Stryker Corp: Form 10-Q for the period ended Jun 30, 2026

ABOUT STRYKER

Stryker Corporation ("we" or the "Company") is a global leader in

medical technologies and, together with our customers, we are

driven to make healthcare better. We offer innovative products

and services in MedSurg, Neurotechnology, and Orthopaedics

that help improve patient and healthcare outcomes. Alongside

our customers around the world, we impact more than 150 million

patients annually. Our goal is to achieve sales growth at the high-

end of the medical technology (MedTech) industry and maintain

our long-term capital allocation strategy that prioritizes: (1)

Acquisitions, (2) Dividends and (3) Share repurchases.

MedSurg and Neurotechnology products include surgical

equipment, patient and caregiver safety technologies, and a

comprehensive line of products for traditional brain and open

skull-based surgical procedures orthobiologic and biosurgery

products, including synthetic bone grafts and vertebral

augmentation (Instruments), endoscopic and communications

systems (Endoscopy), patient handling, emergency medical

equipment, intensive care disposable products, clinical

communication and artificial intelligence-assisted virtual care

platform technology (Medical), and minimally invasive products

for the treatment of acute ischemic and hemorrhagic stroke and

venous thromboembolism (Vascular). Orthopaedics products

include implants and surgical equipment such as navigation

systems and robotics used in total joint replacements, such as

hip, knee and shoulder, ankle and trauma and extremities

surgeries. We bring patients and physicians advanced implant

designs and specialized instrumentation that make orthopaedic

surgery and recovery simpler, faster and more effective. We

support surgeons with technologies, products and services they

need to support each patient’s clinical challenge.

Overview of the Three and Six Months

In the three months 2026 we achieved sales growth of 9.4% from

2025. Excluding the impact of acquisitions and divestitures, sales

grew 9.0% in constant currency. We reported operating income

margin of 25.2%, net earnings of $1,276 and net earnings per

diluted share of $3.30. Excluding the impact of certain items,

adjusted operating income margin(1) increased by 170 basis

points to 27.4%, with adjusted net earnings(1) of $1,424 and

adjusted net earnings per diluted share(1) of $3.69, an increase of

17.9% from 2025.

In the six months 2026 we achieved sales growth of 6.1% from

2025. Excluding the impact of acquisitions and divestitures, sales

grew 5.8% in constant currency. We reported operating income

margin of 20.6%, net earnings of $2,021 and net earnings per

diluted share of $5.23. Excluding the impact of certain items,

adjusted operating income margin(1) increased by 10 basis points

to 24.4%, with adjusted net earnings(1) of $2,428 and adjusted

net earnings per diluted share(1) of $6.29, an increase of 5.4%

from 2025.

(1) Refer to "Non-GAAP Financial Measures" for a discussion of non-

GAAP financial measures used in this report and a reconciliation to the

most directly comparable GAAP financial measure.

nm - not meaningful

Dollar amounts are in millions except per share amounts or as otherwise specified. 12

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

SALES GROWTH ANALYSIS

Note: In the first quarter 2026 we announced a change in our organizational structure. Our new Ortho Tech business combines the

orthopaedic instruments portfolio (Orthopaedic Instruments) from Instruments with Other Orthopaedics. In addition, Neuro Cranial and

the spine enabling technologies portfolio (Enabling Technologies) from Other Orthopaedics were combined with the remaining

Instruments business to align with our internal reporting structure. Ortho Tech includes sales related to Orthopaedic Instruments of $523

and $501 and Other Orthopaedics of $194 and $148 for the three months 2026 and 2025. For the six months 2026 and 2025 Ortho

Tech includes sales related to Orthopaedic Instruments of $1,012 and $985 and Other Orthopaedics of $351 and $281. Instruments

includes sales related to Neuro Cranial of $681 and $616 and Enabling Technologies of $28 and $34 for the three months 2026 and

2025. For the six months 2026 and 2025 Instruments includes sales related to Neuro Cranial of $1,287 and $1,179 and Enabling

Technologies of $54 and $63. We have reflected these changes in all historical periods presented.

