MDT · Q1 2026 Earnings

Bullish

Medtronic

Reported August 19, 2025

30-second summary

Medtronic beat its own Q1 EPS guide by $0.02–$0.04 ($1.26 vs $1.22–$1.24) on 4.8% organic growth, then raised FY26 non-GAAP EPS by $0.08 at the midpoint to $5.60–$5.66 — driven less by operations than by a $15–165M tariff headwind reduction and an FX flip from headwind to flat-to-1% tailwind. The real news is governance: Elliott Management is now formally aligned, two new MedTech-experienced directors were added, and new "growth" and "operating" committees were created with explicit mandates, while management committed to "outsized earnings growth" and floated more aggressive M&A. Cardiac Ablation (CAS) ran ~50% reported (~72% in US), validating the $1B incremental revenue thesis, but underlying ex-tariff EPS growth was raised only 50bps to ~4.5% — so operationally this is a tariff-and-FX-driven raise, with the back-half acceleration story still to be proven.

Headline numbers

EPS

Q1 FY2026

$1.26

Revenue

Q1 FY2026

$8.58B

+4.8% YoY

Gross margin

Q1 FY2026

65.0%

Free cash flow

Q1 FY2026

$0.58B

Operating margin

Q1 FY2026

16.8%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$8.58B	+4.8%	$8.93B	-3.9%
EPS	$1.26	—	$1.62	-22.2%
Gross margin	65.0%	—	65.1%	-10bps
Operating margin	16.8%	—	27.8%	-1100bps
Free cash flow	$0.58B	—	—	—

Guidance

Medtronic raised full-year FY26 EPS guidance and reported Q1 beat, driven by stronger-than-expected EPS, tariff headwind reduction, and FX tailwinds, while reaffirming ~5% organic growth.

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

Metric	Period	Prior guide	Actual	Δ	Result
EPS (non-GAAP)	Q1 FY2026	$1.22 to $1.24	$1.26	+$0.02 to $0.04 above guide	Beat
Revenue organic growth	Q1 FY2026	4.5% to 5%	4.8%	in-line (mid-range of prior guide)	Met

New guidance

Metric	Period	Guide	YoY
FX impact on EPS	FY2026	flat to 1% benefit	—
EPS (non-GAAP)	Q2 FY2026	$1.30 to $1.32	—
Revenue organic growth	Q2 FY2026	4.5% to 5%	—
FX benefit	Q2 FY2026	~1% benefit to EPS	—
Tariff impact	Q2 FY2026	~$18 million negative	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
EPS (non-GAAP)	FY2026	$5.50 to $5.60	$5.60 to $5.66	+$0.10 to +$0.06 (low to high end)	Raised
Reported revenue growth	FY2026	4.8% to 5.1%	6.5% to 6.8%	+1.7 to +1.7 pts (low to high end)	Raised
Underlying EPS growth (excluding tariffs)	FY2026	approximately 4%	approximately 4.5%	+0.5 pts	Raised
Tariff impact	FY2026	approximately $200 million to $350 million	approximately $185 million	-$15 to -$165 million	Lowered

Reaffirmed unchanged this quarter: Organic revenue growth (approximately 5%)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Cardiovascular Portfolio	$3.285B	+7.0%
Cardiac Rhythm & Heart Failure	$1.712B	+9.1%
Structural Heart & Aortic	$0.93B	+6.1%
Coronary & Peripheral Vascular	$0.643B	+2.9%
Neuroscience Portfolio	$2.416B	+3.1%
Neuromodulation	$0.504B	+8.6%
Medical Surgical Portfolio	$2.083B	+2.4%
Diabetes	$0.721B	+7.9%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Cardiac Ablation Solutions (Pulsed Field Ablation) Growth	~50% reported, 72% in US
Non-GAAP Operating Margin	23.6%
Non-GAAP Gross Margin	65.1%
Free Cash Flow Margin	6.8%
Adjusted Revenue (Organic)	$8.539 billion
11 Consecutive Quarters of Mid-Single Digit Organic Growth	4.8% organic growth Q1 FY26

Management tone

Q2 FY25 portfolio defense → Q3 FY25 CAS as emerging driver → Q4 FY25 diabetes separation announced → Q1 FY26 governance reset + "outsized earnings growth"

From measured incrementalism to explicit "new chapter" language. Last quarter management framed FY26 as a transition year burdened by tariff and FX optics; this quarter the framing is materially different: "we're putting the pieces together in place to translate that accelerating top line into a period of sustained, outsized earnings growth." The word "outsized" is not a Medtronic word — for a decade this management team has guided to mid-single-digit revenue and high-single-digit EPS. Combined with the Elliott alignment, two new directors with M&A expertise, and creation of dedicated "growth" and "operating" committees, this reads as management acknowledging that the prior cadence was insufficient.

Diabetes recategorized again — from "separable healthy business" (Q4) to explicit growth constraint (Q1). Last quarter the separation rationale was margin accretion (+50bps GM, +100bps OM). This quarter management went further: "it will also allow Medtronic to grow revenue and earnings faster without diabetes than we do with it today." That is an admission that the diabetes mix has been suppressing the core growth rate — a sharper framing than was offered three months ago, and one that justifies the now-15-month (down from 18-month) separation timeline.

