Medtronic Q4 2025 Earnings Report

Medtronic EPS Results

• Actual EPS: $1.62
• Consensus EPS: $1.58
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $1.46

Medtronic Revenue Results

• Actual Revenue: $8.93 billion
• Expected Revenue: $8.81 billion
• Beat/Miss: Beat by +$112.29 million
• YoY Revenue Growth: +3.90%

Medtronic Announcement Details

• Quarter: Q4 2025
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 21, 2025
• Conference Call Time: 8:00AM ET

Medtronic Q4 2025 Earnings Call Transcript

Key Takeaways

• Medtronic delivered 5.4% organic Q4 revenue growth, marking the tenth consecutive quarter of mid single digit expansion across cardiovascular, neuromodulation, diabetes, and spine technologies.
• Cardiac ablation solutions grew nearly 30%, driving CAS into the $1 billion annual revenue club and contributing over 70 basis points to total company growth with further acceleration expected.
• Medtronic plans to separate its diabetes business via an IPO and split-off to focus on high-margin growth drivers, with the transaction expected to improve gross and operating margins by ~50–100 bps and be EPS accretive.
• Q4 adjusted operating margin expanded by 90 bps to 27.8% and EPS rose 11%, while FY26 guidance targets ~5% organic revenue growth and ~4% EPS growth excluding a ~$200–350 million tariff headwind.
• The innovation pipeline is advancing with a US pivotal trial for the Sphere 360 PFA catheter, pending CMS draft decision on renal denervation coverage, global rollout of HUGO robotics, and full market release of BrainSense adaptive DBS.

Presentation

[Ryan Weispfenning, VP & Head of Investor Relations at Medtronic]

Good morning. I'm Ryan Weisfenning, Vice President and Head of Medtronic Investor Relations, and I appreciate that you're joining us for our fiscal 'twenty five fourth quarter video earnings webcast. Before we go inside to hear our prepared remarks, I'll share a few details about today's webcast. Joining me are Jeff Martha, Chairman and Chief Executive Officer and Thierry Pieton, Chief Financial Officer. Jeff and Thierry will provide comments on the results of our fourth quarter, which ended on 04/25/2025, and our outlook for fiscal year 'twenty six.

[Ryan Weispfenning, VP & Head of Investor Relations at Medtronic]

After our prepared remarks, the executive VPs from each of our four segments will join us, and we'll take questions from the sell side analysts that cover the company. Today's program should last between sixty and ninety minutes. Earlier this morning, we issued a press release containing our financial statements, divisional and geographic revenue summaries and non GAAP reconciliations. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com.

[Ryan Weispfenning, VP & Head of Investor Relations at Medtronic]

During today's program, many of the statements we make may be considered forward looking statements, and actual results may differ materially from those projected in any forward looking statement. Additional information concerning factors that could cause our actual results to differ is contained with our periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward looking statement. Unless we say otherwise, all comparisons are on a year over year basis, and revenue comparisons are made on an organic basis, which excludes the impact of foreign currency and fourth quarter revenue in the current to prior year reported as other. References to sequential revenue changes compared to the third quarter of fiscal twenty five and are made on an as reported basis. All share references are on a revenue and year over year basis and compare our fourth fiscal quarter to our competitors' first calendar quarter.

[Ryan Weispfenning, VP & Head of Investor Relations at Medtronic]

Reconciliations of all non GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And finally, our EPS guidance does not include any charges or gains that would be reported as non GAAP adjustments to earnings during the fiscal year. With that, let's head into the studio and hear about the quarter and our outlook for fiscal 'twenty

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Hello everyone and thanks for joining us today. As you can see in our q four results released this morning, we had a strong finish to our fiscal year, growing 5.4%. Our growth drivers are having impact and are still building momentum. And we've proven to you that our growth is durable as we've now delivered mid single digit revenue growth for two and a half years. Our cardiovascular growth accelerated as forecasted growing 8% on broad strength across the portfolio, including nearly 30% growth in CAS.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We also delivered double digit growth in neuromodulation and diabetes and high single digit US growth in cranial and spinal technologies. Two of our businesses, CAS and ENT reached important milestones entering the $1,000,000,000 annual revenue club alongside 10 of our other businesses. And we've had a number of important clinical and regulatory updates during the quarter as we continue to advance our pipeline. Operationally, we translated our revenue growth into leveraged earnings with high single digit operating profit and low double digit EPS growth. Coupled with our q three results, we delivered a very strong 9% EPS growth in the back half of the year.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And for the full year, we delivered at the upper end of the commitments that we laid out a year ago. We shared with you this morning our view on the potential impact from tariffs which we have included in our newly issued guidance. Thierry will walk you through this later in the broadcast, but you can see from the significant amount that we've already been able to offset that we are extremely focused on mitigating actions. You also see from our guidance that the underlying fundamentals of the business are strong and they're getting stronger. We had also announced this morning that we have decided to separate our diabetes business as we continue to execute on our active portfolio management.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Look, we see this as a win for both diabetes and for Medtronic I'm gonna touch upon this a bit later. So we have several details to cover today and and let's start with our q four performance highlights. Starting first with the cardiovascular portfolio, innovation drove broad based growth in the quarter which accelerated to 8%. We delivered double digit growth in cardiac ablation solutions, structural heart and cardiac surgery and high single digit growth in cardiac rhythm management. Cardiac ablation solutions growth accelerated as forecasted to nearly 30% with high thirties growth in The US and low twenties in international markets.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Our portfolio of pulse field ablation products, the broadest in the space, continues to drive rapid growth around the world. We're opening up new accounts as our supply continues to quickly increase and demand for our Farah PFA products is extremely high. This quarter, I spent a lot of time talking to EPs and we're hearing great feedback. Physicians are saying that our Sphere nine focal catheter is the most desired PFA catheter on the market and we're seeing large centers switch to Medtronic. EPs appreciate the efficiency that comes from fewer catheter exchanges given that Sphere nine can do mapping, PFA and RF ablation all from the same catheter.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Now across our PFA platforms, customers appreciate their ease of use, their precision, durable efficacy, and of course the safety. Now if there's a PFA catheter that is driving even more customer excitement than Sphere nine, It's our next gen Affair Sphere three sixty single shot catheter. Sphere three sixty is an integrated mapping and ablation catheter where the entire lattice tip delivers pulse field energy. So the EP doesn't have to to rotate the catheter. One year data for SPHERIA three sixty was presented last month at, the HRS meeting which showed excellent efficacy, durability, and safety as well as very fast procedure times.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We plan to start our US pivotal trial for, three sixty later this calendar year. So our CAS business has a lot of momentum and its contribution to total company growth continues to increase including 70 basis points this quarter and we expect Casa's growth rate to accelerate again next quarter. The business reached $1,000,000,000 in revenue in FY twenty five and we have near term line of sight to doubling that as we continue to enter new accounts globally with Afera and with Pulse Select. With the cardiac ablation space now at roughly $10,000,000,000 and growing double digits, this is a huge growth opportunity for Medtronic and our focus is to be the leader in this space. Next, our cardiac rhythm management business had a very strong quarter growing 7% with high single digit growth in both defibrillation solutions and cardiac pacing therapies.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

With defib solutions, we're seeing strong customer adoption of our Aurora EVICD with its revenue doubling year over year as we're taking meaningful share from the incumbent. We are seeing our customers placing larger and faster repeat orders for Aurora. Now in pacing, we continue to have strong growth in leadless pacing and conduction system pacing. Our micro leadless pacemaker had strong 17% growth and our thirty eight thirty conduction system pacing lead grew 19%. In structural heart, we grew 10% with strong growth of our Evolut TAVR platform in The US, Japan, and emerging markets.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We continue to differentiate Evolut with positive clinical evidence. Our five year low risk data was presented at ACC during the quarter showing outstanding valve performance for Evolut And our two year data from our head to head SMART trial was presented at CRT showing continued superior performance versus the leading competitor's valve. The SMART data and FX Plus launch continued to have an impact. To give you, just a few examples, a large nonprofit system in the Upper Midwest that does over 200 TAVR implants a year recently reviewed their own patient data and found that SMART was consistent with their outcomes, better valve performance with Evolut. And as a result, we went from a low single digit share to Evolut being their valve of choice.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Another example would be an East Coast academic center that implants about two hundred valves a year and whose physicians participated in the competitor's first balloon expandable TAVR trials. Well, now they've moved from using the competitor's valve almost exclusively to using our Evolut valves in a majority of their patients. Now I could keep going with such examples. The point is that our data, our technology and our sales execution are having a significant impact giving us confidence that we can continue to grow Structural Heart at or above the market. In hypertension, we continue to ramp our market development activities for our simplicity blood pressure procedure as we await reimbursement coverage from CMS.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

