Stryker Corporation · 10-Q · Item 2 MD&A

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 T1maintain

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

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%

(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.

CONSOLIDATED RESULTS OF OPERATIONS

Three Months

Six Months

Percent Net

Sales

Percentage

Percent Net

Sales

Percentage

Change

Change

Net sales

Gross profit

Research, development and engineering expenses

Selling, general and administrative expenses

Amortization of intangible assets

Goodwill and other impairments

1

—

nm

1

—

nm

Interest expense

Other income

Income taxes

nm

nm

nm

nm

Net earnings

Net earnings per diluted share

Adjusted net earnings per diluted share(1)

nm - not meaningful

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

STRYKER CORPORATION

SALES GROWTH ANALYSIS

Three Months

Six Months

Percentage Change

Percentage Change

As

Reported

Constant

Currency

As

Reported

Constant

Currency

MedSurg and Neurotechnology:

Instruments

United States

International

Total

Endoscopy

United States

International

Total

Medical

United States

International

Total

Vascular

United States

International

Total

MedSurg and Neurotechnology

United States

International

Total

Orthopaedics:

Knees

United States

International

Total

Hips

United States

International

—

Total

Trauma and Extremities

United States

International

Total

Ortho Tech

United States

International

Total

Spinal Implants

United States

$—

$—

$—

International

3

5

5

Total

$3

$5

$5

Orthopaedics

United States

International

Total

Geographic:

United States

International

Total

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.

STRYKER CORPORATION

Consolidated Net Sales

Consolidated net sales increased 9.4% in the three months 2026

as reported and 9.0% in constant currency, T2as foreign currency

exchange rates positively impacted net sales by 0.4%. T3Net 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

and 2025. The key components of the change were:

Gross Profit

Percent Net Sales

Volume and mix

Manufacturing and supply chain costs

Structural optimization and other special charges

Inventory stepped up to fair value

T4Gross profit as a percentage of net sales in the three months

a reduction of certain import tariffs and lower amortization of

inventory stepped up to fair value.

2025. The key components of the change were:

Gross Profit

Percent Net Sales

Sales pricing

Volume and mix

Manufacturing and supply chain costs

Structural optimization and other special charges

Inventory stepped up to fair value

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

certain import tariffs and lower amortization of inventory stepped

up to fair value partially offset by T5higher 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, T6we 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

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,

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,

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

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

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

Refer to the discussion above for the primary drivers of the

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

STRYKER CORPORATION

change.

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

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

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

were:

Operating Income

Percent Net Sales

MedSurg and

Neurotechnology

Orthopaedics

Volume

Manufacturing and supply chain costs

Research, development and

engineering expenses

Selling, general and administrative

expenses

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

were:

Operating Income

Percent Net Sales

MedSurg and

Neurotechnology

Orthopaedics

Sales pricing

0 bps

Volume

Manufacturing and supply chain costs

Research, development and

engineering expenses

Selling, general and administrative

expenses

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

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

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

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.

T7Our 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

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.

STRYKER CORPORATION

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.T8Medical 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

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

Reported percent net sales

nm

Acquisition and integration-related costs:

Inventory stepped-up to fair value

—

—

—

—

—

—

—

—

—

Other acquisition and integration-related (a)

7

(4)

—

3

—

Amortization of purchased intangible assets

—

—

—

—

Structural optimization and other special charges (b)

5

(1)

(6)

Goodwill and other impairments (c)

—

—

—

1

—

—

1

—

—

Medical device regulations (d)

—

—

(5)

5

—

1

4

—

Recall-related matters (e)

(1)

(3)

—

2

—

1

1

—

—

Regulatory and legal matters (f)

—

(3)

—

3

—

—

3

—

—

Tax matters (g)

—

—

—

—

—

—

—

—

—

Adjusted

Adjusted percent net sales

nm

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

STRYKER CORPORATION

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

Reported percent net sales

nm

Acquisition and integration-related costs:

Inventory stepped-up to fair value

—

—

—

Other acquisition and integration-related (a)

1

(1)

—

Amortization of purchased intangible assets

—

—

—

—

Structural optimization and other special charges (b)

6

(2)

(3)

(9)

(2)

4

Goodwill and other impairments (c)

—

—

—

—

Medical device regulations (d)

—

—

(7)

7

—

1

6

Recall-related matters (e)

(1)

—

—

1

Regulatory and legal matters (f)

—

(7)

—

7

—

1

6

Tax matters (g)

