Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

98K characters. Original on sec.gov · Markdown

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNDERSTANDING OUR FINANCIAL INFORMATION

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 25, 2025. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and nine months ended January 23, 2026. Amounts reported in millions within this quarterly report are computed based on the actual amounts, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.

Financial Trends

Throughout this Management’s Discussion and Analysis, we present certain financial measures that facilitate management's review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance with U.S. GAAP. We believe that non-GAAP financial measures provide information useful to investors in understanding the Company's underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.

As presented in the GAAP to Non-GAAP Reconciliations section on the following pages, our non-GAAP financial measures exclude the impact of amortization of intangible assets and certain charges or benefits that contribute to or reduce earnings and that may affect financial trends and include certain charges or benefits that result from transactions or events that we believe may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).

In the event there is a Non-GAAP Adjustment recognized in our operating results, the tax cost or benefit attributable to that item is separately calculated and reported. Because the effective rate can be significantly impacted by the Non-GAAP Adjustments that take place during the period, we often refer to our tax rate using both the effective rate and the non-GAAP nominal tax rate (Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate is calculated as the income tax provision, adjusted for the impact of Non-GAAP Adjustments, as a percentage of income before income taxes, excluding Non-GAAP Adjustments.

Free cash flow is a non-GAAP financial measure calculated by subtracting property, plant, and equipment additions from operating cash flows.

Refer to the “GAAP to Non-GAAP Reconciliations," "Income Taxes," and "Free Cash Flow" sections for reconciliations of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with U.S. GAAP.

EXECUTIVE LEVEL OVERVIEW

Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, ear, nose, and throat conditions, urological and digestive disorders, advanced and general surgical care, respiratory and monitoring solutions, and diabetes conditions.

The following is a summary of net sales and diluted earnings per share for the three months ended January 23, 2026 and January 24, 2025 and operating cash flow for the nine months ended January 23, 2026 and January 24, 2025:

Executive Level Overview Infographic Q3 FY26.jpg

GAAP to Non-GAAP Reconciliations

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended January 23, 2026 and January 24, 2025:


	Three months ended January 23, 2026
(in millions, except per share data)	Income Before Income Taxes		Income Tax Provision (Benefit)		Net Income attributable to Medtronic		Diluted EPS		Effective Tax Rate
GAAP	$	1,404	$	254	$	1,143	$	0.89	18.1	%
Non-GAAP Adjustments:
Amortization of intangible assets(1)	441		81		360		0.28		18.4
Restructuring and associated costs(2)	172		31		141		0.11		18.0
Acquisition and divestiture-related items(3)	38		5		33		0.03		13.2
Certain litigation charges, net	62		10		52		0.04		16.1
(Gain)/loss on minority investments(4)	8		1		7		0.01		12.5


Certain tax adjustments, net	—		(14)		14		0.01		—
Non-GAAP	$	2,125	$	369	$	1,750	$	1.36	17.3	%

	Three months ended January 24, 2025
(in millions, except per share data)	Income Before Income Taxes		Income Tax Provision (Benefit)		Net Income attributable to Medtronic		Diluted EPS		Effective Tax Rate
GAAP	$	1,540	$	237	$	1,294	$	1.01	15.4	%
Non-GAAP Adjustments:
Amortization of intangible assets	416		77		339		0.26		18.5
Restructuring and associated costs(2)	46		9		37		0.03		19.6
Acquisition and divestiture-related items(3)	28		5		23		0.02		17.9
Certain litigation charges, net	22		5		18		0.01		22.7
(Gain)/loss on minority investments(4)	68		15		52		0.04		22.1
Medical device regulations(5)	11		2		9		0.01		18.2

Certain tax adjustments, net	—		(15)		15		0.01		—
Non-GAAP	$	2,130	$	334	$	1,787	$	1.39	15.7	%

(1)The Company recognized $30 million of accelerated amortization on certain intangible assets within the Cardiovascular Portfolio.

(2)The charges primarily relate to employee termination benefits, facility related and contract termination costs, and asset write offs.

(3)The charges primarily include business combination costs, changes in fair value of contingent consideration, exit of business-related charges, and gains related to certain business or asset sales. Exit of business-related charges primarily relate to the impending separation of the Diabetes business. For the three months ended January 23, 2026, charges also include costs associated with the Company's June 2021 decision to stop the distribution and sale of the Medtronic HVAD System.

(4)We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.

(5)The charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs.

The tables below present our GAAP to Non-GAAP reconciliations for the nine months ended January 23, 2026 and January 24, 2025:


	Nine months ended January 23, 2026
(in millions, except per share data)	Income Before Income Taxes		Income Tax Provision (Benefit)		Net Income attributable to Medtronic		Diluted EPS		Effective Tax Rate
GAAP	$	4,302	$	724	$	3,557	$	2.76	16.8	%
Non-GAAP Adjustments:
Amortization of intangible assets(1)	1,364		254		1,110		0.86		18.6
Restructuring and associated costs(2)	251		49		202		0.16		19.5
Acquisition and divestiture-related items(3)	96		23		73		0.06		24.0
Certain litigation charges, net	89		17		73		0.06		19.1
(Gain)/loss on minority investments(4)	145		8		137		0.11		5.5

Other(5)	(39)		(8)		(30)		(0.02)		20.5
Certain tax adjustments, net(6)	—		—		—		—		—
Non-GAAP	$	6,209	$	1,066	$	5,122	$	3.98	17.2	%

	Nine months ended January 24, 2025
(in millions, except per share data)	Income Before Income Taxes		Income Tax Provision (Benefit)		Net Income attributable to Medtronic		Diluted EPS		Effective Tax Rate
GAAP	$	4,367	$	737	$	3,606	$	2.79	16.9	%
Non-GAAP Adjustments:
Amortization of intangible assets	1,243		227		1,017		0.79		18.3
Restructuring and associated costs(2)	154		30		124		0.10		19.5
Acquisition and divestiture-related items(3)	15		11		3		—		73.3
Certain litigation charges, net	104		18		86		0.07		17.3
(Gain)/loss on minority investments(4)	41		25		14		0.01		61.0
Medical device regulations(7)	38		8		30		0.02		21.1
Other(5)	90		20		70		0.05		22.2
Certain tax adjustments, net(6)	—		(49)		49		0.04		—
Non-GAAP	$	6,051	$	1,027	$	4,999	$	3.87	17.0	%

(1)The Company recognized $121 million of accelerated amortization on certain intangible assets within the Cardiovascular Portfolio.

(2)The charges primarily relate to employee termination benefits, facility related and contract termination costs, and asset write offs.

