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STRYKER CORP (SYK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered double‑digit organic growth and margin expansion: revenue $6.02B (+11.1% YoY), adjusted EPS $3.13 (+11.4% YoY), adjusted operating margin 25.7% (+110 bps), with pricing +0.5% and FX +0.8% tailwinds .
  • Both revenue and EPS exceeded S&P Global consensus; management raised FY2025 guidance to 9.5–10.0% organic sales and $13.40–$13.60 adjusted EPS; tariffs impact reduced to ~$175M and FX now slightly positive, a key stock catalyst. Bold beat: revenue and EPS vs consensus; guidance raise .
  • MedSurg & Neurotechnology posted 17.3% reported growth to $3.77B (11.0% organic), while Orthopaedics notably grew 9.0% organic despite Spinal Implants divestiture drag; best‑ever Q2 Mako installations underpin knee/hip momentum .
  • Headwinds: Medical supply disruptions to persist through year; Vascular slower in U.S. with H2 product launch tailwinds; Inari destocking and salesforce changes created near‑term noise but still targeted for double‑digit 2025 pro forma growth .
  • Narrative for H2: sustained procedural volumes, elevated capital backlog, continued margin expansion initiatives, and easing macro/tariff pressure—management targets another ~100 bps full‑year adjusted operating margin expansion .

What Went Well and What Went Wrong

What Went Well

  • Double‑digit organic growth (10.2%) and adjusted EPS growth (+11.4%), with adjusted operating margin expanding 110 bps to 25.7%: “We again delivered double‑digit sales and adjusted earnings per share growth” — Kevin Lobo .
  • MedSurg & Neurotechnology strength: $3.77B revenue (+17.3% reported; +11.0% organic), Endoscopy U.S. organic growth ~18.6% on robust OR infrastructure and 1788 platform; “best ever Q2 for Mako installations” .
  • Guidance raised for FY2025 (organic sales 9.5–10.0%, adjusted EPS $13.40–$13.60) with FX turning slightly positive and tariffs reduced to ~$175M; “we are raising our full year 2025 guidance” .

What Went Wrong

  • Medical supply disruptions expected to linger through year, pressuring Emergency Care; growth to accelerate in back half but remains a watch item .
  • Vascular U.S. growth modest (1.4%) amid disruptions; recovery back‑half expected on Surpass Elite, Access Lift, intracranial catheter, Broadway aspiration launches .
  • Inari integration disruptions (destocking, sales rep transitions, non‑compete signings) created near‑term volatility; management reiterates ~$590M 10‑month 2025 sales and double‑digit growth, but cadence is bumpier near‑term .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$6.436 $5.866 $6.022
Reported Gross Margin %64.9% 63.8% 63.8%
Adjusted Gross Margin %65.3% 65.5% 65.4%
Reported Operating Margin %9.0% 14.3% 18.5%
Adjusted Operating Margin %29.2% 22.9% 25.7%
GAAP Diluted EPS ($)$1.41 $1.69 $2.29
Adjusted EPS ($)$4.01 $2.84 $3.13
YoY Revenue Growth (Q2)——11.1%
YoY GAAP EPS Growth (Q2)——7.0%
YoY Adjusted EPS Growth (Q2)——11.4%
Actual vs Consensus (Q2 2025)ConsensusActualSurprise
Revenue ($USD)$5,928,795,670*$6,022,000,000 Beat
Primary EPS ($)$3.070*$3.13 Beat
EBITDA ($USD)$1,609,557,120*$1,618,000,000 Beat

Values marked with * retrieved from S&P Global.

Segment Revenue and Growth (Q2 2025)Revenue ($USD Billions)Reported Growth YoYConstant CurrencyOrganic Growth
MedSurg & Neurotechnology$3.771 17.3% 16.7% 11.0%
Orthopaedics (total)$2.251 2.0% 1.1% 9.0%
Subsegment Sales (Q2 2025)Revenue ($USD Millions)Reported Growth YoY
Instruments$768 10.0%
Endoscopy$899 17.1%
Medical$990 9.0%
Vascular$498 52.3%
Neuro Cranial$616 19.8%
Knees$640 6.3%
Hips$466 8.9%
Trauma & Extremities$957 15.0%
Other Orthopaedics$183 9.6%
Spinal Implants$5 (97.2%)
KPIs and Operating DriversQ2 2025Notes
Adjusted effective tax rate (%)15.9% Q2 adjusted; FY guide 15–16%
Pricing impact on organic sales (%)+0.5% Both segments positive pricing
FX impact on sales (%)+0.8% Slightly positive FX in outlook
Cash from operations (YTD, $USD Billions)$1.361 Working capital improvements
Tariff impact (FY 2025, $USD Millions)~$175 Lower vs ~$200 prior
Cumulative Mako robotic procedures2,000,000 Best‑ever Q2 Mako installs
Endoscopy U.S. organic growth~18.6% Broad portfolio strength

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic net sales growthFY 20258.5%–9.5% 9.5%–10.0% Raised
Adjusted EPSFY 2025$13.20–$13.45 (incl. Inari dilution, offset ~$200M tariffs) $13.40–$13.60 Raised
FX impactFY 2025Slightly unfavorable if rates hold Slightly positive if rates hold Improved
Tariffs net impactFY 2025~ $200M ~ $175M Lowered
Adjusted operating margin expansionFY 2025—~+100 bps YoY (narrative) Reiterated

