Q3 2025 Earnings Summary
- Medtronic's Cardiac Ablation Solutions (CAS) business is experiencing rapid growth driven by their pulsed field ablation (PFA) technology, with a line of sight to $2 billion in revenue in the near term. The company has unlocked supply constraints with a new factory in Galway, Ireland, and demand for both their Affera and PulseSelect platforms is strong.
- The Diabetes business is growing double digits, fueled by the MiniMed 780G system, and there is significant growth potential with upcoming products like the Simplera Sync sensor pending FDA approval and expanded indications for type 2 diabetes. This sustained growth suggests continued momentum in this segment.
- The Hugo robotic surgical system is expected to become a meaningful growth driver starting in fiscal 2026, with progress in market approvals, indications, and advanced capabilities like ICG imaging and LigaSure vessel sealing. Increased procedure volumes and positive external publications support its potential.
- Underperformance and Reliance on Surgical Innovations: Medtronic's U.S. Surgical business has underperformed for about five quarters, growing below the corporate average. Challenges such as distributor inventory reductions have impacted growth, and there is a reliance on the successful launch of the Hugo robotic system to return to mid-single-digit growth. This carries execution risk if the rollout does not proceed as planned.
- Volatility from China's Volume-Based Procurement (VBP) Policies: Exposure to China's VBP policies has caused volatility and declines in certain segments like Peripheral Vascular, which shifted from mid-single-digit growth to a low-single-digit decline. This could continue to negatively impact growth in these segments if issues persist.
- Uncertainty in Timing and Realization of Growth Drivers: There is uncertainty around the timing and magnitude of new growth drivers, such as Renal Denervation and the Hugo robotic system. Limited specific guidance and the need for country-by-country reimbursement approvals in international markets may lead to delays in realizing projected growth, potentially putting pressure on margins as the company continues to invest heavily in these areas.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +2.5% (from $8.089B in Q3 2024 to $8.292B in Q3 2025) | Revenue growth was modest at 2.5% YoY, driven by continued execution on product innovation and geographic expansion strategies that had been building from previous quarters. This steady growth reflects ongoing improvements observed in earlier periods (e.g., in Q2 2025) where diversified business segments and emerging market strengths were highlighted. |
Net Income | +84% (from $1.322B in Q3 2024 to $2.437B in Q3 2025) | The dramatic 84% increase in net income can be largely attributed to enhanced operating efficiencies, better cost management, and lower income tax provisions compared to the prior year. Previous quarters showed improvements driven by higher operating profit and reduced tax expenses, and these factors have compounded in Q3 2025, leading to a significant jump in profitability. |
Operating Income | +11% (from $1.483B in Q3 2024 to $1.646B in Q3 2025) | Operating income grew by 11%, fueled by both revenue increases and operational efficiencies. Similar cost-control measures and innovative product launches that improved margins in earlier quarters (as seen in Q2 2025) have continued to drive operational performance in Q3 2025. |
Diabetes Segment Revenue | +8% (from $640M in Q3 2024 to $694M in Q3 2025) | The Diabetes segment saw an 8% increase YoY, supported by strong product adoption and geographic expansion. This mirrors trends from previous periods where innovations such as the MiniMed 780G system drove U.S. and international growth, reinforcing the segment’s robust performance. |
Capital Expenditures | Swing from +$346M in Q3 2024 to –$2.324B in Q3 2025 | The shift from positive capital expenditures of $346M to a significant outlay of –$2.324B indicates a deliberate ramp-up in investments to expand manufacturing capacity and support new product initiatives. This move is consistent with earlier investments aimed at bolstering the innovation pipeline and scaling production capabilities for emerging technologies. |
