Abbott Laboratories makes money by selling things people need over and over again. It runs four businesses: medical devices like heart monitors and the FreeStyle Libre continuous glucose monitor for people with diabetes, diagnostic tests for hospitals and labs, nutritional products like Similac infant formula and Ensure adult nutrition drinks, and branded generic medicines sold in emerging markets worldwide. None of these businesses depends on a single blockbuster drug patent. Instead, Abbott earns revenue from millions of repeat purchases across more than 160 countries, which means the money comes in steadily rather than in one big burst. The diagram below traces where the money goes.
How Abbott Laboratories Makes Money
flowchart TD
A["Four Product Lines
$44.3B revenue"] --> B["Established Pharma
Branded generics"]
A --> C["Diagnostic Systems
Labs and testing"]
A --> D["Nutritional Products
Infant formula, Ensure"]
A --> E["Medical Devices
Pacemakers, glucose monitors"]
B --> F["Direct Sales to
Wholesalers, pharmacies, governments"]
C --> F
D --> F
E --> F
F --> G["Gross Margin
56.4% of revenue"]
G --> H["Operating Expenses
R&D, manufacturing, distribution"]
H --> I["Operating Income
18.2% margin on revenue"]
I --> J["Free Cash Flow
$7.4B annually"]
J --> K["Reinvestment in
Product development and acquisitions"]
K --> A
J --> L["Shareholder Returns
Dividends and debt service"]
C -.->|"Shared lab infrastructure
and distribution networks"| D
C -.->|"Shared distribution
centers worldwide"| E
Five years of financial data tell a story with two distinct chapters. From 2021 to 2023, revenue fell from $43.1 billion to $40.1 billion. That drop was not a sign of a broken business. It was almost entirely caused by COVID-19 test sales collapsing as the pandemic faded. In 2021 and 2022, hospitals, pharmacies, and governments bought enormous quantities of Abbott's rapid tests. When that demand disappeared, a real hole opened in the Diagnostics segment. COVID-19 testing sales fell from $1.6 billion in 2023 to just $297 million in 2025. The core businesses underneath that noise, however, kept growing.
Abbott Revenue (2021 to 2025, $B)
Revenue dipped in 2023 as COVID-19 test demand collapsed, then recovered as Medical Devices and Established Pharmaceuticals accelerated.
By 2025, total revenue had climbed back to $44.3 billion, a new five-year high. The engine behind that recovery was Medical Devices, specifically Diabetes Care. Sales of Abbott's FreeStyle Libre continuous glucose monitoring system totaled $7.6 billion in 2025, up from $6.4 billion in 2024. That single product line grew 16.3 percent in 2025, excluding currency effects. Heart failure devices, electrophysiology tools, and structural heart products each grew more than 10 percent in the same period. The Medical Devices segment as a whole now carries an operating profit margin of 33.7 percent, up from 31.4 percent in 2023.
$7.6B
FreeStyle Libre CGM sales in 2025, up from $6.4B in 2024
Cash generation tells the same story. Operating cash flow was $10.5 billion in 2021. It dropped to $7.3 billion in 2023 as COVID testing revenue evaporated. By 2025 it had recovered to $9.6 billion. Free cash flow, which is what is left after Abbott spends money maintaining and upgrading its factories and equipment, followed the same arc: $8.6 billion in 2021, a trough of $5.1 billion in 2023, then $7.4 billion in 2025. Net debt fell from $8.3 billion in 2021 to $4.4 billion in 2025, showing that Abbott used the recovery to pay down borrowings rather than spend freely.
$5.1B
Free Cash Flow 2023
$7.4B
Free Cash Flow 2025
Free cash flow recovered sharply as the COVID-19 testing drag faded and Medical Devices growth accelerated.
2025
milestone
Abbott Agrees to Acquire Exact Sciences for ~$21B
In November 2025, Abbott announced a deal to pay $105 per share in cash for Exact Sciences Corporation, a company focused on cancer diagnostics. The total equity value is approximately $21 billion, with an estimated enterprise value of $23 billion. Abbott secured a $20 billion short-term bridge loan to back the deal. If completed, this would be Abbott's largest acquisition in recent history and would push it into the fast-growing cancer detection market. It would also add roughly $20 billion in new borrowing to a balance sheet that had just finished paying down debt.
That acquisition is the most important number to understand right now. Abbott's long-term debt stood at $12.9 billion at the end of 2025. The Exact Sciences deal would add approximately $20 billion more in borrowings on top of that, plus absorb Exact Sciences' own estimated $1.8 billion of net debt. The company that just spent four years carefully reducing its net debt from $8.3 billion to $4.4 billion would be taking on a debt load many times larger than anything it carried during the five-year window in the data. Whether that is a wise move depends entirely on whether Exact Sciences' cancer diagnostics business can grow fast enough to justify the price and service the debt.
What Is a Continuous Glucose Monitor?
A continuous glucose monitor, or CGM, is a small sensor worn on the body that checks blood sugar levels automatically, many times per day, without a finger prick. People with diabetes use them to manage their condition. The sensor itself is a consumable: it wears out and must be replaced regularly, creating a stream of repeat purchases. Abbott's FreeStyle Libre is one of the leading CGM systems in the world.
