How Does Abbott Laboratories Make its Money?
Abbott Laboratories is a diversified healthcare company that develops and sells medical devices, diagnostics, nutritional products, and branded generic pharmaceuticals. Abbott operates in approximately 160 countries and is structured around four business segments, making it one of the most diversified healthcare companies in the world.
After spinning off its research-based pharmaceutical business as AbbVie in 2013, Abbott has been focused on areas where it can build durable, device-driven revenue streams. The company’s standout franchises include the FreeStyle Libre continuous glucose monitor (CGM) for diabetes, rapid diagnostic tests, and its global nutrition business (Ensure, Similac, Pedialyte).
Revenue Breakdown
| Segment | 2024 | 2023 | YoY Growth |
|---|---|---|---|
| Medical Devices | $18.5B | $16.8B | +10.1% |
| Diagnostics | $10.7B | $10.2B | +4.9% |
| Nutritional Products | $8.4B | $8.2B | +2.4% |
| Established Pharmaceuticals | $5.4B | $5.2B | +3.8% |
| Total Revenue | $42.5B | $40.1B | +6.0% |
Medical Devices — 44% of Revenue
Abbott’s largest and fastest-growing segment. The star product is FreeStyle Libre, a continuous glucose monitoring system that uses a small sensor on the arm to track blood sugar levels without finger pricks. FreeStyle Libre generated approximately $6.3B in 2024 revenue (up 22%), making it one of the fastest-growing medical devices globally. The segment also includes:
- Structural Heart — MitraClip (for mitral valve repair) and transcatheter aortic valve replacement (TAVR) systems via the Navitor platform.
- Electrophysiology — Mapping and ablation systems for treating heart rhythm disorders. Abbott’s electrophysiology business has been gaining share with its new pulsed-field ablation (PFA) technology.
- Neuromodulation — Spinal cord stimulators and deep brain stimulation systems for chronic pain management.
- Vascular — Drug-eluting stents and catheters.
Diagnostics — 25% of Revenue
Laboratory diagnostics (blood tests, immunoassays) and point-of-care testing. Abbott’s Alinity family of lab analyzers is deployed in hospitals and laboratories worldwide. The rapid diagnostics business includes BinaxNOW (COVID-19), which drove massive revenue during the pandemic. Post-COVID, the diagnostics base business has returned to steady mid-single-digit growth.
Nutritional Products — 20% of Revenue
Pediatric (Similac, PediaSure) and adult (Ensure, Glucerna, Pedialyte) nutritional products. Abbott is the global leader in medical nutrition. Ensure is the #1 adult nutritional drink in the U.S. This segment generates consistent revenue with modest growth, providing stability to the overall business.
Established Pharmaceuticals — 13% of Revenue
Branded generic pharmaceuticals sold primarily in emerging markets (India, China, Brazil, Russia). These are off-patent drugs that Abbott manufactures and distributes under trusted brand names. The segment provides steady cash flow and growth driven by increasing healthcare access in developing countries.
Income Statement Overview
| Metric | 2024 | 2023 |
|---|---|---|
| Total Revenue | $42.5B | $40.1B |
| Cost of Products Sold | $19.1B | $18.5B |
| Gross Profit | $23.4B | $21.6B |
| Operating Expenses | $14.4B | $13.2B |
| Operating Income | $9.0B | $8.4B |
| Net Income | $7.4B | $6.4B |
Key Financial Metrics
- Gross Margin: 55.1% — Healthy, reflecting the high-margin device and diagnostics businesses blended with the lower-margin nutrition segment.
- Operating Margin: 21.2% — Solidly profitable across all segments. Medical devices carry the highest margins, while nutrition and pharma are moderate.
- Revenue Growth: +6.0% — Driven primarily by FreeStyle Libre and the broader medical devices portfolio. Organic growth (excluding FX) was closer to 8%.
- FreeStyle Libre Revenue: ~$6.3B — Growing 22% and still early in its adoption curve. The addressable population includes the estimated 540 million people globally with diabetes, plus the emerging opportunity in pre-diabetes and general wellness monitoring.
- R&D Spending: ~$2.9B — Abbott invests steadily in next-generation devices, with a focus on less invasive procedures and digital health.
What to Watch
- FreeStyle Libre growth — Libre is Abbott’s most important growth driver. Expansion into Type 2 diabetes (a much larger population than Type 1), over-the-counter availability (Libre 2 was approved for OTC sales), and international expansion provide a long runway.
- CGM competition — Dexcom and Medtronic compete in continuous glucose monitoring. Abbott’s lower price point is an advantage, but technology improvements and new entrants could increase competitive pressure.
- Structural heart and electrophysiology — These device categories are growing in the high teens. New products like pulsed-field ablation (PFA) catheters could accelerate growth and market share gains.
- Infant formula recovery — Abbott’s Similac brand was impacted by a 2022 recall (Sturgis, Michigan plant). The brand has been recovering share but the recall created lasting reputational damage. Full share recovery is still in progress.
- Emerging market pharmaceuticals — The established pharmaceuticals segment benefits from rising healthcare spending in developing countries. India, China, and Latin America are particularly important growth markets.