Medtronic plc (NYSE:MDT) Q4 2025 Earnings Call Transcript

Medtronic plc (NYSE:MDT) Q4 2025 Earnings Call Transcript May 21, 2025

Medtronic plc beats earnings expectations. Reported EPS is $1.62, expectations were $1.58.

Operator: Good morning. I’m Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, and I appreciate that you’re joining us for our Fiscal ‘25 Fourth Quarter Video Earnings Webcast. Before we go inside to hear our prepared remarks, I’ll share a few details about today’s webcast. Joining me 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 fourth quarter, which ended on April 25th, 2025, and our outlook for fiscal year ‘26. After our prepared remarks, the executive VPs from each of our four segments will join us and we’ll take questions from the sell-side analysts that cover the company. Today’s program should last between 60 and 90 minutes.

Earlier this morning, we issued a press release containing our financial statements, divisional and geographic revenue summaries, and non-GAAP reconciliations. 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 with our periodic reports and other filings that we make with the SEC, and we do not undertake 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 fourth quarter revenue in the current and prior year reported as other. References to sequential revenue changes compare to the third 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 fourth fiscal quarter to our competitors’ first 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, let’s head into the studio and hear about the quarter and our outlook for fiscal ‘26.

Geoff Martha: Hello, everyone, and thanks for joining us today. As you can see in our Q4 results released this morning, we had a strong finish to our fiscal year, growing 5.4%. Our growth drivers are having an impact and are still building momentum. And we’ve proven to you that our growth is durable, as we’ve now delivered mid-single-digit revenue growth for 2.5 years. Our Cardiovascular growth accelerated, as forecasted, growing 8% on broad strength across the portfolio, including nearly 30% growth in CAS. We also delivered double-digit growth in Neuromodulation and Diabetes and high single-digit US growth in Cranial and Spinal Technologies. Two of our businesses, CAS and ENT, reached important milestones entering the $1 billion annual revenue club alongside 10 of our other businesses.

Q&A Session

And we’ve had a number of important clinical and regulatory updates during the quarter as we continue to advance our pipeline. Operationally, we translated our revenue growth into leveraged earnings with high single-digit operating profit and low double-digit EPS growth. Coupled with our Q3 results, we delivered a very strong 9% EPS growth in the back-half of the year. And for the full year, we delivered at the upper end of the commitments that we laid out a year ago. We shared with you this morning our view on the potential impact from tariffs, which we have included in our newly issued guidance. Theirry will walk you through this later in the broadcast, but you can see from the significant amount that we’ve already been able to offset that we are extremely focused on mitigating actions.

You also see from our guidance that the underlying fundamentals of the business are strong and they’re getting stronger. We had also announced this morning that we have decided to separate our Diabetes business as we continue to execute on our active portfolio management. Look, we see this as a win for both diabetes and for Medtronic, and I’m going to touch upon this a bit later. So, we have several details to cover today, and let’s start with our Q4 performance highlights. Starting first with the Cardiovascular portfolio, innovation drove broad-based growth in the quarter, which accelerated to 8%. We delivered double-digit growth in Cardiac Ablation Solutions, Structural Heart, and Cardiac Surgery, and high single-digit growth in Cardiac Rhythm Management.

Cardiac Ablation Solutions growth accelerated, as forecasted, to nearly 30%, with high 30s growth in the US and low 20s in international markets. Our portfolio of pulse field ablation products, the broadest in the space, continues to drive rapid growth around the world. We’re opening up new accounts as our supply continues to quickly increase and demand for our Affera PFA products is extremely high. This quarter, I spent a lot of time talking to EPs and we’re hearing great feedback. Physicians are saying that our Sphere-9 focal catheter is the most desired PFA catheter on the market. And we’re seeing large centers switch to Medtronic. EPs appreciate the efficiency that comes from fewer catheter exchanges, given that Sphere-9 can do mapping, PFA and RF ablation, all from the same catheter.

Now, across our PFA platforms, customers appreciate their ease of use, their precision, durable efficacy and, of course, the safety. Now, if there’s a PFA catheter that is driving even more customer excitement than Sphere-9, it’s our next-gen Affera Sphere 360 single-shot catheter. Sphere 360 is an integrated mapping and ablation catheter where the entire lattice tip delivers pulse field energy. So, the EP doesn’t have to rotate the catheter. One-year data for Sphere 360 was presented last month at the HRS meeting, which showed excellent efficacy, durability and safety as well as very fast procedure times. We plan to start our US pivotal trial for 360 later this calendar year. So, CAS business has a lot of momentum and its contribution to total company growth continues to increase, including 70 basis points this quarter, and we expect CAS’s growth rate to accelerate again next quarter.

The business reached $1 billion in revenue in FY ’25, and we have near-term line of sight to doubling that as we continue to enter new accounts globally with Affera and with PulseSelect. With the cardiac ablation space now at roughly $10 billion and growing double digits, this is a huge growth opportunity for Medtronic. And our focus is to be the leader in this space. Next, our Cardiac Rhythm Management business had a very strong quarter, growing 7% with high single-digit growth in both Defibrillation Solutions and Cardiac Pacing Therapies. With Defib Solutions, we’re seeing strong customer adoption of our Aurora EV-ICD, with its revenue doubling year-over-year as we’re taking meaningful share from the incumbent. We are seeing our customers placing larger and faster repeat orders for Aurora.

Now, in pacing, we continue to have strong growth in leadless pacing and conduction system pacing. Our Micro leadless pacemaker had strong 17% growth and our 3830 conduction system pacing lead grew 19%. In Structural Heart, we grew 10% and with strong growth of our Evolut TAVR platform in the US, Japan and emerging markets. We continue to differentiate Evolut with positive clinical evidence. Our five-year low-risk data was presented at ACC during the quarter, showing outstanding valve performance for Evolut. And our two-year data from our head-to-head SMART trial was presented at CRT, showing continued superior performance versus the leading competitor’s valve. The SMART data and FX+ launch continued to have an impact. To give you just a few examples.

A large nonprofit system in the upper Midwest that does over 200 TAVR implants a year, recently reviewed their own patient data and found that SMART was consistent with their outcomes, better valve performance with Evolut. And as a result, we went from a low single-digit share to Evolut being their valve of choice. Another example would be an East Coast academic center that implants about 200 valves a year. and whose physicians participated in the competitor’s first balloon expandable TAVR trials. Well, now they’ve moved from using the competitors’ valve almost exclusively to using our Evolut valves in a majority of their patients. Now, I could keep going with such examples. The point is that our data, our technology and our sales execution are having a significant impact, giving us confidence that we can continue to grow structural heart at or above the market.

In hypertension, we continue to ramp our market development activities for our Simplicity blood pressure procedure as we await reimbursement coverage from CMS. CMS has indicated that they will finalize the NCD on or before October 11. And ahead of this, they will issue a draft on or before July 13. Many large healthcare systems are establishing outpatient simplicity service lines today, so that they’re prepared to rapidly scale to meet the large demand and we’re right there with them. We’re hiring market development managers, clinical specialists and healthcare economics managers to supplement our existing coronary sales force. So we expect Simplicity revenue to meaningfully ramp when it’s covered. And just like PFA, over time, it will become an important contributor to overall Medtronic growth.

Nearly half of US adults have hypertension and one in four of those with hypertension don’t have their blood pressure under control, despite the broad availability of numerous generic drugs. Look, the opportunity here is massive, and we will be the leader in addressing this large unmet need. Now, turning to the neuroscience portfolio. Our Cranial and Spinal Technologies business grew mid-single-digits, including 7% growth in the United States as we continue to win share. We’ve changed the basis of competition in spine to one where enabling technology drives spine implant decisions. And our differentiated AiBLE spine ecosystem, including AI-driven preop planning software, imaging, robotics, navigation and powered surgical instruments, has by far the largest installed base with over 10,000 capital units well ahead of our competition.

