Earnings call transcript: Stryker Q2 2025 beats EPS and revenue forecasts

Stryker Corporation, a prominent player in the Healthcare Equipment & Supplies industry with a market capitalization of $150 billion, reported its second-quarter earnings for 2025, exceeding expectations with an earnings per share (EPS) of $3.13 against a forecast of $3.07, marking a 1.95% surprise. Revenue also surpassed projections, reaching $6.02 billion compared to the anticipated $5.94 billion. Despite these positive results, Stryker’s stock saw a decline of 1.92% during regular trading hours, closing at $400.41, but showed slight recovery in aftermarket trading. According to InvestingPro analysis, the stock is currently trading above its Fair Value, with a high P/E ratio of 52.94.

Key Takeaways

• Stryker achieved 10.2% organic sales growth.
• The company raised its full-year 2025 outlook.
• Adjusted EPS grew by 11.4% year-over-year.
• Stock declined by 1.92% despite earnings beat.
• Raised full-year revenue growth guidance to 9.5-10%.

Company Performance

Stryker demonstrated robust performance in Q2 2025, with a notable 10.2% increase in organic sales, consistent with its impressive 10.76% revenue growth over the last twelve months. The company’s strong position in the orthopedic robotics market, particularly with its Mako robotic systems, contributed significantly to this growth. Stryker continues to expand its product portfolio and international presence, bolstering its competitiveness in the medical technology sector. InvestingPro data reveals the company maintains excellent financial health with an overall score of 3.08 (GREAT), supported by strong profit and growth metrics.

Financial Highlights

• Revenue: $6.02 billion, up from $5.94 billion forecasted
• Earnings per share: $3.13, surpassing the $3.07 forecast
• Adjusted gross margin: 65.4%, an increase of 120 basis points
• Adjusted operating margin: 25.7%
• Year-to-date cash from operations: $1.4 billion

Earnings vs. Forecast

Stryker’s EPS of $3.13 exceeded the forecast of $3.07, resulting in a 1.95% positive surprise. The revenue of $6.02 billion also surpassed expectations by 1.35%. These results reflect the company’s ability to outperform market predictions consistently, aligning with its historical trend of steady growth.

Market Reaction

Despite the earnings beat, Stryker’s stock fell by 1.92% during regular trading hours. The stock closed at $400.41, down from its previous close. However, aftermarket trading saw a slight recovery, with a 0.38% increase, bringing the price to $401.95. The stock generally trades with low volatility and has delivered a strong 21.02% return over the past year. This movement may reflect investor concerns over broader market conditions or sector-specific trends, despite Stryker’s solid performance. For deeper insights into Stryker’s valuation and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.

Outlook & Guidance

Stryker has raised its full-year 2025 guidance, now expecting 9.5-10% organic net sales growth and adjusted EPS between $13.4 and $13.6. The company is optimistic about continued growth in robotic procedures and plans to expand its product offerings, including the upcoming launches of Mako Spine and Shoulder systems.

Executive Commentary

"We are the clear leader in orthopedic robotics," stated Kevin Lobo, CEO of Stryker, highlighting the company’s dominant position in the market. He also emphasized the potential for international market growth, saying, "We continue to view international markets as a big opportunity for future growth."

Risks and Challenges

• Supply chain disruptions could impact production and delivery timelines.
• Market saturation in key segments may slow growth.
• Macroeconomic pressures, including tariffs, could affect profitability.
• Competition in the medical technology industry remains intense.
• Regulatory changes in international markets pose potential hurdles.

Q&A

During the earnings call, analysts inquired about the integration challenges with Inari Medical and the impact of tariffs on operations. Stryker’s leadership addressed these concerns, outlining strategies for mitigating tariff impacts and leveraging international growth opportunities. The company also discussed its ongoing focus on AI and autonomous robotics developments, anticipating significant advancements in these areas.

Full transcript - Stryker Corporation (SYK) Q2 2025:

Operator: Welcome to the Second Quarter twenty twenty five Stryker Earnings Call. My name is Megan and I’ll be your operator for today’s call. At this time, all participants are in a listen only mode. Following the conference, we will conduct a question and answer session. This conference call is being recorded for replay purposes.

Before we begin, I would like to remind you that the discussions during this conference call will include forward looking statements. Factors that could cause actual results to differ materially are discussed in the company’s most recent filings with the SEC. Also, the discussions will include certain non GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today’s press release that is an exhibit to Stryker’s current report on Form eight ks filed today with the SEC. I will now turn the call over to Mr.

Kevin Lobo, Chair and Chief Executive Officer. You may proceed, sir.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Welcome to Stryker’s second quarter earnings call. Joining me today are Preston Wells, Stryker’s CFO and Jason Beach, Vice President of Finance and Investor Relations. For today’s call, I will provide opening comments, followed by Jason, with the trends we saw during the quarter and some product updates. Preston will then provide additional details regarding our quarterly results and guidance before opening the call to Q and A. Our second quarter results reflect being in diverse and attractive end markets, our focus on innovation, and disciplined operational execution.

We delivered double digit organic sales growth of 10.2% and adjusted EPS growth of 11.4%, while managing through the impacts of tariffs, Inari dilution, and the spinal implant divestiture. Our robust organic sales growth was driven by strong demand across our product portfolio, and included double digit growth from med surg and neurotechnology, and high single digit growth from orthopaedics. Geographically, our US organic sales growth of 11.5% included double digit organic growth from our endoscopy, neurocranial, trauma and extremities, and instruments businesses, and high single digit organic growth in medical and hips. We delivered 6.5% organic international sales growth despite supply chain challenges, with notable contributions from South Korea and emerging markets. We continue to view international markets as a big opportunity for future growth.

As a growth company, we are excited to continue delivering innovation, both internally and through M and A. We maintain a healthy deal pipeline and are well prepared to capitalize on a broad range of opportunities. We exited Q2 with strong momentum and are well positioned for the second half of the year. As a result, we are raising our full year 2025 outlook, which includes delivering another 100 basis points of adjusted operating margin expansion. We are confident in the durability of our growth and earnings power across our businesses.

With that, I will now turn the call over to Jason.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Thanks Kevin. My comments today will focus on providing an update on the current environment, capital demand, and the integration of Inari Medical. Procedural volumes remained healthy in the second quarter, driven by the continued adoption of robotic assisted surgery, a stable pricing environment, favorable demographic trends, and the ongoing shift toward ASCs. We anticipate continued strength in procedural volumes as we move into the second half of the year. Demand for our capital products was strong once again in the quarter, and we exited Q2 with an elevated backlog.

With healthy hospital capex budgets, we expect continued strength in our order book for the remainder of the year. We are also excited to share that during the quarter we reached a milestone of 2,000,000 robotic procedures performed with Mako. We are the clear leader in orthopedic robotics and continued to launch new applications such as Revision Hip, which is receiving very positive surgeon feedback. Also, we delivered our best ever Q2 for Mako installations, both in The US and worldwide, with high utilization rates across the globe. We expect sustained momentum from installations and utilization to continue to drive growth in our hips and knees businesses.

The launches of Mako Spine and Shoulder are going well and remain on track for full launches as discussed on our last earnings call. Our platform launches such as LifePack 35 and the Pangaea plating system continue to have success in the marketplace and are driving meaningful contributions to growth. We recently received approval for LifePack 35 in Europe and are on track to launch in late Q3. As a reminder, many of our new products are still pending approval in Europe, such as Insignia and Pangaea. In addition to these launches over the past several quarters, we have introduced a number of next generation and innovative products across our diverse businesses that continue to drive our growth.

