technological differentiation forms a critical competitive moat. The company has been aggressively investing in R&D, dedicating $1.3 billion in 2024 (6.7% of sales) and increasing its AI-enabled FDA authorizations from 58 to 85 in a single year. Key technological advancements include:

• Advanced Imaging: Innovations like AIR Recon DL and Sonic DL upgrades for MR systems enhance image quality and speed. New systems like the Revolution Vibe CT system offer dedicated cardiac capabilities expected to see increased adoption due to favorable reimbursement. The upcoming Photon Counting CT is anticipated to offer significantly higher average selling prices and enable spectral imaging for molecular changes, a potential "game-changer."
• Molecular Imaging & Radiopharmaceuticals: The PDx segment is a standout, consistently delivering high single-digit to double-digit organic revenue growth. The recent FDA approval and U.S. launch of Flyrcado (flurpiridaz F 18), the first and only F-18 PET myocardial perfusion imaging tracer for coronary artery disease, is a major catalyst. With an estimated 6 million myocardial perfusion imaging procedures annually in the U.S., and PET currently representing only 5-10%, Flyrcado's improved diagnostic accuracy and longer half-life position it for significant uptake, with potential revenues exceeding $500 million annually once health system infrastructure is in place. The CMS proposal to pay market value for molecular imaging agents, expected in early 2025, is anticipated to unlock the value of GEHC's radiopharmaceuticals (Flyrcado, Vizamyl, Cerianna, DaTscan) and PET/SPECT scanners, accelerating utilization and penetration. The company is also expanding its PET/SPECT equipment portfolio with innovations like the upgradable Omni Legend platform and the compact MINItrace Magni cyclotron for on-site tracer production.
• Digital and AI Solutions: Development of cloud-based platforms like CareIntellect, offering generative AI-powered applications to streamline workflows and integrate data. Strategic collaborations, such as with AWS (AMZN), aim to build AI tools for hospital operations. AI-driven solutions like CleaRecon DL for interventional imaging and Invenia ABUS Premium for breast ultrasound demonstrate the application of AI to improve image quality and efficiency.

These technological advancements, coupled with a focus on securing large, multi-year enterprise deals (50 closed globally in 2024, totaling over $5 billion since the spin, including a $1 billion, seven-year Care Alliance with Sutter Health), underscore GE HealthCare's strategy to move beyond transactional sales and become an integrated solutions provider. This approach leverages its broad portfolio and digital capabilities to drive recurring revenue and deepen customer relationships.

Performance Amidst Shifting Sands

GE HealthCare's recent financial performance reflects the interplay of strong underlying demand, operational execution, and external headwinds. The first quarter of 2025 demonstrated solid momentum, with total revenues reaching $4.777 billion, a 3% increase on a reported basis and a robust 4% organically compared to Q1 2024 ($4.650 billion). This growth was broad-based across segments, with Imaging revenue at $2.140 billion (+4% reported, +5% organic), AVS at $1.239 billion (+1% reported, +3% organic), PCS at $753 million (+1% reported, +2% organic), and PDx at $632 million (+6% reported, +8% organic). Organic orders growth was particularly strong at 10% in Q1 2025, the highest since the spin, indicating healthy market demand outside of China. The book-to-bill ratio remained strong at 1.09x, contributing to a record backlog of $20.6 billion as of March 31, 2025.

Profitability showed improvement, with Q1 2025 Adjusted EBIT margin at 15.0%, a 30 basis point expansion year-over-year (14.7% in Q1 2024). This was driven by increased volume and productivity gains. Adjusted gross margin expanded 80 basis points, benefiting from higher-margin new products and cost productivity initiatives, which helped offset unfavorable mix and cost inflation in products and services. Operational efficiency efforts, including lean management systems and IT cost optimization (e.g., consolidating vendors for over $40 million in annual savings), contributed to managing operating expenses. Adjusted EPS for Q1 2025 was $1.01, a 12% increase from $0.90 in Q1 2024, benefiting from operating income growth, lower net interest charges, and a favorable tax rate (15.0% in Q1 2025 vs. 24.2% in Q1 2024, partly due to tax reserve releases and the non-taxable NMP remeasurement gain).

