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By Kamal Choudhury and Puyaan Singh
(Reuters) -Medical device maker Medtronic said on Wednesday it plans to separate its diabetes business, which houses its insulin pumps and other wearable devices, into a stand-alone company and forecast 2026 adjusted profit below estimates.
The unit has been struggling over the last few years following regulatory concerns over quality management and cybersecurity issues related to its certain devices. But it has since returned to growth.
"It's ready to be a standalone company," Medtronic CEO Geoff Martha told Reuters in an interview.
"The diabetes business is in a really good spot right now, six quarters in a row (of) double digit growth and a really robust product pipeline... but as you go forward, the investment needs (to) continue, and it needs more focus" Martha said.
The new entity, headquartered in California, will be led by the current head of Medtronic's diabetes unit, Que Dallara.
Dallara told Reuters she is confident in the company's durable growth due to a consistent "major product launch every year."
Medtronic expects the separation of its diabetes business to be immediately profitable and improve margins, as diabetes devices require unique commercial and manufacturing strategies.
The company plans to spin off the unit with an initial public offering (IPO) of less than 20% followed by a split-off of the remaining 80%. The spin-off is expected to be complete within the next 18 months.
Separately, Medtronic forecast its fiscal 2026 adjusted earnings per share in the range of $5.50 to $5.60, below Wall Street estimates of $5.83, according to data compiled by LSEG.
The company said its forecast depends on whether US-China tariffs return to higher rates or remain at current lower rates after a 90-day pause.
Medtronic expects a tariff hit of about $200 to $350 million in 2026 on its cost of goods sold, after mitigation efforts.
CFO Thierry Pieton told Reuters Medtronic plans to implement cost-saving measures to offset tariff impacts, and will seek exemptions due to the humanitarian nature of products.
Medtronic also expects high single-digit EPS growth in fiscal 2027.
Medtronic shares were down 1% in afternoon trading.
(Reporting by Sriparna Roy, Kamal Choudhury and Puyaan Singh in Bengaluru; Editing by Nivedita Bhattacharjee and Shailesh Kuber)