Lastly, we continue to make solid progress on the integration of Inari. We did experience some disruption in Q2, including working through destocking over the first half of

Preston Wells, CFO, Stryker: the year, as well as the onboarding of new sales professionals. We have moved quickly to convert the business to our Stryker offense, which will position us well for the future. Even as we navigate these changes, we still expect double digit pro form a revenue growth for 2025. With that, I will now turn the call over to Preston. Thanks, Jason.

Today I will focus my comments on our second quarter financial results and related drivers. Our detailed financial results have been provided in today’s press release. Organic sales growth was 10.2% for the quarter compared to 9% in the 2024. This quarter had the same number of selling days as 2024. Pricing had a 0.5% favorable impact with both our med surg and neurotechnology and orthopedic segments continuing to see overall positive trends from our pricing initiatives.

Additionally, foreign currency had a 0.8% favorable impact on sales. Our adjusted earnings per share of $3.13 was up 11.4% from the same quarter last year, driven by our robust sales growth and margin expansion, partially offset by higher interest expense. Foreign currency translation had a favorable impact of zero four dollars Now I will provide some highlights around our quarterly segment performance. In the quarter, MedSurg and Neurotechnology had organic sales growth of 11%, which included 12.5% of US organic growth and 5.7% of international organic growth. Instruments had US organic sales growth of 10.1%, led by double digit performance from our Surgical Technologies business, which includes our Neptune waste management and smoke evacuation products.

The number of states that have passed smoke free legislation continues to rise, with 19 states to date having approved smoke free operating rooms. These states represent over half the national population. Endoscopy had U. Organic sales growth of 18.6%, with strong double digit performances across all businesses. Growth was fueled by robust demand for operating room infrastructure and renovations and the continued success of the seventeen eighty eight video platform, as well as our sports medicine business, which has expanded its portfolio through the launch of several new shoulder products.

Medical had US organic sales growth of 9.9%, led by double digit performance in the acute care business, somewhat offset by lower sales in the emergency care business due to the continuing supply disruptions that are now expected to linger through the end of the year. From a product perspective, these supply matters do not affect LifePAC thirty five. Vascular had US organic sales growth of 1.4%. We expect improved growth in the second half of this year, led by recent launches of our Surpass Elite Flow Divergent Stent, AccessLift Intracranial Base Catheter, and Broadway Large Bore Aspiration Catheter. As a reminder, organic sales figures do not include Inari.

And finally, Neurocranial had US organic sales growth of 14.8%, led by strong double digit growth in our neurosurgical and IBS businesses and near double digit growth in our cranial maxillofacial business. Internationally, MedSurg and Neurotechnologies’ organic sales growth was 5.7% despite the supply disruptions in medical mentioned earlier. Growth was led by our neurocranial, instruments, endoscopy, and vascular businesses. Geographically, this included strong performances in South Korea, Canada, and our emerging markets. Orthopedics had organic sales growth of 9%, which included organic growth of 9.7% in The US and 7.5% internationally.

Our US knee business grew 6.2% organically, reflecting our market leading position in robotic assisted knee procedures and continued momentum from new Mako installations. Our US hips business grew 8.4% organically, reflecting the ongoing success of our Insignia hip stem and the continued adoption of our Mako robotic hip platform. Our extremities business grew 13.6% organically, with double digit sales growth in our core trauma and upper extremities businesses. Our core trauma performance continues to be driven by Pangaea, our differentiated plating portfolio, which also hit its one year anniversary of launch in the quarter and continues to generate robust interest and adoption by the market. Our U.

S. Other Ortho business grew 5.6% organically, led by strength of Mako installations and a strong performance in navigational technology products, offset by bone cement. Internationally, Orthopaedics’ organic growth of 7.5% included strong performances in South Korea, Japan, and many of our emerging markets. Additionally, our international results do include a nominal amount of spinal implant revenue because of previously accepted tenders that we are fulfilling before exiting those markets. Now I will focus on certain operating and non operating highlights in the first quarter.

Our adjusted gross margin of 65.4% was favorable by 120 basis points over the 2024 despite the impact of tariffs. The improvement was primarily driven by cost improvements and business mix. Our adjusted operating margin was 25.7 of sales, which was 110 basis points favorable to the 2024, driven by the gross margin favorability I just discussed. Adjusted operating expenses as a percentage of sales were consistent with prior year. Adjusted other income and expense of 106,000,000 for the quarter was $52,000,000 higher than 2024 due to the increased interest expense from our September 2024 and January 2025 debt issuances, slightly offset by favorable foreign exchange impacts.

For 2025, we continue to expect our full year adjusted other income and expense to be approximately $430,000,000 The second quarter had an adjusted effective tax rate of 15.9%, reflecting the impact of geographic mix and certain discrete tax items. For 2025, we continue to expect our full year effective tax rate to be in the range of 15% to 16%. Turning to cash flow, our year to date cash from operations was $1,400,000,000 driven by higher net earnings and year over year working capital improvements. And now I will discuss our full year 2025 guidance. Considering our year to date results, strong demand for our products, and our operational momentum, we are raising our full year guidance and now expect organic net sales growth of 9.5% to 10%, and adjusted earnings per share to be in the range of $13.4 to $13.6 Our updated sales guidance includes a modestly favorable pricing impact.

In addition, foreign exchange is expected to have a slightly positive impact on both sales and earnings per share should rates hold near current levels. We now estimate a net impact from tariffs of approximately $175,000,000 in 2025. This estimate, which is consistent with the amounts we have previously discussed, does reflect the reduction in the bilateral US China tariff rates and the announcement of a new framework agreement with the European Union. We continue to take thoughtful measures to address this estimated impact, which we are offsetting through our continued sales momentum, the leveraging of our manufacturing footprint, disciplined cost management, and better than expected foreign currency impacts. And with that, I will now open up the call for Q and A.

Operator: At this time, we will open the floor for questions. If

: you would like

Operator: to ask a question, please press 5 on your telephone keypad. You may remove yourself at any time by pressing 5 again. We would like to remind callers to please limit themselves to one question and one follow-up question so we can accommodate as many participants as possible. We will pause just a moment. Our first question will come from Larry Biegelsen with Wells Fargo.

Your line is open.

Larry Biegelsen, Analyst, Wells Fargo: Good afternoon. Thanks for taking the question. Congrats on a nice quarter here. Kevin, there’s a lot of uncertainty in the market right now. What’s giving you the confidence to raise both your organic growth and your EPS guidance?

And how much did the supply issue impact growth this quarter? And when exactly do you expect to resolve the issue? And I had one follow-up, please.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yes, thanks. Larry, I would say what Jason mentioned related to procedural strength, and we’ve even seen that in the month of July, continued procedural strength, and that includes implants as well as other procedures across the surgical space. Strong capital demand. Our order book is very healthy. We’re not seeing any slowdown at all on capital.

The supply issues are really limited to medical. The rest of our supply chain is in really good shape. And those issues will continue to persist throughout the year. But medical has a lot of other products that they’re continuing to sell very well, including Pangaea sorry, including Lightpack 35. And we’re very excited that Lightpack has now received European approval.

So that you’ll start to see in Q4. So overall, strength across our portfolio, strong demand for the procedures, strong capital demand, and that’s why we decided to raise it to the level we are. We’re very confident in the top line outlook.

Larry Biegelsen, Analyst, Wells Fargo: That’s very helpful. And Kevin, remanufactured instruments are a hot topic again. You have unique insight to this with the sustainability business. How are you thinking about remanufactured instruments for soft tissue robotics? Do you see that as a good opportunity for Stryker?

