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    SYK
    Earnings call· Jun 2025(Q2 FY25)

    STRYKER Q2 FY25 earnings call SYK

    Jul 31, 2025 Source

    Executive summary

    Stryker Q2 FY25 — Double-Digit Organic Sales and EPS Growth, Raised Full-Year Outlook

    Stryker delivered robust Q2 FY25 results, driven by strong demand across its diverse portfolio and record Mako installations, leading to double-digit organic sales and adjusted EPS growth. The company raised its full-year outlook, confident in its operational execution and innovation pipeline, despite ongoing supply chain challenges in the Medical segment and integration disruptions from Inari Medical. Management remains active in M&A and sees continued strength in procedural volumes and capital demand.

    Highlights

    5

    • Delivered double-digit organic sales growth of 10.2% in Q2 FY25.

    • Achieved adjusted EPS growth of 11.4% in Q2 FY25.

    • Expanded adjusted gross margin by 120 basis points to 65.4% in Q2 FY25.

    • Expanded adjusted operating margin by 110 basis points to 25.7% in Q2 FY25.

    • Recorded best-ever Q2 for Mako installations globally, reaching 2 million robotic procedures performed.

    Concerns

    4

    • Medical segment supply disruptions are expected to persist through the end of FY25.

    • Inari Medical integration caused Q2 disruption due to destocking and sales professional onboarding.

    • Estimated net impact from tariffs for FY25 is $175 million.

    • International organic sales growth of 6.5% was slower than U.S. organic growth of 11.5% in Q2 FY25.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2025 organic net sales growth
    9.5% to 10%
    high materiality
    High
    Full-year 2025 adjusted earnings per share
    $13.40 to $13.60
    high materiality
    High
    Full-year 2025 adjusted operating margin expansion
    100 basis points
    high materiality
    High
    Full-year 2025 adjusted other income and expense
    approximately $430 million
    medium materiality
    High
    Full-year 2025 adjusted effective tax rate
    15% to 16%
    medium materiality
    High
    Inari Medical pro forma revenue growth
    double-digit
    medium materiality
    High

    Segment performance

    11
    SegmentRevenueYoYQoQMargin
    MedSurg and Neurotechnology
    Strong performance across the segment, despite supply chain challenges in Medical.
    U.S. organic growth: 12.5%International organic growth: 5.7%
    		—11%——
    Instruments
    Led by Surgical Technologies, including Neptune Waste Management and smoke evacuation products.
    U.S. organic sales growth: 10.1%Surgical Technologies business performance: Double-digit
    		—10.1%——
    Endoscopy
    Fueled by robust demand for operating room infrastructure and renovations, continued success of the 1788 video platform, and expanded Sports Medicine portfolio with new shoulder products.
    U.S. organic sales growth: 18.6%Performance across all businesses: Strong double-digit
    		—18.6%——
    Medical
    Led by acute care, somewhat offset by lower sales in emergency care due to ongoing supply disruptions expected through year-end.
    U.S. organic sales growth: 9.9%Acute care business performance: Double-digit
    		—9.9%——
    Vascular
    Expected improved growth in the second half of the year, led by recent launches of SURPASS Elite Flow diverting stent, ACE LIFT intracranial-based catheter, and Broadway large bore aspiration catheter.
    U.S. organic sales growth: 1.4%
    		—1.4%——
    Neurocranial
    Strong growth across its businesses, including Interventional Spine (IVS).
    U.S. organic sales growth: 14.8%Neurosurgical and IVS businesses performance: Strong double-digitCranial maxillofacial business performance: Near double-digit
    		—14.8%——
    Orthopedics
    Solid growth driven by Mako installations and new product success.
    U.S. organic growth: 9.7%International organic growth: 7.5%
    		—9%——
    U.S. Knee
    Reflecting market-leading position in robotic-assisted knee procedures and continued momentum from new Mako installations.
    Organic growth: 6.2%
    		—6.2%——
    U.S. Hips
    Reflecting ongoing success of Insignia Hip Stem and continued adoption of Mako robotic hip platform.
    Organic growth: 8.4%
    		—8.4%——
    U.S. Trauma and Extremities
    Core trauma performance driven by Pangea plating portfolio, which hit its 1-year anniversary.
    Organic growth: 13.6%Core trauma and upper extremities businesses performance: Double-digit
    		—13.6%——
    U.S. Other Ortho
    Led by strength of Mako installations and navigational technology products, offset by bone cement.
    Organic growth: 5.6%
    		—5.6%——

