STRYKER CORP

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

Anti-dilutive shares excluded from the calculation of dilutive employee stock options were de minimis in all periods.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 -BASIS OF PRESENTATION

General Information

Management believes the accompanying unaudited Consolidated

Financial Statements contain all adjustments, including normal

recurring items, considered necessary to fairly present the

financial position of Stryker Corporation and its consolidated

subsidiaries ("Stryker," the "Company," "we," "us" or "our") on

June 30, 2026 and the results of operations for thethree andsix

months 2026. The results of operations included in these

Consolidated Financial Statements may not necessarily be

indicative of our annual results. These statements should be read

in conjunction with our Annual Report on Form 10-K for 2025.

In the first quarter 2026 we announced a change in our

organizational structure. Our new Ortho Tech business combines

the orthopaedic instruments portfolio from our Instruments

business with the Mako and enabling technologies portfolio from

our Other Orthopaedics business. By bringing Mako, power tools,

cutting accessories, enabling technologies and the teams behind

these products together under one business, we are simplifying

the customer experience and striving to increase our speed to

market through focused innovation.

Following this reorganization we continue to havetwo business

segments, (i) MedSurg and Neurotechnology and (ii)

Orthopaedics, each of which comprise a reportable segment. All

historical segment financial information has been recast to

conform to this new reporting structure in our financial statements

and accompanying notes.

New Accounting Pronouncements Not Yet Adopted

In September 2025 the Financial Accounting Standards Board

(FASB) issued Accounting Standards Update (ASU) 2025-07

(Topics 815 and 606): Derivatives and Hedging: Derivatives

Scope Refinementsand Revenue from Contracts with

Customers: Scope Clarification for Share-Based Noncash

Consideration from a Customer in a Revenue Contract. This

update expands the scope exception in Topic 815 to certain non-

exchange-traded contracts for which settlement is based on

operations or activities specific to one of the parties to the

contract. The update is effective for fiscal years beginning after

December 15, 2026 including interim periods within those fiscal

years. Early adoption is permitted. We are evaluating if the ASU

will have an impact on our Consolidated Financial Statements.

In September 2025 the FASB issued ASU 2025-06 (Subtopic

350-40): Intangibles - Goodwill and Other - Internal-Use

Software: Targeted Improvements to the Accounting for Internal-

Use Software. This update clarifies and modernizes the

accounting for costs related to internal-use software by removing

all references to project stages and clarifying that the probable-

to-complete threshold is not met if significant development

uncertainty exists. The update is effective for fiscal years

beginning after December 15, 2027 including interim periods

within those fiscal years. Early adoption is permitted. We are

evaluating if the ASU will have an impact on our Consolidated

Financial Statements.

In November 2024 the FASB issued ASU 2024-03 (Subtopic

220-40): Income Statement: Reporting Comprehensive Income -

Expense Disaggregation Disclosures which requires

disaggregation of certain expense captions into specified

categories in disclosures within the Notes to the Consolidated

Financial Statements. The new disclosure requirements are

effective for fiscal years beginning after December 15, 2026 and

interim periods within fiscal years beginning after December 15,

2027. Early adoption is permitted. We are evaluating these new

expanded disclosure requirements.

We evaluate all ASUs issued by the FASB for consideration of

their applicability. ASUs not included in our disclosures were

assessed and determined to be either not applicable or are not

expected to have a material impact on our Consolidated Financial

Statements.

Accounting Pronouncements Recently Adopted

On January 1, 2026 we adopted ASU 2025-05 (Topic 326):

Financial Instruments - Credit Losses: Measurement of Credit

Losses for Accounts Receivable and Contract Assets. This

update provides a practical expedient allowing entities to assume

that current conditions as of the balance sheet date will remain

unchanged for the remaining life of the asset when estimating

expected credit losses for current accounts receivable and

current contract assets arising from transactions accounting for

under Accounting Standards Codification 606, Revenue from

Contracts with Customers. The adoption of this update did not

have a material impact on our Consolidated Financial

Statements.

NOTE 2 -REVENUE RECOGNITION

Our policies for recognizing sales have not changed from those

described in our Annual Report on Form 10-K for 2025.

We disaggregate our net sales by business and geographic

location for each of our segments as we believe it best depicts

how the nature, amount, timing and certainty of our net sales and

cash flows are affected by economic factors.

