Smith & Nephew Q2 2026: Revenue Miss, Profit Up, Guidance Trimmed

Key Facts

Q2 underlying revenue growth: 1.6%
Q2 trading profit: $566 million
Trading profit growth (ex-M&A): 9%
2026 revenue growth guidance: around 4%
2026 efficiency savings: $200 million
Interim dividend per share: $0.156, up 4%

Background

Smith & Nephew, a global medical technology company, reported its second quarter and first half 2026 results on Tuesday, Aug. 4, 2026. The company's CEO Deepak Nath and CFO John Rogers presented the results, highlighting a mixed performance across business units.

In the second quarter, the company delivered underlying revenue growth of 1.6%, which was lower than expected. This was partly offset by strong performance in Sports Medicine & ENT, which grew 8.6%, and double-digit growth from many key products. However, softness in U.S. Orthopaedics and Advanced Wound Bioactives weighed on overall growth.

Despite the revenue shortfall, trading profit was strong at $566 million, up 9% excluding M&A, supported by efficiency savings and tariff refunds that fully offset forecast tariff headwinds.

Current Situation

Geographically, the U.S. declined by 1.3% in the quarter, reflecting softer performance in Orthopaedics and Advanced Wound Bioactives. Other Established Markets grew 1.7%, led by Canada, Australia, and New Zealand. Emerging markets grew 10.6%, and excluding China, group growth was 1.4% on an underlying basis.

In the business units, Sports Medicine & ENT grew 8.6%, with joint repair delivering double-digit growth. Advanced Wound Management declined 2.1%, with Bioactives down 12.7% due to reimbursement changes and a soft quarter for SANTYL. Orthopaedics declined 1% on an underlying basis, reflecting ongoing issues in U.S. Knees and temporary headwinds in U.S. Hips.

For the half year, revenue was $3.1 billion, up 2.3% on an underlying basis and 4.6% on a reported basis. Trading profit increased $43 million to $566 million, with trading margin expanding 60 basis points to 18.3%.

Q2 2026 Business Unit Performance
Business Unit	Underlying Growth	Trading Margin Change
Sports Medicine & ENT	8.6%	+160 bps to 24.7%
Advanced Wound Management	-2.1%	-10 bps to 22%
Orthopaedics	-1%	+30 bps to 13%

Data from Smith & Nephew Q2 2026 earnings call.

Impacts

The company revised its full-year 2026 underlying revenue growth outlook to around 4%, down from previous expectations. However, it maintained its original guidance for profit, trading profit, free cash flow, and ROIC, including an additional $50 million in efficiency savings, bringing total expected savings to $200 million.

The softness in U.S. Orthopaedics, particularly knees, is expected to improve through the year with new product launches and increased set deployments. The delay in CATALYSTEM deployment in U.S. hips is expected to resolve as deployment increases, with growth resuming.

In Advanced Wound Bioactives, SANTYL is expected to return to growth in the second half, despite the impact of prior authorization changes. The skin substitutes business continues to face headwinds from CMS reimbursement changes, with the trading profit headwind now expected towards the upper end of the previously guided $20 million to $40 million range.

Future Outlook

Scenario analysis: The possibilities below are not certain predictions.

If the company successfully ramps up CATALYSTEM deployments and LEGION MS set deployments, Orthopaedics could reaccelerate in the second half, supporting the revised revenue outlook. The company expects growth to strengthen in Trauma & Extremities with the launch of EVOS Pelvic and ramp-up of TRIGEN MAX.

If SANTYL returns to growth and the skin substitutes market normalizes, Advanced Wound Management could improve, though the pace of market adaptation remains uncertain. The company remains confident in long-term fundamentals.

The company expects China VBP to be implemented in the second half, with a profit headwind of around $15 million to $20 million for the full year. If tariffs remain broadly neutral net of refunds, and efficiency savings continue, the company could deliver its original profit guidance despite the lower revenue growth.

Source: yahoo.com

AMRIT EXPLAINER