AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Multi-year commitments provide some commercial protection, but manufacturing advantages remain asserted and are not supported by comparative cost leadership. Current cost pressure and declining segment earnings weaken the structural case.
durability · 1/4 · Contracted recognition extends beyond 2030, but renewals, exit rights and competitive pricing constrain the protection. The separate Kidney Care agreement illustrates long contractual duration with early exit provisions, rather than assured lock-in.
customer dependency · 2/4 · Executed obligations and ongoing supply arrangements demonstrate customer commitments. Dependency is assessed indirectly from contracts; no migration costs or renewal rates are disclosed, while Novum returns and lower Kidney Care volumes show limits.
erosion resilience · 1/4 · Sales growth and contracted demand provide support, but manufacturing pressure, lower segment earnings and actual Class I recalls demonstrate fragile resilience. These are realized problems rather than hypothetical risk factors.
Pricing power31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Baxter attributes part of the 2025 Pharmaceuticals earnings decline to pricing competition and reports consolidation-related pricing pressure. These establish weak observed pricing outcomes, although the passages do not quantify net price changes or establish uniform weakness across products.
retention · 2/4 · Retention is assessed indirectly from substantial executed multi-year commitments and ongoing supply revenue. This is balanced by reduced Kidney Care volumes and Novum return or exchange provisions; no retention rate is inferred.
margin resilience · 1/4 · Reported first-half gross margin was nearly stable, but substantially smaller special-item burdens masked a 3.6-point decline excluding special items. Segment earnings also declined despite sales growth. Cost, mix and inventory-accounting effects limit any pricing-specific attribution.
contractual freedom · 1/4 · Negotiated GPO and IDN prices, government tenders and price controls constrain discretion. Some contracts permit index-dependent increases, providing limited contractual protection without proving unilateral pricing freedom or realized increases.
Predictability79
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 16.98
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 3.09
Financial strength25
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 0.00
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 28.54
- Interest coverage (x)
- -1.06
- Current ratio (x)
- 2.31
Capital allocation47
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 0.04
- 3-year average dilution (%)
- 0.59
- 3-year average SBC / revenue (%)
- 1.00
- cashConversionGrade
- 0.00
Management44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 continuing operating cash flow of $510 million exceeded $253 million of capital expenditures. Substantial 2025 debt repayments, lower dividends and no repurchases support financial restraint. Impairments and the 2025 cash-flow target shortfall offset these achievements; the evidence does not establish strong long-term allocation returns.
incentive alignment · 2/4 · Implemented stock retention requirements, actual 2025 equity grants and a zero payout on the missed cash-flow component provide alignment evidence. Individual assessments remained at 100% despite weak financial achievement. Grants are not treated as vested ownership, and comprehensive ownership and award outcomes are missing.
execution · 1/4 · Execution remains weak given missed 2025 financial targets, actual Class I recalls and incomplete remediation. First-half 2026 cash generation, sales and consolidated operating income improved, but segment earnings fell. This evaluates company outcomes across the leadership transition, without assigning all historical failures to the current CEO.
governance · 2/4 · Implemented Chair and CEO separation, defined independent Chair authority, annual elections and additional stock retention requirements provide substantive governance protections. Product-quality failures and continuing remediation limit confidence in oversight effectiveness; disclosed structures alone do not establish exceptional governance.
Evidence
As of June 30, 2026, we had $7.91 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are included in the Medical Products & Therapies segment.
Revenue recognition / remaining performance obligations at June 30, 2026 · Filed 30/07/2026
We expect to recognize approximately 10% of this amount as revenue over the remainder of 2026, 25% in 2027, 20% in each of 2028 and 2029, 15% in 2030 and the remainder thereafter.
Revenue recognition / expected recognition of remaining performance obligations · Filed 30/07/2026
We have purchasing agreements with several of the major GPOs in the United States, which are subject to renewal from time to time.
