Q4 2025 Stryker Corp Earnings Call

January 29, 2026

Speaker #1: Welcome to the fourth quarter and full year 2025 Stryker Earnings Call. My name is Leila, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode.

Operator: Welcome to the Fourth Quarter and Full Year 2025 Stryker Earnings Call. My name is Leila, 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 8-K filed today with the SEC. I will now turn the call over to Mr. Kevin Lobo, Chair and Chief Executive Officer.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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 8-K, filed today with the SEC.

Q4 2025 Stryker Corp Earnings Call

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Q4 2025 Stryker Corp Earnings Call

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Thursday, January 29th, 2026 at 9:30 PM

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Kevin Lobo: Welcome to Stryker's Fourth 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'll 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 results and guidance before opening the call to Q&A. Our 2025 results were outstanding for both Q4 and the full year across all key financial metrics. Against double-digit comparisons from the prior year, organic sales growth was 11% for Q4 and 10.3% for the full year, surpassing $25 billion in sales. Globally, for the full year, our neurocranial, endoscopy, instruments, and trauma extremities businesses all delivered double-digit organic sales growth, demonstrating continued robust demand across our product portfolio. Full-year US organic sales growth was an impressive 11.2%, and international organic sales growth was 7.5%.

Kevin Lobo: International results were led by strong performances in our emerging markets, South Korea, and Japan. These countries and our other international markets continue to represent significant growth opportunities for us, and we look forward to launching products internationally that have already demonstrated success in the United States. We also had excellent earnings and cash flow performance in 2025. While managing tariff headwinds, our teams delivered a second consecutive year of at least 100 basis points of adjusted operating margin expansion. This performance demonstrates strong operational execution and earnings power that we have been building up over time. Preston will cover cash flow, which is also a standout for us in 2025.

International results were led by strong performances in our emerging markets, South Korea, and Japan. These countries and our other international markets continue to represent significant growth opportunities for us, and we look forward to launching products internationally that have already demonstrated success in the United States. We also had excellent earnings and cash flow performance in 2025. While managing tariff headwinds, our teams delivered a second consecutive year of at least 100 basis points of adjusted operating margin expansion. This performance demonstrates strong operational execution and earnings power that we have been building up over time. Preston will cover cash flow, which is also a standout for us in 2025.

Kevin Lobo: Overall, our financial results reflect the durability of our high-growth offense with the following structural components: exceptional talent and culture, active M&A, a steady cadence of product launches, and systematic specialization by creating new business units and splitting sales forces. The new SmartCare business unit within medical combines Vocera and care.ai, and we have split multiple sales forces in the past two years. One example is the new breast care sales force within endoscopy that launched at the beginning of 2025 and has contributed to their terrific growth. We have momentum entering 2026 and expect to continue delivering growth at the high end of med tech, which is reflected in our full-year 2026 guidance. Our financial position remains strong, providing firepower to execute on M&A in 2026.

Overall, our financial results reflect the durability of our high-growth offense with the following structural components: exceptional talent and culture, active M&A, a steady cadence of product launches, and systematic specialization by creating new business units and splitting sales forces. The new SmartCare business unit within medical combines Vocera and care.ai, and we have split multiple sales forces in the past two years. One example is the new breast care sales force within endoscopy that launched at the beginning of 2025 and has contributed to their terrific growth. We have momentum entering 2026 and expect to continue delivering growth at the high end of med tech, which is reflected in our full-year 2026 guidance. Our financial position remains strong, providing firepower to execute on M&A in 2026.

Operator: Thanks, Kevin. My comments today will focus on providing an update on the current environment as well as a few other highlights. Procedural volumes remain healthy in the fourth quarter, and we continue to expect the markets will remain strong in 2026, underscored by the continued adoption of robotic-assisted surgery, favorable demographics, and durable demand for our capital products. Our US capital-related businesses delivered robust performance in the quarter, helping to drive double-digit organic sales growth for Q4 in our instruments, medical, and endoscopy divisions. Hospital CapEx budgets remain healthy, and our capital order book continues to be elevated as we enter 2026. Next, powered by Mako 4, we delivered a stunning quarter and year of Mako installations with yet another record quarter both in the US and worldwide. Our install base now includes more than 3,000 Mako systems worldwide.

Jason Beach: Thanks, Kevin. My comments today will focus on providing an update on the current environment as well as a few other highlights. Procedural volumes remain healthy in the fourth quarter, and we continue to expect the markets will remain strong in 2026, underscored by the continued adoption of robotic-assisted surgery, favorable demographics, and durable demand for our capital products. Our US capital-related businesses delivered robust performance in the quarter, helping to drive double-digit organic sales growth for Q4 in our instruments, medical, and endoscopy divisions. Hospital CapEx budgets remain healthy, and our capital order book continues to be elevated as we enter 2026. Next, powered by Mako 4, we delivered a stunning quarter and year of Mako installations with yet another record quarter both in the US and worldwide. Our install base now includes more than 3,000 Mako systems worldwide.

Operator: Alongside our record number of installations, we also continue to see steady increases in utilization, bolstering our number one position in US knees and hips. As we exited the year, over 2/3 of our knees and over 1/3 of our hips were performed on Mako in the US. Globally, utilization rates were approximately 50% for knees and over 20% for hips. We have significant momentum heading into 2026 and continue to receive very positive feedback on the latest Mako applications, including advanced primary with revision hip, spine, as well as shoulder, which will launch on Mako 4 mid-year. Finally, Inari, which is now known as our peripheral vascular business, had a strong finish to the year, highlighted by robust procedural growth in the high teens that was partially offset by the stocking, which will be minimal in Q1.

