Zoetis (ZTS) Q1 2026 earnings summary

Executive summary

• Revenue for Q1 2026 was $2.3 billion, up 3% year-over-year, with adjusted net income of $646 million, up 2%, and adjusted diluted EPS of $1.53, up 9% on a reported basis.

• Organic operational revenue was flat year-over-year, with adjusted net income up 1%.

• International segment revenue grew 17% reported and 10% organically, while U.S. revenue declined 8% due to softer demand and increased competition in companion animal products.

• Livestock revenue grew 12% organically, while companion animal revenue declined 4% organically amid intensified competition and price sensitivity.

• The company implemented a major accounting change aligning international subsidiary reporting periods, impacting quarterly comparability.

Financial highlights

• Q1 2026 revenue: $2.3 billion (+3% year-over-year); adjusted net income: $646 million (+2%); adjusted diluted EPS: $1.53 (+9%).

• Adjusted gross margin was 71.8%, nearly flat year-over-year; U.S. gross margin was 82.2%, International 70.9%.

• Adjusted cost of sales was $638 million (28.2% of revenue); adjusted SG&A expenses were $585 million; adjusted R&D expenses were $179 million.

• Interest expense increased to $62 million due to higher average debt balances.

• Net cash provided by operating activities was $401 million, down from $515 million in Q1 2025, mainly due to timing of receipts/payments and higher inventory build-up.

Outlook and guidance

• Full-year 2026 revenue guidance: $9.68–$9.96 billion; organic operational revenue growth expected at 2%–5%.

• Adjusted net income guidance: $2.87–$2.95 billion (organic operational growth of 2%–6%).

• Adjusted diluted EPS guidance: $6.85–$7.00; reported diluted EPS: $6.35–$6.50.

• Fiscal year alignment provides a 200–250 bps tailwind, but challenging environment offsets this.

• Adjusted cost of sales as a percentage of revenue expected at ~28.5% for 2026.