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    MDT
    Earnings call· Apr 2025(Q4 FY25)

    Medtronic Q4 FY25 earnings call MDT

    May 21, 2025 Source

    Executive summary

    Medtronic Q4 FY25 — Strong Growth Across Portfolio and Diabetes Separation Announcement

    Medtronic concluded FY25 with robust Q4 performance, extending its streak of mid-single-digit organic revenue growth, driven by strong contributions from Cardiovascular, Neuroscience, and Diabetes segments. The company announced its intent to separate the Diabetes business via an IPO and spin-off within 18 months, aiming to enhance focus and profitability for both entities. Despite anticipated tariff headwinds and increased investments in FY26, management projects a return to high single-digit EPS growth in FY27, underpinned by continued growth drivers and the benefits of the Diabetes separation.

    Highlights

    5

    • Q4 revenue grew 5.4% organically, marking 2.5 years of durable mid-single-digit growth.

    • Cardiovascular growth accelerated to 8%, driven by nearly 30% growth in Cardiac Ablation Solutions (CAS).

    • Neuromodulation grew 10% and Diabetes grew 12%, both achieving double-digit growth.

    • Adjusted EPS increased 11% in Q4 to $1.62, with operating profit up 7.6%.

    • Two businesses, CAS and ENT, reached $1 billion in annual revenue in FY25.

    Concerns

    4

    • FY26 EPS guidance of $5.50-$5.60 includes a net tariff impact of $200M-$350M to COGS.

    • Adjusted gross margin in Q4 was down 70 bps year-over-year to 65.1%, primarily due to mix from Diabetes and CAS, and FX.

    • FY26 EPS growth is expected to be approximately 4% (ex-tariffs), impacted by increased interest and tax expenses (300 bps headwind).

    • Diabetes separation will result in a near-term mix headwind on gross margin due to Simplera sensor manufacturing ramp.

    Guidance & targets

    20
    CategoryTargetConfidence
    Organic revenue growth
    approximately 5%
    high materiality
    High
    Organic revenue growth
    4.5% to 5%
    medium materiality
    High
    FX impact on total revenue
    0 to $100 million tailwind
    medium materiality
    Medium
    FX impact on total revenue
    roughly neutral impact
    low materiality
    Medium
    Adjusted EPS growth (excluding tariffs)
    approximately 4%
    high materiality
    High
    Adjusted EPS
    $1.22 to $1.24
    medium materiality
    High
    Net tariff impact to COGS
    approximately $200 million to $350 million
    high materiality
    Medium
    Adjusted EPS (all-in)
    $5.50 to $5.60
    high materiality
    High
    Adjusted EPS growth
    high single-digit EPS growth
    high materiality
    High
    Diabetes separation completion
    within 18 months
    high materiality
    High
    Diabetes separation tax impact
    tax-free impact to Medtronic shareholders
    high materiality
    High
    Medtronic adjusted gross margin improvement (post-separation)
    approximately 50 basis points
    medium materiality
    High
    Medtronic adjusted operating margin improvement (post-separation)
    approximately 100 basis points
    medium materiality
    High
    R&D spend growth
    faster than revenue
    medium materiality
    High
    Adjusted tax rate
    about 18%
    medium materiality
    High
    Symplicity NCD draft issuance
    on or before July 13
    high materiality
    High
    Symplicity NCD finalization
    on or before October 11
    high materiality
    High
    Affera Sphere360 U.S. pivotal trial start
    later this calendar year
    medium materiality
    High
    Simplera Sync U.S. launch
    this fall
    medium materiality
    High
    MiniMed Flex submission
    by the end of the fiscal year
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Cardiovascular
    Accelerated as forecasted, broad strength across portfolio. CAS contributed 70 bps to total company growth. Evolut TAVR platform showed strong growth in U.S., Japan, and emerging markets, driven by clinical evidence (5-year low-risk data, SMART trial 2-year data).
    Cardiac Ablation Solutions (CAS) growth: nearly 30%CAS U.S. growth: high 30sCAS international growth: low 20sCardiac Rhythm Management (CRM) growth: 7%Defibrillation Solutions growth: high single-digitCardiac Pacing Therapies growth: high single-digitAurora EV-ICD revenue growth: doubling year-over-yearMicro leadless pacemaker growth: 17%3830 conduction system pacing lead growth: 19%Structural Heart growth: 10%
    		—8%——
    Neuroscience
    CST winning share with AiBLE spine ecosystem (over 10,000 capital units installed base). Neuromodulation achieved #1 global position in SCS with Inceptiv. BrainSense Adaptive DBS received FDA approval in U.S.
    Cranial and Spinal Technologies (CST) growth: mid-single digitsCST U.S. growth: 7%Neuromodulation growth: 10%Pain Stim growth: 12%Pain Stim U.S. growth: 15%Brain Modulation growth: mid-single digitsBrain Modulation international growth: 9%
    		————
    Medical Surgical
    Surgical business improved, driven by emerging markets and Advanced Energy (LigaSure). Hugo soft tissue robotic platform expanding (now in 30 countries), with increasing procedure volumes and utilization. Filed with U.S. FDA for urologic indication for Hugo.
    Surgical business growth: 2%Advanced Energy share win streak: 11th straight quarter
    		————
    Diabetes
    Broad-based strength in pumps, CGM, and consumables. MiniMed 780G installed base growing. Simplera Sync sensor launched in Europe, driving mid-teen CGM growth. U.S. FDA approval for Simplera Sync received, launch expected this fall. Submitted interoperable pump and controller for FDA clearance. Submitted for 780G label expansion (Type 2 diabetes, rapid-acting insulins). Plan to submit MiniMed Flex by end of fiscal year.
    Consecutive quarters of double-digit growth: 6
    		$2.8 billion annual revenue (FY25)12%——