Alongside our record number of installations, we also continue to see steady increases in utilization, bolstering our number one position in US knees and hips. As we exited the year, over 2/3 of our knees and over 1/3 of our hips were performed on Mako in the US. Globally, utilization rates were approximately 50% for knees and over 20% for hips. We have significant momentum heading into 2026 and continue to receive very positive feedback on the latest Mako applications, including advanced primary with revision hip, spine, as well as shoulder, which will launch on Mako 4 mid-year. Finally, Inari, which is now known as our peripheral vascular business, had a strong finish to the year, highlighted by robust procedural growth in the high teens that was partially offset by the stocking, which will be minimal in Q1.

Kevin Lobo: Our fourth quarter adjusted earnings per share of $4.47 was up 11.5% from the same quarter last year, driven by sales growth and operating margin expansion, partially offset by tariffs, higher interest expense, and a higher effective tax rate. Foreign currency translation had an unfavorable impact of $0.02. Our full-year adjusted earnings per share of $13.63 was up 11.8% from 2024, driven by our outstanding sales growth and a return to pre-COVID adjusted operating margins, with a second consecutive year of at least 100 basis points of expansion. Our margin expansion included improvements in gross margin from business mix and cost improvements despite the impact of tariffs. For the year, foreign currency translation had a favorable impact of $0.01. Now, I will provide some highlights around our quarterly segment performance. In the quarter, MedSurg and Neurotechnology had an exceptional organic sales growth of 12.6%, including U.S.

Our fourth quarter adjusted earnings per share of $4.47 was up 11.5% from the same quarter last year, driven by sales growth and operating margin expansion, partially offset by tariffs, higher interest expense, and a higher effective tax rate. Foreign currency translation had an unfavorable impact of $0.02. Our full-year adjusted earnings per share of $13.63 was up 11.8% from 2024, driven by our outstanding sales growth and a return to pre-COVID adjusted operating margins, with a second consecutive year of at least 100 basis points of expansion. Our margin expansion included improvements in gross margin from business mix and cost improvements despite the impact of tariffs. For the year, foreign currency translation had a favorable impact of $0.01. Now, I will provide some highlights around our quarterly segment performance. In the quarter, MedSurg and Neurotechnology had an exceptional organic sales growth of 12.6%, including U.S.

Kevin Lobo: Organic growth of 13% and international organic growth of 10.9%. Instruments had US organic sales growth of 19.1%, with high teens growth from both our orthopedic instruments and surgical technologies businesses. Performance was fueled by strong capital demand in power tools, Steri-Shield, smoke evacuation, and Neptune waste management. Endoscopy had US organic sales growth of 11.1%, led by robust double-digit performances from our sustainability and sports medicine businesses and high single-digit growth from our core endoscopy portfolio. We continue to see strong demand for our sports medicine shoulder products and 1788 video platform. Medical had US organic sales growth of 13.6% that included strong double-digit performances in acute care and Sage businesses. From a product perspective, medical's fourth quarter growth was driven by LIFEPAK 35, ProCuity, Vocera, and Sage products. We do not expect the supply constraints we experienced in 2025 to negatively impact growth rates in 2026.

Organic growth of 13% and international organic growth of 10.9%. Instruments had US organic sales growth of 19.1%, with high teens growth from both our orthopedic instruments and surgical technologies businesses. Performance was fueled by strong capital demand in power tools, Steri-Shield, smoke evacuation, and Neptune waste management. Endoscopy had US organic sales growth of 11.1%, led by robust double-digit performances from our sustainability and sports medicine businesses and high single-digit growth from our core endoscopy portfolio. We continue to see strong demand for our sports medicine shoulder products and 1788 video platform. Medical had US organic sales growth of 13.6% that included strong double-digit performances in acute care and Sage businesses. From a product perspective, medical's fourth quarter growth was driven by LIFEPAK 35, ProCuity, Vocera, and Sage products. We do not expect the supply constraints we experienced in 2025 to negatively impact growth rates in 2026.

Kevin Lobo: Vascular had US organic sales growth of 4.3%, reflecting a strong double-digit performance in our hemorrhagic business that was powered by the recent launch of our Surpass Elite flow-diverting stent. This performance was offset by competitive pressures in our ischemic business. As a reminder, vascular's organic sales growth figures do not include our peripheral vascular business. And finally, neurocranial had US organic sales growth of 9.9%, led by an outstanding double-digit performance in our IVS business and near double-digit performance from our cranial maxillofacial business. Internationally, MedSurg and Neurotechnology's organic sales growth was 10.9%, led by double-digit growth in our endoscopy and neurocranial businesses. Geographically, a slower capital environment in Europe during the quarter was offset by robust demand in other international markets, including very strong performances in Australia and New Zealand, our emerging markets, and South Korea. Orthopaedics had organic sales growth of 8.4%, including US.

Vascular had US organic sales growth of 4.3%, reflecting a strong double-digit performance in our hemorrhagic business that was powered by the recent launch of our Surpass Elite flow-diverting stent. This performance was offset by competitive pressures in our ischemic business. As a reminder, vascular's organic sales growth figures do not include our peripheral vascular business. And finally, neurocranial had US organic sales growth of 9.9%, led by an outstanding double-digit performance in our IVS business and near double-digit performance from our cranial maxillofacial business. Internationally, MedSurg and Neurotechnology's organic sales growth was 10.9%, led by double-digit growth in our endoscopy and neurocranial businesses. Geographically, a slower capital environment in Europe during the quarter was offset by robust demand in other international markets, including very strong performances in Australia and New Zealand, our emerging markets, and South Korea. Orthopaedics had organic sales growth of 8.4%, including US.

