Eli Lilly third quarter 2026 earnings explained: medicines, EPS and valuation multiples

Eli Lilly reported its third quarter 2026 results on October 29, 2026. Revenue for the three months ended September 30 rose 6.2% from the quarter before, but operating income fell 4.1% and net income fell 9.1%, while charges for drug programs Lilly bought from other companies rose by $1,405 million (Dalsna Finance calculation for all three). This article walks through what Lilly sells, how its main medicines performed and what the numbers say about its valuation. Every figure is sourced and dated, and every number worked out by us is labelled as a Dalsna Finance calculation. ^[1][2]

Eli Lilly in brief

Eli Lilly and Company is a drug maker based in Indianapolis, and its shares trade on the New York Stock Exchange under the ticker LLY. It describes itself as a medicine company and says it has been making discoveries for 150 years. It is best known today for tirzepatide, which it sells as Mounjaro and, for obesity in the United States, Canada and Japan, as Zepbound. Lilly reports a single operating segment covering the discovery, development, manufacturing, marketing and sale of medicines worldwide. ^[1][3]

Lilly groups its sales into cardiometabolic health, oncology, immunology and neuroscience. It names eight Key Products: Ebglyss, Foundayo, Inluriyo, Jaypirca, Kisunla, Mounjaro, Omvoh and Zepbound. Foundayo is orforglipron, a GLP 1 medicine taken as a pill. Older brands include Verzenio in oncology, Trulicity in cardiometabolic health, Taltz in immunology and Jardiance, which Lilly sells in a collaboration with Boehringer Ingelheim. In its October 29, 2026 release chair and chief executive David A. Ricks said "Lilly is executing well across the value chain, and our potential for impact on human health continues to expand." ^[1][3]

Revenue by medicine and region

Mounjaro and Zepbound together brought in $16,075 million, about 65.9% of all revenue in the third quarter (Dalsna Finance calculation). Mounjaro revenue rose 65% from a year earlier to $10.7 billion, with $5.0 billion in the U.S. and $5.7 billion outside it, and Lilly said lower Mounjaro prices outside the U.S. reflected Mounjaro being added to the National Reimbursement Drug List in China in the first quarter of 2026. U.S. Zepbound revenue rose 48% to $5.3 billion. Verzenio brought in $1,511 million, up 2.8% from a year earlier, while Trulicity fell 14.1% to $904 million (Dalsna Finance calculation for both changes). ^[1][3]

By region, U.S. revenue rose 34% from a year earlier to $15.1 billion, from a 41% rise in volume partly offset by a 7% fall in realized prices. Revenue outside the U.S. rose 47% to $9.3 billion, from a 76% rise in volume partly offset by a 29% fall in realized prices. In the second quarter U.S. revenue was $14.4 billion and revenue outside the U.S. was $8.6 billion, as Lilly reported them in billions. ^[1][2]

Key Products, quarter over quarter

Lilly's Key Products brought in $17.1 billion in the third quarter. Against the second quarter, Mounjaro grew 7.8% and Zepbound 8.6%, while Foundayo, which had no revenue in 2025, rose 87.8% to $184 million (Dalsna Finance calculation). Lilly said Key Products revenue in immunology, oncology and neuroscience grew 100% from the third quarter of 2025. ^[1][2]

Part of the quarter's revenue will not repeat in the same way. Lilly said third quarter revenue included approximately $900 million of benefits, primarily from $410 million of Jardiance milestones and favorable adjustments to rebate and discount estimates. It added that no further Jardiance milestones remain. Its quarterly report says changes in estimates for its most significant U.S. returns, rebate and discount balances, for products shipped in earlier periods, came to 2 percent of U.S. revenue in the quarter. Second quarter revenue included a $250 million Jardiance milestone. ^[1][3][2]

The numbers, quarter over quarter

Revenue was $24,397 million in the third quarter, against $22,974 million in the second. Gross margin, Lilly's term for revenue minus the cost of sales, rose 3.8% to $20,464 million, though as a share of revenue it slipped to 83.9% from 85.8%. Operating income, which also takes off research, marketing and administrative costs and charges for acquired drug programs, fell to $8,608 million from $8,978 million. Net income under GAAP, the standard US accounting rules, fell to $6,451 million from $7,095 million (Dalsna Finance calculation for the changes). ^[1][2]

The biggest swing was acquired IPR&D, short for in process research and development: the cost of experimental drug programs bought from other companies, which Lilly records as a charge in its income statement. It rose to $4,181 million from $2,776 million. Lilly said the third quarter charges primarily related to the acquisitions of AtaiBeckley and Curevo, and the second quarter charges primarily to Orna Therapeutics and Ajax Therapeutics. Research and development rose to $4,247 million from $3,819 million, while marketing, selling and administrative costs fell to $3,125 million from $3,430 million. ^[1][2][3]

