UBS is flagging a potential earnings inflection across European MedTech as valuations trade near their lowest levels of the past decade. The broker believes that market concerns over AI disrupting the sector are overstated and that, instead of displacing incumbents, artificial intelligence is more likely to augment their product sets and revenue models.
According to UBS, AI can drive recurring revenue through software upgrades, broaden market opportunities and support valuation re-rating once earnings momentum improves. The broker anticipates an uptick in EPS momentum into the second half of 2026 and points to a small group of companies as likely beneficiaries of these selective AI tailwinds.
Convatec
UBS lists Convatec among its highest-conviction calls, citing a combination of potential earnings upgrades and scope for multiple expansion. The broker highlights improving operational execution, steady healthcare demand and a shift in sentiment toward MedTech as factors that could underpin stronger medium-term growth. UBS also notes that Convatec is trading at historically discounted valuations and could benefit from the broader sector recovery.
Demant
UBS regards Demant as one of the clearest beneficiaries from AI within the MedTech complex. The broker suggests that AI-driven software improvements could change the hearing-aid business model by creating recurring monetisation opportunities between hardware replacement cycles. UBS quantifies this potential as an addition of around 1-2 percentage points to long-term market growth and adds that the close coupling of hardware and software in the industry protects incumbents, placing Demant in a favourable position to capture gains.
Ottobock
In human bionics, UBS prefers Ottobock, pointing to its leadership in AI-enabled prosthetic technologies and digital patient-care workflows. The broker expects AI to expand the addressable market through more advanced and personalised prosthetic functionality and to improve rehabilitation and monitoring efficiency. UBS also highlights Ottobock's scale, research and development capabilities and integrated care network as meaningful competitive advantages as intelligent prosthetics gain traction.
Ambu
UBS identifies Ambu as its preferred exposure to single-use endoscopy. The broker argues that AI-enhanced imaging and workflow advances could accelerate the shift toward disposable endoscopes by increasing throughput and expanding clinical use cases. UBS also notes that high manufacturing and regulatory barriers should continue to favour established players, positioning Ambu to capture long-term share gains in this market.
Philips
Within medical imaging, UBS takes a more measured stance on the scale of the AI opportunity but still favours Philips as its preferred stock. The broker expects that AI will have a broadly neutral effect on incumbent imaging hardware revenues while creating opportunities in software and post-processing services. UBS cautions that expectations of sweeping disruption in imaging are exaggerated, but believes Philips could outperform through operational delivery and improvements in fundamentals.
UBS's view is that selective AI applications and improving fundamentals could combine to re-rate parts of the MedTech sector, particularly for companies that can convert software upgrades into recurring revenues and demonstrate operational progress. The broker is looking for evidence of earnings upgrades into H2 2026 as a catalyst for that re-rating.