Now, this is important because when a customer upgrades one of our pieces of capital, they’re not just upgrading one product, they’re upgrading to the full AiBLE ecosystem. So, you don’t go just from O-arm to new O-arm or navigation to new NAV or robot to new robot, you go from one of these pieces of equipment to the entire AiBLE ecosystem. AiBLE is not only appealing to spine surgeons around the world, it’s also attracting the competition’s best sales reps and distributors to join Medtronic. Some of the world’s leading spine and neurosurgery centers, including large iconic teaching institutions, are moving to Medtronic. And combined with the investments we’re prioritizing to even further enhance the AiBLE ecosystem, we expect our strength in CST to continue.

Another business that continues to win share is Neuromodulation, which grew 10%. Our closed-loop sensing technology is driving strong growth in both Pain Stim and Brain Mod. In Pain Stim, we grew 12%, including 15% growth in the US on the continued strength of our Inceptiv closed-loop spinal cord stimulator. We continue to win share and have now reached the number one global position in SCS. Inceptiv is changing patients’ lives as they no longer have to adjust their therapy throughout the day, and they aren’t having to come back to the doctor’s office to have their device settings changed. So, Inceptiv is reducing burden for the patient and for the physician. In Brain Modulation, we grew mid-single-digits, including 9% growth in international markets on the continued adoption of our BrainSense Adaptive DBS for people with Parkinson’s.

Look, this is a groundbreaking technology, a fully closed-loop brain computer interface that automatically provides personalized real-time therapy based on brain activity feedback. In the US, we received FDA approval for BrainSense during the quarter. Now, following stories on adaptive DBS technology on Good Morning America, the BBC and several other media outlets, we are seeing patients now proactively talking to their doctors and requesting adaptive devices. The early results are very exciting, and we’re now entering full market release in the US and Europe with Japan launching next month. So, in Neuromod, we have near-term growth drivers, we’re the category leader and we’re well positioned to capture the future innovations that are coming.

Now, turning to our Medical Surgical Portfolio and our Surgical business, which improved and grew 2%. We continue to drive strong growth in emerging markets and advanced energy. Our market-leading LigaSure vessel sealing technology continues to attract strong surgeon adoption, resulting in our 11th straight quarter of winning share in Advanced Energy. Now, we expect our Surgical growth to improve over time as we expand and launch our Hugo soft tissue robotic platform. Hugo continues to reach important milestones, like last quarter, we filed with the US FDA for urologic indication. And the pivotal data from the urology trial, which met its primary safety and effectiveness end points was presented last month at AUA. We expect to follow our urology indication in the US with hernia and benign GYN indications.

And we will begin enrollment in our GYN oncology trial in the coming months. We also continue to expand instrumentation, having conducted our first cases with LigaSure on Hugo this past quarter. We’re expanding Hugo’s installed base and are now in 30 countries around the world. And we continue to see strong increases in Hugo procedure volumes and utilization. In Surgical, we are also driving impressive expansion in our AI-powered Touch Surgery ecosystem. Touch Surgery is a foundational intelligence technology used across both robotic and laparoscopic surgery. And we’re leading the industry in establishing this digital surgical ecosystem globally. We see our growing digital footprint as a long-term strategic advantage for our Surgical business.

And this will apply to other businesses across Medtronic over time. Finally, in diabetes, we grew 12%, our sixth quarter in a row of double-digit growth. The growth was broad-based with strength in pump CGM and consumables. We continue to grow our MiniMed 780G installed base in both the US and international markets. People with diabetes are attracted to 780G’s highest timing range of any commercial AID system, giving them the ability to achieve more control with less burden. In Europe, the launch of our Simplera Sync sensor is driving strong mid-teen CGM growth. Simplera is half the size and much easier to apply than our previous sensor. Now in the US, we received FDA approval for Simplera Sync just last month and expect to begin the launch this fall.

Regarding our Abbott-based sensor, back-end integration and development work is progressing well. We submitted our interoperable pump and controller for FDA clearance, which paves the way for bringing our AID system with this sensor to the market. We also submitted to the FDA for a 780G label expansion, including for Type 2 diabetes and rapid-acting insulins. And looking ahead, we expect to submit for our 8-Series next-generation pump, the MiniMed Flex by the end of the fiscal year. So, as you can see, we’ve significantly turned around our diabetes business, and it’s very well positioned. And this morning, we announced our plan to separate diabetes into a standalone public company with a capital market separation through our preferred path of an IPO split.

This is a win for both companies. For Medtronic, our portfolio becomes more focused on high-margin growth markets like PFA and renal denervation. At the same time, the independent new diabetes company will be a scale leader and the only diabetes company to commercialize a complete ecosystem to address intensive insulin management. Today’s announcement marks a significant milestone in our ongoing active portfolio management efforts, an important lever to delivering on our long-term strategic and financial objectives. Look, there is a clear strategic rationale for diabetes to be a standalone company. Diabetes is predominantly B2C whereas Medtronic, our businesses are predominantly B2B. We sell different types of products to different types of customers.

Medtronic’s commercial, manufacturing and technology platform synergies are less applicable to the diabetes business, given their distinct customer go-to-market and supply chain infrastructure. For Medtronic, we will continue to have leading franchises in attractive med tech markets. And this separation shifts and simplifies our portfolio to have even more intense focus on our highest margin growth drivers. These growth drivers are already building momentum and this increased focus will ensure that they reach their full revenue growth potential. Our portfolio also shifts to higher profitability, allowing us to pick up both margin and earnings. And the shift increases our exposure to markets where we demonstrate our strongest core capabilities and have scale and synergy benefits, which importantly lowers the overall risk profile of the company.

Now, taken all together, we’ll be in a great position to continue delivering mid-single-digit or higher organic revenue growth as well as accelerating our earnings leverage. So, our direction of travel here is clear. This is about greater focus on the significant opportunities in high-margin growth markets where we are well positioned and we believe that this will result in a win for Medtronic. Look, I’m also excited about what the future holds for the Diabetes business. And now, I’d like Que Dallara, who will become the CEO of the new Diabetes company to share some of her thoughts. Que joined Medtronic in 2022 and has been instrumental in turning the Diabetes business into what it is today. She is an inspirational transformative leader, who is also strategic and pragmatic.

Her impressive track record in driving growth and innovation has set the Diabetes business on a path to continued success, ensuring the needs of people with diabetes are met around the globe. So, over to you, Que.

Que Dallara: Thanks, Geoff. I want to start by thanking you for your leadership and vision. Your decision a few years ago to double-down on the Diabetes business and significantly increased investment has positioned us well, setting us up to generate significant returns for stakeholders. We wouldn’t be where we are without your unwavering support. I’m very excited to be leading this large-scale direct-to-consumer Diabetes business. We have over 8,000 employees and two global manufacturing facilities and a lot of innovation in the works. Our innovations are driven by the desire to improve outcomes while reducing burden. And as an independent company, we will have a shareholder base that is aligned to our business and financial profile.

This will enable more focused investment in innovation as well as manufacturing scale and automation, positioning us for success in Automated Insulin Delivery and SMART MDI while also driving margin expansion over time. Our $2.8 billion Diabetes business has strong momentum in a large $16 billion global addressable market. We’ve delivered double-digit growth now for six consecutive quarters, along with several recent product approvals and the strategic partnership that we have established with Abbott Diabetes Care, and we have a deep pipeline as we’ve been investing in CGM options, insulin delivery options such as a pain, patch and durable pump, a fully automated algorithm and a unified digital customer experience. This full ecosystem not only enables people with diabetes to have a seamless transition between therapies without changing companies, but it also allows them to achieve better control with less burden.

