Medtronic plc

Previous wording

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 26, 2024. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and six months ended October 25, 2024. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.

Current wording

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company, or we, us, or our). For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 26, 2024. In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and nine months ended January 24, 2025. Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.

Previous wording

Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.

Current wording

Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, ear, nose, and throat conditions, urological and digestive disorders, advanced and general surgical care, respiratory and monitoring solutions, and diabetes conditions.

Previous wording

The following is a summary of revenue and diluted earnings per share for the three months ended October 25, 2024 and October 27, 2023, and operating cash flow for the six months ended October 25, 2024 and October 27, 2023:

Current wording

The following is a summary of revenue and diluted earnings per share for the three months ended January 24, 2025 and January 26, 2024, and operating cash flow for the nine months ended January 24, 2025 and January 26, 2024:

Previous wording

(2)The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges. The six months ended October 25, 2024 also includes gains related to certain business or asset sales.

Current wording

(2)The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges.

Previous wording

The tables below present our GAAP to Non-GAAP reconciliations for the six months ended October 25, 2024 and October 27, 2023:

Current wording

The tables below present our GAAP to Non-GAAP reconciliations for the nine months ended January 24, 2025 and January 26, 2024:

Previous wording

(2)The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges. The three months ended October 25, 2024 also includes gains related to certain business or asset sales.

Current wording

(2)The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges. The nine months ended January 24, 2025 also includes gains related to certain business or asset sales.

Previous wording

(6)The charge relates to an income tax reserve adjustment associated with the June 2023, Israeli Central-Lod District Court decision, the establishment of a valuation allowance against certain net operating losses and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

Current wording

(7)The net charge primarily relates to an income tax reserve adjustment associated with the June 2023, Israeli Central-Lod District Court decision and the establishment of a valuation allowance against certain net operating losses which were partially offset by a benefit from the change in a Swiss Cantonal tax rate associated with previously established deferred tax assets from intercompany intellectual property transactions and the step up in tax basis for Swiss Cantonal purposes.

Previous wording

Certain prior period net sales has been recast to reflect the new reporting structure in the fourth quarter of fiscal year 2024. Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's reporting structure. In addition, starting in the first quarter of fiscal year 2025, the Company combined the non-U.S. developed markets and the emerging markets into an international market geography. Prior period net sales has been recast to conform to the new presentation. The charts below illustrate the percent of net sales by segment for the three months ended October 25, 2024 and October 27, 2023:

Current wording

Certain prior period net sales have been recast to reflect the new reporting structure in the fourth quarter of fiscal year 2024. Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's reporting structure. In addition, starting in the first quarter of fiscal year 2025, the Company combined the non-U.S. developed markets and the emerging markets into an international market geography. Prior period net sales have been recast to conform to the new presentation. The charts below illustrate the percent of net sales by segment for the three months ended January 24, 2025 and January 26, 2024:

Previous wording

The table below illustrates net sales by segment and division for the three and six months ended October 25, 2024 and October 27, 2023:

Current wording

The table below illustrates net sales by segment and division for the three and nine months ended January 24, 2025 and January 26, 2024:

Previous wording

The table below includes net sales by market geography for each of our segments for the three and six months ended October 25, 2024 and October 27, 2023:

Current wording

The table below includes net sales by market geography for each of our segments for the three and nine months ended January 24, 2025 and January 26, 2024:

Previous wording

(3)Includes historical operations and ongoing transition agreements from businesses the Company has exited or divested.

Current wording

(1)Includes historical operations and ongoing transition agreements from businesses the Company has exited or divested.

Previous wording

The increase in net sales for the three and six months ended October 25, 2024, as compared to the corresponding periods in the prior fiscal year, was driven primarily by growth in most businesses, including strong growth in Diabetes, Cranial & Spinal Technologies, Neuromodulation, TAVR, Cardiac Rhythm Management, and Cardiac Surgery. The increase in net sales for the six months ended October 25, 2024, was partially offset by the $90 million incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

Current wording

The increase in net sales for the three and nine months ended January 24, 2025, as compared to the corresponding periods in the prior fiscal year, was driven primarily by growth in most businesses, including strong growth in Cardiac Ablation Solutions, Cardiac Pacing Therapies, TAVR, Diabetes, and Neuromodulation. The increase in net sales for the nine months ended January 24, 2025, was partially offset by the $90 million incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

Previous wording

•The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having, and could continue to have impacts on revenue and supply chain. The financial impact of the conflict in the second quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material, and for the three and six months ended October 25, 2024, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets. Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.