And if so, how would you enter the market? Thanks for taking the question.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, thanks. You know, Larry, we don’t really talk about our pipeline, and this would be a pipeline product. And so there is another company that’s obviously getting into the business, and if we decide to enter that, we’ll let you know when we do.

Larry Biegelsen, Analyst, Wells Fargo: Alright, thank you very much.

Operator: Our next question will come from Robbie Marcus with JP Morgan. Your line is open.

Robbie Marcus, Analyst, JP Morgan: Great. Congrats on a nice quarter. Thanks for taking the questions. Maybe first one, Preston, impressive margins here in the quarter. The EPS guide is now basically back to where it was almost pre tariff, pre NRE dilution.

Maybe just walk us through what’s driving the strength in the underlying margins here to get you almost back to the original guidance, especially as you’re absorbing all of these dilutive pressures?

Preston Wells, CFO, Stryker: Thanks for the question, Robbie. So a few things. I guess first I’d point to, we started as we came through the pandemic several years ago, really a focus on price. And so that focus on price has continued. And so we’re seeing the benefits of that flowing down and really helping us to drive margin.

In addition, and we’ve talked about this continued focus on our manufacturing efficiency and really getting our operations into a more efficient manner in terms of supporting the sales growth that we have. And so we’re really starting to see that take shape as well. And we have a lot of different initiatives going on from different lean initiatives at our manufacturing facilities to different initiatives happening across our procurement organization as we think about how we source product, where we source product. And so all of those are certainly helping us to drive the additional margin improvements that you’re seeing. I think we’re also just getting more efficient with where we have product and how we’re moving product through our supply chain, which is leading to some reduced costs as well.

And then finally, I would just point to, we continue to look at how we support the business from an OpEx standpoint, really thinking about G and A as we look at shared service centers and other areas like that as we continue to support the business. The good news, Ravi, is and I’m really pleased with in the first quarter, we saw a consistent delivery of that op margin. So 100 basis points in the first quarter, 100 basis points in the second quarter, which is really helping us to be much more consistent as we drive to the number that Kevin was talking about, our overall 100 basis points of delivery for the year. So all these elements that we’ve been putting in place over the last few years are really starting to take shape and allowing us to drive a more consistent margin story.

Robbie Marcus, Analyst, JP Morgan: Great. Maybe a follow-up. Kevin, in the outpatient rule, we saw proposal to move heart ablation into the ASC for the first time. I know one of your favorite things is whenever you see construction cranes up, you love it. I was wondering if I could just get your thoughts on where we are in the ASC build out.

I know most people with respect to Stryker are focused on orthopedics, but how are thinking about ASCs across other parts of the hospital and Stryker’s partner? Thanks.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, listen, I don’t think there’s going to be any slowdown at all in the ASC trend. And obviously we saw it first with sports medicine and foot and ankle, and then you saw it with hips and knees, and it’ll continue whether it’s cardiology, even general surgery. I could see a lot of those type of more elective procedures being done in ASCs. This trend is not going to stop because it actually lowers the cost of health care. It’s a pleasurable experience for the surgeons.

It’s a pleasurable experience for the patients. And I could see that healthy patients like to go to a place like this where there aren’t sick people. And so I absolutely see this trend continuing. If you look at something even like total ankle, right, we just had nice reimbursement increases both in the hospital outpatient as well as in the ASCs for total ankles. So if you asked me five years ago, would we be doing total ankles in the ASCs?

I wasn’t even sure about that. And now that the reimbursement was raised $7,000 because fusions aren’t nearly as successful as total ankle. So this trend is absolutely going to continue. There’s no doubt about it. And I think you’ll see it across all specialties.

Appreciate it. Thanks. And we like construction, as you say, because we do have a lot of products, even in those specialties we don’t play in, we do provide a lot of infrastructure that’s used in even in other specialties.

Operator: Our next question will come from Ryan Zimmerman with BTIG. Your line is open.

Ryan Zimmerman, Analyst, BTIG: Thank you. Thanks for taking our questions. Preston, last quarter, I think you called out the tariff impact at about $200,000,000 If I heard you correctly, that’s $175,000,000 now. Most companies we’ve seen have come down maybe by about half. I’m just wondering if you could elaborate on why it’s only coming down by about $25,000,000 Is that a reflection of some of the manufacturing locations and so forth?

Comment on that.

Preston Wells, CFO, Stryker: Thanks for the question. You’re right. Last quarter, we did call out $200,000,000 We’ve come down to about 175,000,000 A few things I would probably point to. In our original estimate, you may recall, we were just quoting what was in place at the time. So at that point in time, we really had the baseline 10% that was included for most areas other than some of the specific industry elements around steel and aluminum.

And then I think Canada and China had Canada, China and Mexico had some different ones at that point in time. As we fast forward here into the second quarter, the big change that we’re seeing or the two big changes that we’re seeing, the bilateral agreement with China and The US has brought that tariff down pretty significantly. And so we saw some benefit in our number as a result of that. But then we did see some offsetting increase as Europe has entered into the framework of going to 15%, which would have been in our model 10% previously. So we’re seeing some puts and takes, which is what gets us to that number.

And you’re right, it is reflective of how our manufacturing footprint is set up. Yeah, it’s

Kevin Lobo, Chair and Chief Executive Officer, Stryker: our manufacturing footprint in Europe, as well as us not being as strong in China as other companies. So that’s why it affects us, maybe to a little bit of a lesser degree than others.

Ryan Zimmerman, Analyst, BTIG: Fair enough. And then, you know, the second question is just, we’ve seen some kind of install based numbers out there on orthopedic robotics out in the market. Kevin, I’d love your thoughts on kind of what you see as greenfield opportunity within Mako at this point. And obviously, an install base number is always appreciated. But, you know, how are thinking about that versus kind of maybe adding, you know, the second and third robots at various sites around the world?

Thank you.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Well, listen, can tell you in The United States, there’s very few places that only have one If they have one Mako, they tend to have more than one. And the universe of opportunity for us is every single operating room that does hips and knees. That’s our universe. So, there’s 5,000 hospitals that do procedures, and they have a lot of operating rooms. So there’s still a huge room for us to continue to grow with robotic installations.

Installed base number, we may provide at the end of the year when we provide our sort of percent of procedures being done, which continues to climb. So I’ll talk to Jason O’Presse, and we may provide that number at the end of the year. We tend not to be like to be the only person providing these numbers, but we’ll take that under consideration. And I would tell you internationally, we’re really starting to pick up steam, and we’re kind of where we were in The US about five years ago, especially places like Japan and parts of Europe and Latin America. So we still have a long runway to go.

I would say we’re still in the early innings overall in the robotic penetration.

Ryan Zimmerman, Analyst, BTIG: Thank you.

Operator: Our next question will come from Joanne Wuensch with Citibank. Your line is open.

Joanne Wuensch, Analyst, Citibank: Good evening, and thank you for taking the question. I have two. One of them, the supply issue that you’re talking about in med surg, could you remind us please how long it is going to take to resolve that? And then I’ll put my second question right up front. You launched a new Mako device, I think it was Gen four, in the spring at AAOS, which had the shoulder, the hip, and the knee, and the spine applications altogether.

