AMGN — Q2 2026 Financial Report Analysis

Overview

Amgen's second quarter of 2026 (the three months to June 30, filed on Form 10-Q on August 5) produced two very different-looking earnings numbers from the same set of results. Reported (GAAP) earnings per share jumped 65%, from $2.65 to $4.37. Adjusted (non-GAAP) earnings per share — the version that strips out accounting charges tied to past acquisitions — rose 4%, from $6.02 to $6.29.

Almost the entire gap comes from Amgen's 2023 purchase of Horizon Therapeutics. When a company buys another, it must write off the value of the acquired drug rights a bit at a time, as a non-cash expense called amortization. That expense is now rolling off: the acquisition-related charge inside cost of sales fell from $1,460 million a year ago to $937 million this quarter, a $523 million reduction that flows straight to reported operating profit without anyone selling a single extra vial. Reported operating income rose $858 million, so roughly 60% of the improvement is that accounting roll-off rather than better trading.

The underlying business did grow, just less dramatically. Product sales rose 9% to $9,537 million, and the 10-Q attributes that to volume — more units bought by physicians, clinics, hospitals and pharmacies — rather than price: U.S. volume grew 9% and rest-of-world volume 8%, "driven by certain brands, including Repatha, EVENITY, UPLIZNA, TEZSPIRE, IMDELLTRA/IMDYLLTRA and PAVBLU." Total revenues, which also include royalties and partner payments, rose 10% to $10,054 million, helped by a 27% increase in other revenues from higher corporate partner revenue and royalty income.

Key metrics

Operating margin is the share of sales left after the costs of making and selling the product and of research, before interest and tax. Amgen states margins as a percentage of product sales; on total revenues, GAAP operating margin was 35.0%. Free cash flow is operating cash flow minus spending on plants and equipment.

A portfolio moving in two directions at once

The single largest force in these results is the collapse of Amgen's two denosumab bone drugs. Prolia fell 32% to $759 million and XGEVA fell 34% to $352 million. Together they lost $543 million of quarterly sales year over year — equal to 6% of the entire prior-year quarter's product sales. The 10-Q is blunt about the cause and the trajectory: Prolia's decline was driven by 20% lower volume and 12% lower net selling price, XGEVA's by 22% lower volume and 8% lower net selling price, after the patents covering the underlying antibody expired in the United States in February 2025 and in select European countries in November 2025. Amgen adds that for the rest of 2026 it "continue[s] to expect accelerated sales erosion driven by increased competition, as multiple biosimilars have launched in the United States and ROW." (A biosimilar is a near-copy of a biologic drug, made by a competitor once patent protection lapses; unlike a chemical generic it is not identical, but it competes on price in the same way.)

That $543 million hole was more than filled by newer products. Repatha, the cholesterol-lowering injection, grew 37% to $953 million, with U.S. sales up 41% and rest-of-world up 32%, on volume. EVENITY, an osteoporosis treatment, rose 38% to $714 million on volume. TEZSPIRE (severe asthma, marketed outside the U.S. by AstraZeneca) rose 42% to $486 million. UPLIZNA rose 90% to $335 million and IMDELLTRA/IMDYLLTRA, the small-cell lung cancer drug, grew 115% to $288 million — both on volume. PAVBLU, Amgen's biosimilar of Regeneron's eye drug EYLEA, rose 121% to $287 million, which Amgen explicitly ties to "its position as the only commercially available biosimilar to EYLEA in the U.S. during this period" — a qualifier worth noting, since that exclusivity is a timing advantage rather than a durable one. Chief executive Robert Bradway framed the quarter around "six key growth drivers" that he said grew 26% and generated nearly 70% of second-quarter product sales.

Two other declines are policy-driven rather than competitive, and both have further to run. ENBREL fell only 4% to $580 million, but that headline masks the real move: net selling price fell 22%, "resulting from the impact of U.S. Medicare Part D price setting under the IRA, effective January 1, 2026, as well as an increase in 340B Program mix," offset by a 16-point favorable swing in estimated sales deductions. Those deduction estimates are true-ups of amounts Amgen sets aside for rebates and discounts; they can reverse, and they did not exist as a cushion in the first quarter, when ENBREL managed only $320 million of the $900 million first-half total. Otezla fell 21% to $491 million on 9% lower price and 6% lower volume, with European generics arriving after loss of exclusivity in certain countries in the first quarter of 2026 — and Amgen warns of "further declines in net selling price driven by Medicare price setting beginning in 2027," when the drug's U.S. government-negotiated price takes effect.

Takeaway: The 65% jump in reported EPS is accounting, not operating leverage — roughly $523 million of it is Horizon acquisition amortization rolling off, and the prior-year quarter was depressed by a $394 million mark-to-market loss on Amgen's BeOne stake. Strip both out and earnings grew 4% on 9% volume-led product-sales growth, while the underlying cost of making the drugs got worse, not better.

Margins: the reported improvement runs the other way underneath

Reported cost of sales fell to 29.5% of product sales from 34.3%. But on Amgen's own adjusted basis — which removes the acquisition amortization — cost of sales rose to 19.6% of product sales from 17.7%, a 1.9-point deterioration. The 10-Q names the causes: "higher profit share expense, higher manufacturing costs and changes in our sales mix." Profit share is money paid to partners on co-developed drugs; TEZSPIRE, one of the fastest-growing products, is shared with AstraZeneca, so the faster it grows the more of its revenue Amgen hands over. Growth in the mix is genuinely less profitable than the denosumab sales it replaces.

