Three Weeks Dark, Not a Dollar Off the Guide: The Ramp Is Now the Entire Thesis

Results vs. Consensus

Q1 2026 Scorecard

The revenue consensus carries a modest spread across providers, from $6.29B to $6.34B; we use the higher figure, which two of the three reads we cross-checked carried. The miss is 4.4% or 5.0% depending on the anchor, and the characterization does not change either way. The EPS consensus of $2.98 is unanimous.

Year-Over-Year Comparison

Quarter-Over-Quarter Comparison

The sequential top line is diagnostically useless at Stryker. The fourth quarter is always the largest of the year, and the Q4-to-Q1 step-down has nothing to do with this quarter's event. The margin line is a different matter, and it is where the sequential table earns its place. A year ago adjusted operating margin fell 630 bps from 29.2% in Q4 2024 to 22.9% in Q1 2025, the ordinary seasonal shape of a business whose fixed cost base is spread across a much smaller revenue quarter. This year the same step-down was 910 bps. The excess, roughly 280 bps, is the closest thing to a clean measurement of what three weeks of dark factories cost the P&L.

Revenue

Net sales of $6,020M grew 2.6% as reported and 1.0% in constant currency, with foreign exchange contributing 1.6 points and net divestitures subtracting 1.4 points. Strip both and organic growth was 2.4%. For a business that compounded 10.3% organic across 2025 and 11.0% in the fourth quarter alone, that is a step down of the kind that ordinarily signals a demand break. The evidence in this print argues it does not. Pricing held at a positive 0.3 points, the same modest contribution the company has been guiding to all year. The selling-day count was identical to the prior year, removing the most common calendar excuse. And the geographic split is the wrong shape for a demand story: the U.S., where Stryker's own distribution and revenue-recognition systems sit, grew 1.9% organic, while international grew 3.9%.

The revenue that did not print is better understood by mechanism than by magnitude. In Orthopaedics, most inventory sits consigned at the hospital, so cases proceeded during the outage but could not be recognized, which is a pure receivable-into-revenue timing problem with near-certain reversal. In MedSurg, the businesses weighted toward made-to-order capital equipment lost the ability to build at all for three weeks, which is a production-slot problem that reverses only as fast as a factory can be rescheduled. A third and much smaller slice, urgent cases during the window when representatives could not enter hospitals, is genuinely gone.

Assessment: The composition matters more than the number. Roughly the majority of the hole is revenue recognition on work already performed or product already ordered, and that comes back on a schedule. What does not come back on a schedule is manufacturing capacity, and Stryker has to build both the deferred Q1 book and a normal second-half book out of nine months of production instead of twelve.

Margins

Adjusted gross margin of 63.6% was the weakest quarterly print since the Inari integration year, down 190 bps against a Q1 2025 that ran 65.5% and a full-year 2025 that ran 65.3%. Management attributed the decline to two causes and named them in order: lost manufacturing absorption from the production shutdowns, and tariffs. The absorption piece is mechanical. Fixed manufacturing overhead was incurred for a full quarter and spread across roughly eleven weeks of output, and the under-absorbed balance was expensed. It does not repeat, but it also does not reverse; the cost is sunk in Q1 and the recovered revenue in Q2 through Q4 will carry a normal cost structure, not a credit.

The tariff piece is the one that deserves the attention. The CFO's framing was precise about the comparative:

"Our adjusted gross margin of 63.6% was 190 basis points lower than the first quarter of 2025, reflecting the impact of lost manufacturing absorption from production shutdowns due to the cyber incident as well as the impact of tariffs. As a reminder, there were no incremental tariff impacts in the first quarter of 2025."
— Preston Wells, CFO

Adjusted operating margin of 21.1% fell 180 bps, ten basis points less than gross margin, because operating expenses were managed hard. Adjusted SG&A of $2,152M rose 2.1% against revenue up 2.6%, holding the ratio at 35.8% versus 35.9%, and reported SG&A actually fell in dollars. Adjusted R&D of $404M held at 6.7% of sales, exactly the prior-year ratio, which is the more important signal: the company did not fund the quarter by cutting the pipeline.

Assessment: The operating-expense discipline is the underappreciated line in this print. A company absorbing a 190 bp gross margin hit and still holding R&D intensity flat and SG&A ratio flat is not a company panicking. But the full-year commitment to roughly 50 bps of adjusted operating margin expansion now requires the remaining three quarters to expand margin against a set of tariff and input-cost headwinds that management concedes are still live.

Earnings

Adjusted EPS of $2.60 fell 8.5%, the first year-over-year decline in the metric since the pandemic quarters. Adjusted net earnings of $1,004M fell the same 8.5%, so nothing in the EPS line is share-count engineering; the diluted count was 386.5M against 386.4M. The adjusted effective tax rate of 14.5% was 80 bps above the prior year on geographic mix and discrete items, against a full-year expectation the company reiterated at 15% to 16%, which means the tax line is a modest headwind still to come rather than a tailwind already banked.

Below the operating line, adjusted other income and expense of $97M was $24M worse than the prior year. The CFO gave the bridge without prompting:

"Adjusted other income and expense of $97 million was $24 million higher than 2025 due to higher interest expense from debt issued in 2025 to help fund the acquisition of Inari as well as lower interest income from a combination of lower average cash balances and lower interest rates."
— Preston Wells, CFO

Free cash flow of $415M, computed as $581M of operating cash flow less $166M of capital expenditure, compares to $127M in the prior year. That improvement flatters more than it informs. The Q1 2025 base was depressed by Inari transaction outflows, and the working-capital line was still a $464M use of cash this quarter. Receivables fell $468M sequentially, which is part the normal post-fourth-quarter collection cycle and part the arithmetic of three weeks without shipments creating new ones. That second part reverses as the recovery bills.

