Eli Lilly published its second-quarter report on 5 August 2026. We are writing about it today, 6 August.
And it is a report in which the headline and the substance tell two different stories.
What was reported
| Quarter | Year ago | Change | |
|---|---|---|---|
| Revenue | 22,974 | 15,558 | +48% |
| GAAP net income | 7,095 | 5,661 | +25% |
| GAAP EPS | $7.94 | $6.29 | +26% |
| Non-GAAP net income | 7,493 | 5,680 | +32% |
| Non-GAAP EPS | $8.38 | $6.31 | +33% |
In millions of dollars except per-share data
Revenue up 48%. EPS up 26%. That gap is the first thing that needs explaining.
The gap: $3.03 per share written off
IPR&D charges - and this is not a minor line
The company states it in the first line of the release: EPS, both GAAP and non-GAAP, includes $3.03 of charges for acquired in-process research and development - against just $0.14 in the year-ago quarter.
In absolute terms: $2.8 billion of IPR&D charges, against $154 million a year ago.
What is that? When a pharmaceutical company buys another that holds a molecule in development but no approved product, the accounting rule requires it to write off the entire payment immediately as an expense - rather than record it as an asset and amortise it over years.
This quarter's charges relate primarily to the acquisitions of Orna Therapeutics and Ajax Therapeutics.
And in addition: $703 million of asset impairment, restructuring and other special charges - mainly accelerated vesting of employee equity awards and acquisition costs in the Kelonia and Centessa deals. A year ago that line was zero.
And the effective tax rate jumped to 23.3% from 16.5%, because IPR&D charges are not deductible.
In other words: the company spent $2.8 billion buying development pipeline, and the accounting rule requires it to absorb all of that in a single quarter.
The engine: Mounjaro and Zepbound
And here comes the part there is no arguing with.
| Product | Quarter | Year ago | Change |
|---|---|---|---|
| Mounjaro | 9,943 | 5,199 | +91% |
| Zepbound | 4,928 | 3,381 | +46% |
| Ebglyss | 201 | 87 | +131% |
| Jaypirca | 192 | 123 | +56% |
| Kisunla | 167 | 49 | - |
| Omvoh | 102 | 75 | +36% |
| Foundayo | 98 | 0 | new |
| Inluriyo | 75 | 0 | new |
In millions of dollars
Mounjaro alone brought in nearly $10 billion in the quarter.
And across the half year Mounjaro brought in $18.6 billion against $9.0 billion - more than a doubling.
The geographic detail that explains everything
Outside the US: +80%, and Mounjaro +172%
| Quarter | Change | Volume | Realised price | |
|---|---|---|---|---|
| United States | $14.4bn | +33% | +37% | -3% |
| Outside the US | $8.6bn | +80% | +113% | -36% |
Mounjaro outside the US jumped 172%.
And the reason is explicit in the report: its addition to China's National Reimbursement Drug List - the NRDL - in the first quarter of 2026.
And that is a two-sided trade: entry onto the Chinese list opens an enormous market, but it is done in exchange for a sharp price cut. Hence realised prices outside the US fell 36% - while volume jumped 113%.
And here is a detail worth reading closely. In the US realised prices fell only 3% - but the company writes explicitly that excluding adjustments to estimates for rebates and discounts, the US price would have declined by approximately 9%.
Meaning the reported 3% decline is flattered by accounting adjustments. The underlying decline is three times larger.
The guidance - and here is what is easiest to miss
At first glance the EPS guidance looks cut. On a second look the opposite is happening.
| Prior | Updated | |
|---|---|---|
| Revenue | $82-85bn | $85-87bn |
| Performance margin | 47.0-48.5% | 49.0-50.5% |
| Tax rate | 18-19% | unchanged |
| EPS | $35.50-37.00 | $35.50-36.50 |
The explanation, in the company's own words
The company breaks down the EPS change precisely:
The update reflects an increase of $2.78 at the midpoint due to strong underlying business growth, offset by $3.03 associated with the Q2 acquired IPR&D charges from recent business development activity.