CMS has indicated that they will finalize the NCD on or before October 11. And ahead of this, they will issue a draft on or before July 13. Many large health care systems are establishing outpatient simplicity service lines today so that they're prepared to rapidly scale to meet the large demand. And we're right there with them. We're hiring market development managers, clinical specialists, and health care economics managers to supplement our existing coronary sales force.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So we expect Simplicity revenue to meaningfully ramp when it's covered. And just like PFA, over time it will become an important contributor to overall Medtronic growth. Nearly half of US adults have hypertension and one in four of those with hypertension don't have their blood pressure under control despite the broad availability of numerous generic drugs. Look, the opportunity here is massive and we will be the leader in addressing this large unmet need. Now turning to the neuroscience portfolio.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Our cranial and spinal technologies business grew mid single digits including 7% growth in The United States as we continue to win share. We've changed the basis of competition in spine to one where enabling technology drives spine implant decisions and our differentiated Able Spine ecosystem including AI driven pre op planning software, imaging, robotics, navigation, and powered surgical instruments has by far the largest installed base with over 10,000 capital units well ahead of our competition. Now this is important because when a customer upgrades one of our pieces of capital, they're not just upgrading one product, they're upgrading to the full Able ecosystem. So you don't go just from O arm to new O arm or navigation to new nav or robot to new robot. You go from one of these pieces of equipment to the entire Able ecosystem.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Able is not only appealing to spine surgeons around the world, it's also attracting the competition's best sales reps and distributors to join Medtronic. Some of the world's leading spine and neurosurgery centers including large iconic teaching institutions are moving to Medtronic. And combined with the investments we're prioritizing to even further enhance the Able ecosystem, we expect our strength in CST to continue. Another business that continues to win share is neuromodulation which grew 10%. Our closed loop sensing technology is driving strong growth in both PainStim and BrainMod.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

In PainStim, we grew 12%, including 15% growth in The US on the continued strength of our Inceptive closed loop spinal cord stimulator. We continue to win share and have now reached the number one global position in SCS. Inceptive is changing patients' lives as they no longer have to adjust their therapy throughout the day and they aren't having to come back to the doctor's office to have their device settings changed. So Inceptive is reducing burden for the patient and for the physician. In brain modulation, we grew mid single digits including 9% growth in international markets on the continued adoption of our BrainSense adaptive DBS for people with Parkinson's.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Look, this is a groundbreaking technology, a fully closed loop brain computer interface that automatically provides personalized real time therapy based on brain activity feedback. In The US, we received FDA approval for BrainSense during the quarter. Now following stories on adaptive DBS technology on Good Morning America, the BBC, and several other media, outlets, we are seeing patients now proactively talking to their doctors and requesting adaptive devices. The early results are very exciting and we're now entering full market release in The US and Europe with Japan launching next month. So in neuromod, we have near term growth drivers.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We're the category leader and we're well positioned to capture the future innovations that are coming. Now turning to our medical surgical portfolio and our surgical business which improved and grew 2%. We continue to drive strong growth in emerging markets and advanced energy. Our market leading LigaSure vessel sealing technology continues to attract strong surgeon adoption resulting in our eleventh straight quarter of winning share in advanced energy. Now we expect our surgical growth to improve over time as we expand and launch our HUGO soft tissue robotic platform.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

HUGO continues to reach important milestones like last quarter we filed with the US FDA for urologic indication and the pivotal data from the urology trial which met its primary safety and effectiveness endpoints was presented last month at AUA. We expect to follow our urology indication in The US with hernia and benign gyne indications and we will begin enrollment in our gyne oncology trial in the coming months. We also continue to expand instrumentation having conducted our first cases with LigaSure on Hugo this past quarter. We're expanding Hugo's installed base and are now in 30 countries around the world. And we continue to see strong increases in Hugo procedure volumes and utilization.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

In surgical, we are also driving impressive expansion in our AI powered touch surgery ecosystem. Touch surgery is a foundational intelligence technology used across both robotic and laparoscopic surgery and we're leading the industry in establishing this digital surgical ecosystem globally. We see our growing digital footprint as a long term strategic advantage for our surgical business and this will apply to other businesses across Medtronic over time. Finally, in diabetes, we grew 12%, our sixth quarter in a row of double digit growth. The growth was broad based with strength in pumps, CGM, and consumables.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We continue to grow our MiniMed seven eighty g installed base in both The US and international markets. People with diabetes are attracted to seven eighty gs's highest time in range of any commercial AID system, giving them the ability to achieve more control with less burden. In Europe, the launch of our SimpleraSync sensor is driving strong mid teen CGM growth. Simplera is half the size and much easier to apply than our previous sensor. Now in The US, we received FDA approval for SimpleraSync just last month and expect to begin the launch this fall.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Regarding our Abbott based sensor, back end integration and development work is progressing well. We submitted our interoperable pump and controller for FDA clearance which paves the way for bringing our AID system with this sensor to the market. We also submitted to the FDA for a seven eighty gs label expansion including for type two diabetes and rapid acting insulins. And looking ahead, we expect to submit for our eight series next generation pump, the MiniMed Flex by the end of the fiscal year. So as you can see, we've significantly turned around our diabetes business and it's very well positioned.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And this morning we announced our plan to separate diabetes into a standalone public company with a capital market separation through our preferred path of an IPO split. This is a win for both companies. For Medtronic, our portfolio becomes more focused on high margin growth markets like PFA and renal denervation. At the same time, the independent new diabetes company will be a scaled leader and the only diabetes company to commercialize a complete ecosystem to address intensive insulin management. Today's announcement marks a significant milestone in our ongoing active portfolio management efforts, an important lever to delivering on our long term strategic and financial objectives.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Look, there's a clear strategic rationale for diabetes to be a standalone company. Diabetes is predominantly B2C whereas Medtronic, our businesses are predominantly B2B. We sell different types of products to different types of customers. Medtronic's commercial manufacturing and technology platform synergies are less applicable to the diabetes business given their distinct customer, go to market, and supply chain infrastructure. For Medtronic, we will continue to have leading franchises and attractive med tech markets And this separation shifts and simplifies our portfolio to have even more intense focus on our highest margin growth drivers.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

These growth drivers are already building momentum and this increased focus will ensure that they reach their full revenue growth potential. Our portfolio also shifts to higher profitability allowing us to to pick up both margin and earnings And the shift increases our exposure to markets where we demonstrate our strongest core capabilities and have scale and synergy benefits, which importantly lowers the overall risk profile of the company. Now taken altogether, we'll be in a great position to continue delivering mid single digit or higher organic revenue growth as well as accelerating our earnings leverage. So our direction of travel here is clear. This is about greater focus on the significant opportunities in high margin growth markets where we are well positioned and we believe that this will result in a win for Medtronic.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Look, I'm also excited about what the future holds for the diabetes business And now I'd like Q to Laura who will become the CEO of the new diabetes company to share some of her thoughts. Q joined Medtronic in 02/2022 and has been instrumental in turning the diabetes business into what it is today. She's an inspirational transformative leader who is also strategic and pragmatic. Her impressive track record in driving growth and innovation has set the diabetes business on a path to continued success, ensuring the needs of people with diabetes are met around the globe. So over to you, Q.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

Thanks, Jeff. I wanna start by thanking you for your leadership and vision. Your decision a few years ago to double down on the diabetes business and significantly increase investment has positioned us well, setting us up to generate significant returns for stakeholders. We wouldn't be where we are without your unwavering support. I'm very excited to be leading this large scale direct to consumer diabetes business.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

We have over 8,000 employees and two global manufacturing facilities and a lot of innovation in the works. Our innovations are driven by the desire to improve outcomes while reducing burden. And as an independent company, we will have a shareholder base that is aligned to our business and financial profile. This will enable more focused investment in innovation, as well as manufacturing scale and automation, positioning us for success in automated insulin delivery and smart MDI, while also driving margin expansion over time. Our $2,800,000,000 diabetes business has strong momentum in a large $16,000,000,000 global addressable market.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

We've delivered double digit growth now for six consecutive quarters, along with several recent product approvals and the strategic partnership that we have established with Abbott Diabetes Care. And we have a deep pipeline as we've been investing in CGM options, insulin delivery options such as a pen, patch and durable pump, a fully automated algorithm and a unified digital customer experience. This full ecosystem not only enables people with diabetes to have a seamless transition between therapies without changing companies, but it also allows them to achieve better control with less burden. And finally, I want to thank and celebrate the dedication of our diabetes team. Their passion and perseverance is transforming diabetes care to give people the freedom to forget about diabetes and live their best lives. Back to you, Jeff.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Thanks, Q. I couldn't agree more. Next, I'm going to turn it over to Thierry to share some additional transaction and financial information on the diabetes separation as well as take you through a deeper look at our Q4 financial performance and our guidance for the coming year. But before I do that, I I want to officially welcome Thierry to his first earnings call with Medtronic. He's now in his twelfth week and has already hit the ground running including playing a critical role in preparing for today's announcement.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Thierry is a proven experienced CFO having most recently been in the automotive industry where he created significant value for shareholders by increasing margins, earnings power, and free cash flow. His extensive experience with m and a, divestitures, and forming innovative partnerships is proving to be highly relevant to, work here at Medtronic. His presence is already having a significant impact on organization. He's brought forward many new ideas on how we can further invest in innovation, accelerating R and D while also driving operating leverage and he brings with it the expertise to ensure we get it done. It's great having you on board, Thierry.

