Smith & Nephew (SNN) has held its Q2 earnings call. Read on for the main highlights of the call.

Smith & Nephew’s recent earnings call painted a picture of robust growth and strategic financial maneuvers, despite some challenges in specific markets. The overall sentiment was positive, driven by strong revenue growth and profitability improvements. However, concerns lingered regarding emerging markets, particularly China, and the impact of tariffs. The company also faces challenges in the U.S. Knee segment and potential regulatory changes in the skin substitutes market.

Strong Revenue Growth

Smith & Nephew reported a commendable 6.7% underlying revenue growth in Q2, which rises to 7.8% when accounting for foreign exchange. The U.S. market was a significant contributor, with an 8.7% growth, while emerging markets, excluding China, saw a 12.2% increase. This growth underscores the company’s ability to leverage its market presence effectively.

Profitability and Margin Expansion

The company achieved a 100 basis points expansion in its trading margin for the first half, slightly surpassing expectations. With a full-year margin guidance set between 19% and 20%, Smith & Nephew is on a solid path to maintaining its profitability trajectory.

Free Cash Flow and Share Buyback

A notable highlight was the 70% increase in trading cash flow, resulting in nearly $250 million of free cash flow in the first half. This financial strength has enabled the announcement of a $500 million share buyback in the second half of 2025, reflecting confidence in the company’s future performance.

Orthopaedics and Robotic Growth

The Orthopaedics segment showed a 5.5% underlying growth, with the U.S. Recon and Robotics segment continuing its positive trend. This marks the fourth consecutive quarter of sequential growth, highlighting the company’s advancements in this area.

Advanced Wound Management Growth

Advanced Wound Management recorded a 10.2% growth, driven by a 12.7% increase in Advanced Wound Devices, particularly the PICO single-use negative pressure platform. This segment’s performance underscores its importance to Smith & Nephew’s overall growth strategy.

Emerging Markets Decline

Emerging markets experienced a slight decline of 0.2%, primarily due to volume-based procurement impacts in China. This remains a challenge for the company as it navigates the complexities of international markets.

Tariff Challenges

Smith & Nephew anticipates a net headwind of approximately $15 million to $20 million in 2025 due to tariff impacts. This presents a financial challenge that the company will need to address in its strategic planning.

U.S. Knee Segment Softness

The U.S. Knee segment showed softness, attributed to a slowdown in procedures and strategic portfolio streamlining. This area will require careful management to ensure future growth.

Skin Substitutes Market Changes

Proposed updates to Medicare reimbursement for skin substitutes could pose a challenge to Advanced Wound Management sales and profitability in 2026. This potential regulatory change is a critical area for the company to monitor.

Forward-Looking Guidance

In their forward-looking guidance, CEO Deepak Nath and CFO John Rogers emphasized the company’s strong revenue growth and strategic initiatives. With a total revenue of $1.6 billion for the quarter and a trading margin expansion slightly exceeding expectations, Smith & Nephew is well-positioned for continued success. The announced $500 million share buyback, funded by 2025 cash flow and existing balances, reflects confidence in the company’s financial health.

In conclusion, Smith & Nephew’s earnings call conveyed a positive outlook with strong revenue growth and strategic financial initiatives. While challenges remain in specific segments and markets, the company’s robust performance and proactive strategies position it well for future success.

Smith & Nephew’s Earnings Call: Growth Amid Challenges

Smith & Nephew reported strong Q2 revenue growth of 6.7% (7.8% including FX), driven by U.S. market expansion and emerging markets (excluding China) growth. The company highlighted margin expansion, free cash flow, and a $500 million share buyback, while addressing challenges in China, tariffs, and potential regulatory changes in the skin substitutes market.