Current wording

•The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having, and could continue to have impacts on revenue and supply chain. The financial impact of the conflict in the third quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material, and for the three and nine months ended January 24, 2025, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets. Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.

Previous wording

•Although the long-term implications of Israel's recent conflicts are difficult to predict at this time, the financial impact of the conflicts in the second quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material. As of October 25, 2024, the Company had 6 facilities and approximately 1,500 employees in Israel. For the three and six months ended October 25, 2024, the business of the Company in Israel represented less than 1% of the Company's consolidated revenues and assets.

Current wording

•Although the long-term implications of Israel's recent conflicts are difficult to predict at this time, the financial impact of the conflicts in the third quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material. As of January 24, 2025, the Company had 6 facilities and approximately 1,500 employees in Israel. For the three and nine months ended January 24, 2025, the business of the Company in Israel represented less than 1% of the Company's consolidated revenues and assets.

Previous wording

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators, leads and delivery systems, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products. Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three and six months ended October 25, 2024 were $3.1 billion and $6.1 billion, an increase of 6 percent for both periods as compared to the corresponding periods in the prior fiscal year. The net sales increase was primarily due to strong performance of TAVR, Cardiac Rhythm Management, and Cardiac Surgery.

Current wording

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators, leads and delivery systems, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, open heart and coronary bypass grafting surgical products, and renal denervation systems for the treatment of hypertension. Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division. Cardiovascular's net sales for the three and nine months ended January 24, 2025 were $3.0 billion and $9.1 billion, an increase of 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was primarily due to strong performance of Cardiac Ablation Solutions, Structural Heart, Cardiac Pacing Therapies, and Cardiac Surgery.

Previous wording

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and six months ended October 25, 2024 increased 6 percent for both periods as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by Cardiac Pacing Therapies and Defibrillation Solutions with growth in Micra transcatheter pacing systems, Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system, and TRYX. Cardiac Ablation Solutions experienced strong growth in PulseSelect Pulsed Field Ablation with offsetting declines in cryoablation.

Current wording

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and nine months ended January 24, 2025 increased 5 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by growth in Micra transcatheter pacing systems, Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system, and TYRX. Cardiac Ablation Solutions experienced strong growth in PulseSelect and Sphere-9 pulsed field ablation with partially offsetting declines in cryoablation.

Previous wording

Structural Heart & Aortic (SHA) net sales for the three and six months ended October 25, 2024 increased 8 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by U.S. and international growth in Structural Heart from adoption of Evolut FX+ TAVR system and in Cardiac Surgery driven by growth in Perfusion and Surgical Valves.

Current wording

Structural Heart & Aortic (SHA) net sales for the three and nine months ended January 24, 2025 increased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by continued growth in Structural Heart from adoption of Evolut FX+ TAVR system and in Cardiac Surgery driven by growth in Perfusion and Surgical Valves.

Previous wording

Coronary & Peripheral Vascular (CPV) net sales for the three and six months ended October 25, 2024 increased 5 percent for both periods as compared to the corresponding periods in the prior fiscal year. The increase in net sales was driven by growth in Coronary led by guide catheters and balloons, in addition to growth in Peripheral Vascular and Vascular Embolization.

Current wording

Coronary & Peripheral Vascular (CPV) net sales for the three and nine months ended January 24, 2025 were flat and increased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year. Net sales were impacted by growth in Coronary led by guide catheters and balloons, partially offset by impacts from tender pricing in China in Peripheral Vascular Health.

Previous wording

•Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the Arctic Front cryoablation system, PulseSelect PFA, and Affera mapping and ablation system. The Affera mapping and ablation system and Sphere-9 catheter received U.S. FDA approval in late October 2024.

Current wording

•Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the PulseSelect pulsed field ablation system and the Affera mapping and ablation system with Sphere-9 catheter. The Affera mapping and ablation system and Sphere-9 catheter received U.S. FDA approval in late October 2024.