(3)The charges primarily include business combination costs, changes in fair value of contingent consideration, exit of business-related charges, and gains related to certain business or asset sales. Exit of business-related charges primarily relate to the impending separation of the Diabetes business and costs associated with the Company's June 2021 decision to stop the distribution and sale of the Medtronic HVAD System.

(5)Reflects adjustments to the Company's Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government on June 30, 2025 for certain prior years since 2015.

(6)The charges for the nine months ended January 23, 2026 primarily includes a tax benefit recognized due to a change in interest accrued on uncertain tax positions, offset by amortization of previously established deferred tax assets arising from intercompany intellectual property transactions. The charges for the nine months ended January 24, 2025 primarily includes amortization of previously established deferred tax assets arising from intercompany intellectual property transactions.

(7)The charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses. We consider these costs to be duplicative of previously incurred costs and/or one-time costs.

Free Cash Flow

Free cash flow, a non-GAAP financial measure, is calculated by subtracting additions to property, plant, and equipment from net cash provided by operating activities. Management uses this non-GAAP financial measure, in addition to U.S. GAAP financial measures, to evaluate our operating results. Free cash flow should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Reconciliations between net cash provided by operating activities (the most comparable U.S. GAAP measure) and free cash flow are as follows:


	Nine months ended
(in millions)	January 23, 2026		January 24, 2025
Net cash provided by operating activities	$	4,757	$	4,516
Additions to property, plant, and equipment	(1,416)		(1,400)
Free cash flow	$	3,341	$	3,116

Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities.

Macroeconomic Trends

Looking ahead, a number of macroeconomic and geopolitical factors could negatively impact our business, including without limitation:

Competitive product launches and pricing pressure, geographic macroeconomic developments including changes in global trade policies and fluctuations in currency exchange rates, general price inflation, changes in interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, national and provincial tender pricing for certain products, particularly in China, replacement cycle challenges, and supply chain challenges from time to time.
Recent developments in global trade policy have introduced new uncertainties for our business. The U.S., China, and other jurisdictions have recently imposed or proposed additional tariffs on imported goods. Based on current rates as of February 17, 2026, we estimate the pre-tax net tariff impact to be $185 million in fiscal year 2026, with the majority recognized in the consolidated statements of income in the second half of the fiscal year. The actual amount could vary based on changes in tariff rates, duration of tariffs, scope of tariffs, and potential countermeasures or mitigation actions. While we are taking proactive steps to mitigate the effects of these tariffs, the evolving nature of international trade policy continues to present a risk to our cost structure and financial performance. Further escalation or expansion of trade barriers could have a material adverse effect on our results of operations. On February 20, 2026, the U.S. Supreme Court ruled that President Trump's tariff policies under the International Emergency Economic Powers Act are unconstitutional. We continue to monitor the situation and the impact to our results of operations.
The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having and could continue to have impacts on revenue and supply chain. The financial impact of the conflict for the three and nine months ended January 23, 2026, including on accounts receivable and inventory reserves, was not material. For the three and nine months ended January 23, 2026, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets.
Although the long-term implications of Israel's conflict are difficult to predict at this time, the financial and operational impact of the conflict for the three and nine months ended January 23, 2026, including on accounts receivable and inventory reserves, was not material. As of January 23, 2026, the Company had 6 facilities and approximately 1,200 employees in Israel and the business of the Company represented less than 1% of the Company's consolidated revenues and assets.

NET SALES

The charts below illustrate the percent of net sales by segment for the three months ended January 23, 2026 and January 24, 2025:

116 117

The table below illustrates net sales by segment and division and market geography for the three and nine months ended January 23, 2026 and January 24, 2025:


	Three months ended						Nine months ended
(in millions)	January 23, 2026		January 24, 2025		% Change		January 23, 2026		January 24, 2025		% Change
Cardiac Rhythm & Heart Failure	$	1,856	$	1,545	20	%	$	5,394	$	4,659	16	%
Structural Heart & Aortic	929		874		6		2,814		2,610		8
Coronary & Peripheral Vascular	672		618		9		1,971		1,876		5
Cardiovascular	3,457		3,037		14		10,179		9,145		11
Cranial & Spinal Technologies	1,310		1,250		5		3,819		3,632		5
Specialty Therapies	746		732		2		2,191		2,181		—
Neuromodulation	503		476		6		1,527		1,413		8
Neuroscience	2,558		2,458		4		7,536		7,226		4
Surgical & Endoscopy	1,654		1,596		4		4,945		4,790		3
Acute Care & Monitoring	519		476		9		1,483		1,406		6
Medical Surgical	2,173		2,072		5		6,428		6,196		4
Diabetes	796		694		15		2,274		2,027		12
Reportable segment net sales	8,985		8,260		9		26,417		24,593		7
Other operating segment(1)	32		32		3		101		106		(5)
Other adjustments(2)	—		—		—		39		(90)		NM(3)
Total net sales	$	9,017	$	8,292	9	%	$	26,557	$	24,610	8	%


	U.S.						International
	Three months ended						Three months ended
(in millions)	January 23, 2026		January 24, 2025		% Change		January 23, 2026		January 24, 2025		% Change
Cardiovascular	$	1,589	$	1,405	13	%	$	1,868	$	1,632	15	%
Neuroscience	1,709		1,689		1		849		769		10
Medical Surgical	929		893		4		1,244		1,180		6
Diabetes	248		236		5		548		457		20
Reportable segment net sales	4,475		4,223		6		4,510		4,038		12
Other operating segment(1)	18		15		23		14		17		(15)

Total net sales	$	4,493	$	4,237	6	%	$	4,524	$	4,055	12	%


	U.S.						International
	Nine months ended						Nine months ended
(in millions)	January 23, 2026		January 24, 2025		% Change		January 23, 2026		January 24, 2025		% Change
Cardiovascular	$	4,660	$	4,242	10	%	$	5,519	$	4,904	13	%
Neuroscience	5,063		4,931		3		2,474		2,295		8
Medical Surgical	2,756		2,718		1		3,671		3,478		6
Diabetes	695		683		2		1,579		1,344		18
Reportable segment net sales	13,174		12,573		5		13,243		12,020		10
Other operating segment(1)	60		51		17		41		55		(25)
Other adjustments(2)	—		—		—		39		(90)		NM(3)
Total net sales	$	13,234	$	12,624	5	%	$	13,323	$	11,986	11	%

(1)Includes operations and ongoing transition agreements from businesses the Company has exited or divested.

(2)Reflects adjustments to the Company's Italian payback accruals as further described below.

(3)Not meaningful (NM).

