tapebrief
STE · Q2 2026
Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

STE · Q3 2026 Earnings

Steris

Reported February 4, 2026

30-second summary

Steris delivered Q3 FY2026 revenue of $1.50B (+9.2% YoY, +7.8% constant currency organic) and non-GAAP EPS of $2.53, with Healthcare +9%, AST +11%, and Life Sciences +6.9%. Management reaffirmed FY2026 EPS at $10.15–$10.30 and organic growth at 7–8%, but quantified the tariff drag at $55M pre-tax (up from $45M last quarter) and explicitly conceded "the higher end of that range is less likely" — the operational raise sequence from Q1–Q2 has stalled, and management is now walking the print down within the band rather than lifting it.

Headline numbers

EPS

Q3 FY2026

$2.53

Revenue

Q3 FY2026

$1.50B

+9.2% YoY

Gross margin

Q3 FY2026

43.8%

Operating margin

Q3 FY2026

18.3%

Key financials

Q3 FY2026
MetricQ3 FY2026YoYQ2 FY2026QoQ
Revenue$1.50B+9.2%$1.46B+2.5%
EPS$2.53—$2.47+2.4%
Gross margin43.8%—44.2%-40bps
Operating margin18.3%—18.2%+10bps

Guidance

Company reaffirms full-year FY2026 guidance across EPS, revenue growth, and free cash flow while quantifying ~$55M pre-tax tariff headwind impact—demonstrating resilience despite external pressures.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

MetricPeriodGuideYoY
Tariff headwind impactFY 2026~$55 million pre-tax—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Effective tax rate
FY 2026
approximately 24%Withdrawn — no replacement—Withdrawn

Reaffirmed unchanged this quarter: Adjusted EPS (non-GAAP) ($10.15–$10.30), Revenue growth (as reported) (8–9%), Constant currency organic revenue growth (7–8%), Free cash flow ($850 million), Capital expenditures (approximately $375 million)

Segment KPIs

Q3 FY2026
SegmentQ3 FY2026YoY
Healthcare$1.064B+9.0%
Applied Sterilization Technologies (AST)$0.287B+11.0%
Life Sciences$0.146B+6.9%
Healthcare Service Revenue Growth11%—
Healthcare Consumable Revenue Growth8%—
AST Service Revenue Growth9%—
AST Capital Equipment Revenue Growth103%—

Other KPIs

Q3 FY2026
SegmentQ3 FY2026
Recurring Revenue (Consumables + Service)$1.181 billion
Capital Equipment Revenue$315.6 million
Total Backlog$542.3 million
Tariff Headwind Impact (FY2026 outlook)$55 million pre-tax

Management tone

The top of the EPS range is now explicitly off. This quarter the framing is: "Our earnings outlook of $10.15 to $10.30 is also being maintained, although with $10 million more in anticipated tariffs, the higher end of that range is less likely." Management is pre-announcing where in the band the print will land, which is functionally a soft cut delivered through the call rather than the press release.

AST services has shifted from "double-digit anchor" to "unexplained volatility." The segment grew +9% as-reported with management offering no clean explanation for intra-quarter volatility. That kind of hedging on a recurring-revenue line is the cleanest tell in the brief — management does not know why demand wobbled, and the prior framing of AST as the steady compounder has been replaced by hedging.

Tariff exposure has stepped up again. The $55M FY figure is up $10M from the prior $45M disclosure, with management noting the Q4 step-up: "We were 16 million in the third quarter, Mike, and we would expect that to step up a little bit in the fourth." The increase has been absorbed without an EPS cut, which is operationally impressive — but the cushion is now visibly thin enough that management is pre-announcing the top of the EPS band is gone.

M&A pipeline framed as thin. Management characterized deal activity as "we've kissed a lot of frogs and not a lot of them have turned out to be princes." Combined with capex held at $375M and FCF reaffirmed at $850M, this is a balance sheet with capacity sitting idle — a defensive posture that fits the broader cautious tone and removes a potential catalyst from the FY2027 setup.

Healthcare services deceleration is now in the print and is expected to continue. Q3 delivered +11% — at the manageable end — but management is already extending the trajectory: "we would expect continued slowing in that business in the fourth quarter." The explicit Q4 guide-down within the call commentary is the notable element.

Recurring themes management leaned on this quarter:

Tariff escalation and mitigation effortsHealthcare services deceleration expectedAST capital equipment strength offsetting services softnessBacklog stability across segmentsMargin pressure from inflation and tariffsFourth quarter comparison difficulty and macro slowdown

Risks management surfaced:

Tariff headwinds incrementally increasing to $55 million annualizedFourth quarter comparison toughness, particularly in AST capital equipmentHealthcare services expected to continue slowingInflation and labor cost pressuresUnexplained October demand softness in AST services

Answers to last quarter's watch list

Whether the ETR creep continues — ETR guidance was reaffirmed at ~24%, and the adjusted ETR in Q3 was 24.2%, consistent with the FY outlook.
Resolved positively
Healthcare service deceleration magnitude — Healthcare service grew +11% in Q3. That lands at the manageable end of the range management telegraphed, and the YoY revenue growth held at +9% overall for the segment. Management explicitly guided to further deceleration in Q4.
Resolved positively
AST capital equipment Q4 comp — AST capital equipment printed +103% YoY in Q3 off a $10.2M base, and management has reiterated that Q4 comparisons are tough given last year's strong AST capital Q4. Total AST organic growth was +7.9% on a CC basis, but with services decelerating the capital equipment tailwind has to do the work next quarter against the hardest comp of the year.
Continue monitoring
Adjusted EBIT margin path — Adjusted EBIT margin printed 22.9% in Q3, down 40bps YoY per the CFO, with gross margin compressed 70bps YoY to 43.9% as tariff drag accelerated.
Continue monitoring
Whether organic growth raises continue — No. Constant currency organic growth was reaffirmed at 7–8%, ending the prior raise sequence. The Q3 reaffirmation closes the door on a further raise within FY2026.
Resolved negatively

What to watch into next quarter

Whether FY2026 EPS lands in the bottom half of the $10.15–$10.30 range — management has explicitly signaled the top end is off; with 9M adjusted EPS at $7.34, Q4 implied EPS sits in a roughly $2.81–$2.96 range, and bottom-half landing is now the central case

Whether tariff exposure breaches $55M — Q4 step-up was already pre-announced; any further policy escalation would force an FY2027 EPS reset before the FY2027 guide is even framed

Whether AST services reaccelerates — management lost visibility on the quarter and could not explain October weakness; if Q4 prints another sub-10% as-reported number, the recurring-base thesis loses its strongest pillar

Whether the FY2026 EBIT margin trajectory stabilizes — Q3 adjusted EBIT margin contracted 40bps YoY and gross margin contracted 70bps YoY; further compression in Q4 would weaken the operational story

Whether tariff mitigation translates into FY2027 offset — management framed mitigation efforts (supplier shifts, productivity, back-office cost reductions) as the path to absorbing tariff drag into FY2027; the magnitude of offset disclosed alongside the FY2027 guide will be the cleanest test of whether the cushion can be rebuilt

Sources

  1. Steris Q3 FY2026 press release, SEC filing: https://www.sec.gov/Archives/edgar/data/1757898/000162828026005473/ste12312025ex991.htm
  2. Steris Q3 FY2026 earnings call transcript (prepared remarks and Q&A), February 5, 2026.
  3. Steris Q2 FY2026 brief (prior quarter context), Tapebrief archive.

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