—

—

—

—

—

(2)

2

—

Adjusted

Adjusted percent net sales

nm

nm - not meaningful

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

Three Months

Termination of sales relationships

$6

$—

Employee retention and workforce reductions

(3)

Changes in the fair value of contingent consideration

6

3

Manufacturing integration costs

5

3

Other integration-related activities

Adjustments to Operating Income

Adjustments to Income Taxes

$3

Adjustments to Net Earnings

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

Three Months

Employee retention and workforce reductions

$6

$5

Closure/transfer of manufacturing and other facilities

4

7

Product line exits

9

Termination of sales relationships in certain countries

6

(3)

Other charges

Adjustments to Operating Income

Adjustments to Other Income (Expense), Net

$(6)

$(9)

Adjustments to Income Taxes

$(2)

Adjustments to Net Earnings

$4

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

Three Months

Certain long-lived and intangible asset write-offs and impairments

$—

Product line exits (e.g., long-lived asset and specifically-identified intangible asset write-offs)

1

3

Adjustments to Operating Income

$1

Adjustments to Income Taxes

$—

Adjustments to Net Earnings

$1

(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:

Three Months

Adjustments related to the transfer of certain intellectual properties between tax jurisdictions

Other tax matters

Adjustments to Income Taxes

$(2)

Adjustments to Other Income (Expense), Net

$—

$—

Adjustments to Net Earnings

$2

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

STRYKER CORPORATION

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

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

Reported percent net sales

nm

Acquisition and integration-related costs:

Inventory stepped-up to fair value

—

—

—

—

—

—

—

—

—

Other acquisition and integration-related (a)

9

(8)

—

7

—

Amortization of purchased intangible assets

—

—

—

—

Structural optimization and other special charges (b)

(1)

Goodwill and other impairments (c)

—

—

—

1

—

—

1

—

—

Medical device regulations (d)

—

—

—

2

8

—

Recall-related matters (e)

—

—

—

3

9

—

Regulatory and legal matters (f)

—

(6)

—

6

—

1

5

—

Tax matters (g)

—

—

—

—

—

—

—

—

—

Adjusted

Adjusted percent net sales

nm

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

Reported percent net sales

nm

Acquisition and integration-related costs:

Inventory stepped-up to fair value

—

—

—

Other acquisition and integration-related (a)

(2)

—

Amortization of purchased intangible assets

—

—

—

—

Structural optimization and other special charges (b)

(3)

(9)

Goodwill and other impairments (c)

—

—

—

—

Medical device regulations (d)

1

—

—

4

Recall-related matters (e)

(3)

—

—

9

Regulatory and legal matters (f)

—

(7)

—

7

—

2

5

Tax matters (g)

—

—

—

—

—

Adjusted

Adjusted percent net sales

nm

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

Six Months

Termination of sales relationships

$6

$—

Employee retention and workforce reductions

—

Changes in the fair value of contingent consideration

9

1

Manufacturing integration costs

7

Stock compensation payments upon a change in control

—

Other integration-related activities

Adjustments to Operating Income

Adjustments to Income Taxes

$7

Adjustments to Net Earnings

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

Six Months

Employee retention and workforce reductions

Closure/transfer of manufacturing and other facilities (e.g., site closure, contract termination and redundant employee costs)

9

Product line exits (e.g., inventory, long-lived asset and specifically-identified intangible asset write-offs)

(7)

Termination of sales relationships in certain countries

(4)

Other charges

Adjustments to Operating Income

Adjustments to Other Income (Expense), Net

$(9)

Adjustments to Income Taxes

Adjustments to Net Earnings

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

STRYKER CORPORATION

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

Six Months

Certain long-lived and intangible asset write-offs and impairments

$—

Product line exits (e.g., long-lived asset and specifically-identified intangible asset write-offs)

1

4

Adjustments to Operating Income

$1

Adjustments to Income Taxes

$—

Adjustments to Net Earnings

$1

(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:

Six Months

Adjustments related to the transfer of certain intellectual properties between tax jurisdictions

Other tax matters

Adjustments to Income Taxes

Adjustments to Other Income (Expense), Net

$—

$—

Adjustments to Net Earnings

FINANCIAL CONDITION AND LIQUIDITY

Six Months

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes

Change in cash and cash equivalents

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

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

December 31, 2025. Current assets exceeded current liabilities

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

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.

STRYKER CORPORATION

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

Item 1A. "Risk Factors" of our Annual Report on Form 10-K for

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.