CAS escalated from "promising" (Q3 FY25) to "category leadership" (Q1 FY26). Last quarter Jeff hedged on whether the $2B run-rate would hit in FY26 or shortly after. This quarter the language hardened: "we have more conviction than ever that we have the right technology and the product pipeline to catapult us to category leadership in cardiac ablation." The 72% US growth print earns that conviction. Notably, on the Mike Kratke (Leran Partners) question, management confirmed FY27 is more likely than FY26 for the doubling target — slightly walking back the prior "ballpark in fiscal year" hedge but in exchange offering a sharper conviction statement on category position.

Ardian/RDN promoted to potentially the largest opportunity in the company. Last quarter Ardian was framed as a long-ramp service-line build. This quarter, with CMS NCD decision on October 8 imminent and "record" overwhelmingly positive comment period, management called it "the biggest thing" the company has ever done — larger than CAS — citing 18M uncontrolled hypertension patients in the US. This is a meaningful upgrade of the addressable opportunity language.

Recurring themes management leaned on this quarter:

Cardiac ablation (CAS) as flagship growth accelerator with 50% growth and $1B+ incremental revenue opportunityPortfolio optimization through diabetes separation to unlock faster core growth and margin expansionOperational excellence and cost discipline as co-equal lever to revenue growth for earnings powerNeuromodulation and spine ecosystem gaining share through differentiated technology (closed-loop sensing, able ecosystem)Multiple near-term clinical and regulatory catalysts (Ardian CMS approval October 8, Hugo H2 launch, Simplera/Instinct sensor launches)Governance transformation aligned with Elliott Management to accelerate strategic execution

Risks management surfaced:

Near-term business mix headwinds from CAS capital-to-catheter transition and Simplera manufacturing ramp (70bps gross margin pressure)Tariff exposure reduced but still material at $185M for FY26 (improved from prior $200-350M scenarios)Ongoing market pressures in surgical: bariatric surgery softness and robotic adoption shift in U.S.China VBP and product recall comps in neurovascular creating growth headwinds through near termFX volatility (though currently a tailwind, recent movements cited as substantial)

Q&A highlights

Travis Steed · Bank of America Securities

How can management justify confidence in mid-single-digit base business growth when CAS pipeline growth of 72% isn't flowing through to total U.S. growth (3.5%), and how does this support acceleration in FY26?

Management attributed slower U.S. growth to temporary headwinds in neuroscience, pelvic health, and neurovascular, plus slower diabetes ramp in the U.S. (though 11% international growth). Management emphasized CAS accelerating sequentially near 60% in Afera, with capital systems driving high utilization and strong catheter adoption. Safety profile and physician experience, particularly in Japan, are key competitive advantages. These growth drivers plus rebounds in affected areas will drive significant U.S. growth acceleration, with all new technologies having outsized impact on U.S. growth.

CAS grew 50% this quarter with sequential near-60% growth in AferaDiabetes grew 11% internationally but slower in U.S. due to Simplera ramp timing4.8% organic revenue growth in quarter within 4.5-5% guidanceEPS came in 3 cents above midpoint

Mike Kratke · Leran Partners

Is the $2 billion annual CAS sales target now squarely achievable in fiscal 2026, or does management have reservations about committing to that timeline?

Management confirmed commitment to the $2 billion CAS target ($1 billion incremental revenue on top of FY25 base). Stated 'near term' means could be FY26 but more likely FY27, though 'not far' from FY26. Nothing has changed from prior guidance; sequential acceleration continuing as expected with strong outlook.

$1 billion incremental CAS revenue target on top of FY25 run rateNear-term target: FY26 possible but more likely FY27CAS on track with sequential acceleration continuing

Robbie Marcus · JPMorgan

Beyond communication touchpoints, what substantive strategic changes are the new board committees contemplating around company size, dividend, capital allocation, and EPS growth? Is this a continuation of your strategy or a wholesale change?

Management framed this as entering a 'new chapter' with stable foundation now allowing for more aggressive value creation. Three key themes: (1) More M&A in high-growth areas beyond AFib, building on Afera success; (2) Portfolio reorientation through M&A and portfolio moves to increase WAMGR toward higher-growth areas; (3) Increased reinvestment in R&D and growth-oriented G&A behind secular 'transformational growth drivers.' New MedTech-experienced directors bring operational and M&A expertise. Stressed that reinvestment will not come at the detriment of EPS—growth will enable investment while driving leverage and EPS improvement.

R&D grew almost 8% this quarter with intent to maintain that trendNew directors John and Bill bring deep MedTech experience, M&A expertise, and financial acumenBoard committees restructured for higher-frequency management touchpointsAfera deal serving as proof point for M&A strategy

Anthony Petrone · Mizuho

What is the best-case target population for the RDN NCD decision (Oct 8), and how does renal denervation rank among growth initiatives in transforming the company's growth profile? Could it become a multi-billion-dollar category?