In the first quarter 2026 we announced a change in our

organizational structure. Our new Ortho Tech business combines

the orthopaedic instruments portfolio (Orthopaedic Instruments)

from Instruments with Other Orthopaedics. In addition, Neuro

Cranial and the spine enabling technologies portfolio (Enabling

Technologies) from Other Orthopaedics were combined with the

remaining Instruments business to align with our internal

reporting structure. Ortho Tech includes sales related to

Orthopaedic Instruments of$523 and$501 and Other

Orthopaedics of$194 and$148 for thethree months 2026 and

2025. For thesix months 2026 and 2025 Ortho Tech includes

sales related to Orthopaedic Instruments of$1,012 and$985 and

Other Orthopaedics of$351 and$281. Instruments includes

sales related to Neuro Cranial of$681 and$616 and Enabling

Technologies of$28 and$34 for thethree months 2026 and

2025. For thesix months 2026 and 2025 Instruments includes

sales related to Neuro Cranial of$1,287 and$1,179 and

Enabling Technologies of$54 and$63. We have reflected these

changes in all historical periods presented.

Costs to Obtain or Fulfill a Contract

We typically do not incur costs to fulfill a contract before a

product or service is provided to a customer due to the nature of

our products and services. Our costs to obtain contracts are

typically in the form of sales commissions paid to employees or

third-party agents. Certain sales commissions paid to employees

prior to recognition of sales are recorded as deferred contract

costs. We expense sales commissions associated with obtaining

a contract at the time of the sale or as incurred as the

amortization period is generally less than one year. These costs

have been presented within selling, general and administrative

expenses. On June 30, 2026 and December 31, 2025 deferred

contracts costs recorded in our Consolidated Balance Sheets

were not significant.

Contract Assets and Liabilities

Our contract assets primarily relate to conditional rights to

consideration for work completed but not billed at the reporting

date. On June 30, 2026 and December 31, 2025 contract assets

recorded in our Consolidated Balance Sheets were not

significant.

Our contract liabilities arise as a result of consideration received

from customers at inception of contracts for certain businesses or

where the timing of billing for services precedes satisfaction of

our performance obligations. This occurs primarily when payment

is received upfront for certain multi-period extended service

contracts. Our contract liabilities of$997 and$1,024 on June 30,

2026 and December 31, 2025 are classified within accrued

expenses and other liabilities and other noncurrent liabilities in

our Consolidated Balance Sheets based on the timing of when

we expect to complete our performance obligations.

Changes in contract liabilities during thesix months 2026 were as

follows:

Transfers and Servicing of Financial Assets

We sell certain customer lease agreements and the related

leased assets to third-party financial institutions to accelerate our

cash collection cycle. The lease receivables are sold without

recourse and are derecognized from our Consolidated Balance

Sheets at the time of sale. Under the terms of our arrangements,

we collect lease payments on behalf of the financial institutions

but maintain no other form of continuing involvement. Sales of

these lease agreements are classified as operating activities in

our Consolidated Statements of Cash Flows. Fees earned for our

servicing activities are immaterial. Revenue related to customer

lease agreements sold under these arrangements represented

less than 4% of our total revenue for thethree andsix months

2026 and 2025.

NOTE 3 -ACCUMULATED OTHER COMPREHENSIVE (LOSS)

INCOME (AOCI)

NOTE 4 -DERIVATIVE INSTRUMENTS

We use operational and economic hedges, foreign currency

exchange forward contracts, net investment hedges (both

derivative and non-derivative financial instruments) and interest

rate derivative instruments to manage the impact of currency

exchange and interest rate fluctuations on earnings, cash flow

and equity. We do not enter into derivative instruments for

speculative purposes. We are exposed to potential credit loss in

the event of nonperformance by counterparties on our

outstanding derivative instruments but do not anticipate

nonperformance by any of our counterparties. Should a

counterparty default, our maximum loss exposure is the asset

balance of the instrument. We have not changed our hedging

strategies, accounting practices or objectives from those

disclosed in our Annual Report on Form 10-K for 2025.

