# How GE HealthCare makes money

CXProWealth Business Lens · GE HealthCare (GEHC) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-28 with the SEC (accession 0001932393-26-000059): https://www.sec.gov/Archives/edgar/data/1932393/000193239326000059/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $5.5B (+7.2% on the year)
- Operating income: $805.0M (operating margin 14.6%)
- Net income: $615.0M (net margin 11.2%)
- Gross margin: 40.3%
- Free cash flow: $793.0M (14.4% of revenue)
- Cash conversion (operating cash flow / net income): 1.47x
- Capital expenditure: 2.1% of revenue

## Where the money goes (Q3 FY2026)

- Product → Total revenues: $3.6B
- Service → Total revenues: $1.9B
- Total revenues → Cost of revenue: $3.3B
- Total revenues → Gross profit: $2.2B
- Gross profit → Total operating expenses: $1.4B
- Total operating expenses → Research and development: $320.0M
- Total operating expenses → Selling, general, and administrative: $1.1B
- Gross profit → Operating income: $805.0M
- Operating income → Interest and other financial charges – net: $122.0M
- Operating income → Income before income taxes: $683.0M
- Non-operating benefit (income) costs → Income before income taxes: $50.0M
- Other (income) expense – net → Income before income taxes: $19.0M
- Income before income taxes → Benefit (provision) for income taxes: $129.0M
- Income before income taxes → Net income: $623.0M
- Net income → Net (income) loss attributable to noncontrolling interests: $9.0M
- Net income → Net income attributable to GE HealthCare: $614.0M

## Where the revenue comes from

### Products and services (Condensed Consolidated Statements of Income (Unaudited))

| Member | Value | Share |
|---|---:|---:|
| Product | $3.6B | 65.3% |
| Service | $1.9B | 34.7% |

The members sum to total revenue.

### Segments (SEGMENT INFORMATION - Schedule of Revenues by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| AIS | $3.9B | 70.3% |
| PDx | $846.0M | 15.3% |
| PCS | $793.0M | 14.4% |

The members sum to total revenue.

### ConsolidationItems (SEGMENT INFORMATION - Schedule of Revenues by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating segments | $3.9B | 70.3% |
| Other | $2.0M | 0.0% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Total revenues | $5.5B | 100% |
|   Product | $3.6B | 65.3% |
|   Service | $1.9B | 34.7% |
| Product | $2.4B | 43.0% |
| Service | $916.0M | 16.6% |
| **Gross profit** | $2.2B | 40.3% |
| Selling, general, and administrative | $1.1B | 20.0% |
| Research and development | $320.0M | 5.8% |
| **Total operating expenses** | $1.4B | 25.7% |
| **Operating income** | $805.0M | 14.6% |
| Interest and other financial charges – net | $122.0M | 2.2% |
| Non-operating benefit (income) costs | -$50.0M | 0.9% |
| Other (income) expense – net | ($19.0M) | 0.3% |
| **Income before income taxes** | $752.0M | 13.6% |
| Benefit (provision) for income taxes | ($129.0M) | 2.3% |
| **Net income** | $623.0M | 11.3% |
| Net (income) loss attributable to noncontrolling interests | ($9.0M) | 0.2% |
| **Net income attributable to GE HealthCare** | $615.0M | 11.2% |
| Basic (in dollars per share) | $1 | 0.0% |
| Diluted (in dollars per share) | $1 | 0.0% |
| Basic (in shares) | 452,000,000 |  |
| Diluted (in shares) | 453,000,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2021 | $17.6B | $2.8B | $2.2B | $1.6B | $248.0M | $1.4B |
| FY2022 | $18.3B | $2.5B | $1.9B | $2.1B | $310.0M | $1.8B |
| FY2023 | $19.6B | $2.4B | $1.6B | $2.1B | $387.0M | $1.7B |
| FY2024 | $19.7B | $2.6B | $2.0B | $2.0B | $401.0M | $1.6B |
| FY2025 | $20.6B | $2.8B | $2.1B | $2.0B | $482.0M | $1.5B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +4.8% (year before +0.6%): accelerating
- Operating income: +5.3% (year before +7.8%): slowing
- Net income: +4.6% (year before +27.1%): slowing
- Free cash flow: -3.2% (year before -9.3%): accelerating

## Key insights

### Margin gain came from cost of sales, not overheads

Operating margin rose to 14.6% from 12.7%, and most of it came from gross margin widening to 40.3% from 38.7%.