Business / GPO purchasing agreements and renewals · Filed 12/02/2026
Some contracts in the United States included in this amount contain index-dependent price increases, which are not known at this time.
Revenue recognition / index-dependent contractual price increases · Filed 30/07/2026
GPOs and IDNs negotiate pricing arrangements with manufacturers and distributors and the negotiated prices are made available to members.
Business / negotiated GPO and IDN pricing · Filed 12/02/2026
Pursuant to the Kidney Care MSA, Baxter and the Kidney Care divested entities provide each other with certain dialysis-related products, other products, product components and fulfillment services for up to 10 years post-closing (with certain extension rights and early exit rights as provided therein).
Kidney Care divestiture / supply agreement duration and exit rights · Filed 30/07/2026
The decrease in Other sales for the second quarter and six months ended June 30, 2026 as compared to the prior year periods is driven by reduced volumes under the Kidney Care MSA.
MD&A / reduced Kidney Care supply agreement volumes · Filed 30/07/2026
In 2025, we recorded estimates for sales reductions, for returns or exchanges of Novum LVP, and certain other charges, including estimates of reserves for remediation costs and inventory and contract asset write-downs associated with these Novum LVP corrections.
Contingencies / Novum LVP sales reductions, returns and remediation reserves · Filed 30/07/2026
We also benefit from efficiencies and cost advantages resulting from shared manufacturing facilities and the technological advantages of our products.
Business / management's manufacturing cost and technology advantage claims · Filed 12/02/2026
In addition, global and regional competitors continue to expand their manufacturing capacity and sales and marketing channels.
Competition / competitor manufacturing and distribution expansion · Filed 12/02/2026
36 Excluding the impact of special items, the gross margin ratio decreased by 2.1 and 3.6 percentage points in the second quarter and first six months of 2026, respectively, compared to the prior year periods.
MD&A / gross-margin declines excluding special items · Filed 30/07/2026
The lower gross margins were primarily driven by increased manufacturing and supply costs, including an updated estimate of indirect costs previously recorded in SG&A now capitalized into inventory after the separation of our former Kidney Care business, and product mix, partially offset by IEEPA tariff refunds recorded in the second quarter of 2026.
MD&A / manufacturing costs, inventory capitalization, mix and tariff refunds · Filed 30/07/2026
Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 (in millions) Medical Products & Therapies Healthcare Systems & Technologies Medical Products & Therapies Healthcare Systems & Technologies Net sales $ 2,076 $ 801 $ 1,945 $ 767 Cost of sales 1,331 402 1,157 375 Selling, general and administrative expenses 310 202 299 195 Research and development expenses 74 44 83 49 Other segment items (39) (10) (38) (8) Segment operating income $ 400 $ 163 $ 444 $ 156 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 (in millions) Medical Products & Therapies Healthcare Systems & Technologies Medical Products & Therapies Healthcare Systems & Technologies Net sales $ 3,996 $ 1,506 $ 3,803 $ 1,471 Cost of sales 2,568 787 2,256 729 Selling, general and administrative expenses 605 384 601 385 Research and development expenses 145 92 166 95 Other segment items (72) (19) (67) (16) Segment operating income $ 750 $ 262 $ 847 $ 278 The following table presents our reportable segment operating income and reconciliations of reportable segment operating income to income (loss) from continuing operations before income taxes.
Segment note / first-half 2026 sales, expenses and operating income · Filed 30/07/2026
The decrease in segment operating income in 2025 was primarily due to higher allocation of corporate costs following the sale of our Kidney Care segment, pricing competition, unfavorable product mix and increased manufacturing and supply costs, partially offset by lower accruals under our annual employee incentive compensation plans.
MD&A / 2025 Pharmaceuticals earnings decline and pricing competition · Filed 12/02/2026
There has been consolidation in our customer base and by our competitors, which has resulted and continues to result in pricing and market pressures.
