Overview
Since the Report + 10.5%
Revenue grew 5.0% year over year, EPS beat the estimate by 50.0%; the stock rose 0.2% in its first reaction.
- RevenueQ2
- $16.6B
- ▲ 5% · Above Expectation
- Keytruda Franchise
- $8.37B
- ▲ 5% · Half of Revenue
Verdict
HOLDMerck opened one test, matched one and closed one: sales 1.2% above the estimate, the adjusted loss 50% smaller than expected, but full-year EPS guidance cut; score 56, view hold. The cut comes from acquisition accounting and the revenue outlook was raised; the stock closed earnings day flat. From here the questions are the pace of the Keytruda Qlex conversion and the 2028 patent calendar.
Close on Report DayAug 4
$128.37▲ 0.2%Report-Day Move
- Market Cap(Today)
- ≈ $350 B
- 1Y Return(At Report)
- + 59%
- P/E(At Today's Price · $3.21 · Trailing 12M)
- 44.2
- Net Margin(Trailing 12M)
- 4.8%
Earnings Summary
In 30 Seconds- Sales of $16.6B beat the estimate by 1.2%, and the adjusted loss of $0.13 per share was 50% smaller than expected.
- Full-year revenue guidance rose to $66.3–67.3B, but adjusted EPS guidance was cut 46.9% on acquisition charges.
- The stock closed the report day flat, up 0.18%, as investors read the profit cut as acquisition accounting rather than business weakness.
The Numbers
Keytruda Qlex (Subcutaneous)
$463M
First Read on the Switch
Winrevair
$588M
▲ 75%
Adjusted EPS
-$0.13
Terns Charge: -$2.31
Full-Year Revenue Guidance
$66.3-$67.3B
Raised
Quarterly Revenue ($ Billion)
15.81
Q2 2025 · $15.8 B
17.28
Q3 2025 · $17.3 B · QoQ + 9.3%
16.40
Q4 2025 · $16.4 B · QoQ − 5.1%
16.29
Q1 2026 · $16.3 B · QoQ − 0.7%
16.61
Q2 2026 · $16.6 B · QoQ + 2.0% · YoY + 5.1%
- Q2 2025
- Q3 2025
- Q4 2025
- Q1 2026
- Q2 2026
Q3 2026 Company Guidance
- Full-Year Revenue66.3 – 67.3 billion66.3 billion67.3 billion
Midpoint 66.8 · Growth 2-4% · FX Tailwind ~1 PointRaised 0.6% ▲ · Prior 65.8-67.0
- Full-Year Adjusted EPS2.66 – 2.76 $2.66 $2.76 $
Midpoint 2.71 · Prior Range 5.04-5.16 · Terns $2.31 + Financing $0.12Cut 46.9% by Acquisition Charges ▼
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±2.1% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Pharmaceutical$14.8 BShare 89.3%▲ 5.0% YoY
- Animal Health$1.78 BShare 10.7%▲ 8.0% YoY
5% growth excluding currency
Key Metrics
Gardasil Sales
$1.17 B
▲ 4.0% YoYPress Release
Welireg Sales
$271 M
▲ 67.0% YoYPress Release
Capvaxive Sales
$184 M
▲ 42.0% YoYPress Release
Januvia / Janumet Sales
$429 M
▼ 31.0% YoYPress Release
Shares are computed over the segment total: $16.5 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“We see that as the LOE period is more of a hill than a cliff... I do think you're going to see a shallow dip with a fast return back to growth.”
- Faster-than-expected Clinical De-risking
- LOE a Hill, Not a Cliff
- 20+ New Products, $70B Opportunity
Summary and Review
Summary
Merck's second-quarter 2026 sales were $16.6 billion against a $16.41 billion expectation, a gap of 1.2%; the revenue test is in line. The adjusted loss was $0.13 per share, 50% smaller than expected; the earnings test is open. Revenue guidance was raised to $66.3-$67.3 billion, but adjusted EPS guidance was cut to $2.66-$2.76 from $5.04-$5.16; the guidance test is closed. One closed test means the hold band; score 56. Sales grew 5%; the Keytruda franchise grew 5% to $8.37 billion.
The stock closed earnings day essentially flat, up 0.18% at $128.00 on August 4. It had been up about 1.4% premarket; that faded during the session. The report has two sides. Revenue guidance moved up to $66.3-$67.3 billion from $65.8-$67.0 billion, so the company sees the rest of the year more favorably. The EPS cut is acquisition accounting: $2.31 per share for Terns, $3.62 for Cidara. The business is not deteriorating; money is leaving today's profit for tomorrow's pipeline.
The real subject of this quarter is 2028. Keytruda's U.S. composition-of-matter patent expires that year; roughly half of revenue depends on that drug. Merck's answer has three legs: subcutaneous Keytruda Qlex, oncology beyond Keytruda, and scaling Winrevair, Welireg and Capvaxive. Qlex selling $463 million in its first full quarter is the first evidence the plan works. Reservations pull the score into the band's lower half: gross margin fell 1.1 points, the tax rate rises to 35-36%, and 2028 remains open.
Full Review
Keytruda is growing, but the story is the 2028 patent date.
Keytruda and its subcutaneous sibling Qlex together sold $8.37 billion, up 5%, or 4% excluding currency. Growth comes from earlier-stage indications such as triple-negative breast cancer and cervical cancer. Urothelial cancer demand is climbing in the metastatic setting. A product that once grew 15-20% a year now grows in the single digits, because it is approaching U.S. saturation. Half of company revenue riding on one molecule is a concentration risk. The U.S. composition-of-matter patent expires in 2028; Merck defends method-of-use and manufacturing patents extending into 2029. The commercial leg of the defense is Qlex: it converts an infusion into an injection and moves patients to a new product before biosimilars arrive. The target is 30-40% of eligible volume by 2028. Qlex sold $463 million in its first quarter; adoption rose after the permanent J-code in April. Early use is mostly in monotherapy patients; the combination-therapy mass has not moved yet.
