Zoetis — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue was $2.4 billion, a 1% decrease on a reported and organic operational basis compared to the third quarter of 2025.
• Net income was $591 million, an 18% decrease on a reported basis compared to the third quarter of 2025.
• Diluted EPS was $1.44, a 12% decrease on a reported basis compared to the third quarter of 2025.
• Adjusted net income was $720 million, a 5% decrease on a reported basis and a 7% decrease on an organic operational basis compared to the third quarter of 2025.
• Adjusted diluted EPS was $1.75, a 3% increase on a reported basis and a 1% increase on an organic operational basis compared to the third quarter of 2025.
• Adjusted net income excludes the net impact of $129 million for purchase accounting adjustments, acquisition and divestiture-related costs, and certain significant items.
• Restructuring charges and certain acquisition and divestiture-related costs were $43 million for the quarter, compared to $4 million in the prior year period.
• Certain significant items included $133 million in pre-tax charges for the quarter, primarily driven by $89 million in asset impairment charges and $30 million in other restructuring charges.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance was narrowed to a range of $9.220 billion to $9.320 billion, reflecting organic operational growth of (2)% to (1)%.
• Full-year 2026 adjusted net income guidance was raised to a range of $2.600 billion to $2.640 billion, reflecting organic operational growth of (7)% to (5)%.
• Full-year 2026 adjusted diluted EPS guidance was raised to a range of $6.25 to $6.35.
• Full-year 2026 reported diluted EPS guidance is $5.50 to $5.60.
• Full-year 2026 adjusted SG&A expenses guidance is $2.340 billion to $2.370 billion.
• Full-year 2026 adjusted R&D expenses guidance is $705 million to $715 million.
• Full-year 2026 guidance for certain significant items and acquisition and divestiture-related costs is approximately $210 million.
• Guidance reflects foreign exchange rates as of October 20, 2026.

Business Segments and Product Lines:

• U.S. segment revenue was $1.2 billion, a 6% decrease on both a reported and organic operational basis.
• International segment revenue was $1.1 billion, a 4% increase on both a reported and organic operational basis.
• U.S. Companion Animal revenue decreased 8%, impacted by macro-driven price sensitivity, competitive pressure in dermatology, and generic competition.
• U.S. Livestock revenue increased 5%, supported by strength across cattle, swine, and poultry.
• International Companion Animal revenue increased 1% on a reported basis and remained flat on an organic operational basis, led by parasiticides and osteoarthritis (OA) pain, partially offset by lower sales of key dermatology products.
• International Livestock revenue increased 8% on a reported basis and 9% on an organic operational basis, driven by growth in cattle and fish.
• Received FDA approval for Convenia® RTU for Dogs, a long-acting antibacterial injection, expected to be available in Q1 2027.
• Launched Lenivia® for dogs in Great Britain and received Swiss approval for Portela® for cats for long-acting osteoarthritis pain relief.
• Received U.S. FDA Emergency Use Authorization (EUA) for Simparica Trio® for the treatment of New World screwworm infestations in dogs and puppies.
• Received U.S. and Mexico approval for Fostera® PRRS Needle-free microdose to protect pigs against porcine reproductive and respiratory syndrome.
• Received additional claim in Brazil for Vanguard® B Oral to protect dogs against Bordetella bronchiseptica.
• Received additional claim in Canada for Vanguard® crLyme to protect dogs against subclinical arthritis caused by Borrelia burgdorferi.
• Received approval in Japan and Mexico for Alfaxan® Multidose 4% for sedation of cats.
• Select product approvals previously expected in 2027 are now anticipated in Q4 2026.

Market and Competitive Landscape:

• The company faces competitive pressure in the U.S. Companion Animal dermatology segment.
• Generic competition is impacting U.S. Companion Animal revenue.
• Macro-driven price sensitivity is affecting the U.S. Companion Animal market.
• Growth in International Livestock is driven by cattle and fish segments.
• Zoetis maintains a position as the world's leading animal health company with a diversified portfolio across companion animals and livestock.

Risks and Challenges:

• Forward-looking statements are subject to risks including disruptions in the global supply chain.
• Risks include foreign exchange rates, tax rates, tariffs, and changes in tax regimes and laws.
• Potential impacts of the Fiscal Year Alignment are noted as a risk factor.
• Risks include the financial impact of acquisitions and divestitures, and the ability to integrate new businesses.
• Risks include the timing and likelihood of success for R&D and product approvals.
• Risks include the financial impact of divestitures and expectations regarding competing products.
• Asset impairment charges related to in-process research and development assets acquired from PetMedix were recognized in the quarter.

Management Commentary and Tone:

• CEO Kristin Peck stated third-quarter performance was in line with expectations.
• Management noted that continued pressure in Companion Animal was partially offset by growth in Livestock and Diagnostics.
• Management emphasized a focus on defending their position and directing resources where they can have the greatest impact.
• Management expressed confidence in their ability to create long-term value for customers and shareholders due to their scale, expertise, and pipeline.
• Management highlighted the breadth of their portfolio as a key strength.

Other Key Points:

• A peer-reviewed study published in Parasites & Vectors found dogs treated with Simparica Trio had significantly lower average heartworm counts than those treated with NexGard® Plus.
• Zoetis launched the Zoetis Medical Hub to bring together medical expertise and peer-reviewed research.
• The company hosts a webcast and conference call on November 5, 2026, at 8:30 a.m. ET to review results and guidance.
• Adjusted cost of sales as a percentage of revenue was 29.0% for the quarter.
• Adjusted SG&A expenses were $571 million for the quarter.
• Adjusted R&D expenses were $174 million for the quarter.
• Weighted-average shares used to calculate diluted earnings per share were 411.6 million for the quarter.