The increase in net sales for the three and nine months ended January 23, 2026, as compared to the corresponding periods in the prior fiscal year, was driven primarily by growth in most businesses, as further described in the business sections below. In addition, the net sales increase was driven by impacts of foreign currency fluctuations and, for the nine months ended January 23, 2026, changes in estimates relating to our Italian payback accrual resulting from the two July 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government in June 2025 and formalized into law in August 2025 for certain prior years since 2015. For the nine months ended January 23, 2026, the impact of the Italian payback adjustment was an increase to net sales of $39 million as compared to a decrease in net sales of $90 million for the nine months ended January 24, 2025.

Cardiovascular

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators, leads and delivery systems, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, open heart and coronary bypass grafting surgical products, and renal denervation systems for the treatment of hypertension. Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three and nine months ended January 23, 2026 were $3.5 billion and $10.2 billion, respectively, an increase of 14 percent and 11 percent, respectively, as compared to the corresponding periods in the prior fiscal year, resulting from growth across most businesses and the impacts of foreign currency fluctuations.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended January 23, 2026 and January 24, 2025:

1279 1280

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and nine months ended January 23, 2026 increased 20 percent and 16 percent, respectively, as compared to the corresponding periods in the prior fiscal year. Cardiac Ablation Solutions experienced strong growth in the pulsed field ablation portfolio with partially offsetting declines in cryoablation. Net sales growth was also due to increases within Cardiac Rhythm Management, driven by growth in Micra leadless pacemakers, Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system, SelectSure 3830 lead, and continued Transvenous Tachy momentum.

Structural Heart & Aortic (SHA) net sales for the three and nine months ended January 23, 2026 increased 6 percent and 8 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by Structural Heart and in Cardiac Surgery driven by growth in Penditure LAA exclusion system, Avalus Ultra surgical valve, and VitalFlow ECMO system.

Coronary & Peripheral Vascular (CPV) net sales for the three and nine months ended January 23, 2026 increased 9 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by growth in the Symplicity Spyral renal denervation system, guide catheters and balloons, as well as growth in Peripheral Vascular Health from endoVenous. The net sales increase was partially offset by declines in coronary stents.

In addition to the macroeconomic and geopolitical factors described in the Executive Level Overview, looking ahead, we expect Cardiovascular could be affected by the following:

Continued global penetration of our Micra transcatheter pacing portfolio.
Continued acceptance and growth of the 3830 lead.
Global adoption and growth of Aurora EV-ICD.
Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds.
Continued growth and utilization of the TYRX Envelope for implantable devices.
Continued use and acceptance of Reveal LINQ and expansion of the LINQ II cardiac monitor.
Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the PulseSelect pulsed field ablation system and the Affera mapping and ablation system with Sphere-9 catheter. The Affera mapping and ablation system and Sphere-9 catheter received U.S. FDA approval in late October 2024.
Continued growth and market acceptance of Affera Sphere-360 pulsed field ablation single-shot catheter. The catheter received CE Mark in January 2026.
Continued acceptance and growth of the self-expanding CoreValve Evolut transcatheter aortic valve replacement (TAVR) platform. This includes Evolut PRO which provides enhanced hemodynamics, reliable delivery, enhanced durability, advanced sealing, and Evolut FX, a system designed to improve the overall procedural experience through enhancements in deliverability, implant visibility, and deployment stability. The Evolut FX+ TAVR system maintains the valve performance benefits of the legacy Evolut TAVR platform and is designed to facilitate coronary access. The system was approved by the U.S. FDA in March 2024 and received CE Mark in late October 2024.
Market acceptance and reimbursement for the Symplicity Spyral renal denervation system, also known as the Symplicity blood pressure procedure, for the treatment of hypertension. U.S. Centers for Medicare and Medicaid Services (CMS) finalized National Coverage Determination in October 2025.
Market acceptance and growth of the Penditure LAA Exclusion System. The system received CE Mark in October 2025.
Continued acceptance and growth of the Onyx Frontier drug-eluting stent (DES) platform. Onyx Frontier is a DES that introduces an enhanced delivery system and is used for complex percutaneous coronary intervention (PCI).
Intention to exercise our option to acquire CathWorks, a privately held medical device company focused on advancing the diagnosis and treatment of coronary artery disease.
Acceptance and growth of IN.PACT 018 drug-coated balloons (DCB). IN.PACT 018 adds to the existing IN.PACT Admiral DCB portfolio and is used to treat femoropopliteal disease.
Market launch of both Liberant mechanical thombectomy system and Omnia Secure, which are forecasted to deliver sustained future growth.
Market acceptance and growth of the Neuroguard IEP Carotid stenting system.
Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of, and commercialize the products within our pipeline, including Affera Sphere-360 pulsed field ablation single-shot catheter.

Neuroscience

Neuroscience's products include various spinal implants, bone graft substitutes, biologic products, image-guided surgery and intra-operative imaging systems, robotic guidance systems used in the robot-assisted spine procedures, and systems that incorporate advanced energy surgical instruments. Neuroscience's products also focus on therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents, and flow diversion products, as well as products to treat ear, nose, and throat (ENT), and the treatment of overactive bladder and urinary retention. Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy. Neuroscience’s net sales for the three and nine months ended January 23, 2026 were $2.6 billion and $7.5 billion, respectively, an increase of 4 percent for both periods, as compared to the corresponding periods in the prior fiscal year, resulting from growth in Cranial and Spinal Technologies, Neuromodulation, ENT, and the impacts of foreign currency fluctuations.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended January 23, 2026 and January 24, 2025:

1236 1237

Cranial & Spinal Technologies (CST) net sales for the three and nine months ended January 23, 2026 increased 5 percent for both periods, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the continued adoption of the AiBLE ecosystem of spine implants and enabling technology with growth in Core Spine and Neurosurgery.

Specialty Therapies (Specialty) net sales for the three and nine months ended January 23, 2026 increased 2 percent and remained flat, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by growth in ENT, offset by Pelvic Health and the Pipeline Vantage recall for Neurovascular.

Neuromodulation (NM) net sales for the three and nine months ended January 23, 2026 increased 6 percent and 8 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the Inceptiv closed-loop spinal cord stimulator, the Percept RC deep brain neurostimulator, and Interventional.

