Medtronic FY2026: Sales Up 8.4% to $36.4B, Every Segment Loses Margin

Balance sheet, income statement and segment figures are taken from Medtronic plc's Form 10-K for the fiscal year ended April 24, 2026, filed with the SEC on June 18, 2026, and from the company's XBRL exhibits to that filing. Figures explicitly attributed to management — tariff dollar amounts, fiscal 2027 guidance, organic growth rates and product-line growth percentages — come from Medtronic's fourth-quarter and full-year fiscal 2026 earnings release and conference call of June 3, 2026, and are labelled as such where used. Medtronic's fiscal year ends on the last Friday in April. All dollar figures are U.S. dollars. Medtronic reports both GAAP and non-GAAP measures; every figure below is GAAP unless explicitly labelled otherwise.

Medtronic's fiscal 2026 revenue rose 8.4% to $36,364 million — the fastest growth in the three years presented in this filing, and what the company's June 3 earnings release headlined as its highest annual revenue growth in 10 years. That headline needs one immediate qualifier: management put organic growth at 5.8%, so roughly a third of the reported acceleration came from currency and acquisitions rather than underlying demand.

Almost none of the acceleration reached the bottom line. Net income attributable to Medtronic grew just 3.0% to $4,801 million and diluted EPS 3.3% to $3.73, because the effective tax rate normalized from 16.6% to 21.2% and because the operating businesses themselves gave up margin: aggregate operating profit across the three reportable segments grew only 4.9% on 7.6% segment revenue growth, a compression of approximately 69 basis points. The growth is real and it is concentrated in one place — cardiac ablation, where the Cardiac Rhythm & Heart Failure division added $1,112 million of revenue in a single year — but it is being purchased with gross margin. Management sized the fiscal 2026 tariff bill at roughly $185 million and guided fiscal 2027 to approximately $250 million, an increase of about $65 million that it expects to cut roughly 20 basis points from gross margin year over year.

1. Consolidated Balance Sheet

1-1. Principal asset movements

The balance sheet barely moved in aggregate — total assets up 1.5% — but two lines inside it are moving in opposite directions and they describe the company's position better than the total does.

Other intangible assets fell 13.0%, from $11,667 million to $10,146 million. That is the mechanical run-off of an acquisition-heavy past: amortization of intangible assets was $1,772 million in fiscal 2026 against only $406 million of cash spent on acquisitions, net of cash acquired. Medtronic is amortizing its historical deal book far faster than it is adding to it. Combined goodwill and intangibles of $52,733 million still equal 56.7% of total assets and exceed the $49,463 million of equity attributable to Medtronic shareholders — a reminder that a majority of this balance sheet is purchase accounting rather than productive plant. The offsetting move is property, plant and equipment, up 8.5% to $7,417 million on $1,904 million of capital additions against $2,958 million of total depreciation and amortization. Capital is shifting from bought growth toward built capacity.

Working capital tells a cleaner story than the headline suggests. Receivables grew only 2.0% against 8.4% revenue growth, pulling days sales outstanding from 70.9 to 66.7 — genuine collection improvement, not a reserve release, since the allowance for credit losses actually fell only marginally, from $199 million to $190 million. Inventories rose 8.7%, essentially in line with revenue, leaving inventory days flat at roughly 171 versus 172. For a business launching a new ablation platform at scale, holding inventory days flat while revenue accelerates is a better outcome than the growth rate alone implies.

Debt maturities are not a near-term pressure point. Total scheduled long-term debt maturities are $28,131 million, of which $19,920 million — 70.8% — falls after fiscal 2031, and only $5,148 million (18.3%) comes due within three years. Cash interest paid of $774 million against average gross debt of roughly $28.2 billion implies an effective cash cost near 2.7%. That low cost is not itself a comfort — it is the source of the refinancing risk in this structure. The debt is cheap legacy paper, and the $1,760 million of 1.125% senior notes sitting in current obligations will refinance into a materially higher rate environment. Operating lease right-of-use assets of $1,197 million against $1,187 million of combined current and non-current operating lease liabilities are immaterial to this analysis.

1-2. Financial versus operating liabilities

Financial liabilities shrank. Current debt obligations dropped 37.8% from $2,874 million to $1,788 million while long-term debt rose modestly from $25,642 million to $26,173 million, leaving total gross debt at $27,961 million against $28,516 million a year earlier — a 1.9% reduction. Against $1,949 million of cash and $7,271 million of investments, net debt improved from roughly $19,551 million to $18,741 million. Medtronic issued $1,747 million of long-term debt and repaid $2,930 million during the year; this was a deleveraging year, modestly.

