Eli Lilly & Co (LLY) 10-Q 2026: AI Summary

Summary

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The Print

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Eli Lilly reported Q2 2026 revenue of $22,974 million (up 48% YoY) and net income of $7,095 million, with diluted EPS of $7.94.

Revenue increased for the three and six months ended June 30, 2026, driven primarily by increased volume, partially offset by lower realized prices. The increased volume and the lower realized prices during the three and six months ended June 30, 2026 were primarily driven by Mounjaro and Zepbound. Net income and earnings per share for the three months ended June 30, 2026 increased primarily due to higher gross margin, partially offset by higher acquired IPR&D charges, asset impairment, restructuring, and other special charges, and marketing, selling, and administrative expenses.

Revenue rose 48% YoY to $22,974 million, driven primarily by increased volume, partially offset by lower realized prices, per the MD&A.
Net income increased 25% YoY to $7,095 million and diluted EPS rose 26% to $7.94.
Mounjaro and Zepbound accounted for 65 percent of total revenue for the six months ended June 30, 2026.
Gross margin as a percent of revenue was 85.8% for the quarter, up 1.5 percentage points, primarily driven by improved cost of production and favorable product mix, partially offset by lower realized prices.

Results That Matter

Revenue
Current period
$23.0B
Prior period
$15.6B
Change
+47.7%
Revenue increased for the three months ended June 30, 2026, driven primarily by increased volume, partially offset by lower realized prices, primarily driven by Mounjaro and Zepbound.
Net income
Current period
$7.1B
Prior period
$5.7B
Change
+25.3%
Net income for the three months ended June 30, 2026 increased primarily due to higher gross margin, partially offset by higher acquired IPR&D charges, asset impairment, restructuring, and other special charges, and marketing, selling, and administrative expenses.
Earnings per share - diluted
Current period
$7.9
Prior period
$6.3
Change
+26.2%
Diluted EPS increased 26% YoY; shares used in the diluted calculation declined to 893.7 million from 899.8 million.
Gross margin as a percent of revenue
Current period
85.8%
Prior period
84.3%
Change
+1.5 ppts
Gross margin as a percent of revenue for the three months ended June 30, 2026 increased 1.5 percentage points, primarily driven by improved cost of production and favorable product mix, partially offset by lower realized prices.
Research and development
Current period
$3.8B
Prior period
$3.3B
Change
+14.5%
Research and development expenses increased 14 percent for the three months ended June 30, 2026, driven by continued investments in our early and late-stage portfolio.
Marketing, selling, and administrative
Current period
$3.4B
Prior period
$2.8B
Change
+24.6%
Marketing, selling, and administrative expenses increased 25 percent for the three months ended June 30, 2026, primarily driven by promotional efforts supporting ongoing and planned launches.
Acquired IPR&D
Current period
$2.8B
Prior period
$154.0M
Change
+1702.6%
Acquired IPR&D charges for the three months ended June 30, 2026 were primarily related to the acquisitions of Orna and Ajax.
Asset impairment, restructuring, and other special charges
Current period
$703.0M
Prior period
$0.00
Change
—
Asset impairment, restructuring, and other special charges for the three months ended June 30, 2026 were primarily related to the accelerated vesting of employee equity awards and other acquisition and integration costs associated with the closing of our acquisitions of business combinations.
Income taxes
Current period
$2.2B
Prior period
$1.1B
Change
+92.8%
The effective tax rate was 23.3% for the three months ended June 30, 2026, compared with 16.5% for the prior-year period.

Financial highlights: current period, prior period, change, and investor takeaway per metric
Metric	Current Period	Prior Period	Change	Investor Takeaway
Revenue	$23.0B	$15.6B	+47.7%	Revenue increased for the three months ended June 30, 2026, driven primarily by increased volume, partially offset by lower realized prices, primarily driven by Mounjaro and Zepbound.
Net income	$7.1B	$5.7B	+25.3%	Net income for the three months ended June 30, 2026 increased primarily due to higher gross margin, partially offset by higher acquired IPR&D charges, asset impairment, restructuring, and other special charges, and marketing, selling, and administrative expenses.
Earnings per share - diluted	$7.9	$6.3	+26.2%	Diluted EPS increased 26% YoY; shares used in the diluted calculation declined to 893.7 million from 899.8 million.
Gross margin as a percent of revenue	85.8%	84.3%	+1.5 ppts	Gross margin as a percent of revenue for the three months ended June 30, 2026 increased 1.5 percentage points, primarily driven by improved cost of production and favorable product mix, partially offset by lower realized prices.
Research and development	$3.8B	$3.3B	+14.5%	Research and development expenses increased 14 percent for the three months ended June 30, 2026, driven by continued investments in our early and late-stage portfolio.
Marketing, selling, and administrative	$3.4B	$2.8B	+24.6%	Marketing, selling, and administrative expenses increased 25 percent for the three months ended June 30, 2026, primarily driven by promotional efforts supporting ongoing and planned launches.
Acquired IPR&D	$2.8B	$154.0M	+1702.6%	Acquired IPR&D charges for the three months ended June 30, 2026 were primarily related to the acquisitions of Orna and Ajax.
Asset impairment, restructuring, and other special charges	$703.0M	$0.00	—	Asset impairment, restructuring, and other special charges for the three months ended June 30, 2026 were primarily related to the accelerated vesting of employee equity awards and other acquisition and integration costs associated with the closing of our acquisitions of business combinations.
Income taxes	$2.2B	$1.1B	+92.8%	The effective tax rate was 23.3% for the three months ended June 30, 2026, compared with 16.5% for the prior-year period.