[Thierry Piéton, EVP & CFO at Medtronic]

Thank you for the warm welcome, Jeff. This is certainly an exciting time to join Medtronic. I've had the pleasure of visiting many of our facilities and meeting our employees and also starting to meet with many of you in the investment community. A common question from many of you has been, why did I come to Medtronic? For me, health care is a special industry given the connections to patients.

[Thierry Piéton, EVP & CFO at Medtronic]

And I've always wanted to return since working in healthcare earlier in my career. In addition to this sector, there were two specific things that stood out about Medtronic. First, I saw an opportunity to apply my background to enhance the operations of the company. And second, Medtronic has a few large exciting growth opportunities that don't come around very often and the company is at an inflection point. I'm energized by the opportunities for durable growth and value creation that are ahead of us and I'm really looking forward to hopefully making a difference here.

[Thierry Piéton, EVP & CFO at Medtronic]

Now let's cover our plan to separate the diabetes business, which represented about 8% of our revenue and 4% of our segment operating profit in fiscal year twenty twenty five. We intend to separate diabetes through a series of capital market transactions. Our preferred path involves two steps. First, we plan to execute an IPO of up to 20% of the diabetes business. The proceeds are expected to appropriately capitalize the new diabetes company and provide the ability to retire Medtronic shares.

[Thierry Piéton, EVP & CFO at Medtronic]

Second, we intend to execute a split off where Medtronic will exchange our remaining new diabetes company shares for Medtronic shares from willing shareholders. We plan to retire those shares resulting in a lower Medtronic share count. We're targeting completion of the entire separation within eighteen months and taking this preferred path should result in a tax free impact to Medtronic shareholders for U. S. Federal income tax purposes.

[Thierry Piéton, EVP & CFO at Medtronic]

From a financial standpoint, there are several benefits to Medtronic. Diabetes has lower gross margins and operating margins than overall Medtronic. So upon full separation, we're expecting our adjusted gross and operating margins to improve by approximately 50 basis and 100 basis points respectively. Given the share retirement, this separation is expected to be immediately accretive to Medtronic EPS upon completion. We don't expect any change to our dividend policy.

[Thierry Piéton, EVP & CFO at Medtronic]

So financially, there are some clear short term financial benefits, but the most important aspect is what Jeff mentioned earlier. This separation will allow us to increase our growth accretive investments in our core businesses where margins are structurally higher. This is all about capital allocation and creating the conditions to fuel our future growth. So clearly, this separation will be beneficial for both Medtronic and The New Diabetes Company, unlocking both strategic value and shareholder value. With that, let's now come back to Medtronic overall and recap our Q4 results.

[Thierry Piéton, EVP & CFO at Medtronic]

As Jeff mentioned earlier, Q4 revenue of $8,900,000,000 grew 5.4% organic. On the bottom line, adjusted EPS was $1.62 up 11%. Both revenue and EPS were ahead of expectations driven by outperformances in CRM, Structural Heart and Aortic, diabetes and Euromod among others along with better than expected interest and tax expenses. Our revenue growth was broad based from a geographic perspective. We grew 5% in The U.

[Thierry Piéton, EVP & CFO at Medtronic]

S, our strongest quarterly U. S. Growth in 15 quarters as we accelerated on the strength of new technology. Japan grew high single digits and Western Europe and emerging markets grew mid single digits with strength in India, Southeast Asia and Eastern Europe. Moving down the P and L, our adjusted gross margin was 65.1%, down 70 basis points year over year as a result of mix from diabetes and CAS as well as foreign exchange.

[Thierry Piéton, EVP & CFO at Medtronic]

Our gross margin was actually unchanged on a constant currency basis. On the positive side, we continue to see the benefit of increased pricing, in particular in areas where we introduced new products such as Neuromod, CRM and Structural Heart and we continue to improve our ability to offset FX with price in emerging markets. This quarter again, the savings from our COGS efficiency programs more than offset the impact of inflation. Our Medtronic performance system, which we implemented across our manufacturing network, resulted in high single digit improvement in labor efficiency. We insourced three of our distribution centers to drive cost savings and further improve supply.

[Thierry Piéton, EVP & CFO at Medtronic]

Finally, we were able to significantly reduce our scrap and obsolescence charges. With SG and A, we drove significant leverage, particularly with G and A, while at the same time increasing investment in R and D, more to come on that later. The net of this was leverage on our adjusted op profit line, which grew 7.6% or $175,000,000 Our adjusted operating margin was 27.8%, an increase of 90 basis points or 200 basis points on a constant currency basis. Below the operating profit line, our adjusted tax rate of 16% was better than expected due to favorability in our actual jurisdictional mix of profits for the year, which also resulted in a modest pickup from prior quarters. All in all, as stated in Q4, we delivered EPS of $1.62 up 1116% at constant currency.

[Thierry Piéton, EVP & CFO at Medtronic]

This was a strong close to the year where in fiscal year twenty twenty five we grew revenue 5% organic and EPS 6% or 10% on a constant currency basis. From a capital allocation perspective, we returned €300,000,000 to shareholders in 2025 through share repurchases and through our dividend. And this morning, we announced that we're increasing our dividend for the forty eighth consecutive year. Now let's move to our 2026 guidance. We've now delivered mid single digit organic revenue growth for ten quarters in a row and we expect this to continue through fiscal year twenty twenty six with an increasing contribution from our key growth drivers.

[Thierry Piéton, EVP & CFO at Medtronic]

We expect organic revenue growth of approximately 5% in fiscal year twenty twenty six, including 4.5% to 5% growth in Q1. Based on recent FX rates, we would expect a tailwind from FX of 0 to $100,000,000 in the total year with a roughly neutral impact in Q1. Moving down the P and L, I'll first talk about our underlying business excluding the impact of tariffs. Like we saw in the fourth quarter, we expect continued mix headwinds within gross margin from CAS and diabetes with an increasing impact from diabetes as we are early in the manufacturing ramp of the Simplera sensor. We will continue to drive pricing discipline, in particular on the back of new product introduction and to cover FX.

[Thierry Piéton, EVP & CFO at Medtronic]

We will also accelerate our COGS efficiency programs to significantly outpace inflation. Given my background, this will be a key area of focus for me, together with our businesses and Greg Smith and our global supply chain team. In fiscal year twenty twenty six, we will significantly increase investment in our growth drivers to maximize future growth. For the first time in four years, we're planning to grow R and D faster than revenue. We will also invest in sales and marketing.

[Thierry Piéton, EVP & CFO at Medtronic]

These investments will be deliberately focused on areas like cardiac ablation as well as in surgical robotics and Ardian as we prepare for scaling The U. S. Launches of our HUGO robot and Simplicity hyperintention procedure. On the flip side, we do expect to drive significant leverage with G and A expenses. The net of this will be an operating profit line that grows materially faster than revenue.

[Thierry Piéton, EVP & CFO at Medtronic]

Below the profit line, we're expecting increases in both interest and tax expense, which combined results in a 300 basis points impact on EPS growth. On the interest, this is driven by the fact that any debt we refinance will likely be at higher rates given the current higher interest environment, whereas the pressure on the tax side derives primarily from the effects of Pillar two. This leads to our expectation for approximately 4% EPS growth in fiscal year twenty twenty six, excluding the impact of tariffs. And foreign exchange is a neutral impact to fiscal twenty twenty six at recent rates. For Q1, we would expect EPS in the range of $1.22 to $1.24 which includes minimal expected impact from tariffs and a 1% to 2% headwind from foreign exchange at recent rates.

[Thierry Piéton, EVP & CFO at Medtronic]

Next, I'll share with you our thinking on tariffs, which we laid out in our earnings presentation this morning. We built our expectations based on two potential scenarios. The low end of the potential impact assumes that the current bilateral U. S.-China tariffs that are in place during the ninety day pause remain throughout fiscal year twenty twenty six, while the high end assumes that they resume at the higher levels following the ninety day pause. Through focused efforts from teams across Medtronic, we already have visibility to offsetting a good portion of this headwind and we have high confidence in our ability to execute additional mitigation efforts.

