Stryker (SYK) Q3 2025: Orthopedics Grows 11.4%, Margin Expansion Holds Despite $200M Tariff Headwind
Stryker’s third quarter delivered broad-based growth and robust margin gains, even as tariff impacts intensified, underscoring the company’s operational agility and portfolio depth. Orthopedics led with 11.4% organic growth, while MedSurg and Neurotechnology sustained high single-digit expansion. Management’s guidance raise and active M&A posture signal sustained confidence, but investors must weigh tariff drag and supply chain volatility as persistent watchpoints heading into 2026.
Summary
- Orthopedics Outpaces Market: Stryker’s U.S. knee and trauma businesses delivered above-market growth, reinforcing competitive leadership.
- Margin Expansion Continues: Strong execution offset $200M in tariff headwinds, driving another year of 100 basis points operating margin improvement.
- Forward Momentum in M&A and Innovation: Acquisitions and product launches position Stryker for continued portfolio growth and international expansion.
Performance Analysis
Stryker posted 9.5% organic sales growth in Q3, building on last year’s double-digit comparable and reflecting strong demand across orthopedics, MedSurg, and neurotechnology. Orthopedics was the standout, growing 11.4% organically (12.9% U.S., 7.8% international), with U.S. knees up 8.4% and trauma/extremities up 13.2%. MedSurg and Neurotechnology grew 8.4%, led by double-digit U.S. expansion in surgical technologies and vascular, and high single-digit endoscopy growth. International markets contributed 6.3% organic growth, with South Korea, Japan, and emerging markets notable bright spots.
Adjusted operating margin reached 25.6%, up 90 basis points, despite a $200 million annualized tariff impact that is weighted to the second half. Gross margin rose 50 basis points to 65%, fueled by business mix, pricing, and supply chain optimization. Cash from operations reached $2.9 billion year to date, supported by working capital improvements. Stryker raised its full-year guidance, reflecting continued procedural strength, robust backlog, and pricing execution, even as higher interest expense and ongoing supply chain disruptions in emergency care tempered the upside.
- Orthopedics Outperformance: Mako robotic installations and Insignia hip stem adoption drove U.S. ortho growth above peers.
- Capital Product Demand: Elevated backlog and strong hospital CapEx supported best-ever Q3 for Mako installations.
- Tariff Drag Mitigated: Margin expansion was achieved despite a material increase in tariff-related costs.
While the core businesses delivered, supply chain issues in medical and higher interest expense remain pressure points. The company’s ability to sustain pricing and margin discipline, alongside continued product innovation, will be key to maintaining its growth trajectory.
Executive Commentary
"We are firmly on track to deliver a second consecutive year of 100 basis points of adjusted operating margin expansion, backed by strong execution and conviction in the sustained growth and earnings power of our businesses."
Kevin Lobo, Chair and Chief Executive Officer
"Our adjusted earnings per share of $3.19 was up 11.1% from the same quarter last year, driven by our strong sales growth and margin expansion, partially offset by higher interest expense."
Preston Wells, Chief Financial Officer
Strategic Positioning
1. Orthopedics and Robotics Leadership
Stryker’s orthopedics business continues to outgrow the market, anchored by leading positions in knees and hips, and powered by the Mako, robotic-assisted surgery platform, which saw record installations globally. The company’s cementless knee and new hinge revision systems, alongside Mako-driven procedural growth, are driving share gains. Upcoming software and product innovations aim to deepen this leadership, especially as procedures migrate to ambulatory surgery centers (ASC, outpatient surgical facilities).
2. Margin Expansion Amid Tariff Headwinds
Margin discipline remains a core strategic lever, with Stryker delivering its second consecutive year of 100 basis points adjusted operating margin expansion. This has been achieved through business mix optimization, pricing initiatives, and SG&A discipline, even as tariff headwinds intensified in the back half ($200M impact for 2025). The company’s ability to offset these external pressures underscores operational resilience and a focus on cost structure improvement.
3. M&A and Portfolio Enhancement
Stryker’s active M&A approach is expanding its portfolio and market reach. The quarter saw two tuck-in acquisitions: Guard Medical’s NP Seal (negative pressure wound treatment) and Advanced Medical Balloons (fecal incontinence), both designed to leverage existing sales infrastructure and fill adjacent needs. Management reiterated that acquisitions remain the top capital allocation priority, with a strong balance sheet enabling both small and larger value-creating deals.
