Pro Medicus (ASX: PME) $196.75

PME +11.88%:  delivered another very strong FY26 result, comfortably beating consensus at the profit line and reinforcing why the market continues to pay such a large premium for the business. We liked the earnings beat; strong contract wins and a large implementation pipeline that should support further growth into FY27.

Key results:

• Revenue of A$261.7 million, up 23% and broadly in line with the A$260.3 million expected.
• Adjusted EPS of A$2.54, around 63% ahead of the A$1.55 expected.
• EBIT of A$196.1 million, modestly ahead of the A$191.4 million expected.
• Free cash flow of A$136.1 million, slightly ahead of the A$133.0 million expected.
• Final dividend of 37c per share, up from 30c.

The key operational takeaway was continued contract momentum. PME announced A$407 million of new contracts during FY26, while completing 16 implementations over the year. Those implementations will contribute for a full 12 months in FY27 and beyond, providing a meaningful embedded growth tailwind even before further new contract wins.

That is particularly important given the valuation. PME is trading on more than 100x FY27 earnings, so expectations remain extremely high and we need continued evidence of both contract momentum and operating leverage.

The other key debate remains AI. Pro Medicus is increasingly viewed not just as a radiology software provider, but as a core imaging platform that can potentially benefit from the growth of AI tools rather than be disrupted by them. The key question is whether its Visage platform can continue to command premium pricing and long-duration contracts as AI becomes more deeply embedded across diagnostic imaging – and we can only wait and see here.

MM’s view: This was another high-quality result from PME. Revenue was broadly in line, but profitability was stronger than expected, while the A$407 million of new contract wins and 16 implementations provide excellent visibility into FY27.

The challenge remains valuation rather than execution. For now, however, the combination of recurring revenue, very high margins, strong cash generation and a growing implementation pipeline continues to justify our confidence on PME.