Abbott (ABT) Q3 2025: Medical Devices Surge 12.5% as Portfolio Expansion Drives Durable Growth
Abbott’s third quarter showcased accelerating momentum in its medical devices business, with double-digit growth across core segments and a robust pipeline fueling confidence into 2026. Strategic investments in innovation and operational resilience offset headwinds in diagnostics and tariffs, positioning the company for sustained top- and bottom-line expansion. Management’s narrative and analyst Q&A highlight an inflection point as new launches and easing headwinds converge to reinforce Abbott’s multi-year growth thesis.
Summary
- Device Momentum Accelerates: Double-digit growth in medical devices signals durable portfolio strength and market share gains.
- Pipeline Execution Delivers: Recent launches and clinical investments are translating into outsized sales contributions and future catalysts.
- Diagnostics Headwinds Easing: China pressures are set to moderate, setting up diagnostics for a recovery in 2026.
Performance Analysis
Abbott’s Q3 results reflected a business firing on multiple cylinders, with organic sales growth excluding COVID test sales at 7.5%. Medical devices led the charge, posting 12.5% growth—its strongest segmental performance—driven by robust expansion in diabetes care, electrophysiology (EP), cardiac rhythm management (CRM), heart failure, and structural heart. Diabetes care alone delivered $2 billion in sales, up 17%, as Libre, Abbott’s continuous glucose monitor (CGM), continued to gain global traction.
Nutrition grew 4%, with international adult nutrition up double digits, though U.S. pediatric nutrition saw share losses due to competitive dynamics and WIC contract shifts. Diagnostics posted modest growth ex-COVID, with U.S. and Europe showing acceleration, while China remained a drag due to ongoing VBP (volume-based procurement) and DRG (diagnosis-related group) pricing reforms. Established pharmaceuticals (EPD) delivered 7% growth, led by double-digit gains in key emerging markets and continued progress in biosimilars.
- Device Outperformance: Double-digit growth in multiple device lines, with CRM now Abbott’s fastest-growing MedTech business, signals a successful pivot from flat historical trends.
- Diagnostics Pressure: China’s VBP headwinds persisted, but management flagged stabilization and early volume recovery, with ex-China core lab diagnostics up 7%.
- Margin Dynamics: Adjusted operating margin rose 40bps YoY despite tariff and maintenance headwinds; gross margin expansion remains a management focus.
Underlying demand, new product launches, and operational discipline are driving Abbott’s ability to deliver high single-digit organic growth and double-digit EPS expansion, even as certain legacy businesses face cyclical or competitive challenges.
Executive Commentary
"Our performance continues to be driven by innovation, positioning Abbott to consistently deliver high-quality results and durable long-term value to our shareholders. Recently launched new products generated nearly half a billion dollars in sales this quarter and added more than 100 basis points to organic sales growth."
Robert Ford, Chairman and Chief Executive Officer
"Gross margin continues to be a key area of focus for us. We have dedicated teams in each of our businesses that drive constant ideation and execution throughout our supply chains and operations. We are comfortable that the pattern of gross margin expansion will continue here and maintain that sort of 57% outlook in the profile going forward."
Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer
Strategic Positioning
1. Medical Devices: Portfolio Expansion and Share Capture
Abbott’s device franchise is now the company’s primary growth engine, with broad-based double-digit growth in diabetes, EP, CRM, heart failure, and structural heart. The successful launch of new products like Volt, a pulsed field ablation (PFA) catheter, and Avere, a leadless pacemaker, has expanded Abbott’s addressable markets and driven market share gains. Management highlighted that CRM’s growth trajectory has shifted from flat to double-digit, with dual chamber leadless pacing penetration still in early innings (sub-10%), pointing to multi-year runway.
2. Diagnostics: Navigating China Headwinds, Building for Recovery
China’s VBP and DRG reforms remained a drag on core lab diagnostics, but management sees stabilization and early volume recovery, with ex-China diagnostics up 7%. The U.S. and Europe are delivering strong new business wins as Abbott’s Alinity platform gains traction. Management expects full lapping of China headwinds in 2026, with a return to mid- to high-single-digit growth for the segment.
