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Zimmer Biomet (ZBH) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Health Care· Apr 28, 2026

Source: earnings call transcript

Executive summary

Zimmer Biomet Q1 FY26 — Strong Start with Sales Growth and Raised EPS Guidance

Zimmer Biomet delivered a strong start to the year, exceeding expectations on sales growth and raising full-year EPS and free cash flow guidance, driven by robust technology sales and new product momentum. The company is confidently progressing with its U.S. go-to-market transformation, despite some expected near-term disruption, and is making strategic investments in innovation and operational efficiency to secure future growth.

Highlights

5

  • Organic constant currency sales grew 2.9%, at the upper end of annual guidance.

  • Adjusted EPS increased 15% year-over-year to $2.09, benefiting from tariff-related items.

  • Technology sales grew in strong double-digit rates, with ROSA and TMINI sales continuing strong.

  • U.S. hip franchise grew 5%, driven by the hip triple play and OrthoGrid adoption.

  • Adjusted EPS guidance raised to $8.40-$8.55 and free cash flow growth guidance raised to 9%-11%.

Concerns

3

  • U.S. knee growth was 2.2%, partially offset by pressure in legacy implants and some account losses.

  • Operating margins in Q2 FY26 are expected to be down roughly 200 basis points YoY.

  • Consolidated pricing was 40 basis points negative in the quarter, with full-year expectation of up to 100 bps erosion.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 organic constant currency revenue growth
1% to 3%
high materiality
High
Full-year 2026 price erosion
up to 100 basis points
medium materiality
High
Full-year 2026 FX tailwind to revenue growth
approximate 50 basis points
low materiality
High
Full-year 2026 Paragon 28 contribution to reported sales growth
around 100 basis points
low materiality
High
Full-year 2026 reported sales growth
2.5% to 4.5%
high materiality
High
Full-year 2026 operating margins
down slightly less than 50 basis points from 2025
high materiality
High
Q2 2026 operating margins
down roughly 200 basis points from Q2 2025
medium materiality
High
Q3 2026 operating margins
down around 50 basis points sequentially from Q2
medium materiality
High
Full-year 2026 adjusted EPS
$8.40 to $8.55
high materiality
High
Full-year 2026 free cash flow growth
9% to 11%
high materiality
High
Full-year 2026 share repurchases
up to $750 million
medium materiality
High
Full-year 2026 adjusted gross margin
around 71%
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
U.S. Business
Reflects healthy end markets, strong technology sales, and continued momentum from new products, against the backdrop of go-to-market changes.
—3.2%——
International Business
Impacted by go-to-market model evolution, particularly in emerging markets, and more difficult comps in the first half. Expect mid-single digit growth in H2 FY26.
—2.5%——
U.S. Knees
Driven by Oxford Partial Cementless Knee, partially offset by pressure from legacy Toran Knee implants (NextGen, [indiscernible]) being phased out. Impacted by go-to-market changes, loss of 2 large accounts, and Kaiser strike.
Partial knee cells growth: >20%
—2.2%——
International Knees
Growth impacted by go-to-market changes and difficult comps.
—1.3%——
U.S. Hip Franchise
Seeing increasing traction of hip triple play (OrthoGrid, HAMMR).
Hip triple play of one representation: nearly 40% of U.S. Hips temps
—5%——
International Hip Sales
Rapid adoption in Japan for first of the warm iodine core hip implant.
—1%——
Technology and Data, Bone Cement and Surgical Business
Continued strong ROSA and TMINI sales across the board, supporting a comprehensive suite of technology solutions.
ROSA and TMINI sales: strong double-digit ratesTechnology growth (ROSA, TMINI): 30%
—nearly 12%——
SCP
Led by U.S. CMFT and Upper Extremities businesses, partially offset by challenges in restorative therapies and trauma. Double-digit CMFT growth driven by external closure franchise. Upper extremities increased upper single digits driven by OCF stemless shoulder and Identity total shoulder platform.
—1.6%——
Paragon 28
Trending back towards double-digit growth performance. Almost double-digit growth in Q1, in the teens in early Q2. Driven by focus, investments, rapid product launches, and hiring reps.
—accelerated around 200 basis points from Q4 2025——

Product announcements

ProductTypeDetails
ROSA Shoulderlaunch

Deals & partnerships

Mobility Revolution Fund (Deerfield Management and Hospital for Special Surgery) Exclusive orthopedic investor in a musculoskeletal venture capital fund.

Collaboration between Deerfield Management and the Hospital for Special Surgery in New York City.

Risks & headwinds

U.S. go-to-market transformation disruption Q1 FY26, ongoing through 2027

modest disruption in Q1, in line with expectations

Mitigation:Rapid increases in productivity in transitioned territories, turnover rates in single digits, commitment to complete transition by end of 2027.

Pressure in legacy U.S. knee implants Q1 FY26, ongoing as legacy products phased out

partially offset U.S. knee growth of 2.2%

Mitigation:Brand rationalization strategy, transitioning to Persona franchise.

