Skip to content
    MDT
    Earnings call· Jul 2025(Q1 FY26)

    Medtronic plc MDT

    Aug 19, 2025 Source

    Executive summary

    Medtronic Q1 FY26 — Strong Growth Accelerators and Raised Outlook

    Medtronic delivered a consistent quarter of mid-single-digit organic revenue growth and exceeded EPS expectations, driven by strong performance in Cardiovascular and Neuromodulation. The company is confident in accelerating growth in the second half of FY26, fueled by key product launches in Cardiac Ablation, Renal Denervation, and Diabetes. Strategic initiatives, including the planned Diabetes separation and a new partnership with Elliott Management, aim to enhance focus on growth and operational efficiency, positioning Medtronic for durable, higher earnings growth and long-term shareholder value creation.

    Highlights

    6

    • Delivered 4.8% organic revenue growth, in line with guidance.

    • Adjusted EPS of $1.26, $0.03 above the midpoint of guidance.

    • Cardiovascular segment grew high single digits, with Cardiac Ablation Solutions (CAS) growing nearly 50%.

    • Neuromodulation grew 9%, driven by 10% growth in Pain Stim and high single-digit growth in Brain Modulation.

    • Diabetes segment grew 8%, with international markets up 11% on Simplera sensor strength.

    • Raised full-year FY26 adjusted EPS guidance to $5.60-$5.66 from $5.50-$5.60.

    Concerns

    4

    • Neuroscience growth was 3%, below trend due to delivery changes in Specialty Therapies.

    • MedSurg segment grew 2%, in line with expectations but lower than other segments.

    • Adjusted gross margin was 65.1%, down 80 basis points year-over-year, impacted by business mix and Affera manufacturing ramp.

    • Tariff impact is expected to be approximately $185 million for fiscal 2026.

    Guidance & targets

    16
    CategoryTargetConfidence
    Organic Revenue Growth
    approximately 5%
    high materiality
    High
    Organic Revenue Growth
    4.5% to 5%
    medium materiality
    High
    FX Revenue Tailwind
    $550 million to $650 million
    medium materiality
    High
    FX Revenue Tailwind
    $50 million to $100 million
    low materiality
    High
    Underlying EPS Growth (ex-tariffs)
    4.5%
    high materiality
    High
    FX EPS Benefit
    flat to 1%
    low materiality
    High
    Adjusted EPS
    $5.60 to $5.66
    high materiality
    High
    EPS
    $1.30 to $1.32
    medium materiality
    High
    EPS Growth
    high single-digit
    high materiality
    High
    Diabetes Separation Completion
    within 15 months from now
    high materiality
    High
    CMS NCD for Symplicity
    finalize on or before October 8
    high materiality
    High
    Sphere-360 Pivotal Trial Start
    this calendar year
    medium materiality
    High
    Hugo U.S. Launch
    back half of the fiscal year
    medium materiality
    High
    Simplera Sync Sensor Launch (U.S.)
    this fall
    medium materiality
    High
    Instinct Sensor Launch (U.S.)
    in the coming months
    medium materiality
    High
    MiniMed Flex FDA Submission
    by the end of the fiscal year
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Cardiovascular
    Led by strong performance in Cardiac Ablation Solutions, driven by high demand for Pulsed Field Ablation systems and rapid supply ramp-up. Structural Heart gained traction with Evolut FX and TAVR device. CRM saw strong adoption of premium innovative products.
    Cardiac Ablation Solutions growth: nearly 50%Cardiac Ablation Solutions U.S. growth: low 70sCardiac Ablation Solutions Japan growth: low 70sCardiac Ablation Solutions international markets growth: low 30sStructural Heart growth: 6%Cardiac Rhythm Management growth: 3%Defibrillation solutions growth: 6%Cardiac pacing therapies growth: 3%AURORA EV-ICD growth: 83%Micra leadless pacemakers growth: 14%3830 conduction system pacing lead growth: 21%
    		—7%——
    Neuroscience
    Growth was supported by high single-digit growth in Neurosurgery and Neuromodulation, with strong capital equipment sales in Cranial & Spinal Technologies. Overall growth was below trend due to delivery changes in Specialty Therapies, but expected to improve.
    Cranial & Spinal Technologies growth: mid-single digitsU.S. core Spine growth: 5%U.S. Neurosurgery growth: 8%Neuromodulation growth: 9%Pain Stim global growth: 10%Pain Stim U.S. growth: 11%Brain Modulation growth: high single digits
    		—3%——
    MedSurg
    Growth was in line with expectations. Advanced Energy, with its LigaSure technology, continued to gain share. The segment faced stable headwinds from bariatric surgery and the shift to robotic surgery, primarily in the U.S.
    Surgical business growth: 2%Advanced Energy growth: high single digits
    		—2%——
    Diabetes
    Continued to grow above the company average, driven by the 780G system and Simplera Sync sensor in international markets. U.S. growth was slower due to patients awaiting new CGM technology, but a strong innovation cycle is expected to accelerate performance.
    International markets growth: 11%
    		—8%——