How is that going? And anything you’d say on shoulder and spine would be great. Thank you.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Joanne, I’ll take the first part of this, Joanne, as it relates to the supply issues, and then Kevin can jump in here on Mako. But as it relates to the supply issue, you know, and I think Preston touched on this as well, largely in the medical division, we do expect it’ll kind of linger throughout the remainder of the year. That being said, I think what you’ll see of medical in the back half of the year, growth will accelerate and double digit in terms of organic sales growth for them, well within reach as we think about the full year. Yeah, great.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: As it relates to Mako four, so we’re really excited about this launch. This is not yet a global launch, so we do have countries around the world where we’re still selling Mako three. And what we added with Mako four, so the hip revision application is only available on Mako four. The spine application is only available on Mako four. Right now, the shoulder, we’re in a limited launch on shoulder because that’s actually on the Mako three, and we’re in the process of migrating the shoulder to Mako four.

So that’ll be available starting the beginning of next year on Mako four. And that’s part of the reason why the shoulder launch won’t be a full launch until next year because we do want to launch that Mako four. But so far, so good. The feedback has been very good. We haven’t moved to a full launch on Spine yet for the same reasons of just getting the workflow right and getting good feedback.

And obviously, we have to partner with VB Spine be able to do these deals, which include the robot as well as the implants. We’re working through those commercial contracts and methodologies. But everything so far is looking really good. We have very good applications, very well received by customers. Not going to have much of an impact on our sales this year.

Start to see much more of an impact next year.

Operator: Our next question will come from Travis Steed with Bank of America. Your line is open.

Travis Steed, Analyst, Bank of America: Hey, thanks for taking the question. I wanted to ask a question on Nari. I don’t know if you could maybe help with how the business grew this quarter with the destock and sales rep transitions and what gives confidence in double digit growth in 2025? And then can you get back to kind of market growth rate in 2026?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, listen, you know, destocking is not fun. We’ve been through this before, by the way, when we bought other companies. K2M, we went through that, A lot of these earlier startups have these practices. One of their practices was quarterly incentives, helped to drive the stocking. We’ve done away with that practice.

We’ve also replaced the sales leader with a Stryker sales leader. We replaced the marketing leader with a marketing leader from Stryker. Of course, the President came from Stryker as well and had prior experience in the peripheral vascular space. So we have a Stryker leadership team that’s really in place, which is exciting. We also took some medicine on forcing all the sales reps to sign non competes outside of California.

And that was a bit of a gutsy move when you’re buying a deal for sales, and then you’re making salespeople sign non competes. Some people deflected not to do that. And we took our medicine, and we’ve been rapidly hiring new salespeople. The good news is the underlying actual procedural demand was double digits. So, it’s not like we are procedures and the surgeons doing our products, we’re below market.

So, we’re in pretty good shape from a procedural standpoint, and stocking will burn out, so we’re not too worried. In fact, the second half of the year will be good, and the overall year we expect to be in double digit growth line. So, most of the bad medicine has been taken already. Still a little bit more stocking probably to burn, but overall, we’re setting this up for the future. And we’ve learned in the past is take your medicine early on these kind of deals.

And we love the pipeline. I was just actually at an RA earlier this week, my second visit down there. And pipeline is great, talent is really good, but we’ve moved them now to a Stryker sales offense and put Stryker people in charge, and this is what we’re really good at. They developed this market. They have amazing clinical trials that are underway as well.

International is still tiny for them, and it has a huge opportunity leveraging our infrastructure. So very, very pleased with NRA being part of the Stryker portfolio, and there are good times ahead even as early as POWELL. The second half of this year and certainly into ’twenty six and ’twenty seven.

Travis Steed, Analyst, Bank of America: Great. Thank you. And then maybe the follow-up question. There’s some stuff in D. C.

On Medicaid exchange cuts. I don’t know how you’re thinking about if there’s any potential impact on that, on elective procedures. Like the knee business did decelerate a little bit this quarter. Hear you on the strong volumes, but I think there was some stuff international, like slowdown in US and international needs. So I don’t if there’s anything to kinda call out that was onetime in OUS needs this quarter.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah. It sounds like couple of couple of questions there, Travis,

Kevin Lobo, Chair and Chief Executive Officer, Stryker: but I’ll take it.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: This is Jason. So first off, on the bill side of this, as you can imagine, we are we are continuing to monitor the situation. You know, as you think about procedures for us that involve Medicaid, it’s really an immaterial amount of procedures for us. So really knowing what we know today, no concerns there for us as we think about the bill. But again, we’ll continue to monitor that.

On the knee front, I’ll say a couple different things. So as you think about how we exited Q2, June can be with vacations and some of those things a little bit of a slower month. We saw a little bit of that. I’ll tell you as we went into July off to a really nice start for the quarter. So overall, would say no concerns about the knee market.

We continue to think this will be a kind of a mid single digit market with us growing above market, obviously. And then just the last thing I would say, it’s one quarter. Right? So you see some of these fluctuations as you go throughout the year, but but overall, feel really good about the year.

Travis Steed, Analyst, Bank of America: Great. Thanks, Jason.

Operator: Our next question will come from David Roman with Goldman Sachs. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker0: Hi. This is Jenny Rabinovitz on for David. You’ve highlighted the international expansion opportunity for a few quarters and you have the Pangaea and Insignia launching in Europe. I was hoping you could break down how you’re thinking about inorganic versus organic investment, especially as it relates to international and expansion in new countries. Thinking also here, any reflections on SURF as you kind of anniversary the acquisition and expansion for orthopedics in Europe?

Thank you.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, thanks for the question. So SURF has gone extremely well. We’re really, really pleased. You can see our hip business has been done has done very well internationally. And yes, it’ll lapse and it’s now it’s going to become part of organic.

And in fact, we’re actually going to be bringing our first Surf product to The United States shortly. So very pleased with that acquisition and integration. We haven’t done a lot of deals like that that are primarily revenue based outside The United States. We continue to look for those types of opportunities. I would tell you that the biggest opportunity, frankly, is increasing the penetration of products we already have in our portfolio internationally, and especially acquisitions that primarily have U.

S. Revenue, taking those acquisitions to the international markets such as Inari. So obviously, this quarter international is a little bit slower than it’s been over the past three or four years, but nothing alarming there. Pangaea, just to be clear, is not yet approved, so that probably won’t be approved until next year. And Insignia is still not approved.

The only one that just got approved was Lightpack 35. So unfortunately, this EU MDR has been a real challenge, not just for Stryker, for the whole industry, of a much slower regulatory pathway for products. And so a lot of the super cycle launches that we’re enjoying in The United States are still not arrived in many other international markets. In some cases, we’re launching in Japan before Europe, which was unheard of three or four or five years ago prior to EU MDR. So I think this slight slowdown here, it’s still a good growth rate.

When you’re above 6% growth, that’s still pretty good, but not what we’re accustomed to. We do expect to get back in the second half of this year. International growth will be much better than it was in the second quarter.

Operator: Our next question will come from Pito Chickering with Deutsche Bank. Your line is open.

: Hey, good afternoon guys. So two questions here. The first one is on the guidance raise, really nice raise here. But could you bridge us the EPS increase you saw as it relates to better pricing than expected FX changes to tariffs versus your core operational strength?

Preston Wells, CFO, Stryker: Yeah. So, Pito, thanks for the question. We can walk through a little bit. As we think about the guide, it’s really reflective, as Kevin mentioned before, on our strong performance and our expectation really on the top line of where we expect to continue for the rest of the year. The bottom part of that and the EPS side of that is really just the flow through of that upside that we see.

