Pulse of Progress
In this edition of the Smart Investor newsletter, we spotlight the stock of one of the most influential med-tech companies globally. But first, let’s dive into the latest portfolio news and updates.
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Portfolio News and Updates
❖ Oracle (ORCL) announced an expanded partnership with Alphabet’s (GOOGL) Google Cloud. Under the collaboration, Oracle will integrate Google’s Gemini AI models into Oracle Cloud Infrastructure (OCI). This allows Oracle’s enterprise customers to access Google’s Gemini AI capabilities – including multimodal understanding, coding assistance, and workflow automation – via OCI services, enhancing productivity and workflow automation.
The deal – similar to the one that Oracle struck with Elon Musk’s xAI back in June – is expected to significantly broaden Oracle’s AI offerings, advancing its strategy of offering a menu of AI options rather than trying to push its own technology exclusively. The partnership enhances Oracle’s cloud flexibility, AI capabilities, and joint selling prospects, bolstering its competitive stance in enterprise cloud and AI markets.
The new partnership layer also offers significant benefits for Google through expanded market reach, stronger ecosystem partnerships, increased revenue potential, and enhanced technological leadership in AI and multicloud enterprise solutions. This collaboration supports Google Cloud’s strategy to embed its AI capabilities deeply within major enterprise platforms – a crucial competitive move versus Amazon’s AWS and Microsoft’s (MSFT) Azure.
As Oracle continues to progress on the enterprise AI, analysts are increasingly optimistic, with several of them raising their price targets in the past couple of weeks. The latest such increase – from $245 to $300 – came from Mizuho, which projects a 28% annual revenue growth rate through FY29 and sees a potential for ORCL to join a trillion-dollar market cap club.
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❖ AI startup Perplexity made a formal offer to acquire Google’s (GOOGL) Chrome browser for $34.5 billion as Google faces U.S. antitrust proceedings. The unsolicited bid comes a few weeks after OpenAI also expressed similar interest in acquiring the world’s leading browser, if regulators force its divestiture. However, even if Google were interested in such a sale, Perplexity’s bid would likely not be taken seriously, with analysts estimating Chrome’s value could be around $100 billion. Google has not publicly commented and plans to appeal the antitrust ruling.
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❖ Uber Technologies’ (UBER) stock has been buoyed recently by a wave of analyst upgrades following its solid earnings and encouraging strategic developments that have improved the company’s outlook.
The stock, rated a “Strong Buy,” received price-target upgrades from firms including BofA Securities, Barclays, Stifel Nicolaus, Roth Capital, and others. Analysts highlighted Uber’s transformation into a diversified mobility platform, extending beyond ridesharing into delivery and freight and leveraging AI to improve operations and profitability, with its machine learning platform “Michelangelo” playing a key role.
Wall Street has also praised Uber’s balance-sheet stability – with considerable cash reserves and manageable debt allowing for a new $20 billion buyback authorization – as well as earnings strength, growth prospects across diverse business lines, growing subscriber engagement, and improving profitability metrics. The upgraded average price target implies a potential upside of over 15% from the current price – even after a rally of over 55% year-to-date.
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❖ Autodesk (ADSK) continues to draw investor and analyst attention ahead of its earnings release at the end of the month. After its strong FQ1 2026 report and guidance upgrade – driven by demand for cloud and AI-enhanced design software – analysts will be watching to see how the company navigates macro uncertainties and software sector headwinds.
One recent development is expected to help. ADSK introduced a freemium model for Flow Studio, making advanced AI-driven visual effects (VFX) and animation tools more accessible by offering a free tier alongside substantial price reductions for paid plans. This new pricing structure targets independent creators, indie filmmakers, marketers, and first-time users, lowering the entry barrier and aiming to expand the user base significantly.
Analysts highlighted the move as a potential catalyst for long-term growth. The freemium rollout is a deliberate strategy to broaden market reach, deepen user engagement, and open multiple upgrade pathways, blending free access with premium tiers. Crucially, it is underpinned by powerful AI capabilities from Autodesk’s recent Wonder Dynamics acquisition, which the company has been rapidly integrating into its ecosystem. This positions ADSK as a competitive force in the evolving AI-augmented creative software market.
