Executive Summary

Strong Q1 FY2026: revenue $1.391B (+9% YoY), adjusted EPS $2.34 (+15% YoY), constant-currency organic growth +8% driven by service and pricing; margins expanded despite tariff headwinds .
Beats vs consensus: revenue and adjusted EPS modestly above S&P Global estimates; EBITDA slightly above as well; drivers include price/productivity and FX tailwind offsetting tariffs and healthcare benefit cost pressure. Values with * retrieved from S&P Global.
Guidance: as-reported revenue growth raised to 8–9% (from 6–7%); free cash flow raised to ~$820M; adjusted EPS maintained at $9.90–$10.15 with tariff impact raised to ~$45M pre-tax .
Stock-relevant catalysts: revenue outlook raise, accelerating service growth and backlog, AST strength, plus a 10% dividend increase to $0.63 per quarter announced days before results and a CFO transition to long-time CAO Karen Burton .

What Went Well and What Went Wrong

What Went Well

Broad-based growth and margin improvement: “Our performance exceeded expectations and margins improved nicely, despite tariff headwinds,” with constant-currency organic growth +8% .
Healthcare and AST momentum: Healthcare revenue +8% to $974.7M (service +13%), AST revenue +13% to $281.2M (services +12%); segment operating income increased in both segments .
Cash generation: Operating cash flow $420.0M and free cash flow $326.5M, driven by earnings growth and working capital improvements .
CEO quote on outlook: FX favorable and expected to continue; productivity and restructuring benefits aided margins .
CFO reiterated balance sheet strength and dividend track record: “twentieth consecutive year of dividend increases with a 10% increase to $0.63 per quarter” .

What Went Wrong

Tariffs and healthcare benefits headwinds: Tariff impact increased to ~$45M pre-tax for FY26 (was $30M); higher employee healthcare benefit utilization adds cost pressure .
Tariff rate increases cited: steel/aluminum from 25% to 50%, copper from 0% to 50%, EU tariffs from 10% to 15%, driving the increased estimate .
Life Sciences capital remains soft versus historical levels (though backlog improved meaningfully); Q1 Life Sciences capital +1% with growth coming mainly from consumables and services .
Healthcare margins pressured by tariffs/inflation; EBIT margin increase in Healthcare limited to +10 bps despite strong volume/price/productivity .

Financial Results

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Millions)	$1,370.6	$1,480.5	$1,391.1
Diluted EPS - Continuing Ops ($USD)	$1.75	$1.48	$1.79
Adjusted Diluted EPS ($USD)	$2.32	$2.74	$2.34
Gross Profit ($USD Millions)	$610.3	$641.2	$628.0
Operating Income ($USD Millions)	$245.3	$216.1	$246.0
Gross Profit Margin %	44.53%*	44.25%*	45.14%*
EBIT Margin %	18.33%*	19.95%*	17.85%*
EBITDA ($USD Millions)	$377.2*	$419.0*	$367.6*
EBITDA Margin %	27.52%*	28.30%*	26.43%*

Values marked with * retrieved from S&P Global.

Segment breakdown (revenues and segment operating income):

Segment	Q3 2025 Revenue ($M)	Q4 2025 Revenue ($M)	Q1 2026 Revenue ($M)	Q3 2025 Op Inc ($M)	Q4 2025 Op Inc ($M)	Q1 2026 Op Inc ($M)
Healthcare	$976.0	$1,057.2	$974.7	$246.9	$279.7	$235.5
AST	$258.1	$273.9	$281.2	$115.8	$122.2	$136.7
Life Sciences	$136.4	$149.5	$135.2	$58.1	$65.0	$58.7

KPIs (Q1 FY2026):

KPI	Q1 2026
Cash from Operations ($USD Millions)	$420.0
Free Cash Flow ($USD Millions)	$326.5
CapEx (Purchases of PPE & intangibles, net) ($USD Millions)	$93.6
Dividend declared per share	$0.57
Backlog – Healthcare ($USD Millions)	$403.5
Backlog – Life Sciences ($USD Millions)	$111.0
Total Backlog ($USD Millions)	$514.5

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
As-reported Revenue Growth	FY2026	+6–7%	+8–9%	Raised
Constant-Currency Organic Growth	FY2026	+6–7%	+6–7%	Maintained
Adjusted EPS ($)	FY2026	$9.90–$10.15	$9.90–$10.15	Maintained
Tariff Impact (pre-tax, $M)	FY2026	~$30	~$45	Raised (more headwind)
Free Cash Flow ($M)	FY2026	~$770	~$820	Raised
Capital Expenditures ($M)	FY2026	~$375	~$375	Maintained
Effective Tax Rate	FY2026	~23.5% (implied)	~23.5% (unchanged)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4 FY2025)	Current Period (Q1 FY2026)	Trend
FX impact	FY2025 outlook reduced on currency headwind; guided neutral FX for FY2026 from Q4 base	FX favorable to revenue (~200 bps) expected to continue; later offset tariffs at EPS level	Improving FX tailwind vs prior neutral/headwind
Tariffs	FY2025 outlook did not reflect new tariffs; risk noted	Tariff pre-tax headwind raised to ~$45M; rate increases on metals/EU cited	Headwind intensified
Healthcare capital demand/backlog	Q4 backlog sustained; capital equipment down YoY	Healthcare orders +14% with backlog just over $400M; service +13%	Strengthening orders/backlog
AST volumes/margins	AST revenue +9–10% YoY; margins solid	AST constant-currency +10%; EBIT margin 48.6% (+150 bps); bioprocessing stabilizing	Improving margin/steady demand
Life Sciences capital cycle	Q3/Q4 capital softness after CECS divestiture; consumables strong	Backlog up >50% to $111M; capital +1% with mix/pricing aiding margins	Capital cycle turning positive
Employee healthcare cost	Not highlighted previously	Higher utilization raising costs alongside tariffs	New emerging cost headwind
Regulatory (EO/NESHAP)	Litigation settlement noted in Q4	STERIS did not seek EO relief extension; facilities already compliant	Execution/compliance advantage
ASC buildout	Not central	Viewed as a capital demand catalyst; training/compliance offerings key in ASCs	Secular tailwind developing

