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Presentation

Medtronic plc beats earnings expectations. Reported EPS is $1.26, expectations were $1.23.

Ryan Weispfenning: Hello, everyone, and thanks for joining us today for our fiscal ’26 first quarter video earnings webcast. I’m Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations. Joining me here today are Geoff Martha, Chairman and Chief Executive Officer; and Thierry Pieton, Chief Financial Officer. Geoff and Thierry will provide comments on the results of our first quarter, which ended on July 25, 2025, and our outlook for the remainder of fiscal year ’26. After our prepared remarks, we’ll take questions from the sell-side analysts that cover the company. Today’s program should last about an hour. Earlier this morning, we issued a press release discussing our results and containing several financial schedules.

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. 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 in our periodic reports and other filings that we make with the SEC, and we do not under 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 first quarter revenue in the current and prior year reported as Other.

References to sequential revenue changes compare to the fourth quarter of fiscal ’25 and are made on an as-reported basis. All share references are on a revenue and year-over-year basis and compare our first fiscal quarter to our competitors’ second calendar quarter. 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, over to you, Geoff.

Geoffrey Martha: All right. Thanks, Ryan, and hello, everybody. Welcome to the call. Welcome to the new look. And as you’ve seen from our press releases, we have a lot to talk about today. So why don’t we just jump in, and I’ll get going on our Q1 results here. So we started the fiscal year by delivering another consistent quarter of mid-single-digit revenue growth. And look, we remain confident in our ability to accelerate growth as we move through fiscal ’26. Our top line growth for the quarter was in line with our guidance, and EPS came in ahead of guidance. Look, the entire organization is working with laser focus to execute on the incredible set of opportunities Medtronic has in front of us. And 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.

And as you’re going to hear today, Medtronic is — we’re at the forefront of med tech innovation across product categories, and we’re on the cusp of an acceleration in our financial results and our strategy. So let me take you through some key portfolio highlights before I turn the call over to Thierry, who’s going to walk through the results across all of our businesses. So I’m going to start with cardiovascular, which grew high single digits again this quarter, and that’s off a high single-digit comparison in the prior year. And this is driven by our innovative product portfolio and a relentless execution in what is a core right-to-win area of the market for us. We achieved double-digit growth in cardiac surgery, in ICDs and in Leadless Pacing.

And critically, we reached nearly 50% growth in Cardiac Ablation Solutions on the rollout of our PFA systems. This performance is reflective of our execution capabilities. And we’re excited that our growth momentum in this pivotal area is only really just beginning. Look, this past quarter, I’ve witnessed Affera and our competitors in action in several ablation cases. And I can tell you firsthand that the advantages that we’re bringing to the market in terms of procedure time and ease of use are truly differentiated. Physician feedback and utilization levels of our equipment are phenomenal. And 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.

Now in Neuroscience. We grew 3%, supported by high single-digit growth in both Neurosurgery and Neuromodulation. Look, as I mentioned last quarter, our spine AiBLE ecosystem is driving differentiated share gains as health systems, they’re not just updating one piece of capital equipment when they upgrade, they’re upgrading to the full AiBLE ecosystem, which is a powerful thing for us and creates a real moat, a competitive moat, around that business. In Neuromod, our innovative closed-loop sensing technology in both Pain Stim and Brain Modulation, combined with our strong commercial execution, is also winning share. That said, our Neuroscience growth was a bit below trend due to our Specialty Therapies businesses, which was the result of some delivery changes we’ll discuss in a few moments.

But we expect to improve starting in Q2 and further accelerate in the back half of the fiscal year. Switching to MedSurg. MedSurg grew 2% this quarter, in line with our current expectations. And Diabetes continued to grow above the company average on the strength of our 780G system and Simplera Sync sensor in international markets. So looking ahead, we’re well positioned to accelerate growth in each of our segments in the second half of the year. In our earnings deck that we posted earlier today, we outlined several milestones that we have coming over the rest of the fiscal year that will drive this acceleration, the largest, of course, being our CAS business with our continued rollout of our PFA portfolio. In Q2, we expect our CAS business to grow even faster than the nearly 50% growth we posted this past quarter.

And we continue to have near-term line of sight to adding an incremental $1 billion in revenue off of our fiscal ’25 base. Demand remains extremely high, and we’re executing against our plans to quickly ramp mapping system and catheter supply. And CAS is just one of several upcoming growth accelerators for cardiovascular. Let’s talk Renal Denervation. We’re expecting the final national coverage from CMS on or before October 8, and we expect the U.S. launch of our Symplicity procedure for hypertension to ramp after that. And our Peripheral Vascular business will start the launch of our Contego carotid stent system this quarter and our Liberant mechanical thrombectomy system in the second half of the fiscal year. Now in Neuroscience, we’re poised to accelerate growth starting this quarter with further acceleration in the back half of the fiscal year.

First, we expect our Pelvic Health business to be a key driver for this segment in fiscal ’26 and beyond. Importantly, ahead of our tibial launch this fall, we took the opportunity to make some significant changes to our commercial organization in Pelvic Health in Q1. Now while this had some short-term impact in the quarter as we expected, it sets us up. It sets us up to capitalize on the large opportunity ahead as we anticipate accelerating growth from this business as we go through the year. In Neurovascular, we expect growth to accelerate each quarter as we go through the remainder of the fiscal year and as we lap China VBP and product recall comps. And we also have some new products ramping in carotid stenting and our hemorrhagic portfolio.

Now in Surgical, we have the U.S. launch for Hugo in the back half of the fiscal year, which we expect to be accretive to growth. And in Diabetes, we expect performance to accelerate as we launch 2 new sensors, Simplera Sync this fall and the Abbott-based sensor, which we’re calling Instinct in the coming months. Simplera is half the size of our current sensor. It’s disposable and it’s much easier to put on with no overtape. And with Instinct, our customers will get access to Abbott’s most advanced CGM platform. And when you combine these improved sensors with our MiniMed 780G and its exclusive meal detection technology, we expect to see a positive inflection in our installed base and revenue growth. As for the separation of our Diabetes business, MiniMed we’re calling it, it is proceeding according to plan.

