Executive Summary / Key Takeaways

• Stryker delivered robust 10.1% organic sales growth in Q1 2025, demonstrating continued strong momentum across its MedSurg & Neurotechnology and Orthopaedics segments, significantly outpacing broader market growth rates.
• The company is effectively leveraging its differentiated technology platforms, particularly the Mako robotic system (achieving record Q1 installations) and new product launches like LIFEPAK 35 and Pangea, which are expected to be multi-year growth drivers.
• Strategic portfolio management, including the significant acquisition of Inari Medical (NARI) to enter the high-growth peripheral vascular market and the divestiture of the lower-growth U.S. Spinal Implants business, is aimed at enhancing Stryker's weighted average market growth rate and focusing resources.
• Management raised full-year 2025 organic sales growth guidance to 8.5%-9.5% and reiterated adjusted EPS guidance of $13.20-$13.45 (now including Inari), signaling confidence in sustained top-line performance and operational execution despite macroeconomic risks and estimated $200 million tariff impact.
• Stryker remains committed to approximately 100 basis points of adjusted operating margin expansion in 2025, driven by manufacturing efficiencies, positive pricing, disciplined spending, and natural leverage from sales growth, positioning the company for continued earnings power.

A MedTech Powerhouse Forging Ahead

Stryker Corporation stands as a global leader in medical technologies, a position cultivated over decades through a consistent blend of organic innovation and strategic acquisitions. The company's core mission revolves around partnering with healthcare providers to improve patient and healthcare outcomes across its diverse portfolio spanning MedSurg, Neurotechnology, and Orthopaedics. This strategic focus has positioned Stryker as a formidable competitor in the medical device industry, challenging rivals like Johnson & Johnson (JNJ), Medtronic (MDT), Zimmer Biomet (ZBH), and Globus Medical (GMED) across various segments.

The competitive landscape is characterized by intense innovation, pricing pressures, and the need for strong commercial execution. While larger, more diversified players like JNJ benefit from vast scale and broad portfolios, and focused innovators like GMED achieve high margins in niche areas, Stryker differentiates itself through a combination of technological leadership, a robust distribution network, and a culture of continuous improvement. The company's ability to consistently grow above the market average, as demonstrated by its organic sales growth hovering around or exceeding double digits in recent years (9.7% in 2022, 11.5% in 2023, 10.2% in 2024), underscores the effectiveness of its strategy and operational execution in this dynamic environment.

A foundational element of Stryker's competitive strength lies in its differentiated technology platforms. The Mako robotic system is a prime example, providing quantifiable benefits in precision and reproducibility for joint replacement procedures. This technology has driven significant adoption, leading to record Mako installations in the U.S. and worldwide in Q1 2025. The system's integration with Stryker's implants, such as cementless knees which boast over 99% survivorship at 10 years based on published data, creates a powerful ecosystem that enhances surgical outcomes and drives utilization. This technological edge in robotic-assisted surgery provides a significant moat against competitors, contributing to Stryker's strong performance in the Orthopaedics segment.

Beyond Mako, Stryker continues to innovate across its portfolio. The LIFEPAK 35 defibrillator and monitor, a flagship product in the Medical division, has garnered a robust order book and is driving meaningful sales, with planned international launches in Europe and Japan later this year. The Pangea plating system in Trauma and Extremities is also experiencing strong growth and increasing awareness of Stryker's comprehensive trauma offerings, with international expansion planned for Australia, Canada, and Japan in the coming years. These new product cycles, coupled with established platforms like the 1788 visualization system and ProCuity beds, provide multi-year tailwinds for the MedSurg and Neurotechnology segments. The recent FDA clearance for the OptaBlate BVN system in May 2025 further expands Stryker's pain management portfolio with a minimally invasive solution targeting chronic vertebrogenic low back pain, leveraging the company's expertise in radiofrequency ablation and vertebral access.

