Kenvue grew Q2 2026 sales 3.0% (organic +1.6%), but inflation, tariffs and higher marketing spend held operating income to +1.0%; EPS rose to $0.24 mainly on a lower tax rate, and a July appeals ruling revived federal Tylenol lawsuits ahead of the Kimberly-Clark deal expected to close in Q4.
Revenue
$4.0B
+3.0% YoY
Net income
$456M
+8.6% YoY
Diluted EPS
$0.24
+9.1% YoY
Operating margin
17.7%
Overview
Kenvue, the maker of Tylenol, Listerine, Neutrogena and BAND-AID, grew second-quarter 2026 net sales 3.0% to $3,955 million. Only about half of that was real growth, though. A weaker dollar added 1.4 points (sales earned in other currencies are worth more dollars when the dollar falls). Strip that out and organic sales grew 1.6%. Organic sales is the company's measure of growth from the business itself, excluding currency moves and acquisitions or disposals. That 1.6% came from 0.9 points of higher prices and better mix (the company calls this "value realization") and 0.7 points of higher volume (more units sold).
Net income rose 8.6% to $456 million and diluted EPS rose from $0.22 to $0.24. Most of that earnings growth came from a lower tax bill, not from the business. Operating income, the profit from running the business before interest and tax, rose just $7 million (1.0%) to $699 million. Gross margin fell 70 basis points (0.7 percentage points) to 58.2% because of input-cost inflation, U.S. tariffs and currency effects on transactions. Kenvue is still an independent public company. Kimberly-Clark's acquisition of it is expected to close in the fourth quarter of 2026, and Kenvue gives no financial guidance while the deal is pending.
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$3,955M
$3,839M
+3.0%
Organic sales growth
+1.6%
n/a
FX added +1.4 pts
Price/mix (value realization)
+0.9 pts
n/a
n/a
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Source: Form 10-Q for the quarter ended June 28, 2026. Adjusted EPS comes from the same day's earnings release (Exhibit 99.1 to the 8-K). Operating margin is operating income divided by net sales.
Takeaway: Kenvue's sales are growing again, but the growth isn't reaching operating profit. Organic growth of 1.6% was more than cancelled out at the gross-margin line by inflation, tariffs and currency, and by higher marketing spend. That left operating income up only 1.0% and segment profit down 1.4%. The 9% rise in EPS depended mostly on a tax rate that fell from 28.6% to 23.7%, helped by the one-time release of a valuation allowance (a reserve against tax benefits the company previously doubted it could use). That tax help is not a repeatable driver of earnings growth.
Where the growth came from: segment by segment
The three segments grew for different reasons. Skin Health and Beauty raised prices and sold more. Self Care grew only through price while volumes fell. Essential Health sold more units but at lower prices.
Segment
Reported sales change
FX impact
Organic growth
Price/mix
Volume
Self Care
+2.2%
+1.6 pts
+0.6%
+1.2 pts
-0.6 pts
Skin Health and Beauty
+5.1%
+1.4 pts
+3.7%
+2.7 pts
+1.0 pts
Essential Health
+2.3%
+1.2 pts
+1.1%
-0.8 pts
+1.9 pts
Total
+3.0%
+1.4 pts
+1.6%
+0.9 pts
+0.7 pts
Segment
Sales Q2 2026
Segment adj. operating income Q2 2026
Q2 2025
Change
Segment margin* Q2 2026 vs Q2 2025
Self Care
$1,589M
$512M
$527M
-2.8%
32.2% vs 33.9%
Skin Health and Beauty
$1,113M
$186M
$149M
+24.8%
16.7% vs 14.1%
Essential Health
$1,253M
$315M
$351M
-10.3%
25.1% vs 28.7%
Total
$3,955M
$1,013M
$1,027M
-1.4%
25.6% vs 26.8%
*Segment margin = segment adjusted operating income / segment sales, our calculation from the 10-Q figures. Segment adjusted operating income is Kenvue's own measure. It leaves out depreciation, amortization, restructuring, separation and merger costs, and corporate overhead.
