Johnson & Johnson-JNJ-Q1 FY-26 Earnings Call Note-pushing worldwide revenue to $24.1 billion

Johnson & Johnson (JNJ) Q1 FY2026 Earnings: Strong Beat and Raise Driven by Pipeline Wins Despite STELARA Headwinds

Johnson & Johnson kicked off fiscal 2026 with a highly confident “beat and raise” quarter. The biggest storyline heading into the year was how the healthcare giant would manage the patent cliff for its blockbuster immunology drug, STELARA. The first quarter provided a definitive answer: J&J is outgrowing the loss through sheer volume and pipeline execution.

The company delivered 6.4% operational sales growth, pushing worldwide revenue to $24.1 billion. If you strip out the massive drag from STELARA, the rest of the enterprise actually grew at a blistering double-digit pace. Management was noticeably upbeat, using the call to reiterate a clear line of sight to cross the $100 billion revenue mark this year for the first time in company history, while reaffirming their ambition to hit double-digit top-line growth by the end of the decade.

While the top line was pristine, the bottom line saw some slight compression. Adjusted EPS slipped 2.5% year-over-year to $2.70, largely because the company is spending aggressively right now to launch new products and integrate its recent Intra-Cellular acquisition. Wall Street typically forgives near-term margin compression when it buys future growth, and J&J’s raised full-year guidance suggests the heavy lifting in the first half will pay off in the back half of the year.

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Key Financial Highlights

The underlying numbers paint a picture of a company successfully rotating its portfolio toward higher-growth assets.

• Worldwide Sales: $24.1 billion, representing operational growth of 6.4%.
• US vs International: The U.S. market was the primary engine, growing 8.3%, while international sales grew a steady 3.9%.
• Adjusted Net Earnings: $6.6 billion, a slight decrease of 1.4% compared to Q1 2025.

• Adjusted EPS: $2.70, representing a 2.5% decline.
• Free Cash Flow: Came in at $1.5 billion. Management noted this run rate is below their full-year projection due to expected timing on U.S. rebate programs and higher capital expenditures, but they remain locked in on their $21 billion full-year target.
• Gross Margins: Cost of Goods Sold deleveraged by 10 basis points, hit by MedTech tariffs and unfavorable product mix in Innovative Medicine.
• SG&A Expenses: Deleveraged by 180 basis points as the company heavily funded early-year new product launches and absorbed Intra-Cellular integration costs.
• GAAP Noise (Talc Impact): It is important to note that Q1 2025 included a massive $7 billion talc reserve reversal. Because that did not reoccur this quarter, GAAP-level “Other Income and Expense” and the effective tax rate look vastly different year-over-year. Adjusted figures provide a much cleaner look at the core business.

Operational and Segment Breakdown

Innovative Medicine: The Crown Jewel

The pharmaceutical division, now branded as Innovative Medicine, was the undisputed star of the quarter. Sales hit $15.4 billion, up 7.4% operationally. What makes this impressive is that they achieved this despite a brutal 920 basis point headwind from STELARA, which saw sales plummet 61.7% due to biosimilar competition and unfavorable patient mix.

Goldman Sachs – GS-Q1 FY2026 Earnings Call Note-second-highest quarterly net revenues -17.2 billion

Without STELARA, the pharmaceutical business grew an incredible 16.6%. Ten different brands posted double-digit growth.

• Oncology: The multiple myeloma portfolio continues to dominate. DARZALEX remains the gold standard, pulling in $4 billion for the quarter with 17.8% growth. Newer therapies are also ramping fast: CARVYKTI sales hit $600 million (up 57.4%), while TECVAYLI and TALVEY grew 30.1% and 72.8% respectively. In lung cancer, the RYBREVANT franchise grew 80.5%, fueled by new subcutaneous dosing approvals.

• Immunology: TREMFYA is doing the heavy lifting to replace STELARA, posting 63.8% growth and capturing the market lead for new patient starts in inflammatory bowel disease (IBD). But the real excitement is around the newly approved ICOTYDE, a once-daily oral peptide for plaque psoriasis.

• Neuroscience: SPRAVATO grew 44.5%. Meanwhile, CAPLYTA (acquired via Intra-Cellular) brought in $270 million, showing strong momentum in adjunctive major depressive disorder (aMDD). Management believes CAPLYTA has peak sales potential of over $5 billion.

