ABT — Q3 2026 Financial Report Analysis

Overview

Abbott's third-quarter sales rose 14.5% to $13.0 billion. Only about half of that is the existing business growing. Comparable sales growth, Abbott's measure of underlying growth (it counts Exact Sciences' sales in last year's quarter too, and strips out currency moves and a competitor's payments that have now ended), was 7.0%, up from 4.8% in Q2. The other 7.5 points or so are Exact Sciences, the cancer-test maker Abbott bought on March 23, 2026, whose $851 million of sales a year ago weren't in Abbott's figures then. Earnings went the other way on paper: GAAP net income (the official accounting profit) fell 44.1% to $920 million and GAAP diluted EPS fell to $0.53 from $0.94, mostly because of about $670 million of legal settlements over preterm infant formula and $841 million of amortization on acquired intangible assets. Adjusted EPS, which leaves those items out, rose 9.2% to $1.42, the midpoint of the $1.38-$1.46 range Abbott gave in July.

On the same day Abbott announced it plans to spin off its Nutrition business (Similac, Ensure, PediaSure, Pedialyte, Glucerna, about $8.5 billion of yearly sales) as a separate listed company by the end of 2027.

This report is written from the earnings release (Exhibit 99.1 to the 8-K filed October 21, 2026). The full 10-Q isn't filed yet, so cash flow, the balance sheet and management's longer discussion of results aren't available yet.

Key figures

Operating margin is the share of sales left after the costs of running the business, before interest and tax. The adjusted operating margin is our own calculation from the release's reconciliation table: adjusted gross margin ($7,448M) minus adjusted R&D ($892M) minus adjusted SG&A ($3,505M), which gives $3,051M against $2,610M a year ago (+16.9%).

Takeaway: Underlying sales accelerated and the quarter hit the middle of its EPS target, but the new ~6.0% full-year sales guidance is below the 6.5%-7.5% given in July, even after Q3's 7.0%. Holding the EPS midpoint while cutting the sales outlook means profit per share is now coming more from cost control and tax than from growth, and Q4 still has to deliver about 8% comparable growth (our estimate) to reach even the new number.

Segment performance

Medical Devices is the largest segment. The release says growth was "led by double-digit growth in Electrophysiology and Rhythm Management": electrophysiology (catheters and mapping systems that treat irregular heartbeats) grew 15.5% comparable to $873 million, and rhythm management (pacemakers and defibrillators) grew 10.0% to $752 million. In September the FDA approved Abbott's TactiFlex Duo catheter, which can deliver both pulsed field ablation and radiofrequency energy for atrial fibrillation. Pulsed field ablation is the newer technique the electrophysiology market is moving to. The weak spots were Structural Heart in the U.S. (down 11.1% reported, or 2.3% after removing last year's competitor payments) and Neuromodulation (down 1.1% comparable, with U.S. sales down 5.6%).

Diabetes Care ($2,185M, +6.7% comparable) is the slowdown to watch. Sales of continuous glucose monitors (the FreeStyle Libre wearable sensors) grew 7.3% reported and 7.7% comparable, down from 11.0% and 9.5% in Q2. International Diabetes Care grew only 4.2% reported, while the U.S. grew 9.4%. The release gives no reason for the slowdown. In August the FDA approved Libre Duo, a sensor that tracks both glucose and ketones (ketones rise before diabetic ketoacidosis, a dangerous complication), which is the product most likely to help growth later.

Diagnostics jumped 46.7% on paper because of Exact Sciences. Like-for-like it grew 6.4%. Cancer Diagnostics, mostly the Cologuard at-home colon cancer test, brought in $968 million, up 13.8% comparable, and the release credits Cologuard plus Exact's precision-oncology and international businesses. Core Laboratory (hospital and lab testing machines) grew 5.4%. Rapid and Molecular Diagnostics was nearly flat at +0.9%. Abbott also launched SimpleScreen CRC, an FDA-approved blood test for colorectal cancer screening, in September.

Nutrition grew 4.9% comparable after falling 3.6% in Q2. Pediatric nutrition grew 8.7% (U.S. +11.0%), adult nutrition only 1.8%, and segment sales were up $118 million from Q2. Even so, nine-month Nutrition sales are still down 2.1% comparable, so the year-over-year improvement comes partly from comparing against a weak period: Abbott raised prices in Q4 2025 and volumes fell afterwards.

Established Pharmaceuticals (branded generic medicines sold only outside the U.S.) grew 8.4% comparable but 6.8% reported because of weaker currencies. Key Emerging Markets grew 10.9% comparable, led by India and parts of Latin America and Asia Pacific.

