Medtronic (MDT) Q1 2027 Earnings Call Transcript

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DATE

Tuesday, Sept. 1, 2026 at 7:45 a.m. ET

CALL PARTICIPANTS

• Head of Medtronic Investor Relations - Ingrid Goldberg
• Chairman and Chief Executive Officer - Geoffrey Martha
• Chief Financial Officer - Thierry Pieton
• Medical-Surgical Portfolio - Mike Marinaro

TAKEAWAYS

• Revenue -- $9.8 billion, representing 13.7% organic growth driven by strong market demand and broad-based execution across segments.
• Adjusted Diluted EPS -- $1.45, exceeding internal expectations and prior guidance due to revenue strength and disciplined cost management.
• Extra Week Impact -- approximately $570 million, contributing 670 basis points to total organic enterprise revenue growth during the first quarter.
• Cardiovascular Revenue -- $3.9 billion, growing 18.9% organically behind strength in electrophysiology and cardiac rhythm therapies.
• Cardiac Ablation Solutions Growth -- 88% worldwide, reflecting rapid share gains in the pulsed field ablation market following the Sphere-9 launch.
• Sphere-9 Market Share -- 9-point increase in U.S. share during the quarter, as management reported the business surpassed $2 billion in trailing 12-month revenue.
• Cardiac Rhythm Management Growth -- 15% globally, supported by double-digit growth in the Micra franchise and expansion in conduction system pacing.
• Cranial & Spinal Technologies Growth -- 13% worldwide, driven by the AiBLE surgical ecosystem and the Stealth AXiS navigation platform.
• Medical Surgical Revenue -- $2.3 billion, increasing 10.2% organically with balanced performance in both U.S. and international markets.
• Surgical Growth -- 9% globally, led by share gains in advanced energy products such as LigaSure vessel sealing.
• Acute Care & Monitoring Growth -- 14% globally, reflecting high demand for video laryngoscopy and pulse oximetry technologies.
• Diabetes Revenue -- $843 million, growing 14.9% organically due to acceleration in the U.S. and sustained performance internationally.
• Pelvic Health Growth -- 15% globally, as procedural volumes for the Altaviva system doubled sequentially.
• Fiscal Year 2027 Organic Revenue Guidance -- 7.25% to 7.75%, representing a 50 basis point increase from previous projections.
• Fiscal Year 2027 Adjusted EPS Guidance -- $5.94 to $6.00, raised to reflect the first quarter performance.
• Adjusted Operating Margin -- 23.7%, an increase of 10 basis points year over year despite business mix headwinds.
• Adjusted Gross Margin -- 65.2%, up 10 basis points year over year reflecting pricing discipline and cost-efficiency programs.
• Free Cash Flow -- $1.3 billion, supported by a 70% cash conversion rate and improved operational execution.
• Inorganic Revenue Contribution -- $150 million expected for the full fiscal year from the acquisitions of Scientia Vascular and SPR Therapeutics.
• Affera Installed Base Growth -- 35% sequential increase in the U.S., with 75% of systems placed in high-volume cardiac centers.
• SG&A Expense -- 32.4% of revenue, representing a 14% increase as the company integrated recent acquisitions and commercialized growth platforms.
• R&D Expense -- 7.9% of revenue, a 6% increase focused on high-growth areas like robotics and neurovascular therapies.
• SKU Rationalization -- 9,000 items removed from the portfolio to enhance supply chain efficiency and reduce manufacturing costs.

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RISKS

• Pieton stated, "Neuromodulation was up 3% globally driven by ongoing SCS market softness and replacement headwinds in DBS," noting persistent challenges in the chronic pain and brain stimulation markets.
• Pieton warned that foreign exchange is expected to be a $50 million to $150 million headwind for the full fiscal year based on recent currency rates.

SUMMARY

Management of Medtronic plc (NYSE:MDT) reported broad-based revenue growth across its four primary portfolios, leading to a 50 basis point increase in full-year organic revenue guidance. The company benefited from an extra selling week that added hundreds of millions to the top line, though underlying demand across cardiovascular and surgical segments remained strong. The company stated it is prioritizing capital allocation toward high-growth med-tech markets, such as robotic-assisted surgery and electrophysiology, through both organic investment and strategic partnerships. Management reported that cost-efficiency programs and SKU rationalization are helping to offset inflationary pressures and business mix challenges, supporting a 50 basis point operating margin expansion target for the full fiscal year.

• CEO Martha stated, "By the end of the fiscal year, we expect Hugo to surpass 50,000 completed procedures with procedure growth continuing at more than twice the market rate."
• Management announced a $700 million strategic investment and distribution agreement with Cornerstone Robotics to expand access to the Sentire Surgical System in select international markets.
• The company confirmed its intent to complete the separation of the MiniMed diabetes business prior to the end of fiscal 2027, depending on optimal market conditions.
• Management reported a strategic investment in Pi-Cardia to acquire leaflet modification technology, which addresses coronary obstruction risks in TAVR procedures.
• Chief Financial Officer Pieton noted that the company achieved a 70% cash conversion rate in the first quarter and maintains a path toward 80% for the full year.

INDUSTRY GLOSSARY

• TAVR: Transcatheter Aortic Valve Replacement, a minimally invasive procedure to replace a thickened aortic valve.
• PFA: Pulsed Field Ablation, a non-thermal energy technology used to treat atrial fibrillation.
• CAS: Cardiac Ablation Solutions, a segment focused on treating heart rhythm disorders using ablation technologies.
• CRM: Cardiac Rhythm Management, therapies involving pacemakers and defibrillators to manage heart rates.
• EP: Electrophysiology, the study of the heart's electrical system.
• SCS: Spinal Cord Stimulation, a therapy used to manage chronic pain.
• DBS: Deep Brain Stimulation, a neurosurgical procedure involving the implantation of a medical device to treat movement disorders.
• MMA: Middle Meningeal Artery, an artery in the head targeted for embolization to treat subdural hematomas.

Full Conference Call Transcript

Ingrid Goldberg: Good morning, and welcome to our fiscal '27 first quarter earnings webcast. I'm Ingrid Goldberg, Head of Medtronic Investor Relations. And I'm joined by Geoff Martha, Chairman and Chief Executive Officer; and Thierry Pieton, Chief Financial Officer. Geoff and Thierry will provide comments on the results of our first quarter, which ended on July 31, 2026, and our outlook for the remainder of the fiscal year '27. After our prepared remarks, we'll take questions from the sell-side analysts that cover the company. Earlier this morning, we issued a press release discussing our quarterly results and several financial schedules. We also posted an earnings presentation that provides additional details on our performance.

The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com. During today's program, many of our statements will be forward-looking, and actual results may differ materially as explained in our SEC filings. We undertake no obligation to update any forward-looking statements. Unless otherwise stated, all comparisons are on a year-over-year basis and revenue comparisons are made on an organic basis, which excludes the impact of foreign currency, first quarter revenue in the current and prior year reported as other as well as significant acquisitions, divestitures or other significant discrete items.