Below the operating line, other income and expense was an expense of $202 million, against income of $269 million in the second quarter, when Lilly booked $445 million of net gains on equity investments. Asset impairment, restructuring and other special charges fell to $303 million from $703 million, and Lilly said the third quarter charge primarily related to a partial impairment of an intangible asset associated with a molecule in development. The effective tax rate was 23.3% in both quarters. ^[1][2][3]

Profit margin is net income as a share of revenue: 26.4% in the third quarter against 30.9% in the second (Dalsna Finance calculation: $6,451 million divided by $24,397 million, and $7,095 million divided by $22,974 million). The operating margin, operating income divided by revenue, was 35.3% against 39.1%. Against the third quarter of 2025, revenue rose 38.6% from $17,601 million, which Lilly rounds to 39%, and net income rose 15.5% from $5,583 million (Dalsna Finance calculation). Lilly said the rise in revenue from a year earlier came from a 53% increase in volume, partly offset by a 15% decrease in realized prices. ^[1][2]

Lilly also reports non GAAP net income, its adjusted measure. It adds back amortization of intangible assets and asset impairment, restructuring and other special charges, takes out net gains on equity investments and adjusts for the tax effects. It does not add back acquired IPR&D. Non GAAP net income was $6,679 million in the third quarter and $7,493 million in the second. ^[1][2]

Earnings per share

Earnings per share, or EPS, is profit divided by the number of shares. The diluted figure also counts shares that could be created from stock awards. Lilly reported diluted EPS of $7.22 for the third quarter and $7.94 for the second. Its non GAAP EPS was $7.48 and $8.38. Dividing each net income figure by the diluted share count gives the same figures. ^[1][2]

Both kinds of EPS carry the cost of acquired IPR&D, which Lilly put at $4.57 per share in the third quarter and $3.03 in the second. Non GAAP EPS is a little higher than reported EPS mainly because it adds back the asset impairment charge and the amortization of intangible assets, which were $0.18 and $0.11 per share in the third quarter, as Lilly reported. ^[1][2]

What the market values Lilly at

Market capitalization, or market cap, is what the stock market values the whole company at: the share price times the number of shares. Lilly's shares closed at $1,417.54 on Friday, October 30, 2026, as reported by StockAnalysis. The cover of its third quarter report to the SEC lists 940,745,031 shares of common stock outstanding as of October 26, 2026. That gives a market cap of about $1.33 trillion (Dalsna Finance calculation). Every multiple and share price below uses this one share count. ^[4][3]

The cover count is about 47 million higher than the 893 million diluted shares Lilly used for EPS, and Lilly's own guidance assumes about 894 million shares outstanding (Dalsna Finance calculation for the gap). Using the cover count makes the market cap and every multiple below larger than they would be on the EPS share count, by about 5% (Dalsna Finance calculation: 940.7 million divided by 893.4 million). ^[3][1]

Six valuation multiples

The price to earnings ratio, or P/E, is market cap divided by a year of earnings. It shows how many dollars the market is paying for each dollar of yearly profit. Annualised means one quarter multiplied by four. On that basis Lilly has a P/E of 51.7 (Dalsna Finance calculation: $1,333.5 billion divided by $6,451 million times 4, which is $25,804 million). The adjusted P/E uses non GAAP net income instead: $6,679 million times 4 is $26,716 million, which gives 49.9 (Dalsna Finance calculation). ^[1][4][3]

A forward P/E uses an estimate of future earnings. Lilly's own guidance, given on October 29, 2026, is non GAAP EPS of $35.00 to $36.00 for full year 2026 (a company projection). Its midpoint is $35.50, and multiplying that by the same 940,745,031 shares gives about $33,396 million and a forward adjusted P/E of 39.9 (Dalsna Finance calculation on a company projection). Three of the four quarters in that year had already been reported when the guidance was given, and Lilly said it does not include acquired IPR&D incurred after September 30, 2026. Lilly gives no guidance for reported EPS and we used no analyst estimate, so there is no forward P/E on GAAP earnings. ^[1][4][3]

A trailing P/E, sometimes called a historical P/E, uses the last four reported quarters. Lilly's GAAP net income over the twelve months to September 30, 2026 was $27,578 million, which gives a trailing P/E of 48.4. Non GAAP net income over the same four quarters added up to $28,606 million, which gives a trailing adjusted P/E of 46.6 (Dalsna Finance calculation for both). ^{[1][2][5][4][3]}

