STERIS (STE) Q2 FY26 10-Q: Analysis of Revenue Growth and Free Cash Flow

STERIS plc, a global leader in infection prevention and procedural products, recently filed its second-quarter fiscal 2026 financial report. In an environment where healthcare and life sciences demand resilience and safety, this filing gives us a crucial look into the company's operational health. Let's break down the key numbers from their latest 10-Q filing to see how the business is performing.

The big picture is one of impressive, well-rounded growth. STERIS not only grew its sales but did so profitably, converting a higher percentage of its revenue into actual profit.

Healthy Growth Across the Board

For the quarter ending September 30, 2025, STERIS reported total revenues of $1.46 billion, a solid 9.9% increase compared to the same period last year. This growth wasn't isolated to one area; it was a theme across the company's different revenue streams.

• Service Revenues: Climbed 12.9%
• Consumables Revenues: Grew 9.1%
• Capital Equipment Revenues: Increased by 4.2%

The strong performance in services and consumables is particularly noteworthy. These categories represent recurring revenues, which provide a stable and predictable foundation for the business. This mix suggests strong customer loyalty and consistent demand for STERIS's essential products.

Even more impressive was the company's bottom-line performance. Gross profit margins expanded from 43.6% to 44.2%, and income from operations surged by 21% to $265.8 million. This indicates excellent operational efficiency—the company is successfully managing its costs even as it grows its sales.

The following flow diagram visualizes how the company's revenue for the quarter was allocated across its various costs and expenses, ultimately leading to its net income.

All Segments Are Firing

Digging into the segment performance reveals a company executing well across its entire portfolio.

• Healthcare, the largest segment providing everything from operating room equipment to sterilization consumables, saw revenues grow by 9.5% to $1.03 billion. Its operating income grew even faster at nearly 14%, showcasing strong profitability in its core market.
• Applied Sterilization Technologies (AST), which provides contract sterilization services for medical device manufacturers, reported a 9.7% revenue increase. Its operating income jumped over 16%, highlighting robust demand in this critical part of the medical supply chain.
• Life Sciences, serving pharmaceutical and research labs, was the fastest-growing segment, with revenues up 13.3% to $145.0 million. A significant increase in its order backlog, which rose to $113.7 million from $75.6 million a year ago, points to sustained momentum ahead.

A Surge in Cash Flow Strengthens the Foundation

Perhaps the most compelling story in the report is the company's cash generation. For the first six months of its fiscal year, STERIS generated $527.7 million in free cash flow (cash from operations minus capital expenditures). This is a substantial 53% increase from the $344.5 million generated in the same period last year.

Strong free cash flow is a vital sign of a company's financial health, giving it the flexibility to invest in growth, reward shareholders, and strengthen its balance sheet. STERIS is doing all three:

• It paid down $125 million in debt.
• It repurchased $111 million of its own shares.
• It paid $118 million in dividends to shareholders.

In conclusion, STERIS's second-quarter report paints a picture of a company in a strong position. By delivering essential services and products to the resilient healthcare and life sciences industries, it has achieved impressive growth in both revenue and profitability. The powerful surge in free cash flow further solidifies its financial foundation, allowing it to navigate the market with confidence and continue delivering value.