We had€2.3 billion at June 30, 2026 and December 31, 2025 in

certain forward currency contracts designated as net investment

hedges, for which the maximum term is 8.2 years, to hedge a

portion of our investments in certain of our entities with functional

currencies denominated in Euros. In addition to these derivative

financial instruments designated as net investment hedges, we

had€5.0 billion at June 30, 2026 and December 31, 2025 of

senior unsecured notes designated as net investment hedges to

selectively hedge portions of our investment in certain

international subsidiaries. The currency effects of our Euro-

denominated senior unsecured notes are reflected in AOCI within

shareholders' equity where they offset gains and losses recorded

on our net investment in international subsidiaries.

The total after-tax gain (loss) recognized in OCI related to

designated net investment hedges was$180 in thesix months

Currency Exchange Rate Gains (Losses) Recognized in Net

Earnings

Pretax gains (losses) on derivatives designated as cash flow

hedges of$8 and net investment hedges of$30 recorded in

AOCI are expected to be reclassified to cost of sales and other

income in earnings within 12 months of June 30, 2026. This cash

flow hedge reclassification is primarily due to the sale of inventory

that includes previously hedged purchases. A component of the

AOCI amounts related to net investment hedges is reclassified

over the life of the hedge instruments as we elected to exclude

the initial value of the component related to the spot-forward

difference from the effectiveness assessment.

Interest Rate Hedges

Pretax gains of$6 recorded in AOCI related to interest rate

hedges closed in conjunction with debt issuances are expected to

be reclassified to interest expense in earnings within 12 months

of June 30, 2026. The cash flow effect of interest rate hedges is

recorded in cash flow from operations.

NOTE 5 -FAIR VALUE MEASUREMENTS

Our policies for managing risk related to foreign currency, interest

rates, credit and markets and our process for determining fair

value have not changed from those described in our Annual

Report on Form 10-K for 2025.

In the six months 2026 we recorded$271 of contingent

consideration related to the acquisition of Amplitude Vascular

Systems, Inc. (AVS) described in Note 7.

In 2025 we assumed contingent consideration liabilities with a fair

value of$90 related to previous acquisitions made by Inari

Medical, Inc. (Inari). Refer to Note 7 for further information on the

acquisition of Inari.

There were no significant transfers into or out of any level of the

fair value hierarchy in 2026.

On June 30, 2026 and December 31, 2025 the aggregate

difference between the cost and fair value of available-for-sale

marketable securities was nominal. Interest income on cash and

cash equivalents, short-term investments and income from

marketable securities was$26 and$24 in thethree months 2026

and 2025, and$60 and$62 in the six months 2026 and 2025,

which was recorded in other income.

Our investments in available-for-sale marketable securities had a

minimum credit quality rating of A2 (Moody's), A (Standard &

Poor's) and A (Fitch). We do not plan to sell the investments, and

it is not more likely than not that we will be required to sell the

investments before recovery of their amortized cost basis, which

may be maturity.

NOTE 6 -CONTINGENCIES AND COMMITMENTS

We are involved in various ongoing proceedings, legal actions

and claims arising in the normal course of business, including

proceedings related to product, labor, tax, intellectual property

and other matters. The outcomes of these matters will generally

not be known for prolonged periods of time. In certain of the legal

proceedings the claimants seek damages as well as other

compensatory and equitable relief that could result in the

payment of significant claims and settlements and/or the

imposition of injunctions or other equitable relief. For legal

matters for which management had sufficient information to

reasonably estimate our future obligations, a liability representing

management's best estimate of the probable loss, or the

minimum of the range of probable losses when a best estimate

within the range is not known, is recorded. The estimates are

based on consultation with legal counsel, previous settlement

experience and settlement strategies. If actual outcomes are less

favorable than those estimated by management, additional

expense may be incurred, which could unfavorably affect future

operating results. We are self-insured for certain claims and

expenses. The ultimate cost to us with respect to product liability

claims could be materially different than the amount of the current

estimates and accruals and could have a material adverse effect

on our financial position, results of operations and cash flows.

Other Contractual Obligations and Commitments

Our outstanding balances of confirmed invoices in the supplier

financing program were$78 and$75 at June 30, 2026 and

December 31, 2025 and are included within accounts payable in

our Consolidated Balance Sheets.

NOTE 7 -ACQUISITIONS

We acquire stock in companies and various assets that continue

to support our capital deployment and product development

strategies. In thesix months 2026 and 2025 cash paid for

acquisitions, net of cash acquired was$459 and$4,814.

In May 2026 we completed the acquisition of AVS for net cash

consideration of$435 and up to$400 in future milestone

payments that had a fair value of$271 at the acquisition date.