Assessment: The earnings quality is clean in the sense that matters. There is no tax benefit, no buyback, no below-the-line item propping up the adjusted number, and the miss is exactly where a physical disruption should show up. The company also retired $1.0B of debt and paid $337M of dividends in the quarter while ending at 2.1x gross debt to EBITDA, which is a balance sheet doing normal things in an abnormal quarter.

Segment Performance

Reportable Segments

Business Lines

Geographic Mix

Orthopaedics: the segment that proved the demand case

Orthopaedics organic growth of 4.1% came entirely from unit volume, with pricing a zero contributor. That is roughly half the 9.5% organic the segment delivered in 2025, but it is a remarkable outcome for a quarter in which the company could not manufacture for three weeks, and the reason is structural rather than lucky. Stryker consigns most orthopaedic inventory at the hospital, so the implants needed for a Tuesday knee case in late March were already sitting in the theatre when the systems went down. The surgery happened; only the paperwork that turns a surgery into revenue did not.

The reported line tells a different and much worse story, and the difference is entirely the spine exit. Spinal Implants collapsed from $166M to $2M, a 98.9% decline that drove the segment's 5.9 point acquisition and divestiture drag and pulled reported growth to 0.1%. Excluding it, the remaining businesses grew 6.3% reported and 4.3% in constant currency. Trauma and Extremities was the standout at 9.5% reported and 7.4% constant currency on the Pangea platform.

"in our Orthopaedic businesses, where we have a lot of -- most of those businesses have consigned inventory. So in many cases, that inventory is located at the hospital. And so those cases we're able to proceed as almost normal in many instances. As a result of that, the procedure happened, but given the fact that our systems were down, we had some revenue recognition activities that still need to be performed."
— Preston Wells, CFO

Assessment: This is the segment that carries the recovery credibility. Revenue recognition on procedures already performed is the highest-confidence category of deferred revenue there is, and it should show up in Q2 with very little execution risk. The spine washout also finishes here: with Spinal Implants at $2M, the divestiture drag on Orthopaedics reported growth is now essentially exhausted, and from Q2 the segment's reported and organic lines converge.

MedSurg and Neurotechnology: 0.9% organic, and the number that will be misread

MedSurg organic growth of 0.9% is the single ugliest figure in the release, and it will be quoted more than it deserves. The segment grew 5.0% reported, but 2.7 points of that were acquisition contribution, almost entirely the extra two months of Inari that Q1 2026 carries and Q1 2025 did not, since the deal closed inside the prior-year quarter. Vascular grew 27.5% reported and 24.0% constant currency on that base effect.

The disruption landed hardest here for the reason management laid out at length: this is where the made-to-order capital sits. Medical, which contains the Acute Care and Emergency Care businesses selling beds, stretchers and defibrillators, declined 4.6% reported and 5.6% constant currency. Endoscopy was flat at 0.1% reported and negative 1.0% constant currency. Instruments, the least capital-weighted of the four and now carrying the Neuro Cranial businesses, grew 9.9% reported and 8.7% constant currency, which is the closest thing in the release to an undisturbed data point.

"Certain businesses such as Acute Care and Emergency Care within Medical are more heavily weighted towards capital equipment such as beds, stretchers and defibrillators, which can be made to order and have longer fulfillment cycles. Other businesses are more focused on recurring consumables such as disposable waste management products that are replenished regularly and tend to demonstrate greater demand resilience."
— Preston Wells, CFO

Assessment: The Instruments line at 8.7% constant currency is the most useful number in the segment, because it is the business least exposed to both the consignment mechanic and the made-to-order mechanic. It says the underlying MedSurg market did not soften. The problem is that Medical and Endoscopy, the two businesses carrying the bulk of the deferral, are also the two whose recovery management pushed furthest out, into the third and fourth quarters. This segment is where the ramp risk actually lives.

Ortho Tech: the robotics P&L becomes visible

Ortho Tech is new this quarter and worth understanding structurally rather than as a growth rate. It combines the Orthopaedic Instruments portfolio, $489M in the quarter against $484M a year ago, with the Mako and Enabling Technologies portfolio and other products including bone cement, $157M against $133M, for $646M in total. Knee and hip implant pull-through does not flow into this line; those stay in their own businesses. What Ortho Tech is, therefore, is the closest thing Stryker has ever published to a robotics-and-power-tools P&L: the capital, the cutting accessories, the service, and the enabling technology, in one place.

Assessment: Investors now get a quarterly read on the hardware side of the robotics flywheel without having to infer it. Growth of 3.2% in constant currency in a quarter with three weeks of no shipping is not the number to judge it on; the first clean read comes in Q2. The disclosure change is a net positive for the bull case, because it puts the capital that drives the implant annuity on its own line where it can be tracked.

International: the offset that partially worked

International grew 8.3% reported, 1.5% constant currency and 3.9% organic, against U.S. organic growth of 1.9%. Two forces cut against each other. Japan, now the second-largest country, continues at what management described as a very high level, with India, Korea and East Asia accelerating and Pangea just approved in Europe. Working the other way, the Middle East was a drag that the CFO named directly.

"Turning to the Middle East. The conflict in Iran has had a modest effect on our international growth for the quarter. However, the impact on our overall results was limited."
— Preston Wells, CFO

Assessment: International outgrowing the U.S. by two points of organic in a quarter where the disruption was global is a mild positive, and it is consistent with the pattern of the last several years rather than a new development. The geopolitical drag is real but small, and Saudi Arabia remains the stated long-term prize. The more consequential international item is Pangea's European approval, which is a fiscal 2027 revenue event, not a 2026 one.