Full year 2024 results also highlighted operational strength, with organic revenue growth of 1% ($19.67 billion), trending towards the lower end of guidance due to China headwinds, but Adjusted EBIT margin expanded 120 basis points to 16.3%, exceeding prior guidance. This was driven by strong productivity and price realization.

Liquidity remains solid. As of March 31, 2025, GE HealthCare held $2.473 billion in cash, cash equivalents, and restricted cash. The company maintains access to $3.5 billion in revolving credit facilities and is in compliance with debt covenants. Total debt stood at $8.759 billion, down from $8.951 billion at year-end 2024, reflecting debt repayments.

Cash flow from operations in Q1 2025 was $250 million, down from $419 million in Q1 2024, primarily due to the timing of employee compensation payments shifting to Q1 and inventory build. Free cash flow in Q1 2025 was $98 million, down from $274 million in Q1 2024, impacted by the same factors and capital expenditures ($152 million). The company's capital allocation priorities include investing in organic growth, strategic M&A (like the $269 million net cash acquisition of the remaining 50% of NMP in Q1 2025, which also yielded a $97 million gain on the prior investment), managing debt, and returning capital to shareholders, highlighted by the $1 billion share repurchase program authorized in April 2025.

Outlook and Risks

The outlook for 2025 is shaped by continued underlying demand and operational execution, significantly tempered by the impact of new global tariffs. GE HealthCare reaffirmed its full-year 2025 organic revenue growth guidance of 2% to 3%. This outlook incorporates a cautious view on the China market, expecting a low-single-digit decline for the year, with weakness in the first half before a sequential improvement. Foreign exchange is now expected to be neutral to revenue, a positive shift.

However, the estimated impact from tariffs has necessitated a significant adjustment to the profitability outlook. The company now forecasts full-year 2025 Adjusted EBIT margin in the range of 14.2% to 14.4%, down from the prior guidance of 16.7% to 16.8%. This revision reflects an estimated $475 million negative impact on Adjusted EBIT from incremental tariffs announced since the previous guidance. The total tariff impact on Adjusted EPS is estimated at $0.85, with $0.80 being incremental to prior guidance. Consequently, the Adjusted EPS guidance for 2025 has been lowered to $3.90 to $4.10, representing a 9% to 13% decline year-over-year from $4.49 in 2024. Free cash flow guidance is also reduced to at least $1.2 billion, down from $1.75 billion, primarily due to the timing of tariff payments impacting cash flow and inventory.

Management is actively implementing mitigation actions, including supply chain optimization, shifting manufacturing, and multi-sourcing components. They expect these efforts to reduce the tariff impact in 2026 to less than the $0.85 estimated for 2025 under the current structure.

Key risks to the outlook include the potential for tariffs to remain elevated or increase further, the duration and magnitude of the China market recovery, global macroeconomic instability, changes in healthcare reimbursement policies (though the CMS PET/SPECT proposal is a positive), supply chain disruptions, and competitive pressures. Legal proceedings, including the Iraqi Ministry of Health lawsuit and ongoing government investigations related to compliance matters, also pose potential risks, though outcomes and financial impacts remain difficult to predict.

Despite these challenges, GE HealthCare expresses confidence in its ability to achieve its medium-term financial targets, citing the strength of its innovation pipeline, operational improvements driven by lean, a robust backlog, and the strategic benefits of its precision care focus and integrated solutions offering.

Conclusion

GE HealthCare is executing a clear strategy to transform healthcare delivery through precision care, leveraging its technological strengths and operational discipline. The company's recent performance, marked by strong organic growth and record orders in Q1 2025, underscores the underlying demand for its products and solutions and the effectiveness of its commercial strategy, particularly in the U.S. market. While significant new tariffs and ongoing volatility in China present near-term headwinds, impacting the 2025 financial outlook, GE HealthCare is proactively addressing these challenges through aggressive mitigation efforts and a continued focus on cost productivity. The company's robust innovation pipeline, especially in AI-enabled imaging and the high-growth radiopharmaceutical space, coupled with favorable reimbursement trends, provides a compelling foundation for future growth and margin expansion. With a solid balance sheet, disciplined capital allocation, and a commitment to delivering differentiated value to customers, GE HealthCare appears well-positioned to navigate the current macro environment and deliver on its medium-term objectives, making it a compelling consideration for investors focused on the long-term potential of the healthcare technology sector.