In addition to the macroeconomic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:

Continued adoption and growth of our integrated solutions through the AiBLE offering, which integrates spinal implants with enabling technologies (StealthStation, O-arm Imaging Systems, and Midas), Mazor robotics, and UNiD Adaptive Spine Intelligence AI-driven technology for surgical planning and personalized spinal implants. The Stealth AXiS Surgical System was granted approval by the U.S. FDA in February 2026, integrating established navigation workflows with a modular robotic architecture.
Market acceptance and continued global adoption of innovative spine products and procedural solutions within our CST operating unit, such as Catalyft PL, ModuLeX, CD Horizon Voyager System, and our Infinity OCT System, as well as continued growth from Titan spine titanium interbody implants with Nanolock technology.
Continued growth of commercially available Pipeline Embolization Devices, endovascular treatments for certain wide-necked brain aneurysms.
Continued acceptance of the Solitaire X revascularization device for treatment of acute ischemic stroke and our React Catheter and Riptide aspiration system.
Continued acceptance and growth of our Pelvic Health therapies, including our InterStim therapy with InterStim X and InterStim II recharge-free neurostimulators and InterStim Micro rechargeable neurostimulator for patients suffering from overactive bladder, (non-obtrusive) urinary retention, and chronic fecal incontinence. The Altaviva implantable tibial neuromodulation system received U.S. FDA approval in September 2025 for urge urinary incontinence.
Continued acceptance and growth of our ENT therapies, including capital equipment sales of the StealthStation ENT surgical navigation system and intraoperative NIM nerve monitoring system, and the Propel sinus implants used in the treatment of chronic rhinosinusitis.
Continued acceptance and growth from spinal cord stimulation (SCS) therapy for treating chronic pain and Diabetic Peripheral Neuropathy (DPN) on the Inceptiv closed-loop rechargeable neurostimulator, Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator. The Inceptiv closed-loop rechargeable SCS received U.S. FDA approval in April 2024.
Continued acceptance and growth of our Percept family of deep brain stimulation (DBS) devices with proprietary BrainSense technology for objectifying and personalizing the treatment of Parkinson's Disease, epilepsy, and other movement disorders. In August 2024, the U.S. FDA approved Asleep DBS surgery for people with Parkinson's and people with essential tremor. BrainSense Adaptive DBS and BrainSense Electrode Identifier received CE Mark in January 2025 and U.S. FDA approval in February 2025.
Market acceptance and growth of the Neuroguard IEP Carotid stenting system.
Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of, and commercialize the products within our pipeline, which include the hemorrhagic stroke intravascular device, our next-generation spine enabling technologies, and the implantable tibial bladder control stimulator.

Medical Surgical

Medical Surgical’s products span the entire continuum of patient care from diagnosis to recovery, with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, obesity, and preventable complications. The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, airway products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three and nine months ended January 23, 2026 were $2.2 billion and $6.4 billion, respectively, an increase of 5 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year, resulting from growth across most businesses and the impacts of foreign currency fluctuations.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended January 23, 2026 and January 24, 2025:

1046 1047

Surgical & Endoscopy (SE) net sales for the three and nine months ended January 23, 2026 increased 4 percent and 3 percent, respectively as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to growth in Surgical, with strength in LigaSure vessel sealing technology, ProGrip self-gripping polyester mesh, Wound Management, Electrosurgery, and Surgical Robotics. The growth in Surgical was partially off by Advanced Stapling due to pressures on the U.S. bariatric segment and continued shifts to robotic surgery. The net sales increase was also driven by growth in Endoscopy driven by Nexpowder endoscopic hemostasis system and Endoflip 300 system.

Acute Care & Monitoring (ACM) net sales for the three and nine months ended January 23, 2026 increased 9 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to growth in Nellcor pulse oximetry and McGRATH MAC video laryngoscope.

In addition to the macroeconomic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:

Acceptance and continued growth of Open-to-MIS (minimally invasive surgery) techniques and tools through our efforts to transition open surgery to MIS. Open-to-MIS initiative focuses on capturing the market opportunity that exists in transitioning open procedures to MIS, whether through traditional MIS, advanced instrumentation, or robotics. Through our approach, in parallel, we also expand our presence and optimize open surgery in current open surgery markets.
Continued global acceptance and future growth of powered stapling and energy platform.
Our ability to execute ongoing strategies addressing the pressures to bariatric surgery procedure volumes in the U.S. from pharmaceuticals, and growth of surgical soft tissue robotics procedures in the U.S.
Our ability to create markets and drive products and procedures into emerging markets with our high quality and cost-effective surgical products designed for customers in emerging markets.
Continued acceptance and growth in patient monitoring and airway management. Key products in this area include Microstream Capnography, Nellcor pulse oximetry system with OxiMax technology, Shiley tracheostomy and endotracheal tubes, and McGRATH MAC video laryngoscopes.
Acceptance of less invasive standards of care in chronic and colorectal, as well as hepatology products, including products that span the care continuum from diagnostics to therapeutics.
Expanding the use of less invasive treatments and furthering our commitment to improving options for women with abnormal uterine bleeding. Our expanded and strengthened surgical offerings complement our global gynecology business.
Global adoption of robotic-assisted surgery and the safe and effective use of the Hugo robotic assisted surgery (RAS) system, including system reliability and acceptability, for urologic, bariatric, gynecologic, hernia, and general surgery procedures. This includes continued integration and adoption of Touch Surgery Enterprise with the first artificial intelligence powered surgical videos and analytics platform to make it easier to analyze performance, train, and discover new techniques within the robotics platform. The Hugo RAS system is designed to help reduce unwanted variability, improve patient outcomes, and, by extension, lower per procedure cost. LigaSure RAS vessel-sealing technology received CE Mark in July 2025, expanding Hugo RAS system capabilities for gynecologic, general, and urologic procedures. The Hugo RAS system received U.S. FDA clearance for use in urologic surgical procedures in December 2025.
Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of, and commercialize the products within our pipeline, which include our Hugo RAS system in the U.S., the adoption of AI in Endoscopy and Digital Surgical Technologies, Signia powered stapling devices, and our next-gen Ligasure and Sonicision vessel sealing devices.

Diabetes

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, and consumables. Diabetes' net sales for the three and nine months ended January 23, 2026 were $796 million and $2.3 billion, respectively, an increase of 15 percent and 12 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily driven by strong international growth due to the continued adoption of the MiniMed 780G AID system, including the Simplera Sync and Guardian 4 CGM sensors and Extended Infusion Sets, and the impacts of foreign currency fluctuations. The net sales increase for the three months ended January 23, 2026, was also driven by growth in the U.S. due to adoption of the Simplera Sync and Abbott Instinct sensors.

