Eli Lilly Q3 2026: revenue up 39% to $24.4B, but $4.2B of deal charges held EPS growth to 16%

Eli Lilly's third quarter was another big step up in sales, and a much smaller one in reported profit. Revenue rose 39% to $24,397M, driven by a 53% jump in the volume of medicine sold, partly offset by 15% lower realized prices (what Lilly actually collects after rebates and discounts). Mounjaro and Zepbound, the two brands of the drug tirzepatide, brought in $16,075M, two-thirds of the total. Diluted EPS rose only 16% to $7.22, because Lilly booked a $4,181M charge for drug programs it bought, mainly from the AtaiBeckley and Curevo acquisitions. Lilly raised its 2026 revenue guidance by $5.5bn at the midpoint, to $91–92bn.

Q3 2026 in numbers

Source: Lilly's Q3 2026 Form 10-Q and earnings release. Margins and tirzepatide totals are our arithmetic from the filing's figures.

Where the revenue came from

Tirzepatide is still the story. Mounjaro is the diabetes brand; Zepbound is the obesity brand, used only in the US, Canada and Japan. Elsewhere, obesity patients get tirzepatide as Mounjaro, which is why Mounjaro outside the US grew 93% to $5,725M. Lilly says that growth came from volume, "partially offset by lower realized prices driven by the inclusion of Mounjaro on the NRDL in China" (China's national reimbursement list, which brings far more patients at a much lower price). US Zepbound grew 48% to $5,267M on "strong demand, partially offset by lower realized prices."

Price is the cost of that volume. In the US, volume rose 41% and realized prices fell 7%, mostly on Zepbound. Outside the US, volume rose 76% and prices fell 29%. Q3 was also the first quarter of the Medicare GLP-1 Bridge program, which gives Medicare patients discounted Lilly obesity drugs from July 1, 2026; the filing says "continued uptake from this expanded access is unknown" and does not quantify it.

The newer drugs are adding up. Lilly's eight "Key Products" brought in $17.1bn. Outside tirzepatide, Jaypirca (blood cancer, $228M, +59%), Ebglyss (eczema, $202M, +59%), Kisunla (Alzheimer's, $193M, +175%) and Omvoh (bowel disease, $114M, +76%) are growing fast from small bases. Foundayo, the once-daily GLP-1 pill launched this year, sold $184M in the quarter. Lilly says Key Products in immunology, oncology and neuroscience grew 100%.

The older drugs are fading. Trulicity, the previous-generation diabetes injection, fell 14% to $904M; Taltz fell 5%. Verzenio, the breast-cancer drug, grew 3%; Medicare will set its price from 2028, and Cipla has applied to sell a generic before its compound patent expires (trial set for May 2028). Jardiance's 65% jump is mostly the milestone discussed below.

Where the money went

• R&D rose 23% to $4,247M (17.4% of revenue), "driven by continued investments in our early and late-stage portfolio."
• Marketing, selling and administrative costs rose 14% to $3,125M, for "promotional efforts supporting ongoing and planned launches."
• Gross margin (revenue minus the cost of making the product) rose 1.0 point to 83.9%, which Lilly credits to "favorable product mix and improved cost of production, partially offset by lower realized prices." Cheaper manufacturing is still more than paying for the price cuts.
• Acquired IPR&D was $4,181M, against $656M a year ago. This is the charge Lilly takes when it buys an experimental drug that is not yet approved: the price is expensed at once instead of being spread over years. This quarter it was "primarily related to the acquisitions of AtaiBeckley and Curevo" (AtaiBeckley develops treatments for treatment-resistant depression).
• Special charges were $303M (vs $365M), mainly "a partial impairment of an intangible asset associated with a molecule in development."

Takeaway: Before deal charges, Lilly's operating margin widened from about 46% to about 52% on 39% more revenue, so the business is getting more profitable as it grows despite steep price cuts. The reported 16% EPS gain mostly reflects how much Lilly is spending to buy its next generation of drugs, not a slowdown in the one it sells now.

What the headline numbers hide

Reported EPS understates the quarter. Acquired IPR&D cut EPS by $4.57, against $0.71 a year ago. Lilly's non-GAAP (adjusted) EPS of $7.48 does not remove it: the adjustments are only intangible amortization ($0.11), special charges ($0.18) and equity-investment gains (−$0.04). Adding the IPR&D back, EPS was about $11.79 against $6.92, up 70%; on the non-GAAP basis it was about $12.05 against $7.73, up 56%. That is our arithmetic from Lilly's own per-share figures. Lilly buys companies every quarter, so some IPR&D cost is a normal part of its business, but $4.2bn in a quarter is six times last year's level.

Operating margin fell, and that is the same charge. Reported operating margin fell from 41.8% to 35.3%. Adding acquired IPR&D back to operating income, the margin rose from about 45.6% to about 52.4%.