Self Care (Tylenol, Zyrtec, Nicorette, Benadryl). Organic sales rose 0.6%, but only because prices went up. The 10-Q credits the 1.2-point price gain to "new pricing actions in EMEA and prior fiscal year carry-over pricing actions in North America." Volume fell 0.6 points, which the 10-Q attributes to "lower incidences of illnesses affecting Allergy Care, pediatric Pain Care, and Cough and Cold." A mild season for colds and allergies means fewer people buy the medicine, so this is partly seasonal rather than a loss of customers. The earnings release says U.S. Tylenol consumption "continued to improve sequentially" and that the brand "gained slight market share vs the prior year period." Segment profit still fell $15 million because of higher brand support (advertising and promotion), input-cost inflation, currency and tariffs. For the first half, Self Care organic sales were down 0.9%, with volume down 2.3 points.
Skin Health and Beauty (Neutrogena, Aveeno, OGX, Rogaine). This was the strongest segment. Organic growth was 3.7%, with 2.7 points from price/mix and 1.0 point from volume. The 10-Q attributes the pricing gain to "new pricing actions in Latin America and lower strategic price investments in North America and Latin America." In plain terms, Kenvue discounted less than it did a year earlier. Volume came from e-commerce, new products and hair-regrowth products. Segment profit rose 24.8% to $186 million because prices were better and brand support spending fell, "in part attributable to media cost improvements." Even so, the segment margin of 16.7% is still far below the other two segments, so this is a recovery from a low base. For the first half, segment profit was up 46.9% to $354 million.
Essential Health (Listerine, BAND-AID, Johnson's baby products). Volume grew 1.9 points on e-commerce, new products and distribution gains in wound care, and promotions in baby care. Prices fell 0.8 points because of "increased strategic price investments across all regions." That means deeper discounts and promotions to hold or win share. Oral care volume also fell, which the 10-Q attributes to "competitive pressures." Selling more units at lower prices while paying more for brand support, inputs and tariffs cut segment profit by 10.3% to $315 million. Its segment margin fell about 3.5 points, the largest drop of any segment.
Margins: inflation and tariffs outweighed the savings
Gross margin fell to 58.2% from 58.9%. The 10-Q says the decline was "driven by net input cost inflation, the impact of tariffs imposed on goods imported into the United States, and unfavorable changes in transactional foreign currency exchange rates," partly offset by supply-chain savings and price increases. Kenvue estimates its gross tariff exposure at about $80 million a year. The 10-Q adds that the conflict in the Middle East has made raw-material, logistics and transport costs more volatile.
Selling, general and administrative (SG&A) costs rose 2.2% to $1,537 million. Brand support, currency translation and $16 million of Kimberly-Clark deal costs pushed them up. Restructuring savings and a $16 million drop in the costs of separating from Johnson & Johnson pushed them down. SG&A as a share of sales still fell to 38.9% from 39.2%.
The first half looks better than the quarter. Six-month operating income rose 17.3% to $1,466 million and net income rose 25.3% to $930 million. Most of that improvement came in Q1. Over the half, SG&A fell $51 million, mainly because of restructuring savings and $46 million less in separation costs, and gross margin held roughly flat at 58.5%.
The Kimberly-Clark deal
Terms: For each Kenvue share, shareholders will receive 0.14625 Kimberly-Clark shares plus $3.50 in cash. After closing, current Kenvue shareholders are expected to own about 46% of the combined company and Kimberly-Clark shareholders about 54%.
Approvals so far: Both companies' shareholders approved the deal on January 29, 2026. The U.S. antitrust waiting period (under the Hart-Scott-Rodino Act) expired on February 4, 2026.
Remaining: A number of foreign regulatory approvals and other customary closing conditions. The 10-Q says the deal "is expected to close in the fourth quarter of 2026."
