Medtronic Q3 FY2026 Earnings Call - PFA-fueled CAS Surge and Early-Stage Launches Point to Durable Growth Acceleration

Jeff, Executive (likely CEO or President), Medtronic: We look forward to bringing this unique catheter to the U.S. Beyond CAS, we’re also making material progress with Symplicity Spyral for hypertension and UltraViva for urge urinary incontinence. Symplicity delivers a one-time, durable, minimally invasive treatment for hypertension and represents one of our largest growth drivers. Now, this is going to be a contributor for years to come, given the 18 million U.S. patients with uncontrolled hypertension. We’re seeing strong patient outcomes in the field and the R&D and value proposition, it resonates with both physicians and patients. Now we’ve got strong and growing clinical data, a broad label, and expanding reimbursement all in hand. Look, we built the foundation. Now we’re focused on growing this new segment and transforming the hypertension treatment paradigm.

We’ve recently activated our direct-to-consumer Go Beyond campaign in key markets around the US, which is resulting in a 50 times increase in website visits versus the prior quarter. So a lot of interest coming in from patients. Building a, building a new market, it does take time. That is something Medtronic knows how to do exceptionally well. And in parallel to building out this new market, we’re innovating for the long term. First, with our transradial catheter, which is on track to launch in the second half of fiscal year 2027, and with our Spiral Gemini trial, evaluating multi-organ ablation to further boost efficacy. Now, similarly, we are scaling UltraViva, our tibial neurostimulation device. UltraViva is a, is a simple yet transformational option for treating urge urinary incontinence, which is a condition that affects 16 million people in the US.

UltraViva is a very small device that requires no imaging, no sedation, activates the same day, is MRI ready, and offers up to 15 years of battery life, the longest in its category. Again, we are receiving great early interest and feedback from both physicians and patients, and we are training doctors. We’re educating and supporting hospital staff and investing in omni-channel consumer activation. Look, it’s early days for both of these launches, and we are focused on disciplined execution to convert early traction into procedures. Now pivoting to Hugo. This quarter, our Hugo robot received FDA clearance for urologic surgical procedures, enabling us to begin our purposeful U.S. launch. Today, I’m excited to share that we’ve already completed our first installations and initial cases.

As noted in our release this morning, last week, we completed our first cases at Cleveland Clinic, where surgeons echoed the strong feedback we continuously receive on Hugo’s differentiation across multiple areas. This includes its flexibility, portability, open console, and of course, our trusted instrumentation. Hugo is especially compelling when paired with our Touch Surgery digital ecosystem, an AI-powered data, connectivity, and analytics technology that is unique to Medtronic. This quarter, Touch Surgery installations increased over 20% sequentially and have now surpassed 1,000 systems globally. Further, we continue to evolve our Hugo system with the fourth generation software release and continuous system improvements. We are planning to expand into additional indications in the U.S., like hernia, part of our broader general surgery indication, where this system really shines. Customers value.

I mean, they really value having a partner that spans the full continuum of surgical care. Medtronic is the only company that has approved offerings across open, laparoscopic, and robotic-assisted surgeries, which matters as hospitals build and expand their surgical practices. Now, we are thrilled with these four generational growth drivers, but our innovation pipeline is far broader, and we are committed to driving sustained innovation across our portfolio and advancing a steady cadence of new technologies across high need, high growth categories, where we are well positioned, like MMA, carotid stenting, thrombectomy, coronary DCB, cardiac rhythm management, spine surgery, as well as many others. To that point, I am extremely excited to highlight a major milestone in our neuroscience business. Just last week, we secured FDA clearance for our Stealth AXiS Surgical System for spinal procedures.

Stealth AXiS is a new transformative platform that unifies AI-powered planning, robotics, and navigation into one seamless system, elevated by the entire AiBLE ecosystem. Stealth AXiS was designed around navigation, which is paramount to surgeons’ workflow in the OR. Today, navigation, which we pioneered and we lead, drives 70% of U.S. spine procedures, and really, it just dictates the workflow in the spine OR. So Stealth AXiS is really two things. It’s about taking share as a new platform with improved functionality, and it brings down barriers for physicians to step into robotics without disrupting their workflow. Now, building on our 10,000 unit install base, we are expanding and opening this segment and extending our leadership. And we’re not stopping at spine. We anticipate pursuing future cranial and ENT indications for Stealth AXiS.

This is an important driver for our CST business and an exciting step forward to improve precision, predictive, predictability, and personalization of care. We’re executing our M&A strategy as well with the CathWorks acquisition and CRDN, and we continue to build out our venture and minority investment portfolio with the Anteris investment in Structural Heart. Both transactions underscore our long-term strategy to digitize, enable, and build effective and efficient ecosystems within our core markets. Before I turn it over to Thierry to walk through the details of our business performance, our financials, and the guidance, I would like to close with the following remarks: At Medtronic, we are translating the breadth and the depth of innovation across the portfolio into durable growth.

We have businesses at different stages of their growth journey, but the cadence of innovation across our portfolio suggests a steadily improving growth outlook for total Medtronic. We have businesses that are executing exceptionally well today and are positioned to be meaningful contributors for a very long time. This includes CAS, with its strong PFA pipeline, CST with Stealth AXiS, and of course, CRM, a large and steady growth engine with meaningful innovation and defibrillators and leadless and in conduction system pacing. We have businesses where the pipeline is now just activating, where we have clear line of sight to meaningful, tangible opportunities that will enhance growth. From CRDN with the ramp of Symplicity, Pelvic Health with UltraViva, Peripheral Vascular Health with NeuroGuard and Liberant, and Neurovascular with innovation like Artiss, NeuroGuard, and expanding indication for On-X into MMAE.