As a reminder, fiscal '27 is a 53-week fiscal year with the extra week occurring in the first fiscal month of the first quarter and is included in our Q1 results. References to sequential revenue changes compared to the fourth quarter of fiscal '26 and are made on an as-reported basis. Unless otherwise stated, all references to share gains or losses are on a revenue and year-over-year 52-week basis, comparing our most recently completed fiscal quarter to our competitors' most recently completed calendar quarter. Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com.

And finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year. With that, I'm now pleased to hand it over to you, Geoff.

Geoffrey Martha: Okay. Thanks, Ingrid, and good morning, everyone. Thank you for joining us. Look, Q1 represents a strong start to fiscal '27, with revenue of $9.8 billion and adjusted EPS of $1.45, both well ahead of expectations. Organic revenue growth was 13.7%, reflecting strong underlying market demand and excellent execution across our businesses. Importantly, these results reinforce our confidence in the durability of our growth. Our 3 largest businesses, CRM, CST and Surgical, all delivered strong results this quarter. Cardiac Ablation Solutions continues to perform exceptionally well, and we are making progress in Symplicity, Altaviva and Robotics with Hugo. And at the same time, our recent acquisitions are contributing to reported growth and strengthening our portfolio for the long term.

So we are executing, and this quarter's results are a clear proof point. Our strategic and operational focus is translating into stronger commercial performance and greater consistency. With healthy underlying markets, relentless execution and multiple growth platforms, all gaining scale, Medtronic is increasingly well positioned to deliver on our fiscal '27 targets and our long-term revenue and earnings trajectory. So with that, let's get into the details of what drove the quarter. Starting with Cardiac Rhythm Management, which delivered an outstanding quarter with global growth of 15%. Performance reflected strength across both high-power and low-power therapies with contributions from EV-ICD, Micra and conduction system pacing, including OmniaSecure.

At more than $5.5 billion in annual revenue, CRM is one of our largest businesses and has been a long-standing source of strength for the company. As an example, Micra, which launched more than a decade ago, continues to grow at a healthy double-digit rate, which underscores the lasting impact of meaningful innovation within CRM. And we're not standing still. We are further advancing innovation across pacing, defibrillation and diagnostics, supported by a strong pipeline and excellent execution from our teams. Look, CRM is a flagship business for Medtronic, and we continue to view this business as a key source of innovation, one that will drive durable growth for years to come.

Cranial & Spinal Technologies was another Q1 highlight, delivering 13% growth, including 14% in the U.S. and 10% internationally. Our AiBLE ecosystem continues to resonate with customers as it connects technologies that have traditionally operated in silos. By bringing together AI-driven planning, imaging, navigation, robotics, implants and outcomes data across the surgical journey, AiBLE helps surgeons make more informed decisions, operate with greater precision and learn from each and every case. And our recently launched Stealth AXiS platform also meaningfully outperformed this quarter. While we're still early in the launch, adoption is building and customer feedback has been very positive.

With U.S. spine robotics penetration still in the single digits, we see a significant opportunity to drive ecosystem pull-through and extend our leadership position in spine and cranial technologies for years to come. Now moving to Surgical, which delivered another strong quarter with 9% global growth. Surgical is our largest operating unit with over $6 billion in annual revenue. Here, we're leveraging our decades of innovation and operating room partnerships to build a connected surgical ecosystem. And we're going to dive deeper on this in just a few minutes. In addition to these businesses, our next cycle of large growth opportunities are playing a more significant role in our performance.

Cardiac Ablation Solutions delivered another quarter of excellent performance, further strengthening our position in one of the most attractive markets in med tech. In Q1, CAS delivered 88% worldwide growth, reflecting the team's execution and the strength of our platform. Sphere-9 momentum continued with a 9-point increase in U.S. share during the quarter. And I'm pleased to share that we achieved an important commitment this quarter, ahead of the time frame we promised, surpassing the $2 billion mark in trailing 12-month revenue. The broader EP space remains healthy, growing in the mid-teens, and we continue to expect CAS to grow at more than 2.5x the market rate this fiscal year. Our U.S.

Affera installed base again grew more than 35% sequentially in Q1, demonstrating that we remain in the early innings of this opportunity. And as we look ahead, our runway extends well beyond today's share gains as we build out a comprehensive EP platform, one that spans mapping, ICE catheters, focal ablation software and single-shot innovation, positioning ourselves to serve electrophysiologists with a more -- with more complete solutions and expand the number of patients who can benefit from advanced EP therapies. This quarter, we expanded our offering with CE Mark for Sphere-9 for the treatment of ventricular arrhythmias, including ventricular tachycardia, opening the door to a patient population that is notoriously difficult to treat. And enrollment in our U.S.

VT pivotal trial is also underway. We're only at the beginning for CAS. With a differentiated platform, a growing installed base, expanding indications and a strong innovation pipeline, we are well positioned to treat more patients to continue to gain share and further extend our leadership in this large and growing market. Now turning to Symplicity. Q1 was another strong quarter, and we are increasingly encouraged by this market's evolution. Real-world outcomes, well, they just keep getting better as evidenced by the 3-year data we recently presented. And we are pleased to share that the SPYRAL AFFIRM clinical trial was accepted for a late-breaker at TCT this fall.

Look, the conversations with clinicians is increasingly shifting from awareness to access and more hospitals are approaching us about establishing Ardian programs. Here, our key focus areas are on expanding coverage and integrating Ardian into the care pathway. Looking ahead for Ardian, our transradial catheter remains on track to launch in the second half of this fiscal year. This is an important step forward as many interventional cardiology procedures are performed via radial access today, making the therapy easier to integrate into existing workflows and potentially improving patient outcomes. These positive signals further reinforce our conviction that Symplicity is one of the most compelling long-term growth opportunities in med tech. Now turning to Pelvic Health.

The business delivered strong growth this quarter, increasing 15%, driven by significant progress from Altaviva, where procedures doubled sequentially. Demand for Altaviva is building. And while we are still early in our launch, Altaviva is gaining traction with physicians as well as the 16 million U.S. patients who still suffer from urge urinary incontinence. As we continue to expand training, reimbursement support and patient awareness, we are really encouraged by the progress we are already seeing. And we are confident in Altaviva's ability to become a meaningful contributor to growth for years to come. Okay. Back to Surgical. We have a strong leadership position in surgery, built on decades of innovation, trusted technologies and a long-standing partnerships with surgeons worldwide.

As robotic-assisted surgery continues to expand, we believe our portfolio breadth, our global reach and our operating room presence uniquely position us to help shape the future of surgery and extend the benefits of these technologies to more patients around the world. Robotic-assisted surgery, or RAS, is one of the most compelling growth opportunities in health care, with global penetration still in the single digits and only 1% in emerging markets. At the same time, RAS is in high demand with procedure volumes up approximately 16% per year over the last decade. There is a significant runway here, and we expect robust expansion for many years to come.