In addition to the macroeconomic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following:

The pending separation of the Diabetes business from the Company. In May 2025, the Company announced its intent to separate the Diabetes business, with the intention to create a new independent, publicly traded company, MiniMed Group, Inc. (MiniMed). The separation is expected to be completed within 18 months of the initial announcement.
Continued acceptance and growth for the MiniMed 780G insulin pump system, available with Simplera Sync, Guardian 4 CGM sensor, and the Abbott Instinct sensor, which received U.S. FDA approval for use with the SmartGuard dosing algorithm in September 2025. The MiniMed 780G insulin pump system received FDA approval for use in adults 18+ with insulin-requiring type 2 diabetes and CE Mark for expanded indications for use by children as young as two, during pregnancy, as well as type 2 insulin-requiring diabetes in 2025.
Market acceptance and growth of our sensor Simplera, which received U.S FDA approval in August 2024 and CE Mark in September 2023.
Continued acceptance and growth of the Guardian Connect CGM system, which displays glucose information directly to a smartphone to provide patients access to their glucose levels seamlessly and discretely. The Guardian Connect CGM system is available on both Apple iOS and Android devices.
Market acceptance and growth of our InPen smart pen system, which allows users to have their Medtronic CGM readings in real-time alongside insulin dose information, all in one view. In January 2026, the MiniMed Go app received U.S. FDA clearance for individuals with insulin-requiring type 1 and type 2 diabetes aged 7 years and older, as well as for children ages 2 to 6 years under the supervision of an adult caregiver. The MiniMed Go Smart Multiple Daily Injection (MDI) system integrates InPen with the Abbott Instinct and Simplera sensors, connected through the MiniMed Go app, to deliver real-time, personalized insights and actionable guidance.
Continued pump, CGM, and consumable competition in an expanding global market.
Changes in medical reimbursement policies and programs, along with additional payor coverage on insulin pumps.
Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval, manufacture and commercialize the products within our pipeline, including our partnership with Abbott to expand CGM options for people living with diabetes, our next generation insulin delivery options, as well as expanded labeling in Type 2 diabetes, and fast acting insulins.

COSTS AND EXPENSES

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and nine months ended January 23, 2026 and January 24, 2025:

210

Cost of Products Sold Cost of products sold for the three and nine months ended January 23, 2026 was $3.3 billion and $9.3 billion, respectively, as compared to $2.8 billion and $8.5 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in cost of products sold as a percentage of net sales for the three and nine months ended January 23, 2026 was primarily due to approximately $90 million and $110 million, respectively, of increased duties from tariffs on imported goods, $84 million of asset write offs, and unfavorable currency impact on costs of products sold. The increase in costs of products sold as a percentage of net sales was partially offset by impacts to net sales with favorable currency impact in addition to changes in the Italian payback accruals impacting net sales for the nine months ended January 23, 2026 and January 24, 2025. For additional information about the asset write offs, refer to Note 5 in the consolidated financial statements.

Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve; to create technologies that expand what’s possible across the human body to transform lives; to turn data and insights into real action to serve patient needs, improving care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three and nine months ended January 23, 2026 was $722 million and $2.2 billion, respectively, as compared to $675 million and $2.0 billion, respectively, for the corresponding periods in the prior fiscal year.

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense management initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, and certain acquisition and divestiture-related costs. Selling, general, and administrative expense for the three and nine months ended January 23, 2026 was $3.0 billion and $8.7 billion, respectively, as compared to $2.7 billion and $8.1 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in selling, general, and administrative expense was primarily due to increased selling expenses in line with sales growth, new product launches and related commercialization activities, increased incentive performance in the current year, and increased expenses to support the impending separation of the Diabetes Operating Unit.

The following is a summary of other costs and expenses (income):


	Three months ended				Nine months ended
(in millions)	January 23, 2026		January 24, 2025		January 23, 2026		January 24, 2025
Amortization of intangible assets	$	441	$	416	$	1,364	$	1,243
Restructuring charges, net	77		43		131		120
Certain litigation charges, net	62		22		89		104
Other operating expense (income), net	35		(5)		126		(38)
Other non-operating income, net	(121)		(72)		(247)		(403)
Interest expense, net	181		179		539		555

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of customer relationships, purchased technology and patents, trademarks, tradenames, and other intangible assets.

For the three and nine months ended January 23, 2026, the Company recognized $30 million and $121 million, respectively, of accelerated amortization on certain intangible assets within the Cardiovascular Segment.

Restructuring Charges, Net For the three and nine months ended January 23, 2026 and January 24, 2025, restructuring costs primarily consist of employee termination benefits, facility related and contract termination costs, and asset write-offs.

For additional information about our restructuring activities, refer to Note 5 in the consolidated financial statements.

Certain Litigation Charges, Net We classify specified certain litigation charges and gains related to significant legal matters as certain litigation charges, net in the consolidated statements of income. For additional information, refer to Note 16 in the consolidated financial statements.

Other Operating Expense (Income), Net Other operating expense (income), net primarily includes expenses associated with royalties paid for the in-license of intellectual property from third parties, currency remeasurement and derivative gains and losses, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

For the three and nine months ended January 23, 2026, the change in other operating expense (income), net was largely driven by the net impact of currency remeasurement and our hedging programs resulting in a net loss of $41 million and $173 million, respectively, as compared to a net gain of $12 million and a net loss of $32 million, respectively, in the corresponding periods in the prior fiscal year.

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income, which includes income on marketable debt securities, our global liquidity structures, and equity and other investments.

Interest income for the three and nine months ended January 23, 2026 was $102 million and $310 million, respectively, as compared to $114 million and $364 million, respectively, for the corresponding periods in the prior fiscal year. The decrease in interest income was primarily driven by changes in our global liquidity structures. For the three and nine months ended January 23, 2026, net losses on minority investments were $8 million and $145 million, respectively, as compared to $68 million and $41 million, respectively, for the corresponding periods in the prior fiscal year.

Interest Expense, Net Interest expense, net includes interest incurred on our outstanding borrowings, global liquidity structures, amortization of debt issuance costs and debt premiums or discounts, and amortization of amounts excluded from the effectiveness assessment of certain net investment and fair value hedges.

For the three months ended January 23, 2026, the change in interest expense, net was not material. For the nine months ended January 23, 2026, the decrease in interest expense, net was primarily driven by changes in our global liquidity structure partially offset by increased expense associated with higher coupon rates on the senior notes issued in the second quarter of fiscal year 2026.

INCOME TAXES


	Three months ended						Nine months ended
(in millions)	January 23, 2026			January 24, 2025			January 23, 2026			January 24, 2025
Income tax provision	$	254		$	237		$	724		$	737
Income before income taxes	1,404			1,540			4,302			4,367
Effective tax rate	18.1		%	15.4		%	16.8		%	16.9		%

Non-GAAP income tax provision	$	369		$	334		$	1,066		$	1,027
Non-GAAP income before income taxes	2,125			2,130			6,209			6,051
Non-GAAP Nominal Tax Rate	17.3		%	15.7		%	17.2		%	17.0		%

Difference between the effective tax rate and Non-GAAP Nominal Tax Rate	(0.8)		%	0.3		%	0.4		%	0.1		%

On July 4, 2025, the U.S. Government enacted The One Big Beautiful Bill Act of 2025, which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for the Company beginning fiscal year 2026. The impact for the three and nine months ended January 23, 2026 was not material, and impacts to fiscal year 2026 and beyond are not expected to be material.

