A new report has found that in 2025 through the first half of 2026, innovation increased dealmaking and R&D investment, AI heavily influenced the future of value creation, and that industry growth continued to expand into alternative care settings.
That’s according to the 20th edition of the Ernst & Young LLP (EY US) Pulse of the MedTech Industry report found that, published this week.
Following a period of record-setting growth and investment in the US and Europe, the medtech sector has overcome challenges, including negative investor sentiment and persistent global trade and supply chain uncertainties, and is now at a revenue high point, according to the report.
EY found that, despite a difficult operating environment, the medtech industry saw sustained growth last year, reaching around $650 billion in revenue and representing growth of 11%.
It also continued to show topline performance in the first half of 2026, generating $325 billion in revenue, a 7.1% increase compared with the same period in 2025.
Therapeutic devices led industry growth, followed by non-imaging diagnostic, imaging, and lab equipment and tools. However, the report cautioned that growth was highly concentrated among commercial leaders, highlighting a widening performance gap across the industry.
"MedTech has rebounded from YTD 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," says John Babitt, EY Global MedTech Leader, in the report.
“The broader sector players are at a turning point where discipline is essential to convert innovation into profitable growth.”
Medtech M&A reached its highest level in more than a decade, EY found, with a total disclosed deal value of roughly $130 billion. But while those numbers are strong, the report stated that the M&A recovery was driven by a limited number of blockbuster transactions, including Abbott’s $23 billion acquisition of Exact Sciences.
AI in MedTech is observing a transformation, the report said, with intelligence increasingly being deeply embedded into devices and the care pathways around them. Hardware design, clinical evidence and manufacturing quality will remain fundamental and are increasingly being complemented by the quality of the algorithms, data and digital services surrounding the product.
A recent study found that there were just over 400 FDA AI-enabled medical device authorizations from 2020 to 2022. From 2022 to 2025, that number grew to nearly 800. The FDA authorized 331 AI-enabled devices in 2025 alone, according to the study.
“MedTech is entering a new era of growth, and today's challenges are the catalyst for the industry's next transformations," says Diana Hoff, EY Americas Life Sciences Sector Leader, in the report.
“As companies navigate margin pressure, supply chain risk and global trade uncertainty, the leaders of the next decade will be those that embrace AI, make more deliberate portfolio choices and build productive, resilient operating models that turn innovation into sustained growth and value.”