MiniMed is entering a strong innovation cycle in its own right. The separation will sharpen Medtronic’s focus on our core businesses, including high-growth opportunities like we discussed, PFA and Ardian and others. And it will also allow Medtronic to grow revenue and earnings faster without Diabetes than we do with it today. We continue to expect the separation to be immediately EPS accretive even with conservative valuations and this portfolio move will be a value-creating separation for Medtronic shareholders. Clearly, look, there’s a lot to be excited about at Medtronic in the next few quarters. And as a result of the strength of our product pipeline, we’re confident that not only will our revenue growth inflect in the near term, but we’ll also achieve higher earnings growth over time.

This will come through a combination of natural P&L leverage and decisive urgent action we’re taking to improve efficiency in both COGS and our operating expenses. We’re creating an environment at Medtronic where innovation fuels growth and growth in turn creates the oxygen needed to fuel more high ROI investments into innovation. We’ve already started increasing these investments, as you saw this quarter, with our high single-digit increase in R&D. And it is these investments that will make our earnings power durable. Now with that, I’ll turn it over to Thierry, who’s going to cover the details of our business performance, our financials, and of course, our guidance. So over to you, Thierry.

Thierry Pieton: Thanks, Geoff, and hello, everyone. So I’ll start first with our cardiovascular portfolio. So CV grew 7% this quarter, led by Cardiac Ablation Solutions. CAS growth continued to accelerate to nearly 50%, including low 70s growth in both the U.S. and Japan and low 30s growth in international markets. This rapid growth is being driven by high demand for our Pulsed Field Ablation system including our PulseSelect anatomical catheter and especially our Sphere-9 focal catheter and a Affera mapping system. Affera mapping system utilization is high and the Sphere-9 catheters are being used in a wide variety of cases. Our teams are quickly ramping supply and our mapper hiring is on track. This is allowing us to enter new accounts as well as going deeper into more labs in our established accounts.

We’re still early in the rollout, and we continue to execute with urgency to capitalize on this massive opportunity. We expect to continue to win share in this $11 billion space that is now growing over 25%. As we look forward, we’re advancing our PFA pipeline, including our next-gen Affera Sphere-360 catheter. We hear from many EPs that Sphere-360 is the most anticipated single-shot catheter in this space, driven by very positive early clinical data. We’re expecting to start the pivotal trial for Sphere-360 this calendar year. Next, in structural heart, we grew 6%. We continued to gain traction with our Evolut FX and TAVR device and our differentiated clinical evidence. We’re getting our fair share of international revenue from Boston Scientific’s market exit.

We’re also gaining momentum in several geographies, including Japan. We expect all of this to drive continued strength in our TAVR franchise in the quarters ahead. In Cardiac Rhythm Management, we grew 3%, with 6% growth in defibrillation solutions and 3% in cardiac pacing therapies offset by cardiovascular diagnostics. We continued to see strong adoption of our premium innovative products, including 83% growth of AURORA EV-ICD, 14% growth in Micra leadless pacemakers and 21% growth with our 3830 conduction system pacing lead. In hypertension, we were very pleased with CMS’ proposed NCD for our Symplicity system that they issued last month. as well as the positive comments that came in during the public comment period. And then last week, we received the news that the ACC and AHA issued updated guidelines recognizing Ardian as a treatment option for hypertension.

These are very important steps to providing patients access to our innovative Symplicity procedure. Nearly half of U.S. adults have hypertension and 1 in 4 are uncontrolled despite the broad availability of numerous generic drugs. CMS now expects to finalize the NCD on or before October 8, and we expect procedures to ramp following that. Ahead of this, we’re working with health care systems across the U.S. to train physicians and help them establish Symplicity service lines. We’re rapidly hiring clinical specialists and market development and health care economics managers to drive the future growth. They will work alongside our existing coronary sales force to provide support for this important new treatment. We also continue to invest in next-gen Ardian technology, including our next-gen catheter that will provide radial access.

And we enrolled our first patient in our multi-organ denervation pilot study, which is called SPYRAL GEMINI. Now turning to the Neuroscience business, which grew 3%. Our Cranial & Spinal Technologies business grew mid-single digits, including 5% U.S. core Spine growth and 8% U.S. Neurosurgery growth. As Geoff mentioned, we had a strong capital equipment quarter as our differentiated AiBLE spine ecosystem continues to win share. Several categories of our enabling equipment grew double digit globally, including Mazor, O-arm, Midas Rex and StealthStation. In Neuromodulation, we had another very strong quarter, growing 9%. In Pain Stim, we grew 10% globally, including 11% in the U.S. Our Inceptiv system, with its responsive real-time therapy adjustments, is giving patients greater freedom.

And in Brain Modulation, we grew high single digits as our groundbreaking BrainSense adaptive DBS technology is launching in the U.S., Europe and Japan. BrainSense is a fully closed-loop brain computer interface that automatically provides personalized, real-time therapy adjustments based on brain activity feedback for patients with Parkinson’s disease. Next, turning to our MedSurg portfolio, which grew 2%. Our Surgical business also grew 2% this quarter. The business had high single-digit growth in Advanced Energy where our market-leading LigaSure vessel sealing technology won share again for the 12th quarter in a row. This, combined with high single-digit growth in emerging markets, helped offset 2 ongoing, but stable market pressures, one is in bariatric surgery and the other is from the shift to robotic surgery, and both are primarily in the U.S. We continue to expect our Surgical growth to improve over time, starting in the back half of the fiscal year as we begin to expand the launch of Hugo.

Earlier this calendar year, we filed for FDA approval for Hugo and we’re looking forward to launching it in the important U.S. market. In international markets, we’re making good progress in Surgical Robotics as our revenue and procedure volumes continued to grow. Last month, we received CE Mark for LigaSure technology on Hugo. This was an important step for our robotic offering, given that LigaSure is the most preferred vessel sealing technology in the world, having been used over 35 million procedures. Robotics and the ecosystems that robotic-assisted surgery enables are important for our Surgical business. And as we look ahead, we see robotics and our world-class digital and AI capabilities as an important strategic differentiator that will benefit many of our franchises at Medtronic.