And finally, I want to thank and celebrate the dedication of our diabetes team. Their passion and perseverance is transforming diabetes care to give people the freedom to forget about diabetes and live their best lives. Back to you, Geoff.

Geoff Martha: Thanks, Que, I couldn’t agree more. Next, I’m going to turn it over to Thierry to share some additional transaction and financial information on the Diabetes separation, as well as take you through a deeper look at our Q4 financial performance and our guidance for the coming year. But before I do that, I want to officially welcome Thierry to his first earnings call with Medtronic. He’s now in his 12th week, and has already hit the ground running including playing a critical role in preparing for today’s announcement. Thierry is a proven, experienced CFO, having most recently been in the automotive industry, where he created significant value for shareholders by increasing margins, earnings power, and free cash flow.

His extensive experience with M&A, divestitures, and forming innovative partnerships is proving to be highly relevant to work here at Medtronic. His presence is already having a significant impact on our organization. He’s brought forward many new ideas on how we can further invest in innovation, accelerating R&D while also driving operating leverage, and he brings with it the expertise to ensure we get it done. It’s great to have you onboard, Thierry.

Thierry Pieton: Thank you for the warm welcome, Geoff. This is certainly an exciting time to join Medtronic. I’ve had the pleasure of visiting many of our facilities and meeting our employees, and also starting to meet with many of you in the investment community. A common question from many of you has been, why did I come to Medtronic. For me, healthcare is a special industry given the connections to patients, and I’ve always wanted to return since working in healthcare earlier in my career. In addition to the sector, there were two specific things that stood out about Medtronic. First, I saw an opportunity to apply my background to enhance the operations of the company. And second, Medtronic has a few large, exciting growth opportunities, that don’t come around very often, and the company is at an inflection point.

I’m energized by the opportunities for durable growth and value creation that are ahead of us, and I’m really looking forward to hopefully making a difference here. Now, let’s cover our plan to separate the Diabetes business, which represented about 8% of our revenue and 4% of our segment operating profit in fiscal year ‘25. We intend to separate Diabetes through a series of capital market transactions. Our preferred path involves two steps. First, we plan to execute an IPO of up to 20% of the Diabetes business. The proceeds are expected to appropriately capitalize the New Diabetes Company and provide the ability to retire Medtronic shares. Second, we intend to execute a split-off, where Medtronic will exchange our remaining New Diabetes Company shares for Medtronic shares from willing shareholders.

We plan to retire those shares, resulting in a lower Medtronic share count. We’re targeting completion of the entire separation within 18 months, and taking this preferred path should result in a tax-free impact to Medtronic shareholders for US federal income tax purposes. From a financial standpoint, there are several benefits to Medtronic. Diabetes has lower gross margins and operating margins than overall Medtronic. So, upon full separation, we’re expecting our adjusted gross and operating margins to improve by approximately 50 and 100 basis points, respectively. Given the share retirement, this separation is expected to be immediately accretive to Medtronic EPS upon completion. We don’t expect any change to our dividend policy. So financially, there are some clear short-term financial benefits.

But the most important aspect is what Geoff mentioned earlier, this separation will allow us to increase our growth-accretive investments in our core businesses where margins are structurally higher. This is all about capital allocation and creating the conditions to fuel our future growth. So clearly, this separation will be beneficial for both Medtronic and the New Diabetes Company, unlocking both strategic value and shareholder value. With that, let’s now come back to Medtronic overall and recap our Q4 results. As Geoff mentioned earlier, Q4 revenue of $8.9 billion grew 5.4% organic. On the bottom line, adjusted EPS was $1.62, up 11%. Both revenue and EPS were ahead of expectations, driven by outperformances in CRM, Structural Heart & Aortic, Diabetes, and Neuromod, among others, along with better-than-expected interest and tax expenses.

Our revenue growth was broad-based from a geographic perspective. We grew 5% in the US, our strongest quarterly US growth in 15 quarters, as we accelerated on the strength of new technology. Japan grew high single-digits, and Western Europe and Emerging Markets grew mid-single-digits, with strength in India, Southeast Asia, and Eastern Europe. Moving down the P&L, our adjusted gross margin was 65.1%, down 70 basis points year-over-year as a result of mix from Diabetes and CAS, as well as foreign exchange. Our gross margin was actually unchanged on a constant currency basis. On the positive side, we continued to see the benefit of increased pricing, in particular in areas where we introduced new products such as Neuromod, CRM, and Structural Heart, and we continued to improve our ability to offset FX with price in Emerging Markets.

This quarter again, the savings from our COGS efficiency programs more than offset the impact of inflation. Our Medtronic Performance System, which we implemented across our manufacturing network, resulted in high single-digit improvement in labor efficiency. We insourced three of our distribution centers to drive cost savings and further improve supply. Finally, we were able to significantly reduce our scrap and obsolescence charges. With SG&A, we drove significant leverage, particularly with G&A, while at the same time increasing investment in R&D. More to come on that later. The net of this was leverage on our adjusted op profit line, which grew 7.6%, or $175 million. Our adjusted operating margin was 27.8%, an increase of 90 basis points, or 200 basis points on a constant currency basis.

Below the operating profit line, our adjusted tax rate of 16% was better than expected due to favorability in our actual jurisdictional mix of profits for the year, which also resulted in a modest pick-up from prior quarters. All in all, as stated, in Q4, we delivered EPS of $1.62, up 11% and 16% at constant currency. This was a strong close to the year, where in fiscal year ’25 we grew revenue 5% organic and EPS 6%, or 10% on a constant currency basis. From a capital allocation perspective, we returned $6.3 billion to shareholders in ‘25 through share repurchases and through our dividend. And this morning, we announced that we’re increasing our dividend for the 48th consecutive year. Now, let’s move to our ‘26 guidance. We’ve now delivered mid-single-digit organic revenue growth for 10 quarters in a row, and we expect this to continue through fiscal year ’26, with an increasing contribution from our key growth drivers.

We expect organic revenue growth of approximately 5% in fiscal year ’26, including 4.5% to 5% growth in Q1. Based on recent FX rates, we would expect a tailwind from FX of $0 to $100 million in the total year, with a roughly neutral impact in Q1. Moving down the P&L, I’ll first talk about our underlying business, excluding the impact of tariffs. Like we saw in the fourth quarter, we expect continued mix headwinds within gross margin from CAS and Diabetes, with an increasing impact from Diabetes as we are early in the manufacturing ramp of the Simplera sensor. We will continue to drive pricing discipline, in particular on the back of new product introduction, and to cover FX. We will also accelerate our COGS efficiency programs to significantly outpace inflation.

Given my background, this will be a key area of focus for me, together with our businesses, and Greg Smith and our global supply chain team. In fiscal year ’26, we will significantly increase investment in our growth drivers to maximize future growth. For the first time in four years, we are planning to grow R&D faster than revenue. We will also invest in sales and marketing. These investments will be deliberately focused on areas like Cardiac Ablation, as well as in Surgical Robotics and RDN, as we prepare for scaling the US launches of our Hugo robot and Symplicity hypertension procedure. On the flip side, we do expect to drive significant leverage with G&A expenses. The net of this will be an operating profit line that grows materially faster than revenue.

