Insiders ranked by realized 90-day signed return on their open-market trades at Edwards Lifesciences Corp. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.04pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.05pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.03pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
litigation+5
investigations+5
failure+3
claims+3
harm+3
Positive rising
innovation+1
advancement+1
efficiency+1
meritorious+1
Risk Factors (Item 1A)
7,980 words
Item 1A. Risk Factors
Our business and assets are subject to varying degrees of risk and uncertainty. An investor should carefully consider the risks described below, as well as other information contained in this Annual Report on Form 10-K and in our other filings with the SEC. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business. If any of these events or circumstances occurs, our business, financial condition, results of operations, or prospects could be materially harmed. In that case, the value of our securities could decline and an investor could lose part or all of his or her investment. In addition, forward-looking statements within the meaning of the federal securities laws that are contained in this Annual Report on Form 10-K or in our other filings or statements may be subject to the risks described below as well as other risks and uncertainties. Please read the cautionary notice regarding forward-looking statements in Part I above. Please note that the headers and summary provided below are only intended to assist the reader in navigating the risk factors; some risks, present or future, may implicate multiple types of risks. Please read all risk factors in their entirety.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+4
loss+3
litigation+2
severe+1
impairments+1
Positive rising
improve+2
improved+2
innovation+1
breakthrough+1
successful+1
MD&A (Item 7)
6,744 words
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents the factors that had a material effect on our results of operations during the two years ended December 31, 2025. Also discussed is our financial position as of December 31, 2025, and our consolidated cash flows for 2025 compared to 2024. You should read this discussion in conjunction with the historical consolidated financial statements and related notes included elsewhere in this Form 10-K. For a discussion related to the results of operations for 2024 compared to 2023 and a discussion related to our consolidated cash flows for 2024 compared to 2023, refer to Part II, Item 7, “ Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10–K filed with the Securities and Exchange Commission on February 28, 2025.
Overview
We are the leading global structural heart disease innovation company, driven by a passion to improve patient lives. Through breakthrough technologies, world-class evidence, and meaningful partnerships with clinicians and healthcare stakeholders, our employees are inspired by our patient-focused culture to deliver life-changing innovations to those who need them most. We conduct operations worldwide and are managed in the following geographical regions: United States, Europe, Japan, and Rest of World. Our products are categorized into the following groups: Transcatheter Aortic Valve Replacement (“TAVR”), Transcatheter Mitral and Tricuspid Therapies (“TMTT”), and Surgical Structural Heart (“Surgical”).
The following summarizes the principal risks and uncertainties affecting our business, financial condition, and results of operations. This summary should not be relied upon as an exhaustive summary of the material risks facing our business and you should read this summary together with the more detailed description of risks and uncertainties discussed below.
Business and Operating Risks
• Failure to successfullyinnovate and market products
• Unsuccessful clinical trials or procedures
• Manufacturing, logistics, or quality problems
• Competition
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• Dependence on key physicians. research institutions, and hospital systems
• Public health crises, including pandemics and epidemics
• Reliance on vendors, suppliers, and other third parties
• Use of, or failure to effectively and timely utilize, emerging technologies, including artificial intelligence (“AI”)
• Damage, failure, or interruption of our information technology systems, including due to cybersecurity attacks and breaches
• Failure to recruit and retain qualified talent or execute management succession plans
• Failure to integrate acquired businesses
• Risks associated with the sale of our Critical Care product group
Global Macroeconomic and Industry Risks
• Risks associated with global economic, political and social conditions
• Risks related to our international operations
• Inability to obtain government reimbursement or reductions in reimbursement levels
• Industry consolidation
Legal, Compliance and Regulatory Risks
• Inability to protect our intellectual property
• Inability to defendagainst intellectual property claims from third parties
• Reduced access and demand for our products as a result of, and compliance with, health care legislation and other government regulations
• Risks related to domestic and foreign income and non-income taxes
• Risks related to data privacy and security laws
• Losses from product liability claims
• Use of products in unapproved circumstances
• Substantial costs from environmental, health and safety regulations
• Climate change
• Risks relating to animal-borne illnesses
Business and Operating Risks
Failure to successfullyinnovate and develop new and differentiated products in a timely manner and effectively market these products could have a material effect on our prospects.
Our continued growth and success depend on our ability to innovate and develop new and differentiated products in a timely manner and effectively market these products. Without timely innovation and development, our products could be rendered obsolete or less competitive because of the introduction of a competitor's newer technologies or changing customer preferences. Innovating products requires the devotion of significant financial and other resources to research and development activities; however, there is no certainty that the products we are currently developing will complete the development process, or that we will obtain the regulatory or other approvals required to market such products in a timely manner or at all. Even if we timely innovate and develop products, our ability to successfully market them could be limited by a number of different factors, including competitive products and pricing, barriers in patient activation (including disease awareness, detection, and diagnosis), restrictive requirements in the U.S. national coverage determination for transcatheter aortic valve replacement procedures, the need for regulatory clearance, restrictions imposed on approved indications, capacity constraints within hospital systems, including staffing shortages and the availability of catheterization laboratories, and uncertainty over third-party reimbursement. Failure in any of these areas could have a material effect on our prospects.
Unsuccessful clinical trials or procedures relating to products could have a material adverse effect on our prospects.
The regulatory approval process for new products and new indications for existing products requires extensive clinical trials and procedures, including early clinical feasibility and regulatory studies. Unfavorable or inconsistent clinical data from current or future clinical trials or procedures conducted by us, our competitors, or third parties, or perceptions regarding these clinical data, could adversely affect our ability to obtain necessary approvals and the market's view of our future prospects. Such clinical trials and procedures are inherently uncertain and there can be
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no assurance that these trials or procedures will be enrolled or completed in a timely or cost-effective manner or result in a commercially viable product or indication; failure to do so could have a material adverse effect on our prospects. Clinical trials or procedures may experience significant setbacks even after earlier trials have shown promising results. Further, preliminary results from clinical trials or procedures may be contradicted by subsequent analyses. In addition, results from our clinical trials or procedures may not be supported by actual long-term studies or clinical experience. If preliminary clinical results are later contradicted, or if initial results cannot be supported by actual long-term studies or clinical experience, our business could be adversely affected. Clinical trials or procedures may be delayed, suspended, or terminated by us, the FDA, or other regulatory authorities at any time if it is believed that the trial participants face unacceptable health risks or any other reasons, and any such delay, suspension, or termination could have a material adverse effect on our prospects or the market's view of our future prospects.
If we or one of our suppliers or logistics partners encounters manufacturing, logistics, safety, or quality problems, our business could be materially adversely affected.
The manufacture and sterilization of many of our products are highly complex due in part to rigorous regulatory requirements. Quality is extremely important for many reasons, including due to the serious and costly consequences of a product failure. Safety is also critically important. Problems can arise for a number of reasons, including disruption of facility utilities, equipment malfunction, failure to follow protocols and procedures, raw material problems (including cost volatility and availability), software problems, cybersecurity incidents, or human error. Disruptions can occur at any time, including during production line transfers and expansions. Disruptions can also occur if our manufacturing and warehousing facilities are damaged by earthquakes, hurricanes, volcanoes, fires, and other natural disasters or catastrophic circumstances. As we expand into new markets and scale new products for commercial production, we may face unanticipateddelays or surges in demand which could strain our production capacity and lead to other types of disruption. If any of these manufacturing, logistics, or quality problems arise or if we or one of our suppliers or logistics partners otherwise fail to meet internal quality standards or those of the FDA or other applicable regulatory body, our reputation could be damaged, we could become subject to a safety alert or a recall (whether voluntary or mandated), we could incur product liability and other costs, product approvals and production could be delayed, and our business could otherwise be materially adversely affected.
We operate in highly competitive markets, and if we do not compete effectively, our business will be harmed.
We face substantial competition and compete with technologies of many types and companies of all sizes on the basis of cost-effectiveness, technological innovations, product performance, brand name recognition, breadth of product offerings, real or perceived product advantages, pricing and availability and rate of reimbursement. In addition, given the trend toward value-based healthcare, if we are not able to continue to demonstrate the full value of our differentiated products to healthcare providers and payors, our competitive position could be adversely affected. We have in the past and are continuing to experience constrained procedure volumes and sales for our products because more products, including Edwards’ own products, are competing for the same facilities and staffing within hospitals. See “ Competition” under “ Business” in Part I, Item 1 included herein.
