Medtronic slides 7% on top line miss

Medtronic (NYSE: MDT) reported third-quarter fiscal 2025 earnings that exceeded analyst expectations on the bottom line, though revenue came in slightly below consensus estimates. The medical device giant reaffirmed its full-year guidance as it navigates shifting distributor buying patterns and remains focused on strategic growth initiatives.

For the quarter ended January 24, Medtronic posted adjusted earnings per share of $1.39, surpassing the consensus estimate of $1.36 and reflecting a 7% year-over-year increase. Revenue reached $8.29 billion, up 2.5% year-over-year but falling short of the $8.33 billion analyst projection. Organic revenue growth, which excludes foreign exchange and other adjustments, came in at 4.1%.

The Cardiovascular segment delivered revenue of $3.04 billion, marking a 3.7% increase year-over-year and in line with expectations. Growth was driven by continued strength in cardiac ablation solutions and structural heart products, with pulsed field ablation (PFA) technology seeing rapid adoption. The Neuroscience division outperformed slightly, reporting revenue of $2.46 billion, up 4.4% year-over-year and marginally above estimates, with notable contributions from neuromodulation and deep brain stimulation.

However, Medical Surgical revenue declined 3.5% to $2.07 billion, missing expectations of $2.14 billion. The shortfall was attributed to U.S. distributor buying patterns, which the company expects to normalize by the beginning of fiscal 2026. Despite the headwinds, surgical innovations such as LigaSure vessel sealing technology continued to see strong uptake. The Diabetes division was a standout, posting $694 million in revenue, up 8.4% year-over-year and ahead of the $680.7 million consensus estimate. The segment benefited from strong adoption of the MiniMed 780G automated insulin delivery system and rising continuous glucose monitoring (CGM) attachment rates internationally.

Medtronic’s financial performance was underpinned by expanding profitability. The company’s adjusted gross margin improved to 66.6%, surpassing estimates of 65.6% and up from 66.1% in the prior year. Operating margin also expanded, reaching 26.2% versus 25.6% expected and 25.2% last year. CEO Geoff Martha highlighted these gains as a reflection of Medtronic’s operational efficiency and pricing strategies, while CFO Gary Corona emphasized that the company remains on track for accelerating earnings growth in the second half of fiscal 2025.

Looking ahead, Medtronic reiterated its fiscal 2025 guidance, projecting organic revenue growth of 4.75% to 5% and adjusted EPS between $5.44 and $5.50. This outlook aligns closely with analyst expectations of $5.45 per share. The company also pointed to key developments in its pipeline, including expanded Medicare coverage for renal denervation treatments, expected by October 2025, and additional PFA system approvals that could further drive revenue.

Strategically, Medtronic remains focused on tuck-in acquisitions to bolster its portfolio. Management reiterated that targeted M&A remains a priority as the company looks to enhance its capabilities in high-growth areas such as diabetes management, cardiac rhythm therapies, and robotic-assisted surgery. The company’s investment in Affera, which recently received U.S. FDA approval for an additional PFA manufacturing site, is expected to strengthen its market leadership in cardiac ablation.

Despite short-term challenges in surgical devices, Medtronic’s diversified portfolio and strategic positioning leave it well-placed for continued growth. With ongoing adoption of next-generation technologies and robust margin expansion, the company is poised to capitalize on long-term healthcare trends while delivering stable earnings performance for investors.