Surgical, where the launch of Hugo in the U.S. is just beginning. These are all real drivers with tangible reasons for improvement and the potential to impact growth in the coming quarters and years. We also have areas where there is work to do, and we have defined plans underway, like like in Structural Heart, where we’re taking specific actions to fill out the portfolio and improve the trajectory. So with strong contributors delivering today, businesses on the cusp of step change improvement, and segments where we’re taking deliberate actions to strengthen long-term competitiveness, we are confident in our ability to deliver durably. So with that, I’ll turn it over to Thierry to walk through the details of our business performance. So over to you, Thierry.

Thierry, Financial Executive (likely CFO), Medtronic: Hey, thanks, Jeff, and hi, everyone. I appreciate all of you joining today. Let’s start with our cardiovascular portfolio, where this quarter we delivered 11% year-over-year revenue growth with 13% growth in the U.S. This represents the strongest growth we’ve seen in cardiovascular in the last 10 years, excluding COVID comps. CAS grew 80% year-over-year, with PFA accounting for 80% of that revenue. Beyond CAS, the remainder of the cardiovascular portfolio delivered combined mid-single-digit growth. Cardiac rhythm management also had a strong quarter. CRM continued to contribute 15% of our total revenue, and it grew a healthy 5%. This was primarily driven by continued double-digit growth in Micro, mid-teens growth in 3830 CSP Lead, and over 70% growth in Aurora EV-ICD. In peripheral vascular health, we posted high single-digit growth, driven by broad strength across our endovenous portfolio.

We look forward to the continued launch of NeuroGuard IEP carotid stents and the full market release of our Liberant mechanical thrombectomy system. In structural heart, Q3 was a little softer as expected and grew low single digits. We had a stronger quarter internationally and continued to gain share in Europe. This was partially offset in the U.S., where we annualized our Evolut FX+ launch and saw some competitive pressure. I’ll now pivot to our neuroscience portfolio, which grew 3%. Growth was a little below our expectations this quarter, but neuroscience is also where we have one of our broadest pipelines and some of our most exciting opportunities. Importantly, we expect that pipeline to begin impacting growth in the fourth quarter. Cranial and spinal technologies continues to be a powerful engine for Medtronic. This large business delivered mid-single-digit growth, including 8% growth from strong pull-through in core spine.

We’re excited to offer customers our new navigation and robotics platform, Stealth AXiS, with Jeff, which Jeff just mentioned. With FDA clearance achieved, we expect to see Stealth AXiS contribute neurosurgery and CST overall as soon as the fourth quarter. Specialty therapies delivered flat results in the third quarter. This is an area where we expect improved performance in the coming quarters, given the series of new product developments. Neurovascular has been challenged over the last quarters due to China VBP and to the recall of Vantage, both of which are now mostly behind us. We also have line of sight to a higher level of growth from the contribution of On-X’s expanded indication. The NeuroGuard carotid stent launch will also contribute, as it’s being commercialized by both our neurovascular and peripheral vascular businesses.

In pelvic health, we saw a slightly softer sacral nerve stimulation market environment, but look forward to seeing the increased contribution from UltraViva. In neuromodulation, we grew 4%, driven by the continued rollout of our differentiated, fully closed loop technologies, Inceptiv SCS and BrainSense ADVS. Next, our MedSurg portfolio grew 3% ahead of expectations. First, endoscopy and ACM had strong quarters. Endoscopy revenue grew 10%, led by mid-teens growth in our esophageal portfolio, driven by Nexpower and strong market adoption of EndoFlip 300. Acute care and monitoring saw a 7% growth, led by strength in blood oxygen management and airway access. And finally, our surgical business grew by 1%. We saw strength and energy in wound management and hernia, with expected softness and stapling.

The next phase of growth for this business is the rollout of Hugo, and we’re thrilled to see our first installations and first cases so swiftly after the U.S. launch. Wrapping up our business performance is MiniMed, our diabetes business, which delivered 15% reported and over 8% organic growth. Performance was led by double-digit strength in international markets. We also saw acceleration in the U.S. with strong sequential lift, driven by Simplera Sync and Instinct, which both just launched in December. Our diabetes business continues its strong innovation cycle, supported by multiple recent regulatory and pipeline milestones. In addition to introducing Instinct and Simplera to the market, we secured several FDA clearances that further expand Seven AT’s indications. We also announced that Seven ATG system is now available through pharmacy, with agreements that cover the majority of commercially insured lives in the U.S.

We submitted MiniMed Flex to the U.S. FDA and began the U.S. pivotal study for Vivera, our third generation, fully closed-loop algorithm, which we believe will help maintain our leadership in delivering industry-leading outcomes. Finally, our MiniMed Fit patch pump remains on track, and we intend to submit it to the U.S. FDA by this fall. The planned separation of MiniMed is perfectly on track. Our preferred path continues to be a two-step IPO and split. We continue to expect the separation to be complete by the end of calendar year 2026. Now, turning to the financials. This quarter, revenue of $9 billion grew 8.7% reported and 6% organic, a 50 basis point acceleration from prior quarter and 50 basis points above our guidance.

Geographically, this performance was balanced, led by high single-digit growth in Western Europe, with mid-single digit growth across the U.S. and Japan. U.S. growth was 6% year-over-year, the strongest performance we’ve delivered since fiscal year 2019, excluding COVID comps. In China, we delivered low single-digit growth while navigating ongoing but manageable volume-based procurement in a few businesses. Excluding VBP, our growth rate in China was mid-single digit. Our adjusted gross margin was 64.9% ahead of expectations. As I’ve done in the last several quarters, let me walk you through the rough breakout of the components. We realized 30 basis points of benefit from pricing. Net of inflation, cost down was -20 basis points, as the third quarter is typically our lowest quarter for generating cost efficiency savings, and we had some prior year non-recurring items.