Below the op profit line, we are expecting increases in both interest and tax expense, which combined results in a 300 basis point impact on EPS growth. On the interest, this is driven by the fact that any debt we refinance will likely be at higher rates given the current higher interest environment, whereas the pressure on the tax side derives primarily from the effects of Pillar Two. This leads to our expectation for approximately 4% EPS growth in fiscal year ’26, excluding the impact of tariffs. And foreign exchange is a neutral impact to fiscal ’26 at recent rates. For Q1, we would expect EPS in the range of $1.22 to $1.24, which includes minimal expected impact from tariffs, and a 1% to 2% headwind from foreign exchange at recent rates.

Next, I’ll share with you our thinking on tariffs, which we laid out in our earnings presentation this morning. We built our expectations based on two potential scenarios. The low end of the potential impact assumes that the current bilateral US/China tariffs that are in place during the 90-day pause remain throughout fiscal ‘26, while the high end assumes they resume at the higher levels following the 90-day pause. Through focused efforts from teams across Medtronic, we already have visibility to offsetting a good portion of this headwind, and we have high confidence in our ability to execute additional mitigation efforts. As a result, we forecast a net tariff impact to COGS in fiscal year ’26 of approximately $200 million to $350 million.

From a quarterly breakout, we would expect minimal impact in Q1 as I mentioned earlier, and then approximately 10% in the second quarter, and approximately 30% and 60% in Q3 and Q4, respectively. All that said, it’s highly likely that the impact from tariffs will change, and we’ll keep you updated periodically as we go through the year. So, combining our underlying performance with our current tariffs expectations, we would have you model fiscal year ’26 EPS in the range of $5.50 to $5.60. We’ve shown you that we can deliver high single-digit EPS growth, as we did with the 9% growth in the back half of fiscal year ’25. As we look beyond next year to fiscal year ’27, we expect to return to high single-digit EPS growth upon the Diabetes separation, driven by several factors, including strong revenue growth, and further underpinned by FX tailwind at recent rates, and the margin and share retirement benefits of the separation.

Geoff, back to you.

Geoff Martha: . Thank you, Thierry. Now before we go to Q&A, I’ll make a few closing remarks. Starting with that we had a strong close to the fiscal year, with 2.5 years of mid-single-digit revenue growth that is now also translating into strong operating profit and EPS leverage. We have durable growth drivers that are taking hold, and we also have clear line of sight to improving growth drivers in other businesses. For example, Peripheral Vascular, where we are working with Contego Medical in the carotid market, and we will soon enter the peripheral thrombectomy segment as well. In Pelvic Health, we are working to open a large new market when our revolutionary Tibial stimulation device is approved. And as for Hugo, procedures and utilization are growing, and the cadence of key milestones is accelerating.

We’re also working aggressively to manage external factors that are impacting our ‘26 guide. And as Thierry pointed out, we’ll be back to high single-digit EPS growth in ’27. So, as I assess the overall business, the underlying fundamentals are strong, and they are getting stronger. We’ve been working on a number of changes to the company, and those changes are making a difference. We streamlined the operating model and implemented performance-driven incentives. We brought in outside leadership with accretive skill sets, which are enhancing execution and improving operating rigor. We prioritized investments in groundbreaking innovation that are now paying off and accelerating company growth. We centralized global operations, supply chain, and quality, resulting in improved KPIs. And we’re adding a performance culture to this mission-minded company and transforming our portfolio.

And today’s Diabetes announcement accelerates our speed of travel to higher, profitable growth, aligned around our core strengths, giving all of our stakeholders increased conviction in our ability to deliver. I want to thank our employees around the world who are listening today. You’ve truly embraced our AND culture, our culture of driving both our Medtronic Mission and Performance. This is directly leading to our strong financial outperformance. And it’s making a difference for the millions of people around the world that depend on Medtronic to alleviate pain, restore health, and extend life. We’ve made a lot of progress this past year, and your efforts have laid the groundwork for the inflection point that we’re now entering. And I couldn’t be more excited about what we’re going to accomplish here in the new fiscal year.

So, thank you for your dedication and service. Finally, as you may have seen in our earnings press release this morning, Sean Salmon is moving on, and this will be his last earnings call with us after more than 20 years of service to Medtronic. Sean has been responsible for leading a number of our successes. He leaves a legacy of having developed strong, capable leaders in our Cardiovascular businesses, as well as a robust technology pipeline, both of which are responsible for driving the CV growth acceleration you saw this quarter. Sean departs with our Cardiovascular portfolio in a leading position. To lead CV going forward, we’re promoting Skip Kiil. You’ve seen Skip’s impact in driving above-market growth in our Cranial & Spinal Technologies business, and he had success in other parts of MedTech prior to joining Medtronic.

Skip will augment our deep CV leadership team with his strategic mindset, broad global expertise, strong customer focus, and demonstrated track record of developing new markets and driving commercial success. So I want to thank Sean for his service, and we’re looking forward to Skip leading our continued success in Cardiovascular. So, with that, let’s move to Q&A where we’re going to try to get to as many analysts as possible, so we ask that you limit yourself to just one question, and only if needed, a related follow-up. If you have additional questions, you can reach out to Ryan and the Investor Relations team after the call. Wynne, can you please give the instructions for asking a question?

Operator: [Operator Instructions] For today’s session, Geoff, Thierry, and Ryan are joined by, Que Dallara, EVP and President of Diabetes; Mike Marinaro, EVP and President of the Medical Surgical Portfolio; Sean Salmon, EVP and President of the Cardiovascular Portfolio; and Brett Wall, EVP and President of the Neuroscience Portfolio. We’ll pause for a few seconds to assemble the queue.

Travis Steed: This is Travis. I didn’t hear anything. So, thanks for taking the question. I wanted to ask on — congrats — first of all, congrats on all the good news this morning. I wanted to ask on the guidance philosophy with the new CFO. It is confident enough to put out the 5% no range. What’s being assumed on the pipeline on the revenue side? And then I wanted to ask on the 4% EPS growth ex tariffs. Curious how you’re thinking about what you kind of built in on conservatism on some of the below-the-line items there? And if it’s possible to offset some of the headwinds over the course of the year if the revenue comes in better? And then on FY ’27, the high single-digit EPS growth, maybe talk about the framework and the visibility to be able to go ahead and kind of give that two years ahead that you can kind of get to the high single EPS growth in FY ’27. [Technical Difficulty]

Geoff Martha: Okay. Yeah. So we got your question. Sorry about that, there was some sort of connection issue here. But I got your question. I’m going to — first of all, good question, as Danielle pointed out, and I will take the first part of it and then hand it to Thierry to go through the earnings stuff. But on the growth side, look, we’re very bullish on the growth drivers. We — even in the markets that we’re in and the growth drivers that we have. So like even in Q4, our markets grew 7%, even without diabetes. And we’ve got strong positions in these markets, and we see growth from our big three portfolios to be mid-single and then some. We’re running the company at higher expectations than we’re guiding here. Just some examples.

I mean you see our CV business accelerating to 8% with nearly 30% growth in cash, which added — just that alone added 70 basis points to the company growth. And that’s without Ardian, and Ardian will start ramping through ’26. You got neuroscience with double-digit growth in Neuromod and look, CST, what can I say? I mean, it’s just separating itself from the pack. And we’ve got Tibial coming in Pelvic Health. And so we’ve got some growth drivers there, of course, in surgical, Hugo, as we talked about the commentary’s building momentum, and we’ll start to have more of a meaningful impact on med-surg next year. and then beyond that on the company. So we’re bullish about the markets that we’re in, the positions we have in those markets and our growth potential.

So that’s what’s baked into the next year’s guide and going into ’27. I mean, we’re at the early stages of these growth drivers with more to come. On the earnings, I’ll turn it over to Thierry. Anything else you want to add on growth.