Dollar amounts are in millions except per share amounts or as otherwise specified. 13

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

Consolidated Net Sales

Consolidated net sales increased 9.4% in the three months 2026

as reported and 9.0% in constant currency, as foreign currency

exchange rates positively impacted net sales by 0.4%. Net sales

in constant currency increased by 9.0% from increased unit

volume. The unit volume increase was due to higher product

shipments across most MedSurg and Neurotechnology

businesses and all Orthopaedics businesses.

Consolidated net sales increased 6.1% in the six months 2026 as

reported and 5.0% in constant currency as foreign currency

exchange rates positively impacted net sales by 1.1%. Excluding

the (0.8)% impact of acquisitions and divestitures, net sales in

constant currency increased by 5.6% from increased unit volume

and 0.2% due to higher prices. The unit volume increase was due

to higher product shipments across all MedSurg and

Neurotechnology businesses and all Orthopaedics businesses.

MedSurg and Neurotechnology Net Sales

MedSurg and Neurotechnology net sales increased 9.7% in the

three months 2026 as reported and 9.2% in constant currency, as

foreign currency exchange rates positively impacted net sales by

0.5%. Net sales in constant currency increased by 9.1% from

increased unit volume and 0.1% from higher prices. The unit

volume increase was due to higher shipments across most

Medsurg and Neurotechnology businesses.

MedSurg and Neurotechnology net sales increased 7.4% in the

six months 2026 as reported and 6.5% in constant currency, as

foreign currency exchange rates positively impacted net sales by

0.9%. Excluding the 1.3% impact of acquisitions and divestitures,

net sales in constant currency increased by 4.9% from increased

unit volume and 0.3% from higher prices. The unit volume

increase was due to higher shipments across all MedSurg and

Neurotechnology businesses.

Orthopaedics Net Sales

Orthopaedics net sales increased 9.1% in the three months 2026

as reported and 8.7% in constant currency, as foreign currency

exchange rates positively impacted net sales by 0.4%. Excluding

the 0.1% impact of acquisitions and divestitures, net sales in

constant currency increased 8.6% from increased unit volume.

The unit volume increase was due to higher shipments across all

Orthopaedics businesses.

Orthopaedics net sales increased 4.5% in the six months 2026 as

reported and 3.3% in constant currency, as foreign currency

exchange rates positively impacted net sales by 1.2%. Excluding

the (3.1)% impact of acquisitions and divestitures, net sales in

constant currency increased 6.4% from increased unit volume.

The unit volume increase was due to higher shipments across all

Orthopaedics businesses.

Gross Profit

Gross profit was $4,498 and $3,841 in the three months 2026

and 2025. The key components of the change were:

Gross profit as a percentage of net sales in the three months

2026 increased to 68.3% from 63.8% in 2025 primarily driven by

a reduction of certain import tariffs and lower amortization of

inventory stepped up to fair value.

Gross profit was $8,308 and $7,585 in the six months 2026 and

2025. The key components of the change were:

Gross profit as a percentage of net sales in the six months 2026

increased to 65.9% from 63.8% in 2025 driven by a reduction of

certain import tariffs and lower amortization of inventory stepped

up to fair value partially offset by higher manufacturing and

supply chain costs primarily due to idle production time related to

the cybersecurity incident in the first quarter 2026.

While segment mix was not a significant driver of the change in

gross profit as a percent of net sales between the six months

2026 and 2025, we generally expect segment mix to have an

unfavorable impact for the foreseeable future as we anticipate

more rapid sales growth in our lower gross margin MedSurg and

Neurotechnology segment than our Orthopaedics segment.

Research, Development and Engineering Expenses

Research, development and engineering expenses increased

$27 or 6.6% in the three months 2026 and $35 or 4.3% in the six

months 2026. Expenses as a percentage of net sales of 6.6% in

the three months and 6.7% in the six months 2026 remained

relatively flat with 6.8% in the three and six months 2025.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $150 or

7.2% in the three months 2026. As a percentage of net sales,

expenses decreased to 33.8% from 34.5% in 2025, primarily due

to continued spend discipline and lower acquisition and

integration-related charges partially offset by higher structural

optimization and other special charges.

