Key Highlights

  • Second-quarter net sales reached $2.177 billion, up 4.8% on a reported basis and 4% on an organic constant currency basis.
  • Adjusted earnings per share was $2.07, flat year over year, with adjusted gross margin down 120 basis points to 71.1%.
  • Full-year 2026 guidance was raised, with organic constant currency revenue growth now expected at 2.25% to 3.25%, up from a prior 1% to 3%.
  • Full-year adjusted earnings per share guidance was raised to $8.47 to $8.59, from a prior $8.40 to $8.55.

Broad-Based Volume Growth Across Core Categories

Zimmer Biomet Holdings, Inc. (NYSE:ZBH) reported second-quarter net sales of $2.177 billion, up 4.8% on a reported basis and 4% organic constant currency, with U.S. growth of 4.6% and international growth of 3.1%. Hip volumes grew 5.1%, reaching 5.9% within the U.S., while knee volumes grew a more modest 0.1%. The S.E.T. category, spanning sports medicine, extremities, and trauma products, grew 3.4%, aided by mid-teens growth in the Paragon 28 foot and ankle business.

Technology and bone cement and surgical products stood out as a particular bright spot, growing 21.5% with U.S. technology sales up more than 50%, reflecting continued adoption of the company's digital and robotic-assisted surgical platforms across its customer base.

Margin Pressure Reflects Ongoing Sales Force Investment

Adjusted earnings per share of $2.07 was flat year over year, with adjusted gross margin declining 120 basis points to 71.1% and adjusted operating margin down 210 basis points to 25.7%. Management attributed this margin pressure to continued investment in the company's commercial channel transformation, a restructuring of its U.S. sales force toward a more dedicated, specialized structure organized around specific product categories rather than general orthopedic coverage.

Pricing represented an approximately 80 basis point headwind during the quarter, within the range embedded in the company's full-year guidance. Management indicated the sales force transformation is progressing better than expected, with less disruption and turnover than anticipated, and the company now plans to complete this transformation by the end of 2027. The initiative involves increased share-based compensation costs, contributing to a rise in fully diluted weighted average shares to approximately 193 million expected for 2026.

Innovation continued to be a focus, with the Japan launch of the Oxinium iodine-coated hip platform exceeding expectations and plans to pursue additional international launches alongside U.S. regulatory pathway discussions.

Guidance Raise Reflects Confidence Despite Near-Term Margin Costs

Management raised full-year 2026 guidance, with organic constant currency revenue growth now expected at 2.25% to 3.25%, up from 1% to 3%, and reported sales growth guidance raised to 3.9% to 4.9%. Adjusted earnings per share guidance was raised to $8.47 to $8.59, from $8.40 to $8.55, with free cash flow growth guidance maintained at 9% to 11%.

Some factors could influence whether the company achieves the upper end of this range. The pace of continued sales force transformation completion, along with associated disruption risk even as management characterizes the transition as progressing smoothly, remains a variable that could affect commercial execution through the remainder of the year. The company's pipeline of over 550 new products expected over the next 36 months, alongside continued acquisition activity targeting higher-growth reconstruction segments and S.E.T. adjacencies of up to $2 billion, represents both an opportunity for accelerated growth and an execution risk given the scale of planned integration activity.

Continued adoption of the company's next-generation Rosa Shoulder system and expanding international regulatory approvals for newer platforms could provide additional upside beyond current guidance assumptions.

Conclusion

Zimmer Biomet's second quarter reflected broad-based volume growth across its core hip, knee, and S.E.T. categories, prompting a guidance raise even as margins faced pressure from continued investment in a sales force transformation. The durability of this improved outlook is likely to depend on successful completion of the commercial restructuring by 2027 and continued execution across a new product pipeline spanning more than 550 planned launches.