Stryker's strategic evolution is also marked by deliberate portfolio adjustments. The recent acquisition of Inari Medical in February 2025 for approximately $4.7 billion (net of cash acquired) represents a significant entry into the high-growth peripheral vascular segment, a logical adjacency to Stryker's existing Neurovascular business. Inari's mechanical thrombectomy solutions for venous thromboembolism (VTE), including the FlowTriever and ClotTriever, address a large and underserved market opportunity estimated at $15 billion globally ($6 billion in the U.S.). This acquisition diversifies Stryker's portfolio and adds innovative products like the recently launched Artix Thrombectomy System for arterial cases, enhancing the company's growth profile. Conversely, the divestiture of the U.S. Spinal Implants business, completed in April 2025, allows Stryker to exit a lower-growth area that had faced performance challenges, while maintaining a strategic partnership with the acquiring entity, Viscogliosi Brothers, LLC, on enabling technologies like Mako Spine and Copilot. This partnership allows Stryker to focus its spine efforts on the enabling technology ecosystem, which management believes is the key growth driver in that market.

Performance Reflecting Strategic Momentum

Stryker's financial performance in the first quarter of 2025 underscores the effectiveness of its strategic initiatives and operational execution. The company reported net sales of $5,866 million, an increase of 11.9% as reported and 12.8% in constant currency compared to the prior year period. Excluding the impact of acquisitions and divestitures, organic sales growth was a robust 10.1%. This growth was broadly based, driven by a 9.4% increase in unit volume and a 0.7% contribution from higher prices.

The MedSurg and Neurotechnology segment delivered net sales of $3,511 million, growing 13.4% as reported and 10.7% organically. The Orthopaedics segment reported net sales of $2,355 million, up 9.7% as reported and 9.3% organically. These segment results reflect strong demand across most businesses, including double-digit organic growth in U.S. Trauma and Extremities, Neuro Cranial, Medical, Endoscopy, and Instruments, and high-single-digit organic growth in U.S. Hips and Knees. International markets also showed healthy growth, contributing to the overall strong top-line performance.

Profitability metrics in Q1 2025 showed a mixed picture on a reported basis but improvement on an adjusted basis. Reported gross profit was $3,744 million, resulting in a gross profit margin of 63.8%, relatively flat compared to Q1 2024. Selling, general and administrative expenses increased significantly to $2,300 million, or 39.2% of net sales, primarily due to higher acquisition-related costs, including a $139 million charge related to Inari employee share-based awards that vested upon acquisition, and continued investments. Reported operating income decreased to $837 million, leading to a reported operating margin of 14.3%, down from 18.5% in Q1 2024. However, on an adjusted basis, which excludes certain items like acquisition and integration costs and amortization of intangible assets, the adjusted operating income margin increased by 100 basis points to 22.9%, reflecting the underlying leverage in the business from strong sales growth and manufacturing cost improvements.

Segment operating income margins saw increases, with MedSurg and Neurotechnology at 27.6% (vs 27.3% in Q1 2024) and Orthopaedics at 27.2% (vs 26.2% in Q1 2024). These improvements were driven by higher unit volumes and lower manufacturing/supply chain costs, partially offset by increased SG&A expenses, particularly in MedSurg & Neurotechnology due to the Inari acquisition and growth investments.

Below the operating line, other income/expense, net increased to $73 million in Q1 2025, primarily due to higher interest expense from recent debt issuances, partially offset by higher interest income from invested cash balances. The effective tax rate was 14.4% in Q1 2025, reflecting the benefit of European operations and discrete tax items. Reported net earnings were $654 million, or $1.69 per diluted share, down from $788 million, or $2.05 per diluted share, in Q1 2024. Adjusted net earnings per diluted share increased 13.6% to $2.84, demonstrating strong underlying earnings growth.

From a liquidity perspective, cash and cash equivalents decreased to $2,320 million at March 31, 2025, from $3,652 million at December 31, 2024, primarily reflecting the cash used for the Inari acquisition ($4,749 million net of cash acquired). Cash provided by operating activities was $250 million in Q1 2025.

The company issued $2,979 million in senior unsecured notes in February 2025 to help fund the Inari acquisition and entered into a new $3,000 million revolving credit facility, extending its maturity. As of March 31, 2025, there were no borrowings outstanding under the revolving credit facility or commercial paper program. Stryker maintains strong investment-grade debt ratings, providing flexibility for future financing needs. The company anticipates supporting short-term liquidity and operating needs through cash from operations, commercial paper, and existing credit lines.

