Pro Medicus (ASX:PME) handed shareholders a rare thing recently in August 2026: a full-year result that beat the forecasts. The Melbourne-based medical imaging software group reported record Revenue of $261.7 million and lifted underlying net profit to $144.7 million, while confirming it had signed a minimum of $407 million in new contracts and re-signed another $141 million of renewals during the year. Together that is $548 million of committed work, almost all of it in the United States. Days earlier, the company had already added a fresh $23 million, seven-year deal with St Luke’s Health System. The contract machine, in short, has not slowed.

What just happened

The FY26 numbers, covering the year to 30 June 2026, showed revenue up 22.9 per cent on a reported basis, or 28.4 per cent in constant currency once the stronger Australian dollar is stripped out. Underlying NPAT rose 24.1 per cent to $144.7 million. Reported NPAT more than doubled to $265.3 million, flattered by gains on the company’s financial investments rather than by operations, so the underlying figure is the fairer guide.

The board lifted the full-year Dividend 25.5 per cent to 69 cents a share, fully franked. Management also flagged FY27 revenue and Earnings growth “exceeding 30 per cent” in constant currency, helped by 16 recently installed systems that will contribute for a full year for the first time.

Why it matters

Pro Medicus (ASX:PME) sells Visage 7, a cloud-based platform that lets radiologists open and read large imaging studies almost instantly, wherever they are. Crucially, its biggest US contracts are transaction-based: the company earns a fee each time an image is viewed. That model means revenue climbs as hospital imaging volumes grow, without Pro Medicus having to sign a new customer.

So the headline contract wins matter twice over. They lock in years of minimum payments, and they seed a rising stream of usage fees that compounds quietly in the background. It is a Business that gets paid for activity it does not have to chase.

The numbers that matter

The margins are the standout. Underlying EBIT reached $196.1 million on a 74.9 per cent margin, up about 90 basis points year-on-year, a level almost unheard of for a software firm of this size. Cash conversion ran at 91 per cent, and the group finished with $252.3 million in cash and financial Assets and no debt.

The new-contract roll-call was dominated by North America, which supplied about 90 per cent of revenue. The marquee win was a 10-year, $170 million agreement with UCHealth in Colorado, followed by a seven-year, $90 million deal with Beth Israel Lahey Health covering 14 hospitals. Smaller wins included the University of Maryland ($23 million, five years) and, in Europe, the University of Heidelberg ($10 million, five years). On renewals, all six contracts up for reappointment were extended, mostly on higher fees, keeping the retention rate at 100 per cent. Forward contracted revenue over five years rose 41.3 per cent to $1.34 billion.

The bigger industry picture

Radiology is drowning in data. Imaging volumes keep rising, scans keep getting larger, and there are not enough radiologists to read them. That structural squeeze is exactly what a fast, cloud-native viewer is built to relieve, and it is why US health systems keep migrating off older picture-archiving systems.

Artificial intelligence is the next layer. Pro Medicus has a breast cancer detection algorithm awaiting US Food and Drug Administration clearance and is broadening Visage into cardiology, digital pathology and AI-assisted reporting, with a Visage 7 Reporting product slated for early 2027. It has also taken $10 million stakes in local imaging-AI names 4DMedical and EchoIQ. The strategy is to sit at the centre of the diagnostic workflow and sell more modules into an installed base that is still small relative to the US market.

The bull case

The bull argument is straightforward: Pro Medicus is winning the largest, most prestigious US health systems, displacing incumbents, and is still early in penetrating a vast market. Each win adds contracted minimums plus open-ended transaction upside, margins are extraordinary and expanding, the Balance Sheet is debt-free, and new product lines in cardiology and pathology widen the runway. With management guiding to 30 per cent-plus growth and a pipeline it describes as the strongest yet, the compounding story remains intact.

What happens next

Watch for several catalysts. First, FDA clearance of the breast-density algorithm, which would validate the AI push. Second, the commercial launch of Visage 7 Reporting in early 2027. Third, further US contract announcements, the metric the market reacts to most sharply. Fourth, the FY27 half-year result in February 2027, the first read on whether the 30 per cent-plus guidance is landing. Fifth, progress in digital pathology and cardiology, the modules meant to extend the platform beyond radiology.

Conclusion

Pro Medicus has again delivered what its supporters expect: record revenue, fatter margins, a bulging contract book and guidance that promises more of the same. The transaction-based model means today’s wins keep paying tomorrow, and the AI roadmap gives the story a second act. None of that is in dispute. What remains contested is the price investors must pay for it. At close to 90 times trailing earnings, the company is valued for years of flawless execution, and the market has shown it will punish any stumble hard. For now the operating performance justifies the optimism; the debate is simply how much of that brilliance is already in the share price.