GE HealthCare
GEHC · NasdaqMargin 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%.
Q3 FY2026, the quarter to Sep 30, 2026 · 10-Q filed Oct 28, 2026
- Operating margin
- 14.6%
- Net income
- $615.0M
- Free cash flow, quarter
- $793.0M
Largest source of revenue: Product, 65.3% of the total.
Where GE HealthCare's money goes
- 01
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%.
Why it matters
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%.1
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.1
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.1
AnalysisAnalysis: 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.
- 02
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%.
Why it matters
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 $0.98.1
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.1
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.1
AnalysisAnalysis: 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.
- 03
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.
Why it matters
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.1
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%.1
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”.1
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.1
AnalysisAnalysis: 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.
Sources
- 1.GE HealthCare 10-Q for the period to 2026-09-30 (the filing), Oct 28, 2026, read Nov 2, 2026
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Growth, profit and margin
Revenue went from $17.6B in FY2021 to $20.6B in FY2025, the operating margin from 15.9% to 13.4%, over 4 years.
- Revenue$20.6B
- Operating income$2.8B
- Operating margin13.4%
- Period
- Q3 FY2026
- Revenue
- $5.5B
- Operating income
- $805.0M
- Operating margin
- 14.6%
- Net income
- $615.0M
- Free cash flow
- $793.0M
Does the profit turn into cash?
Q3 FY2026: free cash flow of $793.0M against net income of $615.0M in the quarter.
- Operating cash flow$2.0B
- Capital expenditure$482.0M
- Free cash flow$1.5B
- Net income$2.1B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
Condensed Consolidated Statements of Income (Unaudited). The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Product | $3.6B | 65.3% |
| Service | $1.9B | 34.7% |
Segments
| AIS | $3.9B | 70.3% |
| PDx | $846.0M | 15.3% |
| PCS | $793.0M | 14.4% |
ConsolidationItems
| Operating segments | $3.9B | 70.3% |
| Other | $2.0M | 0.0% |
These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-28
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
The filing's cost lines could not be read beneath operating income.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement22 lines, as presented in the 10-Q
Cash flow statement6 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
Balance sheet33 lines, as presented in the 10-Q
About this data
- Source
- GE HealthCare 10-Q, accession 0001932393-26-000059, filed Oct 28, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds GE HealthCare's model up, and what could bend it
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%.
The detail
Services brought in $1,911 million this quarter, 34.7% of revenue, and products $3,602 million, 65.3%. Cost of services was $916 million and cost of products $2,373 million, so each dollar of service revenue left more gross profit than a dollar of product revenue. Services grew 8.0% and products 6.7%.1
The filing defines services as “contractual and stand-by preventative maintenance and corrective services, as well as related parts and labor, extended warranties, training, and other service-type offerings”. It credits their growth to the Intelerad acquisition and “growth in new and existing customer contractual agreements”, and cites higher pricing of service offerings.1
AnalysisAnalysis: why it holds. Each scanner or monitor placed starts years of maintenance the maker is best placed to provide, since it holds the parts, the diagnostic software and the trained engineers, and hospitals pay for uptime. The equipment sale wins the position; the service contract earns on it.
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.
The detail
Pharmaceutical Diagnostics brought in $846 million this quarter, 15.3% of revenue. The filing attributes its growth to “contrast media and radiopharmaceutical volume, and price”, and its segment table shows it with the highest segment margin of the three.1
The company bought the remaining half of Nihon Medi-Physics, a Japanese radiopharmaceutical maker, and after the quarter agreed to buy SOFIE Biosciences, a U.S. contract manufacturer of PET radiopharmaceuticals, subject to regulatory approvals.1
AnalysisAnalysis: this revenue follows the number of procedures performed on any compatible machine rather than hospital equipment budgets. Radiotracers decay quickly, so manufacturing close to hospitals matters, and owning that manufacturing is a way to secure supply as PET use grows.
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.
The detail
The company says tariffs “have materially impacted our financial results” and that it does not expect its mitigation actions “will fully offset the additional costs”. After the Supreme Court ruled that emergency-powers tariffs were not authorized, it began claiming refunds, and says “the timing and amount of any additional refunds remain uncertain”.1
AnalysisAnalysis: refunds of tariffs already paid are a catch-up, not a running benefit. Once they stop, a gross margin of 40.3% has to be held by price and volume alone against the cost inflation the filing flags, and new tariffs would push the other way.
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.
The detail
The filing says geopolitical instability, including the conflict in the Middle East, raised costs and made service levels harder to maintain. It warns that “sustained cost inflation or constrained availability of critical components could negatively impact our ability to both produce and deliver products to our customers in a timely manner.”1
In China, “increased competition from local companies and the prevalence of volume based procurement policies” have affected orders and revenues. Supplying customers in Russia depends on export licenses the company says it may not obtain, and it warns that negative sentiment toward U.S. companies could weigh on purchasing abroad.1
AnalysisAnalysis: higher prices were one of the named sources of this quarter's margin. Tender-driven buyers and cheaper local rivals limit how far price can keep following cost, which makes these pressures a test of the pricing behind the gross margin.
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.
The detail
The company is a defendant in a suit alleging that sales under contracts with the Iraqi Ministry of Health funded a terrorist organization, in breach of the U.S. Anti-Terrorism Act. The defendants have sought Supreme Court review, discovery is under way, and a similar group of plaintiffs filed a second complaint in September.1
GE has told the company that the IRS may assert a material amount of additional taxes and penalties on GE's consolidated returns from years when it was part of GE. Its share could create “additional material indemnification obligations due to GE for which we have not accrued a liability”.1
AnalysisAnalysis: neither matter shows in the quarter's figures, because nothing has been accrued and the filing gives no estimate of loss. That absence is what makes them hard to weigh against the operating results.
Sources
- 1.GE HealthCare 10-Q for the period to 2026-09-30 (the filing), Oct 28, 2026, read Nov 2, 2026
GE HealthCare, further in
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What could change the outlook
What GE HealthCare's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- How much of the margin gain can outlast the tariff refunds?
What the margin depends on once refunds stop: price, volume, input costs and the service mix, and which of them the filing gives evidence for.
- Why free cash flow fell while revenue kept rising
Where the cash has gone in recent years, from capacity spending to inventory, and what would have to change for cash conversion to recover.
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Have a question about GE HealthCare?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How much of GE HealthCare's gross margin gain came from tariff refunds rather than price and volume?
- Why has GE HealthCare's free cash flow fallen for three straight years while revenue kept rising?
- How would an end to foreign tax reserve releases change GE HealthCare's net margin?
Business Lens describes GE HealthCare from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.