tapebrief
BAX · Q4 2025

BAX · Q1 2026 Earnings

Cautious

Baxter International

Reported April 30, 2026

30-second summary

Baxter delivered its self-described "most challenging quarter" with adj. EPS of $0.36 on -1% organic growth and 11.0% adj. operating margin — well below the FY 13–14% range — while reaffirming the FY2026 guide of $1.85–$2.05 EPS and approximately flat organic growth. The Q1 print is roughly in line with management's flagged trough, but U.S. sales fell 4% with international carrying the model at +12%, and several ancillary guidance items (tariff quantification, tax rate, share count, non-operating expense, TSA income) were quietly withdrawn. The back-half recovery thesis is now load-bearing for the entire year, with no fresh quantitative bridge.

Headline numbers

EPS

Q1 FY2026

$0.36

Revenue

Q1 FY2026

$2.70B

+3.0% YoY

Gross margin

Q1 FY2026

33.0%

Free cash flow

Q1 FY2026

$0.08B

Operating margin

Q1 FY2026

2.4%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$2.70B+3.0%$2.97B-9.2%
EPS$0.36—$0.44-18.2%
Gross margin33.0%—19.4%+1360bps
Operating margin2.4%—-24.5%+2690bps
Free cash flow$0.08B———

Guidance

Core FY2026 EPS and operating margin guidance reaffirmed at $1.85-$2.05 and 13-14% respectively, but Q1 actuals (–1% organic growth, 11.0% adj. op. margin) underscore back-half recovery narrative; multiple ancillary metrics withdrawn.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Adjusted Diluted EPSQ1 FY2026$1.85 to $2.05 (FY2026 full-year)$0.36significantly below full-year guide range; Q1 represented only ~17-19% of annual midpoint ($1.95), consistent with "first quarter to be the most challenging" commentaryMissed
Organic Sales GrowthQ1 FY2026approximately flat (FY2026 full-year guidance)-1%-1% vs. flat guidanceMissed
Reported Sales GrowthQ1 FY2026flat to 1% (FY2026 full-year guidance)3%+2% above high end of full-year guideMet

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Non-Operating Expenses
FY2026
$280 million to $300 millionWithdrawn — no replacement—Withdrawn
Tax Rate
FY2026
18.5% to 19.5%Withdrawn — no replacement—Withdrawn
Diluted Share Count
FY2026
approximately 518 million sharesWithdrawn — no replacement—Withdrawn
TSA Income and Other Reimbursements
FY2026
$130 million to $140 millionWithdrawn — no replacement—Withdrawn
Tariff Impact
FY2026
approximately $80 million (YoY headwind ~$40 million)Withdrawn — no replacement—Withdrawn

Reaffirmed unchanged this quarter: Adjusted Operating Margin (13% to 14%), Adjusted Diluted EPS ($1.85 to $2.05)

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
Medical Products & Therapies$1.285B+2.0%
Healthcare Systems & Technologies$0.705B—
Pharmaceuticals$0.621B+7.0%
Infusion Therapies & Technologies$0.981B-1.0%
Advanced Surgery$0.304B+13.0%
Drug Compounding$0.32B+30.0%
Drug Compounding Organic Growth20%—

Other KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
U.S. Sales$1.435B-4.0%
International Sales$1.266B+12.0%
Organic Sales Growth-1%—
Adjusted Operating Margin11.0%—
Adjusted Diluted EPS from Continuing Operations$0.36—
Free Cash Flow (Continuing Operations)$76 million—
Operating Cash Flow (Continuing Operations)$213 million—
FY2026 Adjusted Diluted EPS Guidance$1.85 - $2.05—
FY2026 Organic Sales Growth Guidance~Flat—

Management tone

Q1 "execution on track" → Q2 "prudent downside" → Q3 "reset and stabilize" → Q4 "early-stage turnaround" → Q1 2026 "GPS execution discipline."

The turnaround narrative has hardened from "early stages" to a specific operational playbook with leading indicators. Q4 introduced Hider's framing of a multi-year turnaround; this quarter he gave it metrics, pointing to "230+ GPS events" completed in Q1 as evidence of the operating-system rollout. The shift is meaningful — management is now offering process KPIs that investors can track quarterly rather than relying solely on financial outputs. Whether 230 GPS events translates to a 200–300bps margin recovery in H2 is the entire question, but at least there is now something to monitor.

Novum framing moved from "the hold remains for the full year" (Q4) to "customer returns risk contemplated but not material" (Q1). The CFO this quarter: "Although we did not see a material impact from customer returns in the first quarter, we continue to believe it's prudent to include the potential impacts from various customer responses in our guidance." The Q4 worst-case framing has not materialized in Q1 actuals, but management is unwilling to release the conservatism — meaning either the risk is genuinely contemplated for H2 or management is preserving cushion. Either reading argues against upside to the FY guide.