Mix was negative 100 basis points, mostly driven by CAS and diabetes. As discussed in prior disclosures, with CAS in the early stages of launch, this business is currently impacted by the mix of lower margin capital to higher margin catheters, and diabetes is in its early manufacturing ramp up of Simplera. Over time, as you know, we expect this mix dynamic to improve as we scale CAS and separate the diabetes business. Tariffs impacted the business $93 million, or 110 basis points, in line with forecast. Finally, foreign exchange provided an approximate 40 basis points tailwind. Adjusted R&D was 8% of revenue and increased 7.4%. On an organic basis, this outpaced revenue by 50 basis points.

Adjusted SG&A was 32.3% of revenue, which is 30 basis points lower than the third quarter of last year. We continue to fuel our PFA launch and develop and build the markets for Symplicity, Inceptiv, and Hugo, but at the same time, we delivered disciplined leverage in G&A. Our adjusted operating profit was $2.2 billion, resulting in an adjusted operating margin of 24.1%, ahead of expectations again. Our adjusted tax rate was 17.3%, about 100 basis points higher than forecast, largely due to jurisdictional mix of profits. All in all, adjusted EPS was $1.36, 3 cents above the midpoint of our guidance range. Now, turning to guidance. On the top line, we’re reiterating fiscal 2026 organic revenue growth guidance of approximately 5.5%.

In the fourth quarter, we expect revenue growth similar to Q3, so around 6% off a stronger Q4 2025 comp. Moving down the P&L, we expect our fiscal 2026 gross margin to increase slightly ex tariffs. Pricing, FX, and COGS efficiency programs are expected to more than offset the negative impacts of business mix, primarily from CAS and diabetes. We anticipate a tariff impact to COGS of approximately $185 million, including $75 million in the fourth quarter. Including tariffs, we expect fiscal 2026 gross margin decrease of roughly 30 basis points. We expect fiscal 2026 adjusted operating profit to grow approximately 5% or 7% excluding tariffs. Our fiscal 2026 operating margin is expected to be roughly flat, excluding tariffs, and down about 50 basis points, including the tariff impact.

In totality, we expect with these results to deliver gross margin and operating margin leverage ex tariffs in the second half of the fiscal year 2026, as we stated last quarter. Turning to EPS, this quarter, we saw a beat of $0.03. This was largely due to slightly better than expected revenue in the quarter, mainly from CRM and ACM. This was partially offset by the aforementioned tax pressure that we saw in the quarter. As we expect CRM and ACM to normalize and the tax pressure to carry into Q4, we are maintaining our fiscal 2026 EPS guidance in the range of $5.62-$5.66. Look, we’re excited about the quarter, and we think Q4 is gonna be another robust quarter, and that we will sustain our growth at a higher level and into the next year.

We’re making progress on margin expansion, and the negative mix effect from CAS and diabetes are gonna get better. We’re going to continue to invest in growth areas like R&D, sales and marketing, and M&A to capitalize on the opportunities ahead of us. We will also continue to drive efficiency in functional areas. All told, we are committed to our guidance, and we maintain our expectation for high single-digit EPS growth in fiscal year 2027. Back to you, Jeff.

Jeff, Executive (likely CEO or President), Medtronic: Okay, thanks, Thierry. Now, before we go to Q&A, let me close with a few final thoughts. So we’re encouraged by the progress across the business, as Thierry just said, and we remain committed to stronger, durable revenue and earnings growth. Our PFA trajectory is strong, and we’re progressing on multiple billion-dollar opportunities. We’re reinforcing our future pipeline, and we’re committed to organic and inorganic investment to further bolster the portfolio. Bottom line, we are delivering. Now, to our Medtronic colleagues around the world, thank you for your unwavering commitment to our mission and to the patients we serve. You’re delivering for customers and for patients, and you’re turning our strategy into performance. So thank you. With that, let’s turn to Q&A. So first, Ingrid, welcome to your first earnings call, and now can you please provide the instructions and queue up the analysts?

Ingrid, Investor Relations, Medtronic: Thank you, Jeff. For sell-side analysts that would like to ask a question, please select Participants button and click Raise Hand. If you’re using the mobile app, please press More and then select Raise Hand. Your lines are currently on mute, and when called upon, you will receive a request to unmute your line. You must respond to this before asking your question. Finally, please be advised, this Q&A session is being recorded. We’ll now pause to assemble the queue. We’ll take our first question from Travis Steed at Bank of America. Travis, please go ahead.

Travis Steed, Analyst, Bank of America: Hi, everybody, thanks for taking the question. I guess first I’ll start on just the comments on accelerating revenue growth next year and growing earnings high single digits. When you think about CAS, obviously... Can you hear me okay? Can you hear me okay?

Jeff, Executive (likely CEO or President), Medtronic: There we go.

Travis Steed, Analyst, Bank of America: Yeah. Okay. I just wanted to ask about the accelerating revenue growth for next year, and also the commitment to grow earnings in high single digits. I guess when you think about the overall portfolio, obviously CAS is starting to hit tougher comps and, you know, this quarter, you know, surgical is only growing 1%. So just trying to think about how you get that business accelerating with Hugo and just like the commitment to be able to deliver on the commitments that you’ve kind of laid out for FY 2027.

Jeff, Executive (likely CEO or President), Medtronic: Well, thanks, Travis, for the question. I’ll give it a start and then hand it over to Thierry. I mean, look, on the top line, obviously, as you mentioned, we had a really strong quarter with CAS. You know, we still, you know, we think that growth is going to continue and become a larger part of the company, obviously. We’re well positioned there. And then we, you know, our other big growth drivers, particularly, Symplicity, for hypertension and UltraViva for overactive bladder, we see them beginning to kick in here, even in Q4. And then you’ve got a number of other businesses here that are going to, you know, start growing faster than they have been here recently. You know, one is CST, with the Stealth AXiS.