Comparing Stryker's latest TTM financial performance to key competitors reveals insights into its relative standing. Stryker's TTM Gross Profit Margin of 63.57% is competitive within the industry, though potentially lower than some peers like JNJ (69%) or ZBH (71%), suggesting varying cost structures or product mix. Its TTM Operating Profit Margin (15.77%) and Net Profit Margin (12.31%) are also within the range of major diversified medtech players but may lag behind more profitable segments of competitors. For instance, JNJ's diversified model yields higher net margins (~16%), while specialized players like GMED can achieve higher margins in their niche (GMED TTM Net Margin ~4%, but this can be volatile). Stryker's TTM P/E ratio of 52.77 and P/S ratio of 6.51 reflect a premium valuation compared to some peers (e.g., MDT P/E 23.21, P/S 3.23; ZBH P/E 23.74, P/S 2.79; GMED P/E 109.01, P/S 4.46), indicative of investor confidence in its growth trajectory and market position, particularly its innovation engine and Mako platform. The TTM Debt/Equity ratio of 0.31 appears manageable, providing capacity for continued strategic investments.

Outlook and Risks

Looking ahead, Stryker's management expressed confidence in the company's momentum and ability to sustain high growth. Based on strong Q1 results, continued demand for capital products, and commercial execution, the company raised its full-year 2025 organic net sales growth guidance to 8.5% to 9.5%. This outlook assumes a modestly favorable pricing impact and a slightly unfavorable foreign exchange impact. The adjusted EPS guidance was reiterated in the range of $13.20 to $13.45, which now includes the expected impact of the Inari acquisition and the divestiture of the Spinal Implants business. Management anticipates approximately 100 basis points of adjusted operating margin expansion for the full year, driven by ongoing initiatives to improve manufacturing efficiency, manage costs, and leverage sales growth, despite absorbing the negative impacts of tariffs, Inari dilution, and the loss of Spinal Implant contributions for nine months. Adjusted other income and expense is projected to be approximately $430 million for the year, reflecting the increased interest expense from recent debt issuances. The full-year effective tax rate is expected to be in the range of 15% to 16%.

This positive outlook is underpinned by the expectation of continued healthy procedural volumes and robust demand for Stryker's differentiated products and capital equipment. The ongoing rollout of key products like LIFEPAK 35 and Pangea internationally, coupled with the anticipated full U.S. commercial launches of Mako Spine in the second half of 2025 and Mako Shoulder in Q1 2026, are expected to fuel future growth. The integration of Inari Medical is progressing well and is expected to contribute to the Vascular business's performance.

However, the path forward is not without risks. The macroeconomic environment, including potential slower economic growth, market volatility, and inflation, could impact demand and operational costs. New tariffs announced by the U.S. government on goods from countries including China and the European Union pose a direct risk, with an estimated impact of approximately $200 million in 2025 based on current rates. While Stryker is implementing mitigation measures, the dynamic nature of trade policies and potential reciprocal tariffs remain a concern. Supply chain disruptions, which affected the Medical business internationally in Q1 and are expected to linger into Q2, could impact product availability and sales. Legal and regulatory matters, including product liability claims and potential impacts from new income tax laws (like OECD Pillar Two), also present ongoing risks that could affect financial results. The successful integration of the Inari acquisition and the transition of the Spinal Implants business under new ownership are critical operational considerations.

Conclusion

Stryker's first quarter 2025 results demonstrate the continued strength of its business and the effectiveness of its strategy to drive durable high growth. The company's blend of organic innovation, fueled by differentiated technology platforms like Mako and a robust pipeline of new products, and strategic portfolio evolution through targeted M&A and divestitures, positions it well within the competitive medical technology landscape. Despite facing macroeconomic uncertainties, tariff headwinds, and integration challenges, Stryker's management is confident in its ability to sustain top-line momentum and expand operating margins. The raised organic sales growth guidance and reiterated adjusted EPS outlook for 2025 reflect this confidence. While risks related to tariffs, supply chain, and integration warrant monitoring, Stryker's proven commercial execution, technological leadership, and disciplined approach to capital deployment provide a compelling foundation for its investment thesis centered on consistent, above-market growth and expanding profitability.