IV solutions reframing from "new baseline" (Q4) back to "normalization expected within 2026." This is a subtle reversal. Q4's "new baseline" language implied a permanent reset; this quarter management talked about "IV solutions normalization expected within 2026" in Q&A. Either the Q4 framing was overdone or management is now hedging back toward a more optimistic interpretation without quantifying. Investors should weight Q4's "new baseline" higher — it is the more conservative read and was delivered with more conviction.

Supply constraint horizon extended further. Q3 framed injectables supply constraints as a near-term issue; Q4 didn't update; this quarter the CFO said "we do expect limited supply into 2027." This is a multi-quarter slip — what was originally a 2025 issue, then a 2026 issue, is now confirmed as a 2027 issue. The pharma segment's headline +7% growth is increasingly dependent on lower-margin compounding to offset injectables supply ceilings.

Hospital capex monitoring intensifies. The CFO: "To date, we have not observed a slowdown in U.S. hospital capital spending, however, given the broader macroeconomic uncertainty, we continue to closely monitor the situation." New defensive language vs. Q4. Combined with U.S. organic at -4% in Q1, the "no slowdown observed" framing is harder to take at face value — Baxter's own U.S. number is the slowdown.

Recurring themes management leaned on this quarter:

Turnaround execution and organizational stabilizationBalance sheet strengthening and deleveraging priorityBaxter GPS continuous improvement system deploymentNovum LVP uncertainty persisting through full yearSupply chain and manufacturing cost pressures extending into H2AI integration into products and internal processes

Risks management surfaced:

Novum LVP ship and installation hold expected to remain full year with potential customer returnsInjectables and anesthesia supply constraints persisting into 2027Tariff headwinds of approximately 80 million expected for full yearAbsorption and manufacturing cost pressures more pronounced in Q2Macroeconomic uncertainty impacting hospital capital spending visibility

Q&A highlights

Robbie Marcus · JPM

How does Q1 performance translate to reiterated full-year guidance? How much is conservatism vs. pull-forward? Why is Q2 expected flat organic sales when Q1 showed better-than-expected results? What are key 2027 new product launches and can EPS grow positively in 2027?

Q1 in line with expectations; Novum customer returns risk contemplated in guidance but not material in Q1. Q2 expected to show sequential improvement but remain pressured YoY due to known headwinds (Novum, injectables, HST back-half weighted). Full-year reiterated as approximately flat. For 2027, while not providing guidance, company expects modest growth and modest earnings growth. Key product launches include Connect360, Dynamo Stretcher, and other innovation initiatives with favorable customer feedback.

Q1 came in line with expectationsNovum customer returns not material in Q1 but factored into guidanceQ2 expected sequential improvement but YoY pressure continuesFull-year organic growth reiterated as approximately flat

David Roman · Goldman Sachs

What is happening in MPT business beyond Novum dynamics? How does the company protect the pump disposal business given Novum headwinds? What can drive this business back to growth? What are KPIs and customer signposts validating back-half ramp confidence?

Novum Syringe launched; Spectrum LVP platform continues with strong customer feedback integrated on IQX pump platform. Sets expected in line with overall pump confidence. Pump revenue expected to grow in back half. Company points to seasonality validation, strong customer interest in product portfolio, IV solutions normalization expected in 2026, HST back-half focus, frontline care timing normalization, and low single-digit HST growth expected. KPIs being tracked to ensure clarity and execution focus.

Novum Syringe launched as addition to portfolioSpectrum LVP platform has strong customer feedbackPump revenue expected to grow in back half of 2026IV solutions business right-sizing, normalization expected within 2026

Larry Beigelson · Wells Fargo

What inflation assumptions are embedded in gross margin guidance? How are cost pressures from oil, freight, and chips being absorbed since Q1, given $50/barrel oil increase? What is the turnaround plan and strategic changes ahead?

Oil exposure reduced to less than 50% of P&L post-kidney care sale. If oil stays flat at current levels, manageable with no material 2026 impact. Supply chain mitigation through proactive engagement, dual sourcing, daily visual management. Company taking disciplined approach but acknowledges not immune to macro trends. Turnaround based on 'standard work' visiting facilities and engaging customers. Innovation positioned as baseheads (consistent improvement) not grand slams. Decentralized business model focused on end markets. 230+ GPS events in Q1 showing momentum on fundamentals.

Oil exposure reduced to less than 50% of P&L due to kidney care divestitureIf oil flat at current levels, 2026 impact manageable and not materialProactive supply chain mitigation via dual sourcing and daily visual managementCompany acknowledges Baxter not immune to macro trends

Vijay Kumar · Evercore ISI

Q1 showed low-single-digit underlying growth (excluding comps) but guidance is flat. Why wouldn't Q1 trends sustain? What step-down or Novum returns are assumed? Comment on HST order performance and timing element.

Q1 in line with expectations. Novum returns risk contemplated but not material in Q1; prudent to reflect in forward guidance. Q2 to have same dynamics as Q1 with YoY headwinds (injectables, Novum, potential returns). HST growth weighted to back half due to large Q1 comp last year. Q1 HST performance driven by frontline care timing aspects and planned exits; CCS roughly flat with PSS growth. Expect HST low-single-digit growth for full year, back-half weighted. Strong demand for connected care business.