Selling, general and administrative expenses increased $131 or

3.0% in the six months 2026. As a percentage of net sales,

expenses decreased to 35.8% from 36.8% in 2025, primarily due

to lower acquisition-related costs and continued spend discipline

partially offset by higher structural optimization and other special

charges. Expenses in the six months 2025 included a charge of

$139 for share-based awards for Inari employees that vested

upon our acquisition.

Amortization of Intangible Assets

Amortization of intangible assets was $175 and $187 in the three

months and $355 and $354 in the six months 2026 and 2025.

Refer to Note 7 to our Consolidated Financial Statements for

further information.

Goodwill and Other Impairments

Goodwill and other impairments was $1 and $55 in the three

months and $1 and $90 in the six months 2026 and 2025.

Operating Income

Operating income was $1,659 and $1,113 in the three months

2026 and 2025. Operating income as a percentage of net sales in

the three months 2026 increased to 25.2% from 18.5% in 2025.

Refer to the discussion above for the primary drivers of the

Dollar amounts are in millions except per share amounts or as otherwise specified. 14

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

change.

Operating income was $2,595 and $1,950 in the six months 2026

and 2025. Operating income as a percentage of net sales in the

six months 2026 increased to 20.6% from 16.4% in 2025. Refer

to the discussion above for the primary drivers of the change.

MedSurg and Neurotechnology operating income as a

percentage of net sales increased to 28.1% in the three months

2026 from 25.6% in 2025. Orthopaedics operating income as a

percentage of net sales increased to 34.0% in the three months

2026 from 33.1% in 2025. The key components of the change

were:

The increase in MedSurg and Neurotechnology operating income

as a percentage of net sales for the three months was primarily

driven by lower selling, general and administrative expenses,

lower manufacturing and supply chain costs and higher unit

volumes, partially offset by higher research, development and

engineering expenses.

The increase in Orthopaedics operating income as a percentage

of net sales for the three months was primarily driven by higher

unit volumes, lower research, development and engineering

expenses and lower selling, general and administrative

expenses, partially offset by higher manufacturing and supply

chain costs.

MedSurg and Neurotechnology operating income as a

percentage of net sales of 25.2% in the six months 2026

remained flat with 2025. Orthopaedics operating income as a

percentage of net sales increased to 32.1% in the six months

2026 from 31.7% in 2025. The key components of the change

were:

MedSurg and Neurotechnology operating income as a

percentage of net sales for the six months remained flat and was

primarily driven by lower selling, general and administrative

expenses and higher unit volumes and prices, offset by higher

manufacturing and supply chain costs and research,

development and engineering expenses.

The increase in Orthopaedics operating income as a percentage

of net sales for the six months was primarily driven by lower

selling, general and administrative expenses, lower research,

development and engineering expenses and higher unit volumes,

partially offset by higher manufacturing and supply chain costs.

Interest Expense

Interest expense was $141 and $159 in the three months and

$289 and $296 in the six months 2026 and 2025. The decrease

in interest expense in the three months and six months 2026 from

2025 was due to lower outstanding debt and credit facilities

partially offset by higher average interest rates.

Other Income

Other income was $46 and $62 in the three months and $108

and $126 in the six months 2026 and 2025. The decrease in

other income in the three and six months 2026 from 2025 was

primarily due to lower interest income in 2026.

Income Taxes

Our effective tax rates were 18.4% and 16.3% in the three and

six months 2026 and 13.0% and 13.6% in the three and six

months 2025. The effective tax rate for the three and six months

2026 increased from the three and six months 2025 due to the

2025 tax benefit related to the sale of the Spinal Implants

business. The effective tax rates for the three and six months

2026 and 2025 reflect the continued lower effective income tax

rates as a result of our European operations and certain discrete

tax items.