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❖ IBM (IBM) shares saw some pressure following a downgrade to “Hold” from “Buy” by Erste Group, which said the company’s growth trajectory is not fully aligned with bullish market expectations, especially when compared to other tech giants like Microsoft (MSFT) and Google (GOOGL).
However, broad analyst sentiment is supported by strong conviction in IBM’s ongoing strategic transformation focused on hybrid cloud, AI, and software-driven recurring revenue. The acquisition of HashiCorp is viewed as a significant catalyst for accelerating IBM’s cloud growth. Additionally, IBM’s robust partnerships with industry leaders such as AWS, Microsoft, and Oracle further enhance its market positioning and competitive edge.
IBM’s AI initiatives are gaining increasing visibility beyond traditional enterprise sectors. Notably, its integration of AI into global sports, exemplified by the 2025 U.S. Open initiatives – including match chats, enhanced slam trackers, AI-driven commentary, and key event highlights – demonstrates how AI can revolutionize the fan experience while delivering measurable financial returns. The AI in sports market is expected to grow rapidly, reaching $8.7 billion by 2029, with IBM already securing a substantial share.
Moreover, IBM is a key player in AI innovation within the financial sector due to its brand credibility in regulated industries. The company is well-positioned to capture adoption in enterprise and financial markets, leveraging its strength in compliance-ready, enterprise-grade AI tools rather than competing directly with fast-growing consumer AI platforms like OpenAI. This focus creates a strong foothold in a high-margin growth segment driven by demand for AI trading, data analytics, and regulatory tech solutions.
The global AI market is projected to reach $4.8 trillion by 2033, fueled by technological advances and broad adoption across industries. IBM’s hybrid cloud and AI infrastructure place it favorably to capitalize on this multi-trillion-dollar opportunity. Even capturing a modest 0.5% share of this market could add approximately $24 billion in incremental revenue by 2033, significantly accelerating IBM’s topline growth.
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❖ ServiceNow (NOW) shares initially dropped post‑earnings on profit‑taking and sector‑wide “AI killing software” concerns but have since retraced part of the decline. Fundamentally, Q2 2025 results beat expectations: accelerating AI adoption lifted subscription growth, margins, and RPOs, driving management to lift FY 2025 subscription revenue guidance.
Analyst response was almost unanimously positive: about 20 Wall Street firms raised price targets – many substantially – with only UBS trimming its PT while still retaining a “Buy” rating. The new Street average target implies over ~30% upside.
Although some investors worry that generative AI may commoditize software, ServiceNow’s execution suggests the opposite: AI is amplifying, not eroding, its value proposition. NOW’s AI‑enhanced offerings such as Now Assist and AI Control Tower are increasingly embedded in large enterprise deals, with Pro Plus bundles included in the majority of top contracts. This is fueling durable multi‑year commitments, margin expansion, and deeper platform stickiness.
Overall, rather than being disrupted by generative AI, ServiceNow is commercializing AI at scale and reinforcing its role as a mission‑critical enterprise workflow platform.
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❖ CrowdStrike Holdings (CRWD) has been added to Wedbush’s IVES AI 30 list, curated by lead analyst Daniel Ives to highlight companies leading in AI innovation. Wedbush recognizes CrowdStrike as the “gold standard” in AI-powered cybersecurity, citing industry-leading ARR growth, strong adoption of FalconFlex modules, and clear differentiation in agentic AI and next-generation attack surface protection. Ives remains highly bullish, maintaining an “Outperform” rating and the Street-high $575 price target, and sees CrowdStrike as a key beneficiary of the cybersecurity industry’s shift to AI-driven platforms, reflecting strong commercial traction and continued product momentum.
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❖ Amphenol (APH) announced a definitive agreement to acquire Trexon for approximately $1 billion in cash. This acquisition is expected to significantly enhance Amphenol’s capabilities in the high-reliability interconnect and cable assemblies market.
Trexon’s extensive expertise and established presence in over 250 aerospace and defense programs provide APH with a robust new growth platform. This strategic move broadens Amphenol’s customer base and positions the company to benefit from increasing government spending in aerospace and defense, supporting its long-term growth and value-creation strategy.
