Second-Quarter Results Significantly Beat Expectations, with International Incretin Growth Supporting Further Earnings Upgrades

Overview

Eli Lilly reported strong Q2 2026 results, with revenue and adjusted EPS both significantly exceeding market expectations. Growth was mainly driven by Mounjaro and Zepbound, particularly demand for Mounjaro outside the United States. Management raised the midpoint of full-year revenue guidance by USD 2.5 billion to USD 85.0 billion to USD 87.0 billion; due to expenses related to acquired R&D projects, adjusted EPS guidance was narrowed to USD 35.50 to USD 36.50, but underlying profitability actually improved. Bernstein believes a higher business base, international market penetration, expanded insurance coverage, and subsequent product catalysts can support continued beats.

Core views

The report’s core view is that the international incretin market has become the main growth driver for Eli Lilly’s next phase, with the company holding leading shares in multiple markets and category penetration still having substantial room to rise. U.S. demand for Mounjaro and Zepbound remains strong, while the Medicare GLP-1 Bridge Program and CVS formulary access will further expand the covered population. Foundayo’s U.S. launch pace is below prior expectations, but channel coverage, physician reach, and promotional infrastructure have improved, while overseas launch potential remains strong. Non-incretin products and the expanding R&D pipeline are expected to further diversify growth sources over time.

Analysis framework

The report adjusts the revenue and EPS model line by line by combining quarterly results versus consensus expectations, management’s earnings call, investor relations follow-up, product and regional sales trends, prescription and access information; valuation uses a blended approach assigning 50% weight each to discounted cash flow and forward P/E methods.

Methodology notes

• Earnings AnalysisBeat Magnitude and Guidance Revision Analysis

  Compare actual revenue, EPS, and product sales against consensus expectations and prior forecasts, and break down changes in full-year guidance.

  This method is used to distinguish the different impacts of continuing operating improvement, one-time rebate adjustments, milestone revenue, and acquired R&D expenses on current-period results and full-year guidance.

• Forecast ModelingProduct and Regional Segment Forecasting

  Model Mounjaro, Zepbound, Foundayo, and non-incretin products separately based on volume, price, access, and regional penetration.

  Bernstein maintained a higher base for Mounjaro’s international market and raised the related forecasts, while lowering U.S. Foundayo sales expectations due to a slower launch in the U.S. obesity market.

• Valuation methodsBlended DCF and P/E Valuation

  Assign 50% weight each to the discounted cash flow method and the 2027 expected P/E method.

  The DCF uses a 7.6% weighted average cost of capital, 5% compound growth in free cash flow through 2043, and a 3.0% terminal growth rate; the relative valuation applies a 28x P/E multiple to 2027 adjusted EPS.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Eli Lilly & Co (LLY.US)

  Core covered company, with earnings growth mainly driven by Mounjaro, Zepbound, and expansion of the global incretin market.

  Strengths

  Strong product demand, leading international market share, clear operating leverage, expanding channel access, and broad R&D pipeline.

  Weaknesses

  Foundayo’s U.S. launch ramp-up is below prior expectations, some quarterly results are supported by rebate adjustments and milestone revenue, and valuation is significantly higher than traditional pharmaceutical peers.

  Comparison

  In the oral obesity drug market, Novo remains ahead for now; however, Eli Lilly maintains strong competitiveness through its injectable portfolio, international Mounjaro share, and subsequent retatrutide pipeline.

  Risks

  Obesity drug market size, demand, or pricing may fall short of expectations; competition and generic drug pressure; obstacles to capacity expansion; regulatory and legal uncertainties; and value destruction from acquisitions and R&D spending.

Key data

• Q2 2026 revenueUSD 23.0 billionUp 48% year over year and 11% above consensus expectations.
• Q2 2026 adjusted EPSUSD 8.3835.4% above consensus expectations of USD 6.19.
• Combined sales of Mounjaro and ZepboundUSD 14.9 billionUp 73% year over year, continuing to serve as the main growth engine.
• Mounjaro revenue outside the United StatesUSD 5.2 billionUp 172% year over year, above the U.S. market’s USD 4.8 billion.
• Foundayo first-quarter salesUSD 98 millionThe United States contributed USD 67 million and international markets contributed USD 31 million, with part of the revenue coming from initial channel stocking.
• Company 2026 revenue guidanceUSD 85.0 billion to USD 87.0 billionThe midpoint of guidance was raised by USD 2.5 billion from prior guidance.
• Bernstein 2026 revenue forecastUSD 88.47 billionRaised from the prior USD 86.3 billion, with expected year-over-year growth of 35.7%.
• Bernstein 2026 adjusted EPS forecastUSD 36.64Previously USD 33.91, above the upper end of the company’s latest guidance.
• International incretin market share54.9%Eli Lilly maintains its leading position in international markets, with the relevant branded market expanding 74% year over year.
• Target price and upsideUSD 1,385; 18%Based on the August 5, 2026 closing price of USD 1,169.86.

Impact & implications

The strong quarterly results increased the likelihood of another full-year guidance raise and reinforced the international incretin market’s support for long-term growth and valuation premium. In the near term, the pace of U.S. prescription conversion for Foundayo, the lower net price of the Bridge Program, and the fading of one-time rebate adjustments may affect revenue quality and margins; however, broader insurance coverage, overseas market expansion, non-incretin product growth, and late-stage pipeline catalysts are expected to provide offsets. The current target price implies a relatively high forward valuation, so subsequent growth delivery and pipeline execution remain key to maintaining the premium.

Risks

• The obesity drug market size, patient demand, regulatory environment, or pricing levels may be below expectations.
• Novo, generic semaglutide, compounded drugs, and other competing products may weaken market share or pricing.
• Capacity construction or manufacturing expansion may stall, limiting volume growth for Mounjaro, Zepbound, and subsequent products.
• Foundayo’s U.S. prescription conversion and sustained demand may be weaker than expected, and early sales are also affected by channel stocking.
• The Bridge Program supplies drugs at a lower net price, and scale expansion may continue to weigh on product price mix.
• Quarterly revenue and profit include one-time factors such as rebate estimate adjustments and Jardiance milestones, which may not be repeatable.
• Retatrutide’s biologic classification has not yet received FDA agreement, and litigation and regulatory discussions may affect the filing timeline and exclusivity period.
• High-risk acquisitions, acquired R&D project expenses, or R&D project failures may cause value destruction.
• The target price corresponds to a relatively high forward P/E ratio; if growth or pipeline delivery falls short of expectations, valuation may compress.

What to watch

• The pace of U.S. paid prescription conversion for Foundayo and the FDA decision on the diabetes indication in the second half of 2026.
• Approval and launch progress for Foundayo in Mexico, Saudi Arabia, and more than 40 other markets under review.
• Mounjaro’s international market penetration, share, and price elasticity, especially in China and Europe.
• The share of new patients, persistence rate, and price mix impact of the Medicare GLP-1 Bridge Program.
• Zepbound’s volume and commercial channel pricing pressure after returning to the CVS formulary in the fourth quarter.
• Retatrutide’s pre-filing FDA meeting, BLA classification dispute, and planned filing in Q1 2027.
• Foundayo Phase 3 data in obstructive sleep apnea and other late-stage pipeline readouts.
• Updates on next-stage growth, pipeline, and capital allocation at the December 7, 2026 investor event.
• Whether gross margin can remain resilient in the second half after increases in new capacity fixed costs, R&D investment, and promotional spending.