The success of many of our products depends upon certain key physicians, research institutions, and hospital systems.
We work with leading global physicians and research institutions who provide considerable knowledge and experience. These physicians may assist us as researchers, marketing consultants, product trainers and consultants, inventors, and public speakers. If new laws, regulations, or other developments limit our ability to appropriately engage these professionals or with the research institutions of which they are a part or to continue to receive their advice and input or we are otherwise unsuccessful in maintaining strong working relationships with these physicians or their research institutions, the development, marketing, and successful use of our products could suffer, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, we rely on hospital systems to be able to hire staff and have available facilities, including catheterization laboratories, to perform procedures using our products. With multiple new technologies competing for these facilities, including technologies we develop and introduce in both our TAVR and TMTT product groups, a decision by a hospital system, particularly a large hospital system, not to adequately staff or provide facilities necessary to perform procedures using our products, or a decision to use a competitors’ products instead of ours, has in the past and may continue in the future to meaningfully adversely impact our ability to sell our products,
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resulting in lower sales and revenue than we forecasted, which could have a material adverse effect on our business, financial condition, and results of operations.
We are subject to risks associated with public health crises.
We are subject to risks associated with public health crises, including pandemics and epidemics, the timing and effects of which are highly uncertain and difficult to predict, and could disrupt our business and the hospital systems and supply chains in which we operate and result in material adverse impacts on our business, financial condition, and results of operations.
We rely on third parties in the design, manufacture, and sterilization of our products. Any failure by or loss of a vendor could result in delays and increased costs, which may adversely affect our business.
We rely on third parties for a broad range of raw and organic materials and other items in the design, manufacture, and sterilization of our products, and we purchase certain supplies and services from single sources for reasons of quality assurance, cost-effectiveness, availability, constraints resulting from regulatory requirements, and other reasons. We experience from time to time, and may continue to experience, supply interruptions due to a variety of factors, including:
• General economic conditions that could adversely affect the financial viability of our vendors;
• Vendors' election to no longer service or supply medical technology companies, including due to the burdens of applicable quality requirements and regulations or for no reason at all;
• The limitation or ban of certain chemicals or other materials used in the manufacture of our products; and
• Delays, shortages and price increases due to trade or regulatory embargoes.
Additionally, any significant increases in the cost of raw materials, whether due to inflationary pressure, supply constraints, the imposition of tariffs, regulatory changes, or otherwise, could adversely impact our operating results. A change or addition to our vendors could require significant effort due to the rigorous regulations and requirements of the FDA and other regulatory authorities; it could be difficult to establish additional or replacement sources on a timely basis or at all, which could have a material adverse effect on our business, financial condition, and results of operations.
Our use of, or our failure to effectively and timely utilize, emerging technologies, including AI, could adversely impact our business and financial results.
We use AI and other emerging technologies in various facets of our operations and our business. The legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain. The rapid advancement of these technologies entails risks, including potential deficiencies in AI-generated information and increased regulatory, cybersecurity, privacy, intellectual property and data-related risks. Another risk may arise if we are unable to timely utilize AI for technological innovation and business operation efficiency in a manner that is faster and more effective than our competitors. In addition, compliance with new or changing laws, regulations or industry standards relating to AI may impose significant costs on us and limit our ability to effectively develop, deploy or use AI technologies. Furthermore, if we are unable to effectively manage the use of AI technologies by our employees and service providers, our confidential information, intellectual property and reputation could be put at risk. Failure to appropriately respond to this evolving landscape may result in reputational, competitive and business harm as well as litigation and regulatory action and fines, penalties and expenses related thereto.
Failure to protect our information technology infrastructure and our products against cybersecurity attacks, network security breaches, service interruptions, or data corruption could materially disrupt our operations and adversely affect our business and operating results.
The operation of our business depends on our information technology systems and the information technology systems of certain of our service providers and suppliers. We rely on our information technology systems to, among other things, effectively manage sales and marketing data, accounting and financial functions, inventory
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management, product development tasks, clinical data, customer service and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, power losses, computer system or data network failures or outages, security breaches, and data corruption.
In addition, our information technology infrastructure and products are vulnerable to cybersecurity attacks. Cybersecurity attacks can include, but are not limited to, computer viruses, denial-of-service attacks, phishing attacks, ransomware attacks, and other introduction of malware to computers and networks; social engineering or other unauthorized access through the use of compromised credentials; exploitation of design flaws, bugs, or security vulnerabilities; intentional or unintentional acts by employees or other insiders with access privileges; and intentional acts of vandalism by third parties and sabotage. Further, cybersecurity threats and the techniques used in cybersecurity attacks change, develop, and evolve rapidly, including from emerging technologies, such as advanced forms of AI and quantum computing. In addition, we rely upon technology suppliers, including cloud‑based data management applications hosted by third‑party service providers, whose cybersecurity and information technology systems are subject to similar risks. While we are not aware of any cybersecurity attacks that have materially affected our business, financial condition, or operations, the preventative measures we have implemented to date may not be sufficient to prevent, mitigate, or offset a future incident that may materially and adversely impact us.
Significant disruption in either our or our service providers’ or suppliers’ information technology or the security of our products could impede our operations or result in decreased sales, result in liability claims or regulatory penalties, impact patient safety or lead to increased overhead costs, product shortages, loss or misuse of proprietary or confidential information, intellectual property, or sensitive or personal information, all of which could have a material adverse effect on our reputation, business, financial condition, and results of operations.
Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified talent or are otherwise unsuccessful in the execution of our management succession plans.
Our continued success depends, in large part, on our ability to hire and retain qualified people and execute on our talent management and succession plans, and if we are unable to do so, our business and operations may be impaired or disrupted. See “ Human Capital Management Strategy” under “ Business” in Part I, Item 1 included herein. Competition for highly qualified people is intense, and there is no assurance that we will be successful in attracting or retaining replacements to fill vacant positions, successors to fill retirements or employees moving to new positions, or other highly qualified personnel.
Failure to successfully integrate acquired businesses, technologies or strategic alliances, or challenges related to the execution of acquisitions or divestitures, as well as liabilities or claims relating to such acquired businesses or divestitures, could adversely affect our business and results of operations.
As part of our strategy, we actively manage a portfolio of businesses, technologies, services, and products as well as enter into potential strategic alliances. If we are unable to acquire businesses or technologies or other transactions on a timely basis or at all, we will not be able to execute our strategy and our business and results of operations may be adversely impacted. The integration of acquired businesses and technologies may be costly and may divert significant amounts of resources, including management and employee time and attention, away from the development and commercialization of our other products. Our failure to successfully manage the integration and growth of acquired businesses and technologies and our existing structural heart therapies could have an adverse impact on our business. We may not receive the anticipated benefits of acquisitions despite such expenses and diversion of resources, and acquisitions may not prove to be profitable. Furthermore, we may face unforeseenchallenges in executing our strategic plans to expand our products and therapies, which could cause our business and results of operations to suffer. Acquired businesses may have liabilities, or be subject to claims, litigation or investigations that we did not anticipate or which exceed our estimates at the time of the acquisition.
From time to time, we identify operations and products that are underperforming or that do not fit with our longer-term business strategy, such as our recent divestiture of our Critical Care product group, or there may be unforeseen operating difficulties and significant expenditures during the integration of an acquired business, technology, service or product into our existing operations. We have written down the value of certain acquired assets in the past, and may be required to do so in the future. We have also previously decided to, and may in the future decide to, dispose of underperforming operations or products or voluntarily cease operations related to a
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product. In addition, we have previously been required, and may in the future be required, to record charges or write-downs in connection with acquisitions and divestitures, including charges related to developed technology and/or in-process research and development assets. We have also been, and may in the future be, party to disputes arising from divestitures or ceased operations related to certain products, which have previously and may in the future result in litigation, liability or reputational harm. Any of these events could have a material adverse effect on our business, financial condition, and results of operations.
We are subject to risks associated with the sale of our Critical Care product group.