Kevin Lobo: organic growth of 9.6% and international organic growth of 5.4%. Our US knee business grew 7.6% organically, reflecting our market-leading position in robotic-assisted knee procedures and continued momentum from recent Mako installations. Our US hips business grew 5.6% organically, highlighted by the enduring success of our Insignia hip stem and continuing adoption of our Mako robotic hip platform with expanded ability to address more difficult primary hip cases as well as hip revisions. Our US trauma and extremities business grew 8.5% organically in the quarter, led by double-digit growth in our upper extremities business as our multi-year strong shoulder growth trajectory continued throughout the year. Additionally, our core trauma business had solid high single-digit growth against a very high prior-year comparable. Core trauma's performance continues to be driven by Pangea, our differentiated plating portfolio, as well as our market-leading position in nailing. Our US.

organic growth of 9.6% and international organic growth of 5.4%. Our US knee business grew 7.6% organically, reflecting our market-leading position in robotic-assisted knee procedures and continued momentum from recent Mako installations. Our US hips business grew 5.6% organically, highlighted by the enduring success of our Insignia hip stem and continuing adoption of our Mako robotic hip platform with expanded ability to address more difficult primary hip cases as well as hip revisions. Our US trauma and extremities business grew 8.5% organically in the quarter, led by double-digit growth in our upper extremities business as our multi-year strong shoulder growth trajectory continued throughout the year. Additionally, our core trauma business had solid high single-digit growth against a very high prior-year comparable. Core trauma's performance continues to be driven by Pangea, our differentiated plating portfolio, as well as our market-leading position in nailing. Our US.

Kevin Lobo: Other ortho business grew 28.7% organically, driven by robust installations in the quarter, led by momentum from the successful launch of Mako 4 in the US. Internationally, orthopedics had an organic growth of 5.4% against a double-digit comparable in the prior prior year. Growth was led by strong performances in Canada and many of our emerging markets. As a reminder, our international results 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 fourth quarter. Our adjusted gross margin of 65.2% was 10 basis points lower than the fourth quarter of 2024, reflecting the impact of tariffs that were mostly offset by business mix and cost improvements as we continue to optimize our supply chain and manufacturing processes.

Other ortho business grew 28.7% organically, driven by robust installations in the quarter, led by momentum from the successful launch of Mako 4 in the US. Internationally, orthopedics had an organic growth of 5.4% against a double-digit comparable in the prior prior year. Growth was led by strong performances in Canada and many of our emerging markets. As a reminder, our international results 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 fourth quarter. Our adjusted gross margin of 65.2% was 10 basis points lower than the fourth quarter of 2024, reflecting the impact of tariffs that were mostly offset by business mix and cost improvements as we continue to optimize our supply chain and manufacturing processes.

Kevin Lobo: Our adjusted operating margin was 30.2% of sales, which was 100 basis points favorable to the fourth quarter of 2024, driven by lower adjusted SG&A as a percentage of sales, primarily due to our ongoing focus on operational excellence and margin expansion. Adjusted other income and expense of $107 million for the quarter was $56 million higher than 2024 due to increased interest expense from debt issuances early in the year and lower interest income. For 2026, we expect our full-year other income and expense to be approximately $420 million. The fourth quarter had an adjusted effective tax rate of 16.1%, reflecting the impact of geographic NICs and certain discrete tax items. For 2026, we expect our full-year effective tax rate to be in the range of 15% to 16%.

Our adjusted operating margin was 30.2% of sales, which was 100 basis points favorable to the fourth quarter of 2024, driven by lower adjusted SG&A as a percentage of sales, primarily due to our ongoing focus on operational excellence and margin expansion. Adjusted other income and expense of $107 million for the quarter was $56 million higher than 2024 due to increased interest expense from debt issuances early in the year and lower interest income. For 2026, we expect our full-year other income and expense to be approximately $420 million. The fourth quarter had an adjusted effective tax rate of 16.1%, reflecting the impact of geographic NICs and certain discrete tax items. For 2026, we expect our full-year effective tax rate to be in the range of 15% to 16%.

Kevin Lobo: Turning to cash flow, our year-to-date cash from operations was $5 billion, an increase of $802 million from 2024 that was primarily driven by higher earnings and year-over-year working capital improvements. As a result, we delivered free cash flow as a percentage of adjusted net earnings this year of 81% compared to 75% last year. Consistent with the long-range plan we presented at our investor day, we will continue to target a range of 70% to 80% for free cash flow as a percentage of adjusted net earnings. Now, I will provide full-year 2026 guidance. Given our strong exit from 2025, our presence in healthy end markets, sustained procedural volumes, and strong demand for our capital products, we expect 2026 organic net sales growth to be in the range of 8% to 9.5% and adjusted net earnings per share to be in the range of $14.90 to $15.10.

Turning to cash flow, our year-to-date cash from operations was $5 billion, an increase of $802 million from 2024 that was primarily driven by higher earnings and year-over-year working capital improvements. As a result, we delivered free cash flow as a percentage of adjusted net earnings this year of 81% compared to 75% last year. Consistent with the long-range plan we presented at our investor day, we will continue to target a range of 70% to 80% for free cash flow as a percentage of adjusted net earnings. Now, I will provide full-year 2026 guidance. Given our strong exit from 2025, our presence in healthy end markets, sustained procedural volumes, and strong demand for our capital products, we expect 2026 organic net sales growth to be in the range of 8% to 9.5% and adjusted net earnings per share to be in the range of $14.90 to $15.10.

