Stryker (SYK) Q3 2026 earnings review
Stryker cuts its full-year plan as knee growth stalls
Stryker, a maker of joint implants and hospital equipment, grew more slowly than its own plan required and cut its full-year targets. Sales from businesses owned a year ago rose 8% to $6.5 billion, while profit per share excluding one-offs climbed 10% as cost discipline lifted margins. Chief executive Kevin A. Lobo said the quarter fell short of management's expectations, and by our math the new outlook points to about 8% underlying sales growth in the fourth quarter.
| Sales from businesses owned a year ago | +7.7% +9.5% a year ago |
|---|---|
| Profit per share, excluding one-offs | $3.52 +10.3% from a year ago |
| Full-year underlying sales outlook | Cut 2 pts middle of the range: 6.8% growth |
| Full-year profit per share outlook, excluding one-offs | Cut $0.18 middle of the range: $14.85 (+9%) |
⚖️ Verdict: 🔴 Bearish
The story got worse because the steep second-half sales acceleration management counted on after the spring cyber incident did not happen. Instead of speeding up past 10%, growth cooled as knee replacement sales almost stalled and hip sales shrank. On the positive side, US Vascular sales bounced back 13% after last quarter's factory bottleneck, and the company bought back $1 billion of its stock.
The question now is whether the slowdown in knee and hip implants is a brief pause after a tough comparison or a lasting cooldown in joint surgery demand. If hospital equipment orders carry the fourth quarter and joint volumes recover, Stryker can return to high-single-digit growth next year; if implant growth stays near zero, 2027 targets will reset lower. Fourth-quarter knee and hip sales and the initial 2027 outlook in January will settle it.
🐂 Bull Case
Hospital Equipment and Robotic Tools Kept Growing Fast
Stryker sells surgical cameras, hospital beds, and robotic tools alongside its joint implants. Management has pointed for quarters to a large order book for hospital equipment and surgical systems. In the third quarter, those equipment lines carried the medical-device maker while implant sales slowed down.
- Ortho Tech, which pairs surgical power tools with Mako robotic systems: $754 million, up 15.8% from a year ago and up 18.1% in the US
- Endoscopy, which makes surgical cameras and viewing tools: $1.02 billion, up 13.9%
- Medical, which sells hospital beds, stretchers and emergency gear: $1.08 billion, up 9.7%
These three divisions grew faster than the group's 7.7% rate because hospitals kept taking delivery of big-ticket gear after the spring cyber outage. What to watch: fourth-quarter sales in Ortho Tech and Medical, plus any dollar figure for the equipment order book on the conference call. Another quarter of double-digit growth would show hospital equipment demand is holding up even as implant procedures cool.
Vascular Sales Returned to Growth After the Plant Disruption
Stryker bought Inari Medical, a maker of devices that remove blood clots from veins, in early 2025 and folded it into its Vascular division. Last quarter, a supply failure at an Inari factory created heavy backorders and pushed US Vascular sales down 6.7%. Chief executive Kevin A. Lobo said then that the division would return to growth in the third quarter.
Vascular sales rose 8.0% from a year ago to $566 million, and US Vascular sales jumped 13.0% to $320 million. That rebound clears the plant bottleneck from last quarter, though international Vascular growth slowed to 0.8% in constant currency. What to watch: management's update on the conference call about whether Inari backorders reached a normal level and whether smaller hospitals returned. Sustained US growth in the fourth quarter would confirm the factory problem did not cause permanent customer losses.
Stryker Bought Back $1 Billion of Shares and Added $3 Billion More
For roughly six years, the Michigan-based group spent its cash on acquisitions and dividends rather than buying back its own stock. Last quarter, management said it planned to resume share repurchases under an existing $1 billion board allowance.
In the third quarter, Stryker spent the entire $1.0 billion to buy back stock, which helped trim its diluted share count by 0.5% from a year ago to 384.7 million. In October, the board approved an extra $3.0 billion for the repurchase programme. What to watch: fourth-quarter share repurchases and diluted share count at year-end. Continued buying would give per-share profit an extra lift while top-line growth runs at a lower pace.
Operating Margin Expanded Despite Slower Sales
Stryker has committed to raising its operating margin, excluding one-offs, by 1.5 percentage points over three years through 2028, or about 0.5 points a year. After the first half of 2026 added only 0.1 points because of the spring cyber incident, the second half had to carry the full-year improvement.
In the third quarter, operating margin excluding one-offs rose 0.6 percentage points from a year ago to 26.2%. Gross margin excluding one-offs improved by 0.4 percentage points to 65.4% on lower manufacturing costs as a share of sales, while research and development spending fell 0.2 percentage points to 6.4% of sales and selling and overhead costs stayed at 32.8%. What to watch: full-year operating margin excluding one-offs in the fourth-quarter release. Reaching 26.8% for the year would keep the three-year margin plan on schedule.
🐻 Bear Case
Sales Missed the Second-Half Target and Forced an Outlook Cut
Three months ago, management kept its full-year sales outlook near 8.8% growth from businesses owned a year ago. By our math, hitting that target required second-half underlying sales to accelerate to between 10.5% and 12.4%, even against last year's tough third- and fourth-quarter comparisons. Management argued then that a large hospital equipment order book would drive that jump.
Instead, underlying sales growth slowed from 9.0% in the second quarter to 7.7% in the third. “While, in absolute terms, this reflected good overall performance, it did fall short of our expectations,” chief executive Kevin A. Lobo said. The company cut its full-year underlying sales growth plan by 2 percentage points at the middle of the range, to 6.5%–7.0%, and trimmed its profit per share outlook excluding one-offs by $0.18 at the middle, to $14.80–$14.90.