As you remember, when we talked about tariffs, part of the way that we’re covering off on tariffs is through some spend discipline and some other areas. And so that’s not necessarily going to 100% flow through to the bottom line as we’re still trying to spend behind our growth initiatives. The other element, really, we do see some favorable FX that does flow through a little bit as well. So really, what you’re just seeing is is that top down flow through from the strong performance that we’ve had. That’s it.

The other thing I would just point to, we do have a little bit of a wider range on the bottom, and a lot of that just reflects some of the continued uncertainties primarily to do with macroeconomic elements like tariffs that we know are still going to have some pluses and minuses for the rest of the year.

: Great. And then the follow-up is, I’m struggling to understand the ’19 -plus growth you saw in endo in The U. S. This quarter, up quite a bit versus first quarter. Comps were easier, but still a pretty big move up.

Are there any reclassifications skewing that number? Or if not, can you just walk us through kind of that great growth? Thank you.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah. First thing I’d say, no reclassifications, no accounting issues whatsoever. Just pure fantastic performance from the Endoscopy Division. And you know, look at last year, an 8% comp, so it wasn’t exactly soft. But yes, it was a little bit lower than the typical double digit, but it was a boomer of a quarter for our Endoscopy division, and it was really across the portfolio.

So the booms and lights in our communications business had a phenomenal quarter, and they have great orders. They have the new Oculon Light that they’ve launched, which has tremendous demand. So communications will continue to the rest of this year. And then, of course, 1788 and what we call the Endoscopy Business Unit had a terrific quarter, and that’s just been a consistent trend that we’ve had. And then sports medicine is just on fire.

You’re talking about very strong double digit growth. They’ve launched about six shoulder products over the past, let’s call it six to eight months, and those products, that shoulder was the one area we’re not quite as strong as hip and knee in sports medicine, and they had an absolute boomer. So it had sort of all the business units kind of clicking at the same time. We also have our reprocessing business that’s part of the endoscopy. They also had a solid quarter as well.

So really one of those quarters where kind of everything caught fire. But this is a division that’s been performing very consistently, very high growth quarter after quarter after quarter. Just a little bit higher than normal, let’s say, this quarter, which we, of course, we enjoy.

Operator: Great. Thanks so much. Our next question will come from Matthew O’Brien with Piper Sandler. Your line is open.

: Good afternoon. Thanks for taking the questions. I’d love to talk a little bit about Mako again. Just, you know, the commentary about record new system adds is great to hear again. But, I mean, you’ve been doing that for a while.

Anything you can call out as far as what’s driving that again here? I know it’s Q2, but is it, you know, the having the shoulder application, the spine application, more people are interested? Or is there any kind of pause around, you know, competitive launches? Just anything to call out there because, again, you know, you continue to put up these great Mako numbers quarter after quarter.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, listen, I was really pleased with this quarter, and this is the first quarter of a new Mako, so Mako four, and I was honestly just not sure that a new robot might cause a little bit of a pause. Hasn’t caused any pause whatsoever. Our team is executing. The robot is performing extremely well. The word is out.

We have a fantastic robot. The revision hip, surgeons are buzzing about it. Just makes a very hard procedure easy to do. They can see exactly where they’re putting their screws and which part of the bone. You help a surgeon out on something that’s very difficult, they enjoy that very much.

But I was actually a little bit pleasantly surprised with the performance, just based on when you’re changing a cycle, Other companies have gone through, we do this in cameras, do this in power tools, we’ve never done it before in Mako, and it has been absolutely seamless in The United States, this transition. They want their next robot and their next robot. There’s been a few customers that are saying, well, I just bought a three. Can I upgrade it to a four? And so we’re having some of those discussions, but we’ll be very friendly to our customers and help them upgrade if they want to upgrade to the new robot.

A lot of customers are saying, okay, I’ll just keep the one I have, I’m just going to buy another one for the next operating room. So we expect this to continue, and the funnel, like, have a visibility into the future. So we expect this momentum on Mako to continue. And there are a lot of operating rooms still that don’t have robots, so those are all targets.

: Got it. I appreciate that. And then as a follow-up, you know, Kevin, you’re pretty transparent

Ryan Zimmerman, Analyst, BTIG: as far

: as just the thoughts on, you know, your M and A strategy, and you’re talking about a full pipeline. Should we expect another sizable type transaction, maybe not quite as big as a NARE, you know, for you guys in, you know, the near future, somewhat near future? And, you know, you’ve also given us kind of some of the areas that you’re interested in. Anything else that you would kind of highlight that might be new to that list or is there something else that you’re really a little more focused on? I don’t know if it’s soft tissue robots, etcetera.

Thanks so much.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, no change to the adjacencies. I would say they’re still the same ones that I’ve talked about in the past. Obviously, with an ARI now in the fold, if we do another deal in the peripheral vascular and that kind of space, that won’t be an adjacency anymore. That’ll kind of be a tuck in. So don’t assume that that peripheral deal is the only deal we’re going to do.

Always, once we get into a space, want to continue. So there’s a pipeline there of deals that they were looking at themselves that we’re going to start to evaluate. Would say that we have the financial bandwidth to be able to do another NRE size deal, but I can’t really predict, you know, when, you know, deals are uncertain. You don’t know when you’re going do a deal and what size. The bulk of our deals will continue to be the tuck in variety.

If you think about last year’s seven deals we did, that’s kind of the normal striker offense. And then every once in a while, we do a bigger deal like a Wright Medical or an Inari. I really can’t give you more on that. We are always looking at deals, right? Our teams are out there scouring the market.

We have a nice pipeline and we have a number of IOIs in process, but those sometimes wash out based on the price, based on our due diligence. And so it’s kind of hard to predict, but I’d be pretty surprised if we don’t announce anything for the rest of the year. There’ll be a deal or two or three, I don’t know exactly how many. Most will be tuck in. And, you know, it’s not impossible that we wouldn’t do something bigger.

We certainly have the bandwidth financially, you know I like to spend money soon. We’ll be active.

: Got it. Thank you.

Operator: Our next question comes from Vijay Kumar with Evercore. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker1: Hi, guys. Thanks for taking my question, and congrats on a nice project, Kevin. Maybe two product segment kind of questions. First on medical, is there a conflict in slowdown a little bit? Obviously, the question is around hospital CapEx environment.

So maybe if you could just touch upon the broader CapEx environment in LP35 launch and how that’s progressing.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah, Vijay, this is Jason. I think I got most of your question there, so I’ll take a run at it here. But I think the question is on the capital environment. I would say, and similar to my prepared remarks here, we feel really good about the capital environment. If you look at our capital backlog, again, it remains very elevated.

No signs of slowdown there as we think about the rest of the year. Really confident in that business for sure.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, and LifeVac thirty five is doing really well. Really strong order book. Again, we’re still waiting for certain approvals. Just getting the European approval is exciting. So September, we’re going to have this kind of a launch in Europe of LP35, but great customer feedback.

It’s doing really, really well. And you know, these medical launches, they’re a little different than sort of cameras or power tools. Like, this will have a long it’ll be we’ll be talking about it as a kind of a new product three years from now. They have a longer cycle of contribution to growth, a longer tailwind than you see with even Procurity is continuing to had a really great quarter in Q2. It was launched a few years ago, but these are long term product cycles, so they’ll continue to be tailwinds for a long time to come.

Kevin Lobo, Chair and Chief Executive Officer, Stryker1: That’s helpful, Kevin. And maybe one on knees here. The comps, was this just comp hitting harder sequentially or anything else that’s going on within within the knee performance?

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Hey, Vijay. No. I wouldn’t say there’s anything else material to call out other than what I’ve already said. Again, feel really good about the knee market, feel good about the full year. And and like I said earlier, July off to a good start here, so really nothing additional to add.