On September 3, 2024, we sold our Critical Care product group to Becton, Dickinson and Company. We are subject to risks involved with transferring the Critical Care product group and functioning under interim operating model arrangements, such as increased complexity of operations, including, but not limited to, those related to finance, quality, and information technology, diversion of management’s attention to our business, and additional related risks and costs which can have an adverse effect on our business, financial condition, and results of operations.
Global Macroeconomic and Industry Risks
We may be adversely impacted by global economic, political and social conditions.
We conduct extensive global operations and have been impacted and may continue to be negatively impacted by general global economic, political and social conditions, although we cannot predict the extent to which such conditions may negatively impact our business. These include, but are not limited to, conditions impacting inflation, credit and capital markets, interest rates, tax law, including tax rate and policy changes, factors affecting global economic stability, tariffs and the political environment relating to health care. These and other conditions could also adversely affect our customers, payers, vendors and other stakeholders and may impact their ability or decision to purchase our products or make payments on a timely basis.
Our international operations subject us to certain business risks.
We are from time to time impacted by a variety of risks associated with doing business internationally that can harm our future results, including the following:
• trade protection measures, quotas, embargoes, import or export requirements, and duties, tariffs, or surcharges (including existing or potential future tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods);
• cultural or other local factors affecting financial terms with customers;
• global regulations including those related to health care, labor and environmental, social and governance; military conflict, political unrest, or wars;
• scrutiny from governmental bodies regarding the pricing of our products; and
• currency exchange rate fluctuations; that is, decreases in the value of the United States dollar to the Euro or the Japanese yen, as well as other currencies in which we transact business, have the effect of increasing our reported sales even when the volume of sales outside of the United States has remained constant. Increases in the value of the United States dollar relative to the Euro or the Japanese yen, as well as other currencies, have the opposite effect. Significant increases or decreases in the value of the United States dollar could have a material adverse effect on our sales, cost of sales, or results of operations.
Additionally, the U.S. Department of Commerce recently initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended, into (among other things) imports of personal protective equipment, medical consumables and medical equipment (including devices), to determine whether they threaten U.S. national security, which further creates policy uncertainty in terms of tariffs. The current tariff environment is dynamic, as the U.S. government has imposed, modified and paused tariffs multiple times since the beginning of 2025. Changes to tariffs and other trade restrictions can be announced at any time with little or no notice. We cannot predict with certainty the future trade policy of the U.S. or other countr ies. We are monitoring recent judicial developments and executive branch responses related to U.S. tariffs; however, the impact, if any, cannot be reasonably estimated at this time. Tariffs may cause (i) increases in manufacturing costs, (ii) disruptions or delays to our supply chain, (iii) limitations on our ability to sell our products domestically or abroad, and (iv) reductions in sales volumes and gross
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margins for our products, any of which could negatively affect our business, financial condition, and results of operations. The ultimate impact of any existing or new tariffs or other changes in international trade policies on our business, financial condition, results of operations and cash flows is subject to a number of factors, including, but not limited to, the duration of such tariffs, changes in tariff rates, the amount, scope and nature of the tariffs, the results of the Section 232 investigation referenced above, any countermeasures that target countries may take or any mitigating actions that may become available.
If government or other third-party payors decline to reimburse our customers for our products or impose other cost containment measures to reduce reimbursement levels, our ability to profitably sell our products will be harmed.
We sell our products and technologies to hospitals and other health care providers, nearly all of which receive reimbursement for the health care services provided to patients from third-party payors, such as government programs (both domestic and outside of the United States), private insurance plans, and managed care programs. The ability of customers to obtain appropriate reimbursement for their products from private and governmental third-party payors is critical to our success. The availability of reimbursement affects which products customers purchase and could impact pricing. Reimbursement varies from country to country and can significantly impact acceptance of new products.
Government and other third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for medical products and services. Reimbursement levels may be decreased in the future. Additionally, future legislation, regulation, or reimbursement policies of third-party payors may otherwise adversely affect the demand for and price levels of our products. The introduction of cost containment incentives, combined with closer scrutiny of health care expenditures by both private health insurers and employers, has resulted in increased discounts and contractual adjustments to hospital charges for services performed. Hospitals or physicians may respond to such cost-containment pressures by substituting lower cost products or other therapies, to the extent they are available.
Third-party payors may deny reimbursement if they determine that a device used in a procedure was not used in accordance with coverage requirements as determined by such third-party payors or was used for an unapproved indication. Third-party payors may also deny reimbursement for experimental procedures and devices. We believe or have demonstrated through studies or analyses that many of our existing products are cost-effective, because they are intended to improve quality of life and can reduce overall health care costs in the short- and long-term. We cannot be certain that these third-party payors will recognize these cost savings and quality of life benefits instead of merely focusing on the lower initial costs associated with competing therapies, to the extent they exist. If our products do not meet coverage requirements by third-party payors, our customers may not be reimbursed for them, resulting in lower sales of our products.
Continued consolidation in the health care industry could have an adverse effect on our sales and results of operations.
The health care industry has been consolidating, and organizations such as GPOs, independent delivery networks, and large single accounts, such as the United States Veterans Administration, continue to consolidate purchasing decisions for many of our health care provider customers. As a result, transactions with customers are larger and more complex, and tend to involve more long-term contracts. The purchasing power of these larger customers has increased, and may continue to increase, causing downward pressure on product pricing. If we are not one of the providers selected by one of these organizations, we may be precluded from making sales to its members or participants. Even if we are one of the selected providers, we may be at a disadvantage relative to other selected providers that are able to offer volume discounts based on purchases of a broader range of medical equipment and supplies. Further, we may be required to commit to pricing that has a material adverse effect on our revenues, profit margins, business, financial condition, and results of operations. We expect that market demand, governmental regulations, third-party reimbursement policies, and societal pressures will continue to drive consolidation and increase pricing pressure.
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Legal, Compliance, and Regulatory Risks
Our inability to protect our intellectual property or failure to maintain the confidentiality and integrity of data or other sensitive company information, by cyber-attack or other event, could have a material adverse effect on our business.
Our success and competitive position are dependent in part upon our ability to protect our proprietary intellectual property through a combination of patents and trade secrets. We cannot guarantee that the protective steps we take are adequate to protect these rights:
• Patents issued to or licensed by us in the past or in the future may be challenged and held invalid.
• As our patents expire, we may be unsuccessful in extending their protection through patent term extensions.
• Confidentiality agreements with certain employees, consultants, and other third parties intended to protect, in part, trade secrets and other proprietary information could be breached, and we may not have adequate remedies.
• Others could independently develop substantially equivalent proprietary information or gain access to our trade secrets or proprietary information, design around our technology, or develop competing technologies.
• Our intellectual property, other proprietary technology, and other sensitive company information is dependent on sophisticated information technology systems and is potentially vulnerable to cyber-attacks, loss, theft, damage, destruction from system malfunction, computer viruses, loss of data privacy, or misappropriation or misuse of it by those with permitted access, and other events.
• We may not detect infringement.
• Intellectual property protection may also be unavailable or limited in some foreign countries.
We spend significant resources to protect and enforce our intellectual property rights, sometimes resulting in expensive and time-consuming litigation that is complex and may ultimately be unsuccessful. Our inability to protect our intellectual property could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Third parties may claim we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products.
During recent years, we and our competitors have been involved in substantial litigation regarding patent and other intellectual property rights, which is typically costly and time-consuming. We may be forced to defendagainstclaims and legal actions alleginginfringement of the intellectual property rights of others, and, if our defense is unsuccessful, we could have significant liabilities to third parties or face injunctions that bar the sale of our products, or could require us to seek licenses from third parties. Such licenses may not be available on commercially reasonable terms, may prevent us from manufacturing, selling, or using certain products, or may be non-exclusive, which could provide our competitors access to the same technologies.
In addition, third parties could also obtain patents that may require us to either redesign products or negotiate licenses from such third parties, which may be costly, unavailable, or require us to exit a particular product offering.
Health care legislation and other regulations may adversely impact access to and demand for our products .