Earnings Quality & Cash Conversion

Net income of $7,095 million for the three months ended June 30, 2026 included acquired IPR&D charges of $2,776 million and asset impairment, restructuring, and other special charges of $703 million, both of which reduced income before income taxes of $9,247 million. The filing does not define or report an adjusted or ex-item earnings total.

Value Drivers & Capital Allocation

Return on equity was 20.9% (period net income / period-end equity, not annualized); return on assets 5.0% (period net income / period-end assets, not annualized).

Forward Signals

cautious

No quantitative financial guidance was provided in the filing. The MD&A states that additional manufacturing capacity is expected to become operational over the next several years and that near-term financial performance will be impacted by the timing of additional potential regulatory approvals for orforglipron and the demand and pace of uptake in new incretin channels and markets.

Known trends

We expect our near-term financial performance will be impacted by, among other factors, the timing of additional potential regulatory approvals for orforglipron, as well as the demand and pace of uptake in new incretin channels and markets, including in U.S. Medicare for Zepbound and Foundayo.
The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors and could significantly impact our business and consolidated results of operations.
We are making investments in global facilities to manufacture existing and future products. These investments, and other capital investments that support our operations, have increased our capital expenditures and will result in meaningfully higher capital expenditures in the near term.

Subsequent events

In July 2026, we acquired three companies to build an infectious disease portfolio for up to $3.9 billion in aggregate, inclusive of upfront payments and additional potential payments based upon the achievement of certain clinical, regulatory, and commercial milestones.
In July 2026, we paid approximately $2.0 billion to acquire companies to build an infectious disease portfolio.
In July 2026, Lilly received notice that multiple generic companies had filed ANDAs seeking approval to market generic versions of Mounjaro and/or Zepbound before the expiration of some or all of the patents listed for those products in the FDA's Orange Book.

“We expect our near-term financial performance will be impacted by, among other factors, the timing of additional potential regulatory approvals for orforglipron, as well as the demand and pace of uptake in new incretin channels and markets, including in U.S. Medicare for Zepbound and Foundayo.”
— Eli Lilly and Company (MD&A)

Risks

4 source-verified filing excerpts. Selected excerpts are not a complete risk inventory.

Filing excerpt 1

EvidenceMounjaro and Zepbound accounted for 65 percent of our total revenue for the six months ended June 30, 2026, and we expect cardiometabolic health products will continue to represent a significant and growing portion of our business, revenue, and prospects.

Filing excerpt 2

EvidenceHHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, in August 2023 (effective 2026), and selected Trulicity and Verzenio in January 2026 (to be effective 2028), as medicines subject to government-set prices.

Filing excerpt 3

EvidenceIn April 2026, the U.S. Court of Appeals for the Federal Circuit issued an opinion reversing the trial court's finding that the patents are invalid and remanding to the district court, and we recognized a charge related to the matter during the three months ended March 31, 2026.

Filing excerpt 4

EvidenceMost of these lawsuits in the United States have been coordinated or consolidated for pretrial proceedings in two federal MDLs: one focused on alleged gastrointestinal injuries, and the other relating to claims of non-arteritic anterior ischemic optic neuropathy (NAION).

Balance Sheet & Liquidity

Leverage: Identified debt as of 2026-06-30 (carrying amount): noncurrent long-term debt of $47.9B. Not separately reported in this filing's standardized data: current portion of long-term debt; short-term borrowings. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Cash and cash equivalents increased to $9.0 billion as of June 30, 2026, compared with $7.3 billion as of December 31, 2025. As of June 30, 2026, we had a total of $10.1 billion of unused committed bank credit facilities, $10.0 billion of which is available to support our commercial paper program.

Working capital: Current assets $64.7B vs. current liabilities $47.7B (current ratio 1.35x). Prior reported balance sheet as of 2025-12-31: $55.6B vs. $35.2B (1.58x).

Maturities & covenants

In May 2026, we issued long-term debt totaling $9.0 billion with maturities from 2028 to 2066 and stated interest rates of 4.150%-5.700%.
Included in the 2028 and 2029 tranches are an aggregate $1.3 billion of floating-rate notes, with interest reset and paid quarterly using Secured Overnight Financing Rate (SOFR) plus 0.350 and 0.460 percent, respectively.

Notable Footnotes

Item	Impact
Business combinations: Kelonia, Centessa, and Ventyx acquisitions during the six months ended June 30, 2026.	Acquisition date fair values of consideration were $4,897 million for Kelonia, $6,593 million for Centessa, and $1,178 million for Ventyx, with acquired IPR&D of $4,695 million, $6,058 million, and $977 million, respectively.
Contingent consideration liabilities carried at fair value.	Other current liabilities included $814 million and other noncurrent liabilities included $1,704 million of contingent consideration as of June 30, 2026, compared with $34 million and $217 million, respectively, as of December 31, 2025.
Revenue adjustments from changes in estimates for U.S. sales returns, rebates, and discounts.	Adjustments to revenue recognized as a result of changes in estimates for our most significant United States (U.S.) sales returns, rebates, and discounts liability balances for products shipped in previous periods were 3 percent and 2 percent of U.S. revenue during the three and six months ended June 30, 2026, respectively.
Subsequent event: July 2026 acquisitions to build an infectious disease portfolio.	In July 2026, we acquired three companies to build an infectious disease portfolio for up to $3.9 billion in aggregate, inclusive of upfront payments and additional potential payments based upon the achievement of certain clinical, regulatory, and commercial milestones.

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AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.