Financially, the acquisition is anticipated to improve Amphenol’s performance, as Trexon’s expected sales and EBITDA margins surpass the company’s average within its Harsh Environment Solutions segment. The deal, expected to close in Q4 2025, is projected to contribute approximately $290 million in revenue by 2026.
Analysts view the acquisition positively, recognizing Trexon as a strategically important complementary addition to Amphenol’s defense portfolio that enhances the company’s defense market exposure. Notably, Baird, Redburn, Bank of America, and UBS raised their price targets on APH, signaling confidence in the strategic fit and accretive earnings potential from the acquisition. Truist analysts highlighted that acquisitions represent Amphenol’s highest-return use of cash, with Evercore ISI supporting this view and predicting continued M&A activity to drive value and growth.
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Portfolio Stocks Under Review
❖ We are placing Cisco Systems (CSCO) under review due to the stock’s sharp post-earnings pullback and lingering caution about revenue growth sustainability beyond the current AI infrastructure cycle.
Cisco delivered a strong fiscal Q4: revenue grew 7.6% year-over-year to $14.67 billion, non-GAAP EPS came in at $0.99 – both above expectations – and product orders tied to AI infrastructure more than doubled management’s full-year target, topping $2 billion. Splunk is now fully integrated, contributing to renewed strength in the security segment. The legacy networking business also posted double-digit growth, even as capex declined and free cash flow improved. Guidance for FY26 was solid, with expected revenue of $59-60 billion and EPS in the $4.00-4.06 range. These are respectable numbers – especially for a company that was written off by many as a legacy laggard just two years ago.
And yet the stock dropped over 7% on the week. Part of that was macro – a hot U.S. PPI print shook the market’s belief in an imminent rate cut and triggered broader selling in tech – but the rest was sentiment. Cisco beat estimates, but not by much, and its guidance didn’t spark the kind of upside enthusiasm the market has come to expect from anything AI-adjacent. The tone on the call was measured, not euphoric. Management remains focused on execution, but the Street is still unsure how much of the AI demand is sustainable, and whether the security business – now 13% of revenue – can accelerate meaningfully.
We believe that CSCO is quietly working to become a pillar of AI infrastructure – not by chasing headlines, but rather through deep integrations, strategic partnerships, and robust product development. Its collaborations with NVIDIA, Microsoft, and sovereign AI players like Saudi Arabia’s HUMAIN reflect a long-term vision to anchor the next wave of scalable, secure AI networks. The company’s efforts to secure open-architecture environments with solutions like AI Defense and Hypershield are already gaining validation through enterprise deployments and inclusion in NVIDIA’s Secure AI Factory blueprint. While execution risks remain, Cisco’s $2 billion in AI infrastructure orders, 65.6% gross margin, and rising R&D investment point to a company laying the groundwork for long-term relevance. If traction continues, the stock could gradually revalue higher as confidence builds.
Analyst sentiment is not euphoric, but far from bearish. No one moved to a “Sell” rating post-earnings. If anything, most firms came away incrementally more constructive. The upgrades weren’t just mechanical responses to new guidance – they reflected improving fundamentals and growing confidence in Cisco’s positioning. Several cited the AI-driven order momentum, the healthier product mix following the Splunk integration, and Cisco’s relative resilience compared to peers exposed to more cyclical hardware. Some also noted Cisco’s capital discipline – with capex falling and free cash flow rebounding – as a sign of maturing financial execution. While HSBC turned cautious on fears the inventory replenishment boost may fade faster than hoped, the broader Street sees Cisco as a steady compounder with optionality if AI tailwinds continue to broaden.
We are inclined to continue holding the stock. But we want to see sentiment catch up to fundamentals – or fundamentals break out from here – before making a renewed bullish call.
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❖ We are placing Applied Materials (AMAT) under review following a textbook beat-and-guide-down pattern that has reignited near-term caution across the Street.
While the company delivered record Q3 results – with revenue up 8% and EPS up 17% YoY – guidance came in soft, and analysts quickly reset their expectations. Q4 guidance calls for a sequential pullback in revenue and EPS – down 4.9% and 9% YoY, respectively – as Chinese demand softens and export license delays cloud visibility. Management explicitly flagged digestion in China and lumpy leading-edge orders as headwinds, making it clear the next few quarters may lack the clean growth narrative many had hoped for.