Competition / realized consolidation-related pricing and market pressures · Filed 12/02/2026
In much of Europe, Latin America, Asia, and Australia, governments provide healthcare at low cost to patients and control their expenditures by various means, such as purchasing products through public tenders, collective purchasing, regulating prices, setting reference prices in public tenders, and limiting reimbursement or patient access to certain products.
Risk factors / public tenders and government pricing controls · Filed 12/02/2026
Condensed Consolidated Statements of Cash Flows (unaudited) (in millions) Six Months Ended June 30, 2026 2025 Cash flows from operations Net income (loss) $ 111 $ 217 Less: Income (loss) from discontinued operations, net of tax (7) 31 Income (loss) from continuing operations 118 186 Adjustments to reconcile net income (loss) to cash flows from operations: Depreciation and amortization 476 504 Deferred income taxes (5) (165) Stock compensation 43 45 Net periodic pension and other postretirement costs (8) (16) Other long-lived asset impairments — 24 Other 22 20 Changes in balance sheet items: Accounts receivable, net (4) (40) Inventories (36) (279) Prepaid expenses and other current assets 81 10 Accounts payable 50 21 Accrued expenses and other current liabilities (232) (151) Other 5 (41) Cash flows from (used in) operations - continuing operations 510 118 Cash flows from (used in) operations - discontinued operations (12) (94) Cash flows from (used in) operations 498 24 Cash flows from investing activities Capital expenditures (253) (262) Acquisitions of developed technology and investments (3) (9) Other investing activities, net 6 32 Cash flows from (used in) investing activities - continuing operations (250) (239) Cash flows from (used in) investing activities - discontinued operations — 3,389 Cash flows from (used in) investing activities (250) 3,150 Cash flows from financing activities Repayments of debt — (3,505) Repayments of debt with original maturities of three months or less — (300) Cash dividends on common stock (10) (174) Proceeds from stock issued under employee benefit plans 13 16 Payments of contingent liabilities (31) — Other financing activities, net (14) (25) Cash flows from (used in) financing activities (42) (3,988) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash - continuing operations (18) 88 Increase (decrease) in cash, cash equivalents and restricted cash 188 (726) Cash, cash equivalents and restricted cash of continuing operations at beginning of period (1) 1,968 2,414 Cash, cash equivalents and restricted cash of continuing operations at end of period (1) 2,156 1,688 (1) The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the condensed consolidated balance sheet as of June 30, 2026, December 31, 2025, and June 30, 2025 (in millions): June 30, 2026 December 31, 2025 June 30, 2025 Cash and cash equivalents $ 2,150 $ 1,966 $ 1,686 Restricted cash included in other non-current assets 6 2 2 Cash, cash equivalents and restricted cash $ 2,156 $ 1,968 $ 1,688 The accompanying notes are an integral part of these condensed consolidated financial statements.
Cash-flow statement / operating cash generation, spending, debt repayment and dividends · Filed 30/07/2026
During the first six months of 2026 and 2025 we did not repurchase any shares under this authority.
Stockholders' equity / no first-half 2026 or 2025 share repurchases · Filed 30/07/2026
In connection with our annual goodwill impairment assessment in the fourth quarter of 2025, we recorded a $485 million goodwill impairment related to our Front Line Care reporting unit within our Healthcare Systems & 50 Technologies segment.
Goodwill / 2025 Front Line Care impairment · Filed 12/02/2026
The reduction in value was primarily due to lower forecasted operating results, a higher discount rate and a lower terminal growth rate utilized in valuing this reporting unit which contributed to reduced expected future cash flows, as well as lower earnings multiples.
Goodwill / impairment drivers including lower forecast operating results · Filed 12/02/2026
HIDER, GRADE AND ROSENBLOOM Threshold 50% Target 100% Max 200% Achievement as a % of Target1 Baxter—Adjusted Net Sales From Continuing Operations (in millions)2 $11,283 76.0% 54% Weighted Financial Payout as a % of Target $10,982 $11,560 $12,138 Adjusted EPS From Continuing Operations3 $2.27 64.4% $2.12 $2.65 $3.18 Free Cash Flow From Continuing Operations (in millions)4 $438 0% $788 $985 $1,182 MR.
