Johnson & Johnson reported on Tuesday, 13 October, before the market opened, its third quarter of 2026, which ended on 27 September. Revenue: $25.4 billion, up 5.9%. Adjusted EPS: $2.59, down 7.5%. GAAP EPS fell to $0.09 from $2.12, and it includes a legal charge of $5.5 billion for the proposed resolution of the talc claims.
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What Was Reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Revenue | 25,399 | 23,993 | +5.9% |
| Innovative Medicine | 16,757 | 15,563 | +7.7% |
| MedTech | 8,642 | 8,430 | +2.5% |
| Gross margin | 68.1% | 69.6% | -1.5 pts |
| Research and development | 4,652 | 3,672 | +26.7% |
| GAAP net earnings | 210 | 5,152 | -95.9% |
| GAAP diluted EPS (dollars) | 0.09 | 2.12 | -95.8% |
| Adjusted net earnings | 6,339 | 6,801 | -6.8% |
| Adjusted EPS (dollars) | 2.59 | 2.80 | -7.5% |
| Adjusted pre-tax margin | 30.2% | 35.2% | -5.0 pts |
In millions of dollars, except per-share data and ratios. Source: the company's results release and financial schedules, 13 October 2026.
Where the Money Was Made
The Innovative Medicine segment (pharmaceuticals) brought in $16.76 billion, up 7.7%, and the MedTech segment (medical devices) $8.64 billion, up 2.5%. The gap between regions stands out: in the U.S. revenue rose 9.1% to $14.96 billion, and outside it only 1.5%, to $10.44 billion. In Innovative Medicine the U.S. rose 11.1% and international 2.4%; in MedTech, 4.8% in the U.S. and 0.1% outside it.
The growth in pharmaceuticals rests on five products:
| Product | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Darzalex | 4,239 | 3,672 | +15.4% |
| Tremfya | 2,396 | 1,424 | +68.3% |
| Stelara | 716 | 1,570 | -54.4% |
| Carvykti | 710 | 524 | +35.5% |
| Caplyta | 398 | 240 | +66.1% |
In millions of dollars.
Tremfya added $972 million and Stelara lost $854 million, so the two together added only about $118 million. Darzalex added $567 million, Carvykti $186 million and Caplyta $158 million. Together the five drugs added about $1.03 billion of the $1.19 billion increase across the whole segment - meaning all other products combined added about $165 million.
In MedTech, Shockwave grew 16.8% to $325 million, Abiomed fell 2.3% to $412 million, and Surgery fell 0.6% to $2.53 billion.
From $2.12 to $0.09: GAAP Earnings
GAAP net earnings fell 95.9%, to $210 million from $5.15 billion. Pre-tax earnings came to only $34 million, against $7.49 billion a year ago, and the company booked a tax benefit of $176 million, against a tax provision of $2.34 billion a year ago. In the income statement, the line "other (income) expense, net" stood at an expense of $5.78 billion, against income of $478 million a year ago.
The items that adjusted earnings exclude, pre-tax, in millions of dollars:
- Litigation-related, the proposed talc resolution: 5,519
- In-process research and development (IPR&D) impairments: 339
- Orthopaedics separation costs: 369
- Restructuring-related costs: 195
- Acquisition, integration and divestiture: 34 credit
- Securities losses: 10
- Intangible asset amortization: 1,240 - a recurring item, not a one-off
The bridge closes: 210 plus 7,638 pre-tax, less 1,677 of tax impact, plus 168 of other tax items, equals 6,339.
The release notes that GAAP earnings also reflect the acquisition of Firefly Bio and the collaboration with Sail Biomedicines, without giving an amount.
According to the company's 27 July announcement, the talc resolution is a commitment of $5.5 billion: a first payment of up to $3 billion in 2027, and no further payments before 2028. It is conditioned on participation of at least 95% and covers about 76,000 ovarian cancer claims. The accounting charge was booked in this quarter, and the cash goes out only from 2027.