To wrap up our business performance, in Diabetes, we grew 8%. This included 11% growth in international markets, where our Simplera sensor technology is already available. We’ve heavily invested in Diabetes over the past few years, and now we’re entering a strong innovation cycle with both new technology and new indications. Last month, we received CE Mark for expanded indications for the 780G for type 2 diabetes, children as young as 2 and during pregnancy. Looking ahead, in addition to launching the 2 new sensors that Geoff mentioned, we’re expecting type 2 approval in the U.S. in the coming months. And we also continue to make progress with our new insulin pump systems. We intend to submit our next-generation durable pump, the MiniMed Flex, to the U.S. FDA by the end of the fiscal year.

Flex is much smaller than 780G as the screen on your phone, allowing for more discreet placement while still using the same reservoirs and infusion sets. And Flex will work with both Simplera Sync and Instinct sensors. Finally, as mentioned, our planned separation of MiniMed is on track. Our preferred path continues to be a 2 step, IPO and split, which we expect to have fully completed within 15 months from now. Upon separation, we continue to expect approximately 50 basis points of gross margin improvement and 100 basis points of operating margin improvement. Now turning to the financials. 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.

This was expected and stable when compared to Q4. I’ll walk you through the 4 main components that drove the gross margin this quarter. First, we continued to benefit from pricing as we launched new products and maintained pricing discipline on contracting, and this had a 30 basis points benefit. Second, business mix, as I noted last quarter, continues to be a near-term headwind, approximately 70 basis points this quarter split roughly equally between CAS and Diabetes. CAS today is impacted by the mix of lower-margin capital to higher-margin catheters and Diabetes is early in its manufacturing ramp of the Simplera sensor. Over time, we expect both of these to improve as we scale our CAS business and separate the Diabetes business. Third, our COGS efficiency programs, net of inflation, continued to benefit gross margin as our global operations and supply chain organization execute to deliver savings on materials and drive efficiencies in our manufacturing plants.

This quarter, this was more than offset primarily by the manufacturing ramp of Affera that we incurred last year. The net of these items was a 50 basis points headwind. And finally, foreign exchange was a 10 basis points tailwind to gross margin. Moving down the P&L. Adjusted R&D was up 7.7%, 100 basis points ahead of revenue growth. We’re allocating significant capital to high-growth projects across our businesses, including large increases in both Cardiovascular and Diabetes. With SG&A, we continued to drive leverage, 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. We are extremely focused on making sure we fuel our growth drivers to maximize the opportunities from these technological breakthroughs.

Our adjusted operating profit was $2 billion, resulting in an adjusted operating margin of 23.6%. Below the operating profit line, our adjusted tax rate was 17.8%, about 70 basis points better than expectations due to jurisdictional mix of profits. The FX impact on EPS was neutral in the first quarter, a couple of cents better than anticipated given rate movements throughout the quarter. The net result was adjusted EPS of $1.26, $0.03 above the midpoint of our guidance. Now let’s move to our guidance. On the top line, 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. As Geoff covered earlier, we’re expecting revenue growth to accelerate in the back half of the fiscal year.

Based on recent FX rates, which have moved substantially over the past quarter, we now see a tailwind of revenue of $550 million to $650 million in fiscal ’26. This is over a $0.5 billion positive increase versus 3 months ago. In Q2, FX is currently $50 million to $100 million tailwind based on the recent rates. Moving down the P&L, we’re continuing to drive pricing discipline and to deliver savings on our COGS efficiency programs. These will be offset in the near term by continued business mix primarily in CAS and Diabetes. Regarding tariffs, you will recall we outlined 2 scenarios when we gave our annual guidance last quarter. Given where we are in the year, we can take the worst case $350 million scenario off the table for this year. And the $200 million scenario has modestly improved, driven by our execution on mitigation efforts.

As a result, tariffs are now expected to be approximately $185 million for fiscal 2026. We also remain committed to increase investment in our current and future growth drivers, resulting in increased R&D and sales and marketing spend. At the same time, we are confident in our ability to drive leverage with our G&A expenses. Accordingly, there’s no change in our expectation for fiscal 2026 operating profit to grow materially faster than revenue. Given our Q1 results, we’re raising our underlying fiscal 2026 EPS growth expectation, which excludes the impact of tariffs to 4.5% versus the prior 4%. 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, a raise from our prior range of $5.50 to $5.60.

For Q2, we would expect EPS of $1.30 to $1.32, which includes an approximate 1% benefit from foreign currency based on recent rates as well as an approximate $18 million negative impact coming from tariffs. As I mentioned last quarter, we’re expecting high single-digit EPS growth in fiscal year ’27, driven by accelerating revenue growth, improved business mix from CAS and Diabetes as well as the other financial benefit of the Diabetes separation. To conclude, our confidence is building. We’re advancing our growth drivers to accelerate revenue and growth. And we’re executing on efficiencies in manufacturing and supply chain and operating expenses to drive earnings growth. At the same time, we’re increasing our growth investments in R&D and sales and marketing, all with a deliberate focus on creating long-term shareholder value.

Geoff, back to you.

Geoffrey Martha: Okay. Thank you, Thierry. And before we go to Q&A, I want to make a few brief remarks on the shareholder value creation initiatives we announced this morning in partnership with Elliott Management and on the opportunity that we both see ahead for Medtronic. Today, we’ve announced a series of governance enhancements that will help capitalize on the enormous opportunities in front of us and unlock the full extent of Medtronic’s potential. To start, we’ve appointed 2 new independent Board members, John Groetelaars and Bill Jellison, each of whom bring deep operational expertise in med tech and fresh perspectives to the table. The Board and I are excited to welcome both John and Bill to Medtronic. And as part of our inflection, the leadership and I are reinvigorating our laser focus up and down the organization on 2 key fronts: growth and creating oxygen to fuel that growth and drive earnings power.