The stock initially fell back into its June range after the release, as investors were spooked by AMAT’s weaker-than-expected near-term outlook. Still, it has since bounced – with Monday’s “buy-the-dip” inflows reflecting renewed interest at more attractive levels and a recognition of the company’s increasingly vital role in enabling the next wave of AI semiconductors.
Applied’s long-term setup remains strong. The company is central to every AI-inflected node transition – from gate-all-around to hybrid bonding to backside power. DRAM is recovering, advanced packaging is set to double, and the company is investing through the cycle with $2.6B in quarterly operating cash flow and new U.S. R&D and manufacturing capacity on the way. Despite near-term noise, fiscal 2025 is still expected to mark the sixth straight year of top-line growth.
Analyst reaction post-earnings was broadly cautious but not bearish. Nearly all firms lowered their price targets, citing inventory normalization, softening semi capex, and the lack of near-term catalysts. BofA and Summit moved to the sidelines, but most major banks – JPMorgan, Goldman, Citi, Nomura, Mizuho, Wolfe, and others – maintained “Buy” ratings, highlighting AMAT’s deep exposure to structural AI demand and its strong competitive position in high-value tools.
We continue to view AMAT as a core enabler of AI-era semiconductor scaling and believe its execution and roadmap warrant long-term optimism. That said, we’d like to see sentiment stabilize and the stock begin reflecting the company’s fundamental momentum before deciding whether to continue holding the position.
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❖ We are keeping MACOM Technology Solutions (MTSI) under review as we monitor whether the stock’s rebound can stabilize into a sustained recovery. While business performance remains fundamentally strong and analyst sentiment is resolutely bullish, the market’s recent volatility – including a sharp drawdown and partial snapback – argues for continued caution before reestablishing conviction.
Fiscal Q3 2025 results confirmed robust execution, with revenue up 32.3% YoY to $252.1 million and EPS of $0.90, matching consensus. Strength was broad-based across industrial, defense, telecom, and data center, underpinned by strong demand for MACOM’s high-speed optics, GaN, and secure RF components. Gross margin held steady at 57.6%, and the company guided Q4 revenue to $256-264 million and EPS to $0.91-0.95 – both slightly ahead of Street expectations. The outlook implies solid sequential growth in industrial and data center, even as telecom moderates.
MACOM’s strategic positioning remains a key asset. It continues to benefit from accelerating AI infrastructure demand, owns a U.S.-based RF fab (RTP), and is pushing further into high-frequency, high-power applications with long-term EPS guidance above $4 on a $1 billion revenue base. Despite the early ownership transfer of RTP and some one-time capex noise, the company expects gross margin to reach 59% as FY2026 wraps up.
The stock, however, remains in a sentiment reset phase. Shares fell ~14% after earnings before rebounding roughly halfway. Sell-the-news behavior, compounded by soft medium-term commentary and insider selling contributed to technical weakness and uncertainty around near-term momentum. While analysts including Evercore, Truist, and Stifel raised price targets to the $151-158 range, and the consensus rating remains Strong Buy, the market has not fully re-priced those fundamentals just yet.
Given the divergence between analyst confidence and market action, we’re inclined to remain patient. MTSI is still trading below its pre-earnings level, and while we believe the company’s roadmap – especially in RF, data center, and defense – supports long-term upside, we want to see sentiment stabilize and the stock reassert leadership. If price action confirms renewed strength in the coming weeks, we’d revisit the position with a bias to maintain exposure.
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❖ We are keeping MasTec (MTZ) under review despite an exceptional second quarter marked by record revenue of $3.5 billion, up 20% year over year, and a 50% jump in adjusted EPS to $1.49 – both ahead of guidance. The company’s 18-month backlog surged 23% to a record $16.5 billion, with especially strong momentum in Clean Energy, Communications, and Power Delivery. Federal energy incentives, grid modernization demand, and MasTec’s expansion several verticals reinforce a powerful multi-year growth runway.
Yet despite these fundamentals, post-earnings trading saw the stock soften as operating cash flow collapsed 98% to $6 million and free cash flow turned negative, driven by heavy working capital investments tied to project ramps. The optics of this short-term cash burn, coupled with a recent notable insider sale, appeared to temper investor sentiment.