Thierry Pieton: No, thanks. I think, Geoff, you were pretty complete on the growth. So we feel comfortable that we’ve got a good opportunity from a growth perspective. From a profitability standpoint, what the construction has, as you may have seen in the details that we’ve given in the commentary, is actually still getting quite a bit of leverage before tariffs that we operated at level. So we’ve got a construction that has operating profit that’s growing around 7%. So, significantly in excess of revenue. And that’s despite making a significant investment for the future of the business here. And I mentioned it in the commentary, for the first time in four years, we actually have a plan that has R&D growing quicker than revenue, and that’s even with revenue up 5%.

So, our R&D spend should be increasing around $200 million next year, which is about 7% versus the 5% growth rate. Despite that, we have significant leverage at the op profit level. And then to your point, we’ve got a couple of pressure points below the line. One is around the tax rate, and that’s primarily driven by Pillar 2. And so our tax rate should go from about 16.7% this year to about 18% next year. And then as I — as we refinance our debt in a higher interest rate type of environment, that also puts some pressure. So, we lose about 300 basis points between the op profit level and the net. On the opportunity to do better, hey, look, we’re — first of all, operationally, we’re, as usual, going to drive the teams to a higher number than this, whether it’s from a growth perspective or from a margin standpoint.

On the margin side, given my background, this is going to be a key area of focus for me. And my initial view is that there is some opportunity from a cost perspective. I think the supply chain team with Greg has kicked off a lot of very positive initiatives and we’re starting to see the results. And I think there’s more to come. So I’ll be focusing on that deeply. And then on the below-the-line items, sure on the tax front, we’ll keep working it. Some of the increase between ‘25 and ‘26 is due to the temporary safe harbors that we’ve got in Pillar 2. And there is uncertainty in terms of our ability to qualify for some of those safe harbors going into next year. And we’ll do everything we can to secure, being able to capture that opportunity.

So sure, we’ll be working on it. So look, we’ve tried to give a guidance. That’s all in, and we’ll work from there. You also had a part of the question on ’27. Sorry, I wanted to address your — the ’27 part of the question. Look, as Geoff mentioned, the growth is not a one-off thing in ’25 or in Q4 ’25. It’s going to carry into ’26. And some of the new products that are carrying this are going to carry us well into ’27. So, Geoff mentioned CAS and Ardian and Tibial that will start having a small impact towards the end of ’26 and we’ll carry into ’27. So first, we expect to continue to have good growth into ’27, and that’s regardless of the separation of the diabetes business. Just to give you some clarity on that. Diabetes drives about 40 basis points of our growth.

So, we’re comfortable we could still achieve the mid-single-digit growth even after the diabetes separation. We’ll continue to drive the cost-out initiatives, as I mentioned earlier, FX should start turning into a small headwind towards the end of ’26 and into 27. And the last item I wanted to mention is, we’ll probably talk about it more in detail on the rest of the conversation. But the deal that we’re — the structure that we’re taking on the diabetes deal actually provides us the opportunity to retire some shares. So, this will be immediately accretive to our EPS and help strengthen the construction to get back to high single-digit growth into ’27.

Geoff Martha: And just one clarification on FX — on the FX, it flips to a tailwind.

Thierry Pieton: Did I say headwind? Sorry. tailwind. Sorry.

Geoff Martha: You got tax on your mind, that’s headwind. But FX flips to a tailwind.

Ryan Weispfenning: Thanks for the question, Travis. Go ahead.

Travis Steed: I was going to ask, is the 7% operating profit, including or excluding tariffs, is there an extra week this year? And then why is there a diabetes EPS headwind this year if it’s 18 months away, those are just sort of a few quickies.

Thierry Pieton: So yeah, so the 7% is excluding the impact of tariffs. And the impact of tariffs, again, as you probably saw in the commentary, it’s $200 million to $350 million of cost at the cost of goods sold level. So from an impact on the op profit growth, I guess it’s something between 2.2 and 3.2 points depending on the outcome on China. And then the pressure on diabetes, I think it’s primarily driven by the rollout of Simplera. So, it’s the launch of this product. And as we grow it, the cost is going to go down, but initially it does put quite a bit of pressure on our margin rate to the tune of about 60 basis points at the GM level, which will translate into the earnings. And again, that will get better as the manufacturing ramps up.

Travis Steed: Helpful. Thanks a lot.

Ryan Weispfenning: Okay. Thanks, Travis. Let’s take the next question, please, Wynne.

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

Robbie Marcus: Great. Good morning, everyone. And, Thierry, welcome. Maybe a question for you and I’ll just have one. You said you’ll be back to high single-digit EPS growth in fiscal year ‘27. That’s with assuming currency remains the same and favorable and you execute the diabetes spin and resulting share buyback, which aren’t really quite sustainable in nature. So, without those benefits, which are kind of one-time, would fiscal ‘27 EPS still grow high single-digits? Thanks.

Thierry Pieton: Hey, look, I want to insist on the fundamentals here. And I think the first thing to look at, if you think about the construction for ’27 is to come back to the performance that we’re showing for Q4 here and to the second half of the year. And this is with no FX tailwind and with diabetes in the portfolio. We just delivered a quarter that’s up 5.4% organically on revenue that has operating margin up 90 basis points, which is 200 basis points if you actually exclude FX, and we’ve got EPS that’s up 11%, which is really 15.8% if you exclude EPS. That earnings growth is actually 9% in the second half of the year. So that’s the fundamentals of the business that we’re trying to build on. Now, back to ’27. As I said, we’re looking at a growth rate that should continue to be positive with all the momentum that Geoff mentioned.

We’re going to continue driving leverage on the cost side. And so here you see some signs of improvement that are pretty significant from an operating profit perspective and we’re going to continue to work on that. FX, we’re assuming that it’s flat. So, we’re not assuming that it improves where the tailwind that I mentioned on ’27 is just the effect of the carryover of the goodness that we’ll have based on the current FX rate. And then you’re right, there should be some accretion that comes from diabetes from the separation. That’s going to help. But the target that we have for the teams is to deliver on the framework regardless of the transaction.

Robbie Marcus: Great. Thanks, Thierry. Appreciate it.

Ryan Weispfenning: Thank you, Robbie. Take the next question please, Wynne.

Operator: We’ll take the next question from Larry Biegelsen from Wells Fargo.

Larry Biegelsen: Good morning, thanks for taking the question. So, Geoff, I wanted to focus on the decision to spin diabetes. I guess a couple of questions. One, did you consider breaking Medtronic up into four separate businesses? One could argue that the remaining pre business have scale on their own and have different customers and capital allocation requirements. So, why not go further in breaking up the company? And the pushback I think you’re going to get on diabetes is that it’s growing above Medtronic’s corporate average. So, why spin it off if your focus is on accelerating top line growth? Thank you.

Geoff Martha: Well, look, yeah, good question, Larry. Like, why diabetes, why now? So, first of all, on the diabetes business, like I said earlier, we believe this is a win-win for both diabetes and Medtronic. And on diabetes, we’re well down the path of the turnaround, it’s ready to stand alone, and we think it’s well suited for public markets. This move is going to ensure that they get really both the funding and the focus the franchise needs to reach its full potential. As much as we’re sitting here, Dave, much progress as we’ve made, we talked about six quarters in a row of double-digits and there’s more to come here. The product pipeline is very robust. We submitted several files to the FDA for approvals on multiple products here in the last couple of months.