[Thierry Piéton, EVP & CFO at Medtronic]

As a result, we forecast a net tariff impact to COGS in fiscal year twenty twenty six of approximately $200,000,000 to $350,000,000 From a quarterly breakout, we would expect minimal impact in Q1 as I mentioned earlier and then approximately 10% in the second quarter and approximately 3060% in Q3 and Q4 respectively. All that said, it's highly likely that the impact from tariffs will change and we'll keep you updated periodically as we go through the year. So combining our underlying performance with our current tariffs expectations, we would have you model fiscal year twenty twenty six EPS in the range of $5.5 to $5.6 We've shown you that we can deliver high single digit EPS growth as we did with the 9% growth in the back half of fiscal year twenty twenty five. As we look beyond next year to fiscal year twenty twenty seven, we expect to return to high single digit EPS growth upon the diabetes separation, driven by several factors, including strong revenue growth and further underpinned by FX tailwind at recent rates and the margin and share retirement benefits of the separation. Jeff, back to you.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Okay. Thank you, Thierry. Now before we go to Q and A, I'll make a few closing remarks. Starting with that we had a strong close to the fiscal year with two and a half years of mid single digit revenue growth that is now also translating into strong operating profit and EPS leverage. We have durable growth drivers that are taking hold and we also have clear line of sight to improving growth drivers in other businesses.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

For example, peripheral vascular where we're working with Contigo Medical in the carotid market and we will soon enter the peripheral thrombectomy segment as well. In pelvic health, we are working to open a large new market when our revolutionary tibial stimulation device is approved. And as for Hugo, procedures and utilization are growing and the cadence of key milestones is accelerating. We're also working aggressively to to manage external factors that are impacting our '26 guide. And as Thierry pointed out, we'll be back to high single digit EPS growth in '27.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So as I assess the overall business, the underlying fundamentals are strong and they are getting stronger. We've been working on a number of changes to the company and those changes are making a difference. We streamlined the operating model and implemented performance driven incentives. We brought in outside leadership with accretive skill sets which are enhancing execution and improving operating rigor. We prioritized investments in groundbreaking innovation that are now paying off and accelerating company growth.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We centralized global operations, supply chain and quality resulting in improved KPIs. And we're adding a performance culture to this mission minded company and transforming our portfolio. And today's diabetes announcement accelerates our speed of travel to higher profitable growth, aligned around our core strengths, giving all of our stakeholders increased conviction in our ability to deliver. I wanna thank our employees around the world who are listening today. You've truly embraced our and culture.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Our culture of driving both our Medtronic mission and performance. This is directly leading to our strong financial outperformance and it's making a difference for the millions of people around the world that depend on Medtronic to alleviate pain, restore health, and extend life. We've made a lot of progress this past year and your efforts have laid the groundwork for the inflection point that we're now entering. And I couldn't be more excited about what we're going to accomplish here in the new fiscal year. So thank you for your dedication and service.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Finally, as you may have seen in our earnings press release this morning, Sean Salmon is moving on and this will be his last earnings call with us after more than twenty years of service to Medtronic. Sean has been responsible for leading a number of our successes. He leaves a legacy of having developed strong capable leaders in our cardiovascular businesses as well as a robust technology pipeline, both of which are responsible for driving the CV growth acceleration you saw this quarter. Shonda parts with our cardiovascular portfolio in a leading position. To lead CV going forward, we're promoting Skip Keel.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

You've seen Skip's impact in driving above market growth in our cranial and spinal technologies business and he had success in other parts of med tech prior to joining Medtronic. Skip will augment our deep CV leadership team with his strategic mindset, broad global expertise, strong customer focus and demonstrated track record of developing new markets and driving commercial success. So I want to thank Sean for his service and we're looking forward to Skip leading our continued success in cardiovascular. So with that, let's move to Q and A where we're going to try to get to as many analysts as possible. So we ask that you limit yourself to just one question and only if needed a related follow-up.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

If you have additional questions, you can reach out to Ryan and the investor relations team after the call. Wynn, can you please give the instructions for asking a question?

[Operator]

For the sell side analysts that would like to ask a question, please select the Participants button and click Raise Hand. If you're using the mobile app, press the More button and select Raise Hand. Your lines are currently on mute. And when called upon, you'll receive a request to unmute your line, which you must respond to before asking your question. Lastly, please be advised that this Q and A session is being recorded.

[Operator]

For today's session, Jeff, Thierry and Ryan are joined by Q. Dellara, EVP and President of Diabetes Mike Maranaro, EVP and President of the Medical Surgical Portfolio Sean Salmon, EVP and President of the Cardiovascular Portfolio and Brett Wall, EVP and President of the Neuroscience Portfolio. We'll pause for a few seconds to assemble the queue.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Hello?

[Thierry Piéton, EVP & CFO at Medtronic]

Hello?

[Travis Steed, Managing Director - Equity Research at Bank of America]

Hey, this is Travis. I didn't hear anything. So thanks for taking the question. I wanted to ask on, congrats first of all, congrats on all the good news this morning. I wanted to ask on the guidance philosophy with the new CFO.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Ed is confident enough to put out the 5% no range. What's being assumed on pipeline on the revenue side? And then I wanted to ask on the 4% EPS growth ex tariffs. Curious how you're thinking about what you kind of built in on conservatism on some of the below the line items there and if it's possible to offset some of the headwinds over the course of the year if the revenue comes in better? And then on FY 2027, the high single digit EPS growth, maybe talk about the framework and the visibility to be able to go ahead and kind of give that two years ahead that you can kind of get to the high single digit EPS growth on FY 2027.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

We're not we're not hearing anything if someone's someone's responding.

[Travis Steed, Managing Director - Equity Research at Bank of America]

This is about the first question.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

I think all our mics are open, Travis. It's Larry.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Okay.

[Analyst]

It was a good question.

[Joanne Wuensch., Managing Director at Citi]

It was a great question. Yeah.

[Analyst]

This is all mindfulness minute. Just relax. Waiting for the answer.

[Danielle Antalffy, Analyst at UBS Group]

Good morning, everyone. This is Danielle. I have an answer for you. Just kidding.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

Danielle, your mic is live. Everyone can hear you.

[Danielle Antalffy, Analyst at UBS Group]

Well, so is yours, Larry.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

How do you know it was Larry?

[Danielle Antalffy, Analyst at UBS Group]

Because you have a very distinct voice, Larry.

[Joanne Wuensch., Managing Director at Citi]

Nice. This is all being taped, everyone can hear it.

[Analyst]

Should we log off and and log on? No. Let them fix it. No.

[Executive]

It's got my conduit. It should be up. It says go again.

[Executive]

Alright. You should be up. Go ahead. Give one sec.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Okay. Travis, can you hear me now?

[Executive]

Yes. Go ahead. Yes.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Alright. Hey. I guess Okay.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Travis, you there?

[Travis Steed, Managing Director - Equity Research at Bank of America]

I can. Can you hear me?

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Okay. Yeah. So we got your question. Sorry about that. There was some sort of connection issue here.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

But I I I got your question. I'm gonna first of all, good question, as Danielle pointed out. And I I will take the first part of it and then and then hand it to to Thierry to go through the the earnings stuff. But on the on the growth side, look, we're very bullish on on the growth drivers. You know, we you know, even in in in q in in the markets that we're in and and the growth drivers that we have. So, like, even in, you know, q four, our markets grew 7% even without diabetes. And we've got strong positions in these markets, and we see, you know, growth from our, you know, big three portfolios to be mid single, you know, and then some. We're running the company in you know, at a higher expectations than we're than we're, you know, than we're guiding here.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

You know, just just some examples. I mean, you see our CV business accelerating to to 8% with nearly 30% growth in cash, which added you know, that just that alone added 70 basis points to the company growth. And that's without Ardium. I mean, Ardium will start ramping through '26. You got neuroscience with double digit growth and neuromod and and, you know, with CST.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

You know, what what can I say? I mean, it's just separating itself from from the pack, and we've got tibial coming in pelvic health. And so we got some growth drivers there, and, of course, in in in surgical, you know, Hugo, as we talked about the commentary, is building momentum, and we'll start to have a more of a meaningful impact on med surg next year and then beyond that on on the company. So we're bullish about the markets that we're in, the positions we have in those markets, and and our growth potential. So that that's what's baked into the to the next year's guide and going into '27.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

I mean, we're at the early stages of these growth drivers with with more to come. On the earnings, I'll turn it over to Thierry. And anything else you want out of the growth?