Compensation discussion / 2025 financial results versus incentive targets · Filed 23/03/2026
Specifically, in response to the support received for a 2024 stockholder proposal, the Board amended Baxter’s stock ownership guidelines to implement additional executive stock retention requirements to better support achievement of the required holdings in the prescribed timeframe.
Governance / implemented executive stock retention requirements · Filed 23/03/2026
Hider Annual Incentive(4) 759,375 1,518,750 3,796,875 RSU Grant #1(5) 9/2/2025 7/7/2025 131,813 3,185,920 RSU Grant #2(5) 9/2/2025 7/7/2025 236,237 5,709,848 Stock Option Grant(5) 9/2/2025 7/7/2025 465,651 24.17 3,185,053 2025 PSU Grant #1(5,6) 9/2/2025 7/7/2025 131,814 263,626 527,252 6,938,636 2025 PSU Grant #2(5,6) 9/2/2025 7/7/2025 82,170 164,339 328,678 4,325,402 2025 PSU Grant #3(5,6) 9/2/2025 7/7/2025 56,492 112,983 225,966 2,973,712 Mr.
Executive compensation tables / CEO equity awards granted in 2025 · Filed 23/03/2026
Based on the strategic priority qualitative assessment described below, input from the independent members of the Board (in the case of the CEO’s individual performance assessment) and the CHC Committee (for all other applicable NEOs), the 2025 individual performance assessment for each NEO still employed by Baxter (based on the sum of the weightings of the related categories and resulting payouts) was 100%.
Compensation discussion / 2025 individual performance assessments · Filed 23/03/2026
In connection with Andrew's appointment, the Board determined it was the appropriate time to separate the roles of Chair of the Board and CEO, consistent with prior commitments made by the Board.
Governance / separation of Chair and CEO roles · Filed 23/03/2026
As Chair of the Board, Mr. Shafer has the following responsibilities and authority: •presiding at all Board executive sessions and all meetings of the Board; •facilitating discussion among the independent directors on key issues and concerns in executive sessions excluding management; •acting as principal liaison between the independent directors and the CEO; •reporting the results of and feedback from executive sessions to the CEO; •reviewing and approving meeting agendas for the Board and facilitating timely and appropriate information flow to the Board; •reviewing and approving meeting schedules to ensure that there is sufficient time for discussion of all agenda items; •having the authority to call meetings of the independent directors; •in consultation with the chair of the NCGPP Committee, leading the annual performance evaluation of the CEO; •in consultation with the chair of the NCGPP Committee, leading the CEO succession process; •engaging with Baxter’s stockholders on selected topics including corporate governance, executive compensation and other sustainability and corporate responsibility matters; •serving as the contact person for interested parties to communicate directly with the independent directors; and •performing such other duties as may be requested by the other independent directors.
Governance / independent Chair responsibilities and authority · Filed 23/03/2026
As such, Baxter maintains annual director elections, regular refreshment including the appointment of three of our current independent directors over the last three years, a range of key skills represented on the Board consistent with its oversight responsibilities and strong Board independence.
Governance / annual director elections, refreshment and independence · Filed 23/03/2026
The U.S. Food and Drug Administration (FDA) classified these voluntary corrections as Class I recalls.
Contingencies / FDA Class I classification of Novum LVP corrections · Filed 30/07/2026
We have implemented certain corrections related to these recalls and have identified additional corrections to address these recalls, some of which may require regulatory clearance or approval, and are in the early stages of verification testing.
