EY: MedTech M&A hits decade high as AI and blockbuster deals drive growth

Revenue up, but growth is concentrated

According to the report from Ernst & Young LLP (EY US), the MedTech industry reached approximately US$650 billion in revenue in 2025, growth of 11%. In the first half of 2026 it generated $325 billion, a 7.1% increase on the same period of 2025.

Therapeutic devices led industry growth, followed by non-imaging diagnostic, imaging, and lab equipment and tools. EY stresses, however, that growth was highly concentrated among commercial leaders, which points to a widening performance gap across the industry. The sector also faces negative investor sentiment and persistent global trade and supply chain uncertainties.

John Babitt, EY Global MedTech Leader, said the sector has rebounded from year-to-date June lows but has underperformed the broader markets in 2026. In his words, "discipline is essential to convert innovation into profitable growth."

Record financing and a surge in dealmaking

MedTech financing reached a record US$63 billion for the year ended June 30, 2026, up 87% year over year and the highest in the last decade. Initial public offerings and debt made up around 80% of the capital raised. EY reads this as a recovery driven mainly by the reopening of public markets and strategic balance sheet financing, rather than broad-based funding strength.

M&A reached its highest level in more than a decade, with total disclosed deal value of roughly US$130 billion. EY notes that this was driven by a limited number of blockbuster transactions. M&A value in the first half of 2026 was up 160% compared with the first half of 2025, reflecting investment in next-generation technologies such as AI-enabled diagnostics, robotics, structural heart, diabetes care and minimally invasive therapies.

Venture capital fundraising remained resilient in 2026, with activity skewed toward earlier-stage innovation. EY says this shows continued investor conviction in differentiated technologies that address significant unmet clinical needs.

AI and new care settings

EY describes AI as reshaping value creation in MedTech, with intelligence increasingly embedded in devices and the care pathways around them. The report points to a record and growing number of FDA-authorized AI-enabled devices. Hardware design, clinical evidence and manufacturing quality remain fundamental, but are increasingly complemented by the quality of the algorithms, data and digital services around a product.

Growth is also expanding beyond traditional care settings. EY highlights the rapidly expanding ambulatory surgery center (ASC) market and direct to consumer/patient channels as areas where MedTech companies are capturing growth.

What it means for the industry

EY finds that companies delivering both high R&D productivity and EBIT margin expansion generated an average total shareholder return of approximately 13.8%. It attributes much of the sector's growth to a breakout group of high-performing, high-differentiation, high-innovation strategic leaders.

Diana Hoff, EY Americas Life Sciences Sector Leader, said 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." EY concludes that MedTechs that maintain innovation while building conviction in capital allocation and portfolio optimization will be best positioned in the years to come.