Previous wording

Neuroscience's products include various spinal implants, bone graft substitutes, biologic products, image-guided surgery and intra-operative imaging systems, robotic guidance systems used in the robot-assisted spine procedures, and systems that incorporate advanced energy surgical instruments. Neuroscience's products also focus on therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents, and flow diversion products, as well as products to treat ear, nose, and throat (ENT), and the treatment of overactive bladder and urinary retention. Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy. Neuroscience’s net sales for the three and six months ended October 25, 2024 were $2.5 billion and $4.8 billion, respectively, an increase of 7 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to growth in Neuromodulation, Spine and Biologics, Neurosurgery, and Hemorrhagic Stroke.

Current wording

Neuroscience's products include various spinal implants, bone graft substitutes, biologic products, image-guided surgery and intra-operative imaging systems, robotic guidance systems used in the robot-assisted spine procedures, and systems that incorporate advanced energy surgical instruments. Neuroscience's products also focus on therapies to treat the diseases of the vasculature in and around the brain, including coils, neurovascular stents, and flow diversion products, as well as products to treat ear, nose, and throat (ENT), and the treatment of overactive bladder and urinary retention. Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy. Neuroscience’s net sales for the three and nine months ended January 24, 2025 were $2.5 billion and $7.2 billion, an increase of 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was primarily due to growth in Neuromodulation, Spine and Biologics, and Neurosurgery.

Previous wording

Cranial & Spinal Technologies (CST) net sales for the three and six months ended October 25, 2024 increased 7 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the continued adoption of the AiBLE ecosystem of spine implants and enabling technology with growth in Core Spine, Biologics, and Neurosurgery.

Current wording

Cranial & Spinal Technologies (CST) net sales for the three and nine months ended January 24, 2025 increased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the continued adoption of the AiBLE ecosystem of spine implants and enabling technology with growth in Core Spine, Biologics, and Neurosurgery.

Previous wording

Specialty Therapies (Specialty) net sales for the three and six months ended October 25, 2024 increased 5 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by hemorrhagic stroke products, growth on continued adoption of the Interstim X system, and ENT.

Current wording

Specialty Therapies (Specialty) net sales for the three and nine months ended January 24, 2025 increased 1 percent and 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by growth on continued adoption of the Interstim X system, and ENT. Hemorrhagic stroke products also contributed to the net sales increase for the nine months ended January 24, 2025.

Previous wording

Neuromodulation (NM) net sales for the three and six months ended October 25, 2024 increased 13 percent and 11 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the continued launch of both the Inceptiv spinal cord stimulator in the U.S. and the Percept RC deep brain neurostimulator.

Current wording

Neuromodulation (NM) net sales for the three and nine months ended January 24, 2025 increased 12 percent and 11 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase was driven by the continued launch of both the Inceptiv spinal cord stimulator in the U.S. and the Percept RC deep brain neurostimulator.

Previous wording

•Continued acceptance and growth of our Percept family of deep brain stimulation (DBS) devices with proprietary BrainSense technology for objectifying and personalizing the treatment of Parkinson's Disease, epilepsy, and other movement disorders. In August 2024, the U.S. FDA approved Asleep DBS surgery for people with Parkinson's and people with essential tremor.

Current wording

•Continued acceptance and growth of our Percept family of deep brain stimulation (DBS) devices with proprietary BrainSense technology for objectifying and personalizing the treatment of Parkinson's Disease, epilepsy, and other movement disorders. In August 2024, the U.S. FDA approved Asleep DBS surgery for people with Parkinson's and people with essential tremor. In January 2025, BrainSense Adaptive DBS and BrainSense Electrode Identifier received CE Mark approval in the E.U. and United Kingdom.

Previous wording

Medical Surgical’s products span the entire continuum of patient care from diagnosis to recovery, with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, obesity, and preventable complications. The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, airway products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three and six months ended October 25, 2024 were $2.1 billion and $4.1 billion, an increase of 1 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales were primarily impacted by growth in Advanced Energy and Blood Oxygen Management with partially offsetting declines in Stapling.