Operating liabilities moved with the business. Accounts payable rose 8.0% to $2,644 million, tracking revenue growth and the higher cost of products sold. Accrued compensation rose to $2,678 million from $2,514 million. The one meaningful decline is accrued income taxes, down from $1,358 million to $914 million, consistent with $1,942 million of cash taxes paid against a $1,299 million book provision — Medtronic paid down a tax liability during the year, which is a cash drag that does not appear in the earnings line.

1-3. Capital structure

The equity account is where the MiniMed transaction shows up. Total equity including non-controlling interests rose from $48,256 million to $50,072 million, and $377 million of that $1,816 million increase is non-controlling interest, which jumped from $232 million to $609 million. The March 9, 2026 MiniMed initial public offering contributed $381 million to NCI — essentially the entire net movement, with the small residual reflecting NCI's share of results for the stub period.

The quality of the equity base continues to improve in composition. Retained earnings rose from $31,476 million to $32,638 million — exactly the $4,801 million of net income attributable to Medtronic less $3,639 million of dividends paid, with no reconciling items. Additional paid-in capital was nearly static at $20,926 million versus $20,833 million, a sharp contrast to the prior year when it fell $2,296 million under a $3,235 million buyback. Accumulated other comprehensive loss narrowed from −$4,284 million to −$4,101 million as currency translation moved in Medtronic's favor. Retained earnings now represent 66.0% of Medtronic shareholders' equity, up from 65.5%, meaning the equity base is increasingly self-funded rather than contributed.

2. Consolidated Income Statement

2-1. Core performance metrics

The 10-K presents three fiscal years. CAGRs are computed off the fiscal 2023 base disclosed in the prior-year Form 10-K, which is not reproduced in the table above.

Revenue accelerated to +8.4% from +3.6% in each of the two prior years. Operating profit grew 8.6%. That produces operating leverage of 1.02 — a 1% revenue gain delivered a 1.02% operating profit gain, which is to say essentially none. For a company with Medtronic's gross margin and fixed-cost base, an 8.4% revenue year should have produced considerably more.

Two operating lines absorbed it. First, gross margin fell 30 basis points to 65.02% as cost of products sold grew 9.4% against 8.4% revenue growth — management identified approximately $185 million of tariff cost in cost of goods sold in fiscal 2026, equal to roughly 50 basis points of revenue. Second, selling, general and administrative expense grew 8.6% to $11,784 million and held at 32.4% of revenue. That is not a drag in the ordinary sense — SG&A did not grow disproportionately — but it is the absence of the operating leverage an accelerating revenue line is supposed to deliver, and on a fixed-cost base of this size a flat opex ratio is a choice, not an accident.

Below the operating line, one item did the rest of the damage. The effective tax rate rose from 16.6% to 21.2%, a 460 basis point increase that cost roughly $280 million in additional tax on fiscal 2026 pre-tax income relative to the prior year's rate. That single line explains most of the gap between 8.6% operating profit growth and 3.0% net income growth — it has nothing to do with operating performance, but it is what a shareholder actually received.

Separating one-off items requires care here because they cut in both directions. Restructuring charges of $249 million (versus $267 million) and certain litigation charges of $113 million (versus $317 million) both declined year over year — a tailwind. But other operating expense, net swung from $23 million of income to $386 million of expense, a $409 million reversal. Adding all three back, normalized operating profit was $7,215 million (19.84% margin) against $6,516 million (19.43%) in fiscal 2025 — a 41 basis point improvement. Excluding only restructuring and litigation, the margin instead falls from 19.50% to 18.78%. The honest reading is that the underlying margin trend is roughly flat, and which direction it appears to point depends entirely on how one treats a single volatile line.

EPS is almost purely an earnings story this year, not a share-count story. Diluted weighted average shares fell only 0.14%, from 1,289.9 million to 1,288.1 million, because Medtronic cut repurchases from $3,235 million to $1,035 million while issuing $516 million of ordinary shares and recognizing $457 million of stock-based compensation. Diluted EPS grew 3.3% against 3.0% net income growth, but the buyback explains only about 0.14 percentage points of that gap — the share count fell just 0.14% — with the remainder a rounding artifact of the reported $3.73 and $3.61 figures.

