Solventum (SOLV) Q1 2026 earnings summary

Executive summary

• Q1 FY26 reported sales declined 3.0% year-over-year to $2,007 million, primarily due to the Purification and Filtration business divestiture, but organic sales grew 2.1% driven by volume and product mix.

• Adjusted diluted EPS rose 10.6% to $1.48, while GAAP diluted EPS dropped to $0.07 due to separation and restructuring costs.

• Strong execution and transformation initiatives, including ERP implementations, cost savings programs, and portfolio optimization, are driving operational improvements and value creation.

• Significant progress in debt reduction, with net debt reduced to $4.5 billion since the spin-off, and active capital allocation through share repurchases and investments.

• Management remains confident in achieving long-range plan targets, supported by commercial momentum and strategic clarity.

Financial highlights

• Net sales were $2,007 million, down 3.0% year-over-year, but up 2.1% organically.

• Adjusted operating income was $392 million, with a non-GAAP operating margin of 19.5%; GAAP operating margin was 4.0%.

• Adjusted gross margin improved to 56.4%, while GAAP gross margin was approximately 54.7%.

• GAAP net income was $13 million, down from $137 million in Q1 2025; adjusted net income was $260 million.

• Operating cash flow was $(189) million and free cash flow was $(273) million, impacted by separation activities and seasonality.

Outlook and guidance

• Full-year 2026 organic sales growth expected at 2.0%–3.0%, or 3.0%–4.0% excluding SKU exits; adjusted EPS anticipated toward the high end of $6.40–$6.60.

• Free cash flow guidance is approximately $200 million for FY26.

• Operating margin guidance remains at 21%–21.5%, up 50–100 basis points year-over-year, despite tariff and inflation headwinds.

• Q2 will see a sales timing benefit of over $100 million due to ERP cutover, which will reverse in Q3 with no full-year impact.

• Foreign exchange is expected to benefit sales growth by approximately 100 basis points.