Stryker's Cyber Comeback: Supply Disruption, Tariff Windfalls, and a Fresh Buyback

Nine percent organic growth and an EPS beat notwithstanding, the company is narrowing guidance while restarting share repurchases.

SYK · Earnings Call · 2026-07-30

Stryker entered its fiscal second quarter still healing from the March cyber incident that shut down production for weeks. But the company's recovery was emphatic: organic sales rose 9%, adjusted EPS hit $3.69, up 17.9% year-over-year, and capital orders came in strong. “We delivered strong organic sales growth of 9% including high single digit growth from both our med surg and neurotechnology and orthopedics businesses.” — Kevin A. Lobo, Chairman & CEO · 2026-07-30 The cyber event left an elevated backlog, a fact management leaned on as evidence of durable demand.

Cyber recovery and a capital surge

The recovery was led by capital equipment, where MAKO installation set a record for Q2, both domestically and internationally. “We exited the quarter with an elevated backlog, and expect continued strength in the hospital capital environment through the remainder of the year.” — Nick Mead, Vice President of Investor Relations · 2026-07-30 That confidence extended to procedures: Kevin Lobo noted the U.S. procedural environment remains stable, despite some industry commentary about softer discretionary volumes. The backlog is so healthy that the company is comfortable raising the bottom end of its organic sales guidance from 8% to 8.3% while narrowing the range to 8.3%–9.3%. The capital strength is especially visible in the medical business, where ProCuity beds and SmartCare (Vocera/care.ai) saw very strong orders. And Mako's evolution into a multi-specialty platform – with the recent full commercial launch of Mako RPS and the upcoming Triathlon Gold – gives the company another avenue to win in ASCs. Triathlon Gold demand is high, and the company expects its production ramp to accelerate into the second half. Kevin's bullishness on Mako was consistent with his prior commentary: “Procedure volumes are very healthy” — Kevin Lobo, Chairman and Chief Executive Officer · 2025-10-30 – a view that has carried across quarters.

Peripheral vascular's supply hiccup

Not everything ran smoothly. The peripheral vascular business, which includes Inari, hit a supply disruption at a single plant, creating a meaningful backorder and lost sales. Kevin Lobo described the pain bluntly:

You are right. We did lose sales. I think I said that in my opening comments that you those are procedures you do not it's not like capital equipment. That you so we did lose business because those cases are emergent.
Kevin A. Lobo, Chairman & CEO · 2026-07-30

The company prioritized its highest-volume, most loyal customers and expects backorders to reach a manageable level by the end of Q3. This is the supply disruption that management attributes to the integration of Inari's manufacturing into Stryker's systems – a pain point company veterans have seen before with Sage and Mako. The long-term case remains intact: the AVS acquisition closed, adding an intravascular lithotripsy platform, and the PEERLESS II trial finished enrollment, with a data readout that could expand the mechanical thrombectomy market.

Margin tailwinds and a fresh buyback

Despite the cyber costs and supply issues, adjusted gross margin expanded 60 basis points to 66%, and adjusted operating margin jumped 170 basis points to 27.4%. A key contributor was the tariff refund net benefit. “Adjusted earnings per share of $3.69 was up $0.56 or 17.9% from the same quarter last year. Driven by our strong sales growth a continued focus on operational excellence and a net benefit in the quarter from tariff related costs.” — Preston Wells, Chief Financial Officer · 2026-07-30 This tariff tailwind is part of a broader industry theme – many peers also recognized IEEPA refunds in the quarter – but Stryker's disciplined cost management amplified the impact. Operating income has grown from roughly $500 million per quarter a decade ago to over $1.7 billion in Q4 2025, though Q1 2026 felt the cyber hit with a dip to $936 million. The company is confident it can continue its 150 basis-point multi-year margin expansion, but the second half will absorb incremental cybersecurity remediation costs and manufacturing loss absorption. That margin discipline, combined with strong cash flow, has prompted a notable policy shift: share repurchases. Preston Wells said the company plans to resume buybacks this quarter, with about $1 billion of board-approved capacity. “As we look to think about our capital deployment, strategy, I mean, really, nothing major has changed. I mean, the m and a continues to be our number 1 priority, and our plan is to continue to find those opportunities that are gonna drive future growth. So that is first and foremost. ... We will also supplement it with some share buybacks this year.” — Preston Wells, Chief Financial Officer · 2026-07-30 That flexibility is a direct result of the company's firepower: $3.5 billion in cash and marketable securities and net debt that declined 19% year-over-year. Guidance for the full year now sits at 8.3%–9.3% organic growth and $14.95–$15.10 adjusted EPS. The narrowing reflects both the strong first half and the execution risk of ramping production to meet the backlog. As Kevin Lobo summed up, on a $25 billion business, even a ~9% growth year is "a pretty good year given that we were knocked out for almost an entire month."