We are subject to various federal and foreign laws that govern our domestic and international business practices. For example, in the United States, continued implementation of the Affordable Care Act and the 21st Century Cures Act, or any future legislation, including deficit reduction legislation, could impact medical procedure volumes, reimbursement for our products, and demand for our products or the prices at which we sell our products.
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In addition, a Mutual Recognition Agreement still under negotiation for the Medical Device Regulation may result in a lack of free movement of medical devices between the EU and Switzerland, may impact our access in the EU and may, ultimately, have a material effect on our business, financial condition, and results of operations. For more information about these laws as they relate to our business, see the section entitled “ Government Regulation and Other Matter s” in Part I, Item 1, “ Business .”
We and our customers are subject to healthcare legislation and other rigorous governmental regulations and we may incur significant expenses to comply with these regulations. In addition, failure to comply with these regulations could subject us to substantial sanctions and may impact our ability to sell our products in certain countries which could adversely affect our business, financial condition, and results of operations.
The medical technologies we create, study, manufacture, and market globally are subject to rigorous regulation and scrutiny by the FDA and various other federal, state, and foreign governmental authorities, including the European Union's European Commission (the “Commission”), which promulgated the European Medical Device Regulation (“EU MDR”). Government regulation applies to nearly all aspects of our products’ lifecycles, including testing, clinical study, manufacturing, transporting, sourcing, safety, labeling, storing, packaging, recordkeeping, reporting, advertising, promoting, distributing, marketing, and importing or exporting of medical devices and products. In general, unless an exemption applies, a medical device or product must receive regulatory approval or clearance before it can be marketed or sold. Modifications to existing products or the marketing of new uses for existing products also may require regulatory approvals, approval supplements, or clearances. If we are unable to obtain these required approvals, we may be required to cease manufacturing and sale, or recall or restrict the use of such modified device, pay fines, or take other action until such time as appropriate clearance or approval is obtained. More specifically relating to the EU MDR which came into effect in May 2017 and became applicable in May 2021 with a staggered transition period, all regulated products must be assessed by notified bodies (organizations designated by EU member states) as to whether they meet the technical requirements of the EU MDR before entering the market in Europe. During the transition period, with the influx of submissions to the notified bodies, any delay on obtaining approvals may result in a disruption of device supply or a further delay in getting a device to market. In addition, in the EU, we import some of our devices through our offices in Switzerland. Switzerland is not a member state of the EU, but is linked to the EU through bilateral treaties; therefore, the free movement of goods, including medical devices, between the EU and Switzerland after implementation of the EU MDR required a revised MRA. If an MRA covering the EU MDR is not put in place, then non-EU manufacturers may be required to make significant changes, including replacement of Swiss economic operators with operators based in EU member states, and changes will need to be made to our device labeling and/or packaging to satisfy EU MDR requirements. If these measures are unable to be taken, it may no longer be possible to place such devices on the EU market.
Regulatory agencies may refuse to grant approval or clearance, or review and disagree with our interpretation of approvals or clearances, or with our decision that regulatory approval is not required or has been maintained. Regulatory submissions may require the provision of additional data and may be time consuming and costly, and their outcome is uncertain. Regulatory agencies may also change policies, adopt additional regulations, or revise existing regulations, each of which could prevent or delay approval or clearance of devices, or could impact our ability to market a previously cleared, approved, or unregulated device. Additionally, the United States federal government has shut down several times in recent years, most recently on October 1, 2025, during which many government agencies, including the FDA, furloughed critical employees and stoppedcritical activities. A prolonged government shutdown could significantly affect the FDA’s timely review of any regulatory filings or applications we submit, which could result in delays or failures to obtain or maintain regulatory approvals, clearances or to comply with regulatory requirements. Our failure to comply with these regulatory requirements of the FDA, the Commission, or other applicable regulatory requirements in the United States or elsewhere might subject us to administratively or judicially imposed sanctions. These sanctions may include, among others, warning letters, fines, civil penalties, criminalpenalties, injunctions, debarment, product seizure or detention, product recalls and total or partial suspension of production, sale and/or promotion. Any of the foregoing actions could result in decreased sales including as a result of negative publicity and product liability claims, and could have a material adverse effect on our business, financial condition, results of operations, and prospects. In addition to the sanctions for noncompliance described above, commencement of an enforcement proceeding, inspection, or investigation could divert substantial management attention from the operation of our business and have an adverse effect on our business, financial condition, and results of operations.
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We are also subject to various United States and foreign laws pertaining to health care pricing, anti-competition, anti-corruption, and fraud and abuse, including prohibitions on kickbacks and the submission of falseclaims laws and restrictions on relationships with physicians and other referral sources. Further, we and our suppliers are subject to various United States and foreign regulations regarding environmental, social and governance matters. These laws are global and broad in scope, are rapidly increasing and are constantly evolving, which could require us to incur substantial costs and utilize internal resources to monitor the regulations and to comply. Any alleged or actual violations of these laws may subject us to government investigations and significant criminal or civil sanctions and may impact our ability to sell products in certain jurisdictions in addition to other liabilities, including substantial fines, imprisonment, and exclusion from participation in governmental health care programs.
We face a number of risks related to our income taxes in the United States as well as other jurisdictions.
Provision for Income Taxes. Our provision for income taxes and our effective tax rate could fluctuate due to changes in the mix of earnings and losses in countries with differing statutory tax rates. Our income tax provision could also be impacted by changes in excess tax benefits of stock-based compensation, federal and state tax credits, non-deductible expenses, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability and creditability of withholding taxes, and effects from acquisitions.
Tax Reform . Our provision for income taxes could be materially impacted by changes in accounting principles or evolving tax laws, including, but not limited to, global corporate tax reform and base-erosion and tax transparency efforts. For example, many countries are aligning their international tax rules with the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting Pillar Two recommendations and action plans that aim to standardize and modernize international corporate tax policy, including changes to cross-border taxes, transfer pricing documentation rules, nexus-based tax practices, and taxation of digital activities. The effective dates of implementation, the interactions of tax reforms in multiple jurisdictions, uncertainty related to dispute resolution mechanisms, and any ultimate agreement regarding treatment of the U.S. tax regime as a qualified side-by-side Pillar Two system, could impact our provision for income taxes.
Tax Audits . We are subject to ongoing tax audits in the various jurisdictions in which we operate. Tax authorities have disagreed and may disagree with certain positions we have taken and assess additional taxes that could be material. Please see Note 19 to our Consolidated Financial Statements in this report for information regarding our current audits and disputes with tax authorities. Although we regularly assess the likely outcomes of such audits and record reserves for potential tax payments, the calculation of tax liabilities involves the application of complex tax laws, and our estimates could be different than the amounts for which we are ultimately liable. In addition, we have challenged in the past and may decide in the future to challenge any assessments, if made, and may exercise our right to appeal, which could result in expensive and time-consuming litigation that may ultimately be unsuccessful.
Tax Incentives . We benefit from various global tax incentives extended to encourage investment or employment. Several foreign jurisdictions have granted us tax incentives which require renewal at various times in the future. If our incentives are not renewed or we cannot or do not wish to satisfy all or part of the tax incentive conditions, we may lose the tax incentives and could be required to refund tax incentives previously realized. As a result, our provision for income taxes could be higher than it would have been had we maintained the benefits of the tax incentives.
Failure to comply with data privacy and security laws could have a material adverse effect on our business.
We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure, and other processing of personal data in the United States and in other countries, which may include, but are not limited to, the Health Insurance Portability and Accountability Act (“HIPPA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, the General Data Protection Regulation (“GDPR”) adopted by the EU and the California Privacy Rights Act (“CRPA”) and the California Consumer Privacy Act, as amended by the CRPA (the “CCPA”). The GDPR imposes stringent EU data protection requirements and provides for significant penalties for noncompliance. HIPAA also imposes stringent data privacy and security requirements and the regulatory authority has imposed significant fines and penalties on organizations found to be out of compliance. The CCPA and the CRPA provides consumers with a private right of action against companies that have a security breach due to lack of appropriate security
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measures. These laws affect how we collect and use data of our employees, customers, and other parties, including patients treated with our products, and they may further restrict our transfer and use of such data, and can expose us to investigations and enforcement actions by regulatory authorities and claims from individuals potentially resulting in penalties and significant legal liability, if our efforts to protect such confidential personal information are inadequate. These laws, as well as similar laws being enacted by other states and countries, impose substantial requirements that involve the expenditure of significant resources and the investment of significant time and effort to comply. We also rely on third parties to host or otherwise process some of this data, who are subject to similar risks, and any failure by such third parties to comply with data privacy and security laws or protect such confidential information, could harm our reputation and have a material adverse effect on our business.
