Exchange: NYSE | Sector: Healthcare | Industry: Medical Devices
Q1 2026
Published: Aug 19, 2025
Earnings Highlights
Revenue of $8.58B down 0.1% year-over-year
EPS of $0.81 increased by 65.3% from previous year
Gross margin of 59.9%
Net income of 1.04B
"Geoffrey Martha: 'We started the fiscal year by delivering another consistent quarter of mid-single-digit revenue growth. And we’re pleased to be able to raise our EPS guidance for the full year on the back of the strong start of the year.'" - Geoffrey Martha
Medtronic plc (MDT) Q1 FY2026 Results Analysis: CAS Momentum, Diabetes Separation Progress, and Strategic Growth Initiatives
Executive Summary
Medtronic reported Q1 FY2026 revenue of $8.578 billion, delivering 4.8% organic growth and adjusted EPS of $1.26, with the quarter aligned to the top end of guidance and EPS modestly ahead of the midpoint. The quarterly performance reflects a bifurcated growth mix: a standout acceleration in Cardiac Ablation Solutions (CAS) and Cardiovascular (CV) portfolio activity, offset by slower momentum in certain Neuroscience and Diabetes ramp-up dynamics. Management signaled an explicit path to an accelerated growth trajectory in the back half of FY26, anchored by ongoing CAS deployment (nearly 50% growth in CAS this quarter, with continued ramp in mapping systems and new catheters like Sphere-360), the anticipated Denervation (Symplicity) market expansion in the U.S. post CMS NCD, and the continued cadence of Diabetes innovations (Simplera Sync, Instinct, and the planned MiniMed separation). The company raised FY26 organic revenue growth guidance to ~5% and reiterated an EPS target range of $5.60-$5.66, underpinned by FX tailwinds and efficiency gains. Medtronic is also advancing its strategy with governance enhancements (two new independent directors, Growth and Operating board committees) and an Investor Day planned for mid-calendar year 2026 to outline a refreshed growth framework and long-term targets.
Key Performance Indicators
Revenue
8.58B
QoQ: 3.45% | YoY:-0.13%
Gross Profit
5.14B
59.93% margin
QoQ: -6.75% | YoY:-1.08%
Operating Income
1.45B
QoQ: -12.21% | YoY:-5.37%
Net Income
1.04B
QoQ: -19.63% | YoY:59.02%
EPS
0.81
QoQ: -19.80% | YoY:65.31%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $8.578B, reported growth 8.4% and organic growth 4.8% vs guidance; Q2 guidance implies continued mid-single-digit organic growth.
Gross margin: 65.1% adjusted gross margin, down 80 bps YoY, driven by mix (CAS vs Diabetes) and ramp costs, partially offset by pricing benefits (≈+30 bps) and FX tailwinds (+0.10 of a point).
R&D and SG&A: Adjusted R&D up 7.7% YoY, with higher investment in CAS and Ardian; SG&A leverage persisted with opex growing 170 bps below revenue growth.
Net income and EPS: Net income $1.04B; adjusted EPS $1.26, $0.03 above guidance midpoint.
Financial Highlights
Key Q1 FY2026 metrics and implications:
- Revenue: $8.578B, reported growth 8.4% and organic growth 4.8% vs guidance; Q2 guidance implies continued mid-single-digit organic growth.
- Gross margin: 65.1% adjusted gross margin, down 80 bps YoY, driven by mix (CAS vs Diabetes) and ramp costs, partially offset by pricing benefits (≈+30 bps) and FX tailwinds (+0.10 of a point).
- Operating performance: Adjusted operating profit $2.0B; adjusted operating margin 23.6% (implies durable margin discipline alongside higher growth investment).
- R&D and SG&A: Adjusted R&D up 7.7% YoY, with higher investment in CAS and Ardian; SG&A leverage persisted with opex growing 170 bps below revenue growth.
