Medical device company Zimmer Biomet (NYSE: ZBH) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 9.3% year on year to $2.09 billion. Its non-GAAP profit of $2.09 per share was 12.2% above analysts’ consensus estimates.

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"We are off to a solid start to the year — strategically, operationally and financially," said Ivan Tornos, Chairman, President and CEO of Zimmer Biomet.

Company Overview

With a history dating back to 1927 and a presence in over 100 countries worldwide, Zimmer Biomet (NYSE: ZBH) designs and manufactures orthopedic products including knee and hip replacements, surgical tools, and robotic technologies for joint reconstruction and spine surgeries.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Zimmer Biomet grew its sales at a mediocre 4.2% compounded annual growth rate. This fell short of our benchmark for the healthcare sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Zimmer Biomet’s annualized revenue growth of 6.2% over the last two years is above its five-year trend, which is encouraging.

Zimmer Biomet also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 5.5% year-on-year growth. Because this number aligns with its reported revenue growth, we can see that foreign exchange has not had a meaningful impact on topline.

This quarter, Zimmer Biomet reported year-on-year revenue growth of 9.3%, and its $2.09 billion of revenue exceeded Wall Street’s estimates by 0.9%.

Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

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Adjusted Operating Margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

Zimmer Biomet has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average adjusted operating margin of 27.2%.

Looking at the trend in its profitability, Zimmer Biomet’s adjusted operating margin decreased by 1.3 percentage points over the last five years. This performance was caused by more recent speed bumps as the company’s margin fell by 2.9 percentage points on a two-year basis. We’re disappointed in these results because it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q1, Zimmer Biomet generated an adjusted operating margin profit margin of 17.9%, down 8.3 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Zimmer Biomet’s EPS grew at 8.3% compounded annual growth rate over the last five years, higher than its 4.2% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its adjusted operating margin didn’t improve.

We can take a deeper look into Zimmer Biomet’s earnings quality to better understand the drivers of its performance. A five-year view shows that Zimmer Biomet has repurchased its stock, shrinking its share count by 6.9%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q1, Zimmer Biomet reported adjusted EPS of $2.09, up from $1.81 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Zimmer Biomet’s full-year EPS of $8.48 to grow 1.9%.

Key Takeaways from Zimmer Biomet’s Q1 Results

It was good to see Zimmer Biomet beat analysts’ EPS expectations this quarter. We were also happy its full-year EPS guidance narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $92.25 immediately after reporting.

Big picture, is Zimmer Biomet a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).