We may incur losses from product liability or other claims that could adversely affect our operating results.
Our business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of medical technologies. Many of the devices we manufacture and sell are designed to be implanted in the human body for long periods of time. Component failures, manufacturing and assembly flaws, design defects, software defects, medical procedure errors, or inadequate disclosure of product-related risks or information could result in an unsafe condition for, injury to, or death of patients. Such problems could result in product liability, medical malpractice or other lawsuits and claims, safety alerts, or product recalls in the future. We establish reserves and may incur charges in excess of those reserves. Although we maintain product liability and other insurance with coverages we believe are adequate, product liability or other claims may exceed insurance coverage limits, fines, and penalties. In addition, regulatory sanctions may not be covered by insurance, or insurance may not continue to be available or available on commercially reasonable terms. These litigation matters and regulatory actions, recalls or other actions, regardless of outcome, could have a material adverse effect on our business, reputation, and ability to attract and retain customers.
We are subject to litigation, investigations, and other legal proceedings relating to our products, customers, competitors, and government regulators that could materially adversely affect our financial condition, divert management’s attention, and harm our business.
We are, and may become, subject to various legal proceedings, investigations and claims that arise in or outside the ordinary course of business. The outcome of these legal proceedings cannot be predicted with certainty. We purchase and maintain business insurance for certain liabilities; however, we cannot determine whether our existing business insurance program would be sufficient to cover the costs or potential losses related to our lawsuits and legal proceedings or otherwise be excluded under the terms of any insurance policy. Regardless of merit, litigation may be time-consuming and disruptive to our operations and cause significant legal costs (including settlements, judgments, legal fees and other related defense costs) and diversion of management attention. We could also be subject to governmental investigations in connection with some of these claims. If we do not prevail in these legal proceedings, we may be faced with significant monetary damages or injunctive relief against us that could have a material adverse effect on our business, financial condition, or results of operations. In addition, even if we believe that we have meritorious defenses, from time to time, we engage in settlement discussions and mediation and consider settlements taking into account various factors including, among other things, developments in such legal proceedings and the resulting risks and uncertainties.
Use of our products in unapproved circumstances could expose us to liabilities.
The marketing approval from the FDA and other regulators of certain of our products are, or are expected to be, limited to specific indications. We are prohibited from marketing or promoting any unapproved use of our products. Physicians, however, can use these products in ways or circumstances other than those strictly within the scope of the regulatory approval. Although the product training we provide to physicians and other health care professionals is conducted in compliance with applicable laws, and therefore, is mainly limited to approved uses or for clinical trials, no assurance can be given that claims might not be asserted against us if our products are used in ways or for procedures that are not approved.
Our operations are subject to environmental, health, and safety regulations that could result in substantial costs.
Our operations are subject to environmental, health, and safety laws, and regulations concerning, among other things, the generation, handling, transportation, and disposal of hazardous substances or wastes, the cleanup of
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hazardous substance releases, and emissions or discharges into the air or water. We have incurred and may incur in the future expenditures in connection with environmental, health, and safety laws and regulations. New laws and regulations, violations of these laws or regulations, stricter enforcement of existing requirements, or the discovery of previously unknown contamination could require us to incur costs or could become the basis for litigation or new or increased liabilities that could be material.
Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.
Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our future operations from natural disasters and extreme weather conditions, such as hurricanes, tornadoes, seismic events, wildfires, or flooding. Such extreme weather conditions could pose physical risks to our facilities and disrupt operation of our supply chain and may impact operational costs and could have an adverse impact on the availability of raw materials. Concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change on the environment. Such laws or regulations may result in increased compliance burdens and costs to meet the regulatory obligations, and it may adversely affect our raw material sourcing, manufacturing operations, and the distribution of our products.
We are subject to risks arising from concerns and/or regulatory actions relating to animal-borne illnesses, including “mad cow disease.”
Certain of our products, including pericardial tissue valves, are manufactured using bovine tissue. Concerns relating to the potential transmission of animal-borne illnesses, including BSE, commonly known as “mad cow disease,” from cows to humans may result in reduced acceptance of products containing bovine materials. Certain medical device regulatory agencies have considered whether to continue to permit the sale of medical devices that incorporate bovine material. We obtain bovine tissue only from closely controlled sources within the United States and Australia. The bovine tissue used in our pericardial tissue valves is from tissue types considered by global health and regulatory organizations to have shown no risk of infectibility for the suspected BSE infectious agent. We have not experienced any significant adverse impact on our sales as a result of concerns regarding BSE, but no assurance can be given that such an impact may not occur in the future.
On December 18, 2025, we completed the sale of a business that is not focused on implantable medical innovations for structural heart disease (the “non-core product group”). On September 3, 2024, we sold our Critical Care product group (“Critical Care”) to Becton, Dickinson and Company (“BD”). We concluded that the non-core product group met the criteria to be classified as held-for-sale in September 2024 and the Critical Care met the criteria to be classified as held-for-sale in June 2024. We determined that, when considered together, the conditions for discontinued operations presentation had been met with respect to each of Critical Care and the non-core product group (collectively, the “discontinued product groups”). As such, the historical financial condition and results of the discontinued product groups have been reflected as discontinued operations in our consolidated financial statements. Our discussion and analysis of our results of operations is reflective of our continuing operations. See Note 5 to the Consolidated Financial Statements for further information.
Financial Highlights and Market Update
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Financial Highlights
Our net sales for 2025 were $6.1 billion, representing an increase of $628.1 million over 2024, driven primarily by sales growth of our TAVR and TMTT products.
Our gross profit increased in 2025, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to higher operational expenses. The decrease in our net income and diluted earnings per share in 2025 was driven primarily by increases in personnel-related costs, one-time charges related to impairments on our investments, and increased certain litigation expenses. For further information, see Note 3, Note 9 and Note 20 to the Consolidated Financial Statements.
Healthcare Environment, Opportunities, and Challenges
The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation. In 2025, we invested 18% of our net sales in research and development. The following is a summary of important developments since January 1, 2025:
• we received United States Food and Drug Administration (“FDA”) approval for the SAPIEN 3 platform for severe aortic stenosis patients without symptoms;
• we received FDA and CE Mark approval for the SAPIEN M3 mitral valve replacement system, launching in both Europe and the U.S. the first transcatheter therapy utilizing a transseptal approach for treatment of patients with symptomatic (moderate-to-severe or severe) mitral regurgitation who are deemed unsuitable for surgery or transcatheter edge-to-edge therapy;
• we received a CE Mark for and launched in Europe the KONECT RESILIA aortic valved conduit, the first ready-to-implant solution with RESILIA tissue specifically designed for bio-Bentall procedures;
• we announced new eight-year data showing that patients receiving aortic surgical valves treated with our proprietary RESILIA tissue technology have significantly improved long-term outcomes compared to those receiving non-RESILIA tissue bioprosthetic valves;
• we announced ENCIRCLE pivotal trial results demonstrating successful patient outcomes supporting our portfolio of mitral and tricuspid therapies;
• we completed enrollment in the CLASP IIF trial for the PASCAL transcatheter valve repair system;
• we announced seven-year data from the PARTNER 3 trial, reaffirming the early and sustained patient benefits of Edwards TAVR; and
• we announced our founding sponsorship of the American Heart Association’s Heart Valve Initiative, a national effort to improve care and outcomes for the more than 28 million people living with heart valve disease worldwide.
We are dedicated to generating robust clinical, economic, and quality-of-life evidence increasingly expected by patients, clinicians, and payors in the current healthcare environment, with the goal of encouraging the adoption of innovative new medical therapies that demonstrate superior outcomes.
