Medtronic Earnings Call Highlights Growth and Margin Upside

Medtronic ((MDT)) has held its Q3 earnings call. Read on for the main highlights of the call.

Medtronic’s latest earnings call struck a distinctly upbeat tone, highlighting a clean top-line beat, robust adoption of new technologies and better-than-expected profitability. Management acknowledged mix, tariff and tax headwinds, plus some softer segments, but emphasized a clear path to margin recovery and reaffirmed its multi‑year growth and earnings framework.

Revenue Growth Outpaces Expectations

Medtronic reported revenue of $9.0 billion, up 8.7% on a reported basis and 6% organically versus last year. Growth accelerated by 50 basis points from the prior quarter and landed about 50 basis points above guidance, reinforcing confidence that the portfolio is gaining momentum across multiple franchises.

Cardiovascular Portfolio Leads the Charge

The cardiovascular segment grew 11% year over year, including 13% growth in the U.S., underscoring its role as Medtronic’s primary engine. Within that, the CAS franchise, focused on pulmonary vein ablation, surged 80%, with pulsed‑field ablation accounting for about 80% of CAS revenue and signaling strong early physician uptake.

Cardiac Rhythm Management Builds Sustainable Momentum

Cardiac Rhythm Management contributed 15% of total company revenue and grew 5% versus a year ago. Growth was fueled by continued double‑digit expansion of the Micra leadless pacemaker line, mid‑teens growth in the 3830 conduction system pacing lead and more than 70% growth from the Aurora EV ICD platform.

MiniMed Shines as Growth and Separation Story

The Diabetes unit, centered on MiniMed, delivered 15% reported growth and more than 8% organic growth, driven by double‑digit gains internationally and faster U.S. growth from Simplera Sync and Instinct launches. Recent FDA clearances broadened indications for the 780G system, which is now available via pharmacy to cover most commercially insured U.S. lives as the planned separation stays on track for 2026.

Simplicity Renal Denervation Shows Strong Early Interest

Early commercial signals for the Simplicity renal denervation platform look encouraging, boosted by the Go Beyond direct‑to‑consumer campaign. Management cited roughly a 50‑fold jump in website traffic, more than 200 new accounts opened and about 100 million covered lives, along with growing physician engagement via its finder tools.

Altaviva Tibial Neurostimulation Gains Traction

Altaviva, Medtronic’s tibial neurostimulation device, is seeing strong initial interest from both physicians and patients, helped by its long battery life and MRI compatibility. The company is training more than 500 physicians to support a broader rollout, aiming to convert early enthusiasm into a durable, recurring therapy business.

Hugo Surgical Robot Clears U.S. Hurdles

Hugo, Medtronic’s soft‑tissue surgical robot, secured FDA clearance for urologic procedures and has completed its first U.S. installations and cases at sites including Cleveland Clinic. The company also noted that Touch Surgery systems grew more than 20% sequentially, surpassing 1,000 global installations and reinforcing its digital surgery ecosystem.

Stealth AXiS Strengthens Spine Robotics Platform

The newly cleared Stealth AXiS system, which unifies AI‑driven planning with robotics and navigation, adds another lever in spine and neurosurgery. With navigation already used in roughly 70% of U.S. spine procedures, Medtronic sees Stealth AXiS contributing to Neurosurgery and Cranial & Spinal Technologies growth as soon as the fourth quarter.

Margins and EPS Beat While Funding Growth

Adjusted gross margin reached 64.9% and adjusted operating margin hit 24.1%, both ahead of expectations despite mix and tariff pressure. Adjusted EPS came in at $1.36, about $0.03 above the midpoint of guidance, as SG&A was leveraged down to 32.3% of revenue even while the company funded major launches and marketing campaigns.

Neuroscience Lags Company Growth Profile

Neuroscience revenue grew 3%, coming in below Medtronic’s internal expectations and trailing the broader portfolio. Specialty Therapies were flat, and Neurovascular felt lingering pressure from China’s volume‑based procurement and the Vantage recall, though management suggested these drags are largely in the rear‑view mirror.

Surgical Segment Growth Remains Soft

The surgical business managed just 1% growth in the quarter, weighed down by expected softness in stapling and other legacy categories. While Hugo’s ramp and digital tools are promising, management cautioned that it will take time for robotic revenue to become large enough to meaningfully influence the broader surgical segment.

Product Mix and New Launches Pressure Gross Margin

Product mix dragged gross margin by about 100 basis points, largely due to the early‑stage nature of the CAS rollout and capital‑heavy launch mix. Additional pressure came from the manufacturing ramp for the Simplera diabetes portfolio, though the company expects these mix issues to improve as volumes scale and recurring usage grows.

Tariff and Tax Headwinds Weigh on Profits

Tariffs reduced quarterly results by roughly $93 million, or about 110 basis points of impact, and are expected to reach about $185 million for fiscal 2026 with a significant Q4 hit. The adjusted tax rate of 17.3% was about 100 basis points above forecasts, creating an incremental EPS headwind that management anticipates will persist into the next quarter.

Structural Heart Faces U.S. Competitive Pressure

Structural heart delivered low‑single‑digit growth overall, with solid performance outside the U.S. offset by pressure in the domestic market. As Medtronic laps the Evolut FX Plus launch and contends with competitive dynamics in U.S. TAVR, management is focusing on execution and differentiation to re‑accelerate growth.

Dilution and Hiring Constraints Temper Near Term

Management highlighted temporary EPS dilution around the MiniMed IPO and final split, in addition to about $0.04–$0.05 of embedded dilution from recent acquisitions and higher interest costs from refinancing debt. They also flagged mapper hiring as a bottleneck for scaling CAS, underscoring that execution capacity is as crucial as technology in driving growth.

Guidance and Multi‑Year Outlook Remain Intact

Medtronic reaffirmed its fiscal 2026 outlook for roughly 5.5% organic revenue growth, with fourth‑quarter growth expected to mirror third‑quarter levels near 6%. The company maintained adjusted EPS guidance of $5.62–$5.66, expects around 5% operating profit growth in fiscal 2026 and continues to target high single‑digit EPS growth in fiscal 2027 despite enduring tariff, dilution and tax headwinds.

Medtronic’s call painted the picture of a medtech giant leaning into innovation while navigating manageable macro and mix challenges. For investors, the message was one of accelerating growth in key franchises, improving profitability levers and a reaffirmed multi‑year EPS trajectory, albeit with near‑term noise from tariffs, product mix and portfolio reshaping.