The guidance cut is a bill, not a broken business.
Adjusted EPS guidance falling to $2.66-$2.76 from $5.04-$5.16 looks alarming at first glance. But the cut comes from the accounting treatment of two acquisitions. Terns flows through as a $5.7 billion research and development charge worth $2.31 per share. Cidara is a $9.0 billion charge worth $3.62 per share. These are not recurring costs; they are the price of acquired drug candidates expensed in one go. The revenue band moving up in the same guidance confirms the distinction. The decision table still counts a cut as a cut, so the guidance test is closed. The side effects are real: the non-deductible portion pushes the effective tax rate into the 35-36% range. The operating expense outlook rises to $42.0-$42.7 billion from $36.0-$36.8 billion. Merck is spending today's profit on tomorrow's pipeline. For where such one-time items land, the guide to reading financial statements is a good start.
The growth engines are finally big enough to count.
The diversification story Merck has been telling for years can finally defend itself with numbers. Winrevair reached $588 million, up 75%, with more than eighteen hundred new patients prescribed in the United States. Welireg hit $271 million, up 67%, and Capvaxive $184 million, up 42%. The respiratory drug Ohtuvayre sold $204 million. Add it up and there is a new revenue layer running at more than $5 billion a year. It is not enough to replace Keytruda, but it is no longer a rounding error. Animal Health continues its quiet consistency: $1.78 billion, up 8%. Livestock contributed $1.04 billion and companion animal $734 million. That business runs independently of the pharmaceutical patent calendar. It is the least-discussed and most predictable piece of the portfolio.
Gardasil is off the bottom, but China is still out.
The HPV vaccine Gardasil sold $1.169 billion, up 4%, or 3% excluding currency. That is the first meaningful sign of recovery after a long decline. Gardasil sales fell 39% in 2025 to $5.2 billion. The center of that collapse was China. When demand fell unexpectedly, Merck halted shipments so partner Zhifei could work down existing inventory. It also withdrew its $11 billion sales target entirely. This quarter's growth is not China coming back. The company cites higher demand in Asia Pacific and Europe plus favorable European tender timing. Lower demand in certain other international markets partly offset that. So Gardasil is growing off a low base. China stands less as a revenue source than as an option that has yet to be exercised.
Two wins and two delays in the pipeline.
The science side of the quarter was mixed. On the positive side, the oral PCSK9 inhibitor Lipfendra won FDA approval. Sac-TMT produced positive Phase 3 data in endometrial cancer. Tulisokibart cleared Phase 3 in ulcerative colitis. On the negative side, that same tulisokibart missed its primary endpoint in a systemic sclerosis-associated interstitial lung disease study. The timeline for the flu prevention candidate MK-1406 slipped to 2029. The Terns acquisition adds MK-4208, a chronic myeloid leukemia candidate. CEO Robert Davis said his confidence in de-risking the pipeline is higher than in January, driven by faster-than-expected clinical readouts. That means the layer meant to fund the post-2028 era is being built. But the construction still finishes after the patent date. Two lines to watch next quarter: Qlex's share of U.S. Keytruda volume, and whether adjusted gross margin slips below 81.1%.
Looking Ahead
Strengths and Risks
5 Strengths · 6 RisksStrengths
5- Sales of $16.6 billion came in above the market expectation of $16.41 billion, and full-year revenue guidance was raised to $66.3-$67.3 billion.
- The newer product layer is now measurableWinrevair grew 75%, Welireg 67% and Capvaxive 42%, while Ohtuvayre sold $204 million.
- Keytruda's subcutaneous formulation Qlex sold $463 million in its first full quarter, with adoption accelerating after April's permanent J-code.
- Gardasil grew 4%, the first recovery signal after a 39% collapse in 2025.
- Animal Health grew 8% to $1.78 billion, offering a predictable revenue layer insulated from the pharmaceutical patent calendar.
Risks
6- Keytruda's U.S. composition-of-matter protection expires in 2028, and roughly half of company revenue rides on that single product.
- If the subcutaneous conversion falls short of the targeted 30-40% of eligible volume, a gap opens in the post-2028 revenue defense.
- Adjusted EPS guidance was cut to $2.66-$2.76 from $5.04-$5.16The charges are one-time, but the operating expense band rose to $42.0-$42.7 billion.
- Profitability is drifting the wrong wayAdjusted gross margin fell to 81.1% from 82.2%, and the effective tax rate outlook moved to 35-36%.
- The China leg of Gardasil remains closed, the $11 billion target has been withdrawn, and the recovery is coming off a low base.
- The pipeline had setbacksTulisokibart missed its primary endpoint in the lung disease study, and flu candidate MK-1406 slipped to 2029.
What to Watch
4- September 21, 2026FDA decision date for the Winrevair label update based on the Phase 3 HYPERION study.
- ~October 2026Q3 results, watching Keytruda Qlex's share of U.S. volume and whether the Gardasil recovery holds.
- Rest of 2026The $3.62 per share Cidara charge flows through results; it is already in full-year guidance, so it should not surprise.
- 2028Expiry of Keytruda's U.S. composition-of-matter patent; the company continues to defend method-of-use and manufacturing patents extending into 2029.
Upcoming Earnings
To Understand This