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Results of Operations
Net Sales by Geographic Region
(dollars in millions)
Years Ended December 31,
Change
United States
Europe
Japan
Rest of World
Outside of the United States
Total net sales
Net sales outside of the United States include the impact of foreign currency exchange rate fluctuations, as further detailed in the discussion below. The impact of foreign currency exchange rate fluctuations on net sales is not necessarily indicative of the impact on net income due to the corresponding effect of foreign currency exchange rate fluctuations on international manufacturing and operating costs, and our hedging activities. For more information, see “ Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A .
Net Sales by Product Group
(dollars in millions)
Years Ended December 31,
Change
Transcatheter Aortic Valve Replacement
Transcatheter Mitral and Tricuspid Therapies
Surgical Structural Heart
Total net sales
Transcatheter Aortic Valve Replacement
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Net sales of TAVR products increased in 2025, driven by higher sales of the Edwards SAPIEN platform in 2025, primarily due to higher sales of the Edwards SAPIEN 3 Ultra RESILIA v alve in the United States and Europe. In addition, foreign currency exchange rate fluctuations increased net sales outside of the United States by $26.7 million primarily due to the strengthening of the Euro against the United States dollar.
Transcatheter Mitral and Tricuspid Therapies
The increase in net sales in 2025 of TMTT products was primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair system and EVOQUE tricuspid valve replacement system in the United States and Europe.
Surgical Structural Heart
Net sales of Surgical products increased in 2025 primarily due to higher sales of the INSPIRIS RESILIA aortic valve and the MITRIS RESILIA in the United States, Europe and Rest of World, and the KONECT RESILIA tissue valved conduit in the United States.
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Gross Profit
Our gross profit increased in 2025 compared to 2024, driven by our sales growth discussed above. Gross profit as a percentage of net sales decreased in 2025, primarily driven by higher operational expenses.
Selling, General, and Administrative (“SG&A”) Expenses
SG&A expenses increased in 2025 compared to 2024 primarily due to (a) higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States, (b) increased marketing expenses primarily related to TAVR, (c) increased performance-based compensation expenses, and (d) increased professional services costs to support the transition services agreement.
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Research and Development (“R&D”) Expenses
R&D expenses increased in 2025 compared to 2024 primarily due to increased investments in implantable heart failure management innovations.
Intellectual Property Agreement and Certain Litigation Expenses
We incurred certain expenses related to legal settlement and contingency, intellectual property litigation, and tax litigation of $325.4 million and $40.4 million during 2025 and 2024, respectively. For further information, see Note 3, Note 9 and Note 20 to the Consolidated Financial Statements .
Change in Fair Value of Contingent Consideration Liabilities, net
The change in fair value of contingent consideration liabilities resulted in gains of $12.5 million during 2025, primarily due to changes in projected probabilities of milestone achievements.
Restructuring Charges, Separation Costs, and Other
In 2025 and 2024, we recorded expenses of $13.1 million and $32.9 million, respectively, related to severance associated with realignment initiatives. In 2025 and 2024, we also recorded expenses of $8.5 million and $19.0 million, respectively, primarily related to costs incurred for professional advisory services associated with the sale of Critical Care to BD.
For further information, see Note 4 to the Consolidated Financial Statements .
Intangible Assets Impairment Charges
Intangible assets impairmentloss of $40.0 million in 2025 related to certain developed technology assets. There were no intangible assets impairment charges recognized in 2024.
Other Operating Income, net
Other operating income, net of $67.2 million in 2025 primarily included income from the transition services agreement relating to the sale of Critical Care of $63.7 million. For further information, see Note 5 to the Consolidated Financial Statements.
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Interest Expense
Interest expense was $20.4 million and $19.8 million in 2025 and 2024, respectively. The increase in interest expense resulted primarily from lower capitalizable interest related to facilities construction.
Interest Income
Interest income was $168.8 million and $120.3 million in 2025 and 2024, respectively. The increase in interest income resulted primarily from a higher average investment balance.
Loss on Impairment
Loss on impairment of $146.9 million in 2025 related to our investment in a promissory note and our determination to not exercise an option to acquire one of our VIE investments. For further information, see Note 9 to the Consolidated Financial Statements .
Other Non-operating Income, net
Other non-operating income, net was $7.2 million and $68.9 million in 2025 and 2024, respectively. The decrease in other income was driven primarily by gains from the remeasurement of our previously held equity interests upon acquisition of the investees in 2024. For further information, see Note 10 to the Consolidated Financial Statements .
Provision for Income Taxes
($ in millions)
Years Ended December 31,
Change
Provision for income taxes
Effective tax rate
Our effective income tax rate in 2025 and 2024 was 17.0% and 9.8%, respectively. Our effective tax rate for 2025 increased in comparison to 2024 primarily due to the impact of Pillar Two (see below), other local tax increases, and certain non-deductible litigation expenses. For further information, see Note 3 to the Consolidated Financial Statements . The effective rates for 2025 and 2024 were lower than the federal statutory rate of 21% primarily due to (1) foreign earnings taxed at lower rates, (2) United States federal and California research and development credits, and (3) the tax benefit from foreign-derived intangible income.
Many countries are implementing some or all of the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting Pillar Two (“Pillar Two”) rules that impose a global minimum tax of 15% on reported profits. Although Pillar Two provides a framework for applying the minimum tax, countries may enact Pillar Two differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar Two. In addition, in January 2025, the United States issued an executive order announcing opposition to aspects of these rules. As countries continue to enact and refine the Pillar Two rules, we will evaluate the potential effects of Pillar Two on our effective tax rate. In 2025, the Pillar Two provisions resulted in additional tax expense of approximately $19.1 million.
In December 2017, the Tax Cuts and Jobs Act of 2017 (the "2017 Act") was signed into law. The 2017 Act required companies to pay a one-time mandatory deemed repatriation tax on the cumulative earnings of certain foreign subsidiaries that were previously tax deferred. We elected to pay the repatriation tax in installments over eight years. As of December 31, 2024, we had a remaining tax obligation of $78.5 million related to the deemed repatriation. The final installment of $78.5 million was paid in the second quarter of 2025.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the 2017 Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through
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2027. The OBBBA did not have a material impact to our tax expense in 2025 and is not expected to have a material impact on future periods.
As of December 31, 2025, we had $245.3 million of gross California research expenditure tax credits that we expect to use in future periods. The credits may be carried forward indefinitely. Based upon anticipated future taxable income, we expect that it is more likely than not that all California research expenditure tax credits will be utilized, although the utilization of the full benefit is expected to be realized over an extended period of time. Accordingly, no valuation allowance has been provided. We also had $69.5 million of United States foreign tax credits of which $47.2 million are expected to be utilized before the end of the 10-year carryforward period. As a result, we recorded a valuation allowance of $22.3 million on the United States foreign tax credit carryforwards which have been determined to be unrealizable.
As of December 31, 2025, our gross uncertain tax positions were $767.4 million. We estimate that these liabilities would be reduced by $377.0 million from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, foreign income taxes, state income taxes, and timing adjustments. The net amount of $390.4 million, if not required, would favorably affect our effective tax rate.
In the normal course of business, the Internal Revenue Service (“IRS”) and other taxing authorities are in different stages of examining various years of our tax filings. During these audits, we may receive proposed audit adjustments that could be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on our financial condition and results of operations. We strive to resolve open matters with each tax authority at the examination level and could reach an agreement with a tax authority at any time. While we have accrued for matters we believe are more likely than not to require settlement, the final outcome with a tax authority may result in a tax liability that is materially different from that reflected in the consolidated financial statements. Furthermore, we may later decide to challenge any assessments, if made, and may exercise our right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law. We believe that adequate amounts of tax and related penalty and interest have been provided for any adjustments that may result from our uncertain tax positions.
In the first quarter of 2022, we executed an Advance Pricing Agreement (“APA”) between Japan and Switzerland covering distribution transactions for tax years 2020 through 2024, and in 2023, we executed an APA between Japan and the United States covering tax years 2020 through 2024. We also executed an APA in the fourth quarter of 2024 between Japan and Singapore covering tax years 2022 through 2026 with roll-back terms to cover the distribution of TAVR products beginning in 2020 and the distribution of Surgical products beginning in 2018. Considering ongoing supply chain changes, we have withdrawn our APA renewal application between Japan and the United States for tax years 2025 through 2029.