    Operational metrics

    13
    Organic sales growth
    10.2%vs 9% in Q2 FY24
    Q2 FY25

    Company-wide organic sales growth.

    Pricing impact on sales
    0.5%favorable impact
    Q2 FY25

    Favorable impact from pricing initiatives across MedSurg and Neurotechnology and Orthopedics segments.

    Foreign currency impact on sales
    0.8%favorable impact
    Q2 FY25

    Favorable impact on sales.

    Adjusted earnings per share
    $3.13up 11.4% from Q2 FY24
    Q2 FY25

    Driven by robust sales growth and margin expansion, partially offset by higher interest expense.

    Foreign currency translation impact on EPS
    $0.04favorable impact
    Q2 FY25

    Favorable impact on adjusted EPS.

    Adjusted gross margin
    65.4%favorable by 120 bps over Q2 FY24
    Q2 FY25

    Despite tariff impact, driven by cost improvements and business mix.

    Adjusted operating margin
    25.7%110 bps favorable to Q2 FY24
    Q2 FY25

    Driven by gross margin favorability.

    Adjusted operating expenses as percentage of sales
    Consistentwith prior year
    Q2 FY25

    Operating expenses as a percentage of sales.

    Adjusted other income and expense
    $106M$52M higher than 2024
    Q2 FY25

    Due to increased interest expense from September 2024 and January 2025 debt issuances, slightly offset by favorable foreign exchange impacts.

    Adjusted effective tax rate
    15.9%
    Q2 FY25

    Reflecting impact of geographic mix and certain discrete tax items.

    Mako robotic procedures performed
    2M
    Cumulative

    Milestone reached for Mako robotic procedures.

    States with smoke-free operating room legislation
    19
    To date

    Number of states that have passed smoke-free legislation, benefiting Surgical Technologies business.

    Inari Medical revenue
    $590M
    10-month period

    Expected revenue contribution for the 10-month period since acquisition.

    Industry KPIs

    9
    MetricValueDetails
    Tariff impact$175MUSD
    System utilizationHighrates
    Pricing realized price0.5%%
    New product launch rampGoing well
    Procedure volume growthHealthy
    FCF conversion leverage guidance$1.4BUSD
    Installed base system placementsRecord Q2installations
    Segment franchise organic growth10.2%%
    Sales force commercial capacity buildAggressively hiringsalespeople

    Product announcements

    7
    ProductTypeDetails
    LIFEPAK 35launch
    Mako Spinelaunch
    Mako Shoulderlaunch
    SURPASS Elite Flow diverting stentlaunch
    ACE LIFT intracranial-based catheterlaunch
    Broadway large bore aspiration catheterlaunch
    Incompass total anklelaunch

    Deals & partnerships

    2
    Inari MedicalIntegration of acquired company in peripheral vascular space.

    Integration experienced Q2 disruption due to destocking and onboarding new sales professionals. Stryker has implemented new leadership and sales practices. Underlying procedural demand remains strong.

    VertosAcquisition in the Interventional Spine business.

    Acquisition made last year, not yet appearing in organic sales growth but off to a good start.

    Risks & headwinds

    5
    Tariff ImpactFY25, with larger impact in H2

    Estimated net impact of $175 million for FY25.

    Mitigation: Offsetting through continued sales momentum, leveraging manufacturing footprint, disciplined cost management, and favorable foreign currency impacts.