Kevin Lobo, Chair and Chief Executive Officer, Stryker1: Fantastic. Thank you, guys.

Operator: Our next question comes from Matt Miksic with Barclays. Your line is open.

Larry Biegelsen, Analyst, Wells Fargo: Great. Thanks so much for taking the question. So I wanted to follow-up on interventional spine. Just the launch of OptiBlade, the investments that you’ve made in that segment, it would be great if you could talk a little bit about any of the quantitative or qualitative metrics about the launch so far, the other products and the investments that you’re making and the growth. Then I had one follow-up.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, listen, we love our interventional spine business. Obviously, that’s reported under neurocranial. And we’ve been, frankly, one of the fastest growing businesses in Stryker over the past three or four years, has been IBS. We’ve added to that with Optiplate initially the Optiplate launch, which was an organic launch, and now we have the Optiplate BVN launch, which has just happened. We also have the Virtus acquisition we did last year, which for now is not appearing in organic sales growth, but will later this year, I would say that business is just cooking on gas.

We have an amazing leader of the business, a great management team, and we are very focused on the space. And we have really done really, really well with balloons early on. The CareFusion acquisition that we did with the Curve balloon has been terrific. We did the SpineJack dealing with the ventral spine. Now we have OptiBlade, and so we’re recovering oncology as well as pain, and adding salespeople and just a fantastic business, a little gem.

It’s not huge yet, but it’s growing really, really fast. But it’s one of the gems of Stryker, and it’s kind of how we drive this kind of growth so consistently, is you have a number of these smaller business units that we continue to fuel really high growth, like very consistent, strong double digit growth. And I don’t think that’s going to slow down whatsoever. It’s going to continue, especially with these, Virtus is off to a really good start. And then the BVN is very new, but, so far getting good feedback.

Larry Biegelsen, Analyst, Wells Fargo: That’s great. That’s great. And then the follow-up is just on, I have to sort of pull, you know, keyword bingo here, but AI is something that we haven’t talked about in a while. I know, you know, Robert, I’m sure, wakes up every day thinking about it and probably goes to sleep working on it. But, you know, maybe talk a little bit about some of the digital efforts that you’re you have underway around, whether it’s orthopedics or other segments of the business, and where we might start to see more of Stryker putting its substantial data and assets and digital technologies to work to deliver solutions in that area?

Thanks.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Hey, thanks. We have a lot going on in the world of AI. You know that BLUEPRINT is already FDA approved and uses AI to create the surgical plan and inform the surgeon as to which implant they should be doing. Preplanning is going to be continued. We’re going proliferate that across our portfolio as one area of opportunity.

We have the Gau Surgical that quantifies hemoglobin and sponges. That’s an AI product approved. We have a number of other projects. And in addition to that, we’ve hired a new Chief Digital Information Officer, Deborah King, who started pretty recently and has a lot of experience more on the generative AI and is also going to bring a lot of infrastructure that can then be used by our divisions. And I would say that this is a topic that we’ll probably cover in our Investor Day that’s planned for later this year.

We’ll get the specific data out shortly. But rather than spending up time on the earnings call going through this, I think we’ll give you a lot more information on that later this year. But suffice to say, we are absolutely aggressively working in this area and see this as a tremendous opportunity to bring more science to health care versus just relying on one surgeon’s experience in their residency and in their training to be able to bring more data to life. So we have a lot of projects underway. We’ll share more later.

Larry Biegelsen, Analyst, Wells Fargo: Thanks, Kevin.

Operator: Our next question will come from Steve Lichtman with Oppenheimer and Company. Your line is open.

: Thank you. Evening, guys. Kevin, you talked about Salesforce change out at Inari as you put noncompetes in place. Can you talk about how much sales vicinity you’re assuming as a result? And I know you mentioned still double digit growth, but has the absolute expected reported expected revenue contribution from Inari changed at all?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, look, for the full year, I think we talked about something like $590,000,000 for the full year. We’re going be right around that number. So we are absorbing these changes, these challenges of sales repetition. It was starting to happen even before the deal, you know, closed, and we accelerated that with the non competes. Look, a lot of those people that decided not to sign on were not necessarily all regrettable, not necessarily striker type of salespeople.

We’ve been aggressively hiring. So we no. We’re not we’re not calling down our number, but it’s a little bumpier. So it was a little lower as we destocked and as we dealt with the turnover, but the reps are coming on, and we’re going to expect very good numbers in Q3 and Q4.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah, Steve, maybe just to add just a finer point on that on the $5.90, just to be crystal clear here, that would be for the ten month period since we’ve owned them.

: Right, right. Thanks. And then just on tariffs, should we still expect the impact all in the second half? Was there anything in 2Q? I thought in the prepared remarks I heard something.

And just in the cadence of that 175,000,000 between 3Q and 4Q,

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: can you talk to that a little bit? Thanks.

Preston Wells, CFO, Stryker: Absolutely. So when you think about tariffs, there is some impact of tariffs in the second quarter. But remember, because most of the tariffs are flowing through our COGS number, they’re flowing into inventory first and then onto the P and L. So we will see a bigger impact in the second half of the year than certainly what we saw in the second quarter or even first half of the year. So back end loaded because it’s going to flow through inventory and then to the P and L.

And certainly also as we pick all of tariffs up in terms of getting to the final numbers, we’ll see that more consistently in the

Kevin Lobo, Chair and Chief Executive Officer, Stryker: back half of the year.

: Got it. Thanks, Christine. Thanks.

Operator: Our next question will come from Chris Pascal with Nephron Research. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Thanks. I wanted to ask a couple of questions on the robotics business. The orthorobot landscape now includes a variety of different form factors. You’ve got some competitors taking more of a portfolio approach to try and provide different solutions to physicians who may have different preferences. You guys have been more one size fits all with Mako.

Do you see a limit to that strategy? Or do you think Mako, in a single form factor, can continue to kind of cover all your bases?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, listen, like I said before, I had a question earlier about a different product. We’re not going to talk about our pipeline of robotic solutions and whether something else will be added to the Mako portfolio. I’m not going to preview that. So that’ll happen. If something like that happens, I’ll let you know when it does.

But we have an absolute winning solution right now. Winning in The United States, winning globally. We know we have the best rollout on the market. And our solution is add applications, add applications, continue. We’re not finished, right?

We’ve got other applications planned that we’re going to continue to add to the robot to create tremendous value. So a hospital buys one robot, they get all these different applications that they can use. So we know that we’re in a good position. We have a winning hand. We’re going to continue to play this hand.

But could we do something different in the future? It’s possible. We’ll let you know at that time, but not before.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Okay, I think my follow-up question also straight into the pipeline territory, so maybe I’ll pivot and ask about trauma. It’s been a real standout. You noted that you’re now lapping the Pangaea launch. I know you guys tend to talk about product rollouts being multiyear affairs. But how do you think about your ability to sustain double digit trauma growth as those comps get tougher?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: You know, we sustain double digit growth in a lot of our businesses as comps get tougher. You just look at neurocranial, just look at endoscopy, at, oh, this is something we do. This launch has been fantastic. Just an absolutely beautifully executed, super complex launch. And we’re actually still adding to it.

So we just added some MIS plates. So it’s such a comprehensive system that it’s not like the launch ever completely stops. You’re going to continue to add little features here and there to keep it fresh, and it hasn’t even launched yet in Europe. That won’t be until next year that it starts. So this tremendous growth, even OUS, our growth is really strong in spite of Pangaea not being everywhere in OUS.