Kevin Lobo: Thanks, Larry. As you saw, this is our fourth consecutive year of double-digit organic sales growth. At some point, you start to think maybe the comparatives will catch up to us. But given the order book, given the strength of the Mako performance we had in the fourth quarter, which, of course, then contributes to implant growth in the future, we really feel more positive, I'd say modestly more positive this year than we did one year ago, which gives us the confidence to start the year with that range, a little wider range, but a little on the higher end. And as I said at this call a year ago, 10% is certainly possible, but it does depend on a lot of things that are in the macro environment, procedure growth. But we do have a strong order book.

Kevin Lobo: Hey, well, that was a lot of questions, Robbie. So let me just say on the positive side, endoscopy, instruments, and Mako were absolutely on fire at the end of the year. I mean, instruments included power tools as well as the products Preston mentioned in his remarks. Endoscopy was a really amazing performance, if you think scopes and sustainability as well. But the camera is a few years into its launch. And unlike prior years, if you look at our prior launches, our growth would start to wane a little bit. Our camera is just phenomenal with fluorescence imaging. We're continuing to sell that very, very well. And this transition to Mako 4 has been incredible for Mako. This is the first time we've had a change of the actual robot to a new robot since we bought Mako.

Kevin Lobo: And to be honest, coming into the year, I wasn't sure how this new transition would go. The team has done a phenomenal job. The extra application certainly helps. The feedback has been terrific. On the other side of the fence, I mean, I am still extremely bullish on trauma and extremities. We had a monster comp from the prior year because Pangea was really gaining steam. And we still don't have Pangea in Europe and some other markets. Shoulder continues to be on fire. Our foot and ankle business was a bit soft this year. And we are now launching a new total ankle called Incompass with much better reimbursement from CMS, which is pretty exciting. We won't see much of that impact in Q1. But starting in Q2, that'll start to really kick in.

And to be honest, coming into the year, I wasn't sure how this new transition would go. The team has done a phenomenal job. The extra application certainly helps. The feedback has been terrific. On the other side of the fence, I mean, I am still extremely bullish on trauma and extremities. We had a monster comp from the prior year because Pangea was really gaining steam. And we still don't have Pangea in Europe and some other markets. Shoulder continues to be on fire. Our foot and ankle business was a bit soft this year. And we are now launching a new total ankle called Incompass with much better reimbursement from CMS, which is pretty exciting. We won't see much of that impact in Q1. But starting in Q2, that'll start to really kick in.

Kevin Lobo: So I don't feel in any way, shape, or form as that business is slowing down. It's just a question of comps. And over the course of the year, you're going to see them have another really strong year in 2026. On the vascular side, I think we commented that the ischemic sector has been tough for us. It's not just in the fourth quarter. That's been going on for the last couple of years. We did launch a new large bore catheter called Broadway. It's a 0.084 lumen. That was a big gap in our portfolio. That feedback has been very positive. But it's the early days of that launch in the US. And then we'll be launching that around the world. So I think over time, that'll start to improve somewhat. But our hemorrhagic business continues to be very strong.

So I don't feel in any way, shape, or form as that business is slowing down. It's just a question of comps. And over the course of the year, you're going to see them have another really strong year in 2026. On the vascular side, I think we commented that the ischemic sector has been tough for us. It's not just in the fourth quarter. That's been going on for the last couple of years. We did launch a new large bore catheter called Broadway. It's a 0.084 lumen. That was a big gap in our portfolio. That feedback has been very positive. But it's the early days of that launch in the US. And then we'll be launching that around the world. So I think over time, that'll start to improve somewhat. But our hemorrhagic business continues to be very strong.

[Analyst] (Needham & Company): Thank you. And let me echo the congratulations on the quarter and the year. This may be a little in the weeds, but there was actually a local coverage determination this morning around total joint arthroplasty and robotics, I think specifically with CGS. It wasn't very impactful, but it would appear to me that there's been some efforts to get incremental reimbursement for the use of robotics. I could be wrong in that assumption. And in the response, some of the MACs argued that the evidence may not be sufficient to warrant this. I'm curious if you have any thoughts about what's going on here, whether this does create any risk in your view from payers, or alternatively, an opportunity to get incremental reimbursement for robotic usage, specifically for specific robotic systems in the market in orthopedics.

Ryan Zimmerman: Thank you. And let me echo the congratulations on the quarter and the year. This may be a little in the weeds, but there was actually a local coverage determination this morning around total joint arthroplasty and robotics, I think specifically with CGS. It wasn't very impactful, but it would appear to me that there's been some efforts to get incremental reimbursement for the use of robotics. I could be wrong in that assumption. And in the response, some of the MACs argued that the evidence may not be sufficient to warrant this. I'm curious if you have any thoughts about what's going on here, whether this does create any risk in your view from payers, or alternatively, an opportunity to get incremental reimbursement for robotic usage, specifically for specific robotic systems in the market in orthopedics.

Jason Beach: Well, I'm not familiar with that particular case that you're citing. But what I can say is, in other parts of the world, there is extra reimbursement for robotic procedures, whether it's in Japan or in other markets around the world. We have examples where we do get extra reimbursement. And we love the opportunity for that. In fact, in Australia, there are studies that are showing that Mako outperforms other robotic systems as well as navigation as well as manual. So it kind of stands on its own in Australian data that has been peer-reviewed and published. So we love our chances of being able to demonstrate that data. We've been in the market for long enough now that the data is starting to come out and would support potentially extra reimbursements. I can't imagine or don't foresee any reduction in reimbursement.