These 2 focus areas need to be linked from the front-line employees of Medtronic up through senior leadership, including me, and all the way to the Board. So today, we announced that we’ve created 2 new board committees to support management. The Growth Committee, which will oversee our portfolio management and capital allocation decisions to accelerate growth; and an Operating Committee, which will provide oversight of our efforts to drive efficiency gains in our operations and expense base. This will enable a higher level of organic investment back into our business while also delivering improving margins and accelerating EPS growth. So we’ll have a fresh perspective from our 2 new board members, and these 2 committees will give us support and focus so we can execute with both speed and urgency.

And finally, we look forward to sharing the culmination of these initiatives at an Investor Day sometime mid-calendar year ’26. And at this event, we intend to provide a comprehensive update for investors on our strategy post Diabetes, the value proposition of our go-forward portfolio and new long-term financial targets for sustained value creation. So to conclude, here’s what we want you to take away from today’s announcement with Elliott. Medtronic is turning the page and we’ll be entering a new period of greater revenue and earnings growth. We’ve put in place a stronger foundation for the company. And over the last few quarters, we’ve discussed how we have an incredible product pipeline that is poised to accelerate our organic growth. And now with our renewed focus on aligning our portfolio and capital allocation for higher growth as well as enhancing operational excellence, we’re putting the pieces together in place to translate that accelerating top line into a period of sustained outsized earnings growth.

We’re entering a new phase of our transformation to act more boldly and more decisively to deliver the strategic clarity, growth profile, operational rigor, investment strategy and shareholder returns that this company is capable of. And as I wrap up, I want to thank the Medtronic employees watching today. We’ve gone through a lot of change together to better position the company to deliver improved performance. I appreciate that you’ve accomplished this while also keeping the Medtronic mission front and center. You’re striving without reserve for the greatest possible reliability and quality in our products and you’re doing so with dedication, honesty, integrity and service. Your work is benefiting millions of patients around the world as we alleviate their pain, as we restore their health and we extend their lives.

So thank you. Okay. Now it’s time to move on to Q&A, where we’re going to try to get to as many of you analysts as possible. [Operator Instructions] If you have additional questions, you can reach out to Ryan and the Investor Relations team after the call. So Ryan, can you please queue up the Q&A instructions.

Geoffrey Martha: Sure, Geoff. [Operator Instructions] Finally, please be advised that this Q&A session is being recorded. Okay, we’ll take the first question from Travis Steed of BofA Securities.

Travis Steed: I guess, first of all, on the pipeline, I see it’s coming through this quarter, CAS 72% U.S. growth. It sounds like supply is ramping up nicely there. So love an update on CAS. But also it’s not showing up in the total U.S. growth. U.S. growth, 3.5% this quarter, 1% Structural Heart growth. Just want to hear your confidence — you talked about being confident in the ability to accelerate growth over FY ’26, but how do you get confidence in kind of the base business still kind of growing mid-single digits so the pipeline can kind of be on top of that?

Geoffrey Martha: Sure. Yes. Thanks for the question, Travis. Look, let me start with just some context on the quarter. Like I said, another mid-single-digit quarter, 4.8% organic revenue growth coming in within our guidance of 4.5% to 5%. EPS coming in $0.03 above the midpoint. To your point, the growth drivers are accelerating. You highlighted CAS, I’ll come back to that, and we got other ones coming already and we talked about the tibial coming in the back half of the year. And you — but you — there are a couple of areas that came in a little below trend like in Neuroscience, for example, Pelvic Health, Neurovascular and then we’ll get to Diabetes. Demand is strong there, but the U.S. growth came down a bit. So there are a couple of areas, and I’ll turn those over to Thierry in a second, that are going to be kind of bouncing back and accelerating.

And then on the — and that will impact the U.S., but also on the U.S. growth, all the new technology that’s coming, the continued acceleration in CAS, already in, like I mentioned, Diabetes, Pelvic Health plus the rebound of these. They all will have an outsized impact on — have an outsized impact on the U.S. growth. I mean, Thierry, do you want to talk about the…

Thierry Pieton: No, I think you hit the main points. So as you said, some of the pieces of the business that had a relatively slower growth in the first quarter were mostly U.S. impacting. So if you take a couple of these examples, in Pelvic Health, we made some changes in the commercial force, as we said in the commentary, to prepare for the launch of tibial and that’s primarily a U.S. impact, I would say. The second element, I would say, is Diabetes. So Diabetes grew very strongly. Outside of the U.S., we were up 11% in the international market. The U.S. was a bit slower and that’s mostly a product topic. So we have the demand for Simplera, but the ramp-up is only starting and that’s impacting the U.S. as well. And so as this ramp-up occurs, we’ll see those things start kicking in the U.S. and just changing the profile that we mentioned between U.S. and international markets. So positive going forward in the U.S.

Geoffrey Martha: Yes. In CAS, we showed in the earnings presentation, that’s going to continue to accelerate. As you highlighted, Travis, we’re getting the capital systems out there. The utilization is off-the-charts high. Everyone is excited about the catheters we have. There are also catheters that are coming, Sphere-360 in the single-shot space. So it’s great. I was just in Japan the week before last. Was there for — it’s 50 years of Medtronic in Japan. I spent a lot of time with physicians, a lot of conversations on CAS. And there, we’re the #1 market share. And Affera’s approved but not even launched there. This is on PulseSelect. And I know our competitor highlighted that they felt they were the #1, talked about how many cases they’ve done.

We’ve done meaningfully more in Japan, and I know we’re the #1 there. And I asked — I was probing as to why, and they talked about the precision of PulseSelect in that. But really the safety profile of our catheters, both the publicized safety of PulseSelect, but also Affera in our IDE trials. And then they did their own — the largest centers there in Japan did their own IDE — their own trials and that safety profile came through. And I think that safety message, obviously, it means a lot in Japan. They really prioritize it. But I think that as PFA grows and becomes more ubiquitous, I think that’s going to – it’s going to become a bigger kind of driver here in the U.S. as well and that plays to our favor. So I think CAS is in a really good spot to continue to accelerate.