Current wording

Medical Surgical’s products span the entire continuum of patient care from diagnosis to recovery, with a focus on diseases of the gastrointestinal tract, lungs, pelvic region, obesity, and preventable complications. The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, airway products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry. Medical Surgical's net sales for the three and nine months ended January 24, 2025 were $2.1 billion and $6.2 billion, a decrease of 2 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year, resulting from declines across most businesses as outlined below.

Previous wording

Surgical & Endoscopy (SE) net sales for the three and six months ended October 25, 2024 increased 1 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales for both periods were impacted by growth in Advanced Energy, driven by continued adoption of the LigaSure Maryland XP vessel sealer, and strength in Hernia and Wound Management products. The net sales results were partially offset by declines in Advanced Stapling and Endoscopy.

Current wording

Surgical & Endoscopy (SE) net sales for the three and nine months ended January 24, 2025 decreased 1 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales for both periods were impacted by declines in Stapling and General Surgical Technologies, primarily driven by ongoing stapling product pressures and changes in U.S. distributor buying patterns. Partially offsetting these declines was growth in Advanced Energy on continued adoption of LigaSure vessel sealing technology.

Previous wording

Acute Care & Monitoring (ACM) net sales for the three and six months ended October 25, 2024 increased 4 percent and 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales increase for both periods was largely due to growth in Nellcor pulse oximetry driven by strong sensor sales and continued adoption of the RespArray patient monitor in addition to strength in Bispectral Index monitoring system (BIS).

Current wording

Acute Care & Monitoring (ACM) net sales for the three and nine months ended January 24, 2025 decreased 4 percent and 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The net sales decrease for the three and nine months ended January 24, 2025 were driven by declines in Nellcor pulse oximetry as a result of year over year declines in U.S. respiratory related hospitalizations in the quarter and Airways with partially offset growth in Bispectral Index monitoring system.

Previous wording

•Our ability to execute ongoing strategies addressing the near-term pressures to bariatric surgery procedure volumes in the U.S. from pharmaceuticals, and growth of surgical soft tissue robotics procedures in the U.S.

Current wording

•Our ability to execute ongoing strategies addressing the pressures to bariatric surgery procedure volumes in the U.S. from pharmaceuticals, and growth of surgical soft tissue robotics procedures in the U.S.

Previous wording

•Acceptance of less invasive standards of care in chronic and colorectal, as well as hepatology products, including products that span the care continuum from diagnostics to therapeutics. Recently launched products include GI Genius.

Current wording

•Acceptance of less invasive standards of care in chronic and colorectal, as well as hepatology products, including products that span the care continuum from diagnostics to therapeutics.

Previous wording

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, and consumables. Diabetes' net sales for the three and six months ended October 25, 2024 were $686 million and $1.3 billion, respectively, an increase of 12 percent for both periods as compared to the corresponding periods in the prior fiscal year. The increase in net sales for both periods was primarily driven by strong U.S growth as a result of the continued adoption of the MiniMed 780G automated insulated delivery (AID) system, and strong international growth in CGM systems from increased attachment rates and adoption of Simplera Sync.

Current wording

Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, and consumables. Diabetes' net sales for the three and nine months ended January 24, 2025 were $694 million and $2.0 billion, an increase of 8 percent and 11 percent, respectively, as compared to the corresponding periods in the prior fiscal year. The increase in net sales for both periods was primarily driven by strong U.S growth as a result of the continued adoption of the MiniMed 780G automated insulated delivery (AID) system, and strong international growth in CGM systems from increased attachment rates and adoption of Simplera Sync.

Previous wording

•Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, including our Minimed 780G insulin pump system with Simplera Sync in the U.S., and the products resulting from our partnership with Abbott to expand CGM options for people living with diabetes.

Current wording

•Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, including our Minimed 780G insulin pump system with Simplera Sync in the U.S., the products resulting from our partnership with Abbott to expand CGM options for people living with diabetes, as well as expanded labeling in Type 2 diabetes, fast acting insulins, and pregnancy warning removal.

Previous wording

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and six months ended October 25, 2024 and October 27, 2023:

Current wording

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and nine months ended January 24, 2025 and January 26, 2024:

Previous wording

Cost of Products Sold Cost of products sold for the three and six months ended October 25, 2024 was $2.9 billion and $5.7 billion, respectively, as compared to $2.8 billion and $5.4 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in cost products sold as a percentage of net sales for the three and six months ended October 25, 2024 was primarily due to unfavorable currency impact.