However, Wall Street’s view remains overwhelmingly supportive. Since the Q2 release, multiple firms – including Goldman Sachs, Truist, KeyBanc, Stifel, DA Davidson, Jefferies, and Baird (which also lifted it from “Hold” to “Buy”) – have raised price targets, while only Citigroup made a minimal cut. The consensus rating sits firmly in “Strong Buy” territory, underpinned by expectations for double-digit earnings growth in 2026 and sustained margin expansion in non-pipeline segments.
While the stock has already reclaimed most of its post-earnings losses, we will keep MTZ under review until the performance more closely reflects its fundamentals and the strong analyst conviction supporting its long-term outlook.
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❖ We are keeping Roper Technologies (ROP) under review, as its strong fundamentals and operational delivery are lined against its stock’s ongoing technical weakness and a lack of near-term catalysts beyond bouts of weakness in higher-growth and AI-related names.
ROP’s core business remains in excellent shape – the company continues to be one of the best-run industrial-software hybrids in the market. It reported 13% year-over-year revenue growth in Q2 2025 and raised its full-year growth outlook to 13%, supported by a consistent 60%+ recurring revenue mix, durable pricing power, and disciplined capital deployment. The $800 million acquisition of Subsplash, an AI-enabled vertical software platform, strengthens its pipeline, while $5 billion in remaining M&A capacity supports further high-ROIC bolt-ons. Roper maintains guidance for mid-teens cash flow growth over the long term and has demonstrated its ability to compound through cycles with 34 consecutive years of dividend increases.
Yet despite these strengths, ROP has remained rangebound, lagging the S&P 500 in recent months. The key reason for this underperformance is the stock’s lack of the AI-related momentum driving recent rallies elsewhere. Weak technical setup has added to downward short-term signals – which, although not rooted in deterioration of the business, have triggered some institutional outflows. While Roper has begun integrating AI into its businesses, the company remains largely outside the current AI narrative fueling market interest. On the other hand, the lack of a close relationship with the current market fixation has kept Roper’s valuation adequate, shielding it from sell-offs related to overvaluation fears.
Analyst sentiment is broadly supportive, with firms such as RBC, JPMorgan, and Truist maintaining Buy or Outperform ratings post-Q2, even as skeptics like Barclays question the long-term sustainability of mid-single-digit organic growth. Overall, analysts rate Roper a “Moderate Buy,” with an average price target implying an upside of ~20%, reflecting confidence in the company’s steady growth trajectory and durable cash generation.
On Tuesday, Citi initiated coverage of Roper Technologies with a “Buy” rating and a $626 price target, stating that the company’s capacity to accelerate organic growth and capture more value from its business mix is underappreciated by the market. Citi argues that Roper’s “subtle” incremental changes position it for enhanced profitability and sustainable growth, while improvements in operational efficiency, execution, scalability, and disciplined capital deployment are expected to drive greater shareholder value over time. Furthermore, Citi views AI as a net positive for Roper: the company’s vertical-specific data expertise equips it to build and deploy tailored AI solutions, strengthening its market positions. Roper’s decentralized operating model also gives it agility to swiftly capitalize on emerging AI trends within its verticals and adjacencies.
Given these dynamics, we prefer to hold ROP and monitor closely. If the stock decisively breaks below $520 on heavy volume, we would consider that a trigger to exit the position as it could signal a more prolonged sentiment shift. For now, the strength of Roper’s business model, recurring revenue base, and capital discipline outweigh the technical headwinds, making patience the better course while awaiting either a reversal in momentum or a fundamental catalyst to close the gap between performance and quality.
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Portfolio Earnings and Dividend Calendar
❖ The Q2 2025 earnings season is winding down, and there are no Smart Portfolio holdings scheduled to report until the next Newsletter comes out. However, several Portfolio companies are expected to report from end-August through mid-September.
❖ The ex-dividend dates for Applied Materials (AMAT), Microsoft (MSFT), and Interactive Brokers (IBKR) are coming this week.