The Organization for Economic Co-operation and Development (OECD) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15% in each jurisdiction in which the group operates. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. A number of countries, including Ireland, have enacted legislation to implement the core elements of Pillar Two, which were effective for the Company in fiscal year 2025.

Our effective tax rate for the three and nine months ended January 23, 2026 was 18.1% and 16.8%, respectively, as compared to 15.4% and 16.9% for the three and nine months ended January 24, 2025, respectively. The increase in the effective tax rate for the three months ended January 23, 2026 primarily relates to an increase in the Pillar Two global minimum tax impact and year-over-year changes in operational results by jurisdiction. The decrease in the effective tax rate for the nine months ended January 23, 2026 primarily relates to a tax benefit recognized during the period related to a change in estimate of accrued interest on uncertain tax positions, partially offset by an increase in the Pillar Two global minimum tax impact and year-over-year changes in operational results by jurisdiction.

Our Non-GAAP Nominal Tax Rate for the three and nine months ended January 23, 2026 was 17.3% and 17.2%, respectively, as compared to 15.7% and 17.0% for the three and nine months ended January 24, 2025, respectively. The increase in our Non-GAAP Nominal Tax Rate for the three months ended January 23, 2026 was primarily due to an increase in the Pillar Two global minimum tax impact and year-over-year changes in operational results. In addition to the items discussed in the current quarter, the increase in our Non-GAAP Nominal Tax Rate for the nine months ended January 23, 2026 was partially offset by a tax benefit recognized during the period related to a change in estimate of accrued interest on uncertain tax positions. An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and nine months ended January 23, 2026 of approximately $21 million and $62 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of January 23, 2026, provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

Our liquidity and capital structures are evaluated regularly within the context of our annual operating and strategic planning processes. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, property, plant, and equipment, and other operating costs. We also consider capital allocation alternatives that balance returning value to shareholders through dividends and share repurchases, satisfying maturing debt, and acquiring businesses and technology.

Summary of Cash Flows

The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:


	Nine months ended
(in millions)	January 23, 2026		January 24, 2025
Cash provided by (used in):
Operating activities	$	4,757	$	4,516
Investing activities	(2,017)		(1,447)
Financing activities	(3,863)		(3,018)
Effect of exchange rate changes on cash and cash equivalents	52		(95)
Net change in cash and cash equivalents	$	(1,072)	$	(44)

Operating Activities During the nine months ended January 23, 2026, there was a $241 million increase in net cash provided, as compared to the corresponding period in the prior fiscal year, primarily driven by an increase in cash collected from customers due to an increase in sales, partially offset by an increase in cash paid to suppliers, cash paid for taxes, and certain litigation payments.

Investing Activities During the nine months ended January 23, 2026, there was a $570 million increase in cash used, as compared to the corresponding period in the prior fiscal year, primarily attributable to an increase in net purchases of investments of $753 million, partially offset by a decrease in acquisitions of $98 million.

Financing Activities There was a $845 million increase in net cash used during the nine months ended January 23, 2026, as compared to the corresponding period in the prior fiscal year.

During the nine months ended January 23, 2026, the Company issued two tranches of Euro-denominated Senior Notes with an aggregate principal of €1.5 billion, or $1.7 billion. The Company used the net proceeds to repay in full €1.5 billion, or $1.8 billion, of Senior Notes. Further, in July 2025, the Company repaid at maturity €1.0 billion, or $1.2 billion, of Senior Notes. During the nine months ended October 25, 2024, the Company issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.0 billion, or $3.2 billion, partially offset by net share repurchases of $2.6 billion. The above changes were partially offset by an increase in short-term borrowings of $173 million as compared to a decrease of $1.1 billion in the prior year. For more information on commercial paper and Senior Notes issued and repaid, refer to the Debt and Capital section below.

Debt and Capital

Our capital structure consists of equity and interest-bearing debt. We primarily utilize unsecured senior debt obligations to meet our financing needs and, to a lesser extent, bank borrowings. From time to time, we may repurchase our outstanding debt obligations in the open market or through privately negotiated transactions.

Total debt at January 23, 2026 was $28.1 billion as compared to $28.5 billion at April 25, 2025. The decrease in total debt was primarily driven by repayments of Euro-denominated debt, net of issuances, as discussed below, partially offset by the impact of foreign exchange rates on our foreign currency denominated debt.

In September 2025, Medtronic, Inc. issued two tranches of Euro-denominated Senior Notes with an aggregate principal of €1.5 billion, with maturities in fiscal year 2031 and 2046, resulting in cash proceeds of approximately $1.7 billion, net of discounts and issuance costs. The Company used the net proceeds to repay at maturity €500 million of Medtronic Luxco’s 2.625% Senior Notes for $587 million in September 2025 and €1.0 billion of Medtronic Luxco's 0.000% Senior Notes for $1.2 billion in October 2025. Further, in July 2025, the Company repaid at maturity €1.0 billion, or $1.2 billion, of Senior Notes.

In June 2024, Medtronic, Inc. issued four tranches of Euro-denominated Senior Notes with an aggregate principal of €3.0 billion, with maturities ranging from fiscal year 2030 to 2054, resulting in cash proceeds of approximately $3.2 billion, net of discounts and issuance costs. In anticipation of the Euro-denominated debt issuance, the Company entered into forward currency exchange rate contracts to manage the exposure to exchange rate movements. These contracts were settled in conjunction with the issuance of the June 2024 Notes.

We repurchase our ordinary shares on occasion as part of our focus on returning value to our shareholders. In March 2024, the Company's Board of Directors authorized the repurchase of $5.0 billion of the Company's ordinary shares. There is no specific time period associated with these repurchase authorizations. During the nine months ended January 23, 2026, the Company repurchased a total of 6 million shares under this program at an average price of $91.58. At January 23, 2026, we had approximately $1.6 billion remaining under the share repurchase program authorized by our Board of Directors.

For more information on credit arrangements, refer to Note 7 in the consolidated financial statements and Note 6 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 25, 2025.

Liquidity

Our liquidity sources at January 23, 2026 included $1.1 billion of cash and cash equivalents and $7.2 billion of current investments. Additionally, we maintain commercial paper programs and a Credit Facility.

Our investments primarily include available-for-sale debt securities, including U.S. and non-U.S. government and agency securities, corporate debt securities, mortgage-backed securities, and other asset-backed securities. Refer to Note 6 in the consolidated financial statements for additional information regarding fair value measurements.

