tapebrief
ZBH · Q4 2025
Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

ZBH · Q1 2026 Earnings

Zimmer Biomet

Reported April 28, 2026

30-second summary

Zimmer Biomet printed Q1 FY2026 revenue of $2.087B (+9.3% YoY, organic CC +2.9%) with adjusted EPS of $2.09, and raised FY2026 adjusted EPS guidance to $8.40–$8.55 (from $8.30–$8.45) and FCF growth to 9–11% (from 8–10%) while leaving the organic CC revenue range of 1–3% untouched. The Q1 organic print landed at the high end of the FY 1–3% range, U.S. organic CC grew +3.2% (reported +8.6% including 540bps from Paragon 28) despite the U.S.-only Salesforce overhaul, and management quantified dedicated-rep productivity gains as the qualitative confidence driver. The mechanical source of the EPS raise, however, is the IEEPA tariff invalidation — a 20¢ Q1 benefit, ~10¢ of which was pulled forward from H2, with the remaining ~10¢ dropping to the FY raise. The configuration — EPS and cash raised, revenue held — confirms the Q4 thesis that 2026 was deliberately under-guided on the top line; the raise itself is principally a tariff-refund story rather than a demand or mix story.

Headline numbers

EPS

Q1 FY2026

$2.09

Revenue

Q1 FY2026

$2.09B

+9.3% YoY

Gross margin

Q1 FY2026

64.6%

Free cash flow

Q1 FY2026

$0.25B

Operating margin

Q1 FY2026

17.9%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$2.09B+9.3%$2.24B-7.0%
EPS$2.09—$2.42-13.6%
Gross margin64.6%———
Operating margin17.9%—6.9%+1101bps
Free cash flow$0.25B———

Guidance

Company raised FY2026 EPS guidance to $8.40–$8.55 (from $8.30–$8.45) and FCF growth to 9–11% (from 8–10%), while maintaining revenue growth guidance.

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

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Adjusted Diluted EPS
FY2026
$8.30 - $8.45$8.40 - $8.55+$0.10 at midpoint (from $8.375 to $8.475)Raised
Free Cash Flow Growth
FY2026
8% - 10%9% - 11%+1 percentage point at both low and high endRaised

Reaffirmed unchanged this quarter: Reported Revenue Growth (2.5% - 4.5%), Organic Constant Currency Revenue Growth (1.0% - 3.0%)

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
Knees$0.829B+4.5%
Hips$0.524B+5.7%
S.E.T.$0.562B+19.5%
Technology & Data, Bone Cement and Surgical$0.172B+14.6%

Other KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
United States$1.209B+8.6%
International$0.877B+10.3%
Adjusted Operating Margin27.3%—
Adjusted Gross Margin73.0%—
Organic Constant Currency Revenue Growth2.9%—
Constant Currency Revenue Growth6.8%—
Operating Cash Flow$359.4 million—
FY2026 Adjusted EPS Guidance (Raised)$8.40 - $8.55—

Management tone

The Q4 reset language has given way to confidence: "I'm very confident that we're moving in the right direction...the word that comes to mind is confident." The confidence is now grounded in a Q1 organic print at the high end of the FY range and a Salesforce transition tracking to plan, plus a tariff tailwind that allowed management to raise EPS at the first quarterly opportunity.

The Salesforce-transition narrative has flipped from gating risk to productivity lever. The Q4 framing was "short-term disruption across pockets of an organization"; this quarter management is quantifying upside: "In the territories that we did switch from non-dedicated to dedicated...we've seen fairly dramatic improvements in productivity. In those dedicated structures...double digit ranges for the number of cases." This is the single largest qualitative shift on the call. Non-dedicated reps dropped from ~66% of the U.S. sales force at year-start to below 60% at end of Q1; specialized reps moved from ~25% toward 30%. Critically, the U.S. organic CC print of +3.2% (not the reported +8.6%, which is Paragon-28-inflated) is what supports the resilience read.

The U.S. Knees story has been recast from growth engine (Q2 Magnificent Seven launch cycle) to managed-decline-with-upside-mix. Q1 U.S. Knees +2.2% with partial-knee sales up >20% and legacy NextGen/Vanguard explicitly being "faced out" makes the franchise math more transparent than it was when growth was the headline. The trade-off is now disclosed rather than absorbed.

The Monogram narrative has moved from acquired-asset to capital-allocation centerpiece. "We believe we've got a bold platform that can get scaled up fairly rapidly...north of 200 sales reps behind the launch of Monogram." This quarter Monogram has a 200-rep deployment number attached and a 102-patient clinical study enrolled. The hiring commitment is the falsifiable signal that this is operating capital allocation, not a financial-statement-only investment.

International distributor consolidation has been recast from "fragile" to "expected sequential improvement." Management's mid-single-digit H2 international growth call is the cleanest forward-commitment of the print. If H2 international organic decelerates further from Q1's +2.5%, the call fails publicly; if it lands at mid-single-digit organic, the consolidation thesis is vindicated.

CFO transition. Management announced that CFO Suky Upadhyay is leaving Zimmer Biomet for a biotech opportunity. Paul Stellato — current controller, chief accounting officer, and head of corporate FP&A — has been named interim CFO while the search for a permanent successor proceeds. This is a material governance change at the financial helm coming the same quarter as an EPS and FCF guide raise, and is worth monitoring through the next call.