Current wording

Cost of Products Sold Cost of products sold for the three and nine months ended January 24, 2025 was $2.8 billion and $8.5 billion, respectively, as compared to $2.8 billion and $8.2 billion, respectively, for the corresponding periods in the prior fiscal year. The decrease in cost of products sold as a percentage of net sales for the three months ended January 24, 2025 was primarily due to favorable currency impact and lower costs for quality remediation and excess and obsolete inventory charges. Cost of products sold as a percentage of net sales for the nine months ended January 24, 2025 was primarily flat as compared to the corresponding period in the prior fiscal year.

Previous wording

Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve; to create technologies that expand what’s possible across the human body to transform lives; to turn data and insights into real action to serve patient needs, improving care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three and six months ended October 25, 2024 was $697 million and $1.4 billion, respectively, as compared to $698 million and $1.4 billion, respectively, for the corresponding periods in the prior fiscal year.

Current wording

Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve; to create technologies that expand what’s possible across the human body to transform lives; to turn data and insights into real action to serve patient needs, improving care; and to expand healthcare access and deliver positive outcomes. Research and development expense for the three and nine months ended January 24, 2025 was $675 million and $2.0 billion, respectively, as compared to $695 million and $2.1 billion, respectively, for the corresponding periods in the prior fiscal year.

Previous wording

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense management initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, certain acquisition and divestiture-related costs, and restructuring associated expenses. Selling, general, and administrative expense for the three and six months ended October 25, 2024 was $2.8 billion and $5.4 billion, respectively, as compared to $2.7 billion and $5.3 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in selling, general, and administrative expense for both periods is primarily due to new product launches and commercialization activities.

Current wording

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense management initiatives. Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, certain acquisition and divestiture-related costs, and restructuring associated expenses. Selling, general, and administrative expense for the three and nine months ended January 24, 2025 was $2.7 billion and $8.1 billion, respectively, as compared to $2.7 billion and $8.0 billion, respectively, for the corresponding periods in the prior fiscal year. The increase in selling, general, and administrative expense for both periods is primarily due to new product launches and commercialization activities.

Previous wording

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, purchased technology, and other intangible assets.

Current wording

Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of customer relationships, purchased technology and patents, trademarks, tradenames, and other intangible assets.

Previous wording

Restructuring Charges, Net For the three and six months ended October 25, 2024 and October 27, 2023, restructuring costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

Current wording

Restructuring Charges, Net For the three and nine months ended January 24, 2025 and January 26, 2024, restructuring costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

Previous wording

Other Operating Income, Net Other operating income, net primarily includes expenses associated with royalties paid for the in-license of intellectual property from third parties, currency remeasurement and derivative gains and losses, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

Current wording

Other Operating (Income) Expense, Net Other operating (income) expense, net primarily includes expenses associated with royalties paid for the in-license of intellectual property from third parties, currency remeasurement and derivative gains and losses, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

Previous wording

For the three and six months ended October 25, 2024, the increase in other operating income, net was largely driven by insignificant gains from certain business or asset sales in the Cardiovascular and Neuroscience Portfolio. The increase in other operating, income net was partially offset by the net impact of currency remeasurement and our hedging programs, which resulted in net expense of $39 million and $44 million for the three and six months ended October 25, 2024, respectively, as compared to a net gain of $32 million and $29 million, respectively, in the corresponding periods in the prior fiscal year.

Current wording

For the nine months ended January 24, 2025, the change in other operating (income) expense, net was largely driven by insignificant gains from certain business or asset sales in the Cardiovascular and Neuroscience Portfolio. In addition, the change in fair value of contingent consideration for the nine months ended January 24, 2025 was $5 million of income as compared to $59 million of expense in the corresponding period in the prior fiscal year. The change in other operating (income) expense, net was partially offset by increased acquisition and divestiture-related charges and the net impact of currency remeasurement and our hedging programs. The currency impact for the nine months ended January 24, 2025 was a net loss of $32 million as compared to a net gain of $16 million in the corresponding period in the prior fiscal year.

Previous wording

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income.

Current wording

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income, which includes income on marketable debt securities and our global liquidity structure.