Key Topics & Management Commentary

Overall Management Tone: Management was unusually forthright about what it would not say. The posture was operational rather than promotional, pairing a genuinely detailed account of how the disruption propagated through different business models with an explicit refusal to size the hole, split it, or shape it by quarter. Confidence was reserved for the things they could evidence, namely the order book, Mako installations and customer retention, and withheld everywhere the honest answer would have been an estimate.

1. What Actually Broke, and For How Long

The incident was identified on March 11 and disclosed the same day as a global disruption to Stryker's Microsoft environment. Twelve days later the company revised its initial "no ransomware or malware" characterization, disclosing alongside Palo Alto Networks' Unit 42 that a threat actor had used a malicious file to run commands and hide its activity, though the file was not capable of spreading. On April 9, three weeks before the print, Stryker filed an Item 1.05 amendment determining the incident had a material impact on operations with a resulting impact on Q1 financial results, while simultaneously stating it was not reasonably likely to be material to full-year guidance. That April 9 filing is the document that told the market what the guide would say on April 30.

"The incident occurred late in the quarter and resulted in a global disruption to our business operations. In partnership with third-party experts, our internal teams reacted quickly to remove the unauthorized party from our environment."
— Kevin Lobo, Chair and CEO

The operational restoration timeline is specific and checkable. Manufacturing came back the week of April 1, roughly three weeks after detection, and the April 9 filing confirmed commercial, ordering and distribution systems had been restored.

"As of the week of April 1, we were fully operational across our global manufacturing network as we continue to meet demand and support patient care."
— Kevin Lobo, Chair and CEO

Assessment: Three weeks from detection to full manufacturing restoration across a global network is fast, and the disclosure cadence was disciplined, including the willingness to walk back the initial malware characterization publicly rather than quietly. The Item 1.05 determination on April 9 did most of the work of setting expectations, which is part of why the print itself did not gap the stock overnight.

2. Sizing the Hole, Since Management Would Not

No figure for the revenue impact appears in the press release, the prepared remarks, or the answers to two direct questions. The company's stated reason is that individual business results are distorted and would mislead. The consequence is that every model on the Street is now built on an inference.

"Because their individual results this quarter are not indicative of the underlying market performance, I will not be going into detailed sales results by business. It is also important to note that the cyber incident occurred towards the end of the quarter, creating an outsized impact on sales due to delays in revenue recognition in addition to the delayed shipments."
— Preston Wells, CFO

Our own arithmetic: Q1 organic growth of 2.4% against a full-year organic plan of 8.0% to 9.5% leaves a gap of 5.6 to 7.1 points, which on the $5,866M prior-year quarter is $330M to $420M. That brackets the roughly $375M figure a questioner put to management on the call, which management neither confirmed nor corrected, and sits above the roughly $310M implied by the consensus revenue shortfall alone. We use $330M to $420M and label it an estimate, because that is what it is.

Assessment: The refusal is defensible on the merits and expensive in practice. Distorted business-level numbers genuinely would mislead, and a company that invents a precise attribution figure three weeks after restoring systems is inviting a restatement of its own narrative later. But the cost is that investors cannot check the recovery against a baseline, which is precisely the thing they need to do for the next two quarters.

3. The Guide That Did Not Move, and the Ramp It Now Requires

Full-year guidance for organic net sales growth of 8.0% to 9.5% and adjusted EPS of $14.90 to $15.10 is unchanged from the January 29 initial guide. Given Q1's contribution, the arithmetic that remains is demanding. Q1 2025 net sales of $5,866M represent 23.4% of 2025's $25,116M, so the final three quarters carry roughly 76.6% of the annual revenue weight. Solving for the balance-of-year organic rate implied by each end of the range gives 9.7% at the low end, 10.7% at the midpoint and 11.7% at the high end, against 2.4% delivered.

On earnings the picture is starker. Q2 through Q4 must produce $12.30 to $12.50 of adjusted EPS against a prior-year base of $10.79, growth of 14.0% to 15.8%. Stryker grew full-year adjusted EPS 11.8% in 2025 and 12.1% in adjusted net earnings. The company is now guiding the back three quarters to grow faster than its best recent full year, in a year when the first quarter fell 8.5%.

"We expect most of the first quarter's lost sales to be realized throughout the rest of the year with the timing and magnitude, reflecting the different product types and operating models we have across our portfolio. In limited cases involving emergent or non-elective care, we expect to offset any permanently lost sales through the strength of our continued commercial execution."
— Preston Wells, CFO

Assessment: Maintaining the guide was the right decision if and only if the recovery mechanics hold, and it was a costly one to get wrong. There was an alternative available, which was to trim the low end by a point and buy the year some slack; management chose not to. That is either conviction backed by an order book they can see and we cannot, or it is a reputational hold on a number set in January. The next two prints resolve which.

4. The Recovery Is Explicitly Back-Half Weighted

The single most consequential disclosure on the call was not the guide, it was the shape of the recovery underneath it. Management drew a clear line between two categories of deferral with two very different clocks.

"the cadence of our sales momentum that occurs through the rest of the year is expected to reflect the catch-up of revenue recognition in Q2, while the rescheduling of certain delayed procedures and the fulfillment of customer orders impacted by production shutdowns will be delayed into the second half of the year."
— Preston Wells, CFO

Restated plainly: Q2 gets the paperwork, the second half gets the surgeries and the machines. The CEO sharpened it further on which businesses sit on which clock.

