Medtronic plc (MDT) Earnings

Management highlights

### Top-Line & Operational Performance - Delivered 9.9% reported / 6.6% organic Q4 FY26 revenue growth, and 8.4% reported / 5.8% organic full FY26 revenue growth, marking Medtronic's strongest full-year top-line performance in 10 years. Adjusted Q4 EPS came in at $1.55 and full-year EPS at $5.53, both above consensus and guidance expectations. Adjusted gross margin expanded 30 basis points year-over-year to 65.4%, driven by disciplined pricing and COGS efficiency savings. Full-year free cash flow hit $5.4 billion, the strongest level since 2022, with improved working capital management. Ended the year with $9.2 billion in cash and investments, supporting active M&A strategy. ### Key Growth Platform Progress - **Cardiac Ablation Solutions (CAS):** Gained 8 additional points of US market share in Q4, with PFA growing 145% globally. US installed base grew 40% sequentially, and next-generation Prism 2 mapping software is rolling out globally. Sphere 9 launched in Japan, Sphere 360 gained CE marking and launched in Europe, and the US VT pivotal trial is on track to begin enrollment in H1 FY27. Two targeted investments in ice catheter technology were made to expand the integrated EP ecosystem. - **Simplicity Renal Denervation for Hypertension:** Doubled average weekly procedure volumes after national coverage determination, and is now annualizing at $100 million in revenue. New 3-year late-breaking clinical data confirmed sustained blood pressure reductions and strong clinical benefit, with 90% of patients achieving meaningful improvements. - **Hugo Surgical Robotics:** Worldwide procedure volume growth is 2-3x the market rate, with utilization increasing. Launched for urology in the US with positive early physician feedback, and submitted for FDA 510(k) clearance for general surgery, gynecologic indications, and the ligature RAS vessel sealer. Touch Surgery digital ecosystem installations reached over 1,400, up 30% sequentially. - **AltaViva Pelvic Health:** Has trained nearly 1,000 physicians since launch, with active implanters up 3x sequentially and treated patients up 2.5x sequentially. Commercial momentum is accelerating as physician experience grows and prior authorization processes streamline. - **Stealth Access (Neurosurgery/Spine):** Early commercial launch is progressing well with strong positive physician feedback. Gained FDA clearance for spine, cranial, and ENT indications, plus CE marking for spine and cranial. Acts as a force multiplier driving pull-through across Medtronic's broader surgical planning, navigation, and robotics ecosystem. ### Portfolio & Capital Allocation - Completed the MiniMed IPO in early March 2026. Closed the CathWorks acquisition in coronary, announced acquisitions of Scientia (neurovascular guidewire technology) and SPR Therapeutics (chronic pain PNS therapy), and made venture investments in next-generation EP technologies and pulmonary artery denervation. Closed/announced nearly $2 billion in new M&A and venture investments in FY26, with 16 total venture investments totaling ~$250 million. All investments are focused on high-growth adjacencies aligned with Medtronic's core strategic priorities. ### Leadership Transition - Brett Wall, long-time leader of the neuroscience portfolio, will retire after 25 years with the company. Dr. Qualey-Thompson, current leader of the CRM business, will transition to lead the neuroscience portfolio.

Guidance

- Fiscal 2027 organic revenue growth is guided to 6.75% to 7.25%, with ~11.5% to 12% organic growth expected in Q1 FY27. Excluding the benefit of an extra selling week, underlying organic growth is 5.5% to 6%, in line with prior year outperformance and acceleration expectations. - Including the impact of full-year inclusion of the diabetes business (per separation timing conservatism) and tariffs, fiscal 2027 adjusted EPS is guided to $5.90 to $6.00. Q1 FY27 EPS is guided to $1.38 to $1.40. - Excluding tariffs, FY27 gross margin is expected to be roughly in line with FY26, with pricing and COGS efficiency offsetting mix headwinds primarily from the diabetes business. Including tariffs, gross margin is expected to decline ~20 basis points year-over-year. Operating margin is expected to increase 60 basis points, driven by the absence of FY26 Blackstone milestone payments and operating leverage. - Foreign exchange is expected to be a neutral to ~$100 million headwind for full FY27, with a neutral to ~$50 million tailwind for Q1. A total $250 million tariff impact to COGS is built into guidance, a $65 million increase from FY26, with no potential government refunds factored in. A ~1 percentage point headwind from increased fuel and transportation costs due to the Middle East conflict is also included. - 2% dilution from M&A is factored into guidance, as deal closings occurred earlier than previously anticipated. If MiniMed separates before the end of FY27, which is Medtronic's current intent, there is potential upside to current EPS guidance from reduced share count and favorable mix. - Gross margin performance is expected to improve in the second half of FY27, after lapping tariff headwinds in H1, with potential additional upside from the MiniMed separation if it occurs before year-end.

Segment performance

Medtronic reported total Q4 FY26 revenue of $9.8 billion, with full FY26 revenue of $36.4 billion. Breakdown by segment: 1. Cardiovascular: 10% total revenue growth, 14% in the US and 7% internationally. Cardiac Ablation Solutions (CAS) grew 78% worldwide, 124% in the US, and is now annualizing over $2 billion in revenue. Cardiac rhythm management (CRM) delivered 5% growth in both the US and international markets, with high teens growth in ICD and mid-60s growth in EVICD. Structural heart performance was flat, with strong international growth offset by softer US results tied to low-risk TAVR data. Coronary declined in the quarter, but this was offset by accelerating Simplicity renal denervation growth. Peripheral vascular health delivered low single-digit growth, while cardiac surgery grew mid-single digits. 2. Neuroscience: 3% global revenue growth, 6% in international markets. Cranial and spinal technologies (CST) grew 3% in both the US and international, with 6% growth in core spine and low double-digit growth in navigation following the Stealth Access launch. Specialty therapies grew 3%, with neurovascular up 6% (11% growth in hemorrhagic treatments), ENT delivered mid-single-digit growth, pelvic health was flat (solid AltaViva growth offset by broader market softness in sacral nerve modulation), and neuromodulation grew low single-digit. 3. Medical Surgical: 5% global revenue growth, 8% in the US. Surgical revenue grew 3% globally, with high single-digit growth in advanced energy and wound management partially offset by continued pressure in bariatrics. Endoscopy delivered high single-digit growth, and acute care and monitoring grew 11% (high teens growth in the US). 4. Diabetes: 15% reported growth / 8.1% organic growth, driven by strong international execution and momentum in US CGM. The MiniMed IPO was completed in Q4 FY26, establishing it as a standalone public company.

Risks & headwinds

- US TAVR business saw a growth slowdown in Q4 FY26 tied to released low-risk data for older generation large-size valves, limited primarily to the US market. While the business has stabilized over the past 8 weeks, it remains a near-term headwind. - Tariffs continue to create cost headwinds, with a projected $250 million total impact to FY27 COGS, up $65 million from FY26. Tariff policy remains unresolved (including USMCA and 232 provisions), creating uncertainty that is not fully reflected in guidance, with no potential refunds factored into current projections. - The Middle East conflict has increased fuel and transportation costs, creating a ~1 percentage point headwind to FY27 results, and continues to create operational uncertainty for teams in the region. - Foreign exchange rate volatility creates potential uncertainty around full-year results, with guidance assuming neutral to small headwind based on recent rates. - MiniMed separation timing is still uncertain, creating potential variability to FY27 guidance if separation occurs earlier or later than currently expected. - Product mix from CAS (higher mix of lower-margin capital equipment in early growth stages) creates near-term gross margin headwinds, though this is expected to improve as the market penetrates and recurring catheter sales grow.

Analyst Q&A

• Q: What segments offset any potential slowdown in CAS growth to support your FY27 organic growth guidance? /

  A: Management clarified CAS growth contribution will be similar to FY26, with CAS growing more than twice the mid-to-high teens projected market growth, already annualizing at $2 billion with strong momentum. Cardiovascular overall will maintain FY26 momentum, with CRM delivering steady mid-single-digit growth driven by new product innovation, and Simplicity growing significantly from its current $100 million annualized run rate. Neuroscience will accelerate across all franchises, with AltaViva scaling, Stealth Access driving consumable pull-through, and new acquisitions adding inorganic growth. MedSurg growth will normalize slightly from its strong Q4 pace, and MiniMed will add ~20-25 basis points to overall growth, resulting in full-year guidance midpoint matching FY26's 5.8% organic growth.

• Q: Why separate MiniMed if it has strong growth and profitability inflection ahead? /

  A: Separation is not a negative reflection of MiniMed's outlook — management expects MiniMed to perform well with a strong product pipeline, and it is being separated when it is ready to stand alone with a strong management team. The primary rationale is to focus Medtronic on its larger, faster-growing core platforms that benefit more from Medtronic's shared technology and commercial footprint, which MiniMed does not capitalize on to the same degree. MiniMed also has structurally lower profitability than the rest of Medtronic's portfolio, so separating allows more disciplined capital allocation to higher-return opportunities across Medtronic's core, with both businesses expected to perform better as standalone entities.

• Q: When can we expect gross margin accretion, particularly in the second half of FY27 after lapping tariffs? /

  A: Excluding tariffs, gross margin is expected to be very slightly up year-over-year, with better performance in H2 than H1. Tariff headwinds will be concentrated in the first half of FY26, and will be lapped in the second half. Mix headwinds will also ease in H2: the diabetes mix impact will be removed if separation occurs before year-end (as planned), and CAS mix headwinds will lessen as CAS margins improve with scale. Pricing lifts and sustained net COGS cost out will continue to support gross margin expansion overall, with accelerating growth driving operating margin leverage through better SG&A absorption.

• Q: What is the outlook for the China business in FY27, and is it accretive to growth? /

  A: China remains a profitable growth market for Medtronic, with very limited export manufacturing exposure, so most exposure is to domestic demand. While the company has navigated VBP pricing headwinds for several years, the worst of these headwinds are now behind us. Teams have successfully offset pricing cuts with higher volume and cost reduction, and China is currently growing at the corporate average, with improving growth trends and still solid profitability, making it accretive to overall Medtronic organic growth.