Medtronic Posts Earnings Beat and Elliott Buys Stake. The Stock Falls Anyway.

Medtronic appointed two new board directors following talks with activist investor Elliott Investment Management. (Courtesy of Medtronic)

After a multiyear stretch in which its shares underperformed even while its earnings grew, the medical device maker Medtronic is opening the door to strategic shifts.

Disclosing an investment by Elliott Investment Management that makes the activist fund one of Medtronic’s largest shareholders, Medtronic took on two new board members, and said it’s created a new board committee to think about deals and divestitures.

“They bring deep domain experience in medtech,” Medtronic CEO Geoff Martha told Barron’s of the new board members announced Tuesday. “And that’s particularly helpful when you’re starting to look at strategies around major investments and acquisitions, and relooking at your portfolio to determine how should that portfolio be constructed, and are there any changes that you need to make to it?”

Medtronic had said earlier this year that it plans to spin off its diabetes business. Martha said Tuesday the board would continue to look at the rest of the business. “We’re splitting diabetes, that’s on track,” Martha said. “We’re in the process of looking at the rest of the portfolio to make that determination, you know, should there be some pruning?”

Medtronic shares were down 3.8% at midday. Along with the Elliott stake, the company also reported financial results on Tuesday for the first quarter of its fiscal year. Results were in-line with guidance, but appear to have disappointed investors following a recent surge of interest in the stock.

The company posted adjusted earnings of $1.26 a share for its fiscal first quarter, surpassing analysts’ consensus call for $1.23, according to FactSet. Revenue totaled $8.6 billion, above Wall Street’s forecast of $8.4 billion.

The company reported 4.8% revenue growth on an organic basis for the quarter. It said it continues to expect organic revenue growth of 5% in its 2026 fiscal year, and raised its non-GAAP earnings growth guidance to between $5.60 and $5.66 a share, up from its prior range of between $5.50 and $5.60 a share. The current FactSet estimate for non-GAAP earnings is $5.55 a share.‘

The company said it was raising its adjusted earnings guidance because the tariff impact will be less than it had feared, among other reasons. But analysts said early Tuesday that they had expected the guidance to climb even higher.

Medtronic had become a favored name among investors in recent weeks, amid excitement about its revenue growth. “MDT feeling more like a crowded long into this week’s print than any recent quarter we can recall,” Mizuho healthcare equity strategist Jared Holz wrote in an email to investors on Sunday.

That excitement seemed to have soured on Tuesday morning.

“We would have thought the EPS guidance…would have been higher,” Raymond James analyst Jayson Bedford wrote Tuesday. “All in, this result and guide fell short of our elevated expectations.”

The company’s CFO, Thierry Piéton told Barron’s that the results had been in line with Medtronic’s own expectations. “For us internally, it was exactly in line with how we had laid out the path for the year,” he said. “We always had a second half that was significantly stronger than the first half.”

One bright spot for Medtronic is that the company now expects a more moderate tariff impact than it had signaled in prior quarters. It says it now expects a tariff impact in this fiscal year of $185 million, down from its prior estimate of between $200 million and $350 million.

The reason “that it’s lower is mainly that the China worst case is kind of off the table now, at least for this year,” Piéton told Barron’s. “And the fact that we’ve continued to make some progress in optimizing our logistics routes and using exemptions, etc., to lower the number.”

In connection with the disclosure of the Elliott investment, Medtronic announced the appointment of John Groetelaars and Bill Jellison as board directors. Groetelaars is a former interim CEO of Dentsply Sirona , while Jellison is a former CFO of Stryker.

Details on Elliott’s stake in the company weren’t disclosed, but filings with the Securities and Exchange Commission show Elliott didn’t hold Medtronic shares as of June 30. The New York-based fund manager is known for taking large stakes in companies and pushing for changes to boost stock performance.

Medtronic shares were down nearly 20% from the start of 2021 through the close of trading on Monday, a period in which the S&P 500 rose more than 70%, and the Health Care Select Sector SPDR Fund , which tracks healthcare stocks, was up 21%.

Over that same period, Medtronic earnings have climbed. Earnings were $4.44 a share in the fiscal year that ended in April of 2021, and $5.49 a share in the fiscal year that ended in April 2025.

Marc Steinberg, a partner at Elliott, called Tuesday’s announcements “the right steps towards realizing Medtronic’s potential” in a statement.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Nate Wolf at nate.wolf@barrons.com