By our math, the new full-year plan implies about 7.6% underlying sales growth in the fourth quarter, down from 11.0% a year earlier. What to watch: fourth-quarter underlying sales growth and the initial 2027 outlook in January. A fourth-quarter reading near 7.6% would confirm that Stryker's four-year streak of roughly 10% annual underlying growth has ended.
Hip Sales Shrank and Knee Growth Almost Stopped
Stryker's Orthopaedics division sells replacement hips and knees, bone-repair plates, and robotic surgical tools. Last quarter, slower hip growth in the US and flat hip sales abroad raised the question of whether demand for joint replacements was cooling or merely facing a tough comparison.
- Hips: $453 million, down 1.0% reported and down 0.7% in constant currency
- Knees: $635 million, up 1.1% reported and up 1.2% in constant currency, down from 8.3% growth in Q2
- Trauma and Extremities, which makes bone-fixation plates and implants for shoulders, hands and feet: $1.01 billion, up 5.3% reported vs 12.0% in Q2
- International sales across all divisions: up 6.0% in constant currency, down from 8.9% in Q2
A second straight quarter of weak hip sales, now joined by a sharp slowdown in knees and bone repair, shows the joint slowdown is broader than a one-quarter blip. What to watch: US Knee and Hip growth in the fourth quarter, when surgical volumes are seasonally highest. Another near-zero reading in knees would show that strong Mako robot installations are not translating into faster implant growth.
Goodwill Write-Downs and Exit Costs Pushed Reported Profit Down
Stryker focuses on profit excluding one-offs, which rose 10.3% per share to $3.52. On a reported basis, however, diluted profit per share fell 11.7% from a year ago to $1.96, and reported operating margin dropped 2.8 percentage points to 15.9%.
Two charge lines caused the drop. First, the company recorded a $293 million goodwill impairment, which is a write-down of the carrying value of past acquisitions, adding 4.5 percentage points of sales to operating expenses. Second, restructuring and special charges jumped to $153 million from $41 million a year ago, including $77 million tied to the past sale of the Spinal Implants business and $37 million for ending sales relationships in certain countries. What to watch: the quarterly filing's footnote on which business unit took the $293 million goodwill write-down. If the charge sits in a recent deal, it would show acquisition returns are falling short.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new figures in the third-quarter earnings release.
- Cybersecurity recovery and 2027 baseline: management still has not sized the revenue or factory-cost impact of the March cyber incident, which leaves next year's comparison base unclear until 2027 targets arrive.
- Hospital equipment order book in dollars: the release gives no dollar backlog figure or contract-liability balance; the quarterly filing will show contract liabilities.
- AVS regulatory timeline: the release gives no Food and Drug Administration approval date for the unapproved vascular device acquired earlier this year; the conference call is the next place to check.
- Medicare physician fee proposals and outpatient shift: the release does not address proposed fee cuts or the move of joint surgeries to outpatient centres; the conference call will show whether those trends hurt third-quarter knee and hip volumes.
💲 Other KPIs
By our math, third-quarter free cash flow — operating cash flow minus property and equipment purchases — fell 9.5% from a year ago to $1,224 million, or 18.8% of sales. Operating cash flow for the first nine months rose 13.9% to $3,303 million, while nine-month capital spending on factories and equipment rose 22.7% to $605 million.
Inventories rose 8.2% from the end of 2025 and 7.0% from a year ago, reaching $5,747 million at the end of September. Stock on hand has climbed in every quarter of 2026 — from $5,310 million at year-end to $5,419 million in Q1 and $5,521 million in Q2 — tying up cash as sales growth slowed.
Long-term debt excluding current maturities declined by $683 million from year-end 2025 to $14,176 million, as the medical-technology group paid down $753 million of net debt over the first nine months. Cash and cash equivalents stood at $3,271 million at quarter-end, down from $4,011 million at year-end after funding $1.0 billion of share buybacks and $1.01 billion of dividends.
🔮 Guidance
Cut. The middle of the full-year underlying sales growth range dropped by 2.05 percentage points to 6.75%, including a “modestly positive pricing impact” and a “slightly favorable impact” from currency. By our math, that leaves about 7.6% underlying growth for Q4, roughly matching Q3's 7.7% and down from 11.0% in Q4 last year. Across four quarters of updates, the middle moved 0.0 points, +0.05 points, and now −2.05 points.
Cut. Management lowered the middle of the full-year range by $0.175 to $14.85, which represents 9.0% growth over 2025. By our math, with $9.81 earned in the first nine months, the plan leaves $5.04 per share for Q4, up 12.8% from $4.47 a year ago. Across four updates, the middle moved $0.00, +$0.025, and −$0.175, breaking a two-year streak of finishing above the initial full-year range.
❓ Key Questions
Which business caused the third-quarter sales shortfall?
Chief executive Kevin A. Lobo said third-quarter sales fell short of expectations, and Knee growth dropped from 8.3% in Q2 to 1.1% in Q3. Did joint replacement procedure volumes slow across the market, or did hospital equipment deliveries slip into 2027?
Which unit took the $293 million goodwill write-down?
Stryker booked a $293 million goodwill impairment in Q3 with no explanation in the release text. Naming the impaired unit will show whether a recent acquisition, such as Inari Medical or care.ai, is falling behind its deal plan.
Have Inari vascular backorders returned to normal levels?
US Vascular sales rebounded 13.0% in Q3, but international Vascular sales grew only 0.8% in constant currency. Management previously promised that plant backorders would reach a manageable level by the end of Q3.
What is the dollar value of the equipment backlog?
Management has cited an elevated order book for hospital beds, cameras and Mako robots for six quarters without giving a dollar figure. Sizing the backlog would show how much support equipment orders give to 2027 sales.