    Operational metrics

    13
    Adjusted Gross Margin
    65.1%down 80 bps YoY, stable vs Q4
    Q1 FY26

    Impacted by business mix and Affera manufacturing ramp, partially offset by pricing benefits and COGS efficiencies.

    Business Mix Headwind to Gross Margin
    ~70
    Q1 FY26

    CAS impacted by lower-margin capital mix, Diabetes by early manufacturing ramp of Simplera sensor.

    COGS Efficiency Net of Affera Ramp
    50headwind
    Q1 FY26

    COGS efficiency programs provided benefit, but this was more than offset by the manufacturing ramp of Affera.

    FX Tailwind to Gross Margin
    10
    Q1 FY26

    Foreign exchange provided a tailwind to gross margin.

    Adjusted R&D
    7.7%up 100 bps ahead of revenue growth
    Q1 FY26

    Increased investment in high-growth projects, particularly in Cardiovascular and Diabetes.

    SG&A Growth
    170below revenue growth
    Q1 FY26

    Leverage driven while increasing investment in growth areas like CAS and Ardian.

    Adjusted Operating Profit
    $2 billion
    Q1 FY26

    Resulting from revenue and expense management.

    Adjusted Operating Margin
    23.6%
    Q1 FY26

    Reflects the company's profitability.

    Adjusted Tax Rate
    17.8%70 bps better than expectations
    Q1 FY26

    Better than anticipated due to jurisdictional mix of profits.

    FX Impact on EPS
    neutralcouple of cents better than anticipated
    Q1 FY26

    Due to rate movements throughout the quarter.

    Diabetes Separation Gross Margin Improvement
    50
    post-separation

    Expected improvement for the remaining Medtronic business upon separation of MiniMed.

    Diabetes Separation Operating Margin Improvement
    100
    post-separation

    Expected improvement for the remaining Medtronic business upon separation of MiniMed.

    R&D Increase
    high single-digit
    Q1 FY26

    Reflects increased investments in innovation.

    Industry KPIs

    12
    MetricValueDetails
    Tariff impact$185MUSD
    System utilizationhigh
    Pricing realized price30bps
    New product launch rampthis fall
    Procedure volume growthtens of thousandsprocedures
    FCF conversion leverage guidance~5%%
    Installed base system placements>30countries
    Segment franchise organic growth7%%
    Consumables recurring revenue mix12th quarter in a row
    Sales force commercial capacity buildon track
    Indicated addressable patient population18 millionpatients
    Pivotal trial clinical evidence milestonespivotal trial expected to start

    Product announcements

    2
    ProductTypeDetails
    LigaSure technology on Hugomilestone
    780G expanded indicationsexpansion

    Deals & partnerships

    1
    Elliott ManagementStrategic partnership focused on governance enhancements, board appointments, and creation of new committees to accelerate growth and drive operational efficiency.

    Appointed John Groetelaars and Bill Jellison as new independent Board members. Created two new Board committees: a Growth Committee to oversee portfolio management and capital allocation, and an Operating Committee for oversight of efficiency gains.

    Risks & headwinds

    6
    Neuroscience growth below trendQ1 FY26

    3% growth

    Mitigation: Expect improvement starting in Q2 and further acceleration in the back half of the fiscal year, driven by Pelvic Health and Neurovascular.

    China VBP and product recall compsQ1 FY26

    Impacted Neurovascular growth

    Mitigation: Expect growth to accelerate each quarter as the company laps these comps and new products ramp in carotid stenting and hemorrhagic portfolio.

    Bariatric surgery and shift to robotic surgery headwindsQ1 FY26

    Stable but ongoing market pressures

    Mitigation: Expect Surgical growth to improve over time, starting in the back half of the fiscal year, with the expansion of Hugo launch in the U.S.

    Business mix impact on gross marginQ1 FY26

    ~70 bps headwind

    Mitigation: Expected to improve over time as the CAS business scales and the Diabetes business separates. Split roughly equally between CAS (lower-margin capital) and Diabetes (early Simplera sensor manufacturing ramp).