Geographic Performance | N/A (U.S. at $4.237B and International at $4.055B) | Q3 2025 displayed balanced performance with the U.S. and international markets contributing almost equally. The regional split underscores a strategic focus on maintaining strong domestic performance while leveraging growth opportunities abroad—a trend that has been progressively refined in prior quarters. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Organic Revenue Growth | FY 2025 | 4.75% to 5% | 4.75% to 5% | no change |
Non-GAAP Diluted EPS | FY 2025 | $5.44 to $5.50 | $5.44 to $5.50 | no change |
Foreign Exchange Impact | FY 2025 | $225 million to $325 million | $275 million to $325 million | lowered |
Organic Revenue Growth | Q4 2025 | no prior guidance | Comfortable with current Street consensus, expecting to deliver 10th consecutive quarter of mid‑single‑digit revenue growth | no prior guidance |
Foreign Exchange Impact | Q4 2025 | no prior guidance | $125 million to $175 million | no prior guidance |
Adjusted EPS Growth | Q4 2025 | no prior guidance | High single‑digit growth expected in the back half of the fiscal year, consistent with prior commitments | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue Growth (YoY) | Q3 2025 | 4.75% | 2.51% (calculated from revenue of 8,292Vs. 8,089) | Missed |
EPS (Diluted) | Q3 2025 | $1.35 to $1.37 | $1.00 | Missed |
Operating Margin | Q3 2025 | 25.6% | 19.9% (calculated from Operating Income of 1,646÷ Total Revenue of 8,292) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Cardiac Ablation Solutions & PFA | Q1 2025 and Q4 2024 calls described moderate growth, early launches of PulseSelect and Sphere‑9 with steady market adoption and a focus on addressing competition | Q3 2025 call emphasized accelerated growth (22% for CAS), expanded PFA portfolio (Affera and PulseSelect), and improved supply capacity (new Galway factory) | Acceleration with enhanced supply and broader global rollout |
Structural Heart Innovations & Evolut FX Launch | Earlier periods (Q1 2025 and Q4 2024) highlighted initial limited launches, FDA approval milestones, and robust clinical data (SMART and 4‑year low‑risk data) | Q3 2025 reported strong U.S. adoption of Evolut FX+, international momentum, and upcoming data catalysts, underscoring solidified market position | Continued growth with expanding market adoption and strengthened clinical evidence |
Diabetes Business Growth and Product Expansion | Q1 2025 and Q4 2024 focused on double‑digit growth driven by the MiniMed 780G, strategic partnerships (e.g. with Abbott), and early product pipeline initiatives like the Simplera sensor | Q3 2025 reiterated double‑digit growth (10%), with emphasis on market transition to AID systems and an advancing diabetes technology pipeline | Steady, healthy growth with ongoing product innovation |
Hugo Robotic Surgical System Execution Risk & Growth Potential | Q1 2025 discussed execution risks due to entrenched competitors and the need for complementary technologies; Q4 2024 noted progress in pivotal trials and early enrollment for new indications | Q3 2025 highlighted increased confidence with near-term U.S. market entry, milestones in FDA submissions, and mitigating execution risks through improved utilization and expanding indications | Maturing platform with reduced execution risk and growing optimism |
Neuromodulation Advancements & New Sensing Technologies | Q1 2025 and Q4 2024 emphasized early successes with closed‑loop systems (Inceptiv, Percept RC with BrainSense) and strong market traction in both pain and brain modulation segments | Q3 2025 continued to feature robust growth in pain stim and brain modulation with similar emphasis on sensing technology innovation and competitive differentiation | Consistent, innovation‑driven growth with strong market leadership |
Supply Chain Improvements (Galway Factory) | Not mentioned in Q1 2025 or Q4 2024 | Q3 2025 introduced the new Galway factory as a “game changer” for improving supply for Affera and supporting rapid global demand | Newly emerged topic boosting production capacity and market responsiveness |
