Why did GAAP EPS grow much faster than non-GAAP EPS in FY25?

GAAP diluted EPS of $3.61 rose 31% while non-GAAP EPS of $5.49 rose only 6%. The gap reflects non-GAAP adjustments, including amortization of intangibles ($1.14 per share), restructuring, litigation charges, and minority investment gains and losses. GAAP results in FY24 were depressed by larger charges, such as the ventilator exit and acquisition-related items, which makes the year-over-year GAAP comparison look stronger than the underlying trend.

What is the outlook for FY26, and what are the main risks?

Medtronic guided FY26 organic revenue growth to about 5% and non-GAAP diluted EPS to $5.50 to $5.60 including tariff impacts. Excluding tariffs, EPS growth is expected near 4%. The main risk is US/China tariffs: the lower end of the EPS range assumes the bilateral tariffs return to higher rates after a 90-day pause. Management stated it has high confidence in executing additional mitigation efforts.

What does the Diabetes separation mean for shareholders?

Medtronic plans to separate Diabetes into a standalone public company within 18 months, preferably through an IPO followed by a split-off, which would allow Medtronic to retire its shares without reducing cash. The company expects the separation to be immediately accretive to adjusted EPS, improve adjusted gross margin by about 50 basis points and adjusted operating margin by about 100 basis points, and leave the dividend per share and dividend policy unchanged. The transaction is generally expected to be tax-free to U.S. shareholders, subject to conditions including market conditions and board approval.

Is the dividend safe, and how strong is cash generation?

The board raised the quarterly dividend to $0.71 per share, marking 48 consecutive years of increases. FY25 cash from operations was $7.0 billion and free cash flow was $5.2 billion, representing about 73% conversion of non-GAAP net earnings. Dividends paid were $3.6 billion and share repurchases were $3.2 billion, so total shareholder returns of $6.3 billion exceeded free cash flow, funded partly by net new long-term debt issuance of about $3.2 billion.

Which business drove growth, and what were the leadership changes?

Cardiovascular was the main growth driver, with FY25 revenue up 6.3% organically and Q4 up 7.8%, led by pulsed field ablation, where Cardiac Ablation Solutions grew nearly 30% in Q4. Neuromodulation and Diabetes also grew double digits for the year. On leadership, Sean Salmon is departing as EVP and President of the Cardiovascular Portfolio, with Skip Kiil succeeding him effective May 21, 2025. Salmon remains an employee until September 2, 2025 and will receive severance consistent with company practices for executive officers.

MDT 8-K: Earnings & Results & Leadership Changes

01—Abstract

Summary

Summary of the 8-K filed May 21, 2025. Cited figures are marked; the original filing is the authoritative source.

Medtronic (NYSE: MDT) reported fourth quarter and fiscal year 2025 results for the year ended April 25, 2025, with FY25 reported revenue of $33.5 billion^a (up 3.6% reported, 4.9% organic) and Q4 revenue of $8.9 billion (up 3.9% reported, 5.4% organic).

Profitability showed meaningful GAAP improvement, with FY25 GAAP diluted EPS of $3.61^b (up 31%), but non-GAAP diluted EPS rose only 6% to $5.49, and non-GAAP operating margin expanded just 10 basis points (100 basis points on a constant currency basis). Free cash flow was $5.2 billion, flat year over year, and the company returned $6.3 billion to shareholders. Growth was led by Cardiac Ablation Solutions (pulsed field ablation), which grew nearly 30% in Q4 and reached $1.0 billion in FY25 revenue, along with Diabetes (up 10.7% reported in FY25) and Neuromodulation.

Management guided FY26 organic revenue growth to approximately 5% and non-GAAP diluted EPS to $5.50 to $5.60^c including potential tariff impacts, versus roughly 4% EPS growth excluding tariffs. The lower end of the range assumes US/China bilateral tariffs resume at higher rates after a 90-day pause. The board raised the quarterly dividend to $0.71 per share (annualized $2.84), marking the 48th consecutive annual increase.