3. Pipeline and Clinical Investment: Sustaining Innovation
Abbott is investing in over 200 clinical trials across its businesses, including pivotal studies for next-generation products in MedTech and biosimilars. New launches such as dual analyte CGM sensors, Volt (PFA), and expanded indications for TAVR and Triclip are positioned to drive incremental growth and reinforce Abbott’s innovation-led strategy.
4. Geographic and Segment Diversification: Risk Mitigation
While China’s revenue share has declined to under 6%, Abbott’s growth is increasingly diversified across geographies and segments. EPD and adult nutrition are delivering double-digit growth internationally, offsetting softness in U.S. pediatric nutrition and Chinese diagnostics. This diversification helps insulate the business from localized shocks and regulatory disruptions.
5. Capital Deployment and Balance Sheet Discipline
Abbott continues to prioritize organic investment, dividend growth, share buybacks, and selective M&A. With $3 billion in debt coming due next year and strong cash flow, management is focused on maintaining flexibility while evaluating strategic bolt-on opportunities that align with portfolio strengths.
Key Considerations
Abbott’s Q3 underscores a strategic inflection, as the company leverages innovation and operational resilience to offset macro and regulatory headwinds. Investors should weigh the following:
Key Considerations:
- Device Growth Sustainability: Management sees the current double-digit device growth as sustainable, underpinned by new launches and share gains in structurally attractive markets.
- Diagnostics Recovery Path: China headwinds are expected to moderate, with global diagnostics positioned for a return to higher growth as new platforms and business wins ramp.
- Nutrition Competitive Dynamics: U.S. pediatric nutrition faces short-term share losses, but new WIC contracts and product launches are set to drive recovery in 2026.
- Pipeline Execution: Over 200 clinical trials and multiple near-term launches provide a robust pipeline of growth catalysts across devices, diagnostics, and pharma.
- Capital Allocation Discipline: Ongoing investments in R&D, manufacturing, and selective M&A balance shareholder returns with long-term portfolio strength.
Risks
China’s pricing reforms and volume uncertainty remain a risk for diagnostics, though exposure is declining as other regions drive growth. Tariff impacts on gross margin could persist if mitigation efforts stall. U.S. nutrition faces competitive pressure and contract churn, while device growth is contingent on continued innovation and execution. Regulatory delays or clinical setbacks in the pipeline could temper the multi-year growth thesis.
Forward Outlook
For Q4, Abbott guided to:
- High single-digit organic sales growth, with device and EPD momentum offsetting China diagnostics drag.
- Adjusted EPS growth in the double digits, supported by margin expansion and easing headwinds.
For full-year 2025, management maintained guidance:
- High single-digit organic sales growth and double-digit EPS growth.
Management cited pipeline launches, stabilization in diagnostics, and operational leverage as key drivers for 2026, with confidence in sustaining current growth rates even as macro and tariff headwinds persist.
- Device launches and broader adoption of CGM and PFA technologies are expected to accelerate sales momentum.
- Diagnostics recovery is set for 2026 as China headwinds abate and new platforms scale globally.
Takeaways
Abbott’s Q3 marked a turning point, with device-led growth and pipeline execution offsetting legacy headwinds.
- Portfolio Resilience: Medical devices and EPD are now Abbott’s primary growth engines, with broad-based momentum and margin expansion.
- Diagnostics Inflection: China’s drag is waning, positioning diagnostics for a rebound as new business wins scale.
- Pipeline and Execution: Robust clinical investment and new launches underpin management’s confidence in sustaining high single-digit top-line and double-digit EPS growth through 2026.
Conclusion
Abbott’s diversified growth model, anchored by innovation and operational discipline, is delivering sustainable performance despite macro and regulatory headwinds. As pipeline launches accelerate and legacy headwinds ease, Abbott is positioned for continued leadership and value creation into 2026 and beyond.
Industry Read-Through
Abbott’s results highlight the power of portfolio breadth and pipeline execution in MedTech and diagnostics, with device innovation and geographic diversification insulating against localized shocks. The diagnostics recovery narrative, driven by stabilization in China and competitive wins in the U.S. and Europe, offers a template for peers navigating similar pricing and regulatory headwinds. CGM adoption and PFA-driven EP growth are secular trends likely to benefit other device makers with robust innovation pipelines. For the sector, operational agility and investment in clinical data remain critical differentiators as payers, regulators, and competitive dynamics evolve globally.