Gross profit was $2,224 million against $1,990 million a year earlier, a gross margin of 40.3% of revenue against 38.7%. Total operating expenses were $1,419 million against $1,337 million, 25.7% of revenue against 26.0%. Operating income reached $805 million against $653 million, a margin of 14.6% against 12.7%. _(from the filing)_
The filing attributes the gross margin gain to “growth in sales volume, an increase in price, and a reduction in tariff expenses, partially offset by cost inflation”. It records refunds of tariffs already paid within cost of products and cost of services, so part of the relief sits inside gross profit. _(from the filing)_
Overheads grew but did little to the margin. Selling, general and administrative costs rose to $1,100 million from $1,045 million, 20.0% of revenue against 20.3%. Research and development rose to $320 million from $292 million, 5.8% of revenue against 5.7%. The filing ties both increases partly to recent acquisitions. _(from the filing)_
Analysis: two of the three named sources, volume and price, belong to the business. The third, lower tariff cost including refunds, belongs to trade policy and need not repeat in the same form. The filing does not split the gain among the three, so how much of it persists cannot be read from this quarter alone. _(analysis)_

### A lower tax charge lifted net profit beyond operations

Tax took about 17% of pre-tax income against about 28% a year earlier, so net margin rose to 11.2% from 8.7%.

Income before income taxes was $752 million against $643 million. The tax provision fell to $129 million from $179 million, about 17% of pre-tax income against about 28%. Net income attributable to GE HealthCare reached $615 million against $446 million, and diluted earnings per share $1.36 against $0.98. _(from the filing)_
The filing ties the lower provision primarily to “current year foreign income tax reserve releases” and changes in reconciling adjustments to recorded tax account balances, partially offset by a foreign tax audit settlement. _(from the filing)_
Below the operating line, two items worked the other way. Pension-related non-operating income shrank to $50 million from $75 million, and interest and other financial charges rose to $122 million from $111 million. Diluted shares fell to 453 million from 457 million. _(from the filing)_
Analysis: reserve releases are described as current year items, not a lower rate built into the business. Comparing this quarter's net profit with later quarters means separating the tax effect from the operating gain, which is what the company's own adjusted measures set out to do. _(analysis)_

### Revenue rose every year while free cash flow fell

Revenue climbed to $20,625 million from $18,341 million over three years while free cash flow slid to $1,505 million from $1,824 million, as capital spending rose.

Revenue rose each year from $18,341 million in FY2022 to $19,552 million, $19,672 million and $20,625 million in FY2025. Free cash flow fell each year over the same span: $1,824 million, $1,714 million, $1,554 million and $1,505 million. Each year, free cash flow kept a smaller part of a larger revenue. _(from the filing)_
Two lines explain the gap. Capital spending rose to $482 million in FY2025 from $310 million in FY2022, and operating cash flow slipped to $1,987 million from $2,134 million. Capital spending took 24.3% of operating cash flow in FY2025 against 14.5% in FY2022, and free cash flow was 72.2% of net income against 95.2%. _(from the filing)_
The filing says this year's capital spending went mostly to “investments in facilities, including manufacturing capacity expansion, and new product introductions”, and that inventories rose “to meet business demand”. _(from the filing)_
This quarter cash caught up: free cash flow was $793 million against $483 million a year earlier, after $112 million and $68 million in the first two quarters of the year. Operating cash flow was 1.47 times net income attributable to GE HealthCare. _(from the filing)_
Analysis: spending on capacity lowers cash today in the expectation of volume later, and capital spending is still only 2.1% of this quarter's revenue. Whether free cash flow turns back up depends on that capacity filling and the inventory build unwinding, which full-year figures would show. _(analysis)_