The company also announced its intent to separate the Diabetes business into a standalone public company, targeted within 18 months via an IPO followed by a split-off, which management expects to be accretive to gross margin, operating margin, and EPS. Leadership changed in Cardiovascular, with Skip Kiil succeeding Sean Salmon, who departs.

02—Key points

Key Highlights

FY25 revenue of $33.5 billion grew 3.6% reported and 4.9% organic; Q4 revenue of $8.9 billion grew 5.4% organic.
FY25 non-GAAP diluted EPS of $5.49 rose 6% (10% constant currency), while GAAP diluted EPS of $3.61 rose 31%, aided by lower non-operating and other items.
Cardiac Ablation Solutions grew nearly 30% in Q4 on pulsed field ablation adoption and reached $1.0 billion in FY25 revenue.
FY26 guidance calls for approximately 5% organic revenue growth and non-GAAP diluted EPS of $5.50 to $5.60 including potential tariff impacts.
Medtronic announced intent to separate its Diabetes business (8% of revenue, 4% of segment operating profit in FY25) via IPO and split-off within 18 months, expected to be accretive to margins and EPS.
Board raised the quarterly dividend to $0.71 per share (annualized $2.84), the 48th consecutive annual increase.
Free cash flow was $5.2 billion, flat year over year, with $6.3 billion returned to shareholders in FY25.

03—Questions

Frequently Asked Questions

Why did GAAP EPS grow much faster than non-GAAP EPS in FY25?
GAAP diluted EPS of $3.61 rose 31% while non-GAAP EPS of $5.49 rose only 6%. The gap reflects non-GAAP adjustments, including amortization of intangibles ($1.14 per share), restructuring, litigation charges, and minority investment gains and losses. GAAP results in FY24 were depressed by larger charges, such as the ventilator exit and acquisition-related items, which makes the year-over-year GAAP comparison look stronger than the underlying trend.
What is the outlook for FY26, and what are the main risks?
Medtronic guided FY26 organic revenue growth to about 5% and non-GAAP diluted EPS to $5.50 to $5.60 including tariff impacts. Excluding tariffs, EPS growth is expected near 4%. The main risk is US/China tariffs: the lower end of the EPS range assumes the bilateral tariffs return to higher rates after a 90-day pause. Management stated it has high confidence in executing additional mitigation efforts.
What does the Diabetes separation mean for shareholders?
Medtronic plans to separate Diabetes into a standalone public company within 18 months, preferably through an IPO followed by a split-off, which would allow Medtronic to retire its shares without reducing cash. The company expects the separation to be immediately accretive to adjusted EPS, improve adjusted gross margin by about 50 basis points and adjusted operating margin by about 100 basis points, and leave the dividend per share and dividend policy unchanged. The transaction is generally expected to be tax-free to U.S. shareholders, subject to conditions including market conditions and board approval.
Is the dividend safe, and how strong is cash generation?
The board raised the quarterly dividend to $0.71 per share, marking 48 consecutive years of increases. FY25 cash from operations was $7.0 billion and free cash flow was $5.2 billion, representing about 73% conversion of non-GAAP net earnings. Dividends paid were $3.6 billion and share repurchases were $3.2 billion, so total shareholder returns of $6.3 billion exceeded free cash flow, funded partly by net new long-term debt issuance of about $3.2 billion.
Which business drove growth, and what were the leadership changes?
Cardiovascular was the main growth driver, with FY25 revenue up 6.3% organically and Q4 up 7.8%, led by pulsed field ablation, where Cardiac Ablation Solutions grew nearly 30% in Q4. Neuromodulation and Diabetes also grew double digits for the year. On leadership, Sean Salmon is departing as EVP and President of the Cardiovascular Portfolio, with Skip Kiil succeeding him effective May 21, 2025. Salmon remains an employee until September 2, 2025 and will receive severance consistent with company practices for executive officers.

04—Continue

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