The audits of our United States federal income tax returns through 2014 have been closed. The IRS audit field work for the 2015 through 2017 tax years was completed during the second quarter of 2021, except for transfer pricing and related matters. The IRS is currently examining the 2018 through 2020 tax years.
The audits of our material state, local, and foreign income tax matters have been concluded for years through 2015.
During 2021, we received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between our United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to our United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $260.0 million and reflects a departure from a transfer pricing method we had previously agreed upon with the IRS. We disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals (“Appeals”). The Appeals process culminated in the third quarter of 2023 when we and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.
During the fourth quarter of 2023, Appeals issued a notice of deficiency (“NOD”) increasing our 2015 through 2017 United States federal income tax in amounts resulting from the income adjustments previously reflected in the
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NOPA. The additional tax sought in excess of our filing is $269.3 million before consideration of interest and a repatriation tax offset.
We plan to vigorously contest the additional tax claimed by the IRS through the judicial process. Final resolution of this matter is not likely within the next 12 months. We believe the amounts previously accrued related to this uncertain tax position are appropriate for a number of reasons, including the interpretation and application of relevant tax laws and accounting standards to our facts and, accordingly, have not accrued any additional amount based on the NOD and other proceedings to date. Nonetheless, the outcome of the judicial process cannot be predicted with certainty, and it is possible that the outcome of that process could have a material impact on our consolidated financial statements. We made deposits with the IRS of $75 million in November 2022 and $305.1 million in March 2024 to prevent the further accrual of interest on that portion of any additional tax and interest we may ultimately be found to owe while we prepare to contest through the judicial process the IRS's entitlement to any of the additional tax claimed by the IRS. The IRS converted those deposits to advance payments, and, on December 20, 2024, we filed administrative claims for refunds of those payments with the IRS for the 2015 through 2017 tax years. We are now able to sue for refunds in the appropriate judicial forum.
Surgical/TAVR intercompany royalty transactions covering tax years 2018 through 2025 remain subject to IRS examination, and those transactions and related tax positions remain uncertain as of December 31, 2025. We have considered this information, as well as information regarding the NOD and other proceedings described above, in our evaluation of our uncertain tax positions. The impact of these unresolved transfer pricing matters, net of any correlative tax adjustments, may be significant to our consolidated financial statements. Based on the information currently available and numerous possible outcomes, we cannot reasonably estimate what, if any, changes in our existing uncertain tax positions may occur in the next 12 months and, therefore, have continued to record the uncertain tax positions as a long-term liability.
We have received tax incentives in certain non-United States tax jurisdictions, the primary benefit for which will expire in 2032. The tax reductions to cash tax expense as compared to the local statutory rates were $93.9 million ($0.16 per diluted share) and $249.3 million ($0.42 per diluted share) for the years ended December 31, 2025 and 2024, respectively.
During the first quarter of 2024, we received a notice of assessment from the Israel Tax Authority (the “ITA”) wherein the ITA claimed that we owed approximately $110.0 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. We maintain that we did not transfer intellectual property outside of Israel in 2017 or in any subsequent year. We filed a formal appeal of the assessment in the third quarter of 2024. During the fourth quarter of 2024, we received a second notice of assessment from the ITA claiming that we owe additional tax of approximately $16.0 million excluding interest and penalties for the 2018 through 2022 tax years based entirely on the collateral impacts of the 2017 assessment. We filed a formal appeal of the second assessment in the first quarter of 2025. In the third quarter of 2025, the ITA agreed that intellectual property was not transferred in 2017 and withdrew its assessment. While the appeals process for the 2018 through 2022 years runs through March 2026, we expect the 2018 through 2022 assessment to also be withdrawn prior to expiration of the appeals process based on the ITA’s conclusion that IP was not transferred in 2017. If not withdrawn, we will defend our position through judicial proceedings.
Liquidity and Capital Resources
Our sources of cash liquidity include cash and cash equivalents, short-term investments, cash from operations, and amounts available under credit facilities. We believe that these sources are sufficient to fund the current and long-term requirements of working capital, capital expenditures, and other financial commitments. However, we periodically consider various financing alternatives and may, from time to time, seek to take advantage of favorable interest rate environments or other market conditions.
As of December 31, 2025, cash, cash equivalents, and short-term investments held in the United States and outside of the United States were $3.7 billion and $516.1 million, respectively. During 2025, we repatriated cash of $1.5 billion. We assert that $405.8 million of our foreign earnings continue to be permanently reinvested and our intent is to repatriate, in the future, $720.9 million of our foreign earnings as of December 31, 2025. The estimated net tax liability on the indefinitely reinvested earnings if repatriated is $1.2 million.
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We have a five-year Credit Agreement (the “Credit Agreement”) that provides for a $750.0 million multi-currency unsecured revolving credit facility and matures on July 15, 2027. We may increase the amount available under the Credit Agreement by up to an additional $250.0 million in the aggregate and extend the maturity date for an additional year, subject to the agreement of the lenders. As of December 31, 2025, no amounts were outstanding under the Credit Agreement.
In June 2018, we issued $600.0 million of 4.3% fixed-rate unsecured senior notes (the "2018 Notes") due June 15, 2028. We may redeem the 2018 Notes, in whole or in part, at any time and from time to time at specified redemption prices. As of December 31, 2025, we have not elected to redeem any of the 2018 Notes. As of December 31, 2025, the carrying value of the 2018 Notes was $598.3 million. For further information on our debt, see Note 12 to the Consolidated Financial Statements .
From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Board of Directors. We consider several factors in determining when to execute share repurchases, including, among other things, expected dilution from stock plans, cash capacity, and the market price of our common stock. During 2025, under the Board of Directors authorized repurchase program, we repurchased a total of 11.7 million shares at an aggregate cost of $884.7 million, including pursuant to $750.0 million of accelerated share repurchase agreements executed during the period. For further information, see Note 16 to the Consolidated Financial Statements . As of December 31, 2025, we had remaining authority to purchase up to $2.0 billion of our common stock under the share repurchase program.
In December 2025, we completed the sale of our non-core product group. Per the agreement, we could earn additional earnouts of up to $40.0 million based on certain revenue-based milestones. During 2024, we completed acquisitions of multiple medical device companies. We are required to pay up to an additional $200.0 million of potential payments upon achievement of certain regulatory, performance, and sales milestones. For further information, see Note 10 to the Consolidated Financial Statements .
On April 12, 2023, we entered into an intellectual property agreement with Medtronic pursuant to which the parties agreed to a 15-year global covenant not to sue ("CNS") for infringement of certain patents in the structural heart space owned or controlled by each other. In consideration for the global CNS and related mutual access to certain intellectual property rights, we paid Medtronic a one-time, lump sum payment of $300.0 million and are making annual royalty payments that are tied to net sales of certain Edwards products. For more information, see Note 3 to the " Consolidated Financial Statements ."
We have purchased options to acquire and have agreed to provide promissory notes to various entities. These arrangements could result in additional cash outlays in the future should we decide to exercise the options or should the entities draw on the promissory notes. For further information, see Note 9 to the Consolidated Financial Statements.
Consolidated Cash Flows - For the Years Ended December 31, 2025 and 2024
Net cash flows provided by operating activities of $1,595.2 million for 2025 increased $1,052.9 million from 2024 primarily due to (1) improved operating performance in 2025, and (2) lower tax payments during the year ended December 31, 2025, which included $175.3 million of local tax payments associated with the sale of Critical Care, compared to the year ended December 31, 2024, which included $469.7 million of tax payments related to the
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sale of Critical Care and a $305.1 million tax deposit we made to mitigate interest on potential tax liabilities we are contesting through the judicial process (for further information, see Note 19 to the Consolidated Financial Statements ).
Net cash used in investing activities of $712.9 million in 2025 consisted primarily of net purchases of investments of $335.2 million, capital expenditures of $260.2 million, issuances of notes receivable of $140.9 million, a payment for a net working capital adjustment of $36.3 million related to the sale of Critical Care, and payments of acquisition options of $25.1 million, partially offset by net proceeds from the sale of our non-core product group of $78.8 million.