I’m sure we’ll get some questions on that, but I do think this is kind of underappreciated, quite frankly, you know, by the Street. This is, you know, not just a new robot. It’s not just an extension of Mazor, it’s a whole new platform that, you know, has a lot of benefits to it, and I think that’s gonna create growth for the long, you know, short and long term for CST. And then Neurovascular is gonna kick up as well. Neurovascular’s got a number of new products, like the On-X, you know, indication for MMAE, as well as our carotid stenting product and NeuroGuard. And then it anniversaries VBP and a few other things. So you’re gonna see a kick up in Neurovascular as well.

So I think, you know, we feel good about the growth continuing here out, you know, not just in Q4, but out into, in FY 2027.

Thierry, Financial Executive (likely CFO), Medtronic: Yeah, and on, on the EPS side. So, you know, as I, as I mentioned in the comments, the algorithm is clear, right? So we have the accelerated growth. The things are getting better at the gross margin level, in, in particular in the second half, as, as we’ll see, the mix effect from, from CAS getting better and, and the separation of diabetes will continue to, to drive the leverage on the functional areas, in particular in G&A. And we’ll then continue to invest in R&D and, and in M&A. So we’re reiterating the, high single-digit EPS growth guidance for 2027. We do have a couple, you know, meaningful puts and takes in the number next year. And as we’re getting more visibility, we’ll, we’ll keep you posted on what the impacts are.

But to name a few, so we’ll have the carryover from the tariffs, the tariff settlement, going into next year. You know, this year we had about 2.5 quarters of tariffs, and that will carry over into the full year. I think the way to think about that is about $75 million per quarter. So on a full year basis, it means around $300 million of headwind versus the $185 million we had in what we’re having in 2026. We’ll have a little bit of help from the fact that there’s 53 weeks in fiscal year 2027, as opposed to 52 usually.

Then, you know, the diabetes deal, we fully expect the deal to be accretive, but between the moment we do the IPO and the moment we do the split, you should expect some dilution to the tune of $0.01-$0.02 per month. The reason behind that is that most of the stock, the Medtronic stock retirement that we will do that drives the accretion, happens only upon the full separation. So we’ll see the accretion later, but initially, we’ve got a little bit of pressure coming from that. And we’ve also embedded in the guidance $0.04-$0.05 of dilution coming from M&A activity. So we’ve already announced CathWorks and Anteris, and so we’ve embedded that in the guidance. So it’s all in.

As we get more visibility to the timing of diabetes and the closing of the M&A deals, we’ll give you more specifics on the different impacts in the Q4 release. But as you can see, we’re committed to the growth acceleration, we’re committed to the investment with M&A and with R&D, and we’re committed to the guidance.

Jeff, Executive (likely CEO or President), Medtronic: Yeah, and just-

Travis Steed, Analyst, Bank of America: The growth acceleration-

Jeff, Executive (likely CEO or President), Medtronic: Go ahead, Travis.

Travis Steed, Analyst, Bank of America: Excluding the selling day. Yeah, there’s that extra selling week next year. Is that, is the growth acceleration excluding that extra selling day?

Thierry, Financial Executive (likely CFO), Medtronic: So that’ll be part of it. That’ll be part of it. And again, we’ll give you the details of the impacts as we go into the Q4 announcement.

Jeff, Executive (likely CEO or President), Medtronic: But when I think about the growth acceleration, you mentioned CAS in Q3. I mean, beyond CAS, you saw our CRM business and our peripheral vascular health business both step up in Q3. You know, Q4, like I said, and beyond, CST, think about CST and neurovascular starting to accelerate. And then as you get into FY 2027, that’s when the Ardian and UltraViva, you know, really kick in, and also Hugo. So we feel good about that acceleration.

Travis Steed, Analyst, Bank of America: Great. Thank you.

Ingrid, Investor Relations, Medtronic: All right, our next question comes from Vijay Kumar at Evercore. Please go ahead, Vijay.

Vijay Kumar, Analyst, Evercore: Thank you, Ingrid, and welcome to your inaugural earnings call here. Jeff, congrats on a nice sprint. You know, I had one product question and one clarification on the guidance. On the product, you mentioned RDN and UltraViva. Those will be growth accelerators in fiscal 2026. How should we monitor the progress? Are there any goalposts that we can look forward to in tracking the launch curves for RDN and UltraViva?

Jeff, Executive (likely CEO or President), Medtronic: ... You know, it’s a good question. I think we’ll start to lay out more concrete goalposts, as we go forward. Right now, we’ve been talking a lot about, you know, the leading indicators that we’re seeing with both, and we’re seeing, you know, really strong leading indicators, like with UltraViva, we talked about, you know, training 500+ physicians. You have strong demand training 500, you know, plus physicians. And, like I said last quarter, I mean, these are- this is all over the weekend, often traveling. It just shows the commitment here. And then things like in renal denervation, I’d say it’s things like, you know, the opening of new accounts. Like this quarter, we opened 200, you know, over 200 new accounts.

Our physician finder is up to 150 physicians, and remember, that’s a low. That’s a low. It’s a hard - It’s a high bar to get in. You have to do 5 cases and plus opt-in. So there’s a lot more physicians doing cases today. And we’ll continue to track, like, the covered lives, like, and for reimbursement for Ardian, we’re already up to, like, 100 million covered lives, which is about one third of the population here in the U.S. So those are all leading indicators, and we’ll start putting more, you know, other, as you put goalposts out there, as this starts to mature a little bit, both of these launches. I don’t know if you have anything to add to that, Thierry.

Thierry, Financial Executive (likely CFO), Medtronic: Nope.

Vijay Kumar, Analyst, Evercore: Great. And just, one clarification on the extra week, Jeff. On, you know, we’re looking at exit rates of 6% organic, right? And let’s assume next year is north of 6%. The extra week is almost 2 points of growth. So are we looking at, you know, base organic, excluding extra week, somewhere in the 5% range, or any thoughts on how to think about extra week contribution?