Our future results of operations could be affected by changes in

the effective tax rate as a result of changes in tax laws,

regulations and judicial rulings. We are continuing to evaluate the

impact of tax reform in the countries in which we operate as new

guidance is published and new regulations are adopted.

Net Earnings

Net earnings increased to $1,276 or $3.30 per diluted share in

the three months 2026 from $884 or $2.29 per diluted share in

2025. Net earnings increased to $2,021 or $5.23 per diluted

share in six months 2026 from $1,538 or $3.98 per diluted share

in 2025. Refer to the discussion above for the primary drivers of

the change.

Non-GAAP Financial Measures

We supplement the reporting of our financial information

determined under accounting principles generally accepted in the

United States (GAAP) with certain non-GAAP financial measures,

including percentage sales growth in constant currency;

percentage organic sales growth; adjusted gross profit; adjusted

selling, general and administrative expenses; adjusted research,

development and engineering expenses; adjusted operating

income; adjusted other income (expense), net; adjusted income

taxes; adjusted effective income tax rate; adjusted net earnings;

and adjusted net earnings per diluted share (Diluted EPS). We

believe these non-GAAP financial measures provide meaningful

information to assist investors and shareholders in understanding

our financial results and assessing our prospects for future

performance. Management believes percentage sales growth in

constant currency and the other adjusted measures described

above are important indicators of our operations because they

exclude items that may not be indicative of or are unrelated to our

core operating results and provide a baseline for analyzing trends

in our underlying businesses. Management uses these non-

GAAP financial measures for reviewing the operating results of

reportable business segments and analyzing potential future

business trends in connection with our budget process and bases

certain management incentive compensation on these non-GAAP

financial measures. To measure percentage sales growth in

constant currency, we remove the impact of changes in foreign

currency exchange rates that affect the comparability and trend

Dollar amounts are in millions except per share amounts or as otherwise specified. 15

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

of sales. Percentage sales growth in constant currency is

calculated by translating current and prior year results at the

same foreign currency exchange rate. To measure percentage

organic sales growth, we remove the impact of changes in

foreign currency exchange rates, acquisitions and divestitures,

which affect the comparability and trend of sales. Percentage

organic sales growth is calculated by translating current year and

prior year results at the same foreign currency exchange rates

excluding the impact of acquisitions and divestitures. To measure

earnings performance on a consistent and comparable basis, we

exclude certain items that affect the comparability of operating

results and the trend of earnings. The income tax effect of each

adjustment was determined based on the tax effect of the

jurisdiction in which the related pre-tax adjustment was recorded.

These adjustments are irregular in timing and may not be

indicative of our past and future performance. The following are

examples of the types of adjustments that may be included in a

period:

1. Acquisition and integration-related costs. Costs related to

integrating recently acquired businesses (e.g., costs

associated with the termination of sales relationships,

employee retention and workforce reductions, manufacturing

integration costs and other integration-related activities),

changes in the fair value of contingent consideration,

amortization of inventory stepped-up to fair value, specific

costs (e.g., deal costs and costs associated with legal entity

rationalization) related to the consummation of the

acquisition process and legal entity rationalization and

acquisition-related tax items.

2. Amortization of purchased intangible assets. Periodic

amortization expense related to purchased intangible assets.

3. Structural optimization and other special charges. Costs

associated with employee retention and workforce

reductions, the closure or transfer of manufacturing and

other facilities (e.g., site closure costs, contract termination

costs and redundant employee costs during the work

transfers), product line exits (primarily inventory, long-lived

asset and specifically-identified intangible asset write-offs),

certain long-lived and intangible asset write-offs and

impairments and other charges.

4. Medical device regulations. Costs specific to updating our

quality system, product labeling, asset write-offs and product

remanufacturing to comply with the new medical device

reporting regulations and other requirements of the

European Union.

5. Recall-related matters. Changes in our best estimate of the

probable loss, or the minimum of the range of probable

losses when a best estimate within a range is not known, to

resolve the Rejuvenate, LFIT V40, Wright legacy hip

products and other product recalls.