Q1 came in line with expectations, not material Novum returnsNovum returns risk factored into full-year guidance prudentlyQ2 expected to have sequential volume improvement but YoY pressure continuesHST growth weighted to back half due to large prior-year Q1 comp

Matt Nixick · Barclays

How is the company mitigating chip shortages and supply chain issues? How far out is visibility through end of 2026? On growth drivers, how is the company putting R&D to work on existing product lines vs. searching for 'shiny objects'?

No material memory chip shortages or supply disruptions experienced to date. Proactive risk management through discipline forecasting, supplier engagement, dual sourcing. Baxter acknowledges not immune but taking counter-measures and monitoring closely. On innovation: company views innovation as 'baseheads' (consistent improvement) not 'walk-off grand slams.' Decentralized positioning focused on end markets. Innovation enabler for future; early wins with Connect360 and Dynamo. Quarterly business reviews with innovation leaders drive disciplined capital allocation and ROIC focus.

No material memory chip shortages or supply disruptions experienced to dateProactive mitigation via disciplined forecasting, supplier engagement, dual sourcingBaxter not immune to macro trends; continuing to monitor and stay closeInnovation viewed as consistent 'baseheads,' not one-time 'grand slams'

Answers to last quarter's watch list

Q1 2026 adj. EPS and operational growth — Q1 EPS of $0.36 lands at ~18% of the FY $1.95 midpoint, meaning Q2–Q4 must average ~$0.53 per quarter (or ~$1.59 cumulative) to hit the midpoint. That bar is consistent with the H2-weighted thesis but requires a step-change starting in Q2. Organic at -1% missed the FY flat pace. The Q1 trough landed in the zone management warned about, but the back-half bar is now mechanically higher.
Continue monitoring
Novum corrective action filing — No specific FDA submission, 510(k) update, or resolution milestone was disclosed this quarter. Management's guidance continues to assume the ship-and-install hold remains in place for the full year. The hold is now mechanically a 2027 issue.
Resolved negatively
U.S. operational sales trajectory — U.S. went from -1% operational in Q4 to -4% reported in Q1, while international widened to +12%. The geographic divergence widened rather than narrowed; the "fragile structure" call from last quarter is now more fragile.
Resolved negatively
Adj. operating margin run-rate — Q1 adj. operating margin of 11.0% sits ~200–300bps below the FY 13–14% guide, in line with "Q1 trough" framing but at the low end of plausible. Q2–Q4 must average ~13.7–14.7% to hit the FY band — a 270–370bps sequential step-up that management has not concretely bridged.
Continue monitoring
Tariff mitigation execution — Tariff guidance was formally withdrawn from the FY table, though the CFO reiterated ~$80M full-year impact (~$40M YoY headwind) in Q&A. The reduced transparency in formal disclosure is itself a negative signal even if the underlying number is unchanged.
Continue monitoring
Free cash flow conversion in H1 — Q1 FCF of $76M is consistent with the H2-weighted FY pattern management reiterated, but provides no upside surprise. Net debt and 3x leverage target progress were not specifically disclosed on the print.
Continue monitoring

What to watch into next quarter

Q2 adj. operating margin step-up — Q2 needs to print at least 12.5–13.0% to make the FY 13–14% range mathematically credible; a Q2 below 12% with H2 carrying everything would force a guide cut by Q3 at the latest.

U.S. organic sales inflection — U.S. has now printed -1% operational (Q4) and -4% reported (Q1); a third consecutive quarter of U.S. decline against +12% international would force the question of whether the U.S. business has a structural problem beyond Novum and IV solutions.

Novum customer-return realization — management has reserved for customer returns in the FY guide but Q1 saw none materialize; watch whether returns begin to surface in Q2 (which would validate the conservatism) or remain absent (which raises the question of why the guide hasn't been raised).

Re-introduction of withdrawn EPS-bridge metrics — watch for the tax rate, share count, non-operating expense, and tariff lines to be re-quantified in Q2 disclosures. Continued absence implies management itself does not have visibility, which would be a tell on FY guide credibility.

GPS event count and operational KPIs — Hider cited 230+ GPS events in Q1 as the leading indicator; track whether this number scales and whether management ties it to specific cost takeout, fill rate, or service-level improvements rather than leaving it as a process metric.

2027 framing — Marcus extracted a "modest sales and earnings growth" 2027 signal in Q&A; watch whether management formalizes this in subsequent quarters or walks it back. The signal matters because it positions 2026 as the trough and reframes the multi-year recovery thesis.

Sources

  1. Baxter International Q1 2026 press release / 8-K Exhibit 99.1 — https://www.sec.gov/Archives/edgar/data/10456/000162828026028582/bax-20260331xex991.htm
  2. Baxter International Q1 2026 earnings call prepared remarks and Q&A
  3. Tapebrief Q4 FY2025 BAX coverage (prior watch list and FY2026 guide baseline)
  4. Tapebrief Q3 FY2025 BAX coverage (multi-quarter tone arc)

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