Management highlighted positive CMS comment period with record overwhelming support and reimbursement alignment. Physician societies now incorporating Simplicity into care pathways. Identified uncontrolled hypertension population of ~18 million in U.S. from ~100 million with hypertension. Positioned Ardian as potentially 'the biggest thing' the company has ever done, larger even than CAS. Management investing heavily in market development specialists, next-generation catheters, and clinical trials targeting different ablation sites for enhanced blood pressure reduction. Massive patient population combined with transition from pharmaceutical to ablation therapy creates substantial market opportunity.

Record number of CMS comment period submissions overwhelmingly positive on RDN~100 million people in U.S. with hypertension; ~18 million with uncontrolled hypertension1 in 4 people with hypertension have uncontrolled hypertensionNext-generation Simplicity catheters already ready; new clinical trials underway

Josh Jennings · TD Securities

On diabetes: Has there been disruption causing U.S. slowdown, or is it just timing? What ramp expectations should we have? What approvals/launches remain for Instinct/780G integration?

Management (via Q) confirmed no disruption—purely timing-based. Strong international Simplera growth (double-digit) with U.S. demand present but supply-constrained. Production ramping to double Q1 output in H2. Abbott Instinct CGM expected to launch 'coming months' post-ACE approval (July) and IAGC approval. Instinct launch competitive to Simplera creates 'super cycle of innovation' with two sensors offering choice, improved form factor, and extended wear. Confident in H2 acceleration. Diabetes separation on track for completion within ~15 months.

Simplera achieved double-digit international growthU.S. production ramping to 2x Q1 output in H2Instinct expected launch in coming months post-ACE and IAGC approvalDiabetes separation expected to complete within ~15 months (down from 18 months three months ago)

Answers to last quarter's watch list

Diabetes separation mechanics and timeline. Timeline tightened to ~15 months (from prior 18 months); structure still described as "capital market transactions" without firm spin/split-off/IPO designation. Management explicitly quantified diabetes mix as a 70bps gross margin drag and now frames separation as both margin- and growth-rate-accretive. Status: Continue monitoring (timeline confirmed but transaction structure still undisclosed).

CAS revenue run-rate vs. doubling-from-$1B trajectory. CAS grew ~50% reported and ~72% in US, with Afera near 60%. Management reaffirmed the $1B incremental target, with timing now more likely FY27 than FY26 — a slight walk-back from Q4's "ballpark in fiscal year" but well above the ~25% threshold that would dent the narrative. Status: Resolved positively.

Tariff resolution and the $200–350M COGS headwind. FY26 tariff impact narrowed and reduced to ~$185M, well below even the prior low end. Underlying ex-tariff EPS growth raised from ~4% to ~4.5%. Status: Resolved positively.

Gross margin stabilization. Q1 non-GAAP gross margin held at 65.1% — flat vs Q4, not the sub-65% feared. Management still flagged ~70bps of CAS/Simplera mix pressure, with ~50bps of gross margin improvement expected over time as CAS scales. Status: Resolved positively.

Hugo US urology approval timing. Hugo launch flagged for H2 FY26 as a back-half catalyst; specific FDA action timing not disclosed in press-release commentary. Status: Continue monitoring.

R&D-faster-than-revenue execution. R&D grew ~8% in Q1, well above the 4.8% organic revenue growth and decisively clearing the ~5% bar. Management committed to maintaining this trend while still driving operating leverage. Status: Resolved positively.

What to watch into next quarter

Ardian/RDN CMS NCD decision on October 8. This is the single largest near-term binary catalyst. A favorable NCD validates the multi-billion-dollar TAM management has now positioned as potentially "the biggest thing" Medtronic has done. Watch the coverage scope and any patient-population restrictions in the final decision.

Underlying ex-tariff EPS growth in Q2. The FY26 raise was driven mostly by tariff/FX, with only 50bps of underlying operational raise. Q2 EPS guide of $1.30–$1.32 includes ~1% FX benefit and only $18M tariff drag. Watch whether the implied operational improvement materializes or whether the back-half acceleration story is doing all the heavy lifting.

CAS US growth sustainment above 60% and Afera trajectory. US CAS at 72% and Afera near 60% are the operational proof points behind the bull thesis. Anything below 50% US growth in Q2 would meaningfully dent the FY27 $2B target.

Diabetes separation structure disclosure. 15-month timeline now in place; specific transaction structure (spin, split-off, IPO of minority stake, or sale) still not specified. A defined structure with proceeds use is the next disclosure that determines whether the +50bps GM / +100bps OM math holds.

Hugo H2 US launch confirmation. Management flagged H2 launch; watch for a definitive FDA action and initial commercial cadence — the first US robotics catalyst.

Elliott engagement next steps. Two new directors and two new committees in place. Watch for any portfolio action announcement (further divestitures, larger M&A than Afera) — management explicitly said "M&A in high-growth areas beyond AFib" is on the table.

Sources

Medtronic FY26 Q1 Earnings Release (SEC 8-K Exhibit 99.1), filed 2025-08-19 — https://www.sec.gov/Archives/edgar/data/1613103/000161310325000141/exhibit991-fy26q1earningsr.htm
Medtronic FY26 Q1 management commentary and Q&A excerpts accompanying the press release

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