Now we've established our foundation in soft tissue robotics with Hugo, where we continue to make meaningful progress. By the end of the fiscal year, we expect Hugo to surpass 50,000 completed procedures with procedure growth continuing at more than twice the market rate. We're also advancing our platform through new capabilities and new indications, including the expected U.S. expansions into general surgery and gynecology. We are investing in building out a broader surgical ecosystem, just like in CST, an ecosystem that integrates robotics, advanced visualization, navigation, instrumentation and digital technologies, including AI-enabled capabilities like Touch Surgery. Today, Touch Surgery is used in more than 1,500 operating rooms globally, supporting AI-powered insights, collaboration and workflows.

And with Touch Surgery Aide, unveiled at SRS, we are bringing 300x more computing power into the operating room and creating a foundation for increasingly advanced AI capabilities over time. And now that brings us to Cornerstone robotics. As announced this morning, we are further enhancing and expanding our robotic portfolio through a strategic investment and distribution agreement for Cornerstone's Sentire Surgical System in select markets outside the U.S. Sentire complements Hugo by extending our reach into select international markets and broadening the range of customer needs that we can address as robotic surgery continues to expand globally.

So taken together, the platforms, Hugo, Touch Surgery Aide, Sentire and our enhanced surgical instrumentation position Medtronic to build a differentiated global robotics portfolio, combining advanced robotics, AI, visualization and instrumentation to push the field forward, improving surgical precision and workflow and serve a broader range of customers and patients around the world. Look, Q1 performance is further evidence that our strategy is translating into stronger results. We are accelerating growth, advancing innovation and focusing the portfolio and deploying capital with discipline. Overall, our progress this quarter reinforces our confidence in fiscal '27 and in our long-term revenue and earnings growth potential.

With that, I'm going to turn it over to Thierry to walk through more detailed business results, our financials and our updated guidance. So over to you, Thierry.

Thierry Pieton: Thanks, Geoff, and hello, everyone. I appreciate you joining today. Before we begin, I'd like to remind everyone this quarter benefited from the extra selling week, which we estimate contributed approximately $570 million or 670 basis points to total organic enterprise revenue growth. Excluding the impact of the extra week, we delivered our strongest quarterly performance in nearly 8 years, excluding COVID comps. Revenue this quarter was $9.8 billion, up 13.7% on both the reported and organic basis. Geographically, we saw nearly 16% growth in the U.S. and 12% internationally. Cardiovascular delivered 19% revenue growth this quarter, excluding 25% in the U.S. and 14% internationally.

Electrophysiology Therapies or EPT, which includes our CRM and CAS businesses, grew 29%, including 41% in the U.S. and 18% internationally. Within EPT, Cardiac Ablation Solutions was again a significant contributor, delivering 88% growth, up 139% in the U.S. As Geoff outlined, while we are gaining share rapidly in CAS, this business is still in the early stages of its trajectory. In Q2, we expect to outpace the market by more than 3x with growth rates moderating over the remainder of the fiscal year as we lap increasingly strong comps. Cardiac Rhythm Management was up 15% worldwide including balanced performance between the U.S. and international markets, gaining 80 basis points of global share.

Conduction System Pacing continues to gain momentum adding over 200 basis points to CRM in the first quarter. As CSP adoption expands across a growing patient population, Medtronic remains the leader with CSP capable leads in both high and low power segments. Our broad portfolio and innovation pipeline, position us to extend our leadership in this large franchise. Pivoting to Interventional Cardiology Therapies, which include Structural Heart and Coronary and Renal Denervation. ICT grew 7% globally, driven mainly by 11% in international growth. Structural Heart grew low single digits. Similarly to Q4, U.S. procedure volume trends remain stable. Our internal programs in mitral and tricuspid replacement are on track.

And we're taking steps to broaden our opportunity over time through targeted external investments as evidenced by our strategic investment earlier this year in Anteris as well as Pi-Cardia announced this morning. Pi-Cardia is the first FDA-cleared leaflet modification technology for TAVR procedures for patients at risk for coronary obstruction, one of the fastest-growing segments in Structural Heart. Coronary and Renal Denervation grew 13% globally. Our coronary business was up low double digits, with CathWorks, our AI and advanced computational science platform for angio-based FFR contributing nearly 300 basis points of organic growth. In Ardian, we continue to make progress in the first quarter. Positive trends across access, market development and adoption reinforce our confidence in this very large opportunity.

Cardiovascular Surgery, which includes our cardiac surgery and aortic businesses grew 8% globally, and Peripheral Vascular Health was up 11%. Now moving to Neuroscience. The portfolio grew 9% worldwide, driven by 11% in the U.S. and 7% internationally. Cranial & Spinal Technologies delivered 13% growth worldwide. Performance was driven by continued strength in Core Spine, up 14% and Neurosurgery up 15%, along with strong contribution from Stealth AXiS following its first full quarter since commercial launch. Specialty Therapies was up 7%, including 10% in the U.S. and 4% internationally. Within Specialty, Neurovascular grew 4% globally driven by 9% in hemorrhagic and continued strength across flow diversion, intrasaccular embolization, carotid stenting and access devices. In August, Onyx 12 received U.S.

FDA approval for MMA embolization to treat subdural hematomas. All 3 Onyx viscosities are now approved for a 1-minute shake time versus the conventional 20 minutes. This quarter, we completed our acquisition of Scientia, which represents an important advancement in navigation, enabling neuro interventionalists to reach areas of the brain that have historically been extremely difficult to access. Pelvic Health delivered 15% growth globally. In SNM, Medtronic continues to outpace peers and Altaviva's performance is now more than offsetting SNM market softness. We're pleased with the continued progress in Altaviva as physician training expands, reimbursement progresses and physician experience builds. We expect Pelvic Health to become a stronger and stronger contributor to neuroscience in fiscal year '27 and beyond.

ENT grew 7% worldwide, driven by low double-digit growth in the U.S. Neuromodulation was up 3% globally driven by ongoing SCS market softness and replacement headwinds in DBS. Our neuromodulation position has been strengthened by the acquisition of SPR Therapeutics in peripheral nerve stimulation, and through our distribution agreement with Merit Medical, which expands our presence in BVNA. Both segments are growing over 20% annually. Together, these strategic actions increased our exposure to attractive high-growth markets and reinforce our broader pain portfolio. Now turning to Medical Surgical, which had a strong quarter and delivered 10% growth globally with balanced performance in the U.S. and internationally. Surgical revenue increased 9% with similar performance across the U.S. and international markets.

