Stryker's Q3 2025: Contradictions Revealed on Supply Chain, Orthopedics Growth, Tariff Impact, and Pricing Strategies

Date of Call: October 30, 2025

Financials Results

• EPS: $3.19 adjusted EPS, up 11.1% YOY
• Gross Margin: 65%, favorable by 50 basis points vs Q3 2024
• Operating Margin: 25.6% of sales, 90 basis points favorable vs Q3 2024

Guidance:

• Full-year 2025 organic net sales growth raised to 9.8%–10.2%.
• Adjusted EPS for 2025 raised to $13.50–$13.60.
• Guidance includes modestly favorable pricing and a slightly positive FX impact if rates hold near current levels.
• Tariffs now estimated to have a net negative impact of approximately $200 million for full-year 2025.
• Adjusted other income/expense expected to be ~ $415 million; full-year effective tax rate expected at the low end of 15%–16%.
• On track for a second consecutive year of ~100 bps adjusted operating margin expansion.

Business Commentary:

* Strong Organic Sales Growth: - Stryker reported strong organic sales growth of 9.5% in Q3 2025 compared to the previous year, with an additional 1.5% increase compared to the same period last year. - The growth was driven by widespread demand across all business segments, particularly in Orthopedics with double-digit growth and MedSurg with high single-digit growth, along with healthy international sales growth.

• Margins and Operational Performance:
• The company achieved an adjusted operating margin of 25.6%, a 90 basis point improvement over the previous year, despite tariff headwinds.

• The margin improvement was due to business mix optimization, cost improvements, and ongoing spend discipline.

• Mako and Capital Equipment Demand:

• Stryker delivered its best-ever Q3 for Mako installations, both in the U.S. and worldwide, with high utilization rates.

• The strong demand for capital equipment was attributed to healthy hospital balance sheets, leading to cash purchases of high-value equipment like Mako.

• Inari Integration and Growth:

• Inari continues to see double-digit pro forma organic sales growth, highlighting robust procedural growth in the teens.

• Despite destocking challenges, Inari remains on track to deliver approximately $590 million in sales for the year as part of Stryker.

• Acquisitions and Product Innovations:

• Stryker completed two small acquisitions: Guard Medical's NPseal products and advanced medical balloons, enhancing its product portfolio.
• These acquisitions highlight Stryker's commitment to growth through strategic deals to deepen its portfolio.

Sentiment Analysis:

Overall Tone: Positive

• Company raised full-year 2025 outlook; reported 9.5% organic sales growth and 11.1% adjusted EPS growth; management: "we are raising our full year 2025 outlook" and "on track to deliver a second consecutive year of 100 basis points of adjusted operating margin expansion."

Q&A:

• Question from Robert Marcus (JPMorgan Chase & Co): Walk us through global procedure volumes and the health of the capital equipment market, plus puts/takes on CapEx?
  Response: Procedure volumes are very healthy and hospital balance sheets are strong; strong Mako purchases (many outright/cash) and solid order books mean continued demand and CapEx strength, though Medical can be variable quarter-to-quarter.

• Question from Robert Marcus (JPMorgan Chase & Co): Help us walk through drivers to the typical Q3→Q4 step-up on sales and margins and what levers you pull?
  Response: Operational margin improvement driven by gross margin mix and SG&A discipline, but fourth-quarter margin expansion will be partially offset by second-half-weighted tariff headwinds.

• Question from Larry Biegelsen (Wells Fargo Securities): How do you think about maintaining ~10% organic growth next year and expanding margins with tariffs increasing YOY?
  Response: Management views ~10% organic growth as durable/sustainable and will provide longer-term detail at Investor Day; tariffs are a headwind but execution and innovation underpin continued growth.

• Question from Larry Biegelsen (Wells Fargo Securities): Any change in M&A strategy, areas of interest or deal size?
  Response: No change — remain focused on the same adjacencies, M&A is the #1 use of capital, balance sheet supports larger value-creating deals and the company plans to stay active.

• Question from Ryan Zimmerman (BTIG): Comment on orthopedics health, how you might capitalize on competitor disruption, and recent price pressure?
  Response: Knee momentum is strong due to Mako adoption and product innovation; pricing remains positive overall but anniversarying prior price gains moderates comps — pricing still above historical levels.

• Question from Ryan Zimmerman (BTIG): On Inari, when will you meaningfully scale international versus the stand-alone company?
  Response: Priority has been U.S. recovery/integration; international expansion has started but meaningful contribution expected in the second half of next year as Stryker infrastructure is leveraged.

• Question from Travis Steed (BofA Securities): Can you elaborate on Inari sales-force integration, whether Q3 was a trough, and the impact of P/E data?
  Response: Stryker installed its sales leader, rebuilt the team after churn; Q3 showed rebound, destocking will complete by end of Q1, and procedure growth in the teens should translate to sustained double-digit growth thereafter.

