Q3 FY26 · Ended Sep 30, 2026 · View SEC filing
Profit trails sales because Lilly is buying its pipeline
Expensed deal costs, not weaker operations, explain why net income rose 15.6% while revenue rose 38.6%.
For investorsWhat has to hold for volume to keep outrunning price?
For foundersOne molecule, many markets: the playbook behind tirzepatide
Expensed deal costs, not weaker operations, explain why net income rose 15.6% while revenue rose 38.6%.
Acquired in-process research and development, the expensed cost of buying drug programs that others discovered, was $4.2B this quarter against $656M a year earlier. It took 17.2% of revenue, up 13.5 points, and almost matched the $4.25B Lilly spent on its own research and development, a ratio of 98.9%. The filing names the acquisitions of AtaiBeckley and Curevo as the main source.1
Pretax income fell 6.6 points to 34.5% of revenue, about half the 13.5 points the acquired R&D line alone added. Net income rose 15.6% to $6.45B and the net margin fell 5.3 points to 26.4%. Income taxes took 23.3% of pretax income, which the filing ties to acquired R&D charges that are not tax deductible.1
AnalysisAnalysis: the charge lands in the quarter a deal closes, so reported profit now moves with the calendar of acquisitions as much as with sales, and comparing quarters means separating the two. The test comes later: whether the bought programs, from a depression compound to a shingles vaccine, reach approval and earn back what was paid.
Lower realized prices absorbed part of the volume gain, yet cost of sales still fell to 16.1% of revenue.
Volume rose 53% against a year earlier while revenue rose 38.6% to $24.4B. The filing attributes the gap to lower realized prices, with both effects driven mainly by Mounjaro and Zepbound. Volume grew 41% in the U.S. and 76% outside it; over nine months the outside-U.S. figure was 93%.1
Outside the U.S., the filing ties lower prices to Mounjaro's inclusion on China's National Reimbursement Drug List. In the U.S., lower prices came mainly from Zepbound, partly offset by revisions to rebate and discount estimates for products shipped earlier, mainly Mounjaro.1
Cost of sales fell 0.97 points to 16.1% of revenue and gross margin reached 83.9%. The filing credits improved cost of production and favorable product mix, partially offset by lower realized prices.1
AnalysisAnalysis: when one more dose costs little next to its price, a lower price that opens a large new payer can still raise total profit. Medicare's bridge program for Lilly's obesity medicines, which began this quarter, works the same way, and the filing calls continued uptake from it unknown. Rebate estimate revisions are not a recurring source of revenue, so the underlying U.S. price trend is somewhat weaker than this quarter shows.
Expensed deal costs reduce net income without touching operating cash, one reason operating cash flow reached $11.4B against $6.45B profit.
Operating cash flow was $11.4B this quarter against net income of $6.45B, 1.77 times. A year earlier it was $8.84B against $5.58B. In the cash flow statement, acquired in-process R&D is added back to net income and the purchases appear under investing activities instead. The relationship swings: in the last full fiscal year operating cash flow was $16.8B against net income of $20.6B.1
The cash is being spent heavily. Over nine months the filing shows higher spending on property and equipment, larger cash payments for acquisitions, a bond issue and less cash on hand. Management says investments in manufacturing facilities will result in higher capital expenditures in the near term.1
AnalysisAnalysis: the operating figure shows how much the medicines themselves throw off, which is large. How much is truly spare depends on how long the pace of deals and plant building continues, and this record cannot isolate the quarter's capital spending because the filing reports cash flows for nine months at a time.
Growth, profitability and cash over the years, where Eli Lilly stands among its peers, and where its profit is made.
How the model works, where every $100 of revenue goes against the industry, and how long the company took to scale.
Ten years of filings where the company has them, each against its peers.
Growth against margin in each company's latest full year; the size of a dot is its revenue. Hover a dot to read it, click to open it.
Eli Lilly, FY2025: revenue +44.7% on the year, operating margin —. Triangles sit beyond the axes; their figures are in the tooltip.
The mechanisms behind the numbers. Pick one to read it.