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New Buy: Boston Scientific (BSX)
Boston Scientific plays a critical role in the global medical technology ecosystem, delivering innovative devices and therapies that diagnose, monitor and treat a broad range of complex conditions. Its products are embedded in life-saving procedures across cardiovascular care, electrophysiology, neuromodulation, urology, and more – helping physicians improve patient outcomes through minimally invasive solutions. With a platform that spans the full product lifecycle from R&D to commercial deployment, Boston Scientific operates at the intersection of precision medicine, procedural innovation and clinical efficiency. Its presence in hospitals, surgical centers and outpatient settings worldwide positions it not just as a device maker, but as a long-term partner in advancing care delivery. By integrating digital tools, procedural intelligence and AI-enabled diagnostics into its offerings, the company is redefining what is possible in interventional medicine – making it a key force shaping the future of global healthcare.
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Heart of Innovation
Founded in 1979, Boston Scientific began as a pioneer in minimally invasive medical solutions, playing a key role in redefining how cardiovascular and interventional procedures were performed. From the first steerable catheters and angioplasty tools to groundbreaking stent systems, the company established itself early as a catalyst for procedural innovation. Over the following decades, it steadily expanded into interventional cardiology, electrophysiology, urology, oncology, and neuromodulation, positioning itself at the forefront of device-based medicine across multiple specialties.
In the past five years, Boston Scientific’s transformation has accelerated. Strategic acquisitions and focused innovation have expanded its clinical reach, reinforced its growth engine, and elevated its role in global care delivery. The $4.2 billion acquisition of BTG in 2019 was a pivotal step, adding interventional oncology and venous therapies. Since then, the company has executed over 15 bolt-on deals, including Farapulse (pulsed field ablation), Baylis Medical (transseptal access), and Relievant Medsystems (chronic pain therapy) – each targeting high-growth adjacencies with unique technologies.
Boston Scientific’s M&A strategy has been matched by a surge in internal investment. Roughly 10% of revenue is now reinvested in R&D, helping fuel advancements in structural heart, electrophysiology, and digital health. The integration of AI tools like HeartLogic (for heart failure monitoring), BeatLogic (arrhythmia detection), and AVVIGO+ (interventional imaging) marks a deliberate shift toward embedded intelligence – not as standalone software, but as clinically integrated features within devices that improve outcomes and create stickier provider ecosystems.
The company has also embraced a more ecosystem-centric approach. It has expanded partnerships with hospital systems, academic centers and digital health platforms to accelerate product validation and adoption. Its venture capital arm continues to support early-stage med-tech innovators, offering optionality for future pipeline expansion.
Operationally, Boston Scientific has enhanced its global manufacturing and commercial footprint – especially in Asia-Pacific and Emerging Markets – while improving margin leverage through disciplined execution. Even as it navigates growing post-market surveillance demands and regional regulatory complexity, the company’s ability to innovate, scale, and adapt has reinforced its standing as a global leader in med-tech.
Today, Boston Scientific is no longer just a device maker – it’s a systems integrator and innovation platform, advancing the future of minimally invasive medicine across the world’s most critical care pathways.
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Circuits of Care
Boston Scientific is a global leader in minimally invasive medical devices, operating at the intersection of engineering, clinical science, and procedural innovation. Its business spans three major segments: Cardiovascular, which contributed about 66% of Q2 2025 revenue; MedSurg, at ~23%; and Neuromodulation, at ~11%.
Cardiovascular is the largest and fastest-growing, powered by therapies such as atrial fibrillation ablation (Farapulse), left atrial appendage closure (Watchman) and coronary interventions like Synergy and Agent drug-eluting stents. MedSurg includes Endoscopy and Urology – both benefiting from rising global demand for less invasive procedures and better patient outcomes.
Neuromodulation, though smaller, is gaining traction as BSX’s deep brain and spinal cord stimulators expand into new indications and geographies. The field is emerging as one of the most dynamic in medtech – with applications spanning chronic pain, Parkinson’s, and next-gen brain-computer interfaces. As clinical adoption widens and reimbursement pathways mature, BSX is well positioned to capture share in this high-growth domain.