Contingencies / implemented corrections and additional work in early verification · Filed 30/07/2026
Condensed Consolidated Statements of Income (Loss) (unaudited) (in millions, except per share data) Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 Net sales $ 2,960 $ 2,810 $ 5,661 $ 5,435 Cost of sales 1,928 1,819 3,738 3,583 Gross margin 1,032 991 1,923 1,852 Selling, general and administrative expenses 735 718 1,463 1,421 Research and development expenses 129 134 268 274 Other operating income, net (49) (52) (91) (92) Operating income 217 191 283 249 Interest expense, net 64 58 130 122 Other (income) expense, net (5) — 1 (3) Income (loss) from continuing operations before income taxes 158 133 152 130 Income tax expense (benefit) 23 11 34 (56) Income (loss) from continuing operations 135 122 118 186 Income (loss) from discontinued operations, net of tax (9) (31) (7) 31 Net income (loss) 126 91 111 217 Net income attributable to noncontrolling interests — — — — Net income (loss) attributable to Baxter stockholders $ 126 $ 91 $ 111 $ 217 Income (loss) from continuing operations per common share Basic $ 0.26 $ 0.24 $ 0.23 $ 0.36 Diluted $ 0.26 $ 0.24 $ 0.23 $ 0.36 Income (loss) from discontinued operations per common share Basic $ (0.02) $ (0.06) $ (0.01) $ 0.06 Diluted $ (0.02) $ (0.06) $ (0.02) $ 0.06 Income (loss) per common share Basic $ 0.24 $ 0.18 $ 0.22 $ 0.42 Diluted $ 0.24 $ 0.18 $ 0.21 $ 0.42 Weighted-average number of shares outstanding Basic 517 513 516 512 Diluted 518 514 517 514 The accompanying notes are an integral part of these condensed consolidated financial statements.
Income statement / first-half 2026 sales and operating income · Filed 30/07/2026
Gross Margin and Expense Ratios Three Months Ended June 30, 2026 % of net sales 2025 % of net sales $ change % change Gross margin $ 1,032 34.9 % $ 991 35.3 % $ 41 4.1 % SG&A $ 735 24.8 % $ 718 25.6 % $ 17 2.4 % R&D $ 129 4.4 % $ 134 4.8 % $ (5) (3.7) % Six Months Ended June 30, 2026 % of net sales 2025 % of net sales $ change % change Gross margin $ 1,923 34.0 % $ 1,852 34.1 % $ 71 3.8 % SG&A $ 1,463 25.8 % $ 1,421 26.1 % $ 42 3.0 % R&D $ 268 4.7 % $ 274 5.0 % $ (6) (2.2) % Gross Margin Our gross margin ratio was 34.9% and 35.3% for the three months ended June 30, 2026 and 2025, respectively.
MD&A / reported gross-margin and expense ratios · Filed 30/07/2026
Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Medical Products & Therapies $ 400 $ 444 $ 750 $ 847 Healthcare Systems & Technologies 163 156 262 278 Total reportable segment operating income 563 600 1,012 1,125 Other 6 6 13 12 Unallocated corporate costs (148) (183) (307) (322) Intangible asset amortization expense (145) (151) (291) (306) Legal matters — — — (11) Business optimization items (7) (17) (75) (62) Acquisition and integration items — (5) — (6) Separation-related costs (22) (14) (33) (27) European Medical Devices Regulation (4) (5) (8) (10) Business transformation (23) — (34) — Hurricane Helene costs (3) (17) (6) (115) Product-related items — (23) 12 (29) Total operating income 217 191 283 249 Interest expense, net 64 58 130 122 Other (income) expense, net (5) — 1 (3) Income (loss) from continuing operations before income taxes $ 158 $ 133 $ 152 $ 130 28 Additional financial information for our segments is as follows: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Depreciation Expense Medical Products & Therapies $ 72 $ 80 $ 143 $ 149 Healthcare Systems & Technologies 15 19 30 35 Total segment depreciation expense 87 99 173 184 Unallocated corporate depreciation expense 7 7 12 14 Total depreciation expense $ 94 $ 106 $ 185 $ 198 Our CODM does not receive asset information by reportable segment and, accordingly, we do not report that information for our segments.
Segment reconciliation / segment earnings and special-item changes · Filed 30/07/2026