And we believe with this focus and funding, the business will be a top-tier diabetes franchise well into the future. And then for Medtronic, though, it allows us to focus more on our high-margin growth drivers that we just walked through. Like I just mentioned, we’re — even without diabetes, we’re in great markets, 7% growth last quarter, stable and this — and these are higher-margin sectors for us. And this accelerates our speed of travel to these high-margin growth areas, and it’s aligned around our core strengths of the company, not technology strengths as well as our go-to-market channel to healthcare systems. So, we think it’s a win-win. It’s going to create shareholder value, short and long term. Theirry walked through the accretive nature of the deal accretive to our EPS, our operating margin and gross margin.

And I think I don’t want to speculate, but I think the diabetes business is probably worth more outside the company than in. And then back to Robbie’s point, I mean, yeah, it will provide a kind of a onetime step-up in margins. But the whole idea, Thierry’s point is that we’re growing them from there and getting to that — you saw a little bit of that in the last two quarters, and we’re going to continue to do that once we get through some of these below-the-line issues. But that’s it. The rest of the company, we believe, I said, are — you’re right, they do have scale. We think it’s better together. There’s a lot of synergies and we’ve got really robust growth drivers across all three of those portfolios of businesses.

Larry Biegelsen: All right. Thanks so much.

Ryan Weispfenning: Thank you, Larry. Next question please, Wynne.

Operator: We’ll take the next question from Vijay Kumar from Evercore.

Vijay Kumar: Hey, guys. Thanks for taking my question. Geoff and Thierry, maybe one sort of on the earnings and margins kind of question. You look at the guidance, a 4% EPS growth ex tariffs, right? Q1, it’s implied as like flattish earnings growth. Why is earnings growth back-end loaded? Is this a mix impact on margins? I think Q4 gross margins came in below. Was there a product mix issue? And, Geoff, sort of when you look at the earnings algorithm, can you commit to EPS growing above revenues irrespective of the FX environment? Thank you.

Geoff Martha: Thierry will take the first part there.

Thierry Pieton: Sure. Look, I think the question is why is the construction back-end loaded? I think in the first quarter, a couple of things I would say. First, it’s always a bit lower from a revenue perspective than the fourth quarter and the rest of the year. So that generates a lower absorption from the factories, et cetera. So, we typically have a dip between the first quarter and the rest of the year. The second element, which I think is important this year is, as I mentioned previously, we’re investing in the growth areas, both in R&D for cardiovascular for CAS, for Ardian, and also in sales and marketing to make sure that we capture the opportunities of growth that are provided by these areas. And so in Q4, what you’re going to see is a bit of that investment ahead of the return from a growth perspective.

The growth in Q4 is slightly lower than the average of the year. We’re looking at roughly 4.5% growth versus the 5% on the full year. So, we’re investing ahead, and we’ll reap the benefits of that towards the second half. And the final element is — there’s a little bit of FX headwind into the first quarter that will turn into a tailwind towards the rest of the year. So that kind of explains why we have a better performance towards the back end.

Geoff Martha: And your question on the leveraged P&L, leveraged EPS growth regardless of FX, I think that was your question. So first, just getting to Thierry’s point, just one more point is, I don’t think this is back end loaded as last year. We did end up hitting — remember, a year ago, we put out that had the back-half of the year growing quite a bit, and there were some skepticism from the call. We did end up hitting on the higher end of that guidance across the board. I just want to point that out. But to your other more strategic question, the answer is yes. FX over the years, as you guys, always dogged us a bit. And yes, we believe and the economists that we’re talking to, which is quite a many is that FX is going to be a tailwind for us for the next couple of years.

That being said, what we’re doing here is underlying in the operations of the company is creating natural hedges and lowering our exposure to FX through a number of different areas, including something we’ve already really made a lot of progress on is dynamic pricing in countries that are serial, the currencies are devaluating on a consistent basis. And that has had a pretty — a fairly meaningful impact, positive impact for us. But in addition to that and expanding that to other countries around the world, paying our teams on kind of actual FX basis, we are making some structural changes that just lower our overall exposure to FX. And then you combine it with our hedging program, I think it’s a good formula. But we’ve got a — we’re putting in place natural hedges.

So the answer is yes.

Thierry Pieton: I just wanted to give some incremental color maybe to give visibility on the gross margin side. What we’re seeing in Q4 and what we’ll see for a part of ’26 is really two things that are offsetting each other. We do have a negative impact coming from mix, and that’s about 80 basis points. And it’s a combination of CAS and diabetes. And that mix impact is offset by the progress that we’re making from a pricing and from a cost standpoint, right? The progress we’re making on pricing and cost, that’s going to carry forward. And I’m going to be focusing on what I can do to help accelerate that. The mix effect on CAS and diabetes. So, look, the diabetes part, I guess, will be addressed through the portfolio move that we’re making.

It’s not why we’re doing it, but it will help. The CAS impact on mix actually translates into good news at the operating profit level, number one. Number two, some of it is driven by the fact that right now, a lot of the growth is done on the capital equipment sales. So, we’re shipping capital equipment first, and the catheters will come after. So the fact that mix within CAS is towards the capital equipment is actually good news for the future because as we increase the catheter sales, that’s going to alleviate a big portion of that mix effect. So, the dynamic you should see is the mix getting better and the cost initiatives hopefully accelerate. I hope that gives some additional color on why we should be able to continue to leverage.

Vijay Kumar: Very helpful. Thank you.

Ryan Weispfenning: Thank you, Vijay. Next question, Wynne.

Operator: We’ll take the next question from Joanne Weunsch from Citi.

Joanne Weunsch: Good morning, and congratulations on all the news this morning. I want to pivot here a little bit to [indiscernible] products. And I was curious about your commentary regarding the preparation that you and you’re seeing hospitals do for renal denervation and reimbursement. And if you could just sort of share a little bit more about what you’re seeing, that would be fabulous. Thank you.

Geoff Martha: Sure. Maybe I’ll call on Sean for that one.

Sean Salmon: Yeah, certainly. Joanne, thanks for the question. So, as you imagine, our focus has been about opening centers that are getting ready to take on this new service line. And that involves making sure that we train physicians how to do the procedure, of course, and educate them on coding and billing for the current fee-for-service Medicare patients. In addition to that, of course, with the NCD in the frame, that’s going to open up a lot of patients and really, it’s about focusing as they build a service line, making sure they are able to work the patients up, rule out secondary causes of the disease and then get them appropriately to the cath lab for renal denervation, which they perform safely. There’s a lot of enthusiasm, as you can imagine, from customers who are looking for new service lines to grow their practices, absorb their cath labs.

So it’s really about that. It’s training, education, and support for their programs as they build that up. Upon getting reimbursement, there’s more to do to activate patients more directly. And we will channel those patients to a physician finder in geographies where patients can then find their way to the treatment. And as you probably recall from the clinical trials, a large proportion of our patients were self-referred by using social media tools. So, it’s a very efficient way to recruit patients to the effort. But of course we’d want to do that when all the reimbursement barriers come down. And that’s what we’re hopeful for and as we move forward into the NCD.

Joanne Weunsch: Thank you. And if I could do a follow-up, how do you think about this revenue ramping? You sort of paralleled it to PFA adoption, and I just want to sort of get expectations set of how to think about that. Thank you.

Sean Salmon: Yeah, Joanne, I think that’s a very different thing, right? So, PFA is replacement incumbent procedure. That is faster, safer procedure that appears to have just excellent efficacy, is really a pretty easy switch. It’s not so difficult to train on our tools and techniques for that. This is a little bit more involved, of course, because there are other reasons why people have high blood pressure. You have to sort those causes out to get patients into the service line. So it’s a longer ramp, but it’s a long annuity. This is a massive patient population, as you know, and be able to build that practice. I think you got to think about this as one of those really important, durable growth drivers for the company that will set us up well for a lot of success for a long time.

