Medtronic plc reported revenue and adjusted earnings ahead of expectations even as it forecast a year-on-year growth of 13.7 percent and an increase in non-GAAP diluted earnings per share to $1.45.
Analysts had expected revenue of around $9.54 billion and adjusted EPS of around $1.39 according to the earnings highlights. And that’s a good earnings surprise for Medtronic when it enters fiscal 2027.
The company's reported performance was broad-based and showed growth across its major businesses. Cardiovascular revenue rose 19.5% on a reported basis to $3.927 billion; Cardiac Ablation Solutions was the key driver of the unit’s growth with an 88% increase in revenue from the previous year. Medtronic also reported good growth across its electrophysiology business.
The Neuroscience portfolio generated $2.678 billion in revenue, up 10.3% reported and 9.3% organically. The Medical Surgical portfolio generated $2.279 billion, up 10.0% revenue, while Diabetes was $843 million, up 16.9% reported and 14.9% organically.
Profitability improved as well. Medtronic reported a GAAP operating margin of 18.1% up 120 basis points from the prior year quarter. Its non-GAAP operating margin was 23.7%, up 10 basis points. GAAP diluted EPS was $1.14 and non-GAAP diluted EPS was $1.45, up 15.1 percent from the year-earlier period.
Free cash flow was in the range of $1.3 billion and that would be the company’s cash flow generation and investment in new technology, acquisitions and growth platforms— all very impressive.
One of the biggest strategic announcements that accompanied the earnings report was Medtronic’s $700 million strategic partnership with Cornerstone Robotics. The agreement allows Medtronic to distribute Cornerstone’s Sentire surgical robotic system in a number of markets outside the United States, where it has regulatory approval. The Sentire will join Medtronic’s Hugo robotic-assisted surgery system.
Medtronic added that the partnership will expand the worldwide access to robotic-assisted surgery and give hospitals and surgeons the option to choose more surgeons. The company expects Hugo system procedures to reach 50,000 globally by the end of fiscal 2027, the earnings highlights show.
The company also announced the completion of its acquisitions of Scientia Vascular and SPR Therapeutics, and a strategic investment in Pi-Cardia. Medtronic also announced an expanded CE Mark indication for its Affera Mapping and Ablation System and Sphere-9 Catheter for ventricular arrhythmias, as well as FDA clearance for the next-generation Touch Surgery Aide computing platform.
The most important takeaway for investors was the company's updated fiscal 2027 outlook. Medtronic raised its organic revenue growth guidance to 7.25-7.75% from 6.75% to 7.25% and its diluted non-GAAP EPS guidance to $5.94-$6.00 from $5.90-$6.00.
Medtronic did note that the first quarter had an extra fiscal week, which contributed an estimated $570 million to organic growth. That is a crucial factor for investors when comparing the headline growth rate with underlying performance.
CEO Geoff Martha said the confidence was not only based on the strong performance of the quarter but also on the performance of all of its businesses and growing contributions from new growth platforms. CFO Thierry Piéton also cited good operating performance and discipline in financial management as the reasons for the new guidance.
Medtronic’s Q1 FY27 results, on the whole, show an excellent revenue and earnings boost and better-than-expected earnings and revenue guidance, improved guidance for the full year, strong performance across its core businesses and an expansion of surgical robotics and other growth technologies. For MDT stock investors looking forward, the growth and an outlook is a positive start to the company’s new fiscal year.
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