Snapshot
Baxter International Inc reported $2.81B of revenue in Q2 2025, up 4.3% year over year, with diluted EPS of $0.24 and an operating margin of 6.8%.
- Revenue
- $2.81B
- YoY growth
- +4.3%
- Diluted EPS
- $0.24
- Operating margin
- 6.8%
What management said
- •On the call this morning, we will be discussing Baxter's second quarter 2025 results along with our financial outlook for the third quarter and full year 2025.
- •As you saw in this morning's release, our second quarter performance for continuing operations met our previously issued guidance on both top and bottom line.
- •Specifically, second quarter sales from continuing operations grew 4% on a reported basis and 1% on an operational basis, with growth coming from all three segments.
- •On the bottom line, adjusted earnings per share from continuing operations were $0.59, increasing 28% over the prior year.
- •These results did come in at the low end of our guidance ranges, reflecting softness in demand for certain products within the Medical Products & Therapies and Pharmaceuticals segments.
- •We are confident in our strategy and our future opportunities to accelerate innovation, growth, and performance overall.
- •Now I'd like to turn it over to Heather and Joel, who will share details on individual segment results, financial performance, and updated guidance.
- •Sales in our Medical Products & Therapies, or MPT segment, were $1.3 billion and increased 1% in the quarter.
- •Performance in the quarter reflected strong demand for Advanced Surgery products, offset by softness in infusion therapies and technologies, or ITT.
- •We continue to believe that hospitals will return to historic practices over time.
- •The Baxter program provides participating healthcare organizations with dedicated on-demand inventory warehoused here in the U.S.
- •Sales in Advanced Surgery products totaled $296 million and grew 5% globally.
What went well
- •Second quarter sales from continuing operations grew 4% on a reported basis and 1% on an operational basis, with growth coming from all three segments and meeting previously issued guidance on both top and bottom line.
- •Adjusted earnings per share from continuing operations were $0.59, increasing 28% over the prior year, driven by positive pricing, TSA income and other reimbursements, and lower interest and tax expense.
- •Advanced Surgery products grew 5% globally on solid demand for hemostats and sealants, drug compounding grew 7% on strong demand outside the U.S., and Care and Connectivity Solutions rose 4% with international sales up 7%.
- •The sale of Vantiv was completed, creating a more agile and focused business, and debt paydown using the proceeds reduced net interest expense by $28 million versus the prior year.
- •Adjusted operating margin improved 180 basis points to 15.1% versus the prior year period, aided by operational execution and TSA income from Vantiv.
- •HST sales of $767 million came in above expectations, and the company appointed Andrew Hyder as its next CEO.
What went wrong
- •Results came in at the low end of guidance ranges, reflecting demand softness within the Medical Products & Therapies and Pharmaceuticals segments.
- •Infusion therapies and technologies sales declined 1% due to hospital IV fluid conservation efforts and slightly lower-than-anticipated U.S. patient admissions.
- •The company voluntarily and temporarily paused shipment and planned installations of the Novum IQ large-volume infusion pump to address quality feedback.
- •Injectables and anesthesia sales declined 4%, hurt by a difficult prior-year comparison on a U.S. government order, softness in premixed products tied to hurricane-driven IV push adoption, and low-double-digit declines in inhaled anesthesia.