We saw strength in Advanced Energy and Wound Management driven by share gains from our LigaSure vessel sealing and V-Loc barbed sutures. As Geoff mentioned, we are pleased with our launch of Hugo, which had an increase in contribution in the quarter. Endoscopy grew high single digits, driven by further momentum of Endoflip 300 system and of PillCam. Acute Care and Monitoring was up 14% globally including high teens growth in the U.S. Results were driven by mid-40s growth in McGRATH video laryngoscopy, high 30s in Microstream capnography and high single digits in Nellcor pulse oximetry. This performance was a positive tailwind in the quarter. However, we expect ACM to normalize as we move through 2027.

Finally, the Diabetes business delivered 15% growth, driven by U.S. acceleration and robust growth internationally. Our strategic intent for the separation of MiniMed is unchanged, create 2 focused companies that will allow both MiniMed and Medtronic to execute more effectively, pursue their distinct capital allocation strategies and align with the investor bases that best match their respective financial profiles. Before we shift to the P&L and guidance, I wanted to spend a moment on what we're seeing in terms of procedure volumes. Look, Q1 was a very strong quarter for Medtronic, underpinned by healthy underlying procedure volumes across nearly all of our end markets and geographies. Importantly, this strength was broad-based and not concentrated in any one therapy or region.

We continue to see resilient demand across chronic disease, high acuity conditions and life-saving interventions, areas where Medtronic is particularly well positioned given our differentiated innovation and strong clinical evidence. While we continue to monitor the broader environment closely, as usual, the underlying demand backdrop remains constructive and reinforces our confidence in the durability of our growth. Overall, we're pleased with Q1 performance as well as the widespread contribution to revenue from many operating units. Now moving down the P&L. Our adjusted gross margin was 65.2%, up 10 basis points year-over-year. Now let me walk you through the elements that shape gross margin this quarter. We've maintained our discipline on pricing, which provided 30 basis point benefit to the quarter.

Net of inflation, cost down contributed 50 basis points this quarter, driven primarily by COGS efficiency programs and strong execution across our portfolios, global operations and supply chain teams. In Q1, we rationalized more than 9,000 SKUs, further streamlining our product portfolio to focus on the areas with the greatest customer impact, while enhancing supply chain performance and delivering cost efficiencies across the enterprise. Mix was unfavorable by 50 basis points, largely reflective of the diabetes and CAS businesses.

Consistent with prior quarters, while the near-term capital mix continues to impact our gross margin, it's reflective of our strong commercial performance and growing installed base, which is expanding our foundation for future pull-through of higher-margin catheter sales over the long term. The tariff-related impact was a slight headwind as tariffs paid were largely offset by related refunds. And finally, the impact from foreign exchange was roughly neutral. Adjusted SG&A was 32.4% of revenue and increased 14% year-over-year. We continue to make investments to accelerate the commercialization of our growth opportunities, while also integrating several recent acquisitions. Adjusted R&D was 7.9% of revenue in Q1 and increased 6% year-over-year.

Here, we are focused on driving sustainable growth through investments in innovation, complemented by targeted inorganic opportunities. This discipline is reflected in acquisitions like SPR Therapeutics and Scientia, both of which operate in markets with CAGRs exceeding 20%. These businesses are demonstrating strong early traction. And while not reflected in our organic growth today, they're expected to contribute over $150 million to inorganic growth in fiscal year '27. Our adjusted operating profit was $2.3 billion and increased 15% year-over-year. This resulted in an adjusted operating margin of 23.7%, up 10 basis points from the prior year, while we continue to invest behind our highest priority growth opportunities. Our adjusted tax rate was 17.2%, slightly better than expected.

The benefit was mostly timing, and we expect this to be offset later in the year. All in, our adjusted EPS was $1.45, $0.06 above the midpoint of our guidance range and of Street expectations. Now turning to our guidance. As a reminder, our full year guidance includes the Diabetes business through fiscal year-end. On the top line, we are pleased with the strong performance in the first quarter, and are raising our fiscal year '27 organic revenue growth guidance to 7.25% to 7.75%, which represents a 50 basis points increase from our prior guidance. In the second quarter, we're expecting roughly 6% organic revenue growth.

Based on recent FX rates, we expect foreign exchange to be a roughly $50 million to $150 million headwind for the full year with approximate $25 million to $75 million headwind in 2Q. Moving down the P&L and starting with gross margin. We continue to expect pricing and COGS efficiency programs to offset the current impact of business mix, which is primarily from diabetes and CAS. This headwind is expected to reduce following the completion of the MiniMed separation, which we intend to close prior to fiscal year-end. We continue to make targeted investments that are focused on our highest priority growth opportunities and are intended to strengthen the durability of our long-term revenue profile.

Taken together, we expect fiscal year '27 operating profit to grow approximately 10%, with operating margin expanding approximately 50 basis points year-over-year. Moving to EPS. Given the strength in the first quarter, we're also raising our fiscal '27 guidance range to $5.94 to $6. For the second quarter, we expect EPS in the range of $1.32 to $1.34, which includes a roughly neutral impact from foreign exchange at recent rates. To close, we are well positioned for a strong year. I'm encouraged by the strength of our first quarter performance and the continued progress we made against our strategic priorities. At the same time, our operational focus has begun translating into our financial results.

Portfolio simplification, SKU rationalization, cost out, and broader supply chain initiatives are beginning to deliver structural efficiencies down the P&L, and we see further opportunity ahead. We're pairing that discipline with targeted organic and inorganic investment to accelerate innovation and support commercialization and expand our growth platforms. Look, we are laser-focused on translating stronger growth and enhanced efficiency into durable earnings leverage. With that, back to you, Geoff.

Geoffrey Martha: Okay. Thanks, Thierry. Q1 was a strong start to fiscal '27 and another proof point that our strategy is translating into results. What gives us confidence is not simply the strength of the quarter, but also the breadth of our performance this quarter. Growth is being driven by several businesses, multiple innovation platforms and teams who are executing at a high level across Medtronic. We look forward to sharing a deeper look at our portfolio and our pipeline and our capital allocation strategy as well as our long-term growth opportunities at our upcoming Investor Day scheduled for December 10 and 11. With that, I'd like to thank our Medtronic colleagues around the world.

The progress we are making reflects the discipline, focus and execution of our teams. I want to thank you for your hard work and continued commitment to reaching more patients. Together, we bring our mission to life for the people who are counting on us the most. Okay. Let's turn to Q&A now. And Ingrid, please provide the instructions and queue up the analysts.

Ingrid Goldberg: [Operator Instructions] Finally, please be advised that the Q&A session is being recorded. [Operator Instructions] Our first question comes from Travis Steed at Bank of America.

Travis Steed: Congrats on a great quarter. I guess I want to -- CAS is doing really well, but I want to spend a second on kind of the Medtronic business ex CAS and just kind of the ability to accelerate and improve kind of the base business ex CAS at Medtronic kind of going forward. We saw Altaviva having an impact. So maybe just spend some time on that and also the investments this morning with the Cornerstone deal. When does that show up in kind of the base surgery revenue? And how is that contract structured with Cornerstone?

