Abbott Reports 10.5% EPS Growth for Fiscal Q2

Key Points

• Q2 revenue beat expectations at $11.14 billion, up 7.4% year over year.

• Adjusted EPS exceeded estimates, reaching $1.26 for Q2 2025, representing 10.5% growth year over year.

• Medical Devices achieved strong double-digit growth, while the Diagnostics segment in China saw ongoing pressure.

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Abbott Laboratories (NYSE:ABT), a global healthcare company known for its medical devices, diagnostics, nutrition, and pharmaceuticals, reported fiscal 2025 earnings on Thursday, July 17, that narrowly topped analysts' consensus estimates. Q2 revenue climbed to $11.14 billion, surpassing the analyst estimate of $11.06 billion, and adjusted earnings per share came in at $1.26, beating the consensus by $0.01.

These results reflect robust year-over-year growth, especially in the company’s Medical Devices segment, which reported year-over-year sales growth of 13.4%, but also highlight continued headwinds in its Diagnostics business, mainly in China. Overall, the company achieved margin expansion and affirmed management’s full-year outlook despite tariff pressures and competitive and regulatory challenges overseas.

Source: Abbott Laboratories. Note: Analysts' consensus estimates for the quarter provided by FactSet. YOY = Year over year. bps = basis points.

Understanding Abbott Laboratories’ Business

Abbott Labs operates across four main segments: medical devices, diagnostics, nutrition, and pharmaceuticals. Its product range includes continuous glucose monitors for diabetes care, implantable heart devices, laboratory diagnostic analyzers, and nutritional products such as Ensure and Glucerna. The company serves customers in over 160 countries, generating a significant portion of sales internationally.

The company’s ongoing strategy centers on technological innovation, shown in products like its FreeStyle Libre system for continuous glucose monitoring, and compliance with evolving global health regulations. Its global footprint supports market access and supply chain resilience. Success depends on delivering new technology, defending market share, and adapting to changing healthcare policies and competitive pressures.

Second-Quarter Highlights

The Medical Devices segment was the standout performer. Sales for the segment reached $5.37 billion, up 13.4%, with especially strong contributions from Diabetes Care, Heart Failure, Structural Heart, and Electrophysiology subsegments. Continuous glucose monitoring systems, like the FreeStyle Libre, generated $1.9 billion in revenue -- up 21.4% on a reported basis -- helped by robust adoption in both the U.S. and international markets. New launches, such as Navitor for heart valves and AVEIR leadless pacemakers, also fueled growth.

Diagnostics segment sales came in at $2.17 billion, declining 1% from last year. The primary factor was a sharp drop in COVID-19 testing sales, now down to $55 million from $102 million a year earlier. Core Laboratory Diagnostics grew slightly, but ongoing price cuts from China’s volume-based procurement program pressured overall segment results. While diagnostics achieved roughly 7% growth outside China in Q1 2025, this did not fully make up for the shortfall in that market. CEO Robert Ford noted the challenge, highlighting that recent changes in Chinese procurement have led to lower prices without offsetting volume gains -- a departure from past patterns.

Nutrition revenue was $2.21 billion, up 2.9% on a reported basis. Adult Nutrition -- driven by Ensure and Glucerna brands -- grew 6.1% on a reported basis, while Pediatric Nutrition organic sales remained nearly flat, reflecting a continuing squeeze in international pediatric sales, which fell 5.7%. The adult product growth offset ongoing softness in pediatric lines. Pharmaceutical sales, mostly in established branded generics outside the United States, rose 6.9% on a reported basis, with double-digit gains in emerging markets across Asia, Latin America, and the Middle East.

Adjusted operating margin rose to 22.9%, a 100 basis point increase from the prior year. Management cautioned that tariffs introduced in 2025 posed a “few hundred million dollar” headwind for the second half of the year, but indicated that mitigation strategies -- such as adjusting manufacturing footprints and leveraging foreign exchange rates -- remain in progress. Net earnings reached $2.21 billion. Abbott Laboratories also maintained a quarterly dividend of $0.59 per share, extending its streak of increases to 53 consecutive years.

Future Outlook and What to Watch

Looking ahead, management reaffirmed its full-year guidance despite new tariff costs. For fiscal 2025, it projects organic sales growth (excluding COVID-19 testing-related sales) of 7.5% to 8.0%, and full-year adjusted EPS in the $5.10–$5.20 range. Third-quarter 2025 adjusted EPS is expected to be between $1.28 and $1.32. Abbott also guided to an adjusted operating margin of 23.5%, implying further focus on efficiency and cost controls. Management sees new product launches and recovery in underperforming segments as growth drivers for the back half of 2025.

Investors should closely monitor the ongoing impact of global tariffs, continued performance in the Diagnostics segment -- especially in China -- and the pace at which the company launches new products in its medical devices pipeline. International pediatric nutrition trends also bear watching, given ongoing weakness. Planned mitigation efforts around tariffs and supply chain reshuffling, along with the evolving clinical and regulatory landscape, are likely to influence the company’s performance as 2025 progresses.

Note: Revenue and net income are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.