Loss of large accounts in U.S. Knees Q1 FY26

lost 2 accounts in Q1, fairly large

Mitigation:Company expects to recoup some business, but will monitor.

Kaiser strike impact Q1 FY26

disrupted for everybody, more disruptive for ZBH due to highest share in knees

Mitigation:External event, no specific mitigation stated beyond monitoring.

International go-to-market model evolution disruption Q1 FY26, ongoing

impact on growth in Q1, accounted for internally

Mitigation:Changes from large network of distributors to fewer partners in emerging markets, Middle East, Europe, and China. Expect mid-single digit growth in H2 FY26.

Middle East macro events Q1 FY26, ongoing monitoring

minor freight cost increase in Q1, no material supply disruptions or sales impact

Mitigation:Most key products are dual-sourced, at least 1 year of poly. Not a concern for supply.

232 investigation (tariffs) ongoing

still evolving and dynamic, no material updates

Mitigation:Validation from IT sources suggests it won't impact companies operating under Nairobi protocol; pathway to mitigate.

What to watch in Q2 FY26

U.S. Knee Growth Acceleration

H2 FY26
Current 2.2% in Q1 FY26
Target Increased growth in H2 FY26

Why it matters

U.S. knee growth was below expectations in Q1 due to sales force changes and account losses; acceleration is critical for overall segment performance and meeting full-year targets, especially with tougher comps.

Your main question, what gives us confidence that we're going to accelerate our net growth in the second half is the ramp-up of our new products is the fact that we continue to place and sell a lot of technology...

Find out whether ZBH delivers this. Inve re-checks your case every morning.

Q&A highlights

Why didn't ZBH raise full-year guidance by the full Q1 beat, given the strong start?

Ivan Tornos expressed confidence in the business momentum, citing progressing sales force changes, a solid technology pipeline, and new product acceleration. He attributed the conservative guidance to it being early in the year and the ongoing significant transitions (go-to-market, innovation investments, talent changes), preferring to wait 90 days for an update.

“I'm very confident that we're more in the right direction. We continue to see the sales force changes progressing as planned. We had some disruption in the quarter early in Q2, but everything is going in accordance to plan.”

asked by Frederick Wise · answered by Ivan Tornos

2 min read 6 chapters

Detailed narrative

Q1 Performance Overview

Zimmer Biomet reported strong Q1 FY26 results with 2.9% organic constant currency sales growth and 15% adjusted EPS growth to $2.09. This performance was supported by healthy end markets, double-digit technology sales, and momentum from new products, despite ongoing U.S. go-to-market changes. The company raised its full-year adjusted EPS and free cash flow growth expectations.

U.S. Go-to-Market Transformation

The transition to a dedicated and specialized sales channel in the U.S. is progressing as planned, with modest disruption in line with expectations. Productivity in transitioned territories is rapidly increasing, with a significant reduction in 1099 (nondedicated) sales force members from 66% to slightly below 60%, and an increase in specialized reps from 25% to nearly 30%. Turnover rates are in the single digits, below the 12% target. Ivan Tornos spends 70% of his time on the road visiting territories to support this transformation. The company aims to complete the transition by the end of 2027.

Innovation and Technology

Zimmer Biomet is seeing strong adoption of its technology solutions, with ROSA and TMINI sales growing significantly (30% in Q1). The company completed enrollment for its Monogram clinical study and expects U.S. approval and launch of the semi-autonomous version in early 2027, followed by the fully autonomous version in late 2027 or early 2028. Investments are being made in robotic clinical sales representatives (targeting over 200 by end of 2027) and clinical evidence to support this launch. ROSA Shoulder has moved to full market release, showing strong feedback and accuracy.

Strategic Priorities and Talent

The company continues to focus on people and culture, operational excellence, and innovation/diversification. Dr. Jonathan [indiscernible], a renowned surgeon, joined as Chief Science Technology and Medical Affairs Officer to lead strategy for AI-enabled robotics, software, smart implants, and connected technologies. Operational improvements include expanding manufacturing into lower-cost geographies and SKU rationalization, expected to strengthen margins and improve free cash flow conversion.

Acquisition Momentum

Recent acquisitions are showing positive momentum. Paragon 28's growth accelerated by 200 basis points sequentially from Q4 FY25 and is trending towards double-digit growth, almost reaching it in Q1 and in the teens in early Q2. OrthoGrid delivered its strongest quarter to date, solidifying its role in the digital ecosystem. The company is pausing on further M&A to focus on current integrations (Paragon, Monogram, [indiscernible]) but will continue share buybacks.

Tariff Impact and Outlook

The Q1 results benefited from a $0.20 EPS impact due to the invalidation of IEEPA tariffs, with a portion being a pull-forward of about half from anticipated H2 credits. The company assumes 122 tariffs remain intact and IEEPA invalidated for the rest of the year. Management is monitoring the 232 investigation but expects it will not materially impact companies operating under the Nairobi protocol, indicating a pathway to mitigation.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.