Stryker Surpasses $25B in Sales, But Tariffs Weigh on Margins

Date of Call: Jan 29, 2026

Financials Results

• Revenue: $25B+ in sales for full year, with Q4 organic sales growth of 11% and full year 10.3%
• EPS: Adjusted EPS of $4.47 per share in Q4, up 11.5% YOY; full year adjusted EPS of $13.63, up 11.8% YOY
• Gross Margin: Adjusted gross margin of 65.2% in Q4, 10 basis points lower than Q4 2024 due to tariffs, offset by business mix and cost improvements
• Operating Margin: Adjusted operating margin of 30.2% in Q4, 100 basis points favorable to Q4 2024

Guidance:

• 2026 organic net sales growth expected in the range of 8% to 9.5%.
• 2026 adjusted net earnings per share expected in the range of $14.90 to $15.10.
• Full year tariff impacts expected to be approximately $400 million, with an incremental $200 million in the first half of 2026 compared to 2025.
• Full year 2026 other income and expense expected to be approximately $420 million.
• Full year 2026 effective tax rate expected to be in the range of 15% to 16%.

Business Commentary:

Revenue and Sales Growth:

• Stryker Corporation reported organic sales growth of 11% for Q4 and 10.3% for the full year, surpassing $25 billion in sales.
• The growth was driven by double-digit organic sales growth in key businesses such as Neurocranial, Endoscopy, Instruments, and Trauma and Extremities, along with strong performances in both U.S. and international markets.

Mako Robotic System Performance:

• The company achieved record Mako installations in the U.S. and worldwide, with over 3,000 systems installed globally.
• This success was attributed to the adoption of Mako 4, increased utilization rates, and positive feedback on new applications like advanced primary and revision hips, spine, and shoulder.

Operating Margin Expansion:

• Stryker's adjusted operating margin was 30.2% of sales, a 100 basis points improvement from the previous year.
• This expansion was driven by lower adjusted SG&A expenses and cost improvements, despite tariff headwinds.

Cash Flow and Financial Position:

• The company reported year-to-date cash from operations of $5 billion, an increase of $802 million from the previous year.
• This improvement was due to higher earnings and working capital improvements, reflecting strong financial performance and positioning for future M&A opportunities.

Capital and Order Book Strength:

• U.S. capital-related businesses delivered robust performance, with elevated capital order books heading into 2026.
• This was supported by healthy hospital CapEx budgets and strong demand for capital products.

Sentiment Analysis:

Overall Tone: Positive

• Kevin Lobo stated, 'Our 2025 results were outstanding for both Q4 and the full year across all key financial metrics.' He also noted, 'We have momentum entering 2026 and expect to continue delivering growth at the high end of med tech.' Management highlighted record Mako installations, strong international growth, and confidence in achieving long-term margin targets.

Q&A:

• Question from Larry Biegelsen (Wells Fargo Securities, LLC, Research Division): What's giving you the confidence to start 2026 with slightly higher organic growth guidance (8%-9.5% vs. 8%-9%) and is 10% still possible?
  Response: Confidence is driven by strong order book, robust Mako performance, sustained procedural volumes, and healthy capital demand; 10% is possible but depends on macro environment.

• Question from Robert Marcus (JPMorgan Chase & Co, Research Division): How are you thinking about pricing for capital and implant businesses in 2026 and expectations for the capital environment?
  Response: Pricing fundamentals remain strong with expected steady cadence similar to 2025; capital environment is healthy with elevated order book entering 2026.

• Question from Joanne Wuensch (Citigroup Inc., Research Division): How do you view recent competitor moves (Penumbra/Boston Scientific, J&J ortho spinout) and what is the outlook for patient volumes?
  Response: Strategy and go-to-market remain unchanged; volumes are robust, and orthopedic markets are expected to grow mid-single digits with Stryker outperforming.

• Question from Ryan Zimmerman (BTIG, LLC, Research Division): Are there efforts to gain incremental reimbursement for robotic procedures, and what is the trajectory for achieving 150 bps operating margin expansion through 2028?
  Response: Extra reimbursement for robotics exists in some regions, and Stryker has data to support it; confidence in achieving long-term margin targets remains based on operational excellence initiatives.

