Executive Summary

Q4 FY2025 delivered a clean top- and bottom-line beat: revenue $1.481B vs $1.467B consensus* and adjusted EPS $2.74 vs $2.599 consensus*, with constant-currency organic growth of 6% and expanding EBIT margin to 24.8% driven by price/mix and productivity .
FY2026 outlook initiated: revenue growth 6–7% (as-reported and organic), adjusted EPS $9.90–$10.15 despite a ~$30M pre-tax tariff headwind; tax rate ~23.5%; capex ~$375M; FCF ~$770M .
Segment mix healthy: Healthcare revenue +5% (service +13%, consumables +6%, capital -4%); AST +9%; Life Sciences -7% (CECS divestiture and lower capital), with Life Sciences margins up on mix/price .
Cash generation and balance sheet strong: record FY free cash flow $787M and gross debt/EBITDA ≈1.4x; company increased buybacks in FY25 and retains capacity for M&A .

What Went Well and What Went Wrong

What Went Well

Price/mix and productivity drove margin expansion: Q4 gross margin to 44.3% (+170 bps YoY) and EBIT margin to 24.8% (+110 bps YoY); ~210 bps of price in Q4 .
Recurring revenue engine: Q4 total recurring revenue grew to $1.109B (service +7.3% YoY; consumables +6.5% YoY), supporting durability through cycles .
Clear FY26 plan despite tariffs: “Our fiscal 2026 outlook of $9.90 to $10.15 includes $30 million of tariff costs... The EPS range implies 7% to 10% growth” (CEO) .

What Went Wrong

Life Sciences revenue -7% YoY on CECS divestiture and capital softness; capital -16%, service -21% in Q4 .
Healthcare capital equipment down 4% YoY in Q4; management flagged shipment timing and customer project delays in recent quarters .
EO-related items and legal spend: a $48.15M Illinois EO litigation settlement recorded in Q4; FY26 cash outflow ~$40M reduces FCF vs FY25 .

Financial Results

Quarterly trend (oldest → newest)

Metric	Q2 FY2025	Q3 FY2025	Q4 FY2025
Revenue ($USD Millions)	$1,328.9	$1,370.6	$1,480.5
Diluted EPS - Continuing Ops ($)	$1.51	$1.75	$1.48
Adjusted EPS ($)	$2.14	$2.32	$2.74
Constant-Currency Organic Revenue Growth %	7%	6%	6%

Q4 FY2025 vs prior year and consensus

Metric	Q4 FY2024	Q4 FY2025	Consensus (Q4 FY2025)*	Outcome
Revenue ($USD Millions)	$1,419.4	$1,480.5	$1,466.8*	Beat
Adjusted EPS ($)	$2.41	$2.74	$2.599*	Beat
Diluted EPS - Continuing Ops ($)	$1.54	$1.48	—	—

Margins and price/mix

Metric	Q3 FY2025	Q4 FY2025
Gross Margin %	44.6%	44.3%
EBIT Margin %	23.3%	24.8%
Price Contribution (bps)	~240 bps	~210 bps

Segment breakdown (Q4)

Segment	Q4 FY2024	Q4 FY2025
Healthcare Revenue ($M)	$1,007.9	$1,057.2
Healthcare Operating Income ($M)	$245.2	$279.7
AST Revenue ($M)	$250.9	$273.9
AST Operating Income ($M)	$114.2	$122.2
Life Sciences Revenue ($M)	$160.6	$149.5
Life Sciences Operating Income ($M)	$64.5	$65.0

KPIs and mix

KPI	Q4 FY2024	Q4 FY2025
Total Recurring Revenue ($M)	$1,036.8	$1,109.5
Capital Equipment Revenue ($M)	$382.6	$371.1
Healthcare Backlog ($M)	$353.8	$369.2
Life Sciences Backlog ($M)	$71.4	$83.7
Total Backlog ($M)	$425.2	$452.9

Note: FY free cash flow reached a record $787.2M vs $620.3M in FY2024 (driven by working capital) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth (as-reported)	FY2026	n/a	6–7%	Introduced FY2026 outlook
Constant-Currency Organic Growth	FY2026	n/a	6–7%	Introduced
Adjusted EPS	FY2026	n/a	$9.90–$10.15	Introduced (includes tariffs)
Effective Tax Rate	FY2026	n/a	~23.5%	Introduced
Tariff Impact (pre-tax)	FY2026	n/a	~+$30M headwind	New headwind quantified
Capital Expenditures	FY2026	n/a	~$375M	Introduced
Free Cash Flow	FY2026	n/a	~$770M	Introduced
Dividend	Next Payable	n/a	$0.57/share payable 6/26/2025	Maintained

Management also noted ~200 bps of price embedded in FY2026 outlook .