- Net income and EPS: Net income $1.04B; adjusted EPS $1.26, $0.03 above guidance midpoint.
- Cash flow: Operating cash flow $1.088B; capex $0.504B; free cash flow $0.584B; net debt position shows a negative net debt (cash) of approximately $1.088B, though quarterly cash flow data show meaningful post-period FX effects and working-capital movements; financing activities contributed to a net cash outflow in the period.
- Guidance: FY26 organic revenue growth guidance raised to ~5%; Q2 EPS guidance $1.30–$1.32; full-year EPS guidance $5.60–$5.66 (tariffs reduced to ~$185M for FY26); FX tailwinds now expected to add $550–$650M to FY26 revenue.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
8.58B
-0.13%
3.45%
Gross Profit
5.14B
-1.08%
-6.75%
Operating Income
1.45B
-5.37%
-12.21%
Net Income
1.04B
59.02%
-19.63%
EPS
0.81
65.31%
-19.80%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management insights and quotes by themes:
- Strategy and growth inflection: Geoff: “we started the fiscal year by delivering another consistent quarter of mid-single-digit revenue growth... we are raising our EPS guidance for the full year on the back of the strong start of the year.” This frames an inflection narrative as CAS and other growth drivers scale.
- CAS momentum and product pipeline: Thierry: “CV grew 7% this quarter, led by Cardiac Ablation Solutions. CAS growth nearly 50%, including low 70s in the U.S. and Japan and low 30s in international markets. Sphere-360 is the next-gen catheter, with pivotal trial planned this calendar year.” This underscores the near-term acceleration path in CAS and the broader PFA ramp.
- Regulatory and market development: Geoff & Thierry highlight CMS NCD progress for Symplicity renal denervation and ACC/AHA guideline support for Ardian as important catalysts for hypertension care pathways, signaling a multi-quarter commercialization ramp.
- Diabetes separation and innovation cadence: Geoff emphasizes the value-creating separation trajectory for MiniMed, with projected gross margin improvement of ~50 bps and operating margin improvement of ~100 bps post-separation; Que and Thierry discuss Simplera Sync, Instinct, and the planned MiniMed IPO/split, with FDA/ACE milestones de-risking near-term timing.
- Capital allocation and governance: Geoff announces two new independent directors and two board committees (Growth and Operating) to drive portfolio optimization and efficiency, signaling a more aggressive expansion of growth initiatives and cost discipline.
Geoffrey Martha: 'We started the fiscal year by delivering another consistent quarter of mid-single-digit revenue growth. And we’re pleased to be able to raise our EPS guidance for the full year on the back of the strong start of the year.'
— Geoffrey Martha
Thierry Pieton: 'CV grew 7% this quarter, led by Cardiac Ablation Solutions. CAS growth continued to accelerate to nearly 50%, including low 70s growth in both the U.S. and Japan and low 30s growth in international markets.'
— Thierry Pieton
Forward Guidance
Outlook and risk assessment:
- Growth trajectory: The company reaffirmed a 5% FY26 organic revenue growth target and expects stronger growth to materialize in the back half of FY26 as CAS maturation, tibial and Hugo launches, and Ardian adding new growth vectors come online. FX tailwinds of $550–$650M for FY26 and a Q2 EPS of $1.30–$1.32 support earnings upside potential, with a longer-term framework to be presented at the mid-2026 Investor Day.
- Growth drivers and milestones to monitor: (1) CAS: continued 2H growth acceleration, mapping/catheter supply ramp, Sphere-360 pivotal trial initiation; (2) Renal Denervation (Symplicity): CMS NCD timing (expected by Oct 8) and ramp of denervation procedures; (3) Pelvic Health and Brain/Neurovascular opportunities; (4) Hugo launch timing in the U.S.; (5) Diabetes separation: timing of MiniMed IPO/split, Instinct launch, and the integration pathway with Abbott’s sensor ecosystem; (6) Ardian market access and reimbursement dynamics.