AVS is developing a next-generation intravascular lithotripsy

platform designed to treat complex peripheral arterial disease.

AVS is part of our Peripheral Vascular business within MedSurg

and Neurotechnology. Acquired in-process research and

development intangible assets represent projects where the

related product has not yet received regulatory approval. The

purchase price allocation for AVS is based on preliminary

valuations, primarily related to in-process research and

development. Goodwill attributable to the acquisition reflects the

strategic benefits of expanding our peripheral vascular portfolio.

This goodwill is not deductible for tax purposes.

In February 2025 we completed the acquisition of Inari for$80

per share, or an aggregate purchase price of$4,810, net of cash

acquired. Inari's product portfolio includes minimally invasive

products for the treatment of venous thromboembolism. Inari is

part of our Peripheral Vascular business within MedSurg and

Neurotechnology. Goodwill attributable to the acquisition reflects

the strategic benefits of expanding our market presence,

diversifying our product portfolio and advancing innovations. This

goodwill is not deductible for tax purposes. Share-based awards

for Inari employees vested upon our acquisition and a charge of

$139 was recorded in selling, general and administrative

expenses in thesix months 2025.

The purchase price allocations for AVS and Inari are:

Consolidated estimated annual amortization expense for definite-

lived intangible assets is:

NOTE 8 - DEBT AND CREDIT FACILITIES

We have lines of credit issued by various financial institutions that

are available to fund our day-to-day operating needs. Certain of

our credit facilities require us to comply with financial and other

covenants. We were in compliance with all covenants on

June 30, 2026.

On June 30, 2026 we had$250 outstanding under our

commercial paper programs which allows for maturities up to 397

days from the date of issuance. The maximum amount of our

commercial paper that can be outstanding at any time is$3,000.

In March 2026 we repaid$1,000 of 3.500% senior unsecured

notes. The following table summarizes our total debt at June 30:

The fair value of the senior unsecured notes was estimated using

quoted interest rates, maturities and amounts of borrowings

based on quoted active market prices and yields that took into

account the underlying terms of the debt instruments.

Substantially all of our debt is classified within Level 2 of the fair

value hierarchy.

Interest expense on outstanding debt and credit facilities,

including required fees incurred totaled$136 and$159 for the

three months 2026 and 2025 and$278 and$296 for thesix

months 2026 and 2025.

NOTE 9 -INCOME TAXES

Our effective tax rates were 18.4% and 16.3% in thethree and

six months 2026 and 13.0% and 13.6% in thethree andsix

months 2025. The effective tax rates for thethree andsix months

2026 increased from thethree andsix months 2025 due to the

2025 tax benefit related to the sale of the Spinal Implants

business. The effective tax rates for thethree andsix months

2026 and 2025 reflect the continued lower effective income tax

rates as a result of our European operations and certain discrete

tax items.

Income tax authorities in various jurisdictions globally conduct

routine audits of our income tax returns to determine if they agree

with our interpretations of income tax regulations. Any audit

assessment, draft audit assessment or final audit report received

is reviewed for new information and evaluated for proper financial

statement treatment.

NOTE 10 -SEGMENT INFORMATION

We segregate our operations intotwo reportable business

segments: (i) MedSurg and Neurotechnology and (ii)

Orthopaedics which aligns to our internal reporting structure and

how our Chief Operating Decision Maker (CODM) assesses the

performance and allocates resources. The CODM is the Chief

Executive Officer. The CODM makes decisions on resource

allocation, assesses performance of the business, and monitors

budget versus actual results using segment operating income.

Information about total assets by segment is not disclosed

because such information is not regularly provided to, or used by,

our CODM.

NOTE 11 -GOODWILL AND OTHER INTANGIBLE ASSETS

In the first quarter 2026 we changed our organizational structure

as further described in Note 1.

Following this reorganization we continue to havetwo reportable

segments, MedSurg and Neurotechnology and Orthopaedics.

The reorganization impacts the composition of the Instruments

and Joint Replacement reporting units and results in a new

reporting unit representing the Ortho Tech business.

In connection with this reorganization we reallocated the goodwill

associated with the impacted businesses using the relative fair

value approach, resulting in a reallocation of$518 of goodwill

from the MedSurg and Neurotechnology segment to the

Orthopaedics segment.