And not only did it grow year-over-year, but it accelerated meaningfully sequentially. We saw a strong sequential growth in CAS, especially in Affera, which was, I think, like near 60% sequential. So I mean, any way you slice it, our CAS business from technology to commercial execution, geographic expansion, safety profile data, physician experience, et cetera, is doing really well.

Thierry Pieton: And Geoff, as you mentioned, the sequential growth is going to continue, right? And you saw that on the chart. We’re going to have both higher growth rate in Q2 than we did in Q1 in CAS. And we’re also going to have an absolute value, significant sequential growth between the first quarter and the second quarter.

Ryan Weispfenning: All right. Thanks, Travis. Appreciate the 1 question. Next, we’ll go to Larry Biegelsen at Wells Fargo Securities.

Larry Biegelsen: New Board committees, one focused on growth, one focused on operations. What can these committees do that you couldn’t do before? What would success look like? And how long before investors start to see an impact?

Geoffrey Martha: Yes. Thanks, Larry. Look, the 2 committees, I think, like I mentioned in the comment, they’re going to provide focus to support management. I think particularly like the — but there’s the 2 committees, one on growth, one on operational performance. Think margins, think continued focus on our supply chain. One thing they’re going to do — a couple of things. One, we’re bringing on these 2 new directors with deep med tech experience. That will be a strong voice on the Board, I believe. We had med tech experience in the past and recently not as much. And so bringing in John and Bill will help a lot and they’ll be on those 2 committees. The other thing is just the frequency — so we’ve rearranged our committees.

We didn’t just add 2 committees. We’re going to rearrange them so that we keep the same amount of committees, and these will be very focused on those 2 topics. And the amount of the intervals with management will be higher. It will be, I think, quite a bit higher than we’ve had in the past. A lot of off-cycle discussions that will help drive this. So that’s what I think. It’s the focus, it’s the interval and it’s touch points with management and I think the med tech voice on those 2 committees.

Ryan Weispfenning: Thanks, Larry. Next question we’ll take from Mike Kratky at Leerink Partners.

Michael Kratky: Maybe just going back to the CAS business. So during your last call, you talked about CAS growth accelerating from 30%. You put up another great quarter of nearly 50%. Expecting that to accelerate again. So I’m curious in terms of the ramp that you’ve seen, is that $2 billion that you’ve talked about in annual CAS sales now squarely on the table for fiscal ’26? Or what reservations would you have about committing to that?

Geoffrey Martha: Yes. No, thanks for the question, Mike. When I said that, we’re sticking to that. Nothing’s changed. And I said it’s near term. I think getting it in fiscal ’26 — and it’s off — just to be clear, it’s another $1 billion on top of our FY ’25 base, right? So that’s what we’re anchored on. 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. So that’s on track. I guess that’s accelerating sequentially as well and things are looking good. So no change there.

Ryan Weispfenning: We’ll take the next question from Robbie Marcus at JPMorgan.

Robert Marcus: Great. I wanted to follow up on Larry’s question on the new directors and the formation of the committee. Geoff, Thierry, maybe you could give us a little more. Besides more touch points and communication, is this something where maybe the size of the company, the dividend, the capital allocation might be up for a discussion how to create more EPS growth? I’m just trying to understand how much of this is more a continuation, Geoff, of your strategy since you became CEO? And I know you’ve talked a lot about portfolio optimization versus maybe evaluating something more of a wholesale change.

Geoffrey Martha: Yes. Look, Robbie, I’d say, first of all, I think we’re entering, like I said in the call, a new chapter here for the company. I mean, when I came in, immediately was met with a couple of challenges that we had to work our way through. Some of our own making, some market like VBP and things like that. But we’re — we’ve got a stable foundation. We’ve worked through that. Our growth drivers are kicking in. And we’re going to execute to that, right? And you’ll see this growth inflection in the back half of the year. But on top of that, I think, we feel confident, our Board feels confident and we — this is something that was in place before we started engaging with Elliott that we can turn the page to a new chapter and be more aggressive on some of these other drivers, right, that we talked about.

And these are the same things that Elliott has talked to us about is whether it be — it’s all about value creation and some bold decisions around a couple of areas. One is more M&A, okay? The Affera deal is looking great. And like I said, we feel like the team has the bandwidth to integrate more such deals like that, not necessarily in AFib, but across the company in these high-growth areas. So more M&A. A reinvigorated laser focus on the portfolio to reorient the whole portfolio between M&A and any kind of portfolio moves towards higher growth. So increase our WAMGR. Diabetes deal is a good proof point, but there’s other opportunities we can look at here. So that’s one big area. And then the second is investing more in the company. So we’re — we’ve talked about capital allocation within the company where we’re investing our R&D and our G&A, where — our growth-oriented G&A, where is that going, but making sure we’re investing more in the company.

Are we investing enough behind these big growth drivers? We think no, we’d want to invest more. You see it in our R&D this quarter growing almost 8%. We’d like to keep that trend going, invest more behind these growth drivers because they’re secular growth drivers. And talking to Elliott, they call them transformational growth drivers that we haven’t seen in decades. That’s their words, not mine. So these are the themes. Reorienting the portfolio for even higher growth that’s durable and then reinvesting more behind our growth drivers. We’ve got the confidence. We’ve got the stable operational base to do this. And we can work on those things as these other growth drivers that we’ve been working on for the past couple of years are taking us — are accelerating our growth.

So we can do both of these at once. And these committees are going to help with that. And super excited to have both John and Bill on the Board. We talked about their med tech background, but specifically operators, strong financial acumen, experienced in doing portfolio moves, M&A. And they’re just a good fit. They went through our normal process through our Nominating & Corporate Governance Committee. Everyone was unanimous. Everyone felt it was a good fit. We want them, they want us. And I think they’re going to do a great job not just supporting management but also representing all of our shareholders. So that’s how I’d answer that question, Robbie. It’s all about value creation, and we’re going to do what it takes to get there. There’s a big opportunity in front of us and it’s about capitalizing on this opportunity and accelerating it.