6. Regulatory and legal matters. Changes in our best estimate

of the probable loss, or the minimum of the range of

probable losses when a best estimate within a range is not

known, to resolve certain regulatory or other legal matters

and the amount of favorable awards from settlements.

7. Tax matters. Impact of accounting for certain significant and

discrete tax items.

Because non-GAAP financial measures are not standardized, it

may not be possible to compare these financial measures with

other companies' non-GAAP financial measures having the same

or similar names. These adjusted financial measures should not

be considered in isolation or as a substitute for reported sales

growth, gross profit, selling, general and administrative expenses,

research, development and engineering expenses, operating

income, other income (expense), net, income taxes, effective

income tax rate, net earnings and net earnings per diluted share,

the most directly comparable GAAP financial measures. These

non-GAAP financial measures are an additional way of viewing

aspects of our operations when viewed with our GAAP results

and the reconciliations to corresponding GAAP financial

measures at the end of the discussion of Consolidated Results of

Operations below. We strongly encourage investors and

shareholders to review our financial statements and publicly-filed

reports in their entirety and not to rely on any single financial

measure.

The weighted-average diluted shares outstanding used in the

calculation of adjusted net earnings per diluted share are the

same as those used in the calculation of reported net earnings

per diluted share for the respective period.

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

Dollar amounts are in millions except per share amounts or as otherwise specified. 16

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

nm - not meaningful

(a) Charges represent certain acquisition and integration-related costs associated with acquisitions, including:

(b) Structural optimization and other special charges represent the costs associated with:

(c) Goodwill and other impairments represent the costs associated with:

(d) Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device

reporting regulations and other requirements of the new medical device regulations in the European Union.

(e) Charges represent changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to

resolve certain recall-related matters.

(f) Charges represent changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to

resolve certain regulatory or other legal matters and the amount of favorable awards from settlements.

(g) Benefits / (charges) represent the accounting impact of certain significant and discrete tax items, including:

Dollar amounts are in millions except per share amounts or as otherwise specified. 17

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

(a) Charges represent certain acquisition and integration-related costs associated with acquisitions, including:

(b) Structural optimization and other special charges represent the costs associated with:

Dollar amounts are in millions except per share amounts or as otherwise specified. 18

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

(c) Goodwill and other impairments represent the costs associated with:

(d) Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device

reporting regulations and other requirements of the new medical device regulations in the European Union.

(e) Charges represent changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to

resolve certain recall-related matters.

(f) Charges represent changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to

resolve certain regulatory or other legal matters and the amount of favorable awards from settlements.

(g) Benefits / (charges) represent the accounting impact of certain significant and discrete tax items, including:

FINANCIAL CONDITION AND LIQUIDITY

Operating Activities

Cash provided by operating activities was $1,842 and $1,361 in

the six months 2026 and 2025. The increase was primarily due to

changes in working capital accounts.

Investing Activities

Cash used in investing activities was $824 and $4,240 in the six

months 2026 and 2025. The six months 2026 included cash paid

for purchases of property, plant and equipment. The six months

2025 included cash paid to acquire Inari and purchases of

property, plant and equipment partially offset by proceeds from

the sale of short-term investments. Refer to Note 7 to our

Consolidated Financial Statements for further information on

acquisitions.

Financing Activities

Cash used in financing activities was $1,605 in the six months

2026 and cash provided by financing activities was $1,545 in the

six months 2025. In 2026, cash used was primarily driven by

repayments of $1,000 to pay off maturing unsecured notes as

described in Note 8 to our Consolidated Financial Statements

and dividend payments. Cash provided by financing activities in

2025 was primarily driven by proceeds from the issuance of

various senior unsecured notes which was partially offset by

dividend payments.

Liquidity

Cash, cash equivalents, short-term investments and marketable

securities were $3,476 and $4,100 on June 30, 2026 and

December 31, 2025. Current assets exceeded current liabilities

by $7,734 and $6,961 on June 30, 2026 and December 31, 2025.

We anticipate being able to support our short-term liquidity and

operating needs from a variety of sources including cash from

operations, commercial paper and existing credit lines.

