Solventum (SOLV) Q4 2025 earnings summary

Executive summary

• Achieved strong momentum in the first full year as a standalone public company, delivering solid financial and operational results in Q4 FY25 and making significant progress on transformation and separation initiatives.

• Prioritized five growth drivers, completed the sale of the Purification & Filtration (P&F) business, and acquired Acera Surgical, expanding into regenerative and synthetic tissue markets.

• Revamped innovation process, restructured global sales, and launched the 'Transform for the Future' program targeting $500 million in cost savings through 2029-2030.

• Announced a $1 billion share repurchase program, initiated in January 2026.

• Well-positioned for growth and margin expansion, maintaining confidence in long-range plans.

Financial highlights

• Q4 FY25 sales were $2 billion, up 3.5% organically but down 3.7% reported year-over-year due to the P&F divestiture.

• Full-year 2025 sales reached $8.33B, up 0.9% reported and 3.3% organically; Q4 adjusted EPS was $1.57, full-year adjusted EPS was $6.11.

• Q4 gross margin was 53.5% (adjusted), with operating margin at 19.9% (adjusted); full-year adjusted operating margin was 20.5%.

• Ended Q4 with $900 million in cash and equivalents, net debt of $4.2 billion, and funded the $725 million Acera acquisition.

• Free cash flow for FY25 was -$10 million, below expectations due to higher Q4 costs; normalized free cash flow would have been ~$1 billion excluding separation and divestiture costs.

Outlook and guidance

• 2026 organic sales growth guidance of 2%-3%, or 3%-4% excluding a 100 basis point SKU exit impact.

• Adjusted EPS guidance for 2026 is $6.40-$6.60; free cash flow expected at ~$200 million, or ~$1 billion excluding separation and divestiture costs.

• Operating margin expected to expand to 21%-21.5% in 2026, driven by sales leverage and cost savings programs.

• Capital expenditures projected at $400 million-$450 million, effective tax rate of 19.5%-20.5%, and non-operating expenses of $300 million.

• Tariff impact estimated at $100 million-$120 million pre-tax, with half as incremental headwind in 1H 2026.