[Thierry Piéton, EVP & CFO at Medtronic]

No. Thanks. I I think, Jeff, you were pretty complete on the growth, so we we we feel comfortable that we've got a good opportunity from from a growth perspective. From a profitability standpoint, you know, what the construction has, as as you may have seen in the details that we've given in the commentary, is actually still getting a lot quite a bit of leverage before tariffs at the operating profit level. So we we've got a construction that has operating profit that's growing around 7%, so significantly in excess of revenue.

[Thierry Piéton, EVP & CFO at Medtronic]

And that's despite make making a significant investment for the future of the business here. And I I mentioned that in the commentary, for the first time in four years, we actually have a plan that has r and d growing quicker than revenue, and that's even with revenue up 5%. So our r and d spend should be increasing around 200,000,000 next year, which is about 7% versus the 5% growth rate. Despite that, you know, we we have significant leverage at the all profit level. And then to your point, we've got a couple pressure points below the line.

[Thierry Piéton, EVP & CFO at Medtronic]

You know, one is is around the the tax rate, and and that's primarily driven by pillar two. And and so our tax rate should go from about 16.7% this year to about 18% next year. And then as as I as we refinance our debt in a higher interest rate type of environment, that also puts some pressure. So we lose about 300 basis points between the op profit level and and and and the net. You know, on on the opportunity to to do better, hey.

[Thierry Piéton, EVP & CFO at Medtronic]

Hey. Look. We're you know, first of all, operationally, we're, as usual, gonna drive the teams to a higher number than this. Whether it's from a growth perspective or from a margin standpoint. You know, on the margin side, you know, given my background, this is this is gonna be a key area of focus for me.

[Thierry Piéton, EVP & CFO at Medtronic]

And my my initial view is that there is some opportunity from a cost perspective. I think that the supply chain team with Greg has kicked off a lot of very positive initiatives, and and we're starting to see the results, and I think there's more to come. So I'll be focusing on that deeply. And then on the on the below the line items, you know, sure, on on the tax front, you know, we're we'll we'll keep working it. Some of the increase between '25 and '26 is due to the temporary self safe harbors that we've got in Pillar two, and there is uncertainty in terms of our ability to qualify for some of those safe harbors going into next year, and we'll do everything we can to secure, you know, being able to to capture that opportunity.

[Thierry Piéton, EVP & CFO at Medtronic]

So, sure, we'll be working on it. So, look, we've we've tried to we've tried to give a guidance that's that's all in, and we'll we'll work from there.

[Travis Steed, Managing Director - Equity Research at Bank of America]

That's that's helpful. Just a quick follow-up.

[Thierry Piéton, EVP & CFO at Medtronic]

You also had a a part of the question on on '27. Sorry. I I wanted to address your the '27 part of the of the question. Hey. Hey.

[Thierry Piéton, EVP & CFO at Medtronic]

Look. As Jeff as Jeff mentioned, you know, the growth is not, you know, a one off thing in in in '25 or in q four twenty five. It's gonna carry into '26. And some of the new products that, you know, are carrying this are are gonna carry us well into '27. So, you know, Jeff mentioned CAS and Ardene and Tibial that will start having a small impact towards the end of '20 '6 and and will carry into '27.

[Thierry Piéton, EVP & CFO at Medtronic]

So, you know, first, we expect to to continue to have good growth into '27, and that's regardless of the separation of the diabetes business. Just to give you some clarity on that, you know, diabetes drives about 40 basis points of our growth, so we're comfortable we could still achieve the mid single digit growth even after the diabetes separation. We'll we'll continue to drive the cost out initiatives as I as I mentioned earlier. FX should start turning into a small or, you know, a headwind towards the end of twenty six and into '27. And the last item I wanted to mention is, you know, we'll probably talk about it more in detail in the rest of the conversation, but the the the the the deal that we're the structure that we're taking on the the diabetes deal actually provides us the opportunity to retire some shares.

[Thierry Piéton, EVP & CFO at Medtronic]

So the this will be immediately accretive to our EPS and help strengthen the construction to get back to high single digit growth into '27.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

I just want one clarification on FX. On the FX, it it it flips to a a tailwind.

[Thierry Piéton, EVP & CFO at Medtronic]

Oh, did I say headwind? You said Yeah. Sorry. Tailwind. Tailwind. Sorry.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Yeah. Tax on your mind. That's headwind. But FX flips to a tailwind.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Yeah. It's is the sub Thanks

[Executive]

for the question, Travis. Yep. Go ahead.

[Travis Steed, Managing Director - Equity Research at Bank of America]

I was going ask you, is the 7% operating profit, including or excluding tariffs, is there an extra week this year? And then why is there a diabetes, EPS headwind this year if it's eighteen months away? Those are just a few quickies.

[Thierry Piéton, EVP & CFO at Medtronic]

So so yeah. So the 7% is excluding the impact of tariffs, and and the the impact of tariffs, you know, again, as you probably saw in the commentary, it's 200 to 303 hundred and 50,000,000 of cost at at the cost of goods sold level. So from an impact on the op profit growth, I guess it's something between two point two and three point two points depending on the the outcome on China. And and then the the the pressure on diabetes, I I think it's primarily driven by the rollout of Simplera. Yep.

[Thierry Piéton, EVP & CFO at Medtronic]

So it's it's it's the launch of of this this product. And as we grow it, the cost is gonna go down. But initially, it does put, you know, quite a bit of pressure on our margin rate to the tune of about 60 basis points at the GM level, which will translate into the earnings. And, that that will get better as the manufacturing ramps up.

[Travis Steed, Managing Director - Equity Research at Bank of America]

Helpful. Thanks a lot.

[Executive]

Okay. Thanks, Travis. Let's take the next question, please, Win.

[Operator]

We'll take the next question from Robbie Marcus at JPMorgan.

[Robert Marcus, Analyst at JPMorgan Chase]

Oh, great. Good morning, everyone, and, Thierry, welcome. Maybe question for you, and I'll just have one. You said you'll be back to high single digit EPS growth in fiscal year twenty seven. That's with assuming currency remains, the same and favorable and you execute the diabetes spin and resulting share buyback, which aren't really quite sustainable in nature.

[Robert Marcus, Analyst at JPMorgan Chase]

So without those benefits, which are kind of one time, would fiscal twenty seven EPS still grow high single digits? Thanks.

[Thierry Piéton, EVP & CFO at Medtronic]

Hey. Hey. Look. You know, I I wanna insist on the fundamentals here. And, you know, I I think the first thing to look at if you think about the construction for for '20 '7 is to come back to the performance that we're showing for q four here and for the second half of the year.

[Thierry Piéton, EVP & CFO at Medtronic]

You you know? And and this is with no FX tailwinds and with diabetes in the portfolio. We just delivered a quarter that's up 5.4% organically on revenue that has operating margin up 90 basis points, which is 200 basis points if you actually exclude FX. And we've got EPS that's up 11%, which is really 15.8% if you exclude EPS. That earnings growth is actually 9% in the second half of the year.

[Thierry Piéton, EVP & CFO at Medtronic]

So, you you know, that that's the fundamentals of the business that we're trying to build on. Now back back to to '27, As I said, you know, we we're looking at a growth rate that should continue to be positive with all the momentum that that Jeff mentioned. We're gonna continue driving the leverage on on on the cost side. And so here you see some signs of of improvement that are pretty significant from an operating profit perspective, and we're gonna continue to work on that. You know, FX, we're just assuming that it's flat, so we're not assuming that it improves.

[Thierry Piéton, EVP & CFO at Medtronic]

We're the the tailwind that I mentioned on '27 is just the effect of the carryover of the goodness that, you know, we'll we'll have based on the the current FX rate. And then you're right. There should be some accretion that comes from diabetes from the separation, and that's gonna help. But the target that we're that we have for the teams is to deliver on the framework regardless of the transaction.

[Robert Marcus, Analyst at JPMorgan Chase]

Great. Thanks, Thierry. Appreciate it.

[Executive]

Thank you, Ravi. Take the next question, please, Gwen.

[Operator]

We'll take the next question from Larry Biegelsen from Wells Fargo.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

Good morning. Thanks for taking the question. So so, Jeff, I wanted to focus on the decision to spin diabetes. I guess a couple questions. One, did you consider, you know, breaking Medtronic up into four separate businesses?

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

One could argue that the remaining three business have scale on their own and have different customers and capital allocation requirements. So why not go further in breaking up the company? You know, the pushback, you know, you think you're gonna get on diabetes is that it's growing above Medtronic's corporate average. You know? So why spin it off if your focus is on accelerating top line growth? Thank you.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Well, look. Yeah. Good question, you know, Larry. Like, why diabetes? Why now?