And then, Thierry, I wanted to also follow up the margin guide, I think, ticked down like 10 basis points from 50 basis points -- from 60 to 50 basis points. Just wanted to clarify that if that's because of some of the investments you've done this year.

Geoffrey Martha: Okay. A couple of other questions there. Thanks for the questions, Travis. First on the -- I'll take -- I'll start on the first one, just on the business performance and get it ex CAS. I'd say, first of all, what we like about the quarter is the breadth and the depth of the performance, right? You had a number of businesses, including our big 3 perform really well. Cardiac Rhythm, CST and improving performance in surgical. And on that breadth note, a lot of different countries around the world contributed to the growth.

And then as you point out, we had a number of growth drivers on top of this to give you the depth, right, CAS being the biggest one, but also some good progress in Altaviva, Ardian, Hugo. So we've got these growth drivers all moving forward. So look, from our perspective, the performance is broad-based, and we had strong execution. And it's really -- as we talked about this last quarter, the compounding impact of a lot of strategic, operational and cultural changes that we've made. So beyond CAS, like you said, you're getting to your question, like I said, we have these other growth drivers that we're feeling really good about.

We can talk about the announcement we made this morning in Structural Heart with Pi-Cardia as well as in soft tissue robotics with Cornerstone Robotics. There's a lot to talk about and Ardian is making good progress as well. Altaviva is starting to inflect. So -- and on top of that, you've got Stealth AXiS really doing well in CST. So we feel good about these other growth drivers. But if I go around the horn, I mean, just talk about Neuroscience for a second. Lots going on there. I mentioned Stealth AXiS in CST. We talked about Altaviva. We can get more into that.

And then in Neurovascular, we see an acceleration here in the back half of the year, getting that business to mid-single digit. It's partly the acquisition of Scientia that's not in our organic growth. And on top of that, we'll get to this mid-single digit. But it is getting us into more cases, and we've got a lot of new products there, more indications for Onyx. We've got carotid stenting, and we've got RT. So we've got a number of new products there that are driving. And of course, in Pain Stim in our Neuromod business, we've got the new BVNA partnership that's accelerating as well as SPR, which is moving us upstream.

And so that business will benefit from that. So you're going to see a nice acceleration in neuroscience, continued performance in cardiovascular, and you're seeing the acceleration in surgery. I don't know, Thierry, if you want to add to that and get to the guidance question.

Thierry Pieton: I would say one thing that I mentioned, you mentioned the different investments that we made. In aggregate, we should expect around $150 million worth of revenue in the full year from these acquisitions with kind of a partial year impact. And it's in organic for now, but it will turn into -- inorganic for now, will turn into organic. And all of these investments and acquisitions are in areas where the CAGR is significantly higher than the rest of the business, right? We're talking segments where the growth is typically north of 20%. So that's further good news down the road. I think one that I would mention, you talked about neuroscience.

In neuroscience, in every single segment, we have meaningful innovation happening. So we have Stealth AXiS in CST. You talked about Scientia, Onyx, Neuroguard, Artisse in neurovascular. We've got Stealth AXiS ENT version for the ENT business and ApexCut that's coming out. So every franchise there has good news going forward. So look, I think we've got a lot of good news ahead of us. And there was a question on Cornerstone, but maybe to talk about the margin question, Travis. There's -- yes, it's really the result of the investments that we're making. So just to talk about the guidance for a moment. So we're raising the revenue guidance by 50 basis points and slightly raising the EPS.

The way to think about the EPS raise is we took the upside of the first quarter. And then a couple of things. I would say part of it, about $0.01 is driven by tax, which is timing, which we assume is going to come back the other way for the rest of the year. We've invented now in the guidance, the foregone interest that is going to come from the investment that we just made in Cornerstone. So it's a $700 million investment, and we're going to have some foregone interest on that.

And then to your point, what we're doing is we're taking a portion of the upside from a revenue perspective and a portion only and reinvesting that to accelerate our commercial performance. The last thing I would say is this is only the first quarter, right? And we want to set the business up for success in the remainder of the year.

Geoffrey Martha: I'm sure we're going to get more questions on Cornerstone and Pi-Cardia. But just high level, I'd say, first on Pi-Cardia, excited about the investment. And it's part of a broader theme in Structural Heart, where we're just making -- doubling down on that space. We made the Anteris investment a few months ago in the TAVR space. We're investing heavily in tricuspid and mitral. We've got an ecosystem that we're building with DASI on the sizing as well and now Pi-Cardia here. It's just another investment in the space, and we're bullish on it, and we're going to keep going there. And in terms of Cornerstone, look, we're just really excited about our progress in soft tissue.

We've made a lot of progress. We talked about it in the commentary on Hugo. That's our play in the U.S. Cornerstone is really about access and choice. It's a global play for us. It's one of a number of investments we're making in soft tissue. But this one in particular, it's a global play. It gives customers choice around the world, and we're really excited about it. And it just goes with a bunch of other investments we're making. We -- our Touch Surgery platform, our digital platform, we believe we're leading, and we've got a nice lead in Touch Surgery, and we were at 1,500 installed base.

We just rolled out our newest version of that aide, which is like 300x more computing power in the surgical suite. We're investments in visualization, robotic instrumentation. So there's a lot going on in soft tissue, and we're really excited about our progress there.

Ingrid Goldberg: Our next question comes from Larry Biegelsen at Wells Fargo.

Larry Biegelsen: I'll keep it at one, Geoff, and follow up on Cornerstone. Just maybe expand on the deal rationale. I'm going to just ask it head on. Some investors may think this is a signal you're not confident in Hugo, address that and maybe a little bit more on the financial implications and which markets you're going to launch this in and whether it includes the U.S. And just lastly, is there an option to acquire the company?

Geoffrey Martha: Well, look, we've got Mike Marinaro on the line here, too, from our Medical-Surgical portfolio. I'm going to turn it to him for a second and then maybe, Thierry, you can hit some of the financial questions. But on the Hugo question, it's just the opposite. I mean, we're very excited about the progress that we're making in Hugo. We talked about it in the commentary. We'll be by the end of the fiscal year, over 50,000 cases, 250 units installed. We're continuing to roll out new -- we're getting new clinical indications. We expect multiple new indications by -- in the fall here.

We're investing -- I was just in our North Haven, Connecticut facility, where we do a lot of the instrumentation last week, and we've got a host of new instruments coming out. So we're really bullish about Hugo. That is our U.S. play and other countries as well. But Cornerstone, like I said, does give us -- it's like more of a global play, gives our customers -- it helps us drive up access to robotic surgery, which is very underpenetrated, particularly in emerging markets, and it gives our customers choice.

And maybe I'll call on Mike to provide a little bit more detail and answer some of the other questions, and we'll go back to Thierry on the financial side.