Thierry, Financial Executive (likely CFO), Medtronic: So I’ll maybe take that one now, and thanks for the question. Look, first, it’s a little bit less than 2 points of full growth, and again, we’ll give you the specific calculations as we close the year. But the way to think of it is that there’s going to be growth acceleration, excluding the extra week, right? So it should be upside. So we should have, you know, better growth than we have in fiscal year 2026, in 2027, and the extra week should be on top of that.

Vijay Kumar, Analyst, Evercore: Thank you so much.

Jeff, Executive (likely CEO or President), Medtronic: Is that clear, Vijay?

Vijay Kumar, Analyst, Evercore: Crystal clear, yes. Thank you.

Ingrid, Investor Relations, Medtronic: Great. Our next question comes from Larry Biegelsen at Wells Fargo. Larry, you are live.

Larry Biegelsen, Analyst, Wells Fargo: Good morning. Thanks for taking the question. Yeah, Jeff, I wanted to ask about CAS, and your growth, you know, continued to accelerate this quarter to 80% worldwide, which implies the worldwide EP market grew about 20% in calendar year Q4. So my question is, you know, how are you thinking about the EP market growth in calendar year 2026 and your CAS growth, you know, going forward now that you’re lapping the Affera US launch? I think to achieve the trailing twelve-month, you know, $2 billion goal, it looks like your CAS growth has to kind of sustain about 80% the next two quarters. Is that directionally accurate? Thanks for taking the question.

Jeff, Executive (likely CEO or President), Medtronic: Well, first, I’d say you’re you know, we agree with you on the market growth in, in our, you know, fiscal Q3 or Q4 here of around 20%. And we think, you know, the market, you know, will, you know, continue to, to be like that in the near term. And, you know, for our fiscal 2027, we think it’s going to be at least high teens, and, and then thereafter, a strong double-digit market. So we see the market growth continuing, and then, you know, we believe we’re, we’re really well positioned with our portfolio of, of catheters, you know, that, that we have, as well as mapping. In terms of our, our business growth, we do see it, sustaining here in, in Q4, and we haven’t provided guidance beyond that.

But, again, I’d like to say, I think we’re very well positioned here. When you look at the four players in PFA, I think we, you know, got two that are really, their value proposition right now is centering around mapping, and we feel like we’re very well positioned against them because... We still think the catheter carries the day, and we have integrated mapping. And then when you look at our competitor, that’s really their value proposition centers around catheters, we believe we have a better portfolio of catheters. Our Sphere-9 is, like I said, in the commentary, proven to be quite versatile.

I know initially, our competitor here did a, you know, did a pretty good job of putting out a narrative that the Sphere-9 was more of a niche. And I think as that’s gotten out there, that’s proven not to be true, as it’s being used in, you know, across persistent and paroxysmal. It’s new cases, redos, it’s simple versus complex. It’s being used across the board. And then we’ve got Sphere-360, you know, got CE Mark, and it’s a single-shot catheter. And again, you know, that’s probably the one catheter that’s got more excitement than Sphere-9. And we started the U.S. trial. And then, of course, we’re going to have mapping upgrades, you know, on a regular basis.

Feeling pretty good about our position today, as well as tomorrow. Like I said, the underlying market’s really strong.

Larry Biegelsen, Analyst, Wells Fargo: All right. Thanks so much, Jeff.

Ingrid, Investor Relations, Medtronic: Thank you, Larry. Our next question comes from Patrick Wood at Morgan Stanley. Patrick, please go ahead.

Patrick Wood, Analyst, Morgan Stanley: Perfect. Thank you so much. Taking the question. I’ll keep it to one, just given there’s so much going on. Obviously, the CathWorks and the Affera deals, I know you were close to CathWorks for a long time. You know, how are we thinking about capital allocation, M&A? There’s a lot of other companies doing very large deals in this space, and I’m just trying to work out, you know, directionally, do you guys feel still more that it’s kind of bolt-on M&A, technology tuck-ins, that kind of things, relative to larger deals, and how do you think about capital allocation going forward? Thanks.

Jeff, Executive (likely CEO or President), Medtronic: ... Well, thanks for the question, Patrick. And look, as we’ve stated, you know, we’re very committed to accelerating M&A, and you’re starting to see that with CathWorks and Affera. And again, it’s very, you know, focused, tied to our strategy venture investments that might lead to ultimately to M&A, and then M&A. And we are focused on, you know, more like what we would define as tuck-in deals. They can get up to $ several billion, but tuck-in or you know, a close adjacency to our existing business, and a number of them, though. I mean, that’s the other thing. I think it’s a fairly, you know, meaningful amount of capital among several different tuck-in venture and tuck-in opportunities across our portfolio.

Again, prioritizing maybe the higher growth areas, and in some cases, maybe having multiple shots on goal, like we did with pulsed field ablation, right? We did an organic program. We went out and got Affera. We, you may see us do that again in some of these high growth, really must-win, you know, markets where... But, but that’s, that’s how I would say it. Tuck-in across many of our different segments and subsegments, as well as venture.

Patrick Wood, Analyst, Morgan Stanley: Appreciate it. Thanks for taking the question, guys.

Ingrid, Investor Relations, Medtronic: Great. So Robbie Marcus from JP Morgan will be our next question. Please go ahead, Robbie.

Robbie Marcus, Analyst, JP Morgan: Great. Can you hear me okay?

Jeff, Executive (likely CEO or President), Medtronic: Yep.

Ingrid, Investor Relations, Medtronic: Yep.