Cost so far: Deal-related costs (advisory, legal and professional fees) were $16 million in Q2 and $32 million in the first half. The year-ago periods had none. In the company's adjusted EPS reconciliation, these costs amount to $0.01 per share for the quarter and $0.02 for the half.
Guidance: The earnings release says: "Due to the pending transaction with Kimberly-Clark, the Company will not be providing forward-looking guidance."
Tylenol litigation: an appeals ruling in July
The 10-Q reports a significant legal change from after the quarter ended. Lawsuits claim that using acetaminophen (Tylenol's active ingredient) during pregnancy is linked to autism and ADHD in children. The federal lawsuits were grouped into a single multi-district litigation in the Southern District of New York. In February 2024 that court entered final judgment for Kenvue's subsidiary and the other sellers, and all remaining federal cases were dismissed by August 2024. The plaintiffs appealed. In July 2026, the Second Circuit Court of Appeals "vacated the District Court's judgment and remanded for further proceedings, affirming in part and reversing in part the District Court's rulings." The federal cases therefore go back to the lower court. The 10-Q also says that "product liability lawsuits continue to be filed" and that there are related suits in U.S. state courts and in Canada. Kenvue states it is "unable to reasonably estimate either the likelihood or the magnitude of its potential liability" from these claims, so it has recorded no specific figure for them.
Separately, in October 2025 the State of Texas sued Kenvue, its subsidiary and J&J under Texas consumer-protection and fraudulent-transfer laws over the same acetaminophen allegations. In November 2025 the court dismissed the claims against Kenvue and J&J, and the fraudulent-transfer claims against the subsidiary. A notice of appeal was filed in December 2025. Here too, Kenvue says it cannot estimate the likelihood or size of any liability.
Other disclosures:
Oral phenylephrine (a decongestant): In July 2026 the Second Circuit also partly reversed the dismissal of class actions claiming the ingredient doesn't work.
Talc powder: Group lawsuits over Johnson's Baby Powder continue in England, Scotland and Australia. J&J kept the talc liabilities for products sold in the U.S. and Canada, but Kenvue remains responsible for talc claims from products sold elsewhere.
Cash and balance sheet
Operating cash flow for the first half was $1,177 million, up from $1,049 million. Capital spending was $203 million, and dividends paid were $796 million. Kenvue repaid $750 million of 5.35% notes due 2026 in February, partly by issuing $680 million of net commercial paper (short-term company borrowing). At June 28, 2026, total debt was $8,480 million and cash was $1,110 million. On July 29, 2026, the board raised the quarterly dividend 1.2% to $0.21 a share.
Kenvue also has a restructuring program approved in February 2026. It expects about $250 million of pre-tax restructuring charges in fiscal 2026 and about $200 million a year in gross cost savings once the program is complete. Q2 restructuring expenses were $59 million.
Outlook
Kenvue gives no guidance, so this section is our own view. Three things to watch in the next quarter:
Whether sales growth starts reaching profit. Price increases are now recovering part of the cost inflation, but tariffs (about $80 million a year) and higher brand spending are taking more. Unless the $200 million of annual savings from the 2026 restructuring show up faster, operating margin is likely to stay about flat year on year.
Self Care volume in cold-and-flu season. Most of the volume decline the 10-Q names (allergy, pediatric pain care, cough and cold) comes from lower illness rates, not lost customers. That makes volume depend on the season. A normal cold-and-flu season would help, and another weak one would extend the first half's 2.3-point volume drop.
What happens next in the Tylenol litigation. The federal cases now go back to the lower court after the July appeals ruling. Kenvue records no amount for this risk. Any settlement or new estimate would fall within the timing of the Kimberly-Clark closing and could matter to the combined company.
If the deal closes in the fourth quarter as expected, the Q3 2026 10-Q may be one of Kenvue's last reports as an independent company.