About $900M of revenue was one-time help. Lilly says Q3 revenue "included approximately $900 million of benefits." The pieces it names:

• A $410M Jardiance sales milestone from Boehringer Ingelheim, against $200M a year ago. The 10-Q says "no further sales-based milestones remain."
• Revisions to rebate estimates for products shipped in earlier periods were 2% of US revenue, against less than 1% a year ago. On $15,136M of US sales that is roughly $300M (our estimate).

The year-ago quarter also had help: the $200M milestone and $180M from selling Cialis rights in some markets. Taking those items out of both years, revenue growth was still roughly 36% rather than 39% (our estimate).

Tax did not help. The tax rate rose to 23.3% from 22.8%, because the IPR&D charges are not tax-deductible. Last year's Q3 also carried a $350M charge ($0.39 a share) from US tax-law changes. That charge did not recur, so it flatters this year's comparison a little.

Buybacks were not a factor. Diluted shares fell only 0.6% (893.4M vs 898.8M). Lilly repurchased $377M of stock in Q3, against $708M a year ago, and paid $1,541M in dividends. Those are our quarterly figures from the difference between the nine-month and six-month cash flow statements.

Cash conversion is strong. Q3 operating cash flow was about $11.4bn against $6.5bn of net income (nine months: $27,420M vs $20,942M, up from $13,588M). That flatters the ratio somewhat: IPR&D lowers net income but Lilly reports the cash it pays for it as an investing outflow. Capital spending was about $3.2bn in the quarter ($8,437M for nine months, up from $5,294M) as Lilly builds new US plants.

Working capital is growing, but not faster than sales. Since December:

• Receivables rose 24% to $22,089M and inventory rose 32% to $18,194M. Nine-month revenue rose 46%.
• The liability for rebates and discounts Lilly owes rose 39% to $24,170M, which fits more volume sold at negotiated prices.

Deals are being funded partly with debt. Lilly paid $18.2bn for business development in nine months (Centessa, Kelonia, AtaiBeckley, Orna, Ventyx, Curevo, Ajax). Total debt rose $7.0bn to $49.5bn and cash fell to $4.9bn. In October it also closed Merida Biosciences for up to $2.9bn.

On balance the quarter is understated: the $4.57-a-share IPR&D charge weighs on EPS far more than the roughly $900M of milestone and rebate benefits help it.

Did last time's read hold up?

Mostly not, and in Lilly's favor. Our Q2 report took Lilly's then-guidance to imply second-half revenue of $21.1–22.1bn a quarter, below Q2's $23.0bn. We expected lower reported growth as the milestone and rebate boosts faded and discounted Medicare volume arrived. Q3 revenue was $24.4bn instead. Growth did slow, from 48% to 39%, but the one-time help did not fade: it rose to about $900M from about $680M in Q2. We also flagged that IPR&D after June 30 was not in guidance, and that the pending AtaiBeckley deal could add charges. It did: $4,181M of IPR&D took $4.57 off EPS and out of the full-year range.

Guidance and outlook

"Performance margin" is Lilly's own measure: gross margin minus R&D and marketing/selling/administrative costs, as a share of revenue. It leaves out IPR&D charges. The lower EPS range is not a cut to the business: Lilly raised underlying EPS by $4.07 at the midpoint and then subtracted the $4.57 Q3 IPR&D charge. As before, guidance "does not include acquired IPR&D incurred after September 30, 2026," so the Merida deal closed in October could lower reported EPS further.

What the guidance implies for Q4 (our arithmetic):

• Revenue: $91–92bn for the year, after $67,170M in nine months, leaves $23.8–24.8bn for Q4, roughly flat with Q3.
• Margin: Lilly's nine-month performance margin works out to about 53.2%. The full-year range implies about 49–51% in Q4, a step down from about 54% in Q3.

So Lilly is again guiding below its latest quarter. Lilly says the first three quarters "benefited from sales-based milestones and adjustments to estimates for rebates and discounts," and the Jardiance milestones are now finished.

What to watch in Q4:

1. Price vs volume in the US. Realized prices fell 7% this quarter. Medicare Bridge volume and Foundayo's ramp will show whether US prices keep falling faster.
2. Revenue without the one-offs. With no Jardiance milestone left, Q4 will show how much of the rebate-revision benefit continues.
3. The pipeline. Lilly plans Phase 3 trials of EloraTZP (eloralintide plus tirzepatide) in Q4 2026. Retatrutide, its next-generation obesity drug, beat Ozempic's top dose head to head in type 2 diabetes. The bought-in programs, meanwhile, will keep adding IPR&D charges each time a deal closes.

Our read: the tirzepatide business is growing faster than Lilly's own guidance assumed in July, and it is getting more profitable while prices fall. The risks are concentration and pricing. Two brands are two-thirds of revenue, several generic makers have filed to copy Mounjaro and Zepbound (Lilly sued in August), and US price policy is still moving.