Lilly sells the same active ingredient, tirzepatide, under two brands: Mounjaro for type two diabetes and Zepbound for obesity, and keeps adding uses, most recently a cardiovascular risk approval in diabetes. The expensive part, discovering the molecule, proving its safety and building the plants, is paid once.
What needs scale, what a startup can take, and how to test itEli Lilly, Q3 FY2026, to operating profit: $34 of every $100 is left. Its widest gap from the industry is r&d: 34.6% of revenue against a median of 9.7%.
Each line as a share of revenue: the band holds the middle half of the Health Care companies covered that report the line, the tick is their median, the dot is Eli Lilly.
Revenue grew 3.5x from FY2007 to FY2025, first doubling in 17 years (FY2024). The pins mark each doubling of the first year shown.
Every figure is computed from the companies' own filings. Peers are the Health Care companies covered, each from its latest report, which is not a market and not a market share. A description of the business, never a view on its shares.
Revenue went from $18.6B in FY2007 to $65.2B in FY2025, over 18 years.
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Each breakdown the filing reports, as shares of revenue, for every period it restates.
Revenue - Schedule of Disaggregation of Revenue by Product (Details). The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
Margins, cash and growth for the period, each with what it was computed from.
Every breakdown the filing reports for the period, with each item's share.
| Mounjaro | $10.7B | 44.0% |
| Zepbound | $5.4B | 21.9% |
| Jardiance | $1.6B | 6.5% |
| Verzenio | $1.5B | 6.2% |
| Other cardiometabolic health | $1.2B | 4.9% |
| Other oncology | $1.1B | 4.5% |
| Trulicity | $904.0M | 3.7% |
| Taltz | $856.0M | 3.5% |
| Other immunology | $579.0M | 2.4% |
| Neuroscience | $444.0M | 1.8% |
| Other | $154.0M | 0.6% |
Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-29
| Europe | $4.5B | 18.3% |
| Rest of world | $3.2B | 13.1% |
These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-29
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.
| Cost line | Q3 FY2026 | Of revenue | Source |
|---|---|---|---|
| Costs, expenses, and other | $16.0B | 65.5% | Source10-Q, lly:CostOfSalesOperatingExpensesAndOtherNet, as reported in the 10-Q filed 2026-10-29 |
From the text of the filing rather than its statements, each with the sentence that states it.
Mounjaro, Zepbound, and Foundayo accounted for 66 percent of our total revenue for the nine months ended September 30, 2026
Volume 41 % 76 % 53 % 42 % 93 % 59 %
Volume 41 % 76 % 53 % 42 % 93 % 59 %
Volume 41 % 76 % 53 % 42 % 93 % 59 %
Volume 41 % 76 % 53 % 42 % 93 % 59 %
Volume 41 % 76 % 53 % 42 % 93 % 59 %
Volume 41 % 76 % 53 % 42 % 93 % 59 %
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Year to date, as a quarterly filing reports it.
| Line | Q3 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Cash Flows from Operating Activities | ||||
| Net income | $6.45B | $5.58B | +16% | Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29 |
| Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | ||||
| Acquired in-process research and development | $4.20B | $656.0M | +540% | Source10-Q, us-gaap:ResearchAndDevelopmentAssetAcquiredOtherThanThroughBusinessCombinationWrittenOff, as reported in the 10-Q filed 2026-10-29 |
| Statement of Cash Flows | ||||
| Cash and Cash Equivalents at September 30 | $4.89B | $9.79B | -50% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsIncludingDisposalGroupAndDiscontinuedOperations, as reported in the 10-Q filed 2026-10-29 |
Research and selling budgets grew far slower than revenue, so each fell as a share of sales while tirzepatide grew.
Lilly sells tirzepatide as Mounjaro for type two diabetes, $10.7B this quarter and up 64.6%, and as Zepbound for obesity, $5.35B and up 49.2%. Mounjaro gained 6.9 points of revenue share and Zepbound 1.55 points. The FDA has also approved tirzepatide to reduce cardiovascular risk in type two diabetes, another use for the same molecule.1
Research and development grew 22.5% to $4.25B but fell 2.3 points to 17.4% of revenue. Marketing, selling and administrative costs grew 14.0% to $3.1B and fell 2.8 points to 12.8%, against revenue growth of 38.6%. The filing ties the selling increase to promotional efforts for current and planned launches.1
AnalysisAnalysis: discovery, safety trials and plants are paid for once, and each new brand, indication or country adds patients against that same base. The advantage holds while the molecule stays protected and while the successors the filing names, the oral pill Foundayo and retatrutide, can be sold through the same channels.
