Merck & Co (MRK) Q2 2025 earnings summary

Executive summary

• Q2 2025 revenue was $15.8 billion, down 2% year-over-year, with non-GAAP EPS at $2.13 and GAAP EPS at $1.76, both including a $0.07 per share charge for a Hengrui Pharma license agreement.

• Oncology and animal health segments drove growth, with KEYTRUDA sales up 9% to $8 billion and animal health sales up 11% to $1.6 billion, while GARDASIL sales declined 55% to $1.1 billion due to China and Japan headwinds.

• New product launches, including WINREVAIR and CAPVAXIVE, are driving growth, with WINREVAIR surpassing $1 billion in cumulative sales and CAPVAXIVE reaching $129 million in Q2.

• Major business development included a $10 billion agreement to acquire Verona Pharma, adding Ohtuvayre for COPD, and a $200 million license deal with Hengrui Pharma.

• The company launched a multi-year $3 billion optimization and restructuring initiative, targeting $1.7 billion in annual savings by 2027, to be fully reinvested in R&D and commercial launches.

Financial highlights

• Total Q2 2025 revenue: $15.8 billion, down 2% year-over-year; non-GAAP gross margin improved to 82.2%, GAAP gross margin at 77.5%.

• KEYTRUDA sales: $8 billion, up 9% year-over-year; GARDASIL/GARDASIL 9 sales: $1.1 billion, down 55% due to China and Japan.

• WINREVAIR global sales: $336 million in Q2; cumulative sales exceeded $1 billion in 15 months.

• Non-GAAP operating expenses rose 7% to $6.6 billion; GAAP net income was $4.43 billion, down 19% year-over-year.

• Non-GAAP EPS: $2.13, down 7%; GAAP EPS: $1.76, down 18%.

Outlook and guidance

• Full-year 2025 revenue guidance: $64.3–$65.3 billion, with non-GAAP EPS of $8.87–$8.97, including a $0.16 per share impact from one-time charges and a 0.5% FX headwind.

• Non-GAAP gross margin expected at ~82%; non-GAAP effective tax rate projected at 15.0–16.0%.

• No GARDASIL shipments to China through at least year-end; Japan expected to be a headwind in H2.

• Outlook excludes impact from the pending Verona Pharma acquisition.

• Continued investment in pipeline and launches, with $3 billion in cost savings to be fully reinvested.