Geoff Martha: Yeah, just to build on that point, Joanne, to build on that point that Sean’s making, the larger health systems around the country, I mean, not just the larger ones, but a lot of them are really proactively calling us for partnerships around hypertension, building these clinics, a lot of them virtual, some not, and establishing these patient pathways with us jointly investing. So it’s — this is going to be a big one for us for a long time. And we’re — and of course, we’re going to continue to invest in the innovation around this too.

Ryan Weispfenning: Thank you, Joanne. Next question, please.

Operator: We’ll take the next question from Matt Taylor at Jefferies.

Matt Taylor: All right, thanks for taking the question. I was wondering, actually, if you could expand on some of the pipeline ideas that you had for diabetes and about their differentiation and timelines, if you can.

Geoff Martha: Sure. I will hand that one off to Que.

Que Dallara: Yeah, thanks for the question. So, if I start with a recent approval of Simplera Sync in the US, we’re ramping that, we’re going to be launching that in a limited fashion in the fall. And in Europe, that product has already launched commercially. And just to give you an idea of the volume ramp versus last year, we expect to ramp our volume at least five times what we did last year. So, we have not really begun to see the potential of Simplera on the business yet. Then we have submitted for an ACE pump in iAGC algorithm to FDA in April. So we’re ready to launch that, working very well with Abbott to make that happen and we’re ready to launch soon after we receive clearance on that. And then — so that’s our CGM option.

It’s going to address a lot of the Achilles heel of our current CGM lineup. And then we also have a multiple insulin options. We have InPen in market today, our next generation durable pump we expect to submit by the end of this fiscal year and then following, the patch will follow after that. And what you can see in the lineup is significant improvement to our form factor. That’s feedback we’ve been given. And so that makes it more wearable with all these pumps having phone control, which is a feature a lot of our customers have asked for. And then in addition to that, we have our third generation closed-loop algorithm that we believe will be a very exciting development in terms of burden reduction while driving the clinical outcomes that people expect from us.

So, when you look at the total ecosystem, I would say a couple things. One, the form factors are completely upgraded. Not only that, we’ve completely re-architected the software, including the algorithm that drives everything. And then you can see the wearability of the entire system. And it’s not talked about in the product itself, but when you think about the burden of diabetes management, there is something very attractive in burden reduction that patients have to only deal with one company, especially when things go wrong. And so our customer, our tech support and our customer service, not just for patients but also physicians, is also a differentiator.

Matt Taylor: Great, thank you very much.

Ryan Weispfenning: Thanks, Matt. Wynne, we have time probably for three more.

Operator: Okay. We’ll take the next question from Matt Miksic at Barclays.

Matt Miksic: Hey, thanks so much for taking the question and congrats on the strong finish here. And just to make sure, understand the operating line growth, 7% with about 300 basis points, getting you back to 4% EPS growth of the full year. And that’s inclusive of all the investments that you’re talking about. That’s inclusive of the sort of gross margin headwinds around investments and so on, just to be crystal clear. Is that right?

Thierry Pieton: Yes, that’s correct. But it’s before the tariffs impact, right? Just to be clear. And again, the tariffs impact are about 2.2 to 3.2 points on that.

Matt Miksic: Right. And so, congrats on that leverage. I mean, I just take a minute to — I know where it’s been, difficult getting growth of EPS above sales with other headwinds and so on. So, getting that operating line growing. So then on tariffs, you mentioned high confidence in getting to the mitigations you’ve described. Opportunity to take those further. And then just maybe if I could drill down a bit on the spine business, just get a sense of, above market performance, where if we were to sort of like, like-for-like spine growth, comparing to your pure play peers, where do you see your growth? Where do you see the market? Any color you provide on that would be great as well. Thanks so much.

Geoff Martha: Sure. So, first of all, thanks for acknowledging the op profit growth. We did, like I said, 8% in Q4 and the guidance for next year is 7%. And if you take out the diabetes, that’s — that would go 8%. So we’ve built that muscle and that’s going to continue. In terms of the spine business, again, the markets — I would say the demand is there. The markets have been stable and technology is the differentiator here. And it’s pretty extreme. If you go back over the last couple of years, you’re seeing a number of our competitors tap out because of the investment and expertise it takes to build out the capital equipment, the enabling technology strategy around this. And we’ve got a big lead here. Like I said in the commentary, with the dynamic that we’re seeing by us taking this portfolio of enabling technology and integrating the workflow, we’ve gone from a product story to a solution story.

We branded AiBLE, AI-enabled technology. And so as our customers are upgrading, they’re upgrading from a product to a broader ecosystem. So it’s not a linear upgrade. It’s more algorithmic. And that’s giving us — and that is durable advantage. And so we’re seeing the market growth is stable, and we’re seeing our competitive advantage growing. You’ve seen a bunch of our competitors tap out, like I said, you see our like probably primary competitor this quarter put up some results — we’ll see where it goes from here, but there’s a pretty big difference between us and them this past quarter, and we’ll see where it goes from here. But we’re feeling good about spine, and this is something that Brett’s highly involved with and leading along with Skip.

I mean, Brett, would you like to comment on this?

Brett Wall: Yeah. Sure, Geoff. And, Matt, thanks for the question. And we’re just seeing, as Geoff said, good stable demand and the ecosystem is driving that. And if you look at our enabling technology growth last quarter, it remains very attractive, very strong. And we just see that stability continuing. It’s an attractor for not only customers, we’re seeing a large scale important academic centers come to Medtronic for this. And we’re also getting very good response from other sales reps and other individuals that want to join Medtronic. So, we’re comfortable with how this is moving forward.

Geoff Martha: So, I just think, I’m glad you asked the question, Matt, because we talk a lot about PFA and RDN and robotics, but part of our — key part of our growth story is the rest of the company. And, we talked about CST or our spine business, CRM, high single-digit quarter there, strong growth from leadless, conduction system pacing, EV-ICD, again, these are durable growth drivers for us that are going to go out. So, and then the other thing we mentioned in the commentary, some of the slower growing parts of the company we have plans for, like peripheral vascular as we enter the carotid space with Contego. And then through an organic program into thrombectomy, taking some technology from our neurovascular business to get into that space.

And then we’ve got things like public health, which will, I think it’s going to surprise people with the growth there once we launch this Tibial system. We think that’s going to be very disruptive and we don’t see a real answer from our competitors. So, the rest — the growth story is pretty broad at the company. It’s not just the lightning bolts of PFA and Ardian. So, thanks for the question.

Ryan Weispfenning: Thanks, Matt. Two more questions please, Wynne.

Operator: We’ll take the next question from Danielle Antalffy from UBS.

Danielle Antalffy: Hey, good morning, guys. Thanks so much for squeezing me in here and I’ll echo everyone’s congrats on all the news this morning. Just a quick question to clarify on some of the commentary around PFA, obviously a really important growth driver. I think you talked about reaching $2 billion in sales to essentially just about doubling. I’m just curious how to think about the ramp from just over $1 billion to $2 billion in that CAS business. I mean, is that something that based on your commentary, I mean, it seems like that’s more near term versus long term. But anything you can add there as far as how we think about getting from that $1 billion to $2 billion? I mean, one of your competitors that was first-to-market here or close to — I mean, you guys came to market about the same time. So, sorry about that. But they ramped pretty quickly. So, just curious if you could give any more color there.