• Question from Travis Steed (BofA Securities, Research Division): What is driving MedSurg's strong growth, and how do you view tuck-in acquisitions and margin protection in 2026?
  Response: Growth is driven by high market shares, continuous product innovation, tuck-in acquisitions, and specialized sales forces; deal pipeline is healthy, and tuck-in margins are factored into expectations.

• Question from Vijay Kumar (Evercore ISI Institutional Equities, Research Division): What are you most excited about for innovation in 2026, and what is the visibility on Inari destocking?
  Response: Excitement is focused on new launches like Mako RPS handheld robot, Vocera Sync Badge, Incompass total ankle, and Triathlon Gold; Inari destocking is minimal in Q1 2026 with good visibility.

• Question from Matthew O'Brien (Piper Sandler & Co., Research Division): What is the durability of Mako implant strength, and why go with x-ray for Mako RPS instead of CT?
  Response: Mako's leading position is durable with expansion into international markets and new applications; Mako RPS is a simplified solution for surgeons not ready for full Mako transition, targeting ASCs and new customers.

• Question from David Roman (Goldman Sachs Group, Inc., Research Division): Any updates on robotic strategy and portfolio, and on Spencer Stiles' new role?
  Response: Mako RPS launched successfully; Spencer Stiles' promotion allows CEO to focus more on operations, AI, and M&A while Stiles leads commercial organization.

• Question from Caitlin Cronin (Canaccord Genuity Corp., Research Division): What is the percentage of Hips, Knees, Shoulders flowing through ASC channel, and any update on Triathlon Gold launch?
  Response: ASC penetration for Hips and Knees is in high teens, ticking up each quarter; Triathlon Gold is in limited launch with positive feedback, offering both cemented and cementless options.

• Question from Matthew Miksic (Barclays Bank PLC, Research Division): How do growth drivers differ between U.S. and international, and how should we think about margin flex if top-line beats guidance?
  Response: International growth is currently slower due to regulatory delays (e.g., EU MDR) but has significant catch-up potential; margin expansion will continue even with higher top-line growth, as seen in 2025.

• Question from Christopher Pasquale (Nephron Research LLC): Why was MedSurg pricing benefit the smallest since 2022, and when will Inari PEERLESS II trial data be available?
  Response: One large international deal drove negative pricing in MedSurg, but fundamentals remain positive; Inari's PEERLESS II trial results are expected in mid-2026.

• Question from Danielle Antalffy (UBS Investment Bank, Research Division): How are pricing dynamics changing with hospitals/ASCs, especially with ACA subsidies expiring?
  Response: Pricing environment is stable with improved contracting; 2026 pricing is expected to be similar to 2025, with price gains built into guidance.

• Question from Patrick Wood (Morgan Stanley, Research Division): What are implications of CMS moving procedures to ASCs, and is vascular an ongoing M&A focus?
  Response: ASC shift is beneficial for Stryker due to high market share and broad portfolio; vascular remains a focus for tuck-ins and broader expansion post-Inari acquisition.

• Question from Michael Matson (Needham & Company, LLC, Research Division): Are there price increases for Mako 4 and upgrade fees for new applications like Shoulder/Spine?
  Response: Base robot pricing not disclosed for competitive reasons; software upgrades for new applications (e.g., Shoulder) require a one-time license fee.

• Question from Shagun Singh Chadha (RBC Capital Markets, Research Division): Where do you see Mako utilization rates going, and what is ReconRobotics market penetration?
  Response: Robotics penetration has no theoretical limit; Mako utilization in U.S. Knees over 66% and Hips over 33% is strong, with Hip utilization beginning to inflect upward.

• Question from Richard Newitter (Truist Securities, Inc., Research Division): Can you reconcile MedSurg and Ortho pricing expectations for 2026?
  Response: MedSurg pricing will be positive, Orthopedics slightly negative, netting to something similar to 2025; price environment is stable with no major disruption.

