Tariffs are still a thing, and they’re hitting Medtronic’s profit

Medtronic is launching more robots. Its new atrial fibrillation tech is taking off. Yet tariffs remain a hurdle.

Tariffs are costing the company $185 million for its fiscal year that will end in April. For the next financial year, they will cost Medtronic around $300 million.

The tariffs, which have gnawed at large manufacturing companies such as the Minnesota-operated medtech giant for about a year now, bit a 1.1 percentage point chunk out of gross margins, a closely watched figure that still managed to beat expectations.

CEO Geoff Martha said the company’s atrial fibrillation-treating technology has a strong trajectory, and the company is progressing on “multiple billion-dollar” opportunities.

“Bottom line: We are delivering,” Martha said.

Medtronic’s stock fell by 2.5% in late morning trading.

Sales were up 8.7% year over year to $9 billion in the quarter, yet the company’s net income was down 11.7% to $1.15 billion. Adjusted profit of $1.75 billion met Wall Street expectations.

The company’s pulse field ablation technology treating the common irregular heartbeat called atrial fibrillation helped drive the revenue of it’s business unit cardiac ablation solutions to grow by 80%.

In the near term, Martha said he expects the global market for this type of technology to continue to grow by about 20%.

Of the competitors in the pulse field ablation market, the CEO said two competitors argue that heart-mapping functions sets their technology apart.

“We feel like we’re very well positioned against them, because that we still think the catheter carries the day, and we have integrated mapping,” Martha said.

Revenue for Medtronic’s medical surgical business, which includes the long-in-the works robotics systems such as Hugo, only increased 2.7% on an organic basis, yet innovation milestones are not yet reflected in its financial performance.

“Hugo is is growing — and growing pretty fast now — and eventually, you’ll start to see this move that big, $6 billion business," Martha said. “But we like where we sit.”

Martha said the company received FDA clearance for its Stealth AXiS Surgical System for spinal procedures last week. The technology unifies AI-powered surgical planning, robotics and navigation into a single system for spinal surgeons, Martha said.

“Stealth is really two things: It’s about taking share as a new platform with improved functionality, and it brings down barriers for physicians to step into robotics without disrupting their workflow,” Martha said.

Medtronic’s earnings landed better with investors compared with Abbott Laboratories and Boston Scientific’s most recent results. Both of these companies also have large Minnesota operations.

While Abbott’s medical device segment pleased investors for the quarter ending Dec. 31, rough nutrition business performance caused its stock price to plummet. Boston Scientific’s share price fell Feb. 4 after the company reported softer sales than expected in its division treating heart conditions.