### Competitive edge

- **Service revenue costs far less to deliver than equipment** Cost of services was 47.9% of service sales against 65.9% for products, and services grew faster, 8.0% against 6.7%.
- **Imaging agents earn on every scan, not every sale** Pharmaceutical Diagnostics brought in $846 million, 15.3% of revenue, from contrast media and tracers used up in each procedure.

### What to watch

- **Part of the margin gain rests on tariff relief** The filing names lower tariff expense among the gross margin drivers and books refunds in cost of sales, while calling future refunds uncertain.
- **Input inflation and local rivals in China press on price** The filing flags memory chips, freight and oil-linked costs, and says local competition and volume based procurement in China have hit orders.
- **Two legal and tax exposures carry no accrued liability** A suit over Iraqi contracts and a possible IRS claim on returns from the GE years could prove material, and neither is accrued.

## Investor view

**Operating margin reached 14.6% as price, volume and lighter tariffs flowed through GE HealthCare's cost of sales**

### How it makes money

GE HealthCare sells through three segments. Advanced Imaging Solutions, covering radiology, specialized ultrasound and procedural guidance, brought in $3,873 million this quarter, 70.3% of revenue. Pharmaceutical Diagnostics, the contrast media and radiopharmaceuticals injected for scans, brought in $846 million, 15.3%. Patient Care Solutions, monitoring and life support equipment, brought in $793 million, 14.4%. Financial services sit outside the segments and added $2 million. _(from the filing)_
Revenue splits into products, $3,602 million or 65.3% of the total, and services, $1,911 million or 34.7%. Products are “equipment, imaging agents, software-related offerings, and upgrades”. Services are “contractual and stand-by preventative maintenance and corrective services, as well as related parts and labor, extended warranties, training, and other service-type offerings”. _(from the filing)_
Services are the cheaper revenue to deliver. Cost of services was 47.9% of service sales this quarter, against 65.9% for products. Together they leave a gross margin of 40.3% on $5,513 million of revenue. Selling, general and administrative costs took $1,100 million and research and development $320 million, leaving operating income of $805 million, an operating margin of 14.6%. _(from the filing)_
The business needs little capital to run. Capital spending was $114 million, 2.1% of revenue, and free cash flow was $793 million, 14.4% of revenue. Operating cash flow of $907 million was 1.47 times net income attributable to GE HealthCare of $615 million. _(from the filing)_

### What shifted

Revenue rose 7.2% to $5,513 million from $5,143 million a year earlier. Services grew faster, up 8.0% against 6.7% for products, so services took a slightly larger share of the mix, 34.7% of revenue. The filing credits services to the Intelerad acquisition and “growth in new and existing customer contractual agreements”, and products to “strong growth across all segments”. _(from the filing)_
Gross margin widened to 40.3% from 38.7%, on gross profit of $2,224 million against $1,990 million. Cost of products rose to $2,373 million from $2,270 million and cost of services to $916 million from $884 million, both slower than sales. The filing attributes the gain to “growth in sales volume, an increase in price, and a reduction in tariff expenses, partially offset by cost inflation”, and records tariff refunds within cost of sales. _(from the filing)_
Most of the gross margin gain reached operating income, which rose to $805 million from $653 million, a margin of 14.6% against 12.7%. Selling, general and administrative costs grew to $1,100 million from $1,045 million but fell to 20.0% of revenue from 20.3%. Research and development rose to $320 million from $292 million, 5.8% of revenue against 5.7%, with recent acquisitions adding to both lines. _(from the filing)_
Net income attributable to GE HealthCare rose faster, to $615 million from $446 million, and diluted earnings per share to $1.36 from $0.98. The tax provision fell to $129 million from $179 million, which the filing ties to “current year foreign income tax reserve releases”, and diluted shares fell to 453 million from 457 million. Working the other way, pension-related non-operating income shrank to $50 million from $75 million and interest charges rose to $122 million from $111 million. _(from the filing)_
Cash caught up with earnings. Free cash flow was $793 million against $483 million a year earlier, after the first two quarters of the year produced $112 million and $68 million. Capital spending was $114 million, against $110 million a year earlier. _(from the filing)_