"And the way to think about that in terms of the MedSurg side of the business is Endo and Medical are more capital-intensive than, let's say, instruments. So you would expect more of their recovery to occur in Q3 and Q4 as opposed to Q2."
— Kevin Lobo, Chair and CEO

Assessment: This is the disclosure that turns a one-quarter event into a three-quarter question. The highest-confidence bucket, revenue recognition on completed procedures, lands first and will make Q2 look better than the underlying business. The lowest-confidence bucket, made-to-order capital that has to find production slots on top of a normal second-half build, lands last. Investors will get a reassuring Q2 followed by the quarter that actually matters.

5. The Capacity Question Nobody Asked

Management addressed rescheduling at length and inventory replenishment at length. What went unaddressed across the whole call is whether there is enough manufacturing capacity in the remaining nine months to build both the deferred first-quarter book and a normal second-half book. Three weeks of downtime does not just displace output, it destroys the slots that output would have used, and those slots do not reappear.

"Really, it's going to be on some of the MedSurg products where we have make-to-order. As I mentioned before, that will take some time. And a lot of it is just not in getting production ramped back up and going. It's really getting those products rescheduled back in so that we can put them back into the program and actually get them produced and made for those specific orders."
— Preston Wells, CFO

Assessment: The answer describes the scheduling problem accurately and stops one step short of the capacity problem. A plant running at eighty percent utilization can absorb three lost weeks over three quarters; a plant running near capacity into a seasonally heavy fourth quarter cannot. Nothing in the disclosure tells us which Stryker's made-to-order lines are, and that gap is the most specific unquantified risk in the guide.

6. Mako Kept Compounding Through the Outage

The most important operating datapoint in the quarter has nothing to do with the incident. Robotic installations set a first-quarter record in both geographies despite three weeks of no shipping, which by construction means the installation base grew on eleven weeks of activity.

"Additionally, we delivered our best ever Q1 for Mako installations both in the U.S. and internationally, with high and increasing utilization rates across the globe. We continue to expect sustained momentum from installations and utilization to drive growth in our joint replacement businesses."
— Jason Beach, VP, Finance and Investor Relations

The CEO added that the number would have been higher still had shipping continued through the end of the quarter, and framed Mako 4's differentiation as procedural breadth rather than utilization rate.

"What's different about Mako 4 is you're getting into new procedures. Advanced hip and revision hip is really getting tremendous feedback from our surgeons. Revisions are hard and Mako 4 makes the revision hip procedure much, much easier."
— Kevin Lobo, Chair and CEO

Assessment: This is the load-bearing bull datapoint. Robotic installations are the leading indicator for implant pull-through over the following two to three years, and a record first quarter achieved in eleven weeks says the demand curve did not bend. The multifunctionality argument also has a specific second-order consequence management flagged: once shoulder arrives on Mako 4 mid-year, surgeons competing for a single multifunctional robot start asking for a second one.

7. Mako RPS Opens a Segment That Was Previously Unaddressable

The handheld robotic platform launched at the March academy meeting is early, with minimal revenue, but the customer feedback described is strategically interesting because of who it is coming from.

"we're getting tremendous feedback from customers that felt that the move all the way to Mako was a bit too big of a leap. For now, it seems like ASC has been a bit of a sweet spot."
— Kevin Lobo, Chair and CEO

The CEO was explicit that this is additive rather than cannibalistic, targeting surgeons who would otherwise have stayed on manual power tools, and that the traction picks up in the second half.

Assessment: If RPS converts manual-tool surgeons in ambulatory surgery centers, it expands the addressable base for robotic implant pull-through into a channel where a full Mako capital placement was never going to pencil. That is a genuine new leg rather than a mix shift. It is also unquantified and second-half weighted, so it belongs in the 2027 case, not the 2026 one.

8. Product-Cycle Density Into 2027

The launch calendar discussed on this call is unusually dense, and almost all of it is weighted to the second half or beyond. Pangea received European approval slightly ahead of schedule after driving what management called explosive growth in U.S. trauma and taking off in Japan. Triathlon Gold medial-stabilized inserts, Mako Shoulder on Mako 4 mid-year, Sonopet 4 late in the year, and the Incompass Total Ankle all sit in the same window.

"Just recently, we received approval of Pangea in Europe. Obviously, not the best timing when you have production shut for a period of time, but we are going to start to ramp up production of Pangea, and that will start to have an impact in Europe towards the back half of this year and certainly into next year."
— Kevin Lobo, Chair and CEO

The Incompass ankle has a specific and unglamorous gating item worth tracking: the PROPHECY cut guides are not yet approved, and most surgeons will not adopt the implant without them.

Assessment: The launch density is the strongest argument for owning the equity through the recovery rather than after it. European trauma is a large market where Stryker has been under-indexed, and Pangea is the platform that fixed the U.S. position. The timing irony is sharp: the approval landed exactly when the factories were dark, so the European ramp starts a quarter later than it otherwise would have.

9. Capital Allocation: Firepower Intact, Cardiovascular Adjacency Opening

Stryker retired $1.0B of debt in the quarter, paid $337M of dividends, and ended at 2.1x gross debt to EBITDA. The Amplitude Vascular Systems acquisition, announced during the quarter and expected to close in Q2, brings intravascular lithotripsy into the peripheral vascular call point created by Inari.

"we're very excited about the deal pipeline, and we're excited about our cash position, being at sort of ending the quarter at 2.1 gross debt to EBITDA definitely means we have firepower to do more acquisitions."
— Kevin Lobo, Chair and CEO

AVS is a departure from Stryker's usual pattern of buying commercial-stage assets. The CEO's defense was that the exception is about the category rather than about a new risk appetite, noting the product may be sellable before year-end based on the timing of its submission and that peripheral vascular is a space where PMA-class products often require early investment.