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

You know? So first of all, you know, on the diabetes business, like I said earlier, I we believe this is a a win win for both diabetes and and Medtronic. You know? On diabetes, we're we're well down the path of the turnaround. It's ready to stand alone, and we think it's well suited for for public markets. You know, this this move is gonna ensure that they get, you know, really both the the funding, and the focus the franchise needs to to reach its full potential. As much as, you know, as we're sitting here today, much progress as we've made, talk about six quarters in a row of double digits, and, yeah, there's more to come here. The the port the product pipeline is very robust. We we did submitted several, files to the FDA for approvals on multiple products here in the last couple months. And, you know, we believe with this focus and funding, you know, the the business will, you know, be a a top tier diabetes franchise well into the future.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And then for Medtronic, though, it allows us to, you know, focus more on our high margin growth drivers that we just, you know, walk through. Like I just mentioned, you know, we're even without diabetes, we're in great markets. 7% growth last quarter, you know, you know, stable, and and this and these are higher margin sectors for us. And this accelerates our speed of travel to these high margin growth areas, and and it's aligned around our core strengths of the company. You know, not, you know, technology strengths as well as our go to market channel to, you know, to health care systems.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So we think it's a, you know, it's a win win. It's gonna create shareholder value short and long term. You know, Terry walked through the the accretive nature of of the deal, accretive to our EPS or operating margin and gross margin. And, you know, I think I don't wanna speculate, but I think the diabetes business is probably worth more outside the company than than in. And then, you know, to back to Ravi's point, mean, yeah, it it'll provide a kind of a one time step up in margins, but the the whole idea, to Terry's point, is that we're growing them from there and getting to that you know, you saw a little bit of that in the last two quarters, and and we're gonna continue to do that once we get through some of these below the line issues.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

But, you know, that's it. The rest of the company, we believe, I said, are are you're right. They they do have scale. We think it's better together. There's a lot of synergies, and we've got really robust growth drivers across all three of those those portfolios of businesses.

[Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo]

Alright. Thanks so much.

[Executive]

Thank you, Larry. Next question, please, Wayne.

[Operator]

We'll take the next question from Vijay Kumar from Evercore.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Hey, guys. Thanks for taking my question. Jeff and Terry, maybe one sort of on the earnings and margins kind of question. You look at the guidance of 4% EPS growth ex tariff rate. Q1, I think it's implied as like flattish earnings growth.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Why is earnings growth back end loaded? Is this a mix impact on margins? I think Q4 gross margins came in below. Was there a product mix issue? And Jeff, sort of when you look at that earnings algorithm, can you commit to EPS growing above revenues irrespective of the FX environment? Thank you.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sure. Wanna take the first part there?

[Thierry Piéton, EVP & CFO at Medtronic]

Sure. Look, I think the question is why why is the construction back end loaded? I I think in the first quarter, a couple of things I would say. First, you know, it's always a bit lower from a revenue perspective than than the fourth quarter and the rest of the year. So, you know, that generates lower absorption from the the the factories, etcetera.

[Thierry Piéton, EVP & CFO at Medtronic]

So we typically have a dip between the first quarter and the rest of the year. The second element, which I I think is is important this year is, as I mentioned previously, you know, we're we're investing in the growth areas, both in r and d for cardiovascular, for cast, for Ardian, and also in sales and marketing to make sure that we capture the opportunities of growth that are provided by these areas. And so in q four, what you're gonna see is a bit of that investment ahead of the return from a growth perspective. The growth in q four is is slightly lower than the average of the year. You know, we're we're looking at roughly four and a half percent growth versus the 5% on the full year.

[Thierry Piéton, EVP & CFO at Medtronic]

So we're invested ahead and investing ahead, and we'll reap the benefits of that towards the towards the second half. And the final element is, you know, there's a little bit of FX headwind into into the first quarter that will turn into a tailwind towards the rest of the year. So so that that kind of explains why we have a better performance towards towards the back end.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And your your your question on, you know, the leveraged p and l, you know, leveraged EPS growth regardless of of FX? I think that was your your question. So so first, just getting to to Thierry's point, just one more point is, you know, I don't think it's as back end loaded as last year. We did end up hitting I remember a year ago, we put out guidance that had the back half of the year growing quite a bit, and there was some skepticism, you know, from from the call. We did end up hitting on the the higher end of that guidance across the board.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Just wanna point that out. But to your other more strategic question, the answer is is yes. You know, FX over the years, as you guys have we always dogged us a bit. And and, yes, you know, we believe in the economists that we're talking to, which quite a many, is that the FX is gonna be a tailwind for us for the next couple years. That being said, what we're doing here is underlying in the operations of the company is creating natural hedges and lowering our exposure to FX through a number of different areas, including something we've already really made a lot of progress on is dynamic pricing in countries that are serial, you know, where the the currencies are devaluating on a consistent basis.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And that has had a pretty a fairly meaningful impact, positive impact for us. But in addition to that and expanding that to other countries around the world, you know, paying our teams on on, you know, kinda actual FX basis, We are, you know, making some structural changes that just lower our overall exposure to FX. And then you combine it with our hedging program. I think it's a good formula. But, you know, we've gotta we we're putting in place natural hedges. So the answer is yes.

[Thierry Piéton, EVP & CFO at Medtronic]

Hey. I I just wanted to give some incremental color maybe to to to to give visibility on on the gross margin side. You know, what what we're seeing in q four and and what we'll see for a part of '26 is really two things that are offsetting each other. We we do have a a negative impact coming from mix, and, you know, that's about 80 basis points. And it's it's a combination of of CAS and diabetes.

[Thierry Piéton, EVP & CFO at Medtronic]

And that mix impact is, you know, is offset by the progress that we're making from a pricing and from a cost standpoint. Right? The the progress we're making on pricing and cost, you know, that's gonna carry forward, and I'm I'm gonna be focusing on what I can do to help accelerate that. The mix effect on CAS and diabetes. So look.

[Thierry Piéton, EVP & CFO at Medtronic]

The diabetes part, I guess, will be addressed through the portfolio move that we're making. It's not why we're doing it, but it will help. The CAS impact on mix actually translates into good news at the operating profit level, number one. Number two, some of it is driven by the fact that right now, a lot of the growth is done on the capital equipment sales. So we're we're shipping capital equipment first, and the catheters will come after.

[Thierry Piéton, EVP & CFO at Medtronic]

So the fact that the mix within CAS is towards the capital equipment is actually good news for the future because as as we increase the catheter sales, that that's going to alleviate a a big portion of that mix effect. So so the dynamic you should see is the mix getting better, and the cost initiatives hopefully accelerating. So I hope that gives some additional color on why we should be able to continue to leverage.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Very helpful. Thank you.

[Executive]

Thank you, Vijay. Next question, Wayne.

[Operator]

We'll take the next question from Joanne Wuensch from Citi.

[Joanne Wuensch., Managing Director at Citi]

Good morning, and congratulations on all the news this morning. I want to pivot here a little bit to to products, and I was curious about your commentary regarding the preparation that you and you're seeing hospitals do for renal denervation and reimbursement. And if you could just sort of share a little bit more about what you're seeing, that would be fabulous. Thank you.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sure. Maybe I'll call on Sean for that one.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

Yeah, certainly, John. Thanks for the question. So as you imagine, our focus has been about opening centers that are getting ready to take on this new service line. And that involves making sure that we train physicians how to do the procedure, of course, and educate them on coding and billing for the current fee for service Medicare patients. In addition to that, of course, with the NCD in the frame, that's going to open up a lot of patients.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

And really, it's about focusing as they build a service line, making sure they are able to work the patients up, rule out secondary causes of the disease, and then get them appropriately to the cath lab for renal denervation, which they perform safely. There's a lot of enthusiasm, as you can imagine, from customers who are looking for new service lines to grow their practices and absorb their cath labs. So it's really about that. It's training, education, and support for their programs as they build that up. Now, upon getting reimbursement, there's more to do to activate patients more directly, and we will channel those patients to a physician finder in geographies where patients can then find their way to the treatment.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

And as you probably recall from the clinical trials, a large proportion of our patients were self referred by using social media tools. So it's a very efficient way to recruit patients to the effort. But of course, we want to do that when all the reimbursement barriers come down. And that's what we're hopeful for as we move forward into

[Joanne Wuensch., Managing Director at Citi]

Thank you. And if I could do a follow-up, how do you think about this revenue ramping? You sort of paralleled it to PFA adoption, and I just want to sort of set get expectations set of how to think about that. Thank you.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

Yeah, John, I think that's a very different thing, right? So PFA is replacing an incumbent procedure. This faster, safer procedure that appears to have just excellent efficacy. It's really a pretty easy switch. It's not so difficult to train on our tools and techniques for that.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

This is a little bit more involved, of course, because there are other reasons why people have high blood pressure. You have to sort those causes out to get patients into the service line. So it's a longer ramp, but it's a long annuity. This is a massive patient population, as you know, and be able to build that practice. Think you've got to think about this as one of those really important durable growth drivers for the company that will set us up well for a lot of success for a long time.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Yeah. Just to to build on that point, Joanne, to build on that point that John's making, the the larger health systems around the country, I mean, not just the larger ones, but a lot of them, are are really proactively calling us for partnerships around hypertension. Building the you know, building these clinics, a lot of them virtual, some not, and establishing these patient pathways with us, jointly investing. So it's this is this is gonna be a big one for us for for a long time. And we're and, of course, we're gonna continue to invest in in the in the innovation around this too.