4. International Opportunity and Integration
International markets are a growing focus, with South Korea, Japan, and emerging markets contributing to above-average growth. The Inari, venous and arterial thrombectomy platform, integration is progressing, with double-digit pro forma growth and plans to leverage Stryker’s infrastructure for broader overseas expansion in the second half of 2026. Product launches like LifePak 35 in Europe further support international momentum.
5. Innovation Pipeline and Procedural Growth
Product innovation remains a growth engine, as evidenced by strong launches in vascular (Surpass Elite stent, Broadway aspiration system), trauma (Pangea plating), and acute care (Procurity beds, Vocera communication). The procedural environment remains robust, with healthy hospital balance sheets and a strong order book supporting both capital and implant businesses. Stryker’s ability to sustain this innovation cadence will be critical to future performance.
Key Considerations
Stryker’s Q3 results highlight the company’s ability to out-execute peers across core franchises, while navigating macro and operational turbulence. The balance of growth, margin, and capital allocation will remain central to investor focus as the company enters a period of heightened tariff and supply chain uncertainty.
Key Considerations:
- Pricing Power and Mix: Sustained pricing gains in MedSurg and orthopedics, though future price improvement may moderate as comps normalize.
- Supply Chain and Tariff Management: Ongoing emergency care supply disruptions and $200M in tariffs require continued mitigation to preserve margin gains.
- Mako Platform Leverage: Record Mako installations drive implant pull-through and reinforce Stryker’s robotics moat in knees and hips.
- ASC Migration Benefits: Procedure shift to ASCs expands Stryker’s addressable market and enables broader portfolio leverage.
- M&A Execution: Tuck-in deals are accretive, but integration and value realization—especially for Inari and international expansion—must be closely monitored.
Risks
Tariff escalation remains the most material near-term risk, with a $200M annualized impact that could intensify if geopolitical conditions worsen. Supply chain volatility, particularly in the emergency care business, continues to pose operational challenges. Interest expense is rising with recent debt issuances, and further rate increases could pressure earnings. Competitive dynamics in orthopedics and potential procedure slowdowns also warrant vigilance.
Forward Outlook
For Q4 2025, Stryker guided to:
- Organic net sales growth of 9.8% to 10.2%
- Adjusted EPS of $13.50 to $13.60 for the full year
For full-year 2025, management raised guidance, citing:
- Strong procedural volume and hospital CapEx environment
- Continued pricing tailwinds and product launch momentum
Management flagged that tariff headwinds are weighted to the second half, and supply chain disruptions in emergency care will persist into Q4, but expect acceleration to achieve double-digit growth in medical for the year.
Takeaways
Investors should note Stryker’s sustained above-market growth and margin execution, even as macro and operational headwinds intensify. The company’s portfolio depth, particularly in orthopedics and capital equipment, remains a competitive differentiator.
- Orthopedics Momentum: Share gains in knees and trauma, powered by Mako, position Stryker for continued leadership as procedures shift to outpatient settings.
- Margin Resilience: Cost improvements and pricing discipline are counterbalancing tariffs, but future expansion will require continued execution and innovation.
- Watch for Integration Payoff: Success in scaling Inari internationally and extracting synergies from recent M&A will be key to sustaining elevated growth rates into 2026.
Conclusion
Stryker delivered operational outperformance in Q3, combining broad-based growth with disciplined margin expansion in the face of external cost headwinds. The company’s raised outlook and active capital deployment signal confidence, but investors should remain alert to tariff, supply chain, and integration risks as the next phase of growth unfolds.
Industry Read-Through
Stryker’s results reinforce robust procedural demand and hospital CapEx strength, suggesting that medtech peers with exposure to orthopedics, robotics, and capital equipment may see similar tailwinds. The ability to offset tariff and supply chain headwinds through pricing and mix will be a key differentiator across the sector. The company’s success in leveraging ASC migration and executing on tuck-in M&A offers a template for others seeking growth beyond core franchises. However, persistent cost inflation and integration challenges highlight the need for operational agility industry-wide.