Assessment: Buying pre-approval is a real change in kind whatever the framing, but the logic holds: the asset lands in a sales force that already exists, calling on physicians Stryker already reaches. The more consequential point is the one about call points. Inari bought Stryker the vascular surgeon and the interventional cardiologist, and the company is now explicit that those relationships will pull further technology in. That is the shape of a new platform being assembled deliberately.

10. Inari, One Year In

The Inari integration passed its anniversary during the quarter. Management characterized the sales-force attrition and integration friction as substantially behind them, and pointed to the AVS deal as evidence of conviction rather than repair.

"obviously, it's been a challenging first year as you go through all the attrition and you Strykerize the sales force, and that's mostly behind us now. So we're looking for clear sailing in the years ahead."
— Kevin Lobo, Chair and CEO

The financial residue of the deal is still visible in two places. Vascular's 27.5% reported growth is largely the extra two months of ownership rather than underlying momentum, and the $24M increase in adjusted other expense traces to the debt issued to fund it.

Assessment: The anniversary matters for modelling. From Q2, Inari lands fully in the organic base, which removes 2.7 points of acquisition contribution from MedSurg's reported growth and simultaneously removes the excuse for a weak organic print. Vascular's second-quarter organic number is the first honest read on whether the Strykerization worked.

11. Customer Retention Through the Outage

The question most relevant to whether the recovery holds is whether customers stayed, and the CEO's answer was the most emphatic passage on the call.

"There isn't really any business I could think of that we've lost. We did lose some cases, obviously, if you couldn't -- reps couldn't get into hospitals, and so there were some urgent cases that we lost, but not really loss of any customers that I can think of."
— Kevin Lobo, Chair and CEO

The operational detail underneath it gives a sense of the scale of the internal disruption, which was considerably larger than the customer-facing disruption.

"They're very empathetic to having 40,000 laptops wiped, having computers wiped."
— Kevin Lobo, Chair and CEO

Assessment: Two claims are being made here and they should be graded separately. "No customers lost" is a soft, unverifiable claim delivered with conviction; medical device switching costs are genuinely high and the claim is plausible, but it is an assertion. "Some urgent cases were lost" is the more useful admission, because it puts a floor under the permanently-gone bucket without sizing it. The 40,000 wiped laptops number is the one that reframes the event: this was an enterprise-wide rebuild, not a contained outage.

Guidance & Outlook

Four further full-year items were given on the call rather than in either press release:

Implied balance-of-year ramp. On organic sales, the guide requires roughly 9.7% at the low end, 10.7% at the midpoint and 11.7% at the high end for Q2 through Q4, against 2.4% delivered in Q1. On earnings, it requires $12.30 to $12.50 of adjusted EPS against a $10.79 prior-year base, growth of 14.0% to 15.8%. Full-year 2025 adjusted EPS growth was 11.8%.

Street at: Consensus entering the print sat at $6.34B of Q1 revenue and $2.98 of adjusted EPS, both of which the quarter missed materially. Because the annual guide is unchanged, the practical effect on the full-year Street number is arithmetic rather than judgmental: the Q1 shortfall either reappears in the back three quarters or it does not, and consensus for 2026 as a whole will track whichever view an individual model takes on that single question.

Guidance style: Stryker's pattern under this management team has been to guide conservatively and raise, which is what makes the unchanged number here informative. The company exited 2025 having beaten a raised guide, and it chose to reaffirm a January number rather than rebase after a genuinely exogenous event that it had already told the SEC was material to the quarter. Management was asked directly whether the reaffirmation consumed the year's upside, and declined to answer, deferring to the second-quarter print. That deferral is the honest reading: the guide is now a commitment rather than a floor.

The tariff assumption embedded in the earnings guide deserves separate flagging, because it is an assumption about the external environment rather than about Stryker's execution.

"Our full year adjusted earnings per share guidance reflects our expected sales recovery, our continued focus on operational excellence and some anticipated improvements in the tariff outlook."
— Preston Wells, CFO

Analyst Q&A Highlights

Whether the Reaffirmation Consumed the Year's Upside

The opening question of the call went straight to the load-bearing issue: not whether the guide could be hit, but what was given up to keep it. Management answered the cadence half in detail and declined the upside half entirely, deferring to the second-quarter print. The answer did add one piece of shape not in the prepared remarks, that deferred and rescheduled procedures will bleed across Q3 and Q4 rather than concentrating in Q2.

Q: "I guess, any more specific color on how we should think about the recovery in sales just given how much of a wild card it is and the variability quarter-to-quarter versus Street numbers? And then also one of the discussions with investors is how much of the guide was -- how much of the upside was removed to be able to reiterate the guide, or is this still the typical Stryker philosophy that you think you'll get almost all of it back and there's still the potential for upside?"
— Robert Marcus, JPMorgan

A: "In terms of the overall guidance itself on an annual basis and the upside, et cetera. Look, I think at this point, just getting to the numbers of reconfirming our guidance from where we are, we feel really good about that. And so we're going to really move into those numbers as we get through second quarter and as we get through second quarter and have our results there. We'll take a look at where we are, again, on a full year basis and provide an update at that point in time."
— Preston Wells, CFO

Assessment: This is a non-answer, and a revealing one. "Just getting to the numbers of reconfirming our guidance" concedes that the reaffirmation was not comfortable, and the explicit deferral to a second-quarter reassessment sets up July as a live revision event. A management team confident it would recover everything and retain upside would have said so.