Robbie Marcus, Analyst, JP Morgan: Great. Good morning. Thank you for taking the questions. Two for me. Maybe I’ll ask them just as one. Jeffrey, or maybe Thierry, as you think about the fiscal 2027 guidance, and especially I imagine you’ll have Hugo and renal denervation and tibial spend to support those launches and continued investment in CAS, you know, how do you think about getting to the high single-digit EPS growth? If you could give us some high-level drivers there. And then second part, the Street’s sitting at 8.5% EPS growth. I know traditionally you do something like 6.5-9.4 is high single. Do you think the Street at 8.5 is at a good midpoint of the range to start here? Thanks a lot.

Thierry, Financial Executive (likely CFO), Medtronic: Yeah. Hi, hi, Robbie. Thanks for the question. So, so again, on, on EPS, you know, the high level drivers, we, we talked about, you know, the accelerated growth and, and obviously that- that’s going to help, from a, from a leverage standpoint. If you look at the gross margin line, what you’ve seen so far is operational improvements in pricing and cost out that have been offset by the mix effects on CAS and diabetes. And as I’ve stated a couple of times already, those are going to get better. So the CAS improvement comes from, the mix shifting towards more catheters and less capital equipment, which, which will help from a margin perspective. And then on the diabetes side, it comes from the separation, right?

So diabetes has a lower gross margin rate than the rest of the business, and so once that business go away, it’ll give us a natural lift from a gross margin perspective. If you start looking at overhead, look, we’re going to continue to lean into R&D and sales and marketing to develop the franchises that you mentioned. So we’re putting resources in RD, and we’re putting resources in CAS. We’re hiring the mappers that are necessary. We’re doing the direct-to-consumer marketing on, in particular on, renal denervation and UltraViva, and we’ll continue to do that.

But, but, net, net, the SG&A line will provide leverage because we, as we’re having this quarter, for example, or Q3, you know, what you see is the leverage that we get on the G&A line, more than offsets the resources that we’re putting from our sales and marketing perspective. So look, that will provide some, some improvements on operating margin, and then, below the line, you know, we’ll continue to have a little bit of a headwind on the interest line because we’re refinancing debt that was contracted almost at 0%, you know, four or five years ago, with debt that’s now at, you know, sort of 3.5%-4%. And, we’ll continue to have some pressure on tax, but the tax line is kind of getting to where it’s going to stabilize now.

And then look, you know, I mentioned we have a few puts and takes where we need to understand the timing between now and, and year-end. One is the timing of the diabetes separation, and, as I said, you know, between, the IPO and the split, we get about $0.01-$0.02 of, of dilution, from the fact that we’re losing 20% of the profit of diabetes, but we don’t have the benefit from the share count reduction yet. You know, that share count reduction is calculated, on a 12-month rolling average, so you’ll see that gradually get better. And then we’ll have some dilution coming from M&A. So, the, the guidance is, is all in at a high single-digit EPS growth.

Now, the second part of your question on the 8.5%, it feels like some of the latter items that I mentioned, so, the sort of temporary dilution that we get from diabetes and some of the M&A dilution is maybe not fully embedded in what the Street sees right now. And, as we get more visibility, we’ll help clarify that.

Robbie Marcus, Analyst, JP Morgan: Thank you very much.

Ingrid, Investor Relations, Medtronic: Our next question comes from Matt Taylor at Jefferies. Matt, please go ahead.

Matt Taylor, Analyst, Jefferies: Hi, thanks for taking the question this morning. I wanted to follow up on the question around capital allocation and TAVR. I guess it was interesting to see the investment in Anteris. I was wondering if you could comment about why you didn’t just buy the whole company versus invest and-

Chris Pasquale, Analyst, Nephron: ... We also saw over the weekend the results of longer-term follow-up for CoreValve, published in JACC, and similar to the Edwards trials, there was some late catch-up in mortality. I was wondering if you could comment on that in the TAVR arm.

Jeff, Executive (likely CEO or President), Medtronic: Sure. I think, you know, on your first go on Anteris, I mean, it’s just we feel the structural heart space is one of the spaces we helped pioneer. We have a really strong position, great reputation, but we want to expand in that. You know, we’ve got some organic program, obviously, we have our Evolut platform. You know, we’ve got mitral and tricuspid replacement programs, but we still think there’s an opportunity here to expand. And in the case of TAVR, the balloon expandable is the larger piece of the market, and this is an opportunity to get into that market.

And again, we may have multiple shots on goal here, but thinking Anteris is a good one to invest in and partner with, and we’ll see where we go from here there. And then in terms of the JACC article, you know, I would say here that, you know, look, this is... I just wanna emphasize that this is, you know, an old valve that’s no longer commercially available, and it’s an old procedural technique that, you know, that we’ve provided guidance. So basically, all that communication did is reiterate the guidance that we provided back in 2020.

And so that’s, you know, that’s what’s happening there, and, you know, like I said, we’re collaborating with our physicians to make sure they understand all of this and, you know, moving forward from here. So that’s... I don’t know if you have anything to add there? But bullish on the structural heart space, and, and, I would, you know, the Anteris investment and, you know, who knows, maybe more following that.

Chris Pasquale, Analyst, Nephron: All right. Thanks for the color, Jeff.

Ingrid, Investor Relations, Medtronic: All right, our next question comes from Matt Miksik at Barclays. Matt, please go ahead.

Matt Miksik, Analyst, Barclays: Great. Thanks, thanks so much for taking the question. And congrats on the Anteris investment, by the way. So, on CAS, I’ll just ask, ask one question. You mentioned, you know, generator sales are kind of a headwind to gross margins at this point. You know, the mix is maybe shifting a little more towards capital. If you could give us, give us a sense of when that starts to normalize. And then also, in terms of the runway, and I think we understand that hiring mappers is, is maybe the, the, the, you know, the, the bottleneck here, if you wanna put it that way. You know, you need more people to open more centers, to, to get more catheter use.