Ryan Weispfenning: Thanks, Robbie. Appreciate the question. Next, we’ll go to the line of Matt Miksic Barclays. Matt?

Matthew Miksic: And congrats on some of the progress here that you’re making in these major growth drivers. And so on that subject, you’ve been investing in the groundwork for these major growth drivers now for several years, Diabetes, Ablation, Ardian, and they’re just starting to really come through. So we get excited. I think everyone gets excited about seeing the growth come through and hearing about rates like 50% growth in Cardiac Ablation. But it’d be super helpful if you could try to square, not to temper the enthusiasm because they’re great programs, but try to square what these can mean on an annual basis to sort of overall Medtronic portfolio growth just because I think the perception becomes we’re accelerating growth, which means we’re not going to do 5%, maybe we’ll do 6% growth or something like that, which to take that off the list for the long term.

But maybe help us walk through a cadence of 25 or 50 basis points over the next 12 months. Is it another 25 or 50 basis points maybe in ’27? Just some way of gauging what this means to overall portfolio growth would be super helpful.

Geoffrey Martha: Okay. Mike. I don’t know, Thierry, do you want to take that one?

Thierry Pieton: Yes, I guess I’ll take a shot at it. And Geoff, you can comment. So first, you might have seen in the announcement that we’ll do an Investor Day sometime in mid-’26 to take you through sort of the next step in our financial profile. So I’m not going to give you very specific targets until we get to that point because that will be the whole purpose of that discussion. When we have that discussion, what we’ll do is we’ll show you where the company is going. We’ll show you the steps to get there. And we’ll show you what it means from a financial profile perspective the new sort of framework financially speaking. And we’ll give you the indicators that you can use to see that we’re tracking towards that path. That being said, to be a little more short term, look, Geoff mentioned the magnitude of the opportunity that we’ve got in CAS.

So we’re talking $1 billion of incremental revenue over the ’25 run rate within a relatively short time frame, right? So this — you could see the type of impact we’re going to have there. On Ardian, it’s also a secular change for us and a massive transformation in terms of run rate. And you can see the size of the opportunity that this represents. So these 2 things alone are going to have a pretty significant impact on our growth rates. And then Geoff mentioned all the other elements such as tibial and Hugo that are going to kick in, et cetera. So it’s very clear that we’re talking macro level impacts growth opportunities. And to be clear, we’re not giving up on the rest of the business, right? So we’ve made the underlying changes to make them run smoother.

We’re addressing with product and innovation some of the businesses that have been slower-growth businesses or franchises for us in the past. So you should see these large opportunities as being incremental, and that’s what we’re targeting. For the exact quantification, I’m afraid you’re going to have to wait a little bit. You’ll start seeing the signs in the second half, and then we’ll show the new framework when we talk to you in the mid of ’26.

Geoffrey Martha: Yes. No, the only thing I’d add to that is, look, why now? We’ve got this growth coming, right? We’re going to have this inflection in the back half of the year and very tangible new product innovation coming. And even from like this quarter, you have some businesses that were growing below trend that also have nice products coming or lapping an issue like VBP and Neurovascular that also contributes at least to a nice back half growth that will continue. And that higher growth allows us — gives us more, just through some natural leverage and our cost control and our operational efficiencies, it gives us more oxygen to reinvest which allows us to do more innovation. So there was that chart of that cycle. And the only thing I think is missing from there is portfolio, right?

So more growth leads to more oxygen, which leads to more investment, which leads to more innovation and more growth. And then you’ve got the portfolio in there. So I do think it creates opportunities for a different algorithm here. But that’s something we’re not going to really talk too much about until we get to that Investor Day. I’d like to think there’ll be some milestones along the way, but the broader strategy and algorithm, all that, we’ll talk about on that Investor Day.

Thierry Pieton: If I can just add one comment, Geoff, on that. We’re talking about reinvesting more, but I want to be clear that we’re not talking reinvesting to the detriment of EPS, right? So it has to be and. So we’re very clear on the fact that the growth will allow us to invest more while continuing to generate leverage in the income statement and improving EPS, right? I just want to be clear about that.

Geoffrey Martha: Good point.

Ryan Weispfenning: Okay. Thanks, Matt. Next, we’ll go to the line of Anthony Petrone at Mizuho. Anthony, please go ahead.

Anthony Petrone: Congratulations on the announcements this morning. And maybe I’ll zone in on one of the growth initiatives, which is Renal Denervation. We’re looking at the targeted date of October 8 for the NCD. So maybe just frame for us what you would view as the best case outcome in terms of the targeted population in uncontrolled hypertension. And when you sort of think about this new structure growth initiatives, where would you stack rank Renal Innovation on transforming the growth profile of this company? Can this be a multibillion dollar product category over the next few years?

Geoffrey Martha: Yes. Thanks for the question, Anthony. Look, First of all, let’s — there was an update on Ardian this quarter, which I don’t think we talked about — we didn’t talk about it in the commentary, but we did get through the comment period, that 30-day comment period ended with CMS. And there was, I think, a record, I’m told, from our reimbursement folks, a record number of comments, overwhelmingly positive in support of Ardian and the guideline — and the kind of the CMS, how they framed reimbursement and what’s required. And that, like we said on our last call, is kind of a best — is a very good case for us that opens up this market. In addition to that, you’re seeing physician societies. We already saw it in Europe a few months ago, now in the U.S. incorporating renal denervation in our — I guess, seeing our product name here Symplicity, you’re going to hear a lot more about that, into the care pathway.

So all these puzzle pieces that we’ve been working on for so long, breakthrough FDA device designation, a nice indication for this, the CMS proposed reimbursement, the comments. Now you’re seeing the physician societies incorporate Symplicity into the care pathways, how you take care of these patients. Strong demand from hospitals to say, okay, we need to get serious about this. How do we — we need to build these care pathways. We’ve put out — we’ve deployed a lot of market development specialists to support them in this. Training of the physicians, although that’s not a huge burden, a lot of — the interventional cardiology community, this is not a big stretch for them. So that’s not a huge burden like something completely new. They got the catheter skills.