Sizing the Shortfall and the Implied Balance-of-Year Rate

The most precise question of the call arrived late and did the company's arithmetic for it, putting both a balance-of-year growth rate and a dollar impact on the record and asking only for a directional split between deferred procedures and production delays. Management declined all three parts.

Q: "So the guidance now implies 10.5% growth for the balance of the year. It looks like the impact is about $375 million. I don't know if you can directionally tell us how much is deferred procedures versus production delays. And as I start to think about the Q2 guide -- the Q2 growth rate, should we be modeling closer to the full year guidance for Q2?"
— Shagun Singh Chadha, RBC Capital Markets

A: "So again, I can't give you any more breakout of what portion of that was deferred procedures versus capital delays, things of that nature. But just in terms of how you're thinking about it, just know that it will flow back in, kind of, throughout the rest of the year in terms of that guidance."
— Preston Wells, CFO

Assessment: The company neither confirmed nor corrected the $375M or the 10.5%, which in practice lets both figures stand as the working assumption without the company owning them. "Just know that it will flow back in" is the entire evidentiary basis being offered for the year. Our independent bracket of $330M to $420M contains the questioner's number, so the working assumption is at least reasonable, but it is not the company's.

Why the Two Segments Recover on Different Clocks

The most substantively useful exchange on the call produced the mechanical explanation for why Orthopaedics organic growth held at 4.1% while MedSurg organic collapsed to 0.9%, and why that ordering reverses on the way back up.

Q: "I know you mentioned how it impacts the different businesses differently, and I was hoping you could speak to just how it could impact MedSurg versus Ortho differently and the cadence of that throughout the year?"
— Samantha Kurtz, Piper Sandler

A: "On the MedSurg side, you had some different impacts just given the fact that some of that business is -- a lot of that business is capital-related. In some cases, it's make-to-order -- any of the make-to-order items certainly are going to get deferred until later into the year. Given the fact that production was down, and so we had to bring production back up and then get those items back into the scheduling from a production standpoint."
— Preston Wells, CFO

Assessment: This exchange is the one to keep. It establishes that the segment that held up best in Q1 is the one that recovers first, and the segment that collapsed is the one that recovers last. Anyone reading the Q2 print as confirmation the recovery is on track will be reading the easy half of the problem.

Orders Versus Shipments: Did Demand Actually Pause

A recurring line of questioning tried to separate Stryker's inability to serve the market from any change in the market's appetite, with particular focus on the capital order book. The response was the most direct rebuttal management offered all call, and it tied the guidance decision explicitly to the order book.

Q: "But some of that pause in orders, I'm wondering if you kind of parse out between what is your ability to serve the market versus what may or may not be changes in demand and just kind of how you think about those two dynamics interplaying particularly as it relates to your capital business?"
— Ryan Zimmerman, BTIG

A: "First thing I would say is we did not see a pause in orders. We definitely had a pause in shipments because we obviously couldn't make product for almost 3 weeks. And so we were not able to ship the capital equipment that we normally would ship. But we have a very healthy order book. There's no new dynamic in Q1. There's no way we'd be reaffirming our full year guidance if we suddenly felt there was some kind of slowdown in orders."
— Kevin Lobo, Chair and CEO

Assessment: The orders-versus-shipments distinction is the correct frame and management used it well. It is also the single claim on which the entire guide rests, and it is unverifiable from outside: Stryker does not disclose backlog. Investors are being asked to take the order book on faith, which is a reasonable ask from a management team with this track record and an uncomfortable one at a 6.5% single-day decline.

The Full-Year Operating Margin Commitment

With Q1 adjusted operating margin down 180 bps, the question of whether the year's expansion target survived was put directly, along with a follow-up on input-cost inflation. Management held both the annual figure and the multi-year framework, conceding only that the quarterly path would shift.

Q: "And do you still expect operating margin to be up about 50 basis -- 50 basis points year-over-year this year?"
— Larry Biegelsen, Wells Fargo

A: "So Larry, I guess I would tell you from a full year perspective, nothing has changed. If we think about what our guidance is and what our expectations were for the year, there's not a change in even those margin expectations off of what we set from the 3-year window that we gave, the 150-plus. And so we're going to continue to expect to live into that. Now you're right, in terms of how we're going to see that play out, it might change slightly quarter-over-quarter for this year."
— Preston Wells, CFO

Assessment: Holding the annual margin target after a 180 bp first-quarter contraction is a bigger commitment than holding the revenue guide, because margin recovery requires the recovered volume to arrive with normal absorption and requires the tariff line to behave. The concession that tariffs remain a headwind in both Q1 and Q2 means the entire year's expansion has to be delivered in the second half.

Customer Relationships Coming Out of the Outage

The question that most directly tested whether the disruption did lasting commercial damage drew the call's most personal answer, and one of its more useful admissions.

Q: "Kevin, I'm wondering how you're feeling about your customer relationships coming out of the cyber incident? It certainly doesn't sound like you're expecting any notable impact given your response to the incident and your guidance reiteration, but I'm wondering what kind of response you've gotten as you've talked to customers?"
— Steven Lichtman, William Blair & Company

A: "You sort of don't know until you go through a crisis kind of how things are really going to go. And we've come out of this very strong. There isn't really any business I could think of that we've lost. We did lose some cases, obviously, if you couldn't -- reps couldn't get into hospitals, and so there were some urgent cases that we lost, but not really loss of any customers that I can think of."
— Kevin Lobo, Chair and CEO

Assessment: The hedging in "that I can think of," repeated twice, is worth noticing without over-reading. It is the language of a CEO answering honestly rather than reciting a prepared line, and the volunteered admission that urgent cases were permanently lost is the kind of specificity a scripted answer avoids. Nothing here suggests share loss; nothing here proves its absence either.

