Medtronic Posts 7 Percent Growth in Q1

Medtronic (MDT -3.82%), a global medical technology leader specializing in cardiovascular, neuroscience, and surgical devices, reported Q1 FY2026 earnings on August 19, 2025. The most notable news from the release was a strong beat on both profits and revenue: Non-GAAP earnings per share reached $1.26, compared to estimates of $1.23, while Non-GAAP revenue hit $8.54 billion, $160 million above expectations. The company also raised its full-year FY26 non-GAAP EPS outlook, supported by solid revenue growth in its Cardiovascular and Diabetes segments. Overall, The quarter showed continued operational momentum, but also revealed ongoing margin pressures and a major portfolio move with the planned spin-off of the Diabetes business.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.

Business Overview and Strategic Focus

Medtronic develops and manufactures a wide range of medical devices, including implantable cardiac pacemakers, heart valves, neurostimulation systems, insulin pumps, and surgical robotics platforms. It serves hospitals, clinics, and doctors—reaching over 150 countries worldwide.

Innovation sits at the center of Medtronic’s current strategy. The company increased research and development investments in FY2026, expanded its technology pipeline, and focused on launching new products in areas such as cardiac ablation and advanced surgical robotics. Other key success factors include delivering better patient outcomes, leveraging data and artificial intelligence in medical devices, expanding global markets, and maintaining regulatory compliance with evolving standards in healthcare.

Quarter Highlights: Revenue Growth, Product Progress, and Operational Developments

Medtronic surpassed analyst expectations on both Non-GAAP revenue and earnings in Q1 FY2026. This marked its eleventh consecutive quarter of mid-single-digit organic revenue growth. Non-GAAP EPS increased by 2% year over year. Non-GAAP revenue rose by 7.2% year over year, supported by broad-based gains in Cardiovascular, Neuroscience, and Diabetes segments.

Cardiovascular devices contributed the largest segment growth, reporting $3.29 billion in revenue—a 9.3% increase from the prior year. The Cardiac Ablation Solutions (CAS) family, which includes ablation catheters for treating abnormal heart rhythms, saw revenue jump nearly 50%, driven by strong demand for Pulsed Field Ablation (PFA) products in the United States. Management cited robust sales of Affera and Sphere-9 ablation catheters as primary drivers in Q4 FY2025. The Cardiac Rhythm & Heart Failure business grew 11.5% as reported, and clinical trial data for TAVR heart valves (used for minimally invasive heart valve replacements) helped expand adoption in the Structural Heart segment.

The Neuroscience portfolio posted $2.42 billion in revenue, up 4.3% year over year (GAAP), led by Cranial & Spinal Technologies and Neuromodulation product families. Key products include the AiBLE spinal surgery ecosystem, which utilizes artificial intelligence, robotics, and imaging, and the Inceptiv spinal cord stimulators with closed-loop technology that auto-adjust to patient feedback. The recent US launch of the BrainSense Adaptive Deep Brain Stimulation (DBS) system further strengthened Medtronic’s position in neurostimulation treatments for conditions such as Parkinson’s disease.

Medical Surgical sales grew 4.4%, with continued strength in advanced vessel-sealing products (LigaSure) and progress in the surgical robotics lineup, most notably the Hugo robotic-assisted surgery system. Hugo recently gained a key regulatory clearance with a European CE Mark for its LigaSure instrumentation and is now installed in over 30 countries.

The Diabetes segment continued its turnaround, recording its sixth straight quarter of double-digit revenue expansion, up 11.5% as reported to $721 million. Growth came from insulin pumps, continuous glucose monitoring (CGM) sensors such as MiniMed 780G and Simplera Sync, and consumable sales. Management highlighted forthcoming product launches and a planned spin-off of the Diabetes business in approximately 18 months (announced in May 2025), which is expected to streamline Medtronic’s portfolio and improve company-wide profitability.

Free cash flow increased 25.3% to $584 million compared to Q1 FY2025.

Notable headwinds included operating margin pressure from a shift toward newer, initially lower-margin products such as PFA in ablation and novel diabetes sensors, as Medtronic accelerated investment in innovation. At the same time, there were also ongoing costs tied to tariffs and changing medical device regulations.

On the regulatory front, the Centers for Medicare & Medicaid Services (CMS) in the United States posted a draft coverage decision for the Symplicity Spyral system, which is used for renal denervation—a therapy addressing high blood pressure; the proposed National Coverage Determination (NCD) was posted with a final decision expected on or before October 8, 2025. A final CMS decision is expected by October 2025 and could create a new source of revenue once complete.

Medtronic maintained its quarterly dividend with no declared change. It paid $910 million in dividends, compared to $898 million in the prior-year period. The company has a track record of 48 consecutive annual dividend increases as of FY2025 and did not announce any change to its dividend policy with this release.

Financial Outlook and What to Watch

Management raised its full-year FY26 non-GAAP EPS guidance to a new range of $5.60–$5.66, citing better-than-expected results in Q1 FY2026 and improved cost assumptions related to tariffs. Revenue growth expectations remained firm, with organic growth projected at approximately 5% for FY2026, and Reported revenue for FY26 is forecasted to rise between 6.5% and 6.8%. Medtronic also reaffirmed plans to spin off its Diabetes business via an initial public offering and share exchange over the next 18 months, anticipating that this move would improve adjusted gross and operating margins by approximately 50 and 100 basis points, respectively, and immediately benefit EPS.

Looking ahead, investors should monitor progress toward regulatory decisions for key therapies like renal denervation, the commercial rollout and revenue ramp of new ablation and diabetes products, and the impact from ongoing tariff and product mix pressures on margins. Management highlighted that R&D and innovation investments will remain elevated in FY2026, targeting high-growth medical technology markets such as cardiac ablation, neuromodulation, and robotics. Following the planned Diabetes spin, Medtronic expects to return to high single-digit EPS growth by FY2027, fueled by streamlined operations and a greater focus on higher-margin businesses.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.