We maintain multicurrency commercial paper programs for short-term financing, which allow us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion. At January 23, 2026 and April 25, 2025, we had $140 million and no commercial paper outstanding, respectively. The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

We also have a $3.5 billion five-year syndicated credit facility (Credit Facility), which expires in December 2030. At each anniversary date of the Credit Facility we can request a one-year extension of the maturity date. The Credit Facility provides backup funding for the commercial paper programs and may also be used for general corporate purposes. The Credit Facility provides us with the ability to increase our borrowing capacity by an additional $1.0 billion at any time during the term of the agreement. At January 23, 2026 and April 25, 2025, no amounts were outstanding under the Credit Facility.

Interest rates on advances of our Credit Facility are determined by a pricing matrix based on our long-term debt ratings assigned by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody’s). Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. We are in compliance with all covenants related to the Credit Facility.

The following table is a summary of our S&P and Moody's long-term debt ratings and short-term debt ratings:


	Agency Rating(1)
	January 23, 2026	April 25, 2025
Standard & Poor's Ratings Services
Long-term debt	A	A
Short-term debt	A-1	A-1

Moody's Investors Service
Long-term debt	A3	A3
Short-term debt	P-2	P-2

(1)Agency ratings are subject to change, and there may be no assurance that an agency will continue to provide ratings and/or maintain its current ratings. A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.

S&P and Moody's long-term debt ratings and short-term debt ratings at January 23, 2026 were unchanged as compared to the ratings at April 25, 2025. We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet, Credit Facility, and related commercial paper programs.

Contractual Obligations and Cash Requirements

We have future contractual obligations and other minimum commercial commitments that are entered into in the normal course of business. We believe our off-balance sheet arrangements do not have a material current or anticipated future effect on our consolidated earnings, financial position, and/or cash flows. Refer to the Debt and Capital section above for changes in debt obligations during the first three quarters of fiscal year 2026. The Company plans to post a surety bond in the amount directed by the court once final judgment has been entered on the Applied Medical case. There have been no other material changes to our long-term contractual obligations as reported in our most recent Annual Report filed on Form 10-K for the fiscal year ended April 25, 2025.

ACQUISITIONS AND DISPOSITIONS

Information regarding acquisitions and disposition activity is included in Note 4 in the current period's consolidated financial statements. In May 2025, the Company announced its intent to separate the Diabetes business, with the intention to create a new independent, publicly traded company, MiniMed Group, Inc. (MiniMed). The separation is expected to be completed within 18 months of the initial announcement.

CRITICAL ACCOUNTING ESTIMATES

We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 25, 2025.

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect our best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our critical accounting estimates are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended April 25, 2025.

Valuation of Intangible Assets and Goodwill When we acquire a business, the assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. Goodwill is the excess of the purchase price over the estimated fair value of identified net assets of acquired businesses. Intangible assets primarily include patents, trademarks, tradenames, customer relationships, purchased technology, and in-process research and development.

Determining the fair value of intangible assets acquired as part of a business combination requires us to make significant estimates. These estimates include the amount and timing of projected future cash flows of each project or technology, the discount rate used to discount those cash flows to present value, and the assessment of the asset’s life cycle. The estimates could be impacted by legal, technical, regulatory, economic, and competitive risks.

Goodwill and indefinite lived intangible assets are tested for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. Intangible assets with a definite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group, which includes intangible assets, may not be recoverable. If goodwill or intangible assets are determined to be impaired, they are written down to their estimated fair value.

We have four goodwill reporting units with goodwill assigned to them. The test for impairment of goodwill requires us to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units. We estimated the fair value of these reporting units using the income and the market approaches, weighted 50 percent each. Fair value under the income approach was determined by discounting to present value the estimated future cash flows of the reporting unit. Fair value under the market approach utilized revenue and earnings multiples using comparable public company information, which uses valuation indicators determined from other businesses that are similar to our reporting unit. We use estimates that are consistent with the highest and best use of the assets based on a market participant's view of the assets being evaluated.

The most critical assumptions used in the calculation of the fair value of each reporting unit are the projected revenue, projected earnings, projected future cash flows, and discount rate. Our forecast of future cash flows is based on estimates of projected revenue and projected earnings, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve our earnings. The fair value of the reporting unit’s goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected earnings, and discount rate used to evaluate the fair value of the reporting unit.

As part of our annual impairment analysis in the third quarter, we completed a quantitative impairment analysis of all of our reporting units to determine if their fair value was less than their carrying amount. Based on the quantitative test, the Medical Surgical reporting unit had an estimated fair value that exceeded its carrying value, including goodwill, by approximately 12%. As of January 23, 2026, $19.8 billion of goodwill was allocated to the Medical Surgical reporting unit. The remaining reporting units' fair values materially exceeded their carrying values.

The following table highlights the sensitivities of the most critical assumptions used in the goodwill impairment test as of the date of our annual testing:


Assumption:
Approximate % by which the fair value exceeds the carrying value based on annual impairment test						12% - 335%
Approximate % by which the fair value exceeds the carrying value if the discount rate was to increase 1%						3% - 307%
Approximate % by which the fair value exceeds the carrying value if the future cash flows in the income approach and revenue and earnings in the market approach were to decrease by 5%						7% - 313%

Although we believe our estimate of fair value is reasonable, actual results may differ from our estimates due to a number of factors including, among others, changes in competitive conditions, timing of regulatory approval, results of clinical trials, changes in worldwide economic conditions, and fluctuations in currency exchange rates.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note 2 in the current period's consolidated financial statements.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

Medtronic plc and Medtronic Global Holdings S.C.A. (Medtronic Luxco), a wholly-owned subsidiary guarantor, each have provided full and unconditional guarantees of the obligations of Medtronic, Inc., a wholly-owned subsidiary issuer, under the Senior Notes (Medtronic Senior Notes) and full and unconditional guarantees of the obligations of Covidien International Finance S.A. (CIFSA), a wholly-owned subsidiary issuer, under the Senior Notes (CIFSA Senior Notes). The guarantees of the CIFSA Senior Notes are in addition to the guarantees of the CIFSA Senior Notes by Covidien Ltd. and Covidien Group Holdings Ltd., both of which are wholly-owned subsidiary guarantors of the CIFSA Senior Notes. Medtronic plc and Medtronic, Inc. each have provided a full and unconditional guarantee of the obligations of Medtronic Luxco under the Senior Notes (Medtronic Luxco Senior Notes). The following is a summary of these guarantees:

Guarantees of Medtronic Senior Notes

Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – Medtronic, Inc.
Subsidiary Guarantor – Medtronic Luxco

Guarantees of Medtronic Luxco Senior Notes

Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – Medtronic Luxco
Subsidiary Guarantor – Medtronic, Inc.