Mike Marinaro: Yes. Thanks, Geoff. And Larry, thanks for the question. I think Geoff covered it very well. This is a distribution and partnership deal that we're very excited about. As Geoff mentioned, this is a global play. It's an opportunity for us to build out a full portfolio of robotics, a full portfolio offering and an ecosystem. And it builds on the progress that we made with Hugo. I think Geoff just spoke to it. But this quarter, we've spoken about now our expectations around installs. Really pleased to see with Hugo that our procedure volume continues to grow at 2x the market rate and then our digital ecosystem, of course, is now expanding.

I think as you've seen at Society of Robotic Surgery, I know you have a prominent presence there. There is a growing suite of capabilities globally. And it's becoming clear to us that there are going to be 2 or 3 platforms that we'll win in the market. And this is an opportunity for us to build out a portfolio of offerings that really meets the customer need and the specifics of the customer situation very well where they sit.

So this is an opportunity for us to take that strategy and expand access in one of the largest markets in med tech that is still highly underpenetrated, and we see it as complementary and really just an expression of our confidence in the progress that we continue to make here with Hugo. Lastly, I'd say we're in this to win. This is a critical area for us. We are leaders in surgery, and this investment is an investment to build out that portfolio of offerings because we're here to win, and we're excited about this platform and portfolio that we'll build together between Hugo, Cornerstone and our Touch Surgery ecosystem.

Thierry Pieton: And then on the financials, Larry, just -- so for this year, other than the impact of the foregone interest that I mentioned in the previous question, the impact should be minimal. Starting in '28, though, we should start seeing the impact of the distribution agreement. And this will contribute the growth that we're experiencing coming from robotics, generally speaking, first with Hugo and now with Sentire, making that stronger and stronger. So we do expect to see a lift in volume and in margins coming into '28 through the distribution agreement. The question on the acquisition, look, we -- on the potential acquisition, we just made a large investment.

The investment that we made does provide us some strategic optionality going forward, I would say. But the way we're approaching it is similar to what we do in a lot of these investments. We like to take a position, have a seat on the board, understand how the company is being run, start developing the collaboration. And then once we understand what's under the hood, so to speak, consider our options. So some optionality there.

Geoffrey Martha: And just, Larry, just to reemphasize, I just want to make sure we're not mincing any words here and there's no earnings speak. We are doubling down here. We have a lot of confidence and conviction about our position in soft tissue right now. And as Mike said, that's the key. We're in it. We are building a winning strategy here. We feel good about our position. We feel good about Hugo. We've got confidence and conviction, but there's no arrogance as my college hockey coach used to say, head on a swivel Panther-like stance. There's lots going on here, and we've got to continue to invest and continue to execute here.

We like our -- we want to become that meaningful #2 and gain on the market leader. And we really like the -- what we believe is a multiyear head start over the next scaled competitor, which is important.

Ingrid Goldberg: So Vijay Kumar, you are next. Vijay at Evercore.

Vijay Kumar: Congrats on a nice spring this morning. I had a 2-parter for you, Geoff. One on diabetes split-off timing. When you look at Medtronic versus stock prices and MiniMed stock, obviously, it's come off the bottom. Why not -- what is the hesitancy in announcing the split off? And one on the CAS. I want to make sure I heard this correctly. I think your prior comment was about twice the rate of market growth. And I think today, you said 2.5x the rate of market growth. So did underlying CAS assumptions improve? And what is driving this confidence?

Geoffrey Martha: Well, thanks, Vijay, for the question. Maybe I'll start with the CAS question, and then Thierry, you can take the diabetes question. Yes, we did say for the balance of the fiscal year, that we would grow 2.5x the market. And we think the market is mid-teens. And in Q3 -- or Q2 rather, it might even be higher than that. So look, we're just -- there's a lot going on in CAS. I'd say -- first of all, there's still room to run on Sphere-9, right? We're still relatively early in that launch as evidenced by the 35% sequential growth over the prior quarter. It tells you we're still early.

Sphere-9 remains kind of one of a kind in that dual energy point-to-point space and with a lot of different features and benefits that physicians like and it continues to grow, and we're getting more clinical indications there. We're on the -- we still got a CE Mark for VT, geographic expansion, we're just launching in Japan. So it's just a lot of room to run on that one. And then we're starting to see progress with Sphere-360 in Europe. And we're going to keep going here. We're building out an ecosystem. That's a trend here at Medtronic. You saw it in CST, it's procedural or surgical ecosystem.

We're doing that in soft tissue, and we're now doing it in various areas of cardiology, CAS being one. We talked about 2 investments in ICE technology last quarter, and we're going to keep going. So again, not too dissimilar from soft tissue. I mean, we like our position. On this one, we're further ahead and marching towards that market leadership. But you got to keep investing here, not just in the therapy itself, but also the ecosystem around it. And I forgot about mapping, too, the integrated mapping continue to kind of drive mapping upgrades every year. So there's a lot going on in CAS, and that's driving our -- plus you got a great market, right?

The market is growing fast. So all that is giving us the confidence and conviction. And then I'll turn over to you on diabetes.

Thierry Pieton: Yes. And just on CAS, it's -- you're right, Vijay, it's 2.5x the market on the full year. We expect it to be north of 3x the market in the second quarter. So we expect another good quarter in Q2 despite comps that are getting tougher and tougher. On diabetes, look, first, as you mentioned, it's great to see that the stock has come back up, and we're encouraged to see that. I think it's a testament to the fact that the business is performing, right? So they had a good fourth quarter last year.

As you can see in the print here, and Chad and Que will give you more details a bit later, they had a good first quarter. So growth is accelerating, in particular, in the U.S. They have a ton of favorability from an innovation perspective. Every single launch is happening ahead of schedule, which is great news. So it's super encouraging going forward. There's no hesitation on our side. So no change in schedule or anything like that. We had mentioned that we would do the separation when we think the economics are optimal for our shareholders and for our stakeholders, generally speaking, and we stick to that position.

So no hesitation going forward with the separation just when the time is right.

Ingrid Goldberg: All right. Great. Next question comes from Mike Kratky at Leerink.

Michael Kratky: So congrats on the strong quarter. Really encouraging to see the 35% sequential growth for your U.S. Affera installed base after 40% last quarter. So can you provide any additional color on utilization trends in centers after they've added an Affera system? How quickly are you seeing your PFA market share shift in those centers? And where are you seeing your share kind of stabilize over time there?

Geoffrey Martha: Well, we're seeing -- let me see here, I'm going to my notes here. Well, so first of all, 75% of our U.S. installed base are at high-volume centers, right? So right now, we're still concentrated in these high-volume centers, which is not a bad thing. But it also tells us we've got room to run in the lower volume centers across the U.S. 30% of our accounts are doing 70% of the ablations, right? These are high-volume centers. That's the 300-plus ablations a year. That's what we define as a high-volume center. And then many of these large accounts have only 1 or 2 systems, and they're asking for more.