And so all the dominoes are falling. The puzzle pieces snapping into place that this is going to be a massive market. Now we’re looking at CAS right now, it’s very tangible. You see the transition from drugs to ablation. And within ablation from one technology over to PFA, and we’ve got a great technology there. It’s growing like crazy. It’s very tangible. I still think Ardian has a chance to even be bigger. The patient population is massive. We’ve talked about, how many, hundred million people in the U.S., 100 million to 200 million people in the U.S. that have hypertension. And of those, is that right, about 100 million?

Ryan Weispfenning: Yes. I’ll chime in, Geoff. 18 million that are uncontrolled hypertension. And so it’s a massive population.

Geoffrey Martha: And 1 in 4 people with hypertension have — it’s a huge number that’s uncontrolled. And so we think this is going to be a — could be the biggest thing that we ever do. And this is one of those areas that we talked about is investing behind this to really make this market develop and grow and be a driver for us and create a moat around our franchise, our Symplicity franchise, to protect it against competitors. We’ve got already our next generation of catheters ready to go. We’ve got new clinical trials, ablating different places that we think in the early work meaningfully helps the blood pressure reduction. So there’s a lot of work going on here and just really pleased with the way it’s all coming together. Anything else…

Ryan Weispfenning: Great. Thanks, Anthony. Next, we’ll go to the line of Josh Jennings at TD Securities. Josh, please go ahead.

Joshua Jennings: Wanted to just check back in with the increased focus on the Diabetes franchise with the IPO split — separation strategy. Just in the U.S., it sounds like that the slowdown may have been driven by just patients and physicians waiting for next-generation CGM and Instinct, the collaboration with Abbott. Multipart question, but just, first, I just want to maybe check and make sure there hasn’t been disruption that’s leading to a slowdown. And then second, just to set expectations in terms of how we, on a sell-side investors, should be thinking about the ramp from here in the U.S. Diabetes business? And then lastly, just what’s left for the approval and launch of Instinct and the integration with 780G? Sorry, 3-parter there, but I hope you got all that.

Geoffrey Martha: Okay. Well, so the 3-parter and change the picture, if you want. But why don’t I do 2 things here. I’ll have Thierry update you just on the deal. It is on track and let him talk about that. And I will bring Que on to talk about the business specifics. So Thierry, do you want to update us on the deal?

Thierry Pieton: Just on the deal, I would say the process is perfectly on track. So there’s really 2 sides. One is the operational separation of the business and the other is the transaction itself on both fronts. The teams are making progress exactly in the way we anticipated. The first investor engagements have been very, very encouraging. So look, we said 3 months ago, we thought we’d complete the separation within 18 months. It’s 3 months later, now it feels like 15 months. So everything on track, that’s all I would say on this front, Geoff.

Geoffrey Martha: Okay. Que, do you want to answer the business questions that Josh had?

Que Dallara: Yes, Geoff, thanks. Josh, I think you got it right. It’s really a matter of timing in the first half. We’re really excited about Simplera, and you can see that we’re achieving double-digit growth in the international markets where Simplera has been launched. And in the U.S., the demand is absolutely there. So we have this dynamic where patients are waiting for the new CGMs. And to give you a sense of how we’re ramping up production, we’re going to be producing double what we made in Q1 and in the second half double what we’re making in the first half. So production is ramping up really nicely. And then in parallel to that, the Abbot-based sensor, Instinct, we expect to launch in the coming months, so not too far behind Simplera.

And to put it in context, it’s actually a very big moment for us because we’re now going to have 2 competitive sensors on the market, giving patients choice, significant improvements in form factor and days of wear. And so really, it’s a matter of timing and why I’m actually extremely confident that we’ll see growth acceleration in the second half. And then you asked about what’s left to get Instinct over the line, we told you that we submitted for ACE and iAGC back in April. We got ACE approved in July. So our expectation is that we’ll be in a very strong position to launch in the coming months.

Geoffrey Martha: Yes. Look, I’d summarize it. There’s, however you want to phrase it, a super cycle of innovation here that Diabetes has. So on the very front end of — and we think this transaction is going to be a value creating — a significant value-creating event for shareholders. But meantime, we still — Medtronic is the owner of this company for 1 year-plus and we’re very focused on it. This is an important part of the company, and we’re committed to making this — capitalize on this cycle of innovation that we’ve been building towards and this — making this transaction a meaningful value creator for investors.

Ryan Weispfenning: Great. Thanks, Josh. We’ll take 2 more questions here before we wrap up. So we’ll go to the line of Matt O’Brien at Piper Sandler.

Matthew O’Brien: I’d love to ask a little more about Ardian. But I think the other thing to think about here is the overall business as you spin off Diabetes, you’ve got half the business that’s doing really well, growing very quickly. But another half that’s a little softer, not growing quite as quickly, maybe some structural headwinds. You do have a couple of new products in tibial and robotics that may be able to help kind of some of these softer areas. But are there other products on the organic side of things that can help kind of bring some of these softer businesses up to the other half of the business that’s doing so well? Or do we need to wait for more inorganic additions to really help with that side of the business, maybe post the Elliott contributions?

Geoffrey Martha: Yes. Thanks, Matt. No, look, the short answer to your question is some of the businesses that came in below trend or lower growth in the portfolio, they have very specific growth accelerators already organic. We talked about Neurovascular, for example, that’s been a good grower for us in the past. And it has to get through a major, probably the biggest VBP impact we’ve had on any one business. Neurovascular for us is huge in China. And so that is — we’ve got a — we’re moving through that and also had a recall, which we’re not technically lapping that, but the replacement product now is ramping up, so that’s going to accelerate. And then I mentioned through the Contego partnership, some products that we’ll be putting on our Neurovascular and our Peripheral Vascular bag, I’ll come to PV in a second, that will help with its growth.