Guarantees of CIFSA Senior Notes

Parent Company Guarantor – Medtronic plc
Subsidiary Issuer – CIFSA
Subsidiary Guarantors – Medtronic Luxco, Covidien Ltd., and Covidien Group Holdings Ltd. (CIFSA Subsidiary Guarantors)

The following tables present summarized financial information for the nine months ended January 23, 2026 and summarized balance sheet information at January 23, 2026 and April 25, 2025 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes. The obligor group consists of the parent company guarantor, subsidiary issuer, and subsidiary guarantors for the applicable senior notes. The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuers and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

The summarized results of operations information for the nine months ended January 23, 2026 was as follows:


(in millions)	Medtronic & Medtronic Luxco Senior Notes (1)		CIFSA Senior Notes (2)
Net sales	$	2,366	$	—
Operating profit (loss)	490		(16)
Income (loss) before income taxes	50		(147)
Net loss attributable to Medtronic	(30)		(202)

The summarized balance sheet information at January 23, 2026 was as follows:


(in millions)	Medtronic & Medtronic Luxco Senior Notes (1)		CIFSA Senior Notes (2)
Total current assets(3)	$	20,258	$	4,363
Total noncurrent assets(4)	12,030		5,215
Total current liabilities(5)	30,798		12,875
Total noncurrent liabilities(6)	38,230		25,858
Noncontrolling interests	211		211

(1)The Medtronic Senior Notes and Medtronic Luxco Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, and Medtronic, Inc. Refer to the guarantee summary above for further details.

(2)The CIFSA Senior Notes obligor group consists of the following entities: Medtronic plc, Medtronic Luxco, CIFSA, and CIFSA Subsidiary Guarantors. Refer to the guarantee summary above for further details.

(3)Includes receivables due from non-guarantor subsidiaries of $16.8 billion and $1.6 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $5.0 billion and $4.9 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(5)Includes payables due to non-guarantor subsidiaries of $28.0 billion and $12.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $8.4 billion and $7.7 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

The summarized balance sheet information at April 25, 2025 was as follows:


(in millions)	Medtronic & Medtronic Luxco Senior Notes (1)		CIFSA Senior Notes (2)
Total current assets(3)	$	18,268	$	4,799
Total noncurrent assets(4)	11,356		5,207
Total current liabilities(5)	21,099		7,625
Total noncurrent liabilities(6)	38,903		25,403
Noncontrolling interests	232		232

(3)Includes receivables due from non-guarantor subsidiaries of $14.2 billion and $1.3 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(4)Includes loans receivable due from non-guarantor subsidiaries of $5.2 billion and $5.2 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(5)Includes payables due to non-guarantor subsidiaries of $16.0 billion and $4.6 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

(6)Includes loans payable due to non-guarantor subsidiaries of $11.3 billion and $7.7 billion for Medtronic & Medtronic Luxco Senior Notes, and CIFSA Senior Notes, respectively.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and other written reports of Medtronic plc, organized under the laws of Ireland (together with its consolidated subsidiaries, Medtronic, the Company, or we, us, or our), and oral statements made by or with the approval of one of the Company’s executive officers from time to time, may include “forward-looking” statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, objectives of management for future operations and current expectations or forecasts of future results, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Our forward-looking statements may include statements related to: our growth and growth strategies; developments in the markets for our products, therapies and services; financial results; product development launches and effectiveness; research and development strategy; regulatory approvals; competitive strengths; the potential or anticipated direct or indirect impact of public health crises, geopolitical conflicts, or changing governmental executive actions and regulations (including relating to global trade policies, enforcement priorities and compliance requirements), on our business, results of operations and/or financial condition; restructuring and cost-saving initiatives; intellectual property rights; litigation and tax matters; governmental proceedings and investigations; mergers, acquisitions, and divestitures; market acceptance of our products, therapies and services; accounting estimates; financing activities; ongoing contractual obligations; working capital adequacy; the value of our investments; our effective tax rate; our expected returns to shareholders; and sales efforts. In some cases, such statements may be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions. Forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding: our ability to drive long-term shareholder value; development and future launches of products and continued or future acceptance of products, therapies and services in our segments; expected timing for completion of research studies relating to our products; integration of new technologies, including artificial intelligence (AI) and data analytics, into our products, therapies and services; market positioning and performance of our products, including stabilization of certain product markets; divestitures and the potential benefits thereof; the costs and benefits of integrating previous acquisitions; anticipated timing for United States (U.S.) Food and Drug Administration (U.S. FDA) and non-U.S. regulatory approval of new products; increased presence in new markets, including markets outside the U.S.; changes in the market and our market share; our ability to meet growing demand for our existing products; acquisitions and investment initiatives, including the timing of regulatory approvals as well as integration of acquired companies into our operations; the resolution of tax matters; the effectiveness of our development activities in reducing patient care costs and hospital stay lengths; our approach towards cost containment; our expectations regarding the potential impact of changing governmental executive actions and regulations (including relating to global trade policies, enforcement priorities, and compliance requirements), on our business; our expectations regarding healthcare costs, including potential changes to reimbursement policies and pricing pressures; our expectations regarding changes to patient standards of care; our ability to identify and maintain successful business partnerships; the elimination of certain positions or costs related to restructuring initiatives; outcomes in our litigation matters and governmental proceedings and investigations; general economic conditions; the adequacy of available working capital and our working capital needs; our payment of dividends and redemption of shares; the continued strength of our balance sheet and liquidity; our accounts receivable exposure; our human capital management with respect to our global workforce; and the potential impact of our compliance with governmental regulations and accounting guidance.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations, financial condition, and/or cash flows. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in our Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. One must carefully consider forward-looking statements and understand that such forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and involve a variety of risks and uncertainties, known and unknown, including, among others, those discussed in the sections entitled “Government Regulation” within “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as well as those related to:

competition in the medical device industry,
delays in regulatory approvals,
reduction or interruption in our supply,
failure to complete or achieve the intended benefits of acquisitions or divestitures,
adverse regulatory action,
laws and governmental regulations,
litigation results,
quality problems,
healthcare policy changes,
public health crises,
cybersecurity and privacy incidents,
international operations, including the impact of armed conflicts,
self-insurance,
commercial insurance,
changes in applicable tax rates,
positions taken by taxing authorities,
decreasing selling prices and pricing pressure,
liquidity shortfalls,
fluctuations in currency exchange rates,
inflation, or
disruption of our current plans and operations.

Consequently, no forward-looking statement may be guaranteed, and actual results may vary materially from those projected in the forward-looking statements. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

Previous: Item 1. Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk