Medtronic plc Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Acceleration in Results: Medtronic is experiencing acceleration in financial results due to focus on strategy, with revenue and EPS beating expectations.
• Enterprise Growth Drivers:
  • Cardiac Ablation: PFA franchise grew 71%, the highest growth in the space, with strong momentum and plans for further growth.
  • Simplicity for Hypertension: Received final Medicare NCD, enabling broad access and commercial payer momentum, representing a massive multi-billion dollar opportunity.
  • AltaViva for Incontinence: Positive signs in U.S. launch, with strong physician interest and consumer search activity.
• Financials: Second quarter revenue was $9 billion, up 6.6% reported and 5.5% organic. Adjusted gross margin was 65.9%, up 70 basis points. Adjusted EPS was $1.36, up 8%.

Segment Performance

• Cardiovascular Portfolio: Grew 9%, with PFA accounting for 75% of cardiac ablation revenue, offsetting 40% declines in cryo. Cardiac Rhythm Management grew 5%, Structural Heart grew 7%, Peripheral Vascular had low single-digit growth.
• Neuroscience Portfolio: Returned to mid-single-digit growth at 4%, with Cranial and Spinal Technologies growing 5%.
• Specialty Therapies: Flat in Q2 but expected improvement, driven by Neurovascular and Pelvic Health growth.
• MedSurg Portfolio: Grew 1%, Surgical business grew 1%, with Hugo expected to drive growth in the back half.
• Endoscopy Business: Grew 8%, fueled by esophageal products and G.I. Genius.
• Diabetes Business (MiniMed): Grew high single digits, with international up 11%, U.S. impacted by new sensor launch, and pipeline progress and separation on track.

Guidance

• Raised full-year revenue guidance to approximately 5.5% growth, a 50 basis point increase from prior guidance. Third quarter expected ~5.5% growth, with Q4 stronger.
• Gross margin expected slightly up ex tariffs, with pricing, foreign exchange, and COGS efficiency offsetting business mix headwinds.
• Adjusted operating profit expected to grow approximately 5% or 7% excluding tariffs. Fiscal 2026 EPS guidance raised to a range of $5.62 to $5.66.

Risks

• No specific material risks prominently highlighted, but general risks associated with market competition, regulatory changes, and execution of growth strategies.

Question and Answer

Q: Patrick Wood at Morgan Stanley asked about Simplicity's commercial payer discussions relative to the NCD.

A: Geoffrey Martha responded that commercial payers are coming online faster than anticipated, noting the Medicare NCD is broad and commercial payers have momentum with some focus on medication usage.

Q: Travis Steed at BofA Global Securities asked about second half guidance, RDN, and margins.

A: Thierry Pieton and Geoffrey Martha discussed margin leverage, revenue growth drivers in the back half, and investment in growth areas.

Q: Vijay Kumar at Evercore ISI asked about Effera supply and TBL cannibalization.

A: Geoffrey Martha stated supply is not an issue for Effera and discussed TBL as a significant market opportunity with potential to take share from Botox.

Q: Robbie Marcus at JPMorgan asked about R&D investment and portfolio management.

A: Thierry Pieton and Geoffrey Martha discussed where R&D dollars are allocated and focus on tuck-in M&A in higher growth segments.

Q: Larry Biegelsen at Wells Fargo Securities asked about Ardian ramp and NCD impact.

A: Geoffrey Martha and Laura Mori discussed the positive impact of the final NCD and expectations for Ardian's ramp.

Q: Shagun Singh at RBC Capital Markets asked about base business growth and portfolio pruning.

A: Geoffrey Martha and Thierry Pieton discussed base business growth drivers and ongoing focus on portfolio management.

Q: Pito Chickering from Deutsche Bank asked about ASC positioning for AF ablation and TAVR market share.

A: Geoffrey Martha discussed ASC positioning for PFA and TAVR market share trends in different regions