Medtronic PLC Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Medtronic's Q2 2026 earnings call highlighted strong financial performance, driven by growth in the Cardiovascular Portfolio, particularly Cardiac Ablation, and positive momentum in Neuroscience and Diabetes. Management raised full-year revenue and EPS guidance, emphasizing strategic investments in key growth drivers like PFA, Symplicity, and Altaviva. The call also touched on portfolio management, tuck-in M&A opportunities, and a commitment to long-term growth and margin expansion.
Key Financial Results
Q2 2026 revenue grew 6.6% reported and 5.5% organic to $9 billion.
Adjusted EPS increased 8% to $1.36, exceeding expectations by $0.05.
Adjusted gross margin was 65.9%, up 70 basis points year-over-year.
Adjusted operating profit increased 6% to $2.2 billion.
Business Segment Results
Cardiovascular Portfolio grew 9%, driven by Cardiac Ablation.
Neuroscience Portfolio grew 4%, with growth in Cranial & Spinal Technologies and Neuromodulation.
Med Surg portfolio grew 1%.
Endoscopy business grew 8%, driven by esophageal products and GI Genius.
Diabetes business grew high-single digits, with strength in international markets.
Capital Allocation
Medtronic is focused on tuck-in M&A, particularly in higher-growth segments like cardiology and neuroscience.
The company is actively evaluating its overall portfolio at every level.
Medtronic has a ventures arm with over 50 companies in which they have a stake.
Industry Trends and Dynamics
The EP ablation space is now over $12 billion and growing mid-20s.
There are 46 million people in the US with overactive bladder.
16 million people in the US are affected with urinary urge incontinence.
The market continues to appreciate Medtronic's differentiated, fully closed-loop technology with responsive real-time therapy adjustments.
Competitive Landscape
Medtronic's PFA franchise grew over 300% in the US and international markets, winning share.
Symplicity RF RDN has consistently shown sustained and improving blood pressure reductions in the long-term.
Medtronic is the only company to meet the full NCD criteria with an approved continued evidence development plan.
Evolut TAVR platform contributed to 7% growth in Structural Heart.
Macroeconomic Environment
Tariffs are expected to have an impact on COGS of approximately $185 million in fiscal year 2026.
Based on recent rates, there is now an FX tailwind to fiscal 2026 revenue of $625 million to $725 million.
The company is managing ongoing volume-based procurement (VBP) in China.
Growth Opportunities and Strategies
Enterprise growth drivers include PFA franchise for Afib, Symplicity for hypertension, Hugo in soft tissue robotics, and Altaviva for incontinence.
Medtronic is focused on pursuing tuck-in M&A and executing strategic portfolio management.
The company is scaling manufacturing to support acceleration.
Medtronic increased OpEx investments to support revenue growth momentum.
The company is focused on allocating capital and executing on its pipeline to drive meaningful acceleration in growth.
Altaviva is expected to add meaningful growth to the Pelvic Health business.
Hugo is expected to enter the US market with a urology indication.
Diabetes is in a strong innovation cycle.
Financial Guidance and Outlook
Medtronic raised its fiscal year 2026 revenue growth guidance to approximately 5.5%.
The company expects fiscal 2026 gross margin to be slightly up ex tariffs.
Fiscal 2026 operating margin is expected to be roughly flat ex tariffs and down about 50 basis points, including the tariffs impact.
Fiscal 2026 adjusted operating profit is expected to grow approximately 5% or 7% excluding tariffs.
Fiscal 2026 EPS guidance was increased to a new range of $5.62 to $5.66.
Q3 EPS is expected in the range of $1.32 to $1.34.
The company continues to expect high single-digit EPS growth in fiscal year 2027.