MedTech: Solid Base with High-Growth Acquired Assets

The MedTech division posted $8.6 billion in sales, up 4.6% operationally. While slightly slower than previous quarters, management chalked this up to normal Q1 seasonality and localized weather impacts in the U.S.

• Cardiovascular: This is J&J’s new high-growth sandbox. Electrophysiology grew 9.5%, fueled by the VARIPULSE platform. The big M&A bets are paying off: Abiomed grew 14.4% on strong Impella adoption, and Shockwave surged 18.1% as intravascular lithotripsy (IVL) becomes the standard of care for calcified lesions.

• Vision: A mixed bag. Overall growth was 3.6%. Contact lenses grew 2.7%, driven by the ACUVUE OASYS 1-Day family. Surgical Vision grew 6% globally, but actually declined nearly 3% in the U.S. due to fierce competition. J&J is banking on the recent FDA approval of the TECNIS PureSee lens to win back U.S. market share later this year.

• Surgery: Grew a modest 1.2%. Biosurgery and wound closure performed well, but the division faced headwinds from value-based procurement (VBP) in China and competitive pressures in energy and endocutters.

• Orthopaedics: This segment flew under the radar but delivered a solid 3.2% growth rate. Under the leadership of Namal Nawana, the unit is showing encouraging momentum as J&J preps the business for its mid-2027 separation.

Sector-Specific Pipeline and Catalysts

J&J is heavily relying on its pipeline to carry the growth narrative into the next decade. Management flagged several key sector-specific catalysts to watch:

• Innovative Medicine Catalysts: * Expecting regulatory approval for TREMFYA to inhibit structural joint damage in psoriatic arthritis.

• Upcoming data readouts for ERLEADA in high-risk prostate cancer and CAPLYTA in bipolar mania.

• Next-Gen Bladder Cancer (ERDA): Following the massive success of INLEXZO (which delivers medicine for three weeks), J&J is prepping ERDA. This intravascular drug-releasing system delivers targeted therapy (erdafitinib) for three months and has already shown a complete response rate north of 90% in biomarker-defined populations.

• MedTech Catalysts: * Approvals and submissions expected for the OTTAVA Robotic Surgical System (currently in a second trial for inguinal hernia repair).

• U.S. launch of the VARIPULSE Pro and the dual energy THERMOCOOL SMARTTOUCH SF catheter.

• Regulatory progress for ETHIZIA in biosurgery.

Management Commentary and Strategic Direction

The overarching theme from CEO Joaquin Duato was total confidence in the organic pipeline. He made it a point to emphasize that J&J does not need to buy its way to its long-term goals.

“We are on track to meet our 2026 target of $100 billion in annual revenue for the first time, and we are confident our progress will continue to improve into 2027, with line of sight to double-digit growth by the end of the decade.” – Joaquin Duato, CEO

Duato highlighted that J&J currently has 28 platforms or products generating at least $1 billion in annual revenue. The strategy is clear: survive the STELARA cliff by stacking base hits and occasional home runs across Oncology and Immunology, while using MedTech acquisitions to create a sustainable, high-margin cardiovascular business.

The messaging around the Orthopaedics business separation remains steady. J&J is actively evaluating the best vehicle to spin off or sell the DePuy Synthes unit, which will instantly lift the growth profile of the remaining enterprise.

Guidance and Outlook

J&J operates from a position of strength, allowing them to raise their full-year outlook just one quarter into the year.

• Operational Sales: Raised to a range of 5.9% to 6.9%, with a midpoint of $100.2 billion (or 6.4% growth).

• Reported Sales: Expected between 6.5% to 7.5%, netting a midpoint of $100.8 billion.

• Adjusted EPS: Bumped up by $0.02 to a range of $11.30 to $11.50 (representing 5.7% growth at the midpoint).

• Margins: Despite the Q1 contraction, management maintained their goal of improving adjusted pre-tax operating margins by at least 50 basis points for the full year.

Note: FY2026 includes a 53rd operating week, which management estimates provides a roughly 100 basis point benefit to the top line, mostly hitting in Q4.

Positives to Watch

• The ICOTYDE Launch: This oral psoriasis drug is off to a scorching start. The first patient was dosed within 24 hours of FDA approval. It has the potential to reshape the market by pulling patients off endless cycles of topical creams and onto a systemic pill.