Net cash provided by investing activities of $2.3 billion in 2024 consisted primarily of proceeds from the sale of our Critical Care product group of $3.9 billion partially offset by payments of $1.1 billion to acquire other companies, capital expenditures of $252.4 million, and net purchases of investments of $161.4 million.
We currently anticipate making capital expenditures of approximately $280.0 million in 2026 as we continue to invest in our operations.
Net cash used in financing activities of $956.8 million in 2025 consisted primarily of purchases of treasury stock of $893.4 million and purchase of the remaining noncontrolling interest in a subsidiary of $233.7 million, partially offset by proceeds from stock plans of $174.1 million.
Net cash used in financing activities of $983.0 million in 2024 consisted primarily of purchases of treasury stock of $1.2 billion, partially offset by proceeds from stock plans of $179.5 million.
Material Cash Requirements
A summary of our material cash requirements as of December 31, 2025 is as follows (in millions):
(a) The amount included in “Year 1” reflects anticipated contributions to our various pension plans. Anticipated contributions beyond one year are not determinable. The total accrued benefit liability for our pension plans recognized as of December 31, 2025 was $28.9 million. This amount is impacted by, among other items, pension expense funding levels, changes in plan demographics and assumptions, and investment returns on plan assets. Therefore, we are unable to make a reasonably reliable estimate of the amount and period in which the liability might be paid, and did not include this amount in the contractual obligations table. For further information, see Note 15 to the Consolidated Financial Statements for further information.
(b) Purchase and other commitments consists primarily of open purchase orders for the acquisition of goods and services in the normal course of business and sponsorship obligations related to the American Heart Association’s Heart Valve Initiative. We have excluded open purchase orders with a remaining term of less than one year. For certain purchase and other commitments, such as commitments to fund equity method or other investments, the timing of the payment is not certain. In these cases, the maturity dates in the table reflect our best estimates.
(c) As of December 31, 2025, the gross liability for uncertain tax positions, including interest, was $920.8 million and relates primarily to transfer pricing matters. Based upon the information currently available and numerous possible outcomes, we cannot reasonably estimate the amount and period in which the liability might be paid, and did not include this amount in the contractual obligations table. In addition, we plan to vigorously contest
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through the judicial process the additional tax claimed by the IRS related to transfer pricing issues for the 2015 through 2017 tax years which may require additional cash outflows. For further information, see Note 19 to the Consolidated Financial Statements for further information on these matters.
(d) We acquire assets still in development, enter into research and development arrangements, acquire businesses, and sponsor certain clinical trials that often require milestone, royalty, or other future payments to third-parties, contingent upon the occurrence of certain future events. We have excluded from the table above those contingent milestone payments and other contingent liabilities for which we cannot reasonably predict future payments or for which we can avoid making payment by unilaterally deciding to stop development of a product or ceaseprogress of a clinical trial and certain sales-based royalties in excess of minimum payment thresholds related to litigation settlements. We estimate that these contingent payments could be up to $1.1 billion if all milestones or other contingent obligations are met.
Critical Accounting Policies and Estimates
Our results of operations and financial position are determined based upon the application of our accounting policies, as discussed in the notes to the Consolidated Financial Statements . Certain of our accounting policies represent a selection among acceptable alternatives under generally accepted accounting principles in the United States of America (“GAAP”). In evaluating our transactions, management assesses all relevant GAAP and chooses the accounting policy that most accurately reflects the nature of the transactions.
The application of accounting policies requires the use of judgments and estimates. These matters that are subject to judgments and estimates are inherently uncertain, and different amounts could be reported using different assumptions and estimates. Management uses its best estimates and judgments in determining the appropriate amount to reflect in the consolidated financial statements, using historical experience and all available information. We also use outside experts where appropriate. We apply estimation methodologies consistently from year to year.
We believe the following are the critical accounting policies that could have the most significant effect on our reported results and require subjective or complex judgments by management.
Revenue Recognition
When we recognize revenue from the sale of our products, the amount of consideration we ultimately receive varies depending upon the return terms, sales rebates, discounts, and other incentives that we may offer, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The estimate of variable consideration requires significant judgment. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely upon an assessment of historical payment experience, historical relationship to revenues, estimated customer inventory levels, and current contract sales terms with direct and indirect customers. Product returns are typically not significant because returns are generally not allowed unless the product is damaged at time of receipt. If the historical data and inventory estimates used to calculate the variable consideration do not approximate future activity, our financial position, results of operations, and cash flows could be impacted.
In addition, in limited circumstances, we may allow customers to return previously purchased products, such as for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount of product to be returned when the next-generation products are shipped to the customer. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls, and variation in product utilization all affect the estimates related to sales returns and could cause actual returns to differ from these estimates.
Our sales adjustment related to distributor rebates given to our distributors represents the difference between our sales price to the distributor and the negotiated price to be paid by the end-customer. We validate the distributor rebate accrual quarterly through either a review of the inventory reports obtained from our distributors or an estimate of the distributor's inventory. This distributor inventory information is used to verify the estimated liability for future distributor rebate claims based on historical rebates and contract rates. We periodically monitor current pricing trends and distributor inventory levels to ensure the credit for future distributor rebates is fairly stated.
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Business Combinations
We account for business combinations using the acquisition method of accounting. The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires judgment and involves the use of estimates and assumptions, such as projected revenues, projected gross margins, the amount and timing of future cash flows, growth rates, discount rates, expected technology life cycles, and useful lives of assets. Discount rates may vary across acquisitions based on the purchase price, forecasts, and relative risks of each acquired company. These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the acquisition date, we may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed if new information is obtained related to facts and circumstances that existed as of the acquisition date.
Intangible Assets and Long-lived Assets
We acquire intangible assets in connection with business combinations and asset purchases. The acquired intangible assets are recorded at fair value, which is determined based on a discounted cash flow analysis. The determination of fair value requires significant estimates, including, but not limited to, projected revenues, projected gross margins, the amount and timing of projected future cash flows, the discount rate used to discount those cash flows, the assessment of the asset's life cycle, including the timing and expected costs to complete in-process projects, and the consideration of legal, technical, regulatory, economic, and competitive risks. Discount rates may vary across acquisitions based on the purchase price, forecasts, and relative risks of each acquired company.
In-process research and development assets acquired in business combinations are reviewed for impairment annually, or whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. Additionally, management reviews the carrying amounts of other intangible and long-lived assets whenever events or circumstances indicate that the carrying amounts of an asset may not be recoverable. The impairment reviews require significant estimates about fair value, including estimation of future cash flows, selection of an appropriate discount rate, and estimates of long-term growth rates.
Income Taxes
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Realization of certain deferred tax assets, primarily tax credits, net operating loss and other carryforwards, is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in our effective tax rate on future earnings.
We have made an accounting policy election to recognize the United States tax effects of global intangible low-taxed income as a component of income tax expense in the period the tax arises.
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our income tax returns are periodically audited by domestic and foreign tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income amongst various tax jurisdictions. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. Significant judgment is required in evaluating our uncertain tax positions, including estimating the ultimate resolution to intercompany pricing controversies between countries when there are numerous possible outcomes. We review these tax uncertainties quarterly and adjust the liability as events occur that affect potential liabilities for additional taxes, such as the progress of tax audits, lapsing of applicable statutes of limitations, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law.
For further information on our income taxes, see Note 2 and Note 19 to the Consolidated Financial Statements .
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Legal Contingencies
We are or may be a party to, or may otherwise be responsible for, pending or threatened lawsuits, including those related to products and services currently or formerly manufactured or performed by us, workplace and employment matters, matters involving real estate, our operations or health care regulations, or governmental investigations. We accrue for loss contingencies to the extent that we conclude that it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be estimated, the low-end of the range of losses is recognized if no amount within the range is a better estimate than any other. If we determine that a loss is possible, but not probable, and the range of the loss can be reasonably determined, then we disclose the range of the possible loss. These matters raise difficult and complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. As such, significant judgment is required in determining our legal accruals. We describe our legal proceedings in Note 20 to the Consolidated Financial Statements.
New Accounting Standards
Information regarding new accounting standards is included in Note 2 to the Consolidated Financial Statements.
