Medical device company Zimmer Biomet (NYSE: ZBH) announced better-than-expected revenue in Q2 CY2025, with sales up 7% year on year to $2.08 billion. Its non-GAAP profit of $2.07 per share was 4.8% above analysts’ consensus estimates.

Is now the time to buy ZBH? Find out in our full research report (it’s free).

StockStory’s Take

Zimmer Biomet’s second quarter results were met with a positive market response, reflecting successful execution on new product launches and meaningful contributions from recent M&A activity. Management attributed the quarter’s outperformance to strong U.S. growth in hip and knee implants, as well as sustained momentum in the S.E.T. (Sports Medicine, Extremities, and Trauma) segment. CEO Ivan Tornos emphasized, “Our U.S. Hips business drove strong results... and S.E.T. reported another solid mid-single-digit organic growth quarter.” The leadership also highlighted disciplined commercial execution and early adoption of new technologies as central to the company’s performance.

Looking forward, Zimmer Biomet’s updated full-year guidance is grounded in expectations for accelerated growth from its new product cycle and operational efficiencies. Management believes contributions from the Monogram Technologies acquisition and continued integration of Paragon 28 will support a higher growth trajectory in the second half of the year. CFO Suketu Upadhyay noted that improved tariff mitigation and favorable foreign exchange rates have also reduced expected headwinds, stating, “We are increasing our guidance for this year, primarily due to lower tariff impact, better cash flow, and ongoing operational improvements.” The company remains focused on broadening product adoption and maintaining momentum in high-growth segments.

Key Insights from Management’s Remarks

Management attributed second quarter results to robust adoption of hip and knee innovations, sustained growth in S.E.T., and the strategic impact of recent acquisitions.

• Hip product momentum: The Z1 triple taper stem for direct anterior hip procedures saw continued robust adoption, with management noting approximately half of Z1 users converted from competing brands. This product’s integration with AI-guided surgical tools, like Orthogrid and HAMMR, has driven share gains in the U.S.

• Knee segment acceleration: The Persona OsseoTi cementless knee and Oxford partial cementless knee posted sequential growth improvements. Nearly 50% of surgeons trained on Oxford have adopted Zimmer Biomet’s implant, with 10% converting from competitors, signaling ongoing traction from new product launches.

• Sustained S.E.T. growth: The S.E.T. segment delivered its seventh consecutive quarter of mid-single-digit organic growth, led by double-digit gains in Sports Medicine and craniomaxillofacial thoracic (CMFT) and strong performance in upper extremities. Management expects this momentum to continue, underpinned by new launches and surgeon conversions.

• M&A integration progress: The integration of Paragon 28, completed in April, proceeded as planned, with no significant staff turnover and expanded commercial reach. The pending Monogram Technologies acquisition is expected to bring AI-driven robotic surgery capabilities, positioning Zimmer Biomet for future leadership in orthopedics.

• Operational initiatives: Efforts to reduce inventory and improve free cash flow generation progressed, with nearly 20 fewer days of inventory on hand compared to last year. These initiatives, along with pricing discipline and commercial investments, contributed to overall earnings growth despite increased expenses from M&A.

Drivers of Future Performance

Zimmer Biomet’s outlook is driven by accelerated new product adoption, ongoing integration of recent acquisitions, and targeted operational improvements.

• New product cycle acceleration: Management anticipates that recently launched hip, knee, and S.E.T. products will drive higher growth in the second half of the year. The “magnificent 7” product introductions are expected to support continued share gains, particularly in the U.S., as more surgeons adopt Zimmer Biomet implants and participate in upcoming training programs.

• M&A contribution and diversification: The integration of Paragon 28 is projected to add to both revenue growth and commercial capabilities, while the Monogram Technologies acquisition should position Zimmer Biomet in fully autonomous, AI-powered orthopedic robotics. Management expects Monogram’s platform to begin driving revenue growth in 2027, with operational synergies supporting earnings in the interim.

• Margin improvement and risk mitigation: The company is managing margin headwinds from M&A-related expenses and tariffs through cost controls, supply chain initiatives, and foreign exchange benefits. Adjusted operating margins are expected to be down year-over-year, but improved guidance reflects lower-than-expected tariff impacts and operational efficiencies. Management also cited strong cash flow performance as a buffer against ongoing integration costs.

Catalysts in Upcoming Quarters

Looking ahead, our analyst team will monitor (1) the pace of adoption for recently launched hip and knee products, (2) the successful integration and commercial impact of Paragon 28 and Monogram Technologies, and (3) the ability to maintain margin improvements amid ongoing operational investments and tariff uncertainties. Progress in robotics innovation and market acceptance of autonomous surgery will also be key indicators for future performance.

Zimmer Biomet currently trades at $100.02, up from $91.15 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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