Any sense of where you are in that, in that continuum, through the academic centers or into the general, you know, centers in the U.S. and, and some sense of, of the pace that you’re able to maintain, for hiring centers? So helpful color. Appreciate you taking the question.

Jeff, Executive (likely CEO or President), Medtronic: Thanks, Matt. You know, on the last part of it, and where are we? I still think we’re kind of relatively early in our launch here, where we still have a long runway to go, which is good, in penetrating some of these high volume academic centers, as well as getting out beyond that. And to your point, the mappers, hiring mappers has been critical. It’s not, you know, the topic, if you will, but it is an important topic here. We’ve been able to stay ahead of it, but it is the thing that we’re probably the most focused on right now is continuing to hire mappers.

You know, and a lot of these mappers tend to be pretty dedicated to this space, and they’re seeing where the direction of travel is, or to use a Minnesota term, where the puck’s going, and so that helps a lot as well. So that, that’s how I would, you know, you know, comment on there. And, what was the first part of the question again?

Thierry, Financial Executive (likely CFO), Medtronic: The first part was on the dilution that comes from the-

Jeff, Executive (likely CEO or President), Medtronic: Yeah

Thierry, Financial Executive (likely CFO), Medtronic: ... capital equipment and when does the mix turn around? First, what I want to say is CAS is a fantastic business from an operating margin perspective, right?

Jeff, Executive (likely CEO or President), Medtronic: Right.

Thierry, Financial Executive (likely CFO), Medtronic: So it is slightly dilutive because of this mix issue at the GM level, but it’s driving significant, you know, profitability at the total business level, at the operating margin level. You know, when it’s gonna turn around between capital equipment and catheters, you know, I wanna say it’s almost a good problem to have, so I-

Jeff, Executive (likely CEO or President), Medtronic: Right

Thierry, Financial Executive (likely CFO), Medtronic: ... I hope it turns around as late as possible, ’cause as we’re building the install base, it’s always gonna be good, good news going forward. That being said, I think you’ll start to see an inflection in the second half of next year. The mix is, you know, starting to improve, with the catheter sales increasing. And look, year-over-year, CAS is gonna drive gross margin improvement as early as 2027. So look, it’s a great business to be in, and it’s all good news going forward.

Matt Miksik, Analyst, Barclays: Great. Thank you.

Ingrid, Investor Relations, Medtronic: Our next question comes from Chris Pasquale at Nephron. Chris, go ahead.

Chris Pasquale, Analyst, Nephron: Thanks. I wanted to ask about Hugo. Jeff, you talked about the impact of Symplicity and UltraViva really beginning to kick in as soon as next quarter. I don’t think you included Hugo in that group, so would love to hear how you’re thinking about the timeline for Hugo to really begin to move the needle within the surgical business and any qualitative comments you can make about the system pipeline right now?

Jeff, Executive (likely CEO or President), Medtronic: Well, first of all, look, super excited about where we are with Hugo. Big quarter for us this past quarter, getting the FDA approval. We just announced this morning, you know, we completed our first cases in the U.S. in February, earlier this month in Cleveland Clinic. We got more scheduled this week, got other centers, and all the leading indicators of Hugo and oh, by the way, on those cases, we got great feedback in terms of how the system’s performing and its future opportunity in the U.S. market. The leading indicators are all positive in terms of, you know, the smooth case rate, procedures, procedure growth globally, and utilization. They can both continue to be really strong. We watch those every week. I know the business watches it every day.

I see them every week. And we’re seeing, you know, a pretty meaningful step up in installations around the world, especially as U.S. kicks in. And so we look, we expect to step up in Q4. Now, the surgical business is a big business, has some puts and takes, so you may not, you know, you may not move the needle on the surgical business quite yet, but underneath the covers there, Hugo is growing and growing, you know, pretty fast now. And it’ll eventually you’ll start to see this move, that big $6 billion business. But we like where we sit. Really excited about getting in the U.S. market, and the reception that we’re getting, and the orders that we have.

Joanne Wonship, Analyst, City: Great. Thanks, Jeff.

Ingrid, Investor Relations, Medtronic: Okay, next question comes from Danielle Antalfi at UBS. Danielle, you are live.

Danielle Antalfi, Analyst, UBS: Good morning, everyone. Thank you so much for taking the question. Jeff, I was hoping you could talk a little bit more about how we should think about renal denervation, Symplicity, and the market development that you’re talking about. You know, we’ve talked to some referring physicians who’ve been involved in renal denervation since the very beginning, and she sounds like she’s getting a lot of calls from folks. I’m just curious, what goes into actually developing this market, building out, helping centers build out referral networks, et cetera?

Jeff, Executive (likely CEO or President), Medtronic: Yeah, sure.

Danielle Antalfi, Analyst, UBS: If you can give any color on actual numbers to date, you know, even directionally. Thanks so much. Sorry about that.

Jeff, Executive (likely CEO or President), Medtronic: Sure. Thanks, Danielle. I mean, I appreciate that question. I mean, you know, first of all, you know, in terms of physicians getting a lot of calls, that is really starting to kick in. Just to give you... Again, I appreciate that it’s a leading indicator, but it’s pretty powerful. So, you know, on our direct-to-consumer website around Symplicity, I’m just double-checking. Last quarter, we had maybe 50,000, or Q2 rather, we had about 50,000 visits. In Q3, we had 2.5 million visits. So the consumer demand is really spiking here, and we’re just getting started. Like I said earlier, we opened up over 200 accounts, the physician finder’s up, reimbursement’s strong, we’re getting that strong consumer demand, and most importantly, we’re getting, you know, terrific, patient results, patient outcomes, right? With the blood pressure coming down meaningfully, it’s staying.

