Medtronic outlines acceleration to 5% organic revenue growth and raises EPS guidance to $5.60-$5.66, driven by CAS and innovation investments

Earnings Call Insights: Medtronic (MDT) Q1 2026

MANAGEMENT VIEW

* CEO Geoffrey Straub Martha stated that Medtronic "started the fiscal year by delivering another consistent quarter of mid-single-digit revenue growth" and emphasized confidence in accelerating growth through fiscal 2026. He highlighted that "top line growth for the quarter was in line with our guidance, and EPS came in ahead of guidance." Martha further announced, "we're pleased to be able to raise our EPS guidance for the full year on the back of the strong start of the year."
* Martha spotlighted cardiovascular as a key driver, noting "double-digit growth in cardiac surgery, in ICDs and in Leadless Pacing" and "nearly 50% growth in Cardiac Ablation Solutions on the rollout of our PFA systems." He pointed to Cardiac Ablation Solutions as a pivotal growth area: "we have more conviction than ever that we have the right technology and the product pipeline to catapult us to category leadership in cardiac ablation."
* In Diabetes, Martha cited continued strong international growth and the anticipated launch of two new sensors, Simplera Sync and Instinct, which are expected to accelerate performance further. He confirmed the planned separation of the Diabetes business remains on track and will be "immediately EPS accretive."
* The company announced two new independent Board members and the formation of Growth and Operating Committees, designed to "oversee portfolio management and capital allocation decisions to accelerate growth" and "provide oversight of our efforts to drive efficiency gains in our operations and expense base."
* CFO Thierry Pieton reported, "Q1 revenue of $8.6 billion grew 8.4% reported and 4.8% organic, in line with our guidance. Our adjusted gross margin was 65.1%, down 80 basis points year-over-year."

OUTLOOK

* Pieton stated, "we continue to expect fiscal year 2026 organic revenue growth of approximately 5%. In Q2, we're expecting 4.5% to 5% organic growth, similar to what we just delivered in the first quarter."
* The company raised its fiscal 2026 EPS growth expectation (excluding tariffs) to 4.5%. Including tariffs, the new EPS guidance is $5.60 to $5.66, up from the prior range of $5.50 to $5.60.
* Pieton indicated, "FX is now a flat to 1% benefit to fiscal '26 EPS. Including the impact of tariffs, we're now guiding EPS in the range of $5.60 to $5.66. For Q2, we would expect EPS of $1.30 to $1.32."

FINANCIAL RESULTS

* The company reported "adjusted operating profit was $2 billion, resulting in an adjusted operating margin of 23.6%." Adjusted gross margin was 65.1% and adjusted R&D was up 7.7%.
* Pieton explained, "SG&A... growing at 170 basis points below revenue growth. Importantly, we drove the significant leverage while also increasing investment in growth areas, including CAS as we hired more mappers, and Ardian as we develop the market."
* Adjusted tax rate was 17.8%. FX impact on EPS was neutral in the first quarter.
* The impact of tariffs is now expected to be approximately $185 million for fiscal 2026, with the worst-case $350 million scenario removed for this year.

Q&A

* Travis Lee Steed, BofA Securities: Asked about confidence in base business growth alongside the pipeline. Martha responded that CAS is accelerating, and other areas like Diabetes and Pelvic Health are set to rebound, with U.S. growth expected to improve as new products ramp.
* Lawrence H. Biegelsen, Wells Fargo: Questioned the impact of new Board committees. Martha highlighted increased focus, higher engagement frequency, and added medtech expertise with new members.
* Michael Holden Kratky, Leerink Partners: Inquired about the $2 billion CAS sales target. Martha confirmed, "When I said that, we're sticking to that. Nothing's changed... Sticking to that. I said near term. So near term, it could be for FY '26. I think it will go into FY '27, but it won't be far."
* Robert Justin Marcus, JPMorgan: Probed capital allocation and portfolio strategy. Martha emphasized a renewed focus on value creation, more M&A, and reinvestment behind growth drivers, supported by the new Board structure.
* Matthew Stephan Miksic, Barclays: Sought clarity on growth cadence. Pieton indicated specific targets would be shared at an Investor Day in mid-2026, but highlighted "$1 billion of incremental revenue over the '25 run rate within a relatively short time frame" for CAS.
* Anthony Charles Petrone, Mizuho: Focused on Renal Denervation. Martha called Ardian "a massive market" and stated, "we think this is going to be a -- could be the biggest thing that we ever do."
* Joshua Thomas Jennings, TD Securities: Asked about U.S. Diabetes business and Instinct launch. Dallara assured, "production is ramping up really nicely" and expects to launch Instinct "in the coming months."
* Matthew Oliver O'Brien, Piper Sandler: Asked about growth in softer business areas. Martha detailed organic growth drivers in Neurovascular, Pelvic Health, and Peripheral Vascular, and highlighted durable growth in Spine and CRM segments.
* Joanne Karen Wuensch, Citi: Asked about learnings from Hugo in Europe and metrics. Marinaro reported "significant double-digit growth in our current accounts on a year-on-year basis" and progress toward U.S. launch.

SENTIMENT ANALYSIS

* Analysts focused on the achievability of growth targets, confidence in pipeline realization, and the impact of new Board and governance changes. The tone was moderately positive but pressed for specifics on cadence and sustainability.
* Management maintained a confident tone during prepared remarks, frequently referencing acceleration and strong pipeline execution. During Q&A, management remained optimistic, directly addressing concerns and providing specifics on growth drivers and timing.
* Compared to the previous quarter, management's tone was more assertive about accelerating growth and value creation, while analysts maintained a similar level of constructive scrutiny.
* Confidence phrases included "we're confident," "we have more conviction than ever," and "we're pleased to be able to raise our EPS guidance."

QUARTER-OVER-QUARTER COMPARISON

* The EPS guidance for fiscal 2026 was raised to $5.60–$5.66 from the prior $5.50–$5.60, while organic revenue growth targets remained steady at approximately 5%.
* Strategic focus has shifted to driving operational rigor through new Board committees and accelerating key growth drivers, notably CAS and Ardian.
* Management's tone intensified around the speed and scale of execution, particularly in pipeline ramp and portfolio optimization.
* Analysts continued to focus on pipeline realization and cadence, but questions about the impact of governance changes and capital allocation were more prominent this quarter.
* The Diabetes separation remains on track, with the timeline narrowing from 18 months to 15 months for completion.

RISKS AND CONCERNS

* Ongoing business mix headwinds in CAS and Diabetes, particularly during manufacturing ramps, are expected to improve over time as scale increases and the Diabetes separation is completed.
* Tariffs remain a headwind, though the worst-case scenario has been taken off the table for fiscal 2026, with ongoing mitigation efforts reducing expected impact.
* Management noted that Neuroscience growth was slightly below trend due to delivery changes but expects improvement starting in Q2.
* Analyst concerns centered on the sustainability of growth in the base business and the practical impact of new governance structures.

FINAL TAKEAWAY

Medtronic's Q1 2026 results reflect consistent mid-single-digit organic revenue growth and an EPS performance that prompted a guidance increase for the fiscal year. The company emphasized accelerating momentum in its Cardiac Ablation Solutions and innovation pipeline, while also advancing major governance enhancements and the Diabetes business separation. With new Board committees focused on growth and operational efficiency, Medtronic expects to drive both revenue and earnings higher in the near term, supported by robust demand, expanding product launches, and decisive cost management.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mdt/earnings/transcripts]

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