Zimmer Biomet Q2 2026 Earnings: Revenue Growth Supports Higher Guidance

Zimmer Biomet (NYSE: ZBH) reported Q2 2026 net sales of $2.177 billion, up 4.8% year over year, while diluted EPS increased 33.8% to $1.03 from $0.77. Adjusted EPS remained unchanged at $2.07, even as operating cash flow rose to $447.9 million and free cash flow reached $308.3 million. Released on August 5, the results cover the quarter ended June 30, 2026.

Core financial results

Reported revenue growth included a 0.7-percentage-point contribution from the Paragon 28 acquisition and a 0.1-point currency benefit. Excluding both effects, organic constant-currency revenue increased 4.0%.

GAAP profit growth was considerably faster than revenue growth, helped by lower acquisition-related expenses and a lower effective tax rate. The adjusted results were more restrained: adjusted net earnings declined, while the reduced share count kept adjusted EPS flat.

Free cash flow is a non-GAAP measure calculated after additions to instruments and other property, plant and equipment.

Business and product performance

U.S. sales increased 5.6% to $1.240 billion, including 4.6% organic constant-currency growth. International sales rose 3.7% to $937.0 million on a reported basis and 3.1% organically at constant currency, leaving the U.S. as the faster-growing geography.

Technology & Data, Bone Cement and Surgical was the fastest-growing product category. Hips also produced broad-based growth, while Knees were nearly flat overall and declined internationally. S.E.T. benefited materially from the Paragon 28 acquisition, as shown by the gap between reported and organic growth.

S.E.T. includes Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic. Within Knees, U.S. sales grew 1.4%, but international sales fell 0.9% as reported and 1.5% at constant currency. Hips grew in both the U.S. and international markets.

GAAP profit expanded while adjusted margins contracted

The improvement in GAAP profitability did not carry through to the adjusted operating results. GAAP operating margin expanded 60 basis points to 15.0%, partly because acquisition, integration, divestiture and related expenses fell to $18.1 million from $78.9 million. The GAAP effective tax rate also decreased to 21.8% from 31.7%, supporting the increase in net earnings.

In contrast, adjusted gross margin declined to 71.1% from 72.3%, while adjusted operating margin fell to 25.7% from 27.8%. Adjusted operating profit decreased approximately 3.2% to $559.7 million despite the 4.8% increase in sales. Adjusted cost of products sold increased to $629.5 million from $575.2 million, and adjusted selling, general and administrative expense rose to $883.0 million from $814.5 million, both outpacing revenue growth.

Adjusted net earnings consequently declined approximately 2.8% to $399.6 million from $411.2 million. Adjusted EPS remained at $2.07 because diluted weighted-average shares fell to 192.8 million from 198.3 million.

Cash flow and balance sheet

Quarterly operating cash flow increased by approximately 18.4%, and free cash flow rose by approximately 24.5%. For the first six months of 2026, operating cash flow was $807.2 million and free cash flow was $554.1 million, compared with $761.0 million and $526.1 million, respectively, in the prior-year period.

Cash and cash equivalents declined to $410.0 million at June 30 from $591.9 million at the end of 2025. Total debt decreased slightly to $7.479 billion from $7.519 billion, but net debt rose to $7.069 billion from $6.927 billion because of the reduction in cash. Zimmer Biomet repurchased $500.8 million of common stock during the first half, compared with $237.0 million a year earlier, and expects fiscal 2026 repurchases of up to $1 billion.

Inventory was $2.270 billion at quarter-end, slightly below $2.286 billion at the end of 2025. The combination of higher free cash flow and lower cash reflects the company’s broader investing and financing activities, including its increased share repurchases.

Full-year guidance

Zimmer Biomet raised its full-year 2026 revenue and adjusted EPS guidance, citing first-half performance, healthy underlying markets, progress with go-to-market changes and momentum from its innovation cycle. The revenue increases were more pronounced than the adjusted EPS revision, making the conversion of sales growth into adjusted profit an important measure for subsequent quarters.

Organic guidance excludes the Paragon 28 contribution through the first anniversary of its April 2025 acquisition, estimated at approximately 110 basis points. The company did not provide a GAAP reconciliation for forward-looking adjusted EPS because the necessary excluded items cannot be estimated without unreasonable effort.

Management perspective

Chairman, President and CEO Ivan Tornos attributed the guidance increase to the first-half results, underlying market conditions, progress in the company’s commercial transformation and continued product innovation. During the period, Zimmer Biomet also received FDA 510(k) clearance and completed the first cases using its next-generation ROSA Shoulder System, supporting management’s emphasis on robotic and digital technologies as growth drivers.

Risks investors should monitor

• Adjusted margin pressure: Adjusted gross and operating margins declined even as revenue increased. Continued growth in product costs and SG&A ahead of sales could limit adjusted earnings growth.
• Weakness in Knees: The company’s largest product category grew only 0.4% as reported, with international Knee sales declining. A sustained slowdown would weigh on consolidated organic growth.
• Difference between reported and organic growth: Paragon 28 contributed 0.7 percentage points to total quarterly growth and 2.8 points to S.E.T. growth. Investors will need to separate acquisition benefits from underlying business performance.
• Capital allocation and leverage: Net debt increased because cash declined, despite a modest reduction in total debt. The planned increase in share repurchases makes cash generation and debt management more consequential.

Summary

Zimmer Biomet’s Q2 2026 revenue growth was led by Technology & Data, Hips and acquisition-supported S.E.T. sales, while Knees remained subdued. Lower acquisition-related expenses and a reduced tax rate lifted GAAP earnings, but declining adjusted margins and lower adjusted net income showed that underlying profit conversion was less favorable. Higher full-year guidance signals greater confidence in revenue growth, while adjusted margins, Knee demand, organic growth and the balance between repurchases and net debt remain the main follow-up points.