Patients, and it’s really resonating with patients, and that, in and of itself, is getting doctors excited. And so what we’re doing is we’ve been hiring a lot of people in terms of market development, and there’s several different roles here, right? One is building that referral pathway from the general practitioners, and the hypertensive specialists into the hospital, into that procedural list. We’ve got a lot of people around health economics, around coding and billing, as well, helping the hospitals. So it’s a number of roles like that, right? Health economics, coding, billing, as well as some of the other roles I said in terms of the market development, building those referral pathways. And that’s really where things are right now.

I’d say all the market, like, the initial foundational elements, have all been like... The chips have turned over green, right? The FDA approval is breakthrough approval, and it’s broad. The CMS reimbursement, it’s a good number, and it’s broad. You know, the commercial payers are, you know, falling in line and, you know, the competitive dynamics are way better than we thought. We initially here, we’re doing... I saw different analysts, you know, over the last couple of years, predictions on the mix between us and the other competitor on the market. We’re doing way better than any of those models. And so now we’ve just got to build this market. It’s all those things we said, Danielle.

But again, where we’re really excited, where you feel the energy, is it all starts with those patient outcomes and how this is resonating with consumers. So the other thing we’re going to do over time, besides building the referral pathway, working with hospitals, is building the brand around Symplicity, right? So all the 50,000 to 2.5 million I talked about in site visits, that’s all about lead development, lead generation. We’d also like to build the brand of Symplicity and make it synonymous with hypertension management. So that’s going to be an investment that Thierry talked about for FY 2027.

So a lot of exciting, a lot of excitement right now and already, and it’ll start to, you know, the numbers in FY will be more meaningful in FY 2027 for us, the actual revenue, the lagging indicators. And again, it, it’ll be... It’s very profitable right out of the gate for us.

Danielle Antalfi, Analyst, UBS: Thank you so much.

Ingrid, Investor Relations, Medtronic: All right. As we reach the top of the hour here, our last question is going to come from Joanne Wonship City. Before we move to Joanne, please, of course, email us for any of those we did not reach today. Sorry, and thank you, and we’ll look forward to talking to you soon. But Joanne, please go ahead.

Joanne Wonship, Analyst, City: Thank you so much, and good morning. I’m gonna ask the Stealth AXiS question and what you can share with us about the product and why you’re so excited about it. Thank you.

Jeff, Executive (likely CEO or President), Medtronic: Well, thanks, Joanne, for that question. You know, it first of all, like I said, I do think this has been, is meaningfully underappreciated in the, not so much in maybe in the clinical community from spine surgeons, but maybe in the investment community. Because, look, this robot does two things. First of all, it’s not an extension of Mazor. It’s a new platform with a ton of new functionality that’s gonna be very value-added. But the other thing that’s really important here is how it fits into the workflow. So today, 70%, I mentioned in the commentary, 70% of procedures in the U.S. are navigated. That’s like navigation and OR, which we invented, and we lead by far. And, you know, today, robotics doesn’t work well with that workflow.

So that’s why robotic penetration is a lot smaller than the 70% that we’re seeing with navigation. The Stealth AXiS fits right into that workflow, so it’s one seamless system from the initial imaging to the AI-based surgical planning, right into the case, navigation, imaging, and now robotics. One seamless workflow that, trust me, surgeons really have been waiting for. So you got a better robot with more functionality, and then you’ve got a much, much, much better workflow that, as you know, is super important to physicians and health systems. And this is just effectively lowering the barriers to step into robotics for spine surgery. And it’s going to grow the market, I believe, and we are definitely gonna continue to take share.

This really, you know, this really, you know, lengthens our or extends our lead, in my opinion, from our primary competitor in this space. The competitive dynamics have dramatically changed over the last couple of years. We’re enabling technology, and our AiBLE suite is key to winning. And this is, like I said, extends our lead over our competitor. So super excited about that, you know. But in closing here, I’d say beyond some of the big generational growth drivers we mentioned, we talked a lot about CAS and RDN, a little bit about UltraViva and Hugo. I would add to that robotics piece. I would add, you know, Stealth AXiS.

But we’ve got a breadth of innovation right now in Medtronic, which is why we’re getting the excitement here. You know, whether, you know, you saw it from this quarter, like I mentioned, from CRM and peripheral vascular health, which we didn’t get any questions on. Their growth is, has meaningfully improved here from a number of new products like Carotid and Thrombectomy. We talked about CST accelerating. Neurovascular is accelerating with new products that they’ve got, you know, between the NeuroGuard Carotid, you know, product as well as, you know, MMAE, that’s a mouthful. And then you’ve got these, like I said, these bigger growth drivers like Ardian and UltraViva, that are at the very, very... And Hugo, that are at the very early stages. So you’re starting to see the breadth kick in, which is beautiful to see.

I know that in this business, innovation is key, and we’ve got a depth of innovation with these big generational growth drivers, but we also have the breadth. And, you know, as Thierry walked through, I think it was Robbie’s question, we’re pulling different levers to make sure that we’re investing appropriately in these organically, whether it’s increasing R&D, funding direct to consumer, hiring a ton of mappers. And if you’re a mapper out there, you know, hit our website up. You know, and then kicking in the M&A, right? So, you know, we’re really shifting our stance, moving into more of an offensive footing here. And it’s based on just the momentum that we have and the momentum we see coming.

Ingrid, Investor Relations, Medtronic: All right. Thank you, everyone, and I’ll turn to Jeff for some closing remarks.

Jeff, Executive (likely CEO or President), Medtronic: I thought that was the close. Okay. Thank you. Thank you all for joining today, and all of your questions, and you know, appreciate your support and continued interest in Medtronic, and we hope that you’ll join us for our Q4 and our full-year fiscal 2026 earnings broadcast, where we’re gonna update you on the continued progress that we just talked about against our short- and long-term strategies. With that, have a great rest of your day. Thank you.