Management Commentary

CEO: “We are pleased with a strong start to fiscal 2026… performance exceeded expectations and margins improved nicely, despite tariff headwinds. Revenue also benefited from favorable foreign currency…” .
Segment notes: Healthcare capital +6%, service +13%, consumables +5%; AST services +12%, capital +46%; Life Sciences consumables +8% with margin benefit from mix/price/productivity .
CFO: “Free cash flow… $327M… driven by an increase in earnings and improvements in working capital… twentieth consecutive year of dividend increases with a 10% increase to $0.63 per quarter” .
Outlook: Adjusted EPS unchanged with FX offsetting increased tariffs; each segment expected to grow constant-currency organic revenue 6–7% .

Q&A Highlights

Tariffs: Increase driven by higher rates on steel/aluminum (25%→50%), copper (0%→50%), EU (10%→15%) since prior guide; explains raised ~$45M headwind .
AST outlook: Maintaining 6–7% organic growth despite strong Q1; conservatism given MedTech manufacturing shifts .
Bioprocessing: Stabilized over 4–5 months, back to normal trajectory; inventory dynamics monitored .
Life Sciences backlog: Capital orders recovering post downcycle; backlog up; confidence in catching up .
Employee healthcare costs: Higher utilization (not premiums) driving cost increases .
Capital allocation: Cash likely to build absent prepayable debt; buybacks to offset dilution; active on small M&A; larger opportunities evaluated opportunistically .
EO regulation: Did not apply for relief; facilities already compliant due to newer infrastructure; limited competitive impact expected .
ASC secular shift: Seen as positive for capital demand; need to support training/compliance in lower-scale settings .
FX hedging: Largely naturally hedged; FX top-line tailwind (~200 bps) nets to ~$14–15M EPS offset vs tariffs .

Estimates Context

Q1 FY2026 actuals vs S&P Global consensus:

Metric	Actual	Consensus	Beat/Miss
Adjusted EPS ($)	$2.34	$2.26375*	Beat
Revenue ($USD Millions)	$1,391.1	$1,362.7*	Beat
EBITDA ($USD Millions)	$367.6*	$366.4*	Beat

Values with * retrieved from S&P Global.
Implications: Modest beats on revenue and EPS driven by service strength, price/productivity, and FX (+200 bps) offsetting higher tariffs and healthcare benefit costs . Near-term estimate revisions likely upward for FY revenue and FCF (already raised); EPS risk balanced by tariff/benefit headwinds.

Key Takeaways for Investors

Mix and pricing momentum: Recurring revenue (service/consumables) remains the engine; expect continued operating leverage while monitoring cost headwinds .
AST resilience: High-margin AST (+150 bps EBIT margin) with stable medical device volumes and recovering bioprocessing supports consolidated margin durability .
Capital cycle turning in Life Sciences: Backlog up >50% to $111M; watch capital conversion and project timing over FY26 .
Guidance credibility: Raised revenue and FCF; unchanged EPS with explicit tariff offset by FX—model EPS around midpoint with sensitivity to metal tariffs and benefit utilization .
Cash returns: Dividend increased to $0.63/quarter; buybacks to offset dilution; cash to build near-term given debt structure .
CFO transition: Seamless succession from long-time CAO may reduce execution risk; continuity in financial leadership .
Trading lens: Narrative favors quality defensive growth with service-driven consistency and AST margin strength; watch headlines on tariffs and EO regulation for sentiment shifts .

Appendix: Additional Context and Non-GAAP Notes

Non-GAAP reconciliation highlights: Q1 adjustments include amortization of acquired intangibles ($67.1M), restructuring ($1.8M); net EPS adjustment ~$0.55 to arrive at $2.34 adjusted EPS .
Q1 GAAP performance: Net income from continuing operations $177.4M; GAAP diluted EPS $1.79 .
Segment organic growth (constant currency): Healthcare +8%, AST +10%, Life Sciences +4% .
Q2 FY2026 trend check: Revenue +10% YoY to $1.460B; adjusted EPS $2.47; constant-currency organic growth +9%; FY2026 adjusted EPS and FCF outlook raised again (to $10.15–$10.30 and ~$850M), FX tailwind trimmed to ~100 bps .