Kevin Lobo: Well, I'm not familiar with that particular case that you're citing. But what I can say is, in other parts of the world, there is extra reimbursement for robotic procedures, whether it's in Japan or in other markets around the world. We have examples where we do get extra reimbursement. And we love the opportunity for that. In fact, in Australia, there are studies that are showing that Mako outperforms other robotic systems as well as navigation as well as manual. So it kind of stands on its own in Australian data that has been peer-reviewed and published. So we love our chances of being able to demonstrate that data. We've been in the market for long enough now that the data is starting to come out and would support potentially extra reimbursements. I can't imagine or don't foresee any reduction in reimbursement.

Jason Beach: Yeah, Ron, good question. So as we think about it, the confidence is the same. We gave you that guide for the next three years because we believe very much in the ability to go out and achieve it based on the activities and actions that we have going on internally, focused on operational excellence, particularly with areas like lean and other elements with regards to shared services and things of that nature. But when we think about what we gave you for 2026 here, we gave you a lot of the different pieces in terms of our overall growth and what we expect from an EPS standpoint. I think if you plug that in, you'll see it's a healthy margin that we're planning for 2026 that really leads you down that path for that expectation of delivering 150 and above potentially as we go through the next three years.

Jason Beach: Yeah, I kind of alluded to some of that in my prepared remarks. I think it's something that's not fully understood. First, it starts off with our tremendous market shares. So we have incredibly high market shares across our MedSurg portfolio, very strong position. We are constantly upgrading these products, launching next generations of each of these products. And then we fill in little acquisitions that are very fast-growing. If you remember acquisitions like NICO, that just continues to fuel extra growth of our NS business and on and on. And then we specialize sales forces and split sales forces continually. A couple of examples. We split our CMF sales force a couple of years ago into an oral maxillofacial sales force, and a neuro sales force. We split our Sage sales force into an infection sales force and an injury sales force.

Jason Beach: I can go on and on. We created a separate sales force for law enforcement within our emergency care business. So we don't talk about all these publicly for competitive reasons. But this is part of the offense: we bring those constant innovations, add in little tuck-in acquisitions, split sales forces, and then that just fuels continual growth. We already have a number of sales force splits that we're contemplating for the next couple of years. We had the, if you think about the Vertos deal, that enabled us to add specialized pain salespeople because today the IVS business sells to interventional oncologists as well as pain docs. So that's really part of the formula, secret sauce, if you will. High market shares, continual internal innovation, constant tuck-ins, which enable us sometimes to even create separate business units.

I can go on and on. We created a separate sales force for law enforcement within our emergency care business. So we don't talk about all these publicly for competitive reasons. But this is part of the offense: we bring those constant innovations, add in little tuck-in acquisitions, split sales forces, and then that just fuels continual growth. We already have a number of sales force splits that we're contemplating for the next couple of years. We had the, if you think about the Vertos deal, that enabled us to add specialized pain salespeople because today the IVS business sells to interventional oncologists as well as pain docs. So that's really part of the formula, secret sauce, if you will. High market shares, continual internal innovation, constant tuck-ins, which enable us sometimes to even create separate business units.

Jason Beach: Yeah, thanks, Vijay. I'd say, look, there's a ton of innovation always going on in this company. And even if you think of something like ProCuity, that's in its whatever, third or fourth year, but it still heads our long-term cycle. That still behaves like a new product in our hands because it's just a long buying cycle. But we have a number of other exciting launches. We have the Mako RPS, the handheld robot. Initial cases started this month. They're going extremely well. That's a brand new segment for us between our manual power tools and Mako. We have the Vocera Sync Badge that launched towards the latter part of last year, which is getting tremendous feedback. We have all kinds of OptiBlade PVNA and IVS, the Incompass Total Ankle, which I talked about. We have Artix, which is a new arterial product within Inari.

Kevin Lobo: Yeah, thanks, Vijay. I'd say, look, there's a ton of innovation always going on in this company. And even if you think of something like ProCuity, that's in its whatever, third or fourth year, but it still heads our long-term cycle. That still behaves like a new product in our hands because it's just a long buying cycle. But we have a number of other exciting launches. We have the Mako RPS, the handheld robot. Initial cases started this month. They're going extremely well. That's a brand new segment for us between our manual power tools and Mako. We have the Vocera Sync Badge that launched towards the latter part of last year, which is getting tremendous feedback. We have all kinds of OptiBlade PVNA and IVS, the Incompass Total Ankle, which I talked about. We have Artix, which is a new arterial product within Inari.

Jason Beach: I can go on and on. I could go on for another 10 minutes. But there aren't right now, let's say, the new power tool, the new camera. Those are sort of flagship products in the past that we would always focus on. But the reality is, as we've become much more diversified, even those launches become a little bit less important to the overall company as the split of CMF is driving CMF to double-digit growth. And all these other tuck-ins like NICO and all these little products contribute to really high growth. And then when you have those other new bigger platforms launched, that gives you just an extra jolt. But the fact that Endoscopy posted these kind of numbers with a camera that's almost 3 to 4 years into its cycle is really impressive. And of course, we do have 1888 in development.

I can go on and on. I could go on for another 10 minutes. But there aren't right now, let's say, the new power tool, the new camera. Those are sort of flagship products in the past that we would always focus on. But the reality is, as we've become much more diversified, even those launches become a little bit less important to the overall company as the split of CMF is driving CMF to double-digit growth. And all these other tuck-ins like NICO and all these little products contribute to really high growth. And then when you have those other new bigger platforms launched, that gives you just an extra jolt. But the fact that Endoscopy posted these kind of numbers with a camera that's almost 3 to 4 years into its cycle is really impressive. And of course, we do have 1888 in development.

