Zoetis Q3 2026 Earnings: U.S. Companion Animal Pressure Weighs on Revenue
Zoetis reported Q3 2026 revenue of $2.391 billion, down 1% year over year, driven by weakness in U.S. companion animal products offset by international and livestock growth. GAAP net income fell 18% due to higher restructuring costs and impairment charges, while adjusted diluted EPS rose 3% to $1.75 aided by a lower share count. Management narrowed the full-year 2026 revenue guidance to $9.22–$9.32 billion and raised adjusted EPS guidance to $6.25–$6.35. Key risks include ongoing U.S. pet market price sensitivity, pipeline execution, and underlying organic contraction.
Zoetis (NYSE: ZTS) reported Q3 2026 revenue of $2.391 billion, down 1% year over year, while diluted EPS fell 12% to $1.44 from $1.63. Weakness in U.S. companion animal products outweighed livestock and international growth, while a lower diluted share count helped adjusted EPS increase despite lower adjusted net income.
Core Financial Results
Revenue declined modestly, but the drop in GAAP profit was more pronounced. Cost of sales was nearly unchanged at $698 million, contributing to an approximately 40-basis-point decline in gross margin, while restructuring and impairment-related items added further pressure below gross profit.
Adjusted net income fell 5% on a reported basis and 7% organically, but adjusted diluted EPS increased 3% reported and 1% organically.
| Metric | Q3 2026 | Q3 2025 | Reported YoY Change |
|---|---|---|---|
| Revenue | $2.391 billion | $2.422 billion | -1% |
| GAAP gross profit | $1.693 billion | $1.725 billion | About -2% |
| GAAP gross margin | About 70.8% | About 71.2% | About -0.4 pp |
| GAAP net income | $591 million | $721 million | -18% |
| GAAP diluted EPS | $1.44 | $1.63 | -12% |
| Adjusted net income | $720 million | $754 million | -5% |
| Adjusted diluted EPS | $1.75 | $1.70 | +3% |
Adjusted results exclude purchase accounting adjustments, acquisition and divestiture-related costs, and certain significant items. These adjustments increased Q3 2026 net income by $129 million relative to the GAAP figure.
Business and Segment Performance
The U.S. was the main source of weakness. U.S. companion animal revenue declined 8% as macro-driven price sensitivity, competitive pressure in dermatology, and generic competition affected sales. U.S. livestock revenue grew 5%, supported by cattle, swine, and poultry products.
International revenue moved in the opposite direction. Companion animal sales increased 1% on a reported basis and were flat organically, with parasiticides and osteoarthritis pain products offsetting lower sales of key dermatology products. International livestock revenue benefited from cattle and fish products.
| Business | Q3 2026 Revenue | Reported Growth | Organic Operational Growth |
|---|---|---|---|
| U.S. segment | $1.2 billion | -6% | -6% |
| U.S. companion animal | Not separately disclosed | -8% | Not disclosed |
| U.S. livestock | Not separately disclosed | +5% | +5% |
| International segment | $1.1 billion | +4% | +4% |
| International companion animal | Not separately disclosed | +1% | Flat |
| International livestock | Not separately disclosed | +8% | +9% |
Charges Deepened the GAAP Profit Decline While a Lower Share Count Lifted Adjusted EPS
GAAP profitability was affected by substantially higher special charges. Restructuring and acquisition- or divestiture-related charges rose to $43 million from $4 million, while other income and deductions shifted from $12 million of income to $72 million of deductions.
Certain significant items totaled $133 million before tax, compared with $8 million a year earlier. These included $89 million of asset impairment charges involving acquired PetMedix in-process research and development assets and certain site exits, as well as $30 million related to restructuring and cost-reduction initiatives.
The share count created a different outcome at the per-share level. Adjusted net income declined 5%, but adjusted diluted EPS rose 3% because diluted weighted-average shares fell to 411.6 million from 443.2 million, a decrease of about 7%.
Product Pipeline and Portfolio Updates
Zoetis said it remains on track for its expected 2026 product approvals, with some approvals previously anticipated in 2027 now expected in Q4 2026.
In October, the FDA approved Convenia RTU for Dogs, a long-acting antibacterial injection expected to become available to veterinarians in Q1 2027. Zoetis also launched Lenivia for dogs in Great Britain and received Swiss approval for Portela for cats, expanding access to long-acting osteoarthritis pain treatments.
During the quarter, Simparica Trio received FDA Emergency Use Authorization to treat New World screwworm infestations in dogs and puppies. The company also secured additional approvals across its livestock vaccines, companion animal vaccines, and animal sedation portfolio.
Full-Year 2026 Guidance
Zoetis narrowed its full-year revenue range while raising its adjusted net income and adjusted EPS ranges. Even after the increases to adjusted earnings guidance, the company still expects organic operational declines in both revenue and adjusted net income.
| Metric | Updated 2026 Guidance | Company Action | Organic Operational Growth |
|---|---|---|---|
| Revenue | $9.220 billion-$9.320 billion | Narrowed | -2% to -1% |
| Adjusted net income | $2.600 billion-$2.640 billion | Raised | -7% to -5% |
| Adjusted diluted EPS | $6.25-$6.35 | Raised | Not provided |
The guidance reflects foreign exchange rates as of October 20, 2026. The release did not provide the exact previous guidance ranges.
Management Commentary
CEO Kristin Peck said the quarter performed in line with the company’s expectations. Management attributed the overall result to continued companion animal pressure, partly offset by growth in livestock and diagnostics, and said Zoetis is directing resources toward areas where they can have the greatest impact.
Risks Investors Need to Watch
- Continued U.S. companion animal pressure: Price sensitivity, dermatology competition, and generic products contributed to an 8% revenue decline in the category. Continued pressure could weigh on consolidated growth.
- Underlying full-year contraction: Updated guidance still calls for organic operational revenue to decline 1% to 2% and adjusted net income to decline 5% to 7% in 2026.
- Restructuring and impairment exposure: The quarter included $89 million of asset impairment charges and higher restructuring costs. The PetMedix-related impairment reflected updated development and commercial assumptions, highlighting execution risk within parts of the pipeline.
- Dependence on portfolio offsets: Livestock and international growth partially cushioned U.S. companion animal weakness. A slowdown in those areas would reduce the benefit of Zoetis’ diversified portfolio.
Summary
Zoetis’ Q3 2026 results showed a clear divide between weaker U.S. companion animal sales and growth in livestock and international markets. Special charges amplified the GAAP profit decline, while the lower share count allowed adjusted EPS to rise despite lower adjusted net income. Investors’ next focus will be whether companion animal trends stabilize and whether Zoetis can deliver its raised adjusted earnings guidance while organic revenue remains under pressure.
This article may include AI-generated content that is human-reviewed, which is for reference and general information purposes only and does not constitute investment advice.
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