Despite a challenging environment, the medtech industry booked revenue of $650bn in 2025, showing 11% growth year-over-year. The industry has already reached $325bn in the first six months of 2026, according to EY’s Pulse of the MedTech Industry report. The release of the report coincides with the kickoff of one of the industry’s largest annual meetings, AdvaMed’s MedTech Conference, held Oct. 18-21 in Boston.
Key Takeaways
- Medtech deal size saw a resurgence in the first half of 2026, with M&A value up 160% compared to the same period a year ago, driven by investments in such next-generation technologies as AI-enabled diagnostics, robotics, structural heart, diabetes care and minimally invasive surgeries.
- VC funding remained resilient in 2026 with activity skewed toward earlier-stage innovation.
- The next phase of AI in medtech will be measured less by the number of algorithms brought to market than by how effective companies are in reshaping their products, economics and organizations around them.
“MedTech has rebounded from [year-to-date] June lows and has underperformed the broader markets in 2026. The sector has continued to demonstrate resiliency, with record revenue financing and strong M&A activity setting the stage for a bright future,” said John Babitt, EY global medtech leader who co-authored the report with EY Americas life sciences sector leader Diana Hoff.
After a rough first half, medtech sentiment improved meaningfully in July and August as investors shifted toward high-quality, earnings-driven growth, the authors said. Revenue growth in 2025 was led by therapeutic devices, which significantly outpaced other segments by rising 16% to $371bn. Non-imaging diagnostics grew 9% to $82bn, while imaging rose 8% to $78bn and lab equipment and tools were up 2% to $116bn.
Growth was highly concentrated among commercial leaders, which the authors noted shows a widening performance gap across the industry. EY expects that changes in the Affordable Care Act subsidies and Medicaid disenrollment will not have a meaningful impact on procedure volumes, though analysts are divided about a potential impact on the industry.
Financing
On the financing side, medtech companies brought in a record $63bn for the year ended June 30, up 87% year-over-year and the highest fundraising seen in the last decade, EY said.
Initial public offerings and debt accounted for about 80% of total capital raised, indicating that the recovery has been driven primarily by public-market reopening and strategic balance sheet financing rather than broad-based funding strength, the authors noted.
On the IPO side, MiniMed raised $560m in its March IPO, while Medline’s $7.2bn IPO in December 2025 holds a record as the largest US medtech IPO in over a decade.
Debt financing more than doubled to $40.7bn across 41 transactions, though issuance remained highly concentrated among a small number of large strategic borrowers rather than broad-based market activity, the report showed.
VC Funding Favors Surgical Robotics, AI, Oncology, Neurotech
Venture capital fundraising was skewed toward earlier-stage innovation with 416 early-stage rounds vs. 161 late-stage rounds. High-growth areas included surgical robotics, AI-enabled healthcare, oncology and neurotech.
Among the biggest VC funding rounds were those for Swan EndoSurgical, which brought in $458m to advance its endoluminal robotic platform; Verily, which raised $300m for its AI-enabled precision health platform; HistoSonics, which raised $250m to expand its non-invasive histotripsy technology. On the neurotech side, Synchron and Cognito Therapeutics collectively raised more than $305m to advance their respective brain-computer interfaces.
Hoff predicts that in the next decade, those leaders who embrace AI, “make more deliberate portfolio choices and build productive, resilient operating models that turn innovation into sustained growth and value,” will have an advantage.
M&A Surged To Record $96Bn In 2025
M&A activity surged to a record $96bn in 2025 as companies pursued target acquisitions to strengthen innovation pipelines, fill portfolio gaps and expand into higher-growth markets.
The investments were predominately in next-generation technologies, including AI-enabled diagnostics, robotics, structural heart, diabetes care and minimally invasive therapies, which are areas that EY expects to outgrow the wider medtech market over the coming decade.
Among the most notable M&A deals were Abbott’s $21bn acquisition of Exact Sciences to expand its diagnostics business; Waters’ $17.5bn acquisition of Becton Dickinson’s biosciences and diagnostics solution business; and Boston Scientific’s $14.5bn buyout of Penumbra, which develops technologies to remove blood clots.
Babitt noted during a roundtable discussion with members of the media on Oct. 14 that the record levels of M&A activity and financing shows that “the capital markets do have an interest in financing medtech” and “see opportunities.”
On the flipside, he said, medtech’s weight in the S&P 500 has fallen by more than half over the last four years with investors focusing on AI, according to an article by McKinsey & Co.
“We’re looking at a sector that at least historically has traded at a premium to the S&P 500 multiples,” Babitt.
AI Is Changing Medtech
“AI is changing the definition of what a medical device is and does,” wrote Ricardo Fracaroli Vilanova, EY principal AI and intelligent automation, in the report.
He expects that medtech companies will use AI not only to capture and interpret information but also to build intelligence around. Existing examples include AI-supported analysis in the operating room (Medtronic’s Touch Surgery Aide), algorithms that use deep learning to identify arrhythmias (Boston Scientific’s BeatLogic), next-generation automated insulin pumps that can adjust insulin without routine carbohydrate counting (Insulet’s Omnipod 6 in development), and sleep tech that can screen for sleep apnea and matches patients with devices (Resmed).
AI integration will also become even more important as care moves into people’s homes and into ambulatory surgery centers, both of which will require a shift from the existing hospital-focused commercial model to building commercial and service models that can scale across an increasingly consolidated channel, wrote Jay Zhu, EY-Parthenon principal and Kevin Wang, EY-Parthenon senior manager.
