STERIS grew fiscal Q1 2027 revenue 7.3% to $1.49B and diluted EPS 14% to $2.04, led by service and consumables, while reiterating full-year guidance and cutting its free-cash-flow outlook to fund a new chemistry plant.
Revenue
$1.5B
+7.3% YoY
Net income
$200M
+12.8% YoY
Diluted EPS
$2.04
+14.0% YoY
Operating margin
19.1%
Overview
STERIS grew first-quarter revenue 7.3% to $1,492.7 million in the three months ended June 30, 2026. That quarter is the first of STERIS's fiscal 2027, because the company's financial year runs April to March. Profit grew faster than sales. Operating income rose 16.2% to $285.8 million, and diluted earnings per share (EPS, profit divided by shares outstanding) rose 14.0% to $2.04. The 10-Q attributes the revenue gain to "higher volume in the Healthcare and Life Sciences segments, and pricing across all three segments."
Most of the growth came from the parts of the business that repeat every quarter. Service revenue (maintenance, instrument repair, outsourced sterilization) grew 7.8%. Consumables (detergents, endoscopy accessories, sterility-assurance products used up in daily hospital work) grew 9.0%. Capital equipment (sterilizers, surgical tables and lights) grew just 3.0%. Management kept its full-year revenue and earnings guidance unchanged. It also announced a $55–70 million restructuring to consolidate chemical manufacturing in North Carolina, and raised its capital-spending plan by $75 million.
Key figures
Metric
Q1 FY2027 (Apr–Jun 2026)
Q1 FY2026 (Apr–Jun 2025)
YoY Change
Total revenue
$1,492.7M
$1,391.1M
+7.3%
Constant-currency organic revenue growth
6.2%
—
—
Gross margin
45.8%
45.1%
+0.7 pts
Read 0 community reports on Steris, or write your own.Write a report
Operating margin is the share of revenue left after running the business, before interest and tax. Organic growth strips out revenue from acquisitions made in the past year. "Constant currency" also removes the effect of exchange-rate moves. Recurring revenue and its share are calculated from the 10-Q's revenue-by-type table. Adjusted EPS comes from the company's earnings release. It excludes $65.3M of amortization of acquired intangible assets (an accounting charge for acquired customer lists, technology and similar assets), plus smaller acquisition, restructuring and tax-restructuring costs.
Where the growth came from
The 7.3% headline includes some help that did not come from the underlying business. Of the $101.7M increase, $8.4M came from favorable exchange rates and $6.9M from acquisitions. Growth excluding both was 6.2%.
Segment
Revenue
YoY (reported)
Constant-currency organic growth
Segment operating margin (vs. last year)
Healthcare
$1,048.3M
+7.6%
6.4%
24.8% (24.2%)
Applied Sterilization Technologies (AST)
$297.6M
+5.8%
4.7%
48.0% (48.6%)
Life Sciences
$146.7M
+8.6%
7.9%
42.1% (43.5%)
Healthcare (70% of revenue) sells equipment, consumables and repair services to hospital sterile-processing departments and operating rooms. It drove the quarter. Service grew 9.6%, consumables 9.2% and capital equipment 1.4%. The 10-Q says constant-currency organic growth of 6.4% was "primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing, impacting revenues by a low-single digit percentage." In the earnings release, CEO Dan Carestio credited "share gains in consumables and services." Healthcare's equipment backlog (orders placed but not yet shipped) rose to $444.0M from $403.5M a year earlier. The company says the increase reflects "the timing of orders and shipments, as well as the impact of an acquisition." That backlog supports capital revenue even though shipments grew only 1.4% this quarter.
AST sterilizes medical devices under contract for manufacturers. Its revenue grew for a different reason. The 10-Q says 4.7% organic growth was "primarily due to increased pricing, impacting revenues by a mid-single digit percentage, partially offset by a decline in volume." In other words, AST processed less product and charged more for it. Price increases cannot keep making up for lower volume indefinitely. The margin already shows the strain: it slipped 0.6 points to 48.0% as "higher depreciation expense, lower productivity and unfavorable labor inflation more than offset the benefit provided by higher pricing."
Life Sciences supplies equipment and consumables to pharmaceutical and biotech manufacturing plants. It grew fastest, with capital equipment up 17.4%. Its margin still fell 1.4 points to 42.1%, which the filing attributes to "lower productivity and higher materials cost." Its backlog eased slightly to $109.9M from $111.0M.