[Executive]

Thank you, Joanne. Next question, please.

[Operator]

We'll take the next question from Matt Taylor at Jefferies.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Hi. Thanks for taking the question. I I was wondering actually if you could expound on some of the pipeline, ideas that you had for for diabetes and about their differentiation and and timelines if you can.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sure. I will hand that one off to Q.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

Yeah. Thanks for the question. So I start with a recent approval of Sinclair resync in The US. We're ramping that.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

We're going to be launching that in a limited fashion in the fall. And in Europe, that product has already launched commercially. And just to give you an idea of the volume ramp versus last year, we expect to ramp our volume at least five times what we did last year. So we have not really begun to see the potential of Sinclera on the business yet. Then we have submitted for an ACE pump in iAGC algorithm to FDA in April.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

So we're ready to launch that, working very well with Abbott to make that happen, and we're ready to launch soon after we receive clearance on that. And then so that's our CGM option. It's gonna address a lot of the Achilles heel of our current CGM lineup. And then we also have multiple insulin options. We have InPen in market today.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

Our next generation durable pump, we expect to submit by the end of this fiscal year. And then following, the patch will follow after that. And what you can see in the lineup is significant improvement to our form factor. You know, that's feedback we've been given. And so that makes it, you know, more wearable with all these pumps having phone control, which is a feature a lot of our customers have asked for.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

And then in addition to that, we have our third generation closed loop algorithm that, you know, we believe will be a very exciting development in terms of burden reduction while driving the clinical outcomes that people expect from us. So when you look at the total ecosystem, I would say a couple of things. One, the form factors are completely upgraded. Not only that, we've completely re architected the software, including the algorithm that drives everything. And then you can see the variability of the entire system.

[Que Dallara, EVP & President, Diabetes Operating Unit at Medtronic]

And, you know, it's not talked about in the product itself, but when you think about the burden of diabetes management, there is something very attractive in burden reduction that patients have to only deal with one company, you know, especially when things go wrong. And so our customer, our tech support and our customer service, not just for patients but also physicians, is also a differentiator.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Great. Thank you very much.

[Executive]

Thanks, Matt. We have time probably for three more.

[Operator]

Okay. We'll take the next question from Matt Miksic at Barclays.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

Hey. Thanks so much for taking the question, and congrats on the strong finish here. And just just to make sure, you know, understand the the, you know, the operating line growth 7% with about 300 basis points, you know, getting you back to 4% EPS growth for the full year. And that's inclusive of all the investments that you're talking about. That's inclusive of the sort of gross margin headwinds around investments and so on, just to be crystal clear. Is that right?

[Thierry Piéton, EVP & CFO at Medtronic]

Yes, that's correct. But it's before the tariffs impact, right? To be And again, the tariffs impact are about 3.2 to 2.2 to 3.2 points on that.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

Right. And so congrats on that leverage. I mean, I just take a minute to, you know, I know what it's been, you know, difficult getting growth of EPS above sales, with with other headwinds and so on. So getting that operating line growing. So then on tariffs, you mentioned high confidence, in getting to the the mitigations you've described, opportunity to take those further.

[Matt Miksic, Equity Research Analyst at Barclays Investment Bank]

And then just maybe if I could drill down a bit on the spine business, get a sense of above market performance, where if we were to sort of like like for like spine growth comparing to your pure play peers, where do you see your growth? Where do you see the market? Any color you provide on that would be great as well. Thanks so much.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sure. Yeah. So first first of all, thanks for acknowledging the the all proper growth. We, you know, we did, you know, like I said, 8% in q four, and the guys next year is seven. And if you take out the diabetes, that that's that that would go eight.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So so we're built we built that we built that muscle, and that's gonna that's gonna continue. You know, in terms of, you know, the spine business, again, I I the markets I would say the demand is there. The markets have been stable, and technology is a differentiator here. And it it's it's pretty extreme. If you go back over the last couple years, you're seeing a number of our competitors tap out because of the investment and expertise it takes to build out the the capital equipment, enabling technology strategy around this.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And and we've got a big lead here. Like I said in the commentary, the dynamic that we're seeing, by us taking this portfolio of enabling technology and integrating the workflow, we've gone from a product story to a solution story. You know, we branded able, you know, AI enabled technology. And so as our customers are upgrading, you know, they're upgrading from a product to a to a broader ecosystem. So it's it's not a linear upgrade.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

It's more algorithmic. And that's giving us and that's a you know, that is a durable advantage. And so we're seeing the market growth is stable, and we're seeing our competitive advantage growing. You know, you've seen a bunch of our our competitors tap out. Like I said, you see our our, like, probably primary competitor this quarter, you know, put up some results that, you know, we'll see where it goes from here.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

But there's a pretty big difference between us and them this past quarter, and we'll see where it goes from here. But, you know, we're feeling good about spine, and it's something that Brett's been, you know, highly involved with and and leading along with Skip. I mean, Brett, would you like to comment on this?

[Brett Wall, EVP & President, Neuroscience Portfolio at Medtronic]

Yeah. Sure, Jeff. And, you know, Matt, thanks for the question. And, we're just seeing, as Jeff said, good stable demand and the ecosystem is driving that. And if you look at our enabling technology growth this last quarter, it remains very attractive, very strong.

[Brett Wall, EVP & President, Neuroscience Portfolio at Medtronic]

And we just see that stability continuing. It's an attractor for not only, you know, customers. We're a large scale important academic centers come to Medtronic for this, and we're also getting very good response from other sales reps and other individuals that wanna join Medtronic. So we're comfortable with how this is moving forward.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So I just think that, you know I'm glad you asked the question, you know, Matt. You know, because we talk a lot about PFA and Ardian and robotics, but part of our a key part of our growth story is the rest of the company. And, you know, we talked about CST or our spine business, you know, CRM, you know, high single digit quarter there, you know, strong growth from leadless, conduction system pacing, EVICD. Again, these are durable growth drivers for us that are gonna go out. So and then and then the other thing we mentioned in the commentary, some of the slower growing parts of the company, we have plans for, like peripheral vascular as we enter the carotid space with Contigo and enter through an organic program into thrombectomy, taking some technology from our neurovascular business to get into that space.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And then, you know, we've got things like public health, you know, you know, which will I think it's gonna surprise people with the growth there once we launch this tibial system. We think that's gonna be very disruptive, and we don't see a real answer from our competitors. So, you know, the rest you know, the the the growth story is pretty broad at the company. It's not just the the lightning bolts of PFA and and Ardium. So thanks for the question.

[Executive]

Thanks, Matt. Two more questions, please, Win.

[Operator]

We'll take the next question from Danielle Antalffy from UBS.

[Danielle Antalffy, Analyst at UBS Group]

Hey. Good morning, guys. Thanks so much for squeezing me in here, and I'll echo everyone's congrats on all the news this morning. Just a quick question to clarify on some of the commentary around PSA, obviously, a really important growth driver. I think you talked about reaching $2,000,000,000 in sales, so essentially just about doubling.

[Danielle Antalffy, Analyst at UBS Group]

I'm just curious how to think about the ramp from just over $1,000,000,000 to $2,000,000,000 in that cast business. I mean is that something that based on your commentary, I mean it seems like that's more near term versus long term, but anything you can add there as far as how we think about getting from that one to two? I mean, one of your competitors that was first to market here or close to I mean, you guys came to market about the same time, so so sorry about that. But, you know, they ramped pretty pretty quickly. So just curious if you could give any more color there.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Yeah. No. They did. They did. They ramped really quickly.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And, you know, I think, you know, we we feel very good about our product portfolio here in in in PFA. And and what we're seeing right now is just an incredible demand for Afera. And and the capital we gotta get those capital systems out there, which we're doing. You get these high volume centers, they get one. And like I said, I I spent the last couple weeks, you know, I'd say 80% of my time or so has been on PFA.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

It's going to Heart Rhythm Society meeting, and then and then a trip to the Northeast United States, just meeting with the leading centers. And the dynamic we're hearing is to get the one affair system, and then they then there's, you know, fighting over that system amongst the different EPs of these systems, they're, you know, they're now getting their second affair system. And and then we're you know, then the the catheter sales build from that. Again, it's not a once you get the installed base, it's not linear. And the and the systems are getting this technology.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

They're not being held back by, you know, capital constraints. And if if there that is an issue, we have opportunities here with through contracting to eliminate that that friction. And then our supply chain has really ramped. Right? This was we bought a fair.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

It's a super innovative technology, but then we had to spend quite a bit of time innovating the manufacturing process because that wasn't really designed in with the acquisition. So so that's up and running, and we're scaling that, and we're really happy with that. And and then you've got a nice robust demand a robust pipeline. Like I said in the commentary, the the only thing that's more exciting than our Sphere nine catheter out there right now is Sphere three sixty, and that goes right at the heart of the competition. Right at them.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And then then we've got Pulse Select, which is not under any kind of supply constraints, and it gives it gives centers around the world an option and a way to blend the pricing as well. So especially in the global areas where the resources aren't as much, you know, you get PulseX a very good system, high quality, very safe, and it's not priced where where the where the Afera is. And so what I would say is that we we we strongly believe in doubling the business. We didn't put a specific time frame on it, but it's not far off. I mean, it you know, it's not far off.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So I'd say it's more near term, you know, the next couple of you know, maybe I don't know if it'll exactly happen in the fiscal year, but, you know, we're in that ballpark and and and really excited about it.