Impact of China’s Volume‑Based Procurement (VBP) Policies | Q4 2024 discussed VBP headwinds with about 80% of the impact resolved and noted strong recovery in China | Q3 2025 mentioned a low‑single‑digit decline in Peripheral Vascular due to VBP issues, but overall effective management allowed profitable performance in China | Recurring theme with improving resolution and managed volatility |
European Market Cost Constraints | Mentioned in Q1 2025 as a factor slowing the adoption of new, higher‑priced technology (notably for PFA) | Not mentioned in Q3 2025 or Q4 2024 | No longer highlighted in current period discussions |
Operating Margin Pressures & Structural Cost Reforms | Q1 2025 noted margin pressures impacted by FX and SG&A, while Q4 2024 described SG&A challenges and early cost reforms | Q3 2025 reported an improved adjusted operating margin (26.2%, up 100 bps) driven by COGS efficiency, better pricing, and strategic cost reforms | Gradual improvement through enhanced operational efficiencies and cost discipline |
Cranial & Spinal Technologies & AI Integration (AiBLE Ecosystem) | Q1 2025 and Q4 2024 demonstrated solid mid‑single‑digit to 9% growth, emphasizing the emerging AiBLE ecosystem as a key driver for market share in Spine and Neurosurgery | Q3 2025 indicated a sustained performance (5% global growth, 8% U.S.) with AiBLE attracting top surgeons and distributors, further disrupting the competitive landscape | Consistent high performance with deepening AI integration and competitive advantage |
Reimbursement and Coverage Uncertainties | Q1 2025 focused on renal denervation’s reimbursement progress (CMS inpatient/outpatient, transitional pass‑through) and Q4 2024 discussed challenges for Symplicity and Simplera Sync | Q3 2025 again centered on renal denervation’s reimbursement pathway (transitioning NCA to NCD) alongside ongoing country‑by‑country efforts internationally | Persistent concern with gradual improvements and positive reimbursement signals |
Product Launch and Market Adoption Risks | Q1 2025 described risks related to scaling production for new products (PulseSelect, Sphere‑9, Evolut FX+, diabetes technologies) and noted early market adoption challenges | Q4 2024 demonstrated reduced uncertainties with strong product launches and positive market reception; Q3 2025 implied robust adoption with no explicit risk warnings | Diminishing concerns as market adoption picks up and product rollouts stabilize |
R&D Investment and Tuck‑in M&A Strategy | Q1 2025 and Q4 2024 stressed continued high investment in R&D and proactive tuck‑in M&A to drive profitable growth, with a focus on areas such as hypertension and robotics | Q3 2025 maintained focus on investing in PFA, Hugo, RDN, and diabetes while emphasizing tuck‑in M&A as “another form of R&D” to enhance margins and growth | Steady, disciplined investment strategy reinforcing long‑term growth objectives |
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Fiscal '26 Growth Outlook
Q: Is mid-single-digit growth and high-single-digit EPS fair for FY '26?
A: Geoff Martha reaffirmed commitment to driving profitable growth and operating leverage. He reiterated guidance of 4.75% to 5% organic revenue growth and high single-digit EPS growth for this fiscal year, and remained committed to long-range plans for FY '26 . -
AF Solutions Acceleration
Q: What drives AF Solutions' acceleration and $2B line of sight?
A: Geoff Martha highlighted strong demand in the pulsed field ablation market, viewing it as a $9 billion market growing in high teens. High demand for both PulseSelect and Affera platforms, improved supply, and the new Galway factory are accelerating growth, giving a near-term line of sight to $2 billion in revenue . -
Balancing Investment and Margins
Q: How will you balance spending on growth and margin expansion?
A: Geoff Martha stated the goal is to invest in growth drivers while achieving profitable growth. Gross margin improvement is key, allowing flexibility to fund investments without sacrificing operating leverage . -
U.S. Surgical Performance
Q: Why did U.S. Surgical decline, and is it share loss?
A: The decline was due to larger distributors reducing inventory levels, costing about 200 basis points in Q3 growth. This is expected to resolve by Q1 as inventory levels stabilize. End customer purchases are stable, and there is no share loss .