So we're seeing -- like once Affera goes in there, most of our experience, Mike, is in these high-volume accounts, right? And once our system gets in there, the utilization is high. We're seeing them add systems. And so we're -- that's all a good sign. That utilization number is something we're watching every quarter. And like I said, so we're focused on those high-volume centers, and we've got a lot of room to run in centers outside of these high-volume centers. Do you have anything to add there?

Thierry Pieton: No, I think I'm glad you picked up on the 35% because it's 35% in Q1 after 40% in Q4. So if you think of just the mathematical, mechanical impact of what that means from a pull-through perspective, it's just super encouraging.

Geoffrey Martha: And for just a variety of reasons, I won't go through all the list of benefits. It's -- Affera is becoming the workhorse in these centers, and that bodes well. And then we've got Sphere-360 coming, which, as I mentioned earlier, goes right at the heart of the largest -- our largest PFA competitor. So feeling bullish on CAS right now.

Ingrid Goldberg: Next question comes from Anthony Petrone at Mizuho.

Anthony Petrone: Congratulations here on a solid quarter. I'll stick to one and maybe go back to Vijay, which is maybe capital allocation in diabetes. There will be a pretty significant hole in the portfolio. It's also growth accretive based on the quarterly numbers for this fiscal quarter, diabetes growing 15%, excluding the week, you're at roughly 7%. So maybe how the capital allocation will change post diabetes being completely separated? Will the cadence of tuck-in deals accelerate? Will you consider scale deals? Is a buyback in the cards here as well, considering that med tech valuations are off the bottom, but are still certainly not at multiyear highs.

So just looking ahead to what the capital allocation program looks like post diabetes.

Geoffrey Martha: Well, thanks, Anthony, for the question. Thierry can comment on the financial impact here. But on the growth side, at the Medtronic level, it's about 20 basis points, right? It's not -- and with our growth accelerating, we're very comfortable. And as we project forward, we're comfortable with losing that 20 basis points. And from a profitability standpoint, from a gross margin standpoint, it's a big step up. Thierry can walk through that. Look, the diabetes business, it is fundamentally different from the rest of Medtronic. That's why we made this decision. It's more consumer based. There's a number of other reasons.

But financially, also that industry is a lower margin business, right, on its best day, materially lower than the rest of Medtronic. And so getting that capital allocation question, I wouldn't say anything has changed. We've already made that switch, and you're seeing it in our performance. We've made that switch to allocating our capital to the highest growth opportunities in med tech, the highest growth, but also where we have confidence that they're going to be big. So high growth, large patient pools. And the third thing is where we feel like we have a right to win. We've got strong commercial presence, a good reputation. We understand the clinical nature of it. We understand the technologies, et cetera.

And that's where our capital allocation is focused. We're much more prioritized in these high-growth areas, much more of a top-down at our leadership team level, allocating that capital. And you're seeing the uptick in M&A already, okay? That's broad-based, organic and inorganic. And on the M&A, you've seen over the last 18 months, we've been working on this for probably 3 years to get that pipeline of M&A going. And it is -- it's not the scale deals, it's the tuck-in deals. And it's not just -- it's venture -- an uptick in venture investing, an uptick in structured deals where you make an investment and then you have strategic optionality later and then just flat out acquisitions.

You're seeing it across the board, prioritizing those high-growth areas. And we announced 2 more investments today. So you're going to see that continue in those areas of cardiology, neuroscience and our Medical-Surgical area.

Thierry Pieton: I don't know what to add. Geoff, that was a pretty complete answer. Just a couple of numbers. I mean, Geoff said, it's about 20 basis points of growth. It is lower margin. So when we deconsolidate diabetes, our gross margin will go up about 50 basis points. Our operating margin will go up about 100 basis points. It typically -- the R&D as a percentage of revenue is about double in diabetes, what the rest of the business is. So it does give us an opportunity to reallocate capital to the other segments of the company where we typically get better returns.

As Geoff said, this is not a -- going forward, when we deconsolidate, it's something that we've already started doing. So if you look at the last 12 months or so, we went from doing about $2.8 billion of R&D and $0.5 billion of acquisitions to almost $3 billion in R&D and $2 billion in acquisitions -- or investments. So we more than doubled the investment in innovation. And that's something that we intend to continue doing going forward. So that's the recipe. And again, diabetes, the separation gives us some flexibility to do more of that.

From a buyback perspective, no specific plans in that area, but never close to if the conditions are right, doing it for tactical reasons.

Geoffrey Martha: And just to kind of further emphasize the point and get into our mindset, just go back and look at some of our actions, right, in terms of prioritizing these high-growth areas. We had to take CAS, right, which we just talked about AFib ablation. We have an organic program, PulseSelect. And at the same time, we thought the space was so important, we decided to go out and invest $1 billion in an inorganic platform. So multiple shots on goal. And here we are today announcing these type of results. We picked up another 9 points of share in the highest growth -- one of the highest growth segments in med tech.

I mean, we want to put together these decisive winning strategies. And then we talked about soft tissue surgery. Again, a lot of investments organically in Hugo and that ecosystem around it, like the digital platform with Touch Surgery. And then here we go today, announcing an inorganic investment, again, doubling down on these high-growth spaces where we believe we have a right to win and putting together winning strategies.

Thierry Pieton: And just one thing I want to add because it's important. You might have seen in the numbers this morning, our free cash flow performance for the first quarter was very strong. Cash conversion is improving. We were at 70% in the first quarter, which is good, but we think we have a strong path to getting to 80%. We've got a strong balance sheet. So independently of the diabetes deal, we've got a lot of firepower to go do this investment. So we look forward to continuing to deploy capital.

Ingrid Goldberg: Okay. Matt O'Brien at Piper Sandler, you are up next.

Matthew O'Brien: Okay. So just real quick, I know we're running long. On renal denervation, I just want to be sure I'm clear on the message here because obviously, CAS is doing really well. So how are you thinking about the trajectory of that business now? The market opportunity, any update on what you're thinking in terms of the market? And then do you really need transradial to accelerate that franchise over the next several years? Is it a reimbursement thing? What's really the clear message on renal denervation here as we get this update here in Q1?

Geoffrey Martha: Well, thanks for the question, Matt, on Ardian. I still -- we have confidence and conviction that this is going to be one of the biggest things in med tech, right? And there's 3 things driving it. You touched on some of them. One is the improving clinical evidence, which I'll touch upon. The other is broader reimbursement coverage and the third is market development. In terms of the evidence, right, the real-world outcomes just keep getting better. I don't know what else to say that we had great 3-year data at CRT, where you saw like 18 -- over 18-point reduction in the office, over a 13-point reduction in the ambulatory setting.