The company operates in more than 120 countries, with 30-35% of revenue generated internationally. It continues to post double-digit sales growth in Asia-Pacific and Emerging Markets – regions expected to contribute a growing share of global medtech expansion. Still, its U.S. business remains the primary engine, supported by high procedure volumes and a consistent cadence of product innovation.
BSX’s total addressable market exceeds $100 billion today – projected to surpass $150 billion by 2029 – fueled by aging populations, rising chronic disease burdens, and broader access to care. Cardiovascular technologies alone could approach $90 billion by decade’s end, with electrophysiology, heart failure, and structural heart therapies forecast to grow at high single- to low double-digit rates. MedSurg is expanding steadily, while Neuromodulation is expected to grow at a 9%+ CAGR, depending on adoption and regulatory clarity.
Boston Scientific’s model emphasizes recurring procedures, longitudinal outcomes, and clinical evidence – not one-off device sales – embedding it deeply within hospital systems and physician workflows. Many of its platforms depend on procedural volume and multi-device configurations, positioning the company as a partner in outcomes rather than a transactional vendor. This approach reinforces both financial durability and clinical reliance across specialties.
A key differentiator is Boston Scientific’s embedded R&D culture. It reinvests about 10% of annual revenue into technology development, accelerating integration of AI and other advanced tools across its portfolio. For a company so R&D-intensive, the recently enacted One Big Beautiful Bill (OBBB) – which expands R&D tax credits and supports U.S.-based medtech innovation – provides a strong tailwind, enhancing returns on core innovation programs, expanding R&D capacity, and boosting long-term margin leverage.
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The Earnings Pulse
Boston Scientific reported strong Q2 2025 results, reinforcing its growth momentum across geographies and business lines. Revenue rose 22.8% YoY to $5.06 billion, beating estimates by ~$100 million. Organic revenue grew 10.8%, led by robust demand in Cardiovascular and Endoscopy, and supported by double-digit sales growth in the U.S. (+30.7%), Asia-Pacific (+16.3%), and Emerging Markets (+12%).
Notably, this quarter marked BSX’s tenth consecutive quarter of double-digit revenue and EPS growth, underpinned by sustained volume expansion and disciplined cost execution. Non-GAAP EPS rose 16.3% YoY to $0.75, ahead of expectations of $0.73. GAAP EPS was $0.53, up 10.4% from the prior year. Adjusted gross margin declined 130bps YoY to 70.1%, mainly due to inventory and obsolescence charges tied to the discontinuation of the ACURATE neo2™ valve in Europe. Despite this, operating margin expanded 170bps YoY to 28.1%, aided by improved mix and cost discipline.
Free cash flow for the quarter reached $772 million, up significantly from $445 million a year earlier. Management noted strong conversion despite FX and working capital timing. The company ended Q2 with $511 million in cash and short-term investments and net debt of ~$6.8 billion.
By business line, Cardiovascular grew 30.1% YoY, driven by continued strength in Farapulse (AFib), Watchman (stroke prevention), and coronary interventions (Synergy, Agent). MedSurg grew 9.3% YoY, with Endoscopy performing well. Urology posted positive growth despite supply chain constraints and price-based competition, which management flagged as temporary but notable headwinds. Neuromodulation revenue grew 4.5% YoY, reflecting early traction in next-gen stimulators and expanded indications.
Looking ahead, BSX raised its Q3 and full-year 2025 guidance despite a projected $100 million tariff headwind. For the ongoing quarter, the company guided for revenue of $4.9-5.0 billion, matching analyst estimates, with non-GAAP EPS of $0.70-0.72, coming slightly above expectations. Boston Scientific anticipates that Q4 seasonal strength – particularly in AFib, heart failure, and structural heart – will help carry the full-year upside. Following the guidance lift, the company now expects net sales growth for 2025 to reach 18-19% – versus 14-15% previously – translating to $19.7-19.9 billion in FY25 revenue, above the ~$19.5 billion consensus. Non-GAAP EPS is guided to $2.95-2.99 (versus $2.87-2.94 previously), implying 12-14% YoY growth – modestly ahead of the $2.92 Street estimate.
With consistent upside across metrics, expanding international momentum, and robust free cash flow generation, BSX is well-positioned to sustain its operational strength through the second half of 2025 and beyond.