    Operational metrics

    20
    Organic revenue growth
    5%
    FY25

    Delivered at the upper end of commitments.

    Adjusted EPS growth
    6%
    FY25

    Delivered at the upper end of commitments.

    Revenue growth
    5%strongest quarterly U.S. growth in 15 quarters
    Q4 FY25

    Accelerated on the strength of new technology.

    Revenue growth
    high single digits
    Q4 FY25
    Revenue growth
    mid-single digits
    Q4 FY25
    Adjusted gross margin
    65.1%down 70 basis points year-over-year
    Q4 FY25

    Offset by increased pricing and COGS efficiency programs.

    Adjusted operating margin
    27.8%increase of 90 basis points
    Q4 FY25

    Driven by significant leverage in SG&A, particularly G&A, while increasing R&D investment.

    Adjusted tax rate
    16%better than expected
    Q4 FY25
    Capital returned to shareholders
    $6.3 billion
    FY25
    Dividend increase streak
    48th consecutive year
    FY25

    Announced increase this morning.

    R&D spend increase
    around $200 millionabout 7% versus the 5% growth rate
    FY26

    Significant investment in growth drivers to maximize future growth.

    Adjusted tax rate
    about 18%from about 16.7% this year
    FY26

    Pressure on the tax side derives primarily from the effects of Pillar 2.

    Diabetes business revenue
    $2.8 billion
    FY25

    Represented about 8% of Medtronic's total revenue.

    Diabetes business segment operating profit
    4%
    FY25

    Represented about 4% of Medtronic's total segment operating profit.

    Global addressable market for Diabetes
    $16 billion
    FY25

    Medtronic's Diabetes business has strong momentum in this market.

    Simplera Sync volume ramp
    at least 5xversus last year
    next year

    Expected ramp in volume for Simplera Sync in Europe.

    U.S. adults with hypertension
    Nearly half
    current

    Massive opportunity for Symplicity blood pressure procedure.

    AiBLE capital units installed base
    over 10,000
    current

    Well ahead of competition, driving share wins.

    Hugo installed base
    30
    current

    Expanding globally, with increasing procedure volumes and utilization.