And then finally, we’ve got some hemorrhagic products in Neurovascular. So Neurovascular, you’re going to see a meaningful acceleration. We talked about Pelvic Health and I think this is an underappreciated one. This overactive bladder is an under — it’s a huge market. It’s millions of patients. And the idea of going from basically an implantable device in your upper buttocks, the sacral nerve modulation, to something that’s above your fascia on the ankle, it’s not quite a wearable, but it’s pretty close to wearable, is really going to open up that market. We’ll take market share, which will be fun. But the bigger thing, we’re going to grow this market like crazy. So that’s another one. And Neuroscience, over the years, has been a consistent performer for us, and it’s very well positioned competitively and it will be that way.

And I think these 2 will help accelerate it. Peripheral Vascular as well. Again, the Contego transaction, we put those carotid stenting products in their bag. They have some other organic products coming in aspiration, Liberant. And so there’s another example as well. Those are some of the slower — and then we talked to you about Diabetes. And then the other 2 things are big — look, we — Surgical we’ve talked about there are those headwinds. They are stable, but consistent headwinds that we’re dealing with there. And then in our other 2 big franchises, Spine and CRM, we’re in great shape. Spine had a mid-single-digit revenue overall and it was like 4.5%. I think we had over 8% in capital worldwide. I know our competitor said something about their capital was a little lower or a lot lower and there was concerns about capital in that area.

No, our capital is growing like crazy globally, over 8%, 13% in large capital. We’ve got a moat around that Spine business that’s going to be durable. And then Cardiac Rhythm, it had some tougher comps to deal with, but there’s a lot of innovation there. EV-ICD growing — well, first of all, Leadless is still growing over 14% this quarter. It’s over a decade and still growing in the teens even with competition, 14% this last quarter. You’ve got EV-ICD growing over 80%. And then our conduction system pacing lead was 20-some percent, 21%, I think. And then we’ve got a new high-power conduction system lead coming, OmniaSecure. So I think that business is in a great shape. So you look around the portfolio, you see major growth drivers and you see some, I’ll call them, singles or doubles coming in, some of these lower-growth businesses, except for Pelvic Health, that’s more than a single — that’s a big one, that are going to get the rest of the company up and really support this back half ramp and keep it durable.

Did I miss anything?

Thierry Pieton: No, I think that was very comprehensive.

Ryan Weispfenning: Thanks, Matt. We’ll take one more question. We’ll go to the line of Joanne Wuensch at Citi.

Joanne Wuensch: SRS earlier this summer, Hugo had a really significant showcasing. And I’m curious what are your thoughts on what you’ve learned in the European market and how that could translate to when it comes into the U.S. market. And I’m also curious if you can give us any sort of metrics on revenue robots placed? Anything that sort of helped ground us to the progress that’s being made in that segment?

Geoffrey Martha: Thanks, Jo. I think we’ll call Mike Marinaro to answer those questions, but I’ll start by saying Hugo continues to make progress. This is an important program for us. We’re counting on it being one of our growth drivers, particularly when it gets into the U.S. we talked about in the back half of the year. But I’ll turn it over to Mike to answer those specific questions. Mike?

Mike Marinaro: Yes. Thanks, Geoff, and thanks, Joanne. So maybe first to answer the questions around what we’ve learned in the international markets. I think, importantly, we’ve learned that we have a form factor that’s been received very well, particularly the open console, the modular design, which is now really starting to play out in a very meaningful way in general surgery. We’re seeing that general surgery applications are really a place where the modularity of the system really shines because you can take a true lap-like approach. We’re learning that partnership really matters. We’re not really selling — we’re selling robots and the performance of the robot, obviously, is critically important. But really we’re building partnerships.

And so training, education, how we surround the robot, how we come to customers as a full surgical business, these are all critical lessons that we’ve learned so far and also lessons that we’re borrowing from our Spine business, which I think Geoff just talked through that there’s really a whole ecosystem play here that we’re thinking about then as we come to the U.S. market. From a performance perspective, we’re now in over 30 countries in markets around the globe. We’ve logged tens of thousands of procedures, and we’re seeing significant double-digit growth in our current accounts on a year-on-year basis. So very good progress there. And we’re tracking that momentum very carefully because how those accounts perform on a year-on-year basis, obviously, is a good indicator for what we should expect moving forward.

As you know, we’ve filed and as we talked about at SRS, Joanne, I think you were there, we filed for FDA approval for our urology study — our urology indication rather here this year. We’re progressing well in talks with FDA. We’re preparing to launch — or rather submit hernia and GYN shortly thereafter. Those are all submitted by very large data sets that we’re presenting at major conferences. So we presented urology at AUA, a very large data set at the European Urology Society, the GYN data at SRS. We’re presenting the hernia, Enable Hernia, which will be the data to support our U.S. approval at the American Hernia Society here coming up in September. So we’re taking a very sort of forward-leaning public approach to really displaying the safety and efficacy of the system so that customers and the community can see what that looks like.

And we’re shortly preparing to enroll our first patient in our GYN-onc study so that we can pursue that indication as well. So there’s a whole series of progress that’s being made here in addition to our digital ecosystem, which grew significantly last year, both in LAP and robotics, including in competitive systems and is poised to more than double again this year. So I think, Geoff said it. We are making very good progress. We’ve seen now the performance of the system. We’ve learned from that. We’ve seen how critical it is to really come in as full partners, and we’re expanding the number of countries and significantly increasing the number of procedures on a quarter-by-quarter basis. But thanks for the question.

Geoffrey Martha: Okay. Thank you, Mike, and thanks, Joanne, for the question. So I think that we’re going to bring the call to a close here. First, I want to thank all the analysts for their questions and all the support. Thank you for joining us today. And I’d like to announce our next — our Q2 earnings call is going to be broadcast the week of Thanksgiving, actually, Tuesday, November 18…

Ryan Weispfenning: The week before.

Geoffrey Martha: The week before. I’m sorry, the week before Thanksgiving, Tuesday, November 18. That’s the week before Thanksgiving. We will update you on our progress. So with that, I’ll bring the call to the close, and thanks for joining us, and have a great day.