How MDT (Medtronic) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a medical device leader like Medtronic makes money is essential for investors and anyone interested in the business of healthcare. In this post, we break down Medtronic's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Medtronic Overview

Medtronic operates as a global leader in medical technology, providing innovative devices, therapies, and services across cardiovascular, neuroscience, medical surgical, and diabetes segments. Revenue comes primarily from sales of implantable devices, surgical tools, and diabetes management solutions to hospitals, clinics, and patients worldwide. The company focuses on four core segments, with additional minor contributions from other areas, emphasizing chronic disease management and minimally invasive procedures.

Revenue Breakdown

• Total Revenue (Q4 2025): $8.96B (+6.6% YoY)
  • Cardiovascular Revenue: $3.44B (38.3% of total)
  • Neurosense Revenue: $2.56B (28.6% of total)
  • Medical Surgical Revenue: $2.17B (24.2% of total)
  • Diabetes Revenue: $0.76B (8.4% of total)
  • Other: $0.04B
  • Growth is powered by strong double-digit increases in Cardiovascular (10.8% YoY) and Diabetes (10.3% YoY), with steady contributions from Neuroscience (4.5% YoY) and Medical Surgical (2.0% YoY).

Gross Profit and Margins

• Gross Profit: $5.41B (60.3% gross margin)
  • Cost of Revenue: $3.56B (+20.7% YoY)
  • Medtronic maintains robust margins due to its scalable manufacturing of high-value medical devices, premium pricing on innovative therapies, and supply chain efficiencies in a high-margin industry.
• Most costs come from manufacturing and procurement of components for devices, raw materials, and direct production expenses.

Operating Income and Expenses

• Operating Income: $1.69B (+5.6% YoY, 18.8% margin)
• Operating Expenses: $3.72B (+-3.7% YoY)
  • R&D: $0.75B (+8.2% YoY, 8.4% of revenue) — focused on advancing cardiovascular implants, neuromodulation devices, and next-generation insulin delivery systems
  • SG&A: $2.97B (+7.6% YoY, 33.1% of revenue) — covering sales force expansion, marketing to healthcare providers, and administrative functions amid global operations
  • Medtronic continues to prioritize innovation while maintaining efficiency through controlled expense growth and operational leverage.

Net Income

• Pre-Tax Income: $1.60B (+2.4% YoY, 17.8% margin)
• Income Tax: $0.22B (13.5% effective tax rate)
• Net Income: $1.37B (+8.2% YoY, 15.3% net margin)
• Medtronic converts a significant portion of sales into profit due to scalability of its device portfolio, pricing power in specialized markets, and disciplined cost management.

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What Drives Medtronic's Money Machine?

• Cardiovascular: 38.3%+ of revenue / leading with pacemakers, defibrillators, and structural heart devices amid rising demand for cardiac interventions
• Patient Monitoring and Procedure Volumes: Key metric with steady growth across segments, supporting $8.96B total revenue
• R&D Investments: $754M allocated to pipeline development in high-growth areas like minimally invasive surgeries and neuromodulation
• Future growth areas: Diabetes therapies and emerging neuroscience applications, though not yet profitable at scale due to heavy R&D

Visualizing Medtronic's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A at 33.1% of revenue) taking the largest chunk.
• Even after significant investments in R&D and interest expenses, 15.3% of revenue drops to the bottom line.

Key Takeaways

• Medtronic's money comes overwhelmingly from Cardiovascular devices
• High gross and net margins illustrate the power of Medtronic's asset-light, high-margin medical technology model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by segment diversification and innovation in chronic care

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FAQ About Medtronic's Income Statement

1. What is the main source of Medtronic's revenue in 2025?

Medtronic generates over 38.3% of its revenue from Cardiovascular. Neuroscience 28.6%, Medical Surgical 24.2%, and Diabetes 8.4% provide significant additional streams.

2. How profitable is Medtronic in Q4 2025?

Medtronic reported net income of $1.37B in Q4 2025, with a net margin of approximately 15.3%, reflecting strong profitability driven by high gross margins and operational leverage.

3. What are the largest expense categories for Medtronic?

The biggest expenses on Medtronic's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached $0.75B in Q4 2025, as Medtronic prioritizes device innovation and clinical trials.

4. Why does Other operate at a loss?

Other, despite generating $35M in revenue, posted an operating loss due to minimal scale and allocation of shared costs. This is because Medtronic aggressively invests in core segments, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does Medtronic's effective tax rate compare to previous years?

Medtronic's effective tax rate in Q4 2025 was 13.5%, consistent with previous years. This moderate rate is primarily due to international operations, tax credits on R&D, and efficient global structuring.