Abbott's Diagnostics segment faces its own unresolved problem. COVID-19 rapid test sales, which once added billions of dollars per year, have now shrunk to $297 million. The segment's operating margin fell from 24.4 percent in 2023 to 19.5 percent in 2025 as that high-margin volume disappeared. On top of that, China's government introduced volume-based procurement programs that squeezed prices on laboratory testing equipment sold there. Abbott is betting that its Alinity suite of diagnostic instruments, expanded test menus, and digital health tools can replace that lost volume. That bet has not yet been proven.
What Is Volume-Based Procurement in China?
China's government runs a program where it groups hospitals together and negotiates bulk discounts on medical products. Companies that want to keep selling in China's hospitals often have to cut their prices sharply to win these contracts. This pushes down revenue even if the number of tests or devices sold stays the same or goes up.
There are specific risks documented in Abbott's own filings that are worth naming plainly. First, manufacturing safety. In 2022, Abbott recalled infant formula from its Michigan factory and had to stop making it there after FDA inspections. The company entered a formal agreement with the FDA called a consent decree. A repeat of that kind of event in any of its four businesses could trigger product recalls, factory shutdowns, lawsuits, and lost market share. Second, regulatory compliance. Abbott operates in more than 160 countries, each with its own rules. Failure to follow those rules can mean fines, forced recalls, or losing the right to sell certain products. Third, the IRS is challenging Abbott's tax filings for multiple years, with assessments totaling over $1 billion across the 2017 through 2020 tax years. Abbott is contesting all of these in U.S. Tax Court.
$23B
Estimated enterprise value of the Exact Sciences acquisition announced in November 2025
The Nutritional Products segment adds a quieter risk. U.S. pediatric nutrition sales fell 2.3 percent in 2025, reflecting lower infant formula volumes. The adult nutrition business in the U.S. also declined 2.2 percent. International sales partly offset those drops, but the segment's overall growth was essentially flat at 0.4 percent. The segment still earns a decent operating margin of 18.4 percent, but it is not growing in the United States. Competition from private-label and local manufacturers, combined with changing consumer preferences, continues to apply pressure.
Abbott paid dividends of $2.40 per share in 2025 and increased its quarterly dividend by 6.8 percent in December 2025. Total dividends paid in 2025 were $4.1 billion. A company paying out that much cash while also preparing to borrow $20 billion for an acquisition is making a strong statement about its confidence in future cash flows.
What Is a Consent Decree With the FDA?
A consent decree is a legal agreement between a company and the U.S. Food and Drug Administration. It usually happens after serious violations are found at a manufacturing facility. The company agrees to fix specific problems, and the FDA gets the right to monitor progress. Violating a consent decree can lead to additional penalties or factory closures.
The Bet
FreeStyle Libre keeps growing fast enough, for long enough, to carry the entire Medical Devices segment while the Diagnostics segment rebuilds without COVID-19 test revenue. That assumption has to hold while Abbott simultaneously digests a roughly $23 billion acquisition of Exact Sciences, services what would become one of the largest debt loads in the company's recent history, and proves that cancer diagnostics can eventually contribute enough profit to justify the price paid. If FreeStyle Libre growth slows, or if the Exact Sciences integration stumbles, the financial model that funds R&D, dividends, and debt repayment all at once comes under serious pressure.
Open question
Abbott's recovery from the COVID-19 testing collapse has been real and measurable. FreeStyle Libre is growing fast. Margins are improving. Debt was coming down. But the company has now committed to spending roughly $23 billion on a cancer diagnostics business at the same moment its existing Diagnostics segment is losing ground. Can a single product line, FreeStyle Libre, generate enough cash to fund a $23 billion acquisition, service the debt that comes with it, maintain a growing dividend, and keep the Diagnostics segment competitive, all at the same time?
Compiled · 10-K · FY2025
Manufacturing and Product Safety
Abbott's complex manufacturing processes for many products could fail due to equipment problems, supply chain issues, or other errors. If problems happen, Abbott may have to throw away products, issue recalls, pay for lawsuits, or temporarily shut down factories. This happened in 2022 when Abbott recalled infant formula from its Michigan facility and had to stop making it there.
Debt and Financing
Abbott is borrowing approximately 20 billion dollars to buy Exact Sciences, adding to its current 12.9 billion dollars in debt. This larger debt could reduce Abbott's flexibility to handle business changes and might make it harder to borrow money in the future or cause credit rating problems.
Regulatory Compliance
Abbott must follow strict FDA and international rules for drug, medical device, and nutrition products. If Abbott breaks these rules, the FDA can issue warnings, fines, recalls, or even shut down production at factories. Abbott learned this when it entered a consent decree with the FDA in May 2022 after the infant formula recall.
Product Research and Development
Abbott spends large amounts of money developing new products and data-driven healthcare solutions, but there is no guarantee these efforts will succeed or create products customers want. New products can fail due to safety concerns, inability to get regulatory approval, or competitors creating better solutions first.
Global Supply Chain Disruptions
Abbott's large global supply chain could be disrupted by inflation, labor shortages, tariffs, the Russia-Ukraine conflict, or other geopolitical problems. These disruptions could increase costs for raw materials and supplies or make products harder to get, which happened during the COVID-19 pandemic.
10-K Item 1A · Risk Factors