R&D rose 7% to $1,868 million in the quarter and 11% to $3,587 million for the half, driven in both cases by "higher spend in Later-Stage Clinical Programs, primarily those related to MariTide" — the once-monthly obesity drug now running nine Phase 3 studies. Selling, general and administrative costs rose 3% to $1,745 million. Adjusted operating margin therefore slipped half a point to 48.4% of product sales despite the 9% sales growth: MariTide is being paid for out of current profit.

Below the operating line, the year-over-year comparison flatters 2026 twice more. Other expense was $73 million against $394 million a year ago, a swing the filing attributes to "lower net unrealized losses on equity investments, primarily BeOne" — a paper valuation change on a shareholding, not cash. Over the first half the same line went from $1,124 million of income in 2025 to $2 million in 2026, which is why half-year net income rose only 33% while half-year operating income rose 61%. Interest expense, net, eased to $673 million from $694 million on lower average debt. The reported tax rate rose to 14.2% from 8.7%, "primarily due to the change in earnings mix, including lower amortization expense" — less amortization means more taxable profit in higher-rate jurisdictions, so part of the amortization benefit is handed back to the tax authorities.

Cash, debt and capital returns

Amgen generated $4.0 billion of operating cash flow in the quarter and $3.5 billion of free cash flow, against $1.9 billion a year earlier; the improvement is largely the absence of the final $1.8 billion repatriation tax payment made in the second quarter of 2025. Cash stood at $14.0 billion at June 30 against $57.3 billion of debt, up from $54.6 billion at year-end after $4.0 billion of new issuance in the first half at coupons of 4.20% to 5.65%. Amgen retired the €750 million 2.00% 2026 euro notes for $833 million and bought back $324 million of principal for $233 million, booking a $90 million gain.

The quarterly dividend is $2.52 per share, up 6% year over year, costing $2.7 billion in the first half. Amgen repurchased no stock in the first half, with $6.8 billion of authorization unused and full-year guidance still allowing up to $3.0 billion. With roughly $43 billion of net debt still outstanding from the Horizon deal, the balance sheet — not the share count — is where the cash is going.

Guidance and trajectory

Amgen raised full-year 2026 guidance alongside the quarter. Revenue is now expected at $38.2–39.4 billion, up from the $37.1–38.5 billion range given in late April; adjusted EPS is now $22.30–23.50, up from $21.70–23.10; reported EPS is $15.80–17.08; the adjusted tax rate is unchanged at 15.0–16.5%; capital spending is about $2.6 billion.

The raise is smaller than it looks once it is set against what has already been banked. First-half revenue was $18,672 million, so the guidance midpoint of $38.8 billion implies second-half revenue of about $20.1 billion against $19.4 billion in the second half of 2025 — growth of roughly 4%, against the 8% Amgen just delivered in the first half. At the bottom of the range, second-half growth is essentially zero. Adjusted EPS guidance implies a second half of about $10.86–12.06 against $11.44 already earned in the first. Management says as much in the 10-Q: "For the remainder of 2026, we expect volume growth from certain brands to be partially offset by net selling price declines."

That deceleration is the honest shape of the business right now. The growth products are compounding fast and are mostly volume-driven, which is the durable kind of growth; but Prolia and XGEVA erosion is accelerating rather than stabilising, Otezla faces a second, larger price cut when Medicare's negotiated price starts in 2027, and ENBREL's IRA price reset is permanent while the sales-deduction true-up that softened it this quarter is not. Prolia and XGEVA together lost $1,070 million of sales in the first half alone, and ENBREL and Otezla a further $347 million; Amgen has to out-run roughly $2.5 billion a year of biosimilar, generic and legislated price loss before any of the new products count as net growth.

Three items in the filings deserve watching for reasons that are not in this quarter's numbers:

• MariTide. The obesity program is now the main claim on R&D and the main reason to hold the stock at a growth multiple, with nine Phase 3 studies running across obesity, type 2 diabetes, cardiovascular outcomes, heart failure, sleep apnea and switching from weekly GLP-1 drugs, plus three more diabetes studies to start in 2026. Nothing in this quarter tests the thesis; the cost is already in the P&L and the revenue is years away. Amgen also discontinued development of AMG 513, a separate obesity candidate.
• The IRS dispute. Amgen is contesting deficiency notices seeking roughly $3.6 billion of additional federal tax for 2010–2012 and $5.1 billion plus about $2.0 billion of penalties for 2013–2015, over how profits are allocated between the U.S. and Puerto Rico. Amounts already accrued as repatriation tax would offset up to about $900 million and $2.2 billion respectively. The trial concluded in January 2025 and Amgen expects a U.S. Tax Court decision "no earlier than late 2026 or early 2027." The IRS has since issued a draft adjustment on the same issue for 2016–2018 and opened an audit of 2019–2022. Against $14.0 billion of cash and $57.3 billion of debt, an adverse ruling is a genuine balance-sheet event, and the timing means it could land within two quarters.
• Two regulatory overhangs. The FDA's drug-evaluation centre has asked Amgen to voluntarily withdraw TAVNEOS — a $150 million-per-quarter product growing 36% — from the U.S. market; Amgen requested a hearing on June 1 and filed supporting materials on July 23, arguing the benefit-risk profile is favourable. Separately, two studies of subcutaneous blinatumomab have paused enrolment under a partial FDA clinical hold, with discussions underway on reopening them.

On balance: the operating business is growing on volume across an unusually broad set of products, and the guidance raise is real. But the reported earnings line will keep flattering that growth for as long as Horizon amortization keeps rolling off, and the price-driven erosion on the other side of the portfolio is scheduled to get worse in 2027, not better. The adjusted 4% is the number to track.

Source: Amgen Inc. Form 10-Q for the quarterly period ended June 30, 2026 (filed August 5, 2026) and the second-quarter 2026 earnings release furnished as Exhibit 99.1 to the Form 8-K dated August 4, 2026.