• Bladder Cancer Dominance: INLEXZO is wildly outperforming expectations for high-risk non-muscle invasive bladder cancer. With a permanent J-code secured on April 1, new patient insertions jumped 50% in week one and nearly 90% in week two.

• Impella Long-Term Data: MedTech management highlighted the DanGer Shock trial results, showing that routine use of Abiomed’s Impella devices leads to an absolute mortality reduction of 16.3% at 10 years, equating to an average of 600 additional days alive for patients. That kind of clinical evidence creates a near-impenetrable moat.

Risks and Concerns

• U.S. Surgical Vision Weakness: The U.S. intraocular lens market is a knife fight. J&J saw a slight decline here due to aggressive new entrants. They need their new TECNIS PureSee lens to gain rapid traction to defend their turf.

• Margin Timing: The company is promising full-year margin expansion despite a Q1 contraction. This requires a flawless pivot in the second half of the year where revenue outpaces the current heavy launch investments. If launch trajectories stumble, margins will suffer.

• STELARA Bleed: The drug fell 61.7% in Q1. While management expected a steep drop, the speed of biosimilar erosion and unfavorable patient mix shifts means J&J has zero room for error with its replacement drugs (TREMFYA and ICOTYDE).

Capital Allocation

J&J’s balance sheet remains a fortress. They ended the quarter with $22 billion in cash and marketable securities against $55 billion in debt.

• Dividends: The board authorized a 3.1% dividend increase to an annual rate of $5.36 per share. This marks an incredible 64th consecutive year of dividend growth.

• Manufacturing Capex: CFO Joe Wolk noted the company is well on its way to fulfilling its pledge to invest $55 billion in U.S. manufacturing and R&D by early 2029. Roughly $12 billion (22%) is already deployed, with massive sites planned in North Carolina and Pennsylvania.

• M&A Philosophy: Duato was firm that their long-term growth targets do not rely on future M&A. Their priority is funding internal pipeline launches. While they remain opportunistic (favoring early-stage deals like the recent Halda Therapeutics partnership), large-scale M&A is taking a back seat to organic execution.

Broader Challenges

• China VBP: Volume-based procurement in China continues to act as a speed bump for the MedTech division. Management noted it impacted the Surgery portfolio in Q1 and expects it to hit the Electrophysiology business in the second half of the year.

• Launch Costs: The cost to educate doctors and build patient access hubs for a drug like ICOTYDE is massive. J&J is absorbing these costs now, but it puts pressure on SG&A lines.

Analyst Q&A Insights

The Q&A session was heavily focused on the commercial dynamics of the new immunology drugs and defending the MedTech growth thesis.

Question: Can you outline the market positioning for ICOTYDE now that we have the label and pricing, and what does the reimbursement ramp look like?

Answer: Jennifer Taubert (Head of Innovative Medicine) noted the drug is off to a massive start, with prescriptions already written for 1,500 patients by over 1,000 unique prescribers. They are positioning ICOTYDE as the first-choice systemic therapy (the pill), while keeping TREMFYA as the first-choice biologic (the injection).

Our take: Management is thrilled with this label. No black box warnings, no mandatory lab monitoring, and simple dosing. Securing 1,500 scripts essentially instantly shows they built the commercial plumbing perfectly ahead of approval.

Question: Sentiment in MedTech is low right now. You posted respectable growth, but it was below Q4 and on an easy comp. What are you seeing in the end markets?

Answer: Tim Schmid (Head of MedTech) forcefully defended the quarter. He noted Q1 is always seasonally quiet and pointed out that January and February weather disrupted procedure volumes in the U.S. He argued that last year’s one-time items merely created a noisy comparable, not a fundamentally easier growth hurdle.

Our take: Schmid sounded a bit defensive but factual. Blaming the weather is a classic MedTech earnings trope, but the underlying 4.6% growth is genuinely solid given the size of the base. He clearly expects Q2 to show a cleaner acceleration.

Question: You keep talking about double-digit growth by the end of the decade, but Wall Street isn’t modeling it. What are analysts missing, and how much of this relies on M&A?

Answer: CEO Joaquin Duato was direct. He stated analysts are underestimating three specific assets: ICOTYDE (psoriasis), RYBREVANT (lung/head & neck cancer), and INLEXZO (bladder cancer). In MedTech, he cited upcoming robotic surgery launches (OTTAVA). He explicitly stated the double-digit target excludes any future M&A.