The Nutrition spin-off

Abbott plans to distribute shares of a new standalone Nutrition company to its shareholders in a tax-free spin-off by the end of 2027. The new company will have about $8.5 billion of sales, 16,000 employees and 14 plants, and Daniel Salvadori, now head of Established Pharma and Nutrition, will be its CEO. What stays at Abbott will have about $42 billion of sales and focus on devices, diagnostics and branded generics. Abbott says the plan doesn't change 2026 guidance or the 2027 guidance due in January. It also says the two companies' combined dividend will equal Abbott's dividend at the time of the split, and that it will take one-time separation charges "to be quantified at a later date." Those charges will widen the gap between GAAP and adjusted earnings again through 2027.

What the headline numbers hide

• Most of the GAAP collapse is three specific charges, and one of them repeats. Specified items totalled $1,689M before tax: $841M of intangible amortization (up from $420M a year ago and $658M in Q2), about $670M of legal settlements, and $178M of acquisition, restructuring and other costs. The settlements resolve the Gill case, where a St. Louis jury awarded $495 million in July 2024, plus necrotizing enterocolitis claims for about 2,000 other infants (Abbott denies liability). Over nine months legal settlements total about $1.07 billion, including about $400 million to settle a Department of Justice investigation and a related whistleblower lawsuit. The settlements are one-offs. The amortization isn't: it keeps growing after the Exact deal, and the release doesn't say why it rose another $183M from Q2. The 10-Q should explain it.
• Interest costs are a real expense that adjusted EPS keeps in. Net interest expense jumped to $297M from $44M (nine months: $664M vs $143M). The release doesn't explain the increase; the timing matches the Exact Sciences purchase. Adjusted pre-tax income still grew 7.0%, so the operating business carried that cost and still grew.
• Part of the adjusted EPS growth came from tax and buybacks. The adjusted tax rate fell to 15.2% from 16.5%, and diluted shares fell 0.6% to 1,738M. At last year's tax rate, adjusted net income would have grown about 7%, not 8.7%. So roughly 1.7 points of the 9.2% adjusted EPS growth came from the lower tax rate, and about half a point from the lower share count. The GAAP tax rate (25.3%) is higher because it includes about $100M of adjustments to an earlier non-cash deferred tax benefit and about $35M of tax expense on old tax positions.
• Margins held up under the acquisition. Adjusted gross margin rose to 57.2% of sales from 55.8%, a gain that fits Exact Sciences' high-margin testing business, although the release doesn't break out the reason. Adjusted SG&A rose 16.7% and adjusted R&D 22.2%, both faster than comparable sales, because they now include Exact's cost base.
• Guidance: the EPS midpoint held, the sales outlook was cut. Full-year adjusted EPS guidance narrowed to $5.50-$5.55 from $5.45-$5.60, the same midpoint. Comparable sales growth guidance went to about 6.0% from 6.5%-7.5%. Nine-month comparable growth is 5.2%. Using the release's own 2025 sales figures (Abbott $44.328B, Exact $3.247B, less $89M of competitor payments), we estimate Q4 needs about 8% comparable growth to reach 6.0% for the year, faster than Q3's 7.0%.
• Not checkable yet: operating cash flow compared with net income, receivables and inventory growth, and debt levels all need the 10-Q.

Did last time's read hold up?

Our Q2 2026 report said to watch whether growth sped up in the second half as management expected, whether Nutrition kept improving from quarter to quarter, and how the Exact Sciences integration went. All three went the right way. Comparable growth rose to 7.0% from 4.8%, Nutrition went from -3.6% to +4.9% and rose $118M from Q2, and Cancer Diagnostics grew 13.8% comparable. But the speed-up was smaller than management's July guidance assumed, which is why the full-year sales range was cut. That report also expected amortization to keep weighing on GAAP EPS by a similar amount. It weighed even more: amortization rose to $841M from $658M.

Outlook

Management guides Q4 adjusted EPS of $1.62-$1.67 and full-year adjusted EPS of $5.50-$5.55, with full-year comparable sales growth of about 6.0%. Abbott doesn't give GAAP guidance, citing unpredictable restructuring, impairment and acquisition charges. The board declared its 411th consecutive quarterly dividend, $0.63 a share, payable November 16.

Our read: the parts that are working are electrophysiology, Cancer Diagnostics and Established Pharma, all growing at or above 8% comparable. The weaker parts are glucose monitors, where growth has slowed for two quarters, and U.S. Structural Heart. The spin-off makes what remains at Abbott mostly a devices-and-diagnostics company, so Libre growth and the new electrophysiology catheters matter even more than before. For Q4, watch whether comparable growth reaches the roughly 8% the new guidance implies, whether CGM growth recovers as Libre Duo launches, and how large the separation charges turn out to be.