Why profit grew faster than sales
Gross margin, the share of revenue left after the direct cost of products and services, rose 0.7 points to 45.8%. The 10-Q breaks the change down:
Offsets: inflation (-60), adjustments and other charges (-50), acquisitions (-10) and materials cost (-10).
Product gross margin improved sharply, from 47.9% to 50.0%. Service gross margin slipped from 42.4% to 41.7%.
One small one-off item helped. STERIS received $3.7M of refunds of tariffs it had previously paid under the International Emergency Economic Powers Act (IEEPA). The refunds were booked as a reduction in product costs and credited to Corporate rather than to any segment. About $23M more has not yet been refunded and has not been recorded. If it arrives, it will be a future one-time boost, not a lasting gain in earning power.
Operating costs grew more slowly than revenue. Selling, general and administrative costs rose 4.5% and R&D rose 8.5%. There were no restructuring charges this quarter, compared with $1.8M a year earlier. Together these lifted operating margin 1.4 points.
The tax rate cut into the gain. Pre-tax income rose 17.9%. The effective tax rate rose to 26.5% from 23.3%, which the 10-Q attributes to "unfavorable changes in discrete items" (one-time tax adjustments specific to the quarter). Net income therefore grew 12.8% rather than roughly 18%. Without that tax swing, EPS growth would have been noticeably higher. Share buybacks also helped EPS slightly: STERIS repurchased 0.5 million shares for $100.0M under a new program adopted May 5, 2026.
Takeaway: STERIS's growth rests on revenue that repeats. Service and consumables grew 8.3% and now make up 82% of sales, while equipment sales grew only 3%. That mix, plus price increases, lifted operating margin 1.4 points. The weak spot is AST. There, price increases are covering for falling volume, and the segment's margin is already shrinking.
Cash flow and capital allocation
Operating cash flow fell to $367.1M from $420.0M, and free cash flow (operating cash flow minus capital spending) fell to $279.6M from $326.5M. The company attributes the drop to "a significantly lower contribution from working capital," meaning more cash was tied up in receivables and inventory, partly offset by higher net income. Debt-to-total capital improved to 20.9% from 21.5% a year earlier, and there were no borrowings on the revolving credit facility at quarter-end. The quarterly dividend was $0.63 per share, up from $0.57.
New restructuring: chemistry plant consolidation
On August 5, 2026, STERIS announced it will move manufacturing and distribution of formulated chemistries to a new "Center of Excellence" in North Carolina. Formulated chemistries are the detergents and sterilants used with its equipment. The plan includes the expected closure of facilities in St. Louis, Missouri and Plymouth, Minnesota. Pre-tax charges are expected to total $55–70 million:
$40–50M in cash, mainly employee retention, severance and benefits
$15–20M non-cash, mainly accelerated depreciation
Completion is expected during fiscal 2030. The businesses involved "together generate more than $700 million in annual revenue" across Healthcare and Life Sciences. The charges will be excluded from adjusted earnings. They will still reduce GAAP (reported) earnings over the next several years.
Outlook
Management reiterated its fiscal 2027 guidance:
Reported revenue growth of 7–8%
Constant-currency organic growth of 6–7%
Adjusted EPS of $11.10–$11.30
Capital spending is now expected to be about $450M, up from $375M, because of the North Carolina build. Free cash flow guidance was cut to about $800M from $850M.
Our read: Q1 fits the guidance. Constant-currency organic growth of 6.2% sits at the low end of the 6–7% range. Adjusted EPS of $2.59 is about 23% of the $11.20 midpoint, which is normal for a first quarter. Three things to watch in the coming quarters:
AST volume: whether it recovers, or whether AST's growth keeps depending on price increases while its margin shrinks.
Healthcare backlog: whether the $444M backlog turns into faster capital shipments, since equipment growth lagged at 1.4%.
The tax rate: whether it falls back toward last year's level.
The lower free-cash-flow guide is a deliberate trade: more money spent on the plant now in exchange for later cost savings, not a sign of weaker operations. Still, the benefits of the consolidation will not show up in the numbers until around fiscal 2030.
The first-quarter 10-Q was filed on August 7, 2026. Figures are from the condensed consolidated financial statements and MD&A; adjusted EPS and guidance come from the August 5, 2026 earnings release (Exhibit 99.1).