Baxter International (NYSE:BAX) reported fourth-quarter 2025 sales from continuing operations of $3.0 billion, up 8% on a reported basis and 3% operationally, supported by growth across all segments. Adjusted earnings from continuing operations were $0.44 per diluted share. While CEO Andrew Hider said the top line exceeded expectations, he noted adjusted EPS fell short due to margin pressure and a higher tax rate.
Management cited several factors that differed from the company’s October expectations, including a “more modest net impact” from Novum IQ Large Volume Pump (LVP) customer returns, which helped revenue. However, margins were pressured by unfavorable product and geographic mix as well as non-recurring items, including inventory adjustments. CFO Joel Grade also pointed to tariffs and a higher quarterly adjusted tax rate of 27.2% as additional headwinds.
Operational focus: organizational changes, GPS, and innovation
According to Hider, the company is “delayering levels of leadership,” removing the segment management layer and embedding functional roles directly into businesses so leaders have full P&L responsibility and clearer accountability. Baxter also launched its Baxter Growth and Performance System (GPS) in October to build a more disciplined operating rhythm and reduce volatility in performance and forecasting.
On innovation, Hider said Baxter expects “continued investment in R&D at or above historical levels,” highlighting recent and upcoming launches including the Connex 360 monitor, the Dynamo Series Stretcher, and a planned early second-quarter launch of PureView on the IQX platform.
Segment results: Advanced Surgery strength, mixed Pharmaceuticals performance
In Medical Products and Therapies (MPT), fourth-quarter sales were $1.4 billion, up 4%. Within MPT, Infusion Therapies and Technologies (ITT) sales were $1.1 billion, up 1%, as IV solutions benefited from an easier comparison but were partly offset by lower infusion pump sales tied to the ongoing Novum IQ LVP shipment and installation hold. Management reiterated that underlying U.S. demand for IV solutions remained below historical levels, citing fluid conservation practices that became embedded following Hurricane Helene.
Advanced Surgery was a standout, with sales of $328 million, up 11%, driven by demand for hemostats and sealants, strong commercial execution, and steady procedure volumes.
Healthcare Systems and Technologies (HST) sales were $827 million, up 4%. Care and Connectivity Solutions (CCS) grew 4% to $537 million, including double-digit growth in Surgical Solutions and continued momentum in Patient Support Systems. Grade said U.S. capital orders for CCS increased nearly 30% year over year and that Baxter had not observed a slowdown in U.S. hospital capital spending to date, though the company is monitoring macro uncertainty. Front Line Care rose 3% to $290 million, reflecting demand in cardiology and patient monitoring, including Connex 360.
Pharmaceuticals sales were $668 million, up 2%. However, Injectables and Anesthesia declined 9% to $352 million, pressured by a difficult year-ago comparison, softness in certain pre-mix products, and trends management has previously discussed around IV infusion protocols and increased use of IV push in some hospital settings. Drug Compounding grew 18% on strong demand for services outside the U.S., though executives acknowledged mix and margin implications.
Margins, costs, and cash flow
Baxter’s adjusted gross margin was 35.5% in the quarter, down 900 basis points year over year. Grade attributed the pressure to mix, higher manufacturing and supply costs, inventory adjustments, and tariffs. Adjusted SG&A was $637 million, or 21.4% of sales, down 330 basis points, aided by expense discipline and the reclassification of certain functional costs. Adjusted R&D was $116 million, or 3.9% of sales, which Grade said was lower than expected due to reclassifications into cost of sales and “does not reflect” anticipated R&D spending going forward.
Adjusted operating margin from continuing operations was 11.8%, down 340 basis points. The company also reported $50 million of TSA income and other reimbursements in the quarter and an improvement in net interest expense to $58 million, down $32 million, reflecting debt paydown following the Vantive sale.
Fourth-quarter free cash flow was $456 million, bringing full-year free cash flow to $438 million. Grade said Baxter intends to deploy cash toward reducing leverage consistent with its capital allocation framework.
2026 outlook: flat organic sales, back-half weighted performance
For full-year 2026, Baxter guided to reported sales growth of flat to 1%, including an estimated 100 basis-point benefit from foreign exchange and a $25 million headwind from MSA revenues from Vantive. Excluding FX and MSA revenue, Baxter expects organic sales to be approximately flat.
- MPT: Organic sales expected to be flat to slightly up, reflecting continued uncertainty around Novum and an assumption that the ship and installation hold remains in place for the full year, along with a “new baseline” in IV solutions demand.
- HST: Organic sales expected to grow low single digits, supported by both CCS and Front Line Care.
- Pharmaceuticals: Organic sales expected to be approximately flat amid pressure in Injectables and Anesthesia from softer demand, supply challenges, and ongoing IV push utilization trends.
Baxter estimated a full-year tariffs impact, net of mitigation actions, of about $80 million (a roughly $40 million year-over-year headwind). The company guided to adjusted operating margin of 13% to 14% and adjusted EPS from continuing operations of $1.85 to $2.05, assuming an 18.5% to 19.5% tax rate and an average diluted share count of about 518 million.
Grade said Baxter expects the first quarter to be the most challenging, with improvement through the year and results “back-half weighted.” He cited an unfavorable year-over-year comparison in ITT due to a one-time distributor build in the prior year, absorption headwinds from higher-cost inventory produced in the second half of 2025, and an interest expense step-up in Q1. In HST, new product launches are expected to contribute more meaningfully in the second half, and Pharmaceuticals headwinds are expected to persist in the first half before comparisons improve later in the year.
On TSAs and stranded costs following the Kidney Care sale, Grade said TSAs begin to tail off in 2026 and largely roll off in early 2027, reiterating Baxter’s commitment to eliminating stranded costs by the end of 2027. Hider closed by acknowledging performance is not where Baxter wants it to be, but said the company is “confronting our challenges head-on” through deliberate actions to improve execution and long-term positioning.
About Baxter International (NYSE:BAX)
Baxter International Inc is a global healthcare company that develops, manufactures and markets a broad portfolio of medical products, pharmaceutical therapies and biotechnology-based solutions. The company’s primary business activities are organized around renal care, medication delivery, acute therapies, pharmacy automation, surgical care and biotechnology. Baxter’s offerings are designed to support patient care in hospitals, dialysis centers, nursing homes and other healthcare facilities worldwide.
In the renal care segment, Baxter provides hemodialysis and peritoneal dialysis systems, water treatment equipment and related disposables, including dialyzers, bloodlines and catheters.
