Prediction: 1 Healthcare Giant Set to Soar in 2026

Medtronic (NYSE: MDT), a medical device specialist, has lagged the market over the past five years. The company has experienced slow revenue growth, significant competition in some of its niches -- such as diabetes care -- and, of course, macroeconomic challenges that have impacted its earnings. However, the healthcare giant has rebounded this year. The stock is up 30%. And Medtronic could perform similarly well in 2026. Let's consider why.

Medtronic is shaking up its business

Medtronic's most recent quarterly update, for its fiscal 2026's second quarter, ended on Oct. 24, was strong. Revenue jumped 6.6% year over year to $9 billion, while its adjusted earnings per share rose 8% to $1.36. Both came in ahead of analyst projections.

One major growth driver for the company during the quarter was its Pulse Field Ablation (PFA) franchise, a suite of devices designed to treat atrial fibrillation (an abnormal heartbeat that can lead to significant cardiovascular issues).

Image source: Getty Images.

Medtronic's PFA business includes such products as the Sphere-9, PulseSelect, and Affela systems. These devices contributed to a 10.8% year-over-year increase in Medtronic's cardiovascular revenue to $3.4 billion during the period, marking the fastest growth rate in over a decade for this segment, excluding pandemic-related distortions.

Here's the good news: Medtronic is gaining market share in this niche and still sees significant traction moving forward for its PFA franchise. This could help it maintain steady top-line growth over the next 12 months, precisely what the market has wanted to see for a long time. Medtronic should have other business, commercial, and clinical catalysts in the coming year. Let's consider some of them.

First, the company is spinning off its diabetes care unit. While this business generally generates strong growth, some of Medtronic's devices, such as those in the continuous glucose monitoring space, do not match the performance of market leaders, including Abbott Laboratories' FreeStyle Libre and DexCom's G7.

Even Medtronic's insulin pumps face stiff competition and are sometimes overshadowed by those of much smaller players in the field, such as Tandem Diabetes Care. And to make matters worse, Medtronic's diabetes care unit has weak margins. During the company's fiscal 2025, it accounted for 8% of Medtronic's revenue but only 4% of operating profits. Spinning off this business should be beneficial for the company and will ultimately pay off.

Second, Medtronic is close to earning clearance for its Hugo system, a robotic-assisted surgery (RAS) device. This gadget performed well in clinical trials in urologic procedures earlier this year. This niche should become an important tailwind for Medtronic over the long run, even if it will likely trail the undisputed leader in the field, Intuitive Surgical. The RAS market is underpenetrated, leaving room for multiple winners to emerge.

Third, and relatedly, Medtronic should see clinical progress with the Hugo system in other indications. It is already working on that project. Earlier this year, it announced positive clinical trial results for the device in hernia repairs. Expanding Hugo's indications will lead to higher demand, a larger installed base over the medium term, and stronger sales growth within this unit.

So, as Medtronic announces more positive clinical trial results next year, the market should cheer. All these developments should help the company maintain strong momentum heading into next year.

Is Medtronic stock a buy?

Medtronic increased its guidance for its fiscal 2026 following its Q2 results. And with the catalysts ahead, the company's short-term prospects appear strong.

What about the long term? In that department, there is plenty to look forward to. Medtronic's underlying business and innovative qualities should lead to competitive returns for patient investors. The company will benefit from significant tailwinds, such as the world's aging population, while launching new products and making breakthroughs, which it has been doing for a long time.

Lastly, Medtronic remains an exceptional dividend stock that has increased its payouts for 48 consecutive years. That's impressive, and in another couple of years, the healthcare giant should join the ranks of Dividend Kings, or companies that have increased their payouts for at least 50 years straight.

Now, Medtronic isn't exactly a growth stock. Investors in the market for those should look elsewhere. However, it is a steady, reliable, low-risk healthcare player that will consistently reward its shareholders with dividend raises. Invest accordingly.

Prosper Junior Bakiny has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Abbott Laboratories and Intuitive Surgical. The Motley Fool recommends DexCom and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic, long January 2027 $65 calls on DexCom, short January 2026 $85 calls on Medtronic, and short January 2027 $75 calls on DexCom. The Motley Fool has a disclosure policy.