I mean, these are materially higher, like 2x, 3x, 4x higher than the clinical trial. And then we put in the commentary today, SPYRAL AFFIRM was accepted as a late-breaker TCT. So more data coming out. I think that's full 6-month data coming out in a very visible conference. So what you're seeing is the difference from the trial is material in terms of the improved results. And we're also seeing really strong durability of these results, especially versus like ultrasound. So this is driving -- the conversation is shifting, right? KOLs and hospitals are coming to us to really get some of these programs going as they see this continued improvement in clinical evidence.

Also driving that would be more improvement in reimbursement coverage, right? Beyond the national coverage decision for CMS, we're seeing these commercial payers continue to jump on board. And this quarter, we had a number of them. Particularly, we had some bigger ones like Highmark. So we're seeing that reimbursement coverage improve. And then the market development. That's where a lot of the focus is now. And look, as you -- I know, Matt, you get out there, you talk to a lot of the KOLs, and we're out there talking to them as well as the hospital C-suite. And the conversation, like I said, is shifting.

The enthusiasm is there, and we're really partnering with them to build out these programs on the back of the clinical evidence, on the back of more insurance coverage, building out those referral pathways and driving consumer/patient awareness on these. So again, we thought we made a good progress on a number of those leading indicators, and it bodes well for the ramp here over the next quarters and years to come.

Ingrid Goldberg: All right. I think we have time for 2 more. So the next question comes from Robbie Marcus at JPMorgan.

Robert Marcus: Great. Congrats on the nice quarter. Thierry, I wanted to ask on margins. This quarter, it came in just a bit above the Street on operating margin. How are you thinking about reinvesting this top line upside versus driving margin expansion, both in the first quarter and for the rest of the year? And then a quick follow-up. You talked about tariffs, rebates offsetting tariffs paid. Do you have the tariff rebate number so we can all keep track of that as some of the one-time benefits in the quarter?

Thierry Pieton: Yes. Thanks, Robbie. So I'll start with the rebates -- with the tariff, sorry. So the refunds in the first quarter were such that we were a slight net negative on the impact from tariffs. So they almost compensated the full tariffs. Going forward for the year, just to be clear, we have not embedded future refunds. So wanted to remain prudent going forward. So we're -- we have a construction for the remainder of the year that doesn't bank on any refunds happening. We are continuing to submit for refunds. So there's a potential upside coming from that. From a margin expansion perspective, look, we're in growth mode.

So we're taking a portion of the upside that we're seeing from a revenue perspective and reinvesting in the growth areas and a portion only. And so the construction that we've got on a full year basis today still calls for an operating margin that should be up about 50 basis points on a full year basis, which should put us with an op profit up 10%, so significantly higher than our revenue growth. So look, we're going through all the different parts of the company, right? Cost of goods sold, the manufacturing efficiency, the relationships with the suppliers. We're looking at logistics costs, and we're looking at overhead.

And we're really looking at how we can drive efficiency at every level. And it's starting to pay off. You've seen some of it in the first quarter. And on the full year, we're going to deliver a leverage P&L.

Ingrid Goldberg: All right. I'm waiting for my queue up here on our last question. It should come from -- perfect, Rick Wise at Stifel.

Thierry Pieton: Might be on mute, Rick.

Ingrid Goldberg: All right, Rick, we'll get you on the next one, please. The next question is going to come from Joanne then, Joanne at Citi.

Joanne Wuensch: Really nice quarter. To wrap it up, I think I'll ask about Charlotte, North Carolina and why are we going there? And what can we expect from the analyst meeting? And my second question sort of probably ties to that one. For a while, I used to think of Medtronic -- or we used to think of Medtronic as sort of a mid-single-digit revenue grower, high single-digit EPS. Has that formula shifted?

Geoffrey Martha: Well, look, I'll start with your last question -- the back half of the question and let Thierry pile on there. But look, we -- Thierry mentioned between the strong cash flow that we're generating, our cash flow is improving here continues to improve. It's always been good, but it's improving, had a really strong quarter. We're going to continue to focus on that. And then our focus on gross margin and operating margins are going to allow us to invest more, both organically and inorganically. And then ramping up our inorganic tuck-in acquisitions, combining that with our organic, you're seeing effectively a doubling of our investment in innovation, and we've been doing this for a while.

And now you're seeing that growth tick up. And clearly, we have aspirations for higher growth than we've done historically. You've seen over the last couple of years, we've gotten the growth to mid-single digits, but we're not satisfied with that. That's why the more investments and the focus on execution. We have -- I can't describe in words the sense of urgency on the investments and the execution to continue. You've seen in the last 2 quarters a bit of an inflection of growth, and we want to kind of continue with that. So before I get to the Charlotte, Thierry, any other comments on that?

Thierry Pieton: No. Look, I think you said it all. So we're clearly at an inflection from a growth perspective, and we're working the P&L. As I just said, we're continuing to make progress in pricing. We're continuing to make progress in cost out. We're reinvesting in innovation, but we're getting leverage from an overhead perspective. So we're really focused on driving the leverage on the income statement as well. And it's one of the things that we'll talk about in Charlotte.

Geoffrey Martha: Yes. And so Charlotte, why are we going there? So look, the IRCAD facility there in Charlotte is an impressive facility. IRCAD is mainly historically outside -- the physician training outside the U.S. This is their first North American site, and we have a big presence in that site. And it's a good way, Joanne, to actually see -- especially a lot of our technology now is -- or more and more of it is capital. So you got our AiBLE platform and Stealth AXiS. You have all of our soft tissue technology, which we keep adding to. You have the digital piece.

It really helps to see it in action and IRCAD is set up so that you can actually see it. We'll have physicians there walking you through it and describing how they're using it. And these are physicians that also use our competition. We all have our weak moments, but they'll be able to provide, I think, a good balance of how we stand up versus the competition, and we'll talk about where we're going with these technologies as well.

And then the other thing, look, on these earnings calls and some of our other events that we do, the different banking meetings, we don't get a chance to go in depth with some of the other parts of our growth pipeline. And so there's a lot that we haven't talked about that we're going to talk about. And in addition to that, you're going to go down a layer into the org below my leadership team to some of the business unit leaders and the experts in these specific areas, and you're going to hear it from them as well.

So physicians plus the business unit leaders themselves, new growth investments that we haven't talked about and then going way deeper into some of these big areas like these surgical ecosystems in a showcase, a space that is built for this. And so December 10 and 11, please mark your calendar. It's -- we're really excited to share, and I know the team is as well. So thanks for the question, Joanne.

Ingrid Goldberg: Right. Great. Well, that wraps up the call. So thank you, everyone, very much for joining. I appreciate your support and continued interest in Medtronic. And Geoff, if you have any other additional prepared remarks, please go ahead.

Geoffrey Martha: No. I mean, look, thanks for -- thanks, as always, for joining today. Really appreciate the engagement. I appreciate the support and the continued interest in Medtronic. With that, have a great rest of your day, and thank you very much.

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