    Affera manufacturing ramp impact on gross marginQ1 FY26

    Net 50 bps headwind

    Mitigation: Teams are quickly ramping supply for the Affera mapping system and catheters. This headwind partially offset COGS efficiency programs.

    Tariff impactFY26

    approximately $185 million

    Mitigation: Prior worst-case scenario of $350 million is off the table. Mitigation efforts have modestly improved the $200 million scenario to $185 million.

    What to watch in Q2 FY26

    5

    CMS NCD for Symplicity (Ardian)

    on or before October 8
    CurrentProposed NCD issued, positive public comments received
    TargetFinal NCD published

    Why it matters

    Finalization of the NCD is critical for the U.S. launch and ramp-up of the Symplicity procedure, opening a massive market for uncontrolled hypertension.

    CMS now expects to finalize the NCD on or before October 8, and we expect procedures to ramp following that.

    Q&A highlights

    8

    Despite strong CAS growth, U.S. total growth was lower. How confident is management in the base business growing mid-single digits to complement pipeline growth?

    Management acknowledged some U.S.-impacting businesses (Pelvic Health, U.S. Diabetes) were slower due to commercial changes or product ramp-up but expect acceleration. CAS is strong globally, with high utilization and positive physician feedback, and is expected to continue accelerating.

    “In CAS, we showed in the earnings presentation, that's going to continue to accelerate. As you highlighted, Travis, we're getting the capital systems out there. The utilization is off-the-charts high.”

    asked by Travis Steed · answered by Geoffrey Martha

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 Performance and Growth Drivers

    Medtronic reported Q1 FY26 organic revenue growth of 4.8%, aligning with guidance, and adjusted EPS of $1.26, exceeding the midpoint of expectations. The Cardiovascular segment was a standout, growing high single digits, with Cardiac Ablation Solutions (CAS) accelerating to nearly 50% growth. Neuromodulation also performed strongly, growing 9%. Management expressed confidence in accelerating growth in the second half of the fiscal year, driven by continued rollout of the PFA portfolio in CAS, anticipated U.S. launch of the Symplicity procedure for hypertension, and new sensor launches in Diabetes.

    02

    Strategic Initiatives and Shareholder Value Creation

    The company announced a partnership with Elliott Management, leading to the appointment of two new independent Board members and the creation of new Growth and Operating Committees. These initiatives aim to enhance focus on portfolio management, capital allocation, and operational efficiency to accelerate growth and drive earnings. The planned separation of the Diabetes business (MiniMed) is proceeding on track, expected to be completed within 15 months, and is projected to be immediately EPS accretive, contributing approximately 50 basis points to gross margin and 100 basis points to operating margin for the remaining Medtronic.

    03

    Innovation and Pipeline Strength

    Medtronic highlighted its strong product pipeline across segments. In Cardiovascular, the PFA system's rapid adoption is driving significant growth, with the next-gen Affera Sphere-360 catheter's pivotal trial expected to start this calendar year. The Symplicity system for hypertension is poised for U.S. launch following expected CMS NCD finalization by October 8. Diabetes is entering an innovation cycle with the upcoming U.S. launches of Simplera Sync and Instinct sensors, and the MiniMed Flex pump submission by year-end. Hugo robotics is also progressing with a U.S. launch planned for the back half of FY26.

    04

    Financial Discipline and Investment

    Despite some gross margin headwinds from business mix (CAS capital, Diabetes ramp) and Affera manufacturing, Medtronic maintained pricing discipline and COGS efficiency programs. The company increased R&D spend by 7.7%, 100 basis points ahead of revenue growth, to fuel high-growth projects. SG&A growth was managed 170 basis points below revenue growth, demonstrating leverage while increasing investment in key growth areas like CAS and Ardian. The adjusted tax rate was 17.8%, better than expectations.

    05

    Outlook and Long-Term Vision

    Medtronic reaffirmed its FY26 organic revenue growth guidance of approximately 5% and raised its full-year adjusted EPS guidance to $5.60-$5.66. The company anticipates high single-digit EPS growth in FY27, driven by accelerating revenue, improved business mix, and benefits from the Diabetes separation. An Investor Day is planned for mid-calendar year 2026 to provide a comprehensive update on strategy, portfolio, and new long-term financial targets, emphasizing a new phase of transformation focused on strategic clarity, growth, operational rigor, and enhanced shareholder returns.

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