- Risks and sensitivities: Near-term margin headwinds from CAS/Diabetes mix, ongoing VBP pressures in some markets, potential tariff and tax-rate fluctuations, FX volatility, execution risk in manufacturing ramp and new product launches, and regulatory approvals, especially for Hugo, Instinct, and new sensors.
- Investment thesis: The CAS-led growth inflection, expansion into high-growth adjacencies (Ardian, tibial, carotid/hemorrhagic stroke). The Diabetes separation is expected to be EPS-accretive in the near term and margin-improving in the medium term. The Investor Day will lay out a refreshed financial framework (growth, profitability, and capital allocation) and new long-term targets.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MDT Focus
59.93%
N/A
N/A
N/A
EW
78.70%
29.00%
0.00%
29.71%
ABT
56.90%
16.30%
2.71%
43.73%
BSX
68.80%
19.80%
3.03%
55.27%
ZBH
71.20%
15.30%
1.47%
30.92%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Medtronic presents a constructive longer-term growth opportunity anchored by CAS-driven cardiovascular momentum, next-generation ablation platforms (PFA and Sphere-360), and a robust diabetes innovation path. The separation of MiniMed (Diabetes) is designed to unlock value through focused, higher-growth growth trajectories and margin expansion, with an expected immediate gross-margin and operating-margin uplift post-separation. The combination of FX tailwinds, ongoing efficiency gains, and increased R&D/S&M investment supports a path to higher earnings power and durable revenue growth. However, investors should monitor: (1) CAS supply ramp and acceptance in new labs; (2) regulatory/approval timing for Hugo and Instinct; (3) Reimbursement and CMS HAL for renal denervation; (4) progress of the Diabetes separation and the timing of the IPO/split; and (5) potential margin dilution from near-term mix shifts. Given these dynamics, a balanced approach to MDT’s stock with a modestly constructive to overweight stance is warranted, pending a clearer long-term framework to be disclosed at the mid-2026 Investor Day and the ramp visibility of major growth drivers in H2 FY26 and into FY27.
Key Investment Factors
Growth Potential
Catalysts include CAS scale (targeting an incremental $1B revenue vs FY25 base in the back half of FY26 and beyond), Sphere-360 pivotal trial, tibial launch, Hugo market entry in the U.S., Ardian expansion into denervation with favorable CMS/ACC/AHA positioning, and the Diabetes separation funnel (MiniMed IPO/split) enabling more aggressive investment behind high-growth platforms (PFA, Ardian, and others). Expect continued R&D intensity (R&D uptick ~7.7% YoY in Q1) to sustain innovation-led growth.
Profitability Risk
Execution risk in CAS supply ramp and market adoption; regulatory and reimbursement timing risk (CMS NCD timing, Instinct and ACE approvals, U.S. FDA pathways for Hugo, pelvic health tibial launch). Structural shifts from the Diabetes separation; FX volatility; tariff exposure, which the company has mitigated but remains a potential swing factor. Competitive dynamics in CV, Precision Robotics, and neuromodulation could compress margins or slow share gains.
Financial Position
Solid cash flow generation (operating cash flow $1.088B; free cash flow $0.584B) with ongoing capital investment in high-growth platforms. Cash position indicates capacity for selective M&A and shareholder-friendly capital allocation (dividends, buybacks) while funding R&D and growth initiatives. The two new independent directors and governance enhancements are intended to improve oversight of growth and efficiency initiatives, enabling a faster path to higher profitability and leverage.
SWOT Analysis
Strengths
Strong CAS momentum driving near-term cardiovascular growth (nearly 50% CAS in Q1; Sphere-360 on the horizon).
Diversified, global portfolio across Cardiovascular, Neuroscience, MedSurg, and Diabetes, providing multiple growth vectors.
AiBLE spine ecosystem leadership contributing durable share gains in Neuroscience.