Jason Beach: Yeah, thanks. Listen, Mako Force has been an absolute home run. We already felt like we had the best robot on the market. And we've just only added to that with these additional applications. The feedback on revision hip, one surgeon actually told me he thought it was a cheat code for revisions. Those were his words. It just makes a very hard procedure very easy to do, providing tremendous value to the surgeon. So these extra applications make it totally compelling, a great investment for a hospital. I think we're in obviously a clear leading position. And there's still a lot of hospitals that only have one Mako. And they're starting to add more and more and more. I think we're up to 30% to 40% now have more than one Mako. But every operating room for us is an opportunity for a Mako to be installed.

Jason Beach: We have clearly the wind at our backs on that. We're seeing it start to take off in international markets, Japan being the most important one where it took a while, first of all, to get the regulatory approval. They're obviously very data conscious there. But now Japan is really starting to take off. In fact, even other countries in Asia Pacific are starting to really drive the incremental growth. So we're very bullish on this. I think the shoulder is going to be really exciting when we bring that to the market. Our limited launch has been on the Mako 3 robot. So that's why we're staying in a limited mode because we really want to get that on the Mako 4 robot, which again will be sometime in the middle of the year. And obviously, the shoulder business continues to grow exceptionally well without Mako.

We have clearly the wind at our backs on that. We're seeing it start to take off in international markets, Japan being the most important one where it took a while, first of all, to get the regulatory approval. They're obviously very data conscious there. But now Japan is really starting to take off. In fact, even other countries in Asia Pacific are starting to really drive the incremental growth. So we're very bullish on this. I think the shoulder is going to be really exciting when we bring that to the market. Our limited launch has been on the Mako 3 robot. So that's why we're staying in a limited mode because we really want to get that on the Mako 4 robot, which again will be sometime in the middle of the year. And obviously, the shoulder business continues to grow exceptionally well without Mako.

Jason Beach: Yeah, look, this is a really great solution for some surgeons that aren't ready to go through the change management of Mako. Mako requires a lot of change for the surgeon as well as for the staff. And if you think about this handheld, it really is very simple, very easy to use, doesn't require the surgeon to go through that type of transition. This launch is just for total knee. So if you want a robot that can do multiple applications, obviously, that's not possible with this. But if you think about in the ASC, some surgeons not wanting the complexity of Mako, I think it's just going to open up new customers for us that weren't ready for Mako but want something better than using the manual instruments and have the visualization. And we're using the intellectual property from Mako to provide some haptic boundaries.

Kevin Lobo: Yeah, look, this is a really great solution for some surgeons that aren't ready to go through the change management of Mako. Mako requires a lot of change for the surgeon as well as for the staff. And if you think about this handheld, it really is very simple, very easy to use, doesn't require the surgeon to go through that type of transition. This launch is just for total knee. So if you want a robot that can do multiple applications, obviously, that's not possible with this. But if you think about in the ASC, some surgeons not wanting the complexity of Mako, I think it's just going to open up new customers for us that weren't ready for Mako but want something better than using the manual instruments and have the visualization. And we're using the intellectual property from Mako to provide some haptic boundaries.

Jason Beach: The feedback has been incredible. From the surgeons using it, this is easy to use. It provides tremendous value. So I do believe this will be an extra accelerator for our knee business and something that will live between Mako as well as our manual instruments. And it will be sold by the same sales force that sells Mako. So the positioning, it's really about meet the surgeons where they are and provide the value that they're looking for. And right now, we understand our customers very well. And we believe there is a home for this. And it's under the Mako name. So you can believe we feel very good about the performance. We would never want to tarnish the performance of the Mako brand. So we know this product can sing.

Jason Beach: Yeah, obviously, when you have somebody in this role that can handle the overall commercial part of the business, it allows me, frankly, to spend more time with our operations team, spend more time with our, we have a brand new leader for information technology and AI. I really want to make sure we are an AI-forward company. We've done a terrific job on AI for customer solutions. But we really haven't made a lot of progress yet on productivity with AI. We've done a great job on lean and a much better job on inventory. But there's a lot of work we can do to drive productivity in AI. And I can now spend a bit more of my time engaging in those other parts of the business that in the past would sort of the gravitational pull would be towards the commercial size of the business.

Jason Beach: Yes, Triathlon Gold is in limited launch right now. Feedback is extremely positive. You can do it both cemented and cementless, which is a huge draw for surgeons. As you know, so many of our knees are now cementless. That percentage of cementless continues to grow. The ability to do both is really tremendous. That will also be on display at AAOS. You'll be able to see that and be able to interact with our people as they can explain that product to you. But we are extremely pleased with the design. Again, it's in limited launch. We always like, when these implant launches, we tend to want to have a limited launch for the number of surgeons, make sure everything's going smoothly with the instrumentation and the actual performance. But so far, so good. This should be a winner for us.

Kevin Lobo: Yes, Triathlon Gold is in limited launch right now. Feedback is extremely positive. You can do it both cemented and cementless, which is a huge draw for surgeons. As you know, so many of our knees are now cementless. That percentage of cementless continues to grow. The ability to do both is really tremendous. That will also be on display at AAOS. You'll be able to see that and be able to interact with our people as they can explain that product to you. But we are extremely pleased with the design. Again, it's in limited launch. We always like, when these implant launches, we tend to want to have a limited launch for the number of surgeons, make sure everything's going smoothly with the instrumentation and the actual performance. But so far, so good. This should be a winner for us.

Kevin Lobo: Hey, thanks so much for taking the question. And congrats on a really, really impressive performance, everybody. So one on kind of growth and one on margins for Preston, if I could. So on the growth side, I was hoping you could maybe talk a little bit about the differences in the way the growth drivers in the US and the growth drivers OUS. Obviously, US, you've got a bigger contribution of ASCs, and maybe robots are making different kinds of contributions, different part of the life cycle in the US versus OUS. And then maybe just as part of that, I get the question sometimes about the recurring nature of your business. Some of the—I don't know if you've ever carved it out and talked about it. But there's clearly parts of the business, robot being one of them, where it's a recurring model.