- •Adjusted gross margin declined 170 basis points to 40.7%, reflecting the Vantiv MSA, lower IV solutions manufacturing volumes, and unfavorable product mix, and year-to-date free cash flow was negative $144 million.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Total reported sales growth | FY2025 | — | 6% to 7% | set |
| Operational sales growth | FY2025 | 4% to 5% | 3% to 4% | lowered |
| Net tariff impact | FY2025 | $60M to $70M (midpoint ~$65M) | ~$40M | lowered ($25M net positive) |
| Anticipated Vantiv MSA revenue | FY2025 | — | ~$320M | set |
| FX contribution to top-line growth | FY2025 | — | ~50 bps | set |
| IV fluid conservation assumption (low end) | 2H2025 | -10% | -20% | more conservative |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total continuing operations sales ($2.8B) | +4% reported / +1% operational | Growth across all three segments, with strength in drug compounding, Advanced Surgery, and CCS offsetting declines in injectables/anesthesia, ITT, and frontline care. |
| MPT segment sales ($1.3B) | +1% | Strong Advanced Surgery demand offset by softness in infusion therapies and technologies. |
| ITT division sales ($1B) | -1% | Hospital IV fluid conservation efforts and slightly lower U.S. patient admissions, partly offset by Novum IQ large-volume pump rollout. |
| Advanced Surgery sales ($296M) | +5% | Solid demand for hemostats and sealants, strong commercial execution, and steady procedure volumes. |
| HST segment sales ($767M) | +2% | Continued strong CCS sales, with international CCS up 7% and U.S. CCS up 3% on care communications and surgical solutions. |
| Pharmaceuticals segment sales ($612M) | +1% | Drug compounding growth of 7% offset by a 4% decline in injectables and anesthesia. |
| Adjusted gross margin (40.7%) | -170 bps | Vantiv MSA impact, lower IV solutions manufacturing volumes, and unfavorable product mix. |
| Adjusted operating margin (15.1%) | +180 bps | Operational execution and TSA income/reimbursements from Vantiv offset lower gross margin. |
| Adjusted EPS ($0.59) | +28% | Positive pricing, TSA income and other reimbursements, and lower interest and tax expense. |
| Adjusted tax rate (16.7%) | -400 bps | Benefits from strategic use of select tax attributes following the kidney care sale. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| IV fluid conservation | Low-end assumption of -10% | Low-end assumption of -20%; slight improvement seen but downside risk built in | more cautious |
| Novum IQ LVP infusion pump | Rollout helping offset fluid conservation impact | Voluntary, temporary ship/install pause; low end of guide assumes no further shipments in 2025 | deteriorating near-term, confident long-term |
| Stranded cost mitigation | ~40 bps negative impact anticipated for 2025; removal by 2027 committed | On track with ~40 bps 2025 impact and 2027 removal target | on track |
| TSA/MSA from Vantiv | — | TSA income $52M and MSA revenue $98M in quarter; ~$320M MSA expected for FY2025; TSAs run ~24 months | ongoing transition |
| Long-term 4-5% growth target | 4% to 5% growth model | Not achieved this year; viewed as still doable via Novum recovery, fluid volume normalization, and new product launches | reaffirmed long-term |
Q&A summary
How much of the quarter's weakness was related to Novum, and how do you get comfort in guidance if the pause is only temporary?
There was no Novum impact in Q2 since the pause decision was made voluntarily only weeks ago; the low end of 2025 guidance assumes no further Novum pumps ship for the rest of the year, which management views as capturing appropriate downside risk.
Can you bridge the lower EPS guide and explain the margin weakness, and what does it mean for 2026?
The reduction is driven primarily by lower manufacturing volume from fluid conservation and the Novum pause, plus unfavorable mix, partly offset by continued price benefit (ahead of schedule on GPO pricing); 2026 should see margin expansion as volume returns, Novum resumes, and stranded-cost work continues.
Did business trends worsen materially through the quarter, and what was the exit rate?
IV Solutions played out largely as expected with consistent conservation through the half; the biggest surprise was elevated IV push usage hurting U.S. injectables and pharma, which the team viewed as temporary but built into the more measured second-half outlook.
How do you avoid a gap where TSA income rolls off faster than you can work down stranded costs?
Stranded cost mitigation is on track (~40 bps 2025 impact, full removal by 2027) and TSAs run roughly 24 months from the late-January close; ongoing stranded-cost programs are specifically designed to stay ahead of the TSA roll-off.
What needs to go right to get back to 4-5% revenue growth, and is the new CEO an opportunity to reevaluate the model?
Management remains bullish on the Novum platform and the pump replacement cycle, expects fluid volumes and pharma to normalize, and points to accelerating new product launches and transformation programs; the 4-5% target is still considered doable.
What is the current IV fluid conservation assumption, and how much of the pharma impact is one-time?
The low end assumes about -20% on IV fluid conservation versus the prior -10% assumption; the prior-year U.S. government injectables order was removed from the outlook as it is not assumed to repeat.