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% year-over-year; organic operational revenue was flat and adjusted net income up 1%.

• International segment revenue grew 17% (10% organic), while U.S. revenue declined 8% due to softer demand and increased competition in companion animal products; livestock revenue grew 12% organically, companion animal declined 4%.

• Market headwinds included increased price sensitivity, lower clinic traffic, and intensified competition, especially in companion animal.

• Strategic focus is on commercial execution, cost discipline, and innovation pipeline to drive future growth.

• Fiscal year alignment led to a $100 million positive impact in international revenue, shifting from Q4 2025 to Q1 2026, and eliminated the one-month reporting lag for international subsidiaries.

Financial highlights

• Q1 2026 global revenue was $2.3 billion, up 3% reported, flat organically; price contributed +2%, volume -2%.

• Adjusted net income was $646 million, up 2% year-over-year; adjusted diluted EPS was $1.53, up 9% year-over-year.

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

• Adjusted operating expenses rose 3%–5% operationally, mainly from higher compensation and logistics costs.

• 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 organic operational revenue growth expected at 2%–5%; adjusted net income growth at 2%–6%.

• Updated revenue guidance: $9.68B–$9.96B; adjusted net income: $2.87B–$2.95B; adjusted diluted EPS: $6.85–$7.00.

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

• No assumption of inventory restocking in guidance; continued headwinds from competition and macro factors expected.

• Guidance incorporates macro-pricing pressures, competitive headwinds, and may be impacted by foreign exchange movements and nonrecurring items.