Philips' (NYSE:PHG) latest announcement sent shockwaves through the market, revealing a sharp downward revision in its sales outlook amid a drastic decline in demand from China. This news has made Phillips' shares plunged by more than 17% today. Sales for Q3 held steady at 4.4 billion, flat compared to last year, as strong performance in regions outside China offset a significant slowdown in its largest growth market. Philips now expects annual sales to grow just 0.5%-1.5%, down from its previous forecast of up to 5%. CEO Roy Jakobs cited further weakening in both hospital and consumer demand in China but maintained that Philips' other markets are driving a respectable adjusted EBITA margin, which climbed to 11.8% this quarter, up from 10.2% a year ago.

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Breaking down the segment performance, Connected Care saw flat sales this quarter, with gains in Enterprise Informatics and Sleep & Respiratory Care balancing out a small dip in Monitoring. Diagnosis & Treatment saw a slight 1% decline, largely due to China, though the segment remains resilient with solid U.S. growth supporting demand for its imaging technologies. In Personal Health, the effects of a double-digit dip in Chinese consumer spending triggered a 5% drop in comparable sales. Still, improved productivity and high-margin innovations powered the overall performance, bringing the total adjusted EBITA for the quarter to 516 million.

Jakobs is focusing on Philips' three-year growth strategy, acknowledging the near-term volatility in China but aiming to capture growth and margin improvements globally. He didn't downplay the challenges, but he's steering the company toward operational efficiencies and stable performance elsewhere to meet its year-end target. With uncertainties in China looming, Philips is doubling down on enhancing margins, prioritizing innovations, and driving a stable growth path to build resilience through these turbulent times.

This article first appeared on GuruFocus.