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/technology initiativesNot highlighted in PR Not highlighted in PR Blueprint AI surgical planning; Gauss Surgical AI; new Chief Digital & Information Officer; more detail at investor day Increasing focus
Supply chain——Medical supply disruptions persist through year; H2 acceleration expected Persistent headwind, improving H2
Tariffs/macro2025 FX ~‑1% to sales, EPS -$0.10 to -$0.15 Tariffs ~$200M FY headwind Tariffs ~$175M; FX slightly positive; back‑end loaded P&L impact via COGS Improving macro inputs
Product performanceEndoscopy strong double‑digit Endoscopy +11.4%–12.1%; Trauma & Extremities +13.9% Endoscopy U.S. ~18.6% organic; Trauma & Extremities +13.6% U.S.; best‑ever Mako installs Accelerating
Regional trendsU.S. +11.8%, Intl +7.2% U.S. +13.4%, Intl +7.3% U.S. +12.5%, Intl +6.8%; EU MDR slowing approvals U.S. outperformance sustained
Regulatory/legal——EU MDR slows EU launches; LifePak 35 EU approval for Q3 launch EU MDR drag; selective approvals
R&D/OpEx executionAdj. op margin +200 bps in Q4 Adj. op margin +100 bps in Q1 Adj. op margin +110 bps; focus on price, lean, procurement, shared services Consistent expansion

Management Commentary

  • “We again delivered double‑digit sales and adjusted earnings per share growth in the second quarter” — Kevin A. Lobo, Chair & CEO .
  • “We exited Q2 with strong momentum…we are raising our full year 2025 outlook, which includes delivering another 100 basis points of adjusted operating margin expansion” — Kevin A. Lobo .
  • Margin drivers: “continued focus on price…manufacturing efficiency…lean initiatives…procurement”— Preston Wells, CFO .
  • “Best ever Q2 for Mako installations both in the U.S. and worldwide” — Jason Beach, VP Finance & IR .
  • “We now estimate a net impact from tariffs in 2025 of approximately $175 million…reflects reduction in U.S.–China tariffs and EU framework” — Company press release and CFO .
  • Inari integration: “destocking…non‑competes…rapid hiring; underlying procedural demand was double digits…expect very good numbers in Q3 and Q4” — Kevin Lobo .

Q&A Highlights

  • Margin strength and returning EPS guide near pre‑tariff/Inari dilution: driven by price discipline, manufacturing efficiency, lean/procurement initiatives, and G&A leverage; consistent +100 bps adjusted operating margin delivery Q1 and Q2 .
  • ASC momentum across specialties (knees/hips, cardiology, general surgery); Mako financing more common in ASCs vs hospital outright purchases .
  • Tariffs cadence: impact flows through inventory to COGS; heavier in H2; net impact reduced to ~$175M with U.S.–China reductions offset by EU framework .
  • Medical supply issues isolated to Emergency Care; linger through year but division can still reach double‑digit organic growth for FY .
  • Endoscopy surge across communications (Oculon lights), 1788 platform, sports medicine shoulder portfolio; “one of those quarters where everything caught fire” .
  • Robotics pipeline and autonomy: Mako capable of autonomous operation but not prioritized due to regulatory burden; strategy is application expansion (revision hip, spine, shoulder) .

Estimates Context

  • Q2 2025 performance exceeded consensus: revenue $6.022B vs $5.929B*, primary EPS $3.13 vs $3.070*, EBITDA $1.618B vs $1.610B*; both headline metrics register as beats, supporting guidance raise. Values retrieved from S&P Global.
  • With FX improving and tariffs lower, Street may need to lift FY EPS and organic growth estimates toward $13.50 midpoint and ~10% organic growth; management’s reiterated margin expansion supports upward revisions .

Key Takeaways for Investors

  • Bold beat and raise: revenue and EPS beats vs S&P Global consensus and higher FY guide (organic +9.5–10.0%, EPS $13.40–$13.60) are positive catalysts; FX tailwind and lower tariff estimate de‑risk H2 .
  • Margin story intact: sustained price realization, manufacturing efficiencies, and OpEx discipline underpin consistent adjusted operating margin expansion (+100–110 bps), supporting compounding EPS .
  • Mako flywheel accelerating: best‑ever Q2 installs, revision hip launch, upcoming spine/shoulder broaden TAM; international ramp aided by Australian outcomes data and approvals trajectory .
  • MedSurg & Neurotechnology leadership: Endoscopy strength (OR infrastructure, 1788, shoulder portfolio) and Neuro Cranial/IVS growth offset Medical supply issues; H2 product launches to lift Vascular .
  • Inari integration: near‑term noise (destocking/salesforce changes) but pipeline and international leverage point to durable double‑digit growth and ~$590M 10‑month contribution in 2025 .
  • Watch items: Medical supply normalization timing, EU MDR approval cadence, tariff framework finalization; management emphasizes mitigation via manufacturing footprint and cost controls .
  • Positioning: Diverse end markets, elevated capital backlog, procedural resilience, and easing macro headwinds support continued beat‑and‑raise potential into H2 .

Notes: All company performance and qualitative statements are cited to primary documents. Consensus values marked with * retrieved from S&P Global.