• Question from Jeffrey Johnson (Robert W. Baird & Co. Incorporated, Research Division): What caused softer capital in Europe, and will MDR simplifications accelerate approvals?
  Response: European capital environment had normal quarterly ups and downs; MDR reforms are welcome and should help accelerate product approvals, benefiting both implants and MedSurg.

Contradiction Point 1

Top-line Growth and Margin Confidence

Guidance for organic growth and margin expansion appears inconsistent, impacting investor confidence in future performance.

What factors support the increased 2026 organic growth guidance to 8%-9.5%? Is 10% growth still achievable? - Larry Biegelsen (Wells Fargo Securities, LLC)

2025Q4: Strong order book... provides modestly increased confidence... 10% growth is possible depending on macro factors. - [Kevin Lobo](CEO)

Given this year's 10%+ organic growth guidance, what factors could impact next year's revenue and profit? - Larry Biegelsen (Wells Fargo)

2023Q3: Momentum is driven by the 'super cycle' of innovation... Guidance for over 10% organic growth this year... - [Glenn Boehnlein](CFO)

Contradiction Point 2

Inari Integration and Performance Outlook

Contradiction on the timeline and impact of Inari's sales force integration and market recovery, affecting expectations for business stabilization and growth.

What product innovations are most exciting for 2026? What caused Inari's Q4 destocking and 2026 visibility? - Vijay Kumar (Evercore ISI Institutional Equities)

2025Q4: Inari destocking was due to sales force disruption; minimal impact expected in Q1 2026. Good visibility into organic growth resuming in late Q1/Q2. - [Kevin Lobo](CEO), [Jason Beach](CFO)

Can you elaborate on the Inari sales force integration, whether Q3 represents a low point and if double-digit growth is sustainable, and any comments on Inari's P/E data? - Travis Steed (Bank of America)

20251031-2025 Q3: Destocking will continue into Q4 and Q1, completing by end of Q1. Strong procedure growth is expected. - [Kevin Lobo](CEO)

Contradiction Point 3

Tariff Impact Forecast for 2026

Contradiction on the magnitude and financial impact of tariffs for the upcoming year, affecting financial planning and forecasting.

Can tariff impacts be mitigated further? - Mike Matson (Needham & Company)

2025Q4: The $200M incremental tariff impact in 2026 reflects annualized mitigation efforts. - [Preston Wells](CFO)

Will the long-term financial targets be updated, and is there any progress on the tariff environment's impact for 2026? - Kendall Au (RBC Capital Markets)

2025Q3: The full-year 2025 impact is now forecast at ~$200 million. - [Jason Beach](VP of Finance & IR)

Contradiction Point 4

Capital and Pricing Environment Outlook

The outlook for the capital environment and pricing momentum shows a shift from strong growth to stable expectations, impacting market strategy and investor expectations.

How are you approaching pricing for capital and implant businesses in 2026, and what are your expectations for the capital environment? - Robbie Marcus (JPMorgan Chase & Co.)

2025Q4: Pricing: Expect similar 2026 pricing dynamics as 2025, with continued gains. Capital environment: Strong finish to 2025 with elevated backlog indicates a healthy outlook for 2026. - [Preston Wells](CFO), [Jason Beach](VP of Finance & IR)

What trends are emerging in robotics (Mako placements) and the capital equipment market? - Robert Marcus (JPMorgan)

2023Q3: The capital environment is healthy, with double-digit growth in Medical (4th consecutive year)... - [Kevin Lobo](CEO)

Contradiction Point 5

Characterization of Competitive Dynamics in Orthopedics

Contradiction in describing the competitive landscape and market share momentum, affecting perception of the company's market position and strategy.

What impact do recent competitive changes from Penumbra, Boston Scientific, and J&J's ortho spinout have on Stryker? - Joanne Wuensch (Citigroup Inc.)

2025Q4: No change to Stryker's strategy or confidence; teams are strong across businesses. - [Jason Beach](VP of Finance & IR)

How do you assess the orthopedics market's health and your competitive position, particularly in light of a competitor's announced spin-off? - Ryan Zimmerman (BTIG)

2025Q3: The orthopedic market share momentum is strong. - [Kevin Lobo](CEO)