Profitability and Cash Flow
Revenue rose 5.9%, but adjusted pre-tax earnings fell 9.1%, to $7.67 billion. Gross margin fell to 68.1% from 69.6% (cost of products sold rose 10.9%), and research and development expense rose 26.7%, to $4.65 billion: 18.3% of revenue, against 15.3% a year ago. The adjusted tax rate fell to 17.4% from 19.4%, and softened part of the damage - adjusted net earnings fell 6.8%, less than the decline before tax.
Against the second quarter, revenue was nearly unchanged (plus 0.4%, from $25.31 billion), and adjusted EPS fell from $2.90 to $2.59, a decline of 10.7%. GAAP EPS was $2.27 in the second quarter.
Free cash flow since the start of the year, an estimate as of 13 October, reached about $15.1 billion, up 6.1% from $14.23 billion a year ago. The release does not include a figure for operating cash flow.
The Guidance
The company presented updated full-year guidance. The midpoints rose and the ranges narrowed, against the 29 July guidance:
| Measure | October range (midpoint) | Midpoint on 29 July |
|---|---|---|
| Adjusted operational sales growth | 6.4%-6.8% (6.6%) | 6.5% |
| Reported sales | $101.0-101.4 billion (101.2) | 101.1 |
| Adjusted EPS | $11.05-11.15 (11.10) | 11.04 |
| Adjusted EPS, excluding currency | $10.95-11.05 (11.00) | 10.94 |
The raise is against 29 July, not 15 July. In the second-quarter report, published on 15 July, the midpoint of adjusted EPS guidance stood at $11.68. On 29 July it stood at $11.04, and now at $11.10 - that is, $0.58 below the midpoint given in mid-July.
The company did not give explicit fourth-quarter guidance, and said additional modeling considerations would be provided on the webcast. Subtracting the first nine months from the midpoint of the annual range gives revenue of about $26.4 billion and adjusted EPS of about $2.91 in the fourth quarter - a calculation from the release, not company guidance.
Chairman and CEO Joaquin Duato attributes the quarter to accelerating momentum in a focused portfolio, with OTTAVA and positive Phase 3 data in multiple myeloma as examples, and says the quarter gives a clearer line of sight to double-digit growth by the end of the decade.
Against Expectations, and the Stock
According to Reuters, based on LSEG data, as published by CNBC, analysts expected revenue of $25.28 billion; the actual figure was $25.4 billion, about $120 million above. For MedTech they expected $8.71 billion, and the actual figure was $8.642 billion - a miss, and the second in a row. According to the same report Tremfya was above expectations, which stood at about $2.2 billion, and Darzalex below expectations of about $4.4 billion. The consensus for adjusted EPS is not given here, because the sources do not agree on it.
The stock opened on the day of the report at $254.56, about 3.5% below the prior close of $263.73, and never returned to it: the high of the day was $256.18. It closed at $248.61, down 5.73%, on volume of about 16.65 million shares. From the start of the year to the close on the day of the report the stock rose about 20%, and at the prior close, on the eve of the report, it was up about 27%.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What caught me in this report is that adjusted earnings fell even though they already neutralize the one-time items. Revenue plus 5.9%, research and development plus 26.7%, and adjusted EPS minus 7.5%. That is, even without the talc, without the impairments and without the separation costs, this quarter produced less earnings per share than the same quarter a year ago, and the GAAP figure of $0.09 is not the only story.
There are two ways to read it. One, a company changing engines: Stelara is weakening, Tremfya, Darzalex, Carvykti and Caplyta are taking its place, and the transition costs money in research and in margin before it reaches the earnings line. If that is right, $2.59 is a transition quarter, and the talc resolution, if it meets the participation condition, puts a number and a payment schedule on an item that had been open. Two, gross margin is falling, MedTech missed for a second straight quarter, and a midpoint of $11.10 requires, a fourth quarter of about $2.91 - a jump of about 12% in three months. Both readings rest on the same numbers, and the stock closed down 5.73%, but one trading day is a reaction, not a verdict.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