    Medical Segment Supply DisruptionsExpected to linger through the end of FY25

    Lower sales in emergency care business.

    Mitigation: Medical has other strong products (e.g., LIFEPAK 35) that are performing well.

    Inari Medical Integration DisruptionQ2 FY25 (initial impact)

    Disruption in Q2 due to destocking and sales professional onboarding.

    Mitigation: Implemented Stryker leadership and sales offense, aggressively hiring new salespeople, underlying procedural demand remains strong.

    EU MDR Regulatory DelaysOngoing

    Slower regulatory pathway for products.

    Mitigation: Delaying approvals for products like Insignia and Pangea in Europe; launching in other markets (e.g., Japan) first.

    China Market VolatilityOngoing

    Not quantified, but described as a challenging market.

    Mitigation: Not withdrawing from China, being thoughtful about investments, experimenting with localized products, building a sustainable growing business.

    What to watch in Q3 FY25

    5

    Medical segment organic sales growth

    H2 FY25
    CurrentU.S. organic sales growth 9.9% (Q2 FY25)
    TargetAcceleration to double-digit organic sales growth

    Why it matters

    Indicates resolution of supply chain issues and overall segment health.

    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.

    Q&A highlights

    6

    What gives confidence to raise guidance amidst market uncertainty, and what is the impact and resolution timeline for supply issues?

    Kevin Lobo cited continued procedural strength, strong capital demand, and broad portfolio strength as reasons for confidence. Supply issues are limited to the Medical segment, will persist through year-end, but Medical has other strong products like LIFEPAK 35.

    “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.”

    asked by Larry Biegelsen · answered by Kevin Lobo

    2 min read6 chapters

    Detailed Narrative

    01

    Procedural Volume and Capital Demand

    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 Ambulatory Surgical Centers (ASCs). Stryker anticipates continued strength in procedural volumes into the second half of the year. Demand for capital products was strong, resulting in an elevated backlog, and continued strength is expected for the remainder of the year due to healthy hospital CapEx budgets.

    02

    Mako Robotics Momentum

    Stryker reached a significant milestone of 2 million robotic procedures performed with Mako. The company reported its best-ever Q2 for Mako installations, both in the U.S. and worldwide, with high utilization rates globally. New applications, such as revision hip, are receiving very positive surgeon feedback, and the launches of Mako Spine and Shoulder are progressing as planned for full launches in the near future.

    03

    New Product Launches and Regulatory Approvals

    Recent platform launches, including LIFEPAK 35 and the Pangea plating system, are contributing meaningfully to growth. LIFEPAK 35 recently received European approval and is slated for a late Q3 launch. However, many other new products, such as Insignia and Pangea, are still awaiting European approval, highlighting challenges with the EU MDR regulatory pathway.

    04

    Inari Medical Integration

    The integration of Inari Medical experienced some disruption in Q2, primarily due to destocking over the first half of the year and the onboarding of new sales professionals. Stryker has moved quickly to implement its sales offense and leadership, and despite these changes, still expects double-digit pro forma revenue growth for Inari in 2025, with underlying procedural demand remaining strong.

    05

    Tariff Impact and Mitigation

    The estimated net impact from tariffs for the full year 2025 is $175 million, a reduction from previous estimates due to bilateral U.S.-China tariff rate adjustments and a new framework agreement with the European Union. Stryker is actively mitigating this impact through continued sales momentum, leveraging its manufacturing footprint, disciplined cost management, and favorable foreign currency impact🌐s.

    06

    ASC Trend and Reimbursement

    The trend towards Ambulatory Surgical Centers (ASCs) is expected to continue without slowdown across all specialties, including orthopedics, cardiology, and general surgery. This shift is driven by lower healthcare costs, improved patient experience, and surgeon preference. Recent positive reimbursement changes for total ankle procedures in ASCs further support this ongoing trend.

    AI-generated summary of the company’s earnings call. Not investment advice.