Free Cash Flow Conversion and the Cost of Remediation

The only question that probed the cost side of the incident asked whether conversion targets survived and whether one-time outlays were required. The answer confirmed the target and acknowledged incremental spend without sizing it.

Q: "And just, Preston, how are you thinking about free cash flow conversion for this year coming out of an obviously, unusual 1Q? Do you think it can be in that 70% to 80%? And are there some onetime outlays you needed to make in the cyber recovery?"
— Steven Lichtman, William Blair & Company

A: "So we're still thinking about it in that 70% to 80% range. We are contemplating different investments that we'll be making as a result. And all of that is contemplated in our guidance that we have. So again, not changing the overall trajectory of where we're headed and what we've committed to in our long-term financials."
— Preston Wells, CFO

Assessment: "Contemplating different investments" is doing a great deal of work in that sentence. Enterprise-wide security rebuilds following an incident of this scale typically run into the hundreds of millions across multiple years, and the answer neither confirms nor excludes that scale. Holding the conversion range while absorbing unquantified remediation spend is a claim that will be checked against the cash flow statement, not the guidance.

What They're NOT Saying

1. The size of the revenue impact. No figure appears in the press release, the prepared remarks, or the answers to two direct questions. The only number spoken on the call came from a questioner. Every model on the Street now rests on an inference the company declined to confirm or correct.
2. The split between deferred recognition and lost production. Asked explicitly for a directional breakdown, management said it could not provide one. This is the split that determines how much of the recovery is near-certain and how much depends on factory scheduling, which makes it the most consequential omission in the release.
3. Manufacturing capacity headroom for the second-half catch-up. Rescheduling was discussed at length; capacity was not discussed at all. Building the deferred first-quarter book and a normal second-half book out of nine months of production requires slack that nobody confirmed exists.
4. Business-level results. For the first time in recent memory, management declined to walk through individual business performance, on the stated ground that the numbers are not indicative of underlying market performance. The 8-K still prints the sub-lines; only the interpretation was withheld.
5. The cost of the incident. No remediation expense figure, no insurance recovery discussion, no separate line item. The $118M of structural optimization charges in the quarter is separately explained and not cyber-related, of which $81M is attributed to termination of sales relationships in certain countries, an item that went entirely unremarked on the call and is more than double the prior year's total structural charge.
6. Any quantification of tariffs. Tariffs were named as one of two drivers of the 190 bp gross margin decline and as a first-half headwind, but never sized. The full-year EPS guide explicitly assumes "some anticipated improvements in the tariff outlook," an external assumption presented without a scenario around it.
7. The threat actor and the lessons learned. Both were declined outright, with an offer to share findings with industry peers at an unspecified later date. Understandable while the investigation is ongoing, and it leaves the recurrence risk unassessable from outside.
8. Any second-quarter shape. "We don't guide to the quarters" is long-standing policy and was applied consistently. In a year where the entire thesis is the timing of a recovery, its effect is to remove the only near-term checkpoint investors could have used.

Market Reaction

• Pre-print setup: SYK closed at $315.13 on Thursday April 30, down 10.3% year to date against an S&P 500 up 5.3%, down 15.7% over the trailing twelve months and down 4.1% over the trailing thirty days. The 52-week closing range entering the print was $315.13 to $403.53, meaning the stock went into the release sitting exactly on its own 52-week closing low.
• After-hours move: The release crossed after the close with the call at 4:30 p.m. ET. The initial reaction was modest, and the stock carried only a small deficit into the next morning.
• Next-day session: The stock opened at $313.34 on Friday May 1, a 0.6% gap down that was also the high of the day, traded to $294.55, and closed at $294.73, down 6.5% or $20.40. That is a new 52-week closing low.
• Volume: 4.5M shares against a 2.0M thirty-day average, or 2.3 times normal.
• Index context: The S&P 500 rose 0.3% on the same session, leaving roughly 6.8 points of relative underperformance.

The shape of the session is more informative than its magnitude. A 0.6% gap that becomes a 6.5% close is not a headline reaction, it is a reading reaction. Overnight the story was "cyber incident, guidance maintained," which is reassuring on its face and is roughly what the April 9 Item 1.05 filing had already prepared the market to hear. By the middle of the following session the story had become "the guidance requires roughly 10.7% organic growth for three consecutive quarters and management declined to say when any of it arrives," which is a different proposition. The stock opened at the high and closed at the low, which is what a market repricing an argument rather than a headline looks like.

Volume at 2.3 times the thirty-day average is the second signal, and it points the same way. This is not marginal trimming by existing holders. On a company of this size, that participation level means positions changed hands, and it happened on a session that set a new closing low, which suggests the sellers were not waiting for a better exit. The pre-print setup makes that harder to dismiss as capitulation from crowded longs: a stock already down 15.7% over twelve months against an index that was up is not one carrying heroic expectations into a print.

What the market appears to be pricing is a partial recovery rather than a full one. At $294.73 the stock trades at 19.6 times the guide midpoint of $15.00, against 21.0 times at the pre-print close. If the guide were fully believed, the multiple should not have moved at all, because the annual number did not. The 1.4 turns of compression is the market's estimate of the probability-weighted shortfall plus a premium for having to wait two quarters to find out.

Street Perspective

Debate: Is the maintained guide a conviction call or a reputational hold?