So that combined with upper extremities being on fire, foot and ankle starting to get better, and certainly the change in reimbursement for total ankle where we have a very high market share is going to be exciting, timed beautifully with the launch of our Encompass brand new total ankle, just fortuitous for us, tells me that trauma and extremities continue to be a high growth division for the company.

Kevin Lobo, Chair and Chief Executive Officer, Stryker3: Great, thank you.

Operator: Our next question comes from Richard Newitter with Truist Securities. Your line is open.

Travis Steed, Analyst, Bank of America: Hi, thanks for taking the questions. Just two quick ones from me. Following up to Chris’ question just then on robotics portfolio, what’s your view on fully autonomous robotic? Your competitor obviously has a solution or wants a solution there. Do you see the market going there?

Is there an appetite for that? And then just a second question upfront here. On neurovascular, Kevin, just curious if you can comment at all on US neurovascular end market, particularly in ischemic stroke.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, so let me start with autonomous. So just to be clear, we’re aware of their portfolio, and we know that they are pursuing autonomous. We have the capability today to do Mako autonomous. I’ve actually been in a lab where I’ve actually seen it operate autonomously. We have chosen not to pursue that because of the regulatory burden and the expenses required to get it through FDA.

And so at some point in the future, if the market really has an appetite for autonomous, we can turn that feature on. But right now, that’s not our focus. Our focus is using our R and D dollars to add new applications that provide tremendous value. And even if they try to move our robot outside of the haptic boundaries, they can’t. So whether they’re putting their hand on it to make it move or whether it’s done autonomously, honestly, that’s not a big value add for a surgeon in our opinion.

But should the market start to move that way, we already have that capability today with makeup. And then as for neurovascular, yeah, the NV market, obviously, the market for hemorrhagic is still stable, I would say, and we continue to do well in the hemorrhagic side of the market. In the ischemic market, it was a little bit slower, and we’ve seen that market kind of vary from quarter to quarter, and there’s a lot of entrants in that market. Obviously, it was a bit of a soft quarter for us in neurovascular this quarter, but we have three product launches that we mentioned in the prepared remarks that give us optimism that we’re going to have a much better second half.

: Thank you. Our

Operator: next question will come from Mike Matson with Needham and Company. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Yeah, thanks. I just wanted to follow-up on the neurovascular question. So you mentioned this broadway large bore catheter. Can you just talk a little bit more about the timing on that? And will that actually have labeling aspiration use for stroke?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Timing. Yeah, so it is approved, and we just started to launch it with the sales force. So initial cases have gone extremely well. It’s made a completely different way. So the manufacturing process is completely different to all of our existing catheters.

So it’s a proprietary manufacturing method that really improves trackability. It’s, I think, the lumen is a point zero eight four, I believe, lumen size. So large lumen size, very trackable, getting great feedback. But it’s just being launched right now. So approved in The US, being launched in The US.

It will take some time before it’s launched in other markets around.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: And is it cleared for delivery use or for actual aspiration use?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: It’s cleared for aspiration use.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Okay. Alright. Thanks. And then just one on shoulders. So I think shoulders have also started to move into the ASC setting, so total shoulders.

So, you know, what what are you seeing there? You know, how does that kind of balance out between maybe increased volume but potential for some pricing pressure?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, we obviously have a very expensive shoulder implant, really the best shoulder implant on the market with the PERFORM system. And there is a little bit less pricing in the ASC, but more volume to pick up, and a lot of people suffering with shoulders. We had another quarter, every quarter, we had good double digit growth in shoulder, and we continue to love our shoulder business. We also have some products and offerings that nobody else has, right? So you have the hemi arthroplasty with Pyrocarbon.

You have the shoulder ID, which is a custom glenoid customized to the patient so you don’t have to have separate augments. And so this pipeline is fantastic. The existing implants are modern. We have blueprint software to help with pre planning. So we have just a terrific offering.

So, yes, we’ve lost a little bit of price on some of those procedures that moved to the ASC, but it certainly hasn’t slowed down our growth at all, let alone the fact that next year we’re going move to full launch on Mako shoulder. So I don’t expect shoulder to be slowing down anytime soon.

Kevin Lobo, Chair and Chief Executive Officer, Stryker1: Okay, thank you.

Operator: Our next question comes from Shagun Singh with RBC. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker4: Great. Thank you so much. Two quick ones for me. Just on your implied second half guide, it seems like a step down in the back half versus front half on an adjusted basis, still really strong, but just wondering if it’s conservatism or any factors to call out there? And then for my second question, I was just wondering if, Kevin, you could talk at a high level or directionally on 2026, any areas that you are most excited about?

And then just thinking through 2026 as well, we’ve been speaking with some hospitals, especially those who have very high exposure to Medicare, Medicaid. They have talked about budgets coming down in ’26 versus ’25. Sounds like you’re not hearing about it for ’twenty five, but just any color on ’twenty six would be great. Thank you for taking the questions.

Preston Wells, CFO, Stryker: Hi, Shagun. I’ll take those questions. First, as we think about the guide in the second half of the year, certainly we have higher comps as we think about our sales growth that we have to get through in the back half. But also, as you know, our plan always is we want to make sure that we beat and raise as we go throughout the year. And so think I we’re very well set up to deliver on what we have.

And ideally, if we overperform to raise guidance as we continue to perform in the second half of the year. As for 2026, we’re not going to provide any update on ’twenty six until we get through the end of this year. So at this point, we have no comments with regards to how we think about 2026 at this point. Yeah, the only thing I’d say, Shagun, is

Kevin Lobo, Chair and Chief Executive Officer, Stryker: that hospitals need our procedures. They’re very revenue producing, the places that we play in healthcare. And so if their finances are affected by less revenue from based on the bill that was passed, they’re certainly not going to come after our procedure areas. We’re the ones that are making a lot of the money in the hospital. So if anything, they’d like to do more of our procedures to help with their financial pressure.

So it’ll take a long time before it really starts to hit our business based on where we play within the health care system.

Joanne Wuensch, Analyst, Citibank: Thank you.

Operator: Our next question will come from Danielle Antalffy with UBS. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker5: Hey, good afternoon, guys. Thanks so much for taking the question. Kevin, just two questions for me. First, on China. I know you guys have highlighted this as an area where you’re under indexed, it’s there’s a lot of potential for growth there.

I’m just curious. I mean, there’s been a lot of it’s been very evolving very quickly with tariffs, but also, you know, the broader health care market in China. Curious about how you’re thinking about China from a growth perspective and how much that’s a focus for you guys today. And then just one quick follow-up after that.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah, we don’t have a large China business, as you probably know. And VBP hurt everybody, hurt us a little bit less than some of our competitors because of our presence. But look, it’s a giant market. Long term, you have to be in China. We’re not withdrawing from China.

But we’re also being very thoughtful about the types of investments that we do and having to have sometimes some localized products, which we’re experimenting with in our endoscopy division as one example. So we’re being, I guess, careful and treading carefully is the way I would describe it, being thoughtful about our distributor arrangements. And it’s not something that we’re pouring a lot of money into, but we’re not taking any steps to leave or to exit. We’re going to hang in there and we’re going to continue sort of build, have the building blocks to have a sustainable growing business. China had a very good second quarter.

It’s having a good year this year. But we’ve been through some challenges in China. So I’m not nearly as bullish as I was, let’s say, five or six years ago before in the pre VBP era. It’s a lot different, the market right now, but it is a market that we’re going continue to be active in, as we are in a lot of other international markets.