Recurring themes management leaned on this quarter:

Salesforce transformation productivity gains materializing ahead of scheduleTechnology platform (ROSA, EMBOSS/Monogram, T-mini) as growth vector offsetting legacy implant pressureTariff benefit pull-forward creating EPS beat but one-time in natureParagon 28 acceleration and focus on controlled integration vs. M&A pauseInternational distributor consolidation trade-off between short-term disruption and long-term efficiencyConnected data/smart implants (Persona IQ, OrthoGrid) as CMS value-based care tailwind

Risks management surfaced:

Loss of two large accounts in U.S. knee due to go-to-market changesKaiser strike impact on U.S. knee demandTariff policy uncertainty (232 investigation remains fluid and dynamic)Legacy implant brand pressure (NextGen, Vanguard) from rationalization strategyCompetitive pricing pressure warranting conservative 100 bps price erosion assumption despite 40 bps Q1 result

Answers to last quarter's watch list

Q1 FY2026 organic CC print versus the 1–3% FY range. Q1 organic CC printed 2.9% — at the high end of the 1–3% range, with management explicitly guiding "growth roughly consistent throughout the remainder of 2026." That phrasing combined with a high-end Q1 print implies the back half is no longer required to recover from a front-loaded disruption; the disruption is being absorbed in real time. Status: Resolved positively.
U.S. revenue growth specifically as the Salesforce-disruption test. U.S. organic CC grew +3.2% in Q1 (reported +8.6%, with Paragon 28 contributing 540bps) — above the level a disruption thesis would have implied. Management quantified "double digit" case-count improvement in converted-territory dedicated structures, framing the Salesforce overhaul as a productivity lever rather than a drag. Status: Resolved positively.
Paragon 28 organic growth trajectory toward the double-digit 2026 commitment. S.E.T. printed +19.5% reported but only +1.6% organic CC, and management noted Paragon 28 first-quarter growth "accelerated around 200 basis points from the fourth quarter of 2025 and is trending back towards double-digit growth performance" — not yet there. The full-year is still the falsifiable test. Status: Continue monitoring.
Gross margin print in Q1. Adjusted gross margin printed 73.0% — above CFO's full-year framing of ~71%, but with the bulk of the upside attributable to the IEEPA tariff invalidation (20¢ in Q1, of which ~10¢ was pulled forward from H2). Underlying gross-margin performance was modestly favorable. Status: Resolved, with caveat that the tariff benefit is not recurring at the Q1 magnitude.
Any M&A commentary. Management commentary signals continued focus on completing existing integrations ("we remain on track to complete the transition by the end of 2027") with no new acquisition disclosure. The Q4 M&A pause is intact. Status: Continue monitoring.
Free cash flow Q1 pace. Q1 FCF printed $246M with operating cash flow of $359.4M, and management raised the FY FCF growth guide from 8–10% to 9–11%. The Q1 pace was credible enough that management spent some of the FY buffer at the first quarterly opportunity. Status: Resolved positively.

What to watch into next quarter

Q2 FY2026 organic CC print and whether the "roughly consistent" framing holds. A Q2 print materially below 2.0% would signal Salesforce-disruption seasonality the Q1 print masked; a print above 3% would set up an organic guide raise in Q2 to match the EPS raise issued this quarter.

Paragon 28 disclosed organic contribution toward "double-digit" 2026 commitment. Management committed in Q4 to "double digit" Paragon growth in 2026 and noted Q1 was "trending back towards" that level. Watch for explicit Paragon organic disclosure on the Q2 call — if it stays below double digits without specific commentary, the commitment is at risk.

Adjusted gross margin sustainability vs. CFO's ~71% FY framing. Q1 printed 73.0% inflated by the IEEPA tariff benefit. CFO said the cadence should be "roughly consistent for the remainder of the quarters" at around 71%. Watch whether Q2 GM holds at or above that framing absent further tariff relief.

U.S. organic CC growth deceleration curve. U.S. organic CC was +3.2% in Q1. A Q2 print at or above +3% would confirm Salesforce productivity gains are sustaining; a print materially below would suggest the disruption is now arriving with a lag.

International H2 mid-single-digit organic commitment progress. Management set a specific H2 international growth call. Watch whether Q2 international organic CC begins compressing toward the mid-single-digit range from Q1's +2.5%.

CFO succession. Paul Stellato is interim CFO while the search continues for a permanent successor to Suky Upadhyay. Identity of the permanent appointee and any framing changes around capital allocation, margin commitments, or guidance philosophy are worth tracking.

Tariff exposure language ($40M baseline), IEEPA status, and any movement on the Section 232 investigation. Management characterized the situation as "fluid" and is assuming Section 232 tariffs remain intact and IEEPA remains invalidated through H2; movement in either direction would directly affect the EPS midpoint that was just raised.

Sources

  1. Zimmer Biomet Q1 FY2026 Press Release (SEC EX-99.1): https://www.sec.gov/Archives/edgar/data/1136869/000119312526183411/zbh-ex99_1.htm
  2. Zimmer Biomet Q1 FY2026 Earnings Call Transcript (prepared remarks and Q&A), April 28, 2026.

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