Abbott signals high single-digit sales growth outlook, eyes biosimilars launch and pipeline momentum amid $1B diagnostics headwinds

Earnings Call Insights: Abbott Laboratories (ABT) Q2 2025

Management View

CEO Robert B. Ford stated, “At the halfway point of the year, we are on track with our key priorities and objectives. In the first half, we delivered high single-digit sales growth over 100 basis points of margin expansion in both gross margin and operating margin, double-digit earnings per share, and we achieved a number of important milestones related to advancing key programs in our new product pipeline.” Ford highlighted 7.5% sales growth in Q2 excluding COVID testing, and adjusted earnings per share of $1.26, reflecting 11% growth versus the prior year and 16% sequential growth versus Q1.
Ford noted strong Adult Nutrition growth at 6.5%, robust performance in the EPD business with nearly 8% sales growth, and 12% Medical Devices growth driven by diabetes care, heart failure, structural heart, electrophysiology, and cardiac rhythm management. Diabetes Care sales of continuous glucose monitors reached $1.9 billion, up 19.5%, supported by international market expansion and product innovation, including a first-of-its-kind collaboration with Epic for Libre sensor integration.
Ford reported headwinds in Diagnostics, with sales down 1.5% due to COVID testing declines and China volume-based procurement, representing a projected $700 million headwind for full year 2025. Excluding China, Core Lab Diagnostics grew 8%.
Ford emphasized the launch of the Tendyne mitral replacement valve following FDA approval, expansion in the mitral valve replacement market, and the development of a new transfemoral mitral valve replacement product with FDA breakthrough designation. He also highlighted strong uptake of AVEIR leadless pacemaker, double-digit growth in cardiac rhythm management, and 14% heart failure business growth.
CFO Philip P. Boudreau stated, “Sales increased 6.9% or 7.5% when excluding the COVID testing-related sales. Adjusted earnings per share of $1.26 increased 11% compared to the prior year and was above the consensus estimate.” Boudreau reported adjusted gross margin at 57% of sales, up 100 basis points, and adjusted operating margin at 22.9%. He forecast Q3 adjusted EPS in the range of $1.28 to $1.32 and anticipated a relatively neutral FX impact for the full year with a favorable 2% impact on Q3 sales.

Outlook

Boudreau guided for Q3 adjusted EPS of $1.28 to $1.32. Management reaffirmed full-year expectations of high single-digit growth and double-digit EPS growth, despite headwinds from diagnostics and tariffs. Ford explained, “Even with that $1 billion, we’re still forecasting high single-digit growth and absorbing the impact of tariffs, which we now expect to be just under $200 million of impact.” He projected that the current diagnostics headwinds, including China and COVID testing declines, will be lapped next year, with new product launches and biosimilars rollout expected to drive momentum in 2026.

Financial Results

Abbott reported Q2 sales growth of 6.9%, or 7.5% excluding COVID testing sales. Adjusted EPS reached $1.26, marking 11% growth year-over-year and 16% sequential growth. Adjusted gross margin improved to 57% of sales, and adjusted operating margin to 22.9%. Adult Nutrition sales rose 3.5%, EPD sales increased nearly 8%, and Medical Devices grew 12% in Q2. Diabetes Care sales of continuous glucose monitors climbed to $1.9B, growing 19.5%.
Diagnostic segment sales declined 1.5%, mainly due to COVID testing and China market pressures. Foreign exchange provided a 0.5% favorable impact on sales.

Q&A

David Harrison Roman, Goldman Sachs, asked about the transience of diagnostics headwinds, with Ford responding, “Together with the funding for HIV testing, that’s over $1 billion of headwind. And even with that $1 billion, we’re still forecasting high single-digit growth… So yes, it will be good to see these elements… behind us next year.”
Robert Justin Marcus, JPMorgan, inquired about trends in diabetes and electrophysiology, to which Ford detailed, “Another great quarter of Libre, almost 26% in the U.S., an acceleration internationally… The new sensor you referenced, I think, is going to definitely accelerate there.” He described the Dual-analyte sensor as a significant change for intensive users.
Lawrence H. Biegelsen, Wells Fargo, asked about competitive bidding for CGM and the ketone sensor. Ford explained, “If CMS chooses to do competitive bidding… it’s really going to be the DMEs that are going to be the ones doing the bidding, not the CGM manufacturers… I don’t expect there to be an impact on Abbott.” On the ketone sensor: “Do we think that, that can accelerate our share gain? 100%, yes.”
Vijay Muniyappa Kumar, Evercore ISI, asked about CRM business metrics and EPS guidance offsets. Ford stated, “I think it’s fundamentally changed the growth trajectory of our CRM business… achieving this is very sustainable.” Boudreau quantified tariff impact as “a little less than $200 million impact here, so down from previous estimates.”
Travis Lee Steed, BofA Securities, and Danielle Joy Antalffy, UBS, probed on M&A opportunities and structural heart TAM expansion. Ford said, “It’s a good environment for M&A, good opportunities out there, got a strong organic pipeline. So that allows us to be a lot more selective here.”

Sentiment Analysis

Analyst sentiment was slightly positive, focusing on future growth drivers, the impact of headwinds, and product innovation. Analysts asked probing questions about sustainability and recovery, reflecting some caution but optimism regarding pipeline and market share.
Management maintained a confident tone in prepared remarks and Q&A, acknowledging headwinds but emphasizing resilience and sustainable growth. Ford used phrases such as “we’re still forecasting high single-digit growth” and “we’re very bullish on this segment,” signaling confidence in long-term prospects.
Compared to the previous quarter, management’s tone remained steady and optimistic, with a more detailed breakdown of strategies to address diagnostics and tariff headwinds, and a greater emphasis on upcoming product launches and biosimilars.

Quarter-over-Quarter Comparison

Guidance language remains consistent, with management reaffirming high single-digit growth and double-digit EPS targets, while specifying the magnitude and expected duration of diagnostics and tariff headwinds.
Strategic focus this quarter shifted toward pipeline execution, biosimilars rollout, and mitigating diagnostics headwinds, compared to prior quarter’s emphasis on initial tariff response and margin improvement.
Analysts’ focus evolved from tariff mitigation and manufacturing flexibility in Q1 to product pipeline momentum and market share acceleration in Q2.
Key metrics such as sales growth, adjusted EPS, and margin expansion were highlighted in both quarters, but this quarter included more concrete details on product launches, biosimilars, and international expansion.
Management’s confidence level remained high, with more explicit discussion of overcoming current headwinds and leveraging pipeline strength for 2026.

Risks and Concerns

Management cited diagnostics headwinds from COVID testing declines, China volume-based procurement, and U.S. foreign aid funding for HIV testing, collectively representing over $1 billion in headwinds for 2025.
Tariffs are expected to impact results by just under $200 million, with ongoing efforts to mitigate effects through global manufacturing network adjustments.
Analysts raised concerns about the sustainability of CRM growth, competitive bidding impacts on CGM, and EPS flexibility in the face of tariffs and FX volatility. Management outlined ongoing mitigation strategies and long-term resilience plans.

Final Takeaway

Abbott Laboratories’ Q2 2025 call underscored the resilience of its diversified business model, delivering high single-digit organic sales growth, double-digit EPS expansion, and significant margin improvement despite notable headwinds in diagnostics and tariffs. Management reaffirmed its outlook for the remainder of 2025 and highlighted the momentum of its product pipeline—including biosimilars launches, device innovations, and international expansion—as key drivers for sustainable growth through 2026 and beyond, positioning the company to absorb current challenges and capitalize on future opportunities.

Read the full Earnings Call Transcript