Matthew Miksic: Hey, thanks so much for taking the question. And congrats on a really, really impressive performance, everybody. So one on kind of growth and one on margins for Preston, if I could. So on the growth side, I was hoping you could maybe talk a little bit about the differences in the way the growth drivers in the US and the growth drivers OUS. Obviously, US, you've got a bigger contribution of ASCs, and maybe robots are making different kinds of contributions, different part of the life cycle in the US versus OUS. And then maybe just as part of that, I get the question sometimes about the recurring nature of your business. Some of the—I don't know if you've ever carved it out and talked about it. But there's clearly parts of the business, robot being one of them, where it's a recurring model.

Jason Beach: Sure. I'll start with that question. The dynamics internationally are not different than the United States. We have premium products that we sell through specialized sales forces. The reason that we're experiencing higher growth in the US right now versus these markets primarily is because of the timing of launches. So we get these approvals early in the US. Europe, in particular, with the EU MDR has been extremely frustrating. And it's taking us Insignia, Pangea. These LIFEPaks just got approved. These products aren't yet on the market. And they're really important products. And then Mako has taken longer for us to really get that going. And that's not unusual where these international markets tend to want to wait to see more data before they'll start to grow.

Jason Beach: Yeah, absolutely. So we have a range on the top, as you said. And certainly, as we deliver that, if we're able to deliver towards the top end of that range, it does drop some additional margin or additional profits down. But also remember, there's some costs that come with that in terms of, obviously, tariffs are fluctuating with our business. And then also just the investment that it takes for us to put back in to have those growth rates. So it's something that we balance as we look at the entirety of our P&L and obviously with both the growth rates, but then funding for future growth rates as well when we look at what we drop down from a margin standpoint. But I think you could look at this year as a good example, right? So we moved up our top line this year.

Preston Wells: Yeah, absolutely. So we have a range on the top, as you said. And certainly, as we deliver that, if we're able to deliver towards the top end of that range, it does drop some additional margin or additional profits down. But also remember, there's some costs that come with that in terms of, obviously, tariffs are fluctuating with our business. And then also just the investment that it takes for us to put back in to have those growth rates. So it's something that we balance as we look at the entirety of our P&L and obviously with both the growth rates, but then funding for future growth rates as well when we look at what we drop down from a margin standpoint. But I think you could look at this year as a good example, right? So we moved up our top line this year.

[Analyst] (JPMorgan): Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on a really strong 2025. Just following up on, excuse me, Chris's question on pricing, just at a higher level, Stryker, I know you guys had talked about, broadly speaking, that you saw over the last two years starting, you're expecting that to wane. It sounds like that's reflected in guidance. But I'm just curious about how you're seeing potentially your hospital customers, ASC customers. Are they changing the way they're contracting at all or on price? I'm just curious because, obviously, one of the narratives is with ACA subsidies expiring, hospitals could be more constrained from a budget perspective as we move further away from the change in purchasing patterns during COVID. Thanks so much.

Danielle Antalffy: Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on a really strong 2025. Just following up on, excuse me, Chris's question on pricing, just at a higher level, Stryker, I know you guys had talked about, broadly speaking, that you saw over the last two years starting, you're expecting that to wane. It sounds like that's reflected in guidance. But I'm just curious about how you're seeing potentially your hospital customers, ASC customers. Are they changing the way they're contracting at all or on price? I'm just curious because, obviously, one of the narratives is with ACA subsidies expiring, hospitals could be more constrained from a budget perspective as we move further away from the change in purchasing patterns during COVID. Thanks so much.

Jason Beach: Yeah, Danielle, thanks for the question. In terms of price, I mean, price has always been something that's been a negotiation in terms of where we've been trying to gain price. And it's something that we, quite frankly, have gotten better as we've talked about over the last few years. And certainly, as we look at contracting, that's an element of where we've really improved over the last few years. And so I think our ability to go out and make sure that we are working those contracts appropriately across our entire book of business has really helped us in terms of that pricing element. And we expect that to continue into 2026. And as you said, it is built into what our expectations are from a top line and guidance standpoint.

Jason Beach: Yeah, I think you answered it well. Our high market share is just a new—it's just a new site for us. But I think what really can help us is, again, if there's new construction of ASCs, it just gives us—if new procedures are added and start being done in ASCs, procedures where we have implants, that only helps us to provide a more full offering to the ASC. We already have the broadest offering by far in the industry, which is why we win at a very high rate, new construction and big rebuilds of ASCs. So the more procedures that go, the more that provides—we provide that full service. And they need financing for their capital equipment in these ASCs, unlike hospitals that have the capital balance sheets to be able to provide to buy capital.

Jason Beach: Yeah. So what you see with that $200 million really is the net result of mitigation activities that we've been taking for the past year as this whole tariff item has really come to bear over the last year. So that is reflective of the annualization, really, of all the work and activity that's been done. And as you'll look at our guidance that we gave, you can see when you do the work around the margin pieces of it that we have, in fact, built that into our expectations. Yeah. A total of $400 million. And we're still driving margin expansion. We drove a significant amount this year with $200 million. We've got another $200 million. And you'll do the math through your models. You'll see we're going to drive meaningful margin expansion in the face of this extra $200 million. So our margin muscle is really good.