Which means:
- The revenue outlook rose by $3 billion at both ends of the range
- The performance margin outlook rose by two full percentage points
- And EPS fell only because the company chose to spend money on acquisitions
A company raising revenue and margin while lowering EPS because of acquisitions is not a company that weakened. It is a company that decided to invest the improvement.
And the guidance states explicitly that it excludes IPR&D incurred after 30 June 2026 - meaning any further acquisition will lower that line again, regardless of the business.
The margin, and the costs
Gross margin reached 85.8% of revenue - up 1.5 percentage points. On a non-GAAP basis 86.3%.
The explanation: improved cost of production and favourable product mix, partly offset by lower realised prices.
And on the cost side:
- Research and development: $3.8 billion, up 14% - roughly 17% of revenue
- Marketing, selling and administrative: $3.4 billion, up 25% - mainly promotional support for launches
Worth noting that marketing is growing faster than R&D. That is logical during a launch phase, but it is worth watching whether the gap persists.
The pipeline: what comes after Mounjaro
This is the part that determines the value five years out, and it concentrates in two names.
Retatrutide
A triple agonist - a drug acting on three receptors rather than two.
The company reports positive data from three additional Phase 3 obesity trials, and states:
The clinical data package is now complete to support global registrations for obesity, obstructive sleep apnea, and knee osteoarthritis pain - with plans to submit to the FDA in the first quarter of 2027.
Three indications, not one. Sleep apnea and knee pain are complications of obesity - and approval in them widens the patient population far beyond those defined as obese.
Foundayo - this is orforglipron
The drug regarded as the first GLP-1 in a pill has been given a brand name and brought in $98 million in its first quarter.
The company notes it is the only oral GLP-1 taken without food or water restrictions, and that a submission for type 2 diabetes has been filed in the US.
And why that matters: a weekly injection constrains the market. A daily pill removes that barrier - both in patient willingness and in manufacturing and distribution logistics.
What else happened in the quarter
Completed acquisitions: Orna Therapeutics, Ajax Therapeutics, Centessa Pharmaceuticals and Kelonia Therapeutics. And after quarter end: three acquisitions to build an infectious disease portfolio, and an agreement to acquire AtaiBeckley.
And manufacturing: an additional $4.5 billion committed to expanding Indiana sites.
Regulatory: FDA approval of Ebglyss for one maintenance dose every eight weeks, European Commission approval of Jaypirca as monotherapy in chronic lymphocytic leukemia, and the submission of orforglipron for type 2 diabetes in the US.
David A. Ricks, Lilly chair and CEO: "Lilly's momentum continues... after 150 years, Lilly's future has never been brighter."
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
This is one of the more interesting reports I have read this season, and the reason lies in the gap between two lines.
Revenue rose 48%. EPS rose 26%. Anyone stopping there concludes profitability is eroding. Anyone reading on discovers the company spent $2.8 billion buying development pipeline, and the accounting rule requires it to write all of that off immediately.
And what completed the picture for me was actually the guidance table. The top of the EPS range fell from $37.00 to $36.50 - but the revenue outlook rose by $3 billion and the performance margin by two percentage points. The company itself breaks it down: plus $2.78 from the business, minus $3.03 from the acquisitions.
In other words: the business improved by more than the headline shows, and the improvement was spent buying the future. You can argue about whether those acquisitions are worth the price. You cannot read this as weakening.
And what I do put a question mark on is price. Volume plus 60% against realised price minus 13%. And outside the US the gap is extreme: volume plus 113% against price minus 36%, because of the entry onto the Chinese list. That is a deliberate trade - an enormous market in exchange for a low price - but it says future growth will have to come from more boxes, not from a higher price.
And the detail that bothered me most: in the US the reported price decline is 3%, but the company writes that excluding accounting adjustments it would have been about 9%. That is a wide gap, and it appears in the body text rather than the headline.
And what I am waiting for is retatrutide. A complete clinical package across three indications - obesity, sleep apnea and knee pain - with an FDA submission in the first quarter of 2027. If that goes through, Lilly is not selling an obesity drug. It is selling treatment for its complications, and that is a market of an entirely different size.
