Smith+Nephew Reports Strong 2025 Results, Completes 12-Point Plan and Sets 2028 Growth Targets

Smith+Nephew 2025 results: revenue, margins and cash all step up

Smith+Nephew capped off 2025 with a strong fourth quarter and full-year performance, completing its 12-Point Plan and setting the stage for its new RISE strategy. Revenue grew, margins widened and cash generation jumped, with all three business units delivering more than 5% underlying growth.

Quick jargon check:

• Underlying revenue growth strips out currency moves and M&A so you see like-for-like performance.
• Trading profit is the company’s preferred operating metric, excluding items like restructuring and amortisation of acquired intangibles.
• ROIC (return on invested capital) measures how efficiently profits are generated from the asset base.
• VBP (Volume Based Procurement) is China’s bulk tendering process that pressures prices.

Headline numbers investors should know

What drove the beat in Q4 and the full year

Q4 revenue rose 6.2% underlying to $1,702 million, helped by one extra trading day, with Orthopaedics putting in its best quarter for more than two years at 7.9% underlying. Sports Medicine & ENT grew 7.3% despite China, while Advanced Wound Management added 2.8% on a tougher comparable and some skin substitute softness ahead of 2026 reimbursement changes.

For 2025, each business unit delivered more than 5% underlying growth. Orthopaedics rose 5.1% as supply issues receded and robotics momentum built. Sports Medicine & ENT grew 5.2% despite a -400bps China headwind from VBP. Advanced Wound Management delivered 5.6%, led by Devices at 9.8%.

Orthopaedics – robotics pulling its weight

• FY underlying growth 5.1%; Q4 7.9%.
• “Other Reconstruction” (robotics capital and bone cement) grew 33.8% underlying for the year. More than 1,100 CORI Surgical Systems are now installed worldwide, with the US finishing 2025 at 36% of knee implants completed on CORI and 63% utilisation.
• US Knee Implants still need work. The new LANDMARK Knee System launches in H2 2026, including a cementless version, aimed at closing the gap.

Sports Medicine & ENT – innovation offsets China

• FY underlying growth 5.2% with -400bps China drag. Q4 up 7.3% underlying as China headwinds eased year-on-year.
• Shoulder repair remains a star, led by the REGENETEN Bioinductive Implant. The CARTIHEAL AGILI-C cartilage implant gained a Category I CPT code effective 1 January 2027, a helpful future reimbursement milestone.
• China VBP for Arthroscopic Enabling Technologies and ENT is expected in 2026, but management expects smaller impacts than in Joint Repair.

Advanced Wound Management – devices out in front

• FY underlying growth 5.6%; Devices +9.8% with strong PICO single-use negative pressure therapy and the LEAF monitoring system.
• Bioactives grew 6.8% for the year but was softer in Q4 as the market digested 2026 reimbursement changes. SANTYL delivered mid-single digit growth.

Margins, cash and capital discipline impress

Trading margin expanded to 19.7%, up 160bps, driven by operating leverage and productivity from the 12-Point Plan. Notably, Smith+Nephew booked a $159 million non-cash inventory provision to accelerate portfolio rationalisation, yet still delivered higher trading gross margin at 70.9% and stronger operating profit.

Cash conversion was excellent at 102%, with free cash flow up 52.5% to $840 million. Inventory discipline improved markedly, with Days Sales of Inventory down 51 days year-on-year as the company pares back lower-priority product families.

RISE strategy and 2028 targets – what’s new

With the 12-Point Plan completed, the new RISE strategy targets faster top-line and profit growth through reaching more patients, scaling innovation, focused investment and tighter execution. Management set 2028 goals of:

• 6-7% organic revenue CAGR,
• 9-10% trading profit CAGR,
• More than $1 billion free cash flow, and
• Adjusted ROIC of 12-13%.

Acquisitions will support this. In January 2026 Smith+Nephew bought Integrity Orthopaedics for an initial $225 million (up to $225 million more earn-out). Integrity’s TENDON SEAM system complements REGENETEN in rotator cuff repair, strengthening the shoulder franchise.

2026 outlook – acceleration with known headwinds

• Underlying revenue growth expected to accelerate to around 6%.
• Trading profit growth around 8% organically, with revenue leverage and savings offsetting headwinds.
• Headwinds include inventory revaluation, tariffs of around $60 million (vs $17 million in 2025), US skin substitute reimbursement changes of $20–40 million, and ENT VBP in China.
• Including Integrity Orthopaedics dilution, trading profit is expected to be around $1.3 billion.
• Free cash flow around $800 million and adjusted ROIC greater than 10% excluding Integrity.
• Phasing: softer first half, stronger second half. One fewer trading day in Q1 and one more in Q4 vs 2025.

Regional picture – steady in the US, China still a drag

• US underlying revenue growth was 5.9% for 2025 to $3,306 million.
• Other Established Markets grew 5.9% underlying; Emerging Markets grew 2.5% underlying as China weighed.
• China revenue fell to $128 million as VBP and market adjustments played through.

Shareholder returns and balance sheet

With strong cash generation, Smith+Nephew completed a $500 million buyback in H2 2025 and lifted the full-year dividend 4.3% to 39.1¢ per share, consistent with a 38% payout ratio. Adjusted leverage sits at a comfortable 1.7x and the group has access to $4.1 billion of committed facilities.

The good, the not-so-good, and what to watch

What looks positive

• All business units above 5% underlying growth and Q4 momentum in Orthopaedics.
• Margin expansion and 102% cash conversion, even after a sizeable non-cash inventory provision.
• Clear 2028 targets with credible levers – robotics adoption, portfolio pruning and focused launches like LANDMARK and continued PICO growth.

What tempers the story

• China remains a headwind, with more VBP to navigate in 2026.
• US Knee Implants still lag – 2026 is the prove-it year with LANDMARK.
• Tariffs and reimbursement changes create a profit drag in 2026, and Integrity is marginally dilutive this year.

Catalysts to track

• H2 2026 launch of the LANDMARK Knee System – especially cementless – and any share gains in US knees.
• Further CORI placements and utilisation – knee growth is higher in CORI accounts.
• AGILI-C reimbursement tailwind from 1 January 2027 and progress integrating Integrity’s TENDON SEAM with REGENETEN.
• Execution on portfolio rationalisation and the targeted cost savings flowing into margins.

My take – why this matters for investors

Smith+Nephew has done the hard yards. Three years on, it is a higher-growth, higher-margin and far more cash-generative business. 2026 brings real-world headwinds, but guidance points to another step up in growth and profits, and the balance sheet has room to back strategy and returns.

If management executes on RISE – notably in US knees, robotics utilisation and wound devices – the 2028 targets of faster growth, more than $1 billion in free cash flow and 12-13% adjusted ROIC look achievable. For long-term investors, this reads as a disciplined recovery story with tangible milestones and plenty of self-help still to come.