We have raised funds in the capital markets and have accessed

the credit markets in the past and may continue to do so from

time-to-time. We continue to have strong investment-grade short-

term and long-term debt ratings that we believe should enable us

to refinance our debt as needed.

Our cash, cash equivalents, short-term investments and

marketable securities held in locations outside the United States

was 51% on June 30, 2026 compared to 20% on December 31,

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no changes to our critical accounting policies and

estimates from those disclosed in our Annual Report on Form 10-

K for 2025, except as follows:

Refer to Note 11 for discussion on the impact of changes to our

organizational structure in the first quarter 2026 on our reportable

segments and the related goodwill.

Guarantees and Other Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing

arrangements, including variable interest entities, of a magnitude

that we believe could have a material impact on our financial

condition or liquidity.

OTHER MATTERS

Legal and Regulatory Matters

We are involved in various ongoing proceedings, legal actions

and claims arising in the normal course of our business, including

proceedings related to product, labor, tax, intellectual property

and other matters. Refer to Note 6 to our Consolidated Financial

Statements for further information.

FORWARD-LOOKING STATEMENTS

This report contains statements that are not historical facts and

are considered "forward-looking statements" within the meaning

of the Private Securities Litigation Reform Act of 1995. These

statements are based on current projections about operations,

industry conditions, financial condition and liquidity. Words that

identify forward-looking statements include, without limitation,

words such as "may," "could," "will," "should," "possible," "plan,"

"predict," "forecast," "potential," "anticipate," "estimate," "expect,"

"project," "intend," "believe," "may impact," "on track," "goal,"

"strategy" and words and terms of similar substance used in

Dollar amounts are in millions except per share amounts or as otherwise specified. 19

STRYKER CORPORATION 2026 Second Quarter Form 10-Q

connection with any discussion of future operating or financial

performance, an acquisition or our businesses. In addition, any

statements that refer to expectations, projections or other

characterizations of future events or circumstances, including any

underlying assumptions, are forward-looking statements. Those

statements are not guarantees and are subject to risks,

uncertainties and assumptions that are difficult to predict,

including uncertainties related to the impact of the cybersecurity

incident first reported on March 11, 2026 on our operations and

financial results. Therefore, actual results could differ materially

and adversely from these forward-looking statements, historical

experience or our present expectations. Some important factors

that could cause our actual results to differ from our expectations

in any forward-looking statements include the risks discussed in

We consider our greatest potential area of market risk exposure

to be exchange rate risk on our operating results. Quantitative

and qualitative disclosures about exchange rate risk are included

in Item 7A "Quantitative and Qualitative Disclosures About Market

Risk" of our Annual Report on Form 10-K for 2025. There were

no material changes from the information provided therein.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive

Officer and Chief Financial Officer (the Certifying Officers),

evaluated the effectiveness of the Company's disclosure controls

and procedures (as defined in Rules 13a-15(e) or 15d-15(e)

promulgated under the Securities Exchange Act of 1934, as

amended) on June 30, 2026. Based on that evaluation, the

Certifying Officers concluded the Company's disclosure controls

and procedures were effective as of June 30, 2026.

Changes in Internal Control Over Financial Reporting

There was no change to our internal control over financial

reporting during the six months 2026 that materially affected, or is

reasonably likely to materially affect, our internal control over

financial reporting.

2025. This Form 10-Q should be read in conjunction with our

Consolidated Financial Statements and accompanying notes to

our Consolidated Financial Statements in our Annual Report on

Form 10-K for 2025. While we believe that the assumptions

underlying such forward-looking statements are reasonable,

there can be no assurance that future events or developments

will not cause such statements to be inaccurate. All forward-

looking statements contained in this report are qualified in their

entirety by this cautionary statement. We expressly disclaim any

intention or obligation to publicly update or revise any forward-

looking statement to reflect any change in our expectations or in

events, conditions or circumstances on which those expectations

may be based, or that affect the likelihood that actual results will

differ from those contained in the forward-looking statements.