Bull view: The bull case on the Street is that management has the one dataset that resolves the question, the capital order book, and that a team with this track record would not reaffirm a January number three weeks after telling the SEC the event was material unless the book supported it. The recovery mechanics are also unusually legible: procedures already performed require paperwork, not persuasion.

Bear view: The bear camp contends that the reaffirmation was the only socially acceptable answer available. Cutting a guide over an event the company had already characterized as immaterial to full-year guidance in an SEC filing three weeks earlier would have been an embarrassment, and the refusal to size the impact or shape the quarters is exactly what a management team does when it is buying time rather than expressing confidence.

Our take: The bear reading of the incentive is correct and the bull reading of the mechanics is also correct, which is why this resolves empirically rather than rhetorically. What tilts us toward the bulls is the April 9 filing itself: a company planning to cut in three weeks does not volunteer that the incident is not reasonably likely to be material to full-year guidance. It could have said nothing. The uncomfortable half is that the answer to whether upside was consumed was an explicit deferral, which means July is a live revision event.

Debate: Does the de-rating reflect the cyber event or a structural reset of the growth premium?

Bull view: The optimistic reading is that the multiple compression long predates the intrusion. The stock entered this print already down 15.7% over twelve months while the market rose, so most of the de-rating happened for reasons unrelated to March, and a franchise still guiding to high single-digit organic growth with a robotics installed base compounding does not belong at a market-level multiple.

Bear view: The skeptical reading is that the market began repricing Stryker's growth premium in 2025 for good reasons, including a spine exit that removed revenue, an Inari integration that consumed a year, and an orthopaedic market where competitive robotics offerings have narrowed the gap. On this view the cyber incident is not the cause of the de-rating but the occasion for finishing it, and the multiple is converging on what a high-single-digit grower is actually worth.

Our take: Both are describing real things, and the tiebreaker is what the quarter revealed about the growth engine rather than about the quarter. Record first-quarter robotic installations achieved in eleven weeks, an Instruments business growing 8.7% in constant currency with minimal disruption exposure, and Orthopaedics holding 4.1% organic on consigned inventory are not the fingerprints of a franchise losing its premium. The spine and Inari drags are both finishing, which means the 2027 comparison is clean for the first time in three years.

Debate: How much of the first-quarter shortfall is permanently gone?

Bull view: The recoverable share is very high. Consigned orthopaedic procedures already happened and simply need to be recognized. Capital equipment that could not ship sits in an order book that management says did not shrink. Only urgent cases during the window when representatives could not enter hospitals are genuinely lost, and management has said it expects commercial execution to offset those.

Bear view: The bear camp's arithmetic runs the other way. If three weeks of downtime produced a shortfall in the low hundreds of millions in a single quarter, the confidence that all of it returns rests on a factory schedule nobody has seen, and hospital capital budgets are annual: an order deferred from March into November may be an order competing against a new fiscal year's priorities.

Our take: The recoverable share is high but the bulls are underweighting the capacity constraint and the bears are underweighting how small the stakes are. Our estimate of the hole is $330M to $420M, roughly 1.5% of a $27B revenue year. At a 35% to 45% incremental adjusted operating margin, losing every dollar of it costs approximately $0.25 to $0.41 of adjusted EPS. That is the maximum damage, and it still leaves the year growing.

Model Update & Valuation Framework

The downside is smaller than the drawdown implies. Our estimate of the revenue hole is $330M to $420M, and at a 35% to 45% incremental adjusted operating margin the complete non-recovery of all of it costs $116M to $189M of adjusted operating income, or roughly $0.25 to $0.41 per share after a 15.5% tax rate on 386.5M diluted shares. That takes full-year adjusted EPS to approximately $14.59 to $14.75 instead of the $15.00 guide midpoint, which is still 6.7% to 7.5% growth on 2025 and leaves the stock at roughly 20 times. The bear case in its fully realized form is a mid-single-digit earnings growth year at a market multiple.

Valuation. At the $294.73 close the stock trades at 19.6 times the FY26 guide midpoint of $15.00, 20.0 times our own FY26 estimate of approximately $14.78, and 21.6 times trailing 2025 adjusted EPS of $13.63. Entering the print it was 21.0 times the guide midpoint. This is a business that carried a high-twenties forward multiple as recently as early 2025.

Price target framework. We anchor to 22 times our FY27 estimate of approximately $16.60, which produces a twelve-month target of $365, roughly 24% above the reaction-day close. The 22 times multiple is deliberately set below the pre-2026 average rather than at it, so the target does not require a full re-rating; it requires the recovery to happen and the multiple to stop compressing. Against that, our downside case of 18 times a failed-recovery FY26 of $14.59 gives $263, roughly 11% below the close. The resulting risk and reward is approximately two to one in favor of the upside, which is what a franchise trading at trough valuation on a timing problem should offer.

Thesis Scorecard Post-Earnings

This is initiating coverage, so the pillars below are established rather than carried forward. Each is scored against what this quarter's print and call actually revealed.

Overall: The quarter is close to non-diagnostic on the franchise and highly diagnostic on the guide. Every operating signal that survived the disruption pointed the right way, and every signal that would have told us whether the recovery is achievable was withheld. The thesis we establish is therefore asymmetric in a specific way: the business case rests on evidence, and the 2026 numbers rest on trust.

Action: Buy the de-rating. The maximum plausible damage from a failed recovery is roughly $0.41 of adjusted EPS on a year that still grows, while the stock has already surrendered 6.5% to a new 52-week low and 1.4 turns of multiple. Size the position for two more quarters of poor visibility, because the first honest read on the recovery is the October print, not the July one.