Our take: This was the most important exchange of the call. Duato is essentially telling Wall Street their models are broken because they are too pessimistic on the pipeline’s peak sales. By claiming the pipeline is already “de-risked,” he is putting his credibility entirely on commercial execution over the next three years.

Question: Where are the early ICOTYDE patients coming from? Are they switching off orals or injectables? And can it be as big as TREMFYA?

Answer: Taubert stated it is too early for granular switching data but noted a broad range of prescribers. She emphasized the massive “market expansion” opportunity, pointing out that 70-80% of eligible autoimmune patients are not on advanced therapies because they fear needles or side effects.

Our take: J&J isn’t just trying to steal market share from AbbVie or Eli Lilly; they are trying to expand the total addressable market by offering a safe pill to people who have been stubbornly stuck on topical creams for years.

Question: There is a lot of new competition coming into the IVL (intravascular lithotripsy) market. How does Shockwave defend its turf?

Answer: Schmid laid out a formidable defense. First, Shockwave has massive real-world evidence (25,000 published outcomes). Second, footprint: they already have generators in almost every cath lab in the U.S. Finally, while competitors are launching their first-generation products, Shockwave is preparing to launch its fifth-generation catheters.

Our take: A masterful answer. Schmid systematically dismantled the bear case for Shockwave. If you are a hospital purchasing manager, it is very hard to justify ripping out established Shockwave generators for a competitor’s version 1.0 product.

Question: What are the investments you are making in prescriber and patient education for ICOTYDE, and how important is the ICONIC-ASCEND trial reading out?

Answer: Taubert confirmed they are “investing big” in launch support, field teams, and patient access hubs. John Reed (Head of R&D) added that the ICONIC-ASCEND trial a head-to-head study against a TYK2 inhibitor will illustrate ICOTYDE’s best-in-disease profile regarding high efficacy and safety.

Our take: J&J is pulling no punches with marketing spend here. The head-to-head data against a TYK2 (likely Bristol Myers Squibb’s Sotyktu) is a direct shot at the competition. They want to own the oral psoriasis market outright.

Question: What does the U.S. Surgical Vision market look like given the 3% decline in the quarter?

Answer: Schmid admitted the U.S. market is facing competitive pressures from new entrants. However, he expects a sharp rebound in the back half of the year driven by the rollout of the TECNIS PureSee lens, which solves the historic problem of halos and glare associated with premium lenses.

Our take: Honesty is good policy. Vision was the weak link this quarter in the U.S. They are entirely reliant on the new PureSee product cycle to bail them out of this competitive rut.

Question: Could you talk about your vision for JNJ-4804 (the co-antibody) in IBD treatments and what readouts we should watch for?

Answer: Reed explained that JNJ-4804 combines an IL-23 inhibitor (TREMFYA) with a TNF inhibitor (golimumab) into a fixed-dose combination. It is designed for the 50%-plus of IBD patients who do not achieve complete remission on single therapies. Phase II data in both Crohn’s and colitis will be presented in the coming year.

Our take: This is a major pipeline play that analysts are just starting to price in. If J&J can successfully combine two blockbuster mechanisms of action into one drug for the sickest IBD patients, it breaks through the current “efficacy ceiling” of the market.

Question: What is the commercial rollout plan for the bladder cancer drug INLEXZO given its unique delivery mechanism?

Answer: Taubert highlighted that INLEXZO is outperforming all recent launches in the space. Securing a permanent J-code on April 1 acted as a massive catalyst, driving week-over-week insertion growth of 50% and then 90%. They are cross-training urologists using the MedTech division’s training institutes to speed up adoption.

Our take: This is a brilliant synergy between the pharma and device arms. Delivering a drug via a localized device requires physician training. Having the MedTech division handle the training logistics for a Pharma asset proves the value of J&J’s diversified structure.

Key Takeaway

Johnson & Johnson is executing a textbook masterclass in patent cliff management. While the loss of STELARA revenue is visually jarring, the underlying business is running hot. The immediate commercial success of ICOTYDE and INLEXZO, combined with the steady compound growth of DARZALEX and the MedTech acquisitions, proves the internal innovation engine is working. If management can cleanly navigate the Orthopaedics spin-off, execute on their deep pipeline catalysts (like JNJ-4804 and ERDA), and hold the line on second-half margins, the narrative will shift rapidly from “surviving STELARA” to “dominating the back half of the decade.”