[Danielle Antalffy, Analyst at UBS Group]

That's so helpful. Thanks so much.

[Executive]

Thank you, Danielle. Let's take the last question, please, Quinn.

[Operator]

Our last question comes from Shagun Singh at RBC.

[Shagun Singh, Senior Equity Analyst at RBC Capital Markets]

Great. Thank you so much. So a couple of follow ups on the CAS business. Impressive growth. Can you talk about the mix of cryo?

[Shagun Singh, Senior Equity Analyst at RBC Capital Markets]

It seems like it's becoming less and less of a headwind. Any color on pricing there? And then on RDN, any updated thoughts on what patient subset you think you could get coverage for? Thank you for taking the questions.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sean, do want to take the first, catalyst Yes.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

Sure thing, Shaikhaz. Yes. So first of all, on CAS, cryo will become less and less a part of the mix, but I think that rate of decline will slow, and then that'll really aid in the growth of that business going forward. It's still a really valued tool, and particularly in places that don't use general anesthesia and are more cost constrained. It really is holding up very, very well.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

So I think it hits kind of a near and will stay there, and then we'll have growth on top of that. With regard to your question on what we're expecting for coverage for the population of patients, I think what I'd just say is I will front run the CMS decision makers here, but what we've been presenting to them is what is the evidence and what are the guidelines and professional societies saying? And those really track pretty closely. So, to meet the standard of reasonable and necessary for CMS, I think it's going be very close to what we've studied and what's being recommended by the guidelines. And that would be patients that both aren't able to control their blood pressure despite lifestyle and medications, but also those patients that are unable to take medications due to side effects and such.

[Sean Salmon, EVP & President, Cardiovascular Portfolio at Medtronic]

So, I think relatively broad. We'll find out soon enough in July. But I think just following that evidence and expert opinion and the commentary that was collected in the public commentary period will lead to that decision.

[Shagun Singh, Senior Equity Analyst at RBC Capital Markets]

Got it. If I could just squeeze in one last one, just your strategy around portfolio management. I think, Jeff, at some point, you had indicated that you are committed to areas where you can build an ecosystem, and diabetes was one of those areas. You know, you're now looking to separate that. Just how should we think about your portfolio management strategy going forward? Thank you for taking the questions.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sure. I mean, look, we've been as I said before, it's a continuous process. We've been at it. We're gonna stay at it. Diabetes isn't an end. You know, we we exited ventilation for different reasons.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We exited ventilation. We exited our, you know, heart our LVAD business. We exited dialysis, and now diabetes. And it really comes down to, you know, you know, where do we have these secular growth opportunities along with a financial profile, you know, like higher margins that that works for us, where we have core strengths. And the those four, you know, they're different degrees, but, you know, I think there's other stuff inside the company that is a higher degree of higher margin growth and aligned around our core our our core synergies and capabilities.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And that's what's really driving it. And so we're, you know, we're we like where we are. Like I mentioned before, we're all we we're in high growth markets, but we'll we'll continue looking at the portfolio. I want this to be both additions and subtractions. We wanna do more deals to I think the the of the company are the best I've seen in in my nearly fourteen years here.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

And so we are you know, the markets that we're in, the technology that we have, our operational how we're executing operationally. And we're at a point now where I I would like to turn up the heat on some tuck in m and a to support these strong market positions. So that's part of the portfolio piece. And then on the divestiture side, I I I just talked through that, and it's it's an ongoing process. You know, on on that note, you know, I just just seeing some of the chatter back and forth here.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

The diabetes deal, I I do wanna clarify the mechanics of it a bit and how this transaction will work because it is it is unique and has unique benefits for Medtronic. So, Thierry, could you just hit on that before we

[Thierry Piéton, EVP & CFO at Medtronic]

Sure. Yeah. Thanks, Jeff. So so, look, the the the preferred path that we've laid out really has two steps. The first step is, you know, we we do an IPO of up to 20% of the shares of the new diabetes company.

[Thierry Piéton, EVP & CFO at Medtronic]

And and what that does is it enables us to raise capital to make sure that that the new diabetes company is fully capitalized. Those proceeds will also cover the costs that are relative to executing the deal overall. And it it will you know, in in our projections, it will enable potentially to have some of the proceeds go to Medtronic to potentially apply our capital allocation typical policy. It provides an opportunity to do a buyback in the first phase. Then there's a second phase, which would should occur, I guess, roughly six months after the first phase.

[Thierry Piéton, EVP & CFO at Medtronic]

And and that in that second phase, we do a split. And what that means is, you know, we post the lockup period, we give an opportunity for Medtronic shareholders, some of which will have entered the stock to participate to the split. We give them the option either to keep the Medtronic stock or to swap for stock in the shares in the new diabetes companies. So the the result of that is that it will reduce the share count of Medtronic on a permanent basis. So this is the accretive effect that it will have on EPS, so it's it's not a one off buyback.

[Thierry Piéton, EVP & CFO at Medtronic]

I wanna be clear. It's it's a permanent retirement of the shares corresponding to something probably around 80% of the shares of the the new diabetes company. So all this should be a tax free transaction for in US federal income taxes, and and the goal is to get everything done within within the next eighteen months, which means that, you know, we will fully consolidate the diabetes business through 2026 and see the impacts of the deconsolidation and and the EPS accretion primarily in 2027.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Right. And that that, you know, onetime EPS bump, we're not looking at that. We we see it for what it is. It's a onetime bump, and we're gonna apply our algorithm on top of that and and grow that EPS year over year like we talked about as part of our as our algorithm. And then, additionally, the the this the other benefit, it does reduce with retired shares, does reduce the cash burden on the dividend liability.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

So that's another benefit of it. So it's a unique structure. It's a unique deal. It's a unique structure, and that's why I say it's a it's a it's a win win. So with that, you know, look.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

Sorry for the little technical challenge at the beginning of the call. Thanks for your patience on that. Thanks for going the extra half hour plus and all the the great questions and engagement. I'm sure there'll be a lot of conversation throughout the day. We there's a lot of lot of news, a lot of good news, I I think.

[Geoff Martha, Chairman and Chief Executive Officer at Medtronic]

We're we're, like I said, I'm as excited about the setup as as I've ever been, and and we're at the early stages of it. So thanks for all the questions. And to all to all of us who joined today, we appreciate your your support and and the continued interest in Medtronic, and we hope that you'll join our our q one earnings broadcast, which we anticipate holding on Tuesday, August 19, where we'll continue to update you on all all the progress here. So with that, thanks for spending time with us today, and have a have a great rest of your day.

Participants

Executives

• Ryan Weispfenning, VP & Head of Investor Relations
• Geoff Martha, Chairman and Chief Executive Officer
• Que Dallara, EVP & President, Diabetes Operating Unit
• Thierry Piéton, EVP & CFO
• Sean Salmon, EVP & President, Cardiovascular Portfolio
• Brett Wall, EVP & President, Neuroscience Portfolio

Analysts

• Travis Steed, Managing Director - Equity Research at Bank of America
• Matt Miksic, Equity Research Analyst at Barclays Investment Bank
• Lawrence Biegelsen, Senior Medical Device Equity Research Analyst at Wells Fargo
• Analyst
• Joanne Wuensch., Managing Director at Citi
• Danielle Antalffy, Analyst at UBS Group
• Executive
• Robert Marcus, Analyst at JPMorgan Chase
• Vijay Kumar, Senior Managing Director at Evercore ISI
• Matt Taylor, Managing Director at Jefferies & Company Inc
• Shagun Singh, Senior Equity Analyst at RBC Capital Markets