Medtech revenue surged to $650 billion as growth concentrated in a few leaders
The medtech industry entered 2026 with a rare mix of resilience and concentration. EY’s Pulse of the MedTech Industry report says the sector reached about $650 billion in revenue in 2025, up 11%, then added another $325 billion in the first half of 2026, a 7.1% increase over the same period in 2025. On paper, those are powerful numbers. Beneath them sits a more selective story: growth is increasingly driven by commercial leaders with the scale to absorb margin pressure, supply chain risk, and the cost of innovation.
The report frames the moment as a turning point rather than a clean rebound. A sector can post record revenue and still be reordering itself around fewer winners, and that is the pattern EY describes. Therapeutic devices led the advance, followed by non-imaging diagnostics, imaging, and lab equipment and tools. The sequence matters because it reflects where hospitals, clinics, and alternative care settings are spending money: on devices and systems that can change treatment pathways, expand access, or lower cost outside the traditional inpatient model.
A widening performance gap sits at the center of the story. Smaller or less efficient players are not moving at the same pace as the companies with deep commercial reach, broad portfolios, and stronger manufacturing footing. In practical terms, medtech growth is no longer evenly distributed across the industry; it is clustering around firms that can turn innovation into repeatable execution.
AI is moving from add-on feature to operating logic
Artificial intelligence is no longer a side trend in medtech. EY describes AI as increasingly embedded in both devices and the care pathways surrounding them, shifting value creation away from hardware alone and toward the combination of software, data, and digital services. The biological metaphor is imperfect, but the commercial logic is clear: the device remains essential, yet the intelligence around it now influences clinical use, workflow efficiency, and purchasing decisions.
Hardware design, clinical evidence, and manufacturing quality still anchor the product. What has changed is the weight given to algorithm performance and the data infrastructure behind it. A device that once competed primarily on physical design now competes on its ability to improve interpretation, automate tasks, or extend clinical utility after placement in the real world. That raises the bar for evidence generation and for the companies trying to defend premium pricing.
The report points to accelerating regulatory momentum as well. A recent study found just over 400 FDA AI-enabled medical device authorizations from 2020 to 2022, rising to nearly 800 from 2022 to 2025. The FDA authorized 331 AI-enabled devices in 2025 alone. The pace suggests a regulatory system that is no longer treating AI as a novelty. It is becoming part of the mainstream device pipeline, with every new authorization adding pressure on competitors to match the pace of product development.
Blockbuster dealmaking masked a narrower M&A recovery
Medtech mergers and acquisitions reached their highest level in more than a decade, with total disclosed deal value of roughly $130 billion. One transaction looms especially large: Abbott’s $23 billion acquisition of Exact Sciences. That size of deal can distort the broader picture. The recovery in M&A was real, but it was driven by a limited number of massive transactions rather than by a broad-based surge across the sector.
A single outsized acquisition can transform the perception of market activity, yet it also reveals where strategic conviction is strongest. Buyers are paying for growth, diagnostics reach, and the ability to reshape portfolios quickly. In a market where organic expansion is becoming harder to sustain uniformly, scale transactions can serve as a shortcut to category strength, especially when a company wants to broaden its foothold across diagnostics or adjacent platforms.
The financing environment appears to have supported that activity. EY says the sector saw record revenue financing, another sign that investors still believe in the long-term commercial case for medtech even after periods of negative sentiment and global uncertainty. The caution is in the composition of that capital. Financing alone does not guarantee industry-wide strength if most of the value is flowing to a narrow group of operators already positioned to capture it.
Margin pressure is forcing stricter portfolio discipline
John Babitt, EY Global MedTech Leader, said the sector has rebounded from year-to-date June lows and has underperformed broader markets in 2026, while still showing resilience through strong M&A and revenue financing. He also argued that discipline will be essential if companies want to convert innovation into profitable growth. That point lands hard in an industry where technology cycles are fast, but reimbursement, manufacturing, and go-to-market execution can blunt returns.
Diana Hoff, EY Americas Life Sciences Sector Leader, cast the next decade as a period in which the strongest companies will be those that embrace AI, make more deliberate portfolio choices, and build operating models that are both productive and resilient. The language is corporate, but the implication is concrete: companies with undisciplined portfolios, weak supply chains, or a vague AI strategy may struggle to keep pace even in a rising market.
Alternative care settings add another layer of pressure. Growth outside the hospital has become a structural feature of medtech demand, not a temporary adjustment. Devices that can support ambulatory procedures, outpatient monitoring, diagnostics at the point of care, and digitally enabled follow-up are better positioned to benefit from where care is moving. The commercial winners will be the companies that can package those capabilities into workflows providers will actually adopt.
A stronger market, but not a broader one
The most important tension in the report is simple. Medtech is growing, yet the gains are increasingly concentrated in commercial leaders with the scale to execute across devices, diagnostics, data, and global operations. That concentration helps explain why the sector can look healthy on revenue while still facing a widening internal divide.
The next phase will depend on whether the industry can turn AI adoption, regulatory momentum, and large-scale consolidation into durable earnings rather than episodic headline growth. For now, the unresolved issue is not whether medtech can keep expanding. It is whether the rest of the sector can participate in that expansion, or whether the gains will stay concentrated among the few companies already built to capture them.