Generic makers have already filed to copy Mounjaro and Zepbound, and the filing warns incretin swings move results disproportionately.
Mounjaro, Zepbound and Foundayo made up 66% of revenue over the first nine months, and management expects cardiometabolic products to remain a significant and growing portion of the business. The filing says incretin volume fluctuations from channel dynamics or demand can have a disproportionate impact on results in any given period.1
Multiple generic companies have filed to market copies of Mounjaro and Zepbound before some or all listed patents expire, and Lilly has filed infringement suits. Product liability suits over gastrointestinal injuries and an optic nerve condition are consolidated in two federal proceedings. The filing also names counterfeit and mass-compounded copies, and says Lilly is largely self-insured for litigation losses.1
AnalysisAnalysis: durability rests on successors. The filing points to Foundayo, to retatrutide, whose late-stage obesity and diabetes trials met their primary endpoints, and to eloralintide. Patients and payers would need to move to these before the original molecule's pricing power fades.
Jardiance already carries a Medicare set price, Trulicity and Verzenio are next, and Lilly expects more major products to follow.
Under the Inflation Reduction Act, the U.S. government sets Medicare prices for certain older single-source medicines. Jardiance, a Boehringer Ingelheim collaboration product worth $1.58B of revenue this quarter, is subject to a set price from this year. Trulicity, $904M, and Verzenio, $1.51B, were selected for later, and both lost revenue share this quarter. Lilly expects other significant products to be selected.1
Lilly has also agreed with the U.S. government to lower Medicaid and certain other prices and to launch new medicines with more balanced pricing across developed nations. It says efforts to align U.S. prices with international benchmarks are uncertain and may reduce revenue in certain markets.1
AnalysisAnalysis: the drugs selected so far are shrinking parts of the mix, so their set prices weigh less on the total. The larger question is when the same rules reach tirzepatide, which now carries most of the company.
Member research on this company.
What Eli Lilly's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
AnalysisGrowth now depends on volume outrunning price. Every new channel the filing describes, the Medicare bridge program for obesity drugs, China's reimbursement list, the voluntary U.S. pricing agreements, opens access in exchange for a lower price per patient. For revenue to keep compounding, enrollment in those channels has to grow faster than realized price falls. The filing itself calls continued uptake from the expanded Medicare access unknown.
AnalysisReported profit is now shaped by deal timing as much as by operations. Acquired R&D is expensed the quarter a deal closes, so net income swings with the calendar of acquisitions rather than with sales. A reader comparing quarters has to separate the two, and the question that matters is whether the bought programs, from a depression compound to an in-vivo cell therapy and a shingles vaccine, reach approval and earn back what was paid.
AnalysisThe cash figure flatters a deal-heavy quarter. Acquired R&D is a charge against net income but is paid through investing cash flow, so operating cash flow runs well ahead of net income when deals are large. Over the same nine months the company also raised capital spending for new plants, borrowed in the bond market and drew down cash. Whether the spare cash is as large as the operating figure suggests depends on how long both the deal pace and the plant build continue.
AnalysisThe succession inside tirzepatide's franchise is the long question. Generic makers have already filed to sell copies of Mounjaro and Zepbound before patents expire, and Lilly has sued. The filing places its hope for durability on new medicines: Foundayo, retatrutide, which met its primary endpoints in late-stage obesity and diabetes trials, and eloralintide. What would have to be true is that patients and payers move to these successors before the original molecule's pricing power fades.1
AnalysisPart of this quarter's U.S. price picture was helped by revisions to rebate estimates for products shipped in earlier periods, mainly Mounjaro. Such true-ups are by nature not a recurring source of revenue. A quarter without them would show the underlying price trend more plainly.1
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Business Lens describes Eli Lilly from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.
