Today we'll discuss Baxter's second quarter results, along with our updated financial outlook for the full year 2026. This morning, a press release was issued with our preliminary earnings results and updated outlook. On the call, we will reference organic growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and the impacts associated with business acquisitions or divestitures. In the quarter, broad-based operating performance drove organic revenue growth of 5%.
Additionally, results reflect a tariff refund that was not contemplated in our original guidance. Free cash flow generation was again positive, which reflects our focus on strengthening financial flexibility. Second quarter global sales totaled approximately $3 billion, representing an increase of 5% on both a reported and organic basis. We saw growth across the portfolio, led by Advanced Surgery and drug compounding.
Every segment and division contributed, with sales increasing in both the U.S. Adjusted earnings for the quarter were $0.56 per diluted share versus $0.59 in the prior year period. It also includes a tariff refund of $75 million that was not assumed in our previous guidance and contributed approximately $0.11 per diluted share. Importantly, absent this benefit, margins and earnings still exceeded our expectations due to the strength of the operating performance.
| Metric | Period | Current guidance |
|---|---|---|
| Reported sales growth | FY2026 | 3% to 4% (FX ~+100 bps; ~$25M/30 bps Vantive MSA headwind) |
| Organic sales growth | FY2026 | 2% to 3% |
| Adjusted EPS (continuing operations) | FY2026 | $1.95-$2.15 (raise reflects the Q2 tariff refund) |
| Adjusted operating margin | FY2026 | 13%-14% (unchanged) |
| Net leverage | Year-end 2026 | ~3x (increased confidence given first-half progress) |
| Tariff impact (net of mitigation) | H2 2026 | ~$40 million |
| Tax rate / share count | FY2026 | Tax rate 18.5%-19.5%; ~518 million average diluted shares |
| Metric | YoY | Note |
|---|---|---|
| Total sales | +5% to $2.96B | Broad-based growth led by Advanced Surgery and drug compounding, with every segment and division contributing in both the U.S. and internationally; includes a tariff refund benefit. |
| Medical Products & Therapies (MPT) | +5% to $2.1B | Infusion Therapies & Platforms up 4% on drug compounding and IV Solutions, partially offset by lower infusion systems and injectables; Advanced Surgery up 12%. |
| Advanced Surgery | +12% to $331M | Strong demand and higher volumes across the global hemostats and sealants portfolio, with steady procedure volumes and strong commercial execution. |
| Healthcare Systems & Technologies (HST) | +4% to $801M | Care & Connectivity Solutions up 5% on strong Patient Support Systems volumes and U.S. backlog execution; Front Line Care up 2% on Connex 360, partly offset by planned product exits. |
| Adjusted gross margin | 38.6% (-210 bps) | Higher-cost inventory roll-through and unfavorable cost timing comparison, partially offset by the tariff refund. |
| Adjusted operating margin | 14.2% (-90 bps) | Higher manufacturing costs and the unfavorable prior-year comparison, partly offset by the tariff refund and higher volumes; SG&A improved 80 bps to 21.9% of sales. |
| Adjusted diluted EPS | $0.56 (-5%) | Known mechanical headwinds (higher-cost inventory, SG&A/COGS reclass comparison), partially offset by an $0.11 tariff-refund benefit. |
| GAAP diluted EPS | $0.26 | GAAP net income of $135 million; GAAP operating income of $217 million (~7.3% margin). |
| Free cash flow | $181M (Q2); $257M YTD | Improved operational performance and focused working-capital execution, supporting deleveraging toward ~3x by year-end. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Turnaround and Baxter GPS | GPS deployment in early quarters | In its third quarter since deployment, GPS is embedded in culture with 400+ improvement events completed, ~200 in flight, and 400 planned; CEO Hider framed it as 'boring in consistency, brilliant in execution,' with small accumulating gains rather than a single defining innovation. | — |
| Balance sheet and capital allocation | Deleveraging priority | Positive free cash flow ($257M YTD) builds confidence in ~3x net leverage by year-end, unlocking optionality for strategic tuck-in M&A and share repurchases. | — |
| Novum IQ pump remediation | Shipment/installation hold | Corrections identified and in early verification testing; customers operating with mitigations, and Baxter continues serving the market with its broader pump portfolio (Spectrum IQ, Novum Syringe) on the IQX platform, now enhanced by PeerView. | — |
| IV Solutions new baseline | Post-Hurricane Helene rebasing | Growth now runs off a new lower baseline following clinical practice changes; management sees no material restocking, calling it the 'new norm.' | — |
| Business reorganization | Separate pharmaceuticals and infusion units | Pharmaceuticals combined with infusion therapies into a single Infusion Therapies & Platforms (ITP) division within MPT to improve coordination and execution across shared pharmacy customers. | — |
| Hospital demand / macro monitoring | — | Management reports stable hospital capital demand with a solid order book and no observed change in behavior from ACA/Medicaid debates, while continuing to monitor macro uncertainty and oil prices. | — |