Boston Scientific Q3 Earnings Call Highlights

Key Points

• Cybersecurity disruption hurt Q3 results: An eight-business-day outage reduced organic revenue growth by about 300 basis points and adjusted EPS by approximately $0.07. Revenue grew 1.5% to $5.138 billion and adjusted EPS fell 3% to $0.73, below guidance.
• Near-term outlook remains weak: Boston Scientific expects fourth-quarter organic revenue to decline 1% to 3%, with the cyber incident creating a 200- to 300-basis-point headwind. Management views 2027 as the trough of the current cycle, citing pressure in electrophysiology, WATCHMAN and China pricing.
• Recovery depends on cost savings and new products: The company expects more than $500 million in restructuring savings over three years and improved growth beginning in 2028. Key future initiatives include new EP and WATCHMAN products, the planned Penumbra acquisition and development of the VITALYST circulatory-support platform.

Boston Scientific NYSE: BSX reported third-quarter 2026 results that fell below its prior guidance after a cybersecurity incident disrupted manufacturing and product shipments for eight business days, while competitive and pricing pressures weighed on key cardiovascular franchises.

Organic revenue grew 1.5% year over year to $5.138 billion, below the company’s prior outlook for 3% to 5% growth. Adjusted earnings per share fell 3% to $0.73, compared with guidance of $0.80 to $0.82. Chairman and Chief Executive Officer Mike Mahoney said the cybersecurity incident reduced quarterly sales growth by about 300 basis points and lowered adjusted EPS by approximately $0.07.

Mahoney said operations were restored following a two-week outage, with all operations back online as of Sept. 8. However, the company expects the incident to continue affecting fourth-quarter results as elevated customer orders at the end of the third quarter are worked through and inventory levels normalize.

Fourth-Quarter and Full-Year Outlook

Boston Scientific forecast fourth-quarter organic revenue to decline 1% to 3% from the prior-year period and projected adjusted EPS of $0.77 to $0.79. Chief Financial Officer Jon Monson said the cyber incident is expected to create a 200- to 300-basis-point revenue headwind in the fourth quarter and reduce EPS by roughly $0.04 to $0.05.

For full-year 2026, the company now expects organic revenue growth of approximately 3.75%, or about 4.25% on a reported basis, including an estimated 50-basis-point foreign-exchange tailwind. It forecast adjusted EPS of $3.16 to $3.18, representing growth of 3% to 4% from 2025, and free cash flow of approximately $3.6 billion.

Third-quarter adjusted gross margin was 68.0%, down 300 basis points year over year, primarily because of unfavorable manufacturing absorption during the disruption. Adjusted operating margin was 26.5%, down 150 basis points. GAAP operating margin was 16.1%, including an approximately $80 million charge primarily related to certain product liability cases.

Pressure Expected to Continue in 2027

Management said it expects 2027 to be the trough of the company’s current business cycle. Excluding the planned acquisition of Penumbra, Boston Scientific expects it will be challenging to grow revenue and adjusted EPS next year.

Mahoney attributed the expected pressure principally to the company’s electrophysiology, or EP, and WATCHMAN left atrial appendage closure businesses, as well as additional pricing headwinds in China. He said roughly 75% of the company’s business has continued to grow consistently, but that growth is not expected to fully offset the pressure from EP and WATCHMAN in 2027.

Boston Scientific expects to return to improved revenue and adjusted EPS performance in 2028, with further acceleration anticipated in 2029. The company cited new product launches, expansion into new markets and a restructuring program as key elements of that outlook.

Monson said the restructuring initiative is expected to generate more than $500 million in savings over three years, with more than half of those savings expected by the end of 2027. The program includes organizational streamlining, supply-chain optimization, back-office transformation and reductions in spending on areas such as travel, meetings and external vendors.

Business-Unit Performance

• Neuromodulation: Sales rose 13%, supported by broad pain-management growth and “exceptional” performance from Nalu peripheral nerve stimulation technology. Growth in brain therapies was driven by the Cartesia X Lead and Illumina 3D software.
• Urology: Sales declined 3%, reflecting the cyber incident and expanding pricing pressure in China. The company cited recent regulatory clearances for stone-management products and expects launches, commercial productivity and stabilization to improve the business’s growth profile during 2027.
• Endoscopy: Sales declined 1%, affected by China volume-based procurement pricing and the cyber incident. Management said underlying performance remained strong, led by AXIOS technology, but expects growth to remain closer to mid-single-digit market growth until the China pricing impact is annualized in the fourth quarter of 2027.
• Interventional Cardiology and Vascular Therapies: Sales grew 12%, including 19% growth in interventional cardiology. The company said its AGENT drug-coated balloon has now been used to treat more than 400,000 patients.
• Cardiac Rhythm Management: Sales declined 2%, partly due to disruption involving remote-monitoring systems during the outage. Management expects performance to improve during 2027 with new launches and continued momentum.

Boston Scientific said it has shifted development efforts for its VITALYST circulatory support platform away from high-risk percutaneous coronary intervention and toward acute myocardial infarction cardiogenic shock. The company expects to begin clinical work in 2027 and aims to bring the technology to market in 2030. It has entered an agreement with Blackstone Life Sciences to co-fund development of the program.

WATCHMAN and EP Remain Key Challenges

WATCHMAN sales declined 6% in the quarter, including a 7% decline in the U.S., while international sales grew 4%. U.S. concomitant procedures rose about 35%, but standalone procedures declined by the high teens. Mahoney said changes in patient identification and referral patterns, as physicians assess recently published clinical evidence, have contributed to a slowdown in the left atrial appendage closure market.

The company is increasing medical education events, adding dedicated commercial resources and pursuing a potential label change. Still, it assumes WATCHMAN market conditions in 2027 will resemble fourth-quarter trends, with additional pressure from a new competitive launch. Boston Scientific has begun enrollment in its Elite AF trial for the next-generation WATCHMAN Elite platform, which it expects to bring to market in 2029.

EP sales declined 5%, including an 8% decline in the U.S. and 2% international growth. Management estimated that the cyber incident accounted for about half of the business’s quarterly shortfall, primarily outside the U.S. The company also said its pulsed field ablation market share has eroded as competitors introduce new technologies.

Boston Scientific expects continued EP share pressure until the planned early-2028 launch of FARAWAVE Ultra. It also expects to launch 2D intracardiac echocardiography in the second half of 2027 and FARAFLEX, a wide-area focal catheter, in 2029.

The company continues to expect its Penumbra acquisition to close in early 2027, subject to remaining regulatory clearances. Monson said the later closing timeline and higher interest rates could increase the transaction’s expected EPS dilution beyond the previously stated $0.06 to $0.08 range.

About Boston Scientific (NYSE:BSX)

Boston Scientific Corporation is a medical technology company that develops, manufactures and markets devices used to diagnose and treat a broad range of complex medical conditions. Founded in 1979 and headquartered in Marlborough, Massachusetts, the company serves healthcare providers and patients worldwide.

Its products support minimally invasive procedures in areas including interventional cardiology, peripheral interventions, electrophysiology, endoscopy, urology and neuromodulation.

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