• Question from Travis Steed (BofA Securities): Any color on the Siemens partnership in Neurovascular robotics?
  Response: No additional detail to disclose at this time.

• Question from Samantha Munoz (Piper Sandler): What drove the strong performance in the 'Ortho other' category and is it durable?
  Response: Record Mako installations and favorable deal mix (outright purchases) drove the strength; the magnitude may not repeat every quarter but underlying demand is strong.

• Question from Samantha Munoz (Piper Sandler): More commentary on the supply-chain disruption in Medical and the implied Q4 rebound?
  Response: Supply issues have lingered but October started strong; company expects acceleration in Medical in Q4 to help reach full-year targets.

• Question from Michael Matson (Needham & Company): Update on PEERLESS II timing and how Artix is performing?
  Response: PEERLESS II results expected sometime next year; Artix (first arterial product) is off to a very strong start and receiving favorable market feedback.

• Question from Jennifer Reena Rabinowitz (Goldman Sachs): Details on the two smaller product acquisitions and whether tuck-ins continue?
  Response: NPseal is a pump-free negative-pressure wound therapy that fits into ortho instruments reps' call bag; the balloon addresses fecal incontinence for ICU patients — tuck-in acquisitions are part of the strategy to augment sales channels.

Contradiction Point 1

Supply Chain and Medical Growth

It highlights differing expectations and timelines for resolving supply chain issues, which directly impact the growth and financial outlook for the Medical segment.

What is your update on global procedure volume, the equipment market, and capital equipment health? - Robert Justin Marcus (JPMorgan Chase & Co)

2025Q3: Supply chain disruptions in emergency care have impacted growth, but it will still be a double-digit growth year. - [Kevin Lobo](CEO)

What’s the status of the MedSurg supply issue and the Mako 4 launch? - Joanne Karen Wuensch (Citigroup Inc., Research Division)

2025Q2: Supply issue lingering throughout the year, but growth will accelerate in the back half. - [Jason Beach](CFO)

Contradiction Point 2

Orthopedics Market Health

It involves differing views on the health and driving factors behind the orthopedics market, which is a critical component of Stryker's business.

How do you assess the orthopedics market's health and prepare for potential disruption from competitors' spinouts? - Ryan Zimmerman (BTIG)

2025Q3: We're in a great position with our Knee business due to market leadership, strength in cementless, and adoption of Mako. Expect continued high growth. - [Kevin Lobo](CEO)

Can you discuss the Medicaid cuts and their potential impact on knee business this quarter? - Travis Lee Steed (BofA Securities, Research Division)

2025Q2: Knee market remains healthy, and we expect continued strength. - [Jason Beach](CFO)

Contradiction Point 3

Orthopedics Market Growth and Sustainability

It involves differing perspectives on the sustainability and growth prospects of the orthopedics market, which is crucial for Stryker's business outlook.

Can you elaborate on price pressure seen this quarter? - Kevin Lobo (Stryker)

2025Q3: Orthopedics is performing above historic levels, though not back to the level before. We continue to work on maintaining positive prices. - [Preston Wells](CFO)

How is Stryker planning to mitigate the $200 million tariff impact and ensure orthopedic market growth sustainability? - Marcus Robert (JPMorgan)

2025Q1: Ortho market remains strong with consistent demand. Stryker continues to take market share with products like Mako and Pangea. The company is well-positioned for growth. - [Kevin Lobo](CEO)

Contradiction Point 4

Tariff Impact and Mitigation Strategies

It centers on the expected impact of tariffs and the strategies Stryker is employing to mitigate their effects, which directly influences financial performance.

What price pressures did you see this quarter? - Kevin Lobo (Stryker)

2025Q3: Some tariff impacts will be held on the balance sheet and amortized. - [Preston Wells](CFO)

How is Stryker planning to mitigate the $200 million tariff impact and ensure ortho market growth sustainability? - Marcus Robert (JPMorgan)

2025Q1: The $200 million is based on announced tariffs. Mitigation strategies include sales momentum, positive pricing, and optimizing supply chain. - [Preston Wells](CFO)

Contradiction Point 5

Price Pressure and Pricing Strategy

It reflects differing perspectives on price pressure and the company's ability to maintain positive pricing, which directly impacts revenue and profitability.

Can you explain the price pressures experienced this quarter? - Kevin Lobo (Stryker)

2025Q3: We've driven positive pricing, especially with strategic initiatives over the past few years. Recent price increases are compounded year-over-year. - [Preston Wells](CFO)

Why is the spine sale timing appropriate? What are the impacts on BB and the sale price, and how is dilution being offset? - Larry Biegelsen (Wells Fargo)

2024Q4: We continue to expect a slightly higher growth rate in constant currency this quarter, as we lap the strategic price decrease from the second quarter of last year. - [Glen Boehnlein](CFO)