Merck Q3 2026 Earnings: Sales Rise 5% as EPS Declines

Merck (NYSE: MRK) reported Q3 2026 sales of $18.09 billion, up 5% year over year, while GAAP diluted EPS fell 12% to $2.04 from $2.32. GAAP net income declined 12% to $5.07 billion, and non-GAAP EPS decreased 3% to $2.49. Growth from KEYTRUDA, WINREVAIR, GARDASIL and Animal Health was outweighed at the earnings level by higher operating costs, amortization, restructuring and net interest expense.

Core Financial Results

Sales grew 4% excluding foreign exchange, with approximately $550 million of growth benefiting from the timing of purchases. Despite the higher revenue, both GAAP and non-GAAP earnings declined as margins narrowed and expenses increased.

Both Q3 2026 EPS measures included a $0.12-per-share charge tied to Merck’s global license agreement with SciBrunch. The prior-year quarter included a $0.10-per-share charge related to a LaNova milestone payment.

Business and Product Performance

Pharmaceutical sales increased 4% to $16.27 billion, supported by several growth products and the inclusion of OHTUVAYRE following Merck’s October 2025 acquisition of Verona Pharma. Animal Health sales rose 4%, reflecting growth in both livestock and companion animal products.

KEYTRUDA growth reflected uptake in earlier-stage indications and greater demand in metastatic cancers. KEYTRUDA QLEX contributed $830 million following its launch. WINREVAIR nearly doubled as U.S. demand increased and international launches gained traction, particularly in Europe and Japan.

GARDASIL benefited from favorable U.S. public-sector purchasing patterns and higher net pricing. In contrast, generic competition following loss of U.S. market exclusivity reduced JANUVIA/JANUMET and BRIDION sales. Koselugo alliance revenue also fell to $13 million from $214 million after the payment structure of Merck’s AstraZeneca collaboration changed.

Sales Growth Did Not Translate Into Earnings Growth

GAAP gross margin contracted by 4.8 percentage points, primarily because of higher intangible-asset amortization, restructuring costs and production costs. The much smaller 0.5-point decline in non-GAAP gross margin indicates that acquisition-related and restructuring items accounted for a meaningful part of the GAAP contraction, although production costs still pressured the adjusted measure.

SG&A expense increased 10% to $2.89 billion because of higher administrative costs and spending to support product launches. GAAP R&D expense rose 7% to $4.54 billion, while non-GAAP R&D increased 13%. The quarter included a $400 million SciBrunch licensing charge and higher clinical-development spending, partly offset by a $200 million reduction in R&D expense under a Blackstone Life Sciences funding agreement.

Other income and expense also shifted unfavorably, moving from $238 million of income in Q3 2025 to $27 million of expense, mainly because of higher net interest expense. A lower GAAP effective tax rate of 8.9% partly cushioned these pressures but did not prevent the decline in net income and EPS.

Full-Year 2026 Guidance

Merck raised the lower end of its sales outlook while leaving the upper end unchanged. It also increased and narrowed its non-GAAP EPS range, even as projected operating expenses moved higher and the expected tax-rate range declined.

The EPS outlook includes one-time charges of $3.62 per share for the Cidara acquisition, $2.31 for the Terns acquisition and $0.12 for the SciBrunch agreement. Merck’s guidance does not assume additional significant business-development transactions.

Management’s Pipeline Priorities

Chairman and CEO Robert Davis emphasized late-stage oncology progress and said the latest clinical results had reduced uncertainty around parts of Merck’s pipeline. The FDA accepted sacituzumab tirumotecan, or sac-TMT, for priority review in certain previously treated patients with endometrial cancer, with an action date of June 15, 2027. In the Phase 3 TroFuse-005 trial, sac-TMT reduced the risk of death by 32% and the risk of disease progression or death by 41% compared with chemotherapy.

Merck and Moderna also reported that intismeran autogene plus KEYTRUDA reduced the risk of recurrence or death by 42% compared with KEYTRUDA alone in certain patients with resected melanoma. Other milestones included U.S. approval of WELIREG plus Lenvima for certain advanced renal cell carcinoma patients and European approval of KEYTRUDA plus Padcev for perioperative treatment of resectable muscle-invasive bladder cancer. Separately, Merck voluntarily withdrew the I-DXd application for certain previously treated patients with extensive-stage small cell lung cancer.

Recent Insider Transactions

The supplied insider data classify 177,002 shares across 16 purchases and 228,238 shares across seven sales during the past six months, resulting in net sales of 51,236 shares. Total insider holdings were listed at approximately 1.38 million shares. The latest 10 reported entries involved direct holdings and consisted of seven sales and three derivative-security conversions; the data do not provide the reasons for the transactions.

Risks Investors Need to Watch

• Purchase timing affected reported growth: Approximately $550 million of growth benefited from purchasing patterns, making the underlying sales run rate less clear.
• Margins and operating costs remain under pressure: Production costs, intangible amortization, restructuring, clinical-development spending, launch support and higher net interest expense all reduced the earnings benefit from revenue growth.
• Generic competition is affecting established products: JANUVIA/JANUMET and BRIDION recorded declines of 39% and 67%, respectively, following loss of U.S. market exclusivity.
• Revenue remains concentrated in KEYTRUDA: KEYTRUDA and KEYTRUDA QLEX generated approximately 48% of total quarterly sales, increasing the importance of sustaining demand while expanding the broader portfolio.
• Pipeline execution is not uniform: Merck reported several positive regulatory and clinical milestones, but the voluntary withdrawal of the I-DXd application shows that not every late-stage program will progress as planned.

Summary

Merck delivered higher Q3 2026 sales as KEYTRUDA, WINREVAIR, vaccines and Animal Health offset declines in products exposed to generic competition. However, lower margins, higher R&D and launch spending, restructuring, amortization and net interest expense caused both GAAP and adjusted earnings to fall. The raised full-year sales and EPS ranges provide a firmer outlook, while underlying growth excluding purchase timing, expense control and execution across the late-stage pipeline remain the main areas to monitor.