### Risks in the filing

This quarterly filing reports no material change to the risk factors in the annual report, and its management discussion names the pressures in play. Tariffs come first: the company says they “have materially impacted our financial results” and that it does not expect its mitigation “will fully offset the additional costs”. After the Supreme Court ruled against tariffs imposed under emergency powers, it is claiming refunds whose timing and amount it calls uncertain. _(from the filing)_
Supply and cost inflation. The filing says geopolitical instability, including the conflict in the Middle East, raised costs and made service levels harder to maintain in affected areas. It is watching memory chips, freight and costs linked to the price of oil, and warns that sustained inflation or constrained availability of critical components could delay production and delivery to customers. _(from the filing)_
Market access. In China, “increased competition from local companies and the prevalence of volume based procurement policies” have affected orders and revenues. In Russia, supplying customers depends on export licenses, and the company says there is no guarantee it will obtain them on time or at all. It also warns that negative sentiment toward U.S. companies could weigh on purchasing decisions abroad. _(from the filing)_
Legal and tax exposures. The company is a defendant in suits alleging that sales under contracts with the Iraqi Ministry of Health funded a terrorist organization, and a second, similar complaint was filed in September. Separately, GE has told it that the IRS may assert material additional taxes and penalties on GE's consolidated returns from years when the company was part of GE; its share could create indemnification obligations it has not accrued. _(from the filing)_
Tariffs are the risk the quarter's numbers already show, and in both directions: lower tariff expense and refunds are part of the gross margin gain, so the exposure that weighed on last year's results is now helping. China and Russia appear in the filing's regional commentary rather than in the totals. The legal and tax matters show nowhere yet, because nothing has been accrued, which is what makes them hard to weigh. _(analysis)_

## Founder view: mechanisms

### The installed base pays for years

Every scanner or monitor placed in a hospital starts years of maintenance, parts, repairs, upgrades and training. The equipment sale wins the position; the service contract earns on it. A hospital cannot let a CT scanner sit idle, so uptime is worth paying for, and the maker holds the parts, the diagnostic software and the trained engineers. Service revenue also arrives on contract terms rather than on hospital capital budgets. _(analysis)_

### A consumable used in every scan

Contrast agents and radiotracers are used up in each imaging procedure. That revenue follows scan volume rather than equipment purchase cycles, and it rises with every procedure performed on any compatible machine. Radiotracers decay quickly, so manufacturing close to the hospital matters, which is why the company bought out its Japanese radiopharmaceutical joint venture and has agreed to buy a U.S. PET tracer manufacturer. _(analysis)_

### Switching costs let price follow cost

Imaging and monitoring systems are specified by clinicians, wired into hospital IT, and run by staff trained on one vendor's interface. Changing vendor means retraining, revalidating workflows and moving data. That friction lets the maker raise prices on products and service when its own costs rise, which the filing cites as a source of this quarter's margin. The limit is visible too: hospitals tender large purchases, and procurement policies such as China's push the other way. _(analysis)_

### Cash arrives late in the year

Hospitals buy capital equipment on budget cycles, installations and acceptance take time, and inventory is built ahead of shipments. Cash therefore comes in unevenly, thin early in the year and heavy later. A company of this size absorbs that with cash on hand and credit lines; the swings are a feature of selling big-ticket equipment to institutions, not a sign of trouble in themselves. _(analysis)_

## Member research

Signed-in members read, on the page: what GE HealthCare's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- GE HealthCare 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/1932393/000193239326000059/ (2026-10-28)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02