The last four quarters

Lilly's releases give the fourth quarter of 2025, the second quarter and the third quarter of 2026 on their own. The first quarter of 2026 is worked out as the six months to June 30 minus the second quarter: $14,491 million minus $7,095 million is $7,396 million of GAAP net income, and $15,156 million minus $7,493 million is $7,663 million of non GAAP net income (Dalsna Finance calculation). GAAP net income added up to $27,578 million over the four quarters and non GAAP net income to $28,606 million. ^[5][2][1]

Three base cases: the third quarter held flat for a year

Suppose revenue stayed at the third quarter's level for a full year, with no growth and no decline: $24,397 million times 4, or $97,588 million. The first base case keeps the reported 26.4% profit margin, which gives earnings of $25,804 million, or $27.43 per share on the cover share count. The adjusted case keeps the 27.4% non GAAP margin, which gives $26,716 million, or $28.40 per share. Each is simply the latest quarter annualised, so at its own annualised multiple it returns the October 30, 2026 close of $1,417.54 by construction. The other cells only show how the price moves when the same earnings are given a different multiple. ^[1][4][3]

Lilly said the quarter's revenue included approximately $900 million of benefits, so the third base case uses the operating margin with the one piece Lilly put an exact figure on taken out: the $410 million of Jardiance milestones, after which Lilly said no further milestones remain. Operating income of $8,608 million minus $410 million is $8,198 million, or 33.6% of revenue, which gives $32,792 million a year, or $34.86 per share (Dalsna Finance calculation). This assumes the whole milestone reached operating income, as Lilly gave no cost against it. Lilly did not give a dollar figure for the rebate and discount part of the $900 million. Its quarterly report gives only a rounded 2 percent of U.S. revenue for a wider measure that also covers returns, so nothing is subtracted for it here. Operating income is counted before interest, taxes and other income, so this is not net income. ^[1][3]

None of the cases takes out acquired IPR&D. Lilly counts it in both reported and non GAAP earnings and did not describe it as a one time item, and it was large in the second quarter too. At $4,181 million in the third quarter it held down every row on this grid. The GAAP multiples apply to the two GAAP rows and the adjusted multiples to the adjusted row, so each kind of earnings meets its own kind of multiple. ^[1][2]

The adjusted base case in a chart

What to watch

Lilly updated its full year 2026 guidance on October 29, 2026. It now expects revenue of $91.0 billion to $92.0 billion, up from $85 billion to $87 billion, and non GAAP EPS of $35.00 to $36.00, down from $35.50 to $36.50. Lilly said it raised its underlying non GAAP EPS guidance by $4.07 at the midpoint, more than offset by $4.57 of acquired IPR&D charges from third quarter business development activity. It also expects a non GAAP performance margin, gross margin minus research and development and marketing, selling and administrative expenses, divided by revenue, of 52.0% to 52.5%. These are company projections, and Lilly said its guidance does not include acquired IPR&D incurred after September 30, 2026. ^[1]

Lilly is also defending its main patents. Its quarterly report says that in July 2026 Lilly received notice that multiple generic companies had filed applications to market generic versions of Mounjaro and/or Zepbound before some or all of the patents listed for them in the FDA's Orange Book expire, and that in August 2026 Lilly sued them for patent infringement in the U.S. District Court for the District of Delaware. A similar Verzenio case against Cipla is scheduled for trial in May 2028. Separately, the U.S. Department of Health and Human Services selected Trulicity and Verzenio in January 2026 as medicines subject to government set prices under the Inflation Reduction Act, effective 2028. ^[3]

Lilly has been buying companies at a fast pace. It paid $18.2 billion for business development in the first nine months of 2026, and in October 2026 it acquired Merida Biosciences for up to $2.9 billion in aggregate, including an upfront payment and further potential payments based on achieving certain clinical and regulatory milestones. In May 2026 it issued long term debt totaling $9.0 billion. Lilly said it used the net cash proceeds for general corporate purposes, including repaying outstanding commercial paper and funding part of the upfront cash consideration and related fees and expenses for its acquisitions of Centessa and Kelonia. It also repurchased $4.3 billion of shares in the first nine months under its $15.0 billion share repurchase program. Because acquired IPR&D moves earnings so much, readers may want to watch that line as closely as product sales. ^[3]

How these figures were made: inputs come from Lilly's earnings releases for the fourth quarter of 2025 and the second and third quarters of 2026 and its third quarter 2026 quarterly report on SEC EDGAR, plus the dated closing price named above. Calculations use unrounded inputs and are rounded only at the end, with multiples to one decimal and per share figures and prices to the cent. ^{[1][3][2][5][4]}