BAXTER INTERNATIONAL INC (BAX) Q2 2025 Earnings Summary

Executive Summary

Q2 2025 results were in line with guidance: sales from continuing operations $2.81B (+4% reported, +1% operational) and adjusted diluted EPS from continuing operations $0.59; GAAP diluted EPS from continuing operations $0.24 .
FY 2025 guidance was lowered: reported sales growth to 6–7% (from 7–8%), operational to 3–4% (from 4–5%), and adjusted EPS to $2.42–$2.52 (from $2.47–$2.55), reflecting downside risk in Medical Products & Therapies (IV fluids conservation and Novum IQ pause) .
Segment trends: Advanced Surgery +7% to $296M; Care & Connectivity Solutions +5% to $474M with international strength; Drug Compounding +7% to $280M; Injectables & Anesthesia −3% to $332M; Front Line Care −1% to $293M .
Operational drivers: $98M MSA revenue from Vantive, $52M TSA income; adjusted operating margin 15.1% (↑180 bps YoY) despite lower adjusted gross margin (40.7%) due to IV fluids volumes and mix .
Leadership update: Andrew Hider appointed CEO (start no later than Sept. 3, 2025), a potential operational improvement catalyst .

What Went Well and What Went Wrong

What Went Well
- Advanced Surgery delivered solid demand globally; CCS saw international improvement (+7%), supporting HST growth (segment +3%) .
- Price realization and TSA reimbursements supported margin expansion; adjusted operating margin reached 15.1% (+180 bps YoY) .
- Management reaffirmed confidence in Novum IQ platform and ongoing competitive wins despite a temporary shipment pause: “We remain confident in the Novum IQ infusion platform…” .
What Went Wrong
- IV fluids demand remained soft due to post-Hurricane Helene conservation; MPT flat reported (+1% operational), with Infusion Therapies & Technologies −1% operational .
- Pharmaceuticals faced unfavorable mix: Injectables & Anesthesia −3%; inhaled anesthesia declined low double digits globally; U.S. injectables saw elevated IV push usage .
- Guidance cut driven by volume absorption in manufacturing and product mix; low end assumes no Novum IQ shipments in 2H and ~−20% fluid conservation persists .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Net Sales – Continuing Ops ($B)	$2.694	$2.625	$2.810
Adjusted Diluted EPS – Continuing Ops ($)	$0.46	$0.55	$0.59
GAAP Diluted EPS – Continuing Ops ($)	$0.19	$0.13	$0.24
Adjusted Gross Margin %	42.4%	41.8%	40.7%
Adjusted Operating Margin %	13.3%	14.9%	15.1%

Segment Breakdown (Q2 2025 vs Q2 2024)

Segment ($M)	Q2 2024	Q2 2025	YoY
Infusion Therapies & Technologies	1,045	1,024	−2%
Advanced Surgery	277	296	+7%
Medical Products & Therapies	1,322	1,320	0%
Care & Connectivity Solutions	452	474	+5%
Front Line Care	296	293	−1%
Healthcare Systems & Technologies	748	767	+3%
Injectables & Anesthesia	341	332	−3%
Drug Compounding	261	280	+7%
Pharmaceuticals	602	612	+2%
Other	22	111	+405%

KPIs and Operational Items

KPI	Q2 2024	Q1 2025	Q2 2025
TSA Income & Reimbursements ($M)	$24	$—	$52
MSA Revenue from Vantive ($M)	$—	$—	$98
Adjusted Tax Rate – Continuing Ops (%)	20.7%	17.4%	16.7%
Free Cash Flow – Continuing Ops ($M, YTD)	$(150) (6M’24)	$(221) (Q1’25)	$(144) (6M’25)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported Sales Growth	FY 2025	7–8%	6–7%	Lowered
Operational Sales Growth	FY 2025	4–5%	3–4%	Lowered
Adjusted Diluted EPS ($)	FY 2025	$2.47–$2.55	$2.42–$2.52	Lowered
Adjusted Diluted EPS ($)	Q2 2025	$0.59–$0.63	Actual: $0.59	Met low end
Reported Sales Growth	Q3 2025	—	6–7%	New
Operational Sales Growth	Q3 2025	—	3–4%	New
Adjusted Diluted EPS ($)	Q3 2025	—	$0.58–$0.62	New
Dividend	Q2 2025	—	$0.17/sh payable Oct 1, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024; Q1 2025)	Current Period (Q2 2025)	Trend
IV fluids supply & conservation	North Cove restored; IV solutions declined in Q4 due to Helene, but impact less than anticipated . Q1: strong restocking then inventory bleed; conservation continued .	Conservation persists; low end assumes ~−20% conservation through year; allocations removed; Vizient Reserve partnership .	Improving supply, demand recovery slower.
Novum IQ infusion pumps	Q4: LVP 510(k) clearance, strong sales .	Voluntary temporary ship/install pause to address field corrections; confidence maintained; low end guide assumes no shipments rest of 2025 .	Temporary disruption; execution focus.
Tariffs	2024/early 2025 noted macro uncertainty .	Net impact cut to ~$40M in 2025 (from $60–$70M); supply chain/pricing actions ongoing .	Less severe than prior.
Capital spending (U.S. hospitals)	Q1: strong Patient Support Systems upgrades .	U.S. CCS capital orders declined on tough comp; no observed slowdown overall; monitoring macro .	Mixed; watch macro.
Segment mix and margins	Q4/Q1: pharma strength, compounding growth; HST mixed .	Pharma mix unfavorable; anesthesia down; compounding +7%; adjusted OI margin +180 bps YoY with TSA/MSA support .	Margins improved; mix headwinds.
R&D & innovation cadence	Q1: innovation momentum (Voalte Linq, Hemopatch room temp) .	Continued targeted R&D (4.8% of sales); pipeline to drive growth in 2026 .	Steady investment.
Management/strategy	CEO transition announced Q1 (interim CEO, COO) .	Andrew Hider appointed CEO (operational discipline, ATS background) .	Leadership catalyst.