Kevin Lobo, Chair and Chief Executive Officer, Stryker5: Okay. And then my follow-up was on international, and you mentioned with Mako where, you know, where we were five years ago in The US. Is there anything structural about the international market that would make the ramp look different for Mako than it did in US, or should we think of The US as a good proxy for how to model Mako uptake over the next few years internationally? Thanks so much.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yeah. Thanks. It’s it’s a good proxy. Japan it’s a good proxy for Japan. So Japan has a financial wherewithal.

They like technology. They can afford this. So I say Japan’s a good proxy, and some of the European countries are good proxies. The the countries that are not quite as good a proxy would be something like France, which is all government paid. It takes a long time, and Canada is another example where all of a sudden they’re now starting to be very interested in Mako because they’ve seen long term data that shows that it’s really high performing.

The Australian data was tremendous. So it showed that Mako not only performed better than manual instruments, but performed better than navigation. And that is very credible on global stage. So that data that came out is something that we’re using internationally to help drive the business. So it does vary by country.

Would say countries like The UK, countries like Italy, that will be moving kind of like The United States, but there are some other countries that are purely socialized medicine. It will move a little bit slower. It’s just the nature of the beast.

Operator: Our next question will come from Matthew Aspero with Jefferies. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Thanks for taking the questions. This is Matt on for Matt Taylor. I wanted to quickly ask about, or have you expand a little bit of how you’re thinking about the recent OB VBA and the implications for your business? Primarily, are you seeing any shifts in the behavior of purchasing or CapEx budgeting from hospitals, given the favorable CapEx treatments they have from accelerated depreciation and etcetera? And then also, a follow-up to that is, how should we be thinking about the tax rate for your business heading into 2026?

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah, Matt, it’s Jason. I’ll take the first part of this and Preston will pick up on the on the tax rate portion of this. But kind of like I said earlier, as we think about the bill, we are continuing to monitor the bill. As it relates to the Medicaid piece, you know, a small part of our procedures are Medicaid related. So feel really good about that.

I think, know, as we think about the capital environment again, and Kevin mentioned this as well, if you think about the majority of our capital, it’s closely tied to procedures, right? So as procedures continue to be strong, we expect that there’ll be a high need of our capital. And so we’re positioned well on that front.

Preston Wells, CFO, Stryker: And as it relates to the tax implications of the bill, we expect that over the next year or so, we will see some benefit in terms of our cash tax just given the bill. But from an ETR standpoint, we would relatively be in the similar area that we are this year. So this year, our guide is 15% to 16%. And as we get into next year, we’ll confirm what that’s going to be. But we don’t expect it to have a significant impact on our ETR at this point.

Kevin Lobo, Chair and Chief Executive Officer, Stryker2: Great. Thank you very much.

Operator: Our next question will come from Caitlin Cronin with Canaccord. Your line is open.

Joanne Wuensch, Analyst, Citibank: Great. Thanks so much for taking the questions,

Operator: and congrats on a great quarter. I guess, you know, just starting off with hips, I think it was a strong number. Are you guys seeing any pressure from, you know, the competitor launches in hips? And then just any update on whether you’re continuing to trend higher in kind of the percent of hip procedures done robotically?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yes, I would say on robotic procedures trending, both knees and hips continue to climb. And we’re very excited about the hip four point zero software, because if you recall, the first five or six years, maybe seven years after the acquisition, the hip percentage hadn’t really changed very much. But this new software is very good, and especially now that we’ve added Revision Hip, I expect that to continue to improve. Insignia has been an absolute home run of a product for us and has really taken off, I can’t wait for it to get approved in Europe. That’ll continue to contribute to our growth.

We’ve done a lot of training around direct anterior, which has been terrific. And so overall, we run a really good offense in terms of our commercial offense, and we just focus more on ourselves and what we’re doing with the customers rather than focusing on the competition, and that’s been paying off for us.

Kevin Lobo, Chair and Chief Executive Officer, Stryker4: That’s great. And then just

Joanne Wuensch, Analyst, Citibank: a quick one on navigation.

Operator: I think you called that out earlier, being strong. Was that related to, you know, Q guidance and maybe the momentum in the spine and cranial portion of the enabling tech portfolio?

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Yes, that’s exactly right. So when we say enabling tech, we mean the Q guidance. The Q guidance, just a reminder, with Mako four, that’s half of the system. So you can use it for spine to do navigation, but you could also combine it with the Mako robotic arm to use Mako. So we have this reuse of software type of approach, which is really effective.

We also have the Co Pilot product that’s reported under our neurosurgery business under neurocranial, which is a bur that has haptic feedback as you get close to the key critical anatomy in the spine that’ll actually buzz and they actually turn off before the surgeon hits those structures. So that has been very, very favorably received by customers. So to be able to use CoPilot, you have to have the Q guidance system. And so even though the revenue part of it’s an enabling tech and part of the revenue is in neurosurgery, it does operate as a system and we had a really good quarter in Qtwo.

Kevin Lobo, Chair and Chief Executive Officer, Stryker4: Our

Operator: next question comes from Josh Jennings with TD Cohen. Your line is open.

Kevin Lobo, Chair and Chief Executive Officer, Stryker3: Hi, this is Eric on for Josh. Thank you for taking the question. On capital, I understand you guys bucket items into large and capital items. For large items in particular, was wondering if there’s any detail you can share on the portion of outright capital sales versus financing options or placements for that category? And maybe an easier one to answer is just whether or not that has seen any meaningful shift in the ratio over the past several quarters.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah, this is Jason. I’ll take this one. So as you think about our capital as a percent of total revenue, you have about 15% of our total revenue. That’s the smaller capital, more closely tied to procedures. And then you’ve got the larger capital that’s closer to 9% to 10% of our total revenue.

And that business continues to do really well. I think Kevin mentioned earlier our communications business where you see a large percentage of our large capital did really well in the quarter and other areas of our business that this large capital as

Kevin Lobo, Chair and Chief Executive Officer, Stryker: well continues to perform really well. So we’re really happy with both the large and small capital. The only trend towards more financing has really been on the robots under Mako, where there has been, especially in the ASC, most of those deals in the surgery centers are financed versus hospitals which tend to do more outright purchasing just historically, but not a major change that we’re seeing from the trend that we’ve seen over the past year to eighteen months.

Kevin Lobo, Chair and Chief Executive Officer, Stryker3: Okay, understood. And then I know there was a question earlier on Mako internationally, but if I could focus on Mako Spine and shoulder in particular. I appreciate the reiteration of The U. S. Launch timeline there, but was just curious if you could share your thinking around those new offerings in international markets and and what the commercial opportunity could look like outside The US.

Jason Beach, Vice President of Finance and Investor Relations, Stryker: Yeah. I would say the opportunity is large. Right? And as you think about just the initial launch, we’re we’re we’re looking at the end of this year for Mako Spine and then, the first part of next year for for Mako Shoulders. So it’ll be a deliberate lengthy launch.

But but, yeah, there’s there’s lots of opportunity both in The US and outside.

Kevin Lobo, Chair and Chief Executive Officer, Stryker3: Okay. Appreciate it. Thank you so much for the questions.

Operator: There are no further questions. I will turn the call over to Kevin Lobo for closing remarks.

Kevin Lobo, Chair and Chief Executive Officer, Stryker: Thank you all for joining our call. We look forward to sharing our Q3 results with you in October. Thank you.

Operator: This concludes the second quarter twenty twenty five Stryker earnings call. You may now disconnect.

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