    Diabetes revenue contribution to Medtronic growth
    about 40 basis points
    current

    Comfortable achieving mid-single-digit growth even after Diabetes separation.

    Industry KPIs

    11
    MetricValueDetails
    Tariff impact$200 million to $350 millionUSD
    System utilizationstrong increases
    Pricing realized priceincreased pricing
    New product launch rampdoubling
    Procedure volume growthstrong increases
    FCF conversion leverage guidancehigh single-digit EPS growth%
    Installed base system placementsover 10,000capital units
    Segment franchise organic growth8%%
    Sales force commercial capacity buildhiring market development managers, clinical specialists and health care economics managers
    Indicated addressable patient populationNearly half
    Pivotal trial clinical evidence milestonesexcellent efficacy, durability and safety, as well as very fast procedure times

    Product announcements

    4
    ProductTypeDetails
    Simplera Sync sensorlaunch
    MiniMed Flexroadmap
    Hugo soft tissue robotic platformmilestone
    LigaSure on Hugomilestone

    Deals & partnerships

    3
    New Diabetes Company (IPO and spin-off)Separation of Medtronic's Diabetes business into a stand-alone public company.

    Preferred path involves a two-step process: first, an IPO of up to 20% of the Diabetes business to capitalize the new company and potentially retire Medtronic shares; second, a spin-off where Medtronic exchanges remaining Diabetes shares for Medtronic shares from willing shareholders, leading to permanent share count reduction for Medtronic.

    Abbott Diabetes CareStrategic partnership for Abbott-based sensor integration with Medtronic's AID system.

    Back-end integration and development work progressing well for bringing AID system with this sensor to market.

    Contego MedicalCollaboration in the carotid market.

    Working with Contego Medical in the carotid market as part of plans for peripheral vascular growth.

    Risks & headwinds

    4
    Net tariff impact to COGSfiscal year '26

    approximately $200 million to $350 million

    Mitigation: Focused efforts from teams across Medtronic, high confidence in executing additional mitigation efforts (e.g., multi-sourcing, price offsets, exemption/refund pursuit).

    Increased interest expensefiscal year '26

    contributes to 300-basis points impact on EPS growth (combined with tax)

    Mitigation: Driven by refinancing debt at higher rates in the current interest environment.

    Increased tax expensefiscal year '26

    adjusted tax rate to increase from 16.7% (FY25) to ~18% (FY26); contributes to 300-basis points impact on EPS growth (combined with interest)

    Mitigation: Primarily from effects of Pillar 2; uncertainty around qualifying for temporary safe harbors.

    Mix headwinds within gross marginQ4 FY25 and FY26

    Q4 FY25: 70 bps decline year-over-year; FY26: increasing impact from Diabetes and CAS

    Mitigation: For Diabetes, primarily driven by Simplera sensor manufacturing ramp, expected to improve as manufacturing scales. For CAS, current growth is capital equipment-heavy, catheter sales ramp will alleviate mix effect. Offset by pricing discipline and COGS efficiency programs.

    What to watch in Q1 FY26

    5

    Symplicity NCD Draft

    Q1 FY26 (by July 13)
    CurrentCMS indicated issuance on or before July 13
    TargetDraft NCD published

    Why it matters

    This draft NCD is a critical step towards securing reimbursement coverage for the Symplicity blood pressure procedure, which is expected to drive meaningful revenue ramp in a massive unmet need market.

    CMS has indicated that they will finalize the NCD on or before October 11. And ahead of this, they will issue a draft on or before July 13.

    Q&A highlights

    5

    Travis asked about the confidence in the 5% revenue growth guidance, assumptions for pipeline contribution, conservatism in below-the-line items for 4% EPS growth (ex-tariffs), and the framework/visibility for high single-digit EPS growth in FY27.