Management Commentary

“Second quarter performance for continuing operations met our previously issued guidance… adjusted earnings per share… were $0.59, increasing 28% over the prior year.” — Brent Shafer .
“We have decided to voluntarily and temporarily pause shipment and planned installations of the Novum IQ large volume infusion pump… Our goal is to resume both as soon as possible this year.” — Heather Knight .
“Adjusted operating margin at 15.1%… improving 180 basis points YoY… despite lower gross margin due to Vantiv MSA, lower IV solutions volumes, and product mix.” — Joel Grade .
“We now estimate the net impact to our results from tariffs is approximately $40 million in 2025… reduction from prior $60–$70 million.” — Joel Grade .
“The low end of our guidance assumes we don’t resume shipments for Novum prior to the end of the year… fluid conservation levels remain similar to the first half.” — Joel Grade .

Q&A Highlights

Novum IQ impact and guidance: Low end of FY guide assumes no further Novum shipments in 2025; management emphasized confidence in platform and pursuing interim mitigations with customers .
Fluid conservation assumptions: Low end modeling assumes ~−20% conservation vs prior −10%; hospitals expected to normalize gradually as supply confidence builds .
Margin bridge: Volume absorption in integrated supply chain and mix were primary drivers of lowered operating margin expectations, partially offset by pricing and reduced tariff impact .
TSA vs stranded costs: TSAs ~24-month horizon post-January 2025 close; stranded cost removal program on track (target removal by 2027) to avoid gap when TSA winds down .
Pharma dynamics: Government order comp lapped; elevated IV push usage; Drug Compounding strength expected to continue in 2H .

Estimates Context

Metric	Consensus (Q2 2025)	Actual (Q2 2025)	Consensus (Q3 2025)
Primary EPS ($)	0.610*	0.54 (Adjusted diluted EPS total)	0.598*
Revenue ($B)	2.823*	2.810	2.877*
EBITDA ($M)	574*	691 (adjusted basis; S&P actual field) *	533*
# of EPS Estimates	13*	—	13*
# of Revenue Estimates	11*	—	11*

Values retrieved from S&P Global*. Note: S&P’s “Primary EPS” actual for Q2 2025 aligns with adjusted diluted EPS for total Baxter ($0.54) vs Baxter’s adjusted diluted EPS from continuing operations ($0.59) . Use caution comparing definitions.

Key Takeaways for Investors

Q2 landed at the low end of guidance but maintained operational discipline; adjusted EPS from continuing ops $0.59 and revenue $2.81B .
Guidance reset is the key narrative: FY reported sales growth 6–7% and EPS $2.42–$2.52, embedding downside scenarios for IV fluids and Novum IQ .
Margin quality improved YoY on operating execution (15.1% adj OI%), supported by TSA/MSA, but sustained recovery depends on fluid demand normalization and pump shipments resuming .
Segment mix matters: watch Advanced Surgery strength and CCS international demand vs headwinds in injectables/anesthesia .
Operational de-risking: Vizient Reserve Program enhances IV fluids supply assurance; allocations removed at North Cove; should aid customer confidence over 2H .
Balance sheet/cash: YTD FCF remains negative (−$144M), with positive Q2 FCF; inventory management is a priority for 2H improvement .
Leadership catalyst: new CEO with deep operational background may accelerate cost, supply chain, and innovation initiatives .

Additional References

Dividend declared: $0.17 per share payable Oct 1, 2025 .
8-K furnished with full press release and reconciliations (Item 2.02) .
Prior quarter baseline: Q1 2025 revenue $2.63B; adjusted EPS $0.55; prior FY guide was higher before Q2 reset .
Q4 2024 context: Novum IQ momentum; Hurricane Helene impact less than anticipated; transformation post Kidney Care sale .