Earnings Call Themes & Trends

Topic	Q2 FY2025 (Q-2)	Q3 FY2025 (Q-1)	Q4 FY2025 (Current)	Trend
Tariffs / Macro	—	Monitoring; too fluid to quantify	~$30M net tariff cost; ~50% China, ~50% global 10% tariff; mitigation underway; tax ~23.5%	From uncertainty → quantified with mitigation
AST demand / bioprocess	AST +9%, capex up; services +6%	Services +10%; bioprocess improving; cautious on volatility	FY26 AST services high-single-digit growth; capex to decline; total 6–7%	Normalizing growth; conservative outlook
Healthcare capital equipment & backlog	Capex -2% YoY; backlog $405.3M	Capex -5% YoY; shipment delays; backlog $434.9M; orders +10%	Capex -4% YoY; full-year orders +12%; backlog $369.2M	Demand intact; shipment timing variable
Life Sciences	Revenue -4%; consumables +21%, capex -35%	Revenue -7%; consumables +14%, capex -31%	Revenue -7%; consumables +8%; margins up on mix/price	Recurring strength; capital set to recover
EO litigation	—	Mistrial; retrial set for May; higher corp legal expense	$48.15M Illinois EO settlement in Q4; ~$40M FY26 cash outflow	Costs recognized/quantified
M&A	—	—	Capacity and willingness for deals if fit is right	Optionality restored
Onshoring / supply chain	—	—	Limited near-term impact; regulatory constraints slow moves	Watchlist item

Management Commentary

“Fiscal 2025 was another record year… We continue to benefit from our diversified Customer base and growth in global procedure volumes.” – Dan Carestio, CEO .
“Gross margin for the quarter increased 170 bps… to 44.3%. Positive price, favorable mix and productivity outpaced labor inflation. EBIT margin increased 110 bps to 24.8%.” – Mike Tokich, CFO .
“Our fiscal 2026 outlook of $9.90 to $10.15 includes $30 million of tariff costs… The EPS range implies 7% to 10% growth in earnings, including tariffs.” – CEO .
“We continue to pay down debt… ending with $2 billion in total debt. Gross debt to EBITDA at quarter end was approximately 1.4x. Free cash flow for fiscal 2025 was a record $787 million.” – CFO .

Q&A Highlights

Tariffs quantified and mitigation: ~$30M net, roughly half China-related and half global 10% tariff; mitigation actions ongoing and weighted later in the year; bulk of impact in Healthcare .
AST capacity/demand: Services growth guided high-single digits for FY26; capacity is not a governor—able to accommodate higher demand if it materializes .
Healthcare capital equipment: Category is a “utility,” supported by procedure growth; backlog healthy and orders strong entering FY26 .
Cash flow headwinds: FY26 FCF lower vs FY25 primarily due to ~$40M EO legal settlement payment and less inventory tailwind; tariffs also a drag .
M&A appetite: With leverage near ~1.4x, company is open to deals that fit strategic/financial criteria .

Estimates Context

Q4 FY2025 actuals vs S&P Global consensus:
- Revenue: $1,480.5M vs $1,466.8M consensus* → Beat .
- Adjusted EPS: $2.74 vs $2.599 consensus* → Beat .
Number of estimates: 7 for revenue and EPS*.

Metric	Consensus*	# Estimates*	Actual	Outcome
Revenue ($USD Millions)	$1,466.8*	7*	$1,480.5	Beat
Adjusted/Primary EPS ($)	$2.599*	7*	$2.74	Beat

Values marked with * retrieved from S&P Global.

Implication: With FY2026 EPS guidance of $9.90–$10.15 including ~$30M tariffs and ~200 bps price, estimate revisions likely skew upward on operating leverage and recurring strength, while Street models may adjust for tariff phasing and a slightly lower FCF vs FY25 .

Key Takeaways for Investors

Quality beat with resilient recurring revenue and expanding EBIT margin; Q4 strength underpinned by price/mix and productivity .
FY2026 guide credible despite tariff headwind; pricing (~200 bps) and restructuring savings support 7–10% EPS growth .
Healthcare fundamentals solid (orders/backlog), implying improved capital shipment cadence as project timing normalizes .
AST normalization continues; management conservatively guides services growth high-single digits, leaving upside if bioprocessing accelerates .
Life Sciences recurring performing; capital appears set for recovery as pharma orders improved late in FY25 (backlog up) .
Strong FCF and low leverage provide optionality for buybacks/M&A; monitor EO cash settlement ($40M) and tariff mitigation as FY26 near-term drags .
Trading lens: Narrative skew positive on durable recurring, improving capital execution, and quantified tariff headwind; beats on revenue/EPS and confident FY26 framework are potential positive catalysts for sentiment .

Appendix: Additional detail and reconciliations

Non-GAAP adjustments in Q4 included $48.15M Illinois EO litigation settlement; adjusted EPS $2.74 vs GAAP EPS (cont. ops) $1.48 .
Free cash flow (FY): $787.2M vs $620.3M prior year, driven by working capital improvements .
Dividend: $0.57/share payable June 26, 2025 (declared May 7, 2025) .

Notes: All company figures reflect continuing operations as presented. Values marked with * retrieved from S&P Global.

STERIS plc (STE)·Q4 2025 Earnings Summary