Fisher & Paykel's Momentum Meets Tariff Reality: FY27 Guidance Balances Growth and Disruption

A 27% surge in hospital hardware and a new consumables lens define a year of clinical-practice gains, even as tariffs and Middle East freight costs cloud the near-term margin path.

FPH.NZ · Earnings Call · 2026-05-25

Fisher & Paykel Healthcare's FY26 results delivered the momentum its management promised, with operating revenue up 14% to $2.3 billion and net profit after tax up 24% to $468.5 million. But the real story lies in the company's unusually detailed FY27 guidance, which pairs confident growth ambitions with a frank accounting of tariff and freight headwinds. The market is being asked to believe that the same clinical-practice engine that powered a 27% constant-currency surge in hospital hardware can also absorb a 50-basis-point net margin drag next year—without flinching.

A Year of Clinical Momentum

The headline number is the hospital hardware result. As Lewis Gradon put it, “we achieved a strong result in hospital hardware sales. It's been strong across all the regions, but especially so in the United States, where both Airvo 3 flow generator and the 950 humidification system were released just 2 years ago.” “The 27% constant-currency growth reflects pent-up demand from U.S. customers finally upgrading after a lull, and the company sees that funnel persisting into FY27.” — Lewis Gradon, Managing Director and CEO · 2026-05-25 More importantly, consumables growth—the metric Lewis now says is “becoming the more relevant number”—accelerated to 14% in constant currency, driven by new applications and a broadening of Optiflow's use across hospital departments. Anesthesia, now over 10% of new-app consumables and growing at better than 40%, is a clear sign that the dedicated sales force is paying off. As Gradon noted, “over 10% of new apps would be anesthesia. In terms of penetration, I think it's on a fairly similar trajectory going back to what respiratory was at the time.”

Navigating Cost Headwinds

Gross margin expanded 122 basis points to 63.7% in constant currency, but the composition matters. Lyndal York flagged that “U.S. tariffs on products sourced from New Zealand impacted our gross margin by approximately 90 basis points this year.” “No material Middle East impact hit FY26, but that changes. FY27 guidance embeds a 10% tariff rate for the full year (a 70-basis-point drag), plus 45 basis points from raw-material surcharges and 25 basis points from freight—netted against a 20-basis-point year-on-year tariff improvement, yielding a 50-basis-point net negative.” — Lyndal York, Chief Financial Officer · 2026-05-25 The company insists it won't chase price increases to recover this. Gradon said, “we typically don't pass on cost increases to our customers... we tend to put our time and effort into the growth opportunities rather than renegotiating pricing.” This echoes a stance from the prior year's call, where he argued, “we're approaching this as a cost in. And we're mitigating it the way we mitigate all cost in.” “That discipline is why management still expects to expand gross margin in FY27 despite the headwind.” — Lewis Gradon, Managing Director and Chief Executive Officer · 2025-05-27

Guidance and Strategic Focus

The FY27 guidance range—revenue of $2.45 to $2.57 billion, NPAT of $500 to $550 million—is built on a transparent set of assumptions. As Gradon explained in his prepared remarks, “we've provided insight into some of the assumptions that we've incorporated into those estimates... we assume a continuation of the current status.”

So first of all, tariffs. There's a number of moving parts of potential U.S. tariffs during the year, and we fully expect some change at some time during the year. In this net profit after tax estimate, we've assumed that a 10% tariff rate for certain respiratory products manufactured in New Zealand is applied for the whole year.
Lewis Gradon, Managing Director and CEO · 2026-05-25

The midpoint implies roughly 9% constant-currency revenue growth, a tick below the company's 12% long-term aspiration, but management is comfortable pointing to hardware lumpiness and an OSA hardware replacement bolus from a 3G-to-4G transition in FY26. Meanwhile, the decision to shift attention from new applications to total hospital consumables reflects a structural change: invasive and noninvasive therapies are blending as ventilators now deliver nasal high flow, making clinical practice the only meaningful lens. “Personally, I don't tend to look at new apps to the same extent I used to, so I'm looking at hospital consumables,” Gradon said, a subtle but real strategic refocus.

Beyond the Numbers

OSA mask growth of 5% looks soft, but Gradon frames it as lapping three years of double-digit gains and a competitive launch cadence. The company is sticking to its guns on product development timelines, with no new full-face mask on the immediate horizon—a deliberate patience that has historically paid off. On the margin front, the 65% long-term target remains intact, but the path is longer. York noted that if current tariffs and Middle East costs persist, “we could get back to that 65% in, say, 2 to 3 years,” with favorable FX offering upside. The investment case is one of compounding clinical adoption, temporarily obscured by trade disruptions. As Gradon summed up, “a business built on innovation with the patience to change clinical practice... builds momentum.” That momentum, rather than any single quarter's beat, is what makes this report noteworthy.