Jason Beach: Well, as it relates to robotics, I don't think there's any limit. I think robotics can become standard of care at some point in time. It's not like cementless where I don't think cementless knees will get to 100 because of bone quality. In the case of robotics, I don't see a limit to how much can be done. And we're over 2/3 in the US and over 1/3. And what I like is I see the hip starting to inflect upwards. So with the launch of Mako 4, the new software, it's called the 5.0 software for hip, which is really amazing for revisions. But once the surgeon starts to do it for revisions, they start to realize it could be very good for primaries also. So very bullish on that potential. Is there a second question, Jay? Okay. Thank you.

[Analyst] (Needham & Company): Hi. Thanks for taking the question. I just wanted to go back to the price comments. I hear you loud and clear, Kevin. Your overall price assumption is not dramatically different from last year for 2026. But just within the components, I just want to kind of reconcile with some comments I think I've heard you make in the past between MedSurg and Ortho. And just tell me, if you can, if this is directionally correct. But my understanding was that MedSurg is over the long-range plan that I would presume in 2026 as well, about positive 100 to 200 basis points. And then your Ortho I think has tended to be in a negative 1% to negative 2% range. And maybe that's a little bit more towards the negative 2% part of that range. Then you net those two out, and you're somewhere similar-ish to last year.

Richard Newitter: Hi. Thanks for taking the question. I just wanted to go back to the price comments. I hear you loud and clear, Kevin. Your overall price assumption is not dramatically different from last year for 2026. But just within the components, I just want to kind of reconcile with some comments I think I've heard you make in the past between MedSurg and Ortho. And just tell me, if you can, if this is directionally correct. But my understanding was that MedSurg is over the long-range plan that I would presume in 2026 as well, about positive 100 to 200 basis points. And then your Ortho I think has tended to be in a negative 1% to negative 2% range. And maybe that's a little bit more towards the negative 2% part of that range. Then you net those two out, and you're somewhere similar-ish to last year.

Jason Beach: Yeah. Look, I'm not going to be that specific. I think your outer ranges are probably a little bit high on both sides, on both the implant side as well as the MedSurg side. But MedSurg will be positive. The orthopedics will be slightly negative. And the two will net to something similar to what we experienced this year going forward. I'm not excited or worried at all about our price. We have a really good offense. We understand what happens quarter by quarter. We feel like we're in a pretty stable pricing environment. And keep in mind, these are just like-for-like products, right? So this does not include when we launch a new product, we obviously launch at a higher price. And those products don't show up in price for at least another year until at anniversaries. So I just want to make sure you remember that as well.

Jason Beach: Yeah. Look, it's an important product that is actually premium priced versus a standard implant. It's roughly 5% of the market, but we didn't have an offering. So we would have Stryker-loyal surgeons that would actually switch to a competitor to be able to do this if they had a metal-sensitive patient. And frankly, what my hope is, given that you can do this cementless, and if the product performs really well, that 5% might actually grow. It's not just for metal sensitivities. This is, let's call it, an advanced bearing implant. So I'm not going to promise that, but there is the potential for this to continue to grow and grow the market beyond 5% of the total implants. It's really a wonderful product. The feedback so far has been very positive. But it's roughly 5%. We were not playing at all.

Jason Beach: Yeah. Thanks. First of all, the breast care sales force is within our endoscopy business. So we were already calling on them, but we didn't have a focus. And the acquisition of MOLLI, the marker, in addition to Novadaq, the exoscope, in addition to the tissue from Novadaq, in addition to the Invuity retractors, the Invuity was bought by our instruments business, but we moved it over to endoscopy because it's absolutely perfect for those procedures, breast reconstruction procedures. So a combination of acquired products and obviously our internal products within endoscopy created enough of a basket to have a dedicated sales force. It was really successful in year one. And yes, we look to continue to expand within breast care. We could potentially do additional acquisitions to fill out the bag, continue to add more specialized salespeople. But this is what we do at Stryker.

Kevin Lobo: Yeah. Thanks. First of all, the breast care sales force is within our endoscopy business. So we were already calling on them, but we didn't have a focus. And the acquisition of MOLLI, the marker, in addition to Novadaq, the exoscope, in addition to the tissue from Novadaq, in addition to the Invuity retractors, the Invuity was bought by our instruments business, but we moved it over to endoscopy because it's absolutely perfect for those procedures, breast reconstruction procedures. So a combination of acquired products and obviously our internal products within endoscopy created enough of a basket to have a dedicated sales force. It was really successful in year one. And yes, we look to continue to expand within breast care. We could potentially do additional acquisitions to fill out the bag, continue to add more specialized salespeople. But this is what we do at Stryker.

[Analyst] (Bank of America): Yeah. So from a free cash flow standpoint, I said before, I mean, we're still going to target in that same range of 70 to 80. That's been the range that we've been targeting for the last few years. We feel like that's a good place for us where we can balance investment with also obviously being more productive from a cash perspective. When it comes to capital, I mean, really, our capital focus is around how do we support growth? So whether that's investments we're making in our plants or obviously investments we're making in our IT systems for structure as well in terms of how we're running our businesses. So there's really no change in our overall approach that we're thinking about from a cash flow standpoint.

Preston Wells: Yeah. So from a free cash flow standpoint, I said before, I mean, we're still going to target in that same range of 70 to 80. That's been the range that we've been targeting for the last few years. We feel like that's a good place for us where we can balance investment with also obviously being more productive from a cash perspective. When it comes to capital, I mean, really, our capital focus is around how do we support growth? So whether that's investments we're making in our plants or obviously investments we're making in our IT systems for structure as well in terms of how we're running our businesses. So there's really no change in our overall approach that we're thinking about from a cash flow standpoint.

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Q4 2025 Stryker Corp Earnings Call

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