Geoff Martha: Yeah, no, they did. They did. They ramped really quickly. And, I think, we feel very good about our product portfolio here in PFA. And what we’re seeing right now is just an incredible demand for Affera. And the capital, we got to get those capital systems out there, which we’re doing. You get these high-volume centers, they get one. And like I said, I spent the last couple of weeks, I’d say 80% of my time or so has been on PFA, just going to Heart Rhythm Society meeting, and then a trip to the Northeast United States, just meeting with the leading centers. And the dynamic work hearing is they get the one Affera system, and then there’s fighting over that system amongst the different EPs at these systems. And they’re now getting their second Affera system.

And then the catheter sales build from that. Again, it’s not a — once you get the installed base, it’s not linear. And the systems are getting this technology. They’re not being held back by capital constraints. And if that is an issue, we have opportunities here through contracting to eliminate that friction. And then our supply chain has really ramped, right? This was — we bought Affera, it’s a super innovative technology, but then we had to spend quite a bit of time innovating the manufacturing process. That wasn’t really designed in with the acquisition. So that’s up and running and we’re scaling that and we’re really happy with that. And then you’ve got a nice robust demand, a robust pipeline. Like I said in the commentary, the only thing that’s more exciting than a Sphere-9 catheter out there right now is the Sphere-360 and that goes right at the heart of the competition, right at them.

And then we’ve got PulseSelect which is not under any kind of supply constraints. And it gives centers around the world an option and a way to blend the pricing as well. So especially in the global areas where the resources aren’t as much, you got PulseSelect, a very good system, high quality, very safe, and it’s not priced where the Affera is. And so what I would say is that we strongly believe in doubling the business. We didn’t put a specific timeframe on it, but it’s not far off. I mean, it’s not far off. So, I’d say it’s more near-term. The next couple of — maybe, I don’t know if it will exactly happen in the fiscal year, but we’re in that ballpark and really excited about it.

Danielle Antalffy: That’s so helpful. Thanks so much.

Ryan Weispfenning: Thank you, Danielle. Let’s take the last question, please, Wynne.

Operator: Our last question comes from Shagun Singh at RBC.

Shagun Singh: Great. Thank you so much. So, a couple of follow-ups on the CAS business. Impressive growth. Can you talk about the mix of cryo? It seems like it’s becoming less and less of a headwind. Any color on pricing there? And then on RDN, any updated thoughts on what patient subset you think you could get coverage for? Thank you for taking the questions.

Geoff Martha: Sean, do you want to take the first one?

Sean Salmon: Sure, thanks, Shagun. Yes, so first of all, on CAS, cryo will become less and less part of the mix, but I think that rate of decline will slow and then that will really aid in the growth of that business going forward. It’s still a really valued tool and particularly in places that don’t use general anesthesia and are more cost-constrained. It really is holding up very, very well. So, I think it hits kind of a near nadir and it’ll stay there and then we’ll have growth on top of that. With regard to your question on what we’re expecting for coverage with the population of patients, I think what I’d just say is, I will front run the CMS decision makers here, but what we’ve been presenting to them is what is the evidence and what are the guidelines and professional society saying.

And those really track pretty closely. So, to meet the standard of reasonable and necessary for CMS, I think it’s going to be very close to what we’ve studied and what’s being recommended by the guidelines. And that would be patients that both aren’t able to control their blood pressure despite lifestyle medications, but also those patients that are unable to take medications due to side effects and such. So, I think relatively broad. We’ll find out soon enough in July. But I think just following that evidence and an expert opinion and the commentary that was collected in the public commentary period will lead to that decision.

Shagun Singh: Got it. If I could just squeeze in one last one, just your strategy around portfolio management. I think, Geoff, at some point you had indicated that you are committed to areas where you can build an ecosystem and diabetes was one of those areas. You’re now looking to separate that. Just how should we think about your portfolio management strategy going forward? Thank you for taking the questions.

Geoff Martha: Sure. I mean, look, we’ve been, as I said before, it’s a continuous process. We’ve been at it. We’re going to stay at it. Diabetes isn’t an end. We exited ventilation for different reasons. We exited ventilation. We exited our heart — our LVAD business. We exited dialysis, and now diabetes. And it really comes down to, where do we have these secular growth opportunities along with a financial profile, like higher margins that works for us, where we have core strengths. And those four, they’re different degrees, but I think there’s other stuff inside the company that is a higher degree of higher margin growth and aligned around our core synergies and capabilities. And that’s what’s really driving it. And so we’re — we like where we are, like I mentioned before, we’re in high growth markets.

But we’ll continue looking at the portfolio. I want this to be both additions and subtractions. We want to do more deals to, I think, the fundamentals of the company are the best I’ve seen in my nearly 14 years here. And so we are — the markets that we’re in, the technology that we have, our operational, how we’re executing operationally. And we’re at a point now where I would like to turn up the heat on some tuck-in M&A to support these strong market positions. So that’s part of the portfolio piece. And then on the divestiture side, I just talked through that. And it’s an ongoing process. On that note, I just — seeing some of the chatter back and forth here, on the diabetes deal, I do want to clarify the mechanics of it a bit and how this transaction will work because it is unique and has unique benefits for Medtronic.

So, Thierry, could you just hit on that before we?

Thierry Pieton: Sure. Yeah. Thanks, Geoff. So, look, the preferred path that we’ve laid out really has two steps. The first step is we do an IPO of up to 20% of the shares of the new diabetes company. And what that does is it enables us to raise capital to make sure that the new diabetes company is fully capitalized. Those proceeds will also cover the costs that are relative to executing the deal overall. And it will — in our projections, it will enable potentially to have some of the proceeds go to Medtronic to potentially apply our capital allocation typical policy. So it provides an opportunity to do a buyback in the first phase. Then, there is a second phase, which would — should occur, I guess, roughly six months after the first phase, and that in that second phase, we do a split.

And what that means is we post the lockup period, we give an opportunity for Medtronic shareholders, some of which will have entered the stock to participate to the fit. We give them the option either to keep the Medtronic stock or the swap for stock and the shares in the new diabetes companies. So, the result of that is that it will reduce the share count of Medtronic on a permanent basis. So this is the accretive effect that it will have on EPS. So it’s not a one-off buyback. I want to be clear. It’s a permanent retirement of the shares corresponding to something probably around 80% of the shares of the New Diabetes Company. So all this should be a tax-free transaction for US federal income taxes. And the goal is to get everything done within the next 18 months, which means that we will fully consolidate the diabetes business through 2026 and see the impacts of the deconsolidation and the EPS accretion primarily in 2027.

Geoff Martha: And that onetime EPS bump, we’re not looking at that. We see it for what it is. It’s a onetime bump, and we’re going to apply our algorithm on top of that and grow that EPS year-over-year like we talked about as part of our algorithm. And then additionally, the other benefit it does reduce with the retired shares, does reduce the cash burden on the dividend liability. So that’s another benefit of it. So, it’s a unique structure. It’s a unique deal. It’s a unique structure. And that’s why I say it’s a win-win.

Geoff Martha: So, with that, look, sorry for the little technical challenge at the beginning of the call. Thanks for your patience on that. Thanks for going the extra half hour plus and all the great questions and engagement. I’m sure there’ll be a lot of conversations throughout the day. There’s a lot of news, a lot of good news. I think we’re — like I said, I’m as excited about the setup as I’ve ever been, and we’re at the early stages of it. So, thanks for all the questions. And to all of us who joined today, we appreciate your support and the continued interest in Medtronic. And we hope that you’ll join our Q1 earnings broadcast, which we anticipate holding on Tuesday, August 19, where we’ll continue to update you on all the progress here. So with that, thanks for spending time with us today, and have a great rest of your day.