    Geoff highlighted bullishness on growth drivers like CV (CAS, Ardian), Neuroscience (Neuromod, CST, Tibial), and Surgical (Hugo), expecting these to drive mid-single-digit growth and beyond. Thierry explained the 4% EPS growth (ex-tariffs) includes significant operating profit leverage (7% growth) despite increased R&D investment ($200M, 7% growth), but is pressured by higher tax rates (Pillar 2) and interest expenses. He noted opportunities for further cost optimization. For FY27, continued growth momentum, cost initiatives, and FX tailwinds, plus the share retirement from Diabetes separation, are expected to drive high single-digit EPS growth.

    “For the first time in 4 years, we're planning to grow R&D faster than revenue. We will also invest in sales and marketing.”

    asked by Travis Steed · answered by Geoffrey Martha, Thierry Pieton

    2 min read7 chapters

    Detailed Narrative

    01

    Q4 Performance Highlights

    Medtronic delivered a strong Q4 FY25, with 5.4% organic revenue growth and 11% adjusted EPS growth. This marks 2.5 years of mid-single-digit revenue growth, demonstrating durable performance. Key drivers included accelerated Cardiovascular growth (8%), double-digit growth in Neuromodulation and Diabetes, and high single-digit U.S. growth in Cranial and Spinal Technologies. Two businesses, Cardiac Ablation Solutions (CAS) and ENT, surpassed $1 billion in annual revenue.

    02

    Cardiac Ablation Solutions (CAS) Momentum

    CAS grew nearly 30% in Q4, with high 30s growth in the U.S. and low 20s internationally, driven by its broad portfolio of pulse field ablation (PFA) products. The Sphere-9 focal catheter is highly desired, and the next-gen Sphere360 single-shot catheter showed excellent efficacy and safety in one-year data, with a U.S. pivotal trial planned for later this calendar year. CAS reached $1 billion in FY25 revenue and has line of sight to doubling that.

    03

    Diabetes Business Separation

    Medtronic announced plans to separate its Diabetes business into a stand-alone public company via an IPO and spin-off within 18 months. This move is expected to create a focused, well-capitalized diabetes company and allow Medtronic to concentrate on higher-margin growth markets. The separation is projected to improve Medtronic's adjusted gross and operating margins by approximately 50 and 100 basis points, respectively, and be immediately accretive to EPS due to share retirement.

    04

    Renal Denervation (Symplicity) Ramp

    The company is actively ramping market development for its Symplicity blood pressure procedure, anticipating reimbursement coverage from CMS. CMS is expected to issue a draft National Coverage Determination (NCD) by July 13 and finalize it by October 11. Many healthcare systems are establishing outpatient Symplicity service lines, and Medtronic expects revenue to ramp meaningfully once coverage is secured, addressing a massive unmet need in hypertension.

    05

    Neuroscience Portfolio Strength

    The Neuroscience portfolio showed strong performance, with Cranial and Spinal Technologies (CST) growing mid-single digits (7% in the U.S.) driven by the AiBLE spine ecosystem. Neuromodulation grew 10%, with Pain Stim up 12% (15% in U.S.) due to the Inceptiv closed-loop SCS, achieving the #1 global position. Brain Modulation grew mid-single digits, with FDA approval for BrainSense Adaptive DBS in the U.S. and full market release underway.

    06

    FY26 Guidance and Tariff Impact

    Medtronic issued FY26 guidance for approximately 5% organic revenue growth and adjusted EPS of $5.50-$5.60. This guidance incorporates an estimated net tariff impact🌐 to COGS of $200M-$350M. The company expects to significantly increase R&D investment (growing faster than revenue) and drive operating leverage, with a return to high single-digit EPS growth projected for FY27.

    07

    Operational Efficiency and Capital Allocation

    The company continues to drive operational efficiencies, with COGS efficiency programs offsetting inflation and high single-digit improvement in labor efficiency. Medtronic returned $6.3 billion to shareholders in FY25 through buybacks and dividends and announced its 48th consecutive annual dividend increase. The Diabetes separation is expected to fuel future growth by increasing growth-accretive investments in core businesses.

    AI-generated summary of the company’s earnings call. Not investment advice.