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Vitals in Check
Boston Scientific’s stock has delivered strong returns over the past year, rising about 31% – far outpacing the S&P 500 and a peer set that includes slower-growing industry benchmark Medtronic, cardiovascular growth champion Abbott, orthopedics and surgical innovation leader Stryker, and agile structural heart specialist Edwards Lifesciences.
The outperformance is grounded in BSX’s category-leading growth: revenue has surged both over the past 12 months and on a three-year CAGR basis, comfortably ahead of peers. It also leads in YoY and three-year EBITDA expansion, with adjusted EPS growth close to the top of the pack – reinforcing expectations of continued strength across core metrics.
Past wins and expectations of sustained leadership in revenue, EPS, and free cash flow growth have led to higher valuations than peer averages on several metrics – including TTM and forward non-GAAP P/E, EV/EBITDA, and EV/Sales, as well as TTM Price/Sales. However, the premium over Edwards Lifesciences – which shares a comparable growth profile – is modest, despite Boston Scientific’s broader market position and stronger execution.
Crucially, BSX’s forward non-GAAP PEG is the lowest in the group – meaning its exceptional earnings growth is priced at a relative discount. That makes it the best growth-adjusted value in the peer set and underpins its “premium growth at a reasonable price” investment case.
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Investing Takeaway
Boston Scientific offers investors a rare combination of category leadership, expanding end markets, and relative value. The company has established itself as a durable growth engine in medtech, underpinned by procedural innovation, high clinical adoption, and a deepening global footprint. With a proven track record of operational execution and a platform model that rewards scale and consistency, BSX continues to outperform both peers and the broader market. Its forward outlook remains strong, supported by a high-growth pipeline, robust free cash flow, and expanding margins. Despite this momentum, the stock still trades at a discount on growth-adjusted valuation – positioning it as one of the most compelling long-term ideas in large-cap healthcare. For investors seeking sustained upside in a premium business at a reasonable price, Boston Scientific stands out.
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New Sell: Qualcomm (QCOM)
We are removing Qualcomm from the portfolio following its post-earnings rally, which has lifted the stock over 8% and created a clean opportunity to exit with a notable gain. While the company continues to execute well and boasts credible long-term positioning in AI, 5G, and automotive semiconductors, we see few near-term catalysts to justify sustained outperformance – even at a valuation that remains modest relative to peers.
Qualcomm’s latest results once again beat expectations, with strength across Automotive and IoT segments and signs of early traction in AI-related PCs. Yet despite consistently strong earnings delivery, the stock has lagged the broader semiconductor space year-to-date, underperforming the S&P 500 and struggling to break decisively above long-term resistance. This pattern suggests that while execution is solid, sentiment remains unconvinced – and it will likely take a stronger growth inflection to unlock the next leg up.
Valuation is undemanding, and the stock screens as moderately priced on both forward P/E and EV/EBITDA compared to peers. However, until the market sees tangible proof that Qualcomm’s diversification is translating into durable, high-growth revenue streams, that multiple is unlikely to expand. Automotive and IoT are growing, but not yet large enough to offset handset cyclicality or mitigate risks tied to Apple modem losses, trade tensions, or licensing headwinds.
Analyst sentiment remains mixed. JPMorgan, Piper Sandler, and Rosenblatt reiterated bullish ratings post-earnings, highlighting long-term AI upside and solid execution. Yet others – including Evercore, Loop, and Wells Fargo – remained cautious due to moderate growth expectations, geopolitical risk, and valuation ceilings. The consensus price target implies only limited upside from current levels.
In our view, Qualcomm remains a high-quality name worth revisiting – but for now, we prefer to step aside, lock in gains, and wait for a more compelling setup. Should momentum reaccelerate or the company deliver a breakout quarter in automotive or AI compute, we’d be open to reentry at a stronger inflection point.
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
Markets have been volatile, and while the Club gained a new name, UBER, it has lost two of its recent members – CRWD and VRT. The Winners are now 11 stocks: GE, AVGO, ANET, EME, ORCL, HWM, APH, TSM, IBKR, PH, and UBER.
The first contender for the Club’s entry is now CRWD with a 28.78% gain since purchase. Will it return to the ranks of the Winners, or will another stock outrun it to the finish line?
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