2-2. Where the growth and the margin actually sit

FY2026 operating margins are calculated from reported segment revenue and operating profit per Note 19 of the filing; year-over-year margin changes are calculated from reported figures. Medtronic has three reportable segments — Cardiovascular, Neuroscience and Medical Surgical. Following the MiniMed IPO on March 9, 2026, the Diabetes Operating Unit ceased to be a reportable segment in the fourth quarter of fiscal 2026 and is included in "Other," which the June 3 earnings release shows carried $3,112 million of Diabetes revenue.

Every reportable segment lost operating margin, and so did Other. This is the most important single fact in the filing, and it is disclosed in Medtronic's own segment note rather than derived.

One reconciliation is worth stating plainly before going further, because the segment table and the consolidated table appear to disagree. Consolidated operating margin was flat to slightly up (17.76% to 17.78%) while segment margin fell 69 basis points. Both are correct: total segment operating profit of $8,968 million including Other exceeds consolidated operating profit of $6,467 million by roughly $2.5 billion of corporate and unallocated cost — amortization, restructuring and litigation among it — and that unallocated block shrank enough this year to offset the deterioration inside the businesses. The segment line is the cleaner read on operations.

Cardiovascular carried the year, adding $1,495 million of revenue — 64% of the entire $2,344 million of reportable-segment revenue growth. Within it, Cardiac Rhythm & Heart Failure grew 17.4% to $7,504 million from $6,392 million on the pulsed-field ablation ramp. The eye-catching percentages management has quoted for that ramp — 145% global PFA growth and a 78% global increase in Cardiac Ablation Solutions revenue — are fourth-quarter figures from the June 3 release, not full-year rates, and should not be read across to the annual numbers; the full-year divisional result is the 17.4% above. Structural Heart & Aortic grew 7.4% to $3,817 million and Coronary & Peripheral Vascular 4.8% to $2,656 million. But Cardiovascular's cost of products sold grew 13.5% against 12.0% revenue growth, and R&D within the segment grew 11.4% — the segment is spending ahead of the revenue it is capturing, which is a defensible choice in a competitive land-grab but is not margin-accretive in year one. Segment operating profit grew 9.8%, below its 12.0% revenue growth.

Neuroscience is the profitability anchor at 29.77% operating margin, and it is also where the margin loss is sharpest among the three reportable segments. Revenue grew 4.5% to $10,287 million while segment operating profit grew roughly 1.0% to $3,062 million — a 101 basis point margin loss, the largest of the three. A franchise growing at 4.5% cannot absorb a 101 basis point margin decline for long without the profit line going flat outright, and on this year's arithmetic it very nearly did.

Medical Surgical is the least dramatic line in the filing and, for that reason, the most informative about the base business. Revenue grew 4.9% to $8,815 million, operating profit roughly 2.8% to $2,128 million, margin down 49 basis points to 24.14%. This is a mature portfolio growing at mid-single digits and slowly conceding price and cost.

Other, including Diabetes, is the outlier and should be read with the MiniMed separation in mind. Revenue grew 12.3% to $3,247 million while operating profit fell to $106 million from roughly $214 million — a 414 basis point margin collapse to 3.26%. Part of that is genuine: standing up a separately listed company carries duplicated cost. But it means the fastest-growing revenue line in the table outside Cardiovascular contributed essentially nothing to profit, and once MiniMed is fully separated that revenue leaves while the stranded cost does not automatically follow it.

3. What the filing actually says

Three conclusions survive the arithmetic.

The growth is narrower than the headline. Reported revenue growth of 8.4% becomes 5.8% organic on management's own measure, and 64% of reportable-segment growth came from Cardiovascular alone. Strip out cardiac ablation and Medtronic is a mid-single-digit grower — which is what Neuroscience (+4.5%) and Medical Surgical (+4.9%) independently confirm.

The margin loss is universal, not situational. It would be easy to explain away Cardiovascular's 52 basis points as the cost of winning a new market, and that argument is defensible. It does not explain Neuroscience giving up 101 basis points on 4.5% growth, or Medical Surgical giving up 49 on 4.9%. Every business line conceded margin in the same year, which points at cost — tariffs at roughly 50 basis points of revenue, plus input and separation costs — rather than at strategy.

The reported earnings gap is mostly tax and mostly repeatable. The 460 basis point rise in the effective tax rate to 21.2% is normalization, not a one-off, and it cost roughly $280 million. With the tariff bill guided up to approximately $250 million in fiscal 2027 and a further 20 basis points of gross margin at risk, the two forces that held fiscal 2026 net income growth to 3.0% are both still in place going into fiscal 2027. The revenue acceleration has to widen beyond one division for that arithmetic to change.