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    ZTS
    Earnings call· Jun 2026(Q2 FY26)

    Zoetis Q2 FY26 earnings call ZTS

    Aug 6, 2026 Source

    Executive summary

    Zoetis Q2 FY26 — Companion Animal Pressure Offsets Livestock Strength; Full-Year Outlook Revised Down

    Zoetis faced significant headwinds in its Companion Animal segment in Q2 FY26, with revenue and adjusted net income declining organically due to reduced vet clinic visits, value-conscious pet owners, and intensified competitive discounting, particularly in Dermatology and U.S. parasiticides. This pressure was partially offset by robust 11% growth in Livestock and 12% growth in Diagnostics, showcasing the resilience of its diversified portfolio. The company has revised its full-year outlook downward, implementing targeted commercial execution, cost discipline, and strategic investments in innovation to navigate the challenging environment.

    Highlights

    4

    • International revenue grew 6% organically, supported by broad-based growth in emerging markets.

    • Livestock delivered strong 11% organic revenue growth, led by cattle and poultry.

    • Companion Animal Diagnostics revenue grew 12% organically, reflecting sustained demand.

    • Adjusted diluted EPS was $1.87, up 4% year-over-year, benefiting from share repurchases.

    Concerns

    6

    • Organic operational revenue declined 1% in Q2 FY26.

    • Adjusted net income declined 2% organically in Q2 FY26.

    • U.S. revenue declined 7% organically, driven by Companion Animal pressure.

    • Key Dermatology revenue declined 16% globally (18% in US) due to softer demand and intensified competition.

    • Full-year organic operational revenue growth guidance revised to decline 3% to 1%.

    • Full-year adjusted net income organic operational growth guidance revised to decline 9% to 5%.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 organic operational revenue growth
    decline 3% to 1%
    high materiality
    Medium
    Full-year 2026 organic operational adjusted net income growth
    decline 9% to 5%
    high materiality
    Medium
    Full-year 2026 revenue
    $9.12 billion to $9.32 billion
    high materiality
    Medium
    Full-year 2026 adjusted net income
    $2.57 billion to $2.62 billion
    high materiality
    Medium
    Full-year 2026 adjusted diluted EPS
    $6.15 to $6.25
    high materiality
    Medium
    Full-year 2026 reported diluted EPS
    $5.55 to $5.65
    high materiality
    Medium
    Second half 2026 U.S. Livestock growth
    mid-single-digit range
    medium materiality
    Medium
    Vetscan OmniMax commercial validation
    by year-end
    medium materiality
    High
    Long-acting Cytopoint U.S. approval
    later this year
    high materiality
    High

    Segment performance

    29
    SegmentRevenueYoYQoQMargin
    Global
    Driven by a 1% decline in volume with price approximately flat.
    		$2.5Bflat reported, -1% organic operational——
    International
    Broad-based growth across parasiticides, OA pain, diagnostics, and livestock, partially offset by pressure in Key Dermatology. Emerging markets provided a meaningful tailwind.
    		$1.2B+6% organic operational——
    U.S.
    Reflected continued pressure from clinic traffic and affordability dynamics alongside intensifying competition in key franchises.
    		$1.3B-7% organic operational——
    Global Companion Animal
    Affected by softer demand, lower pruritic visits, and elevated competitive activity.
    		$1.7B-6% organic operational——
    Global Key Dermatology
    Category affected by softer demand, including lower pruritic visits in the U.S., alongside elevated competitive activity.
    		$395M-16% organic operational——
    Global OA Pain mAbs
    Early contributions from Lenvia and Portela in the EU and Canada, with broadening of the OA pain portfolio internationally.
    		$147M-3% organic operational——
    Global Canine OA Pain mAbs
    Consists of combined sales of Librela and Lenvia.
    		$105M-8% organic operational——
    Global Feline OA Pain mAbs
    Consisting of Solensia and Portela, demonstrating continued traction in an early-stage category.
    		$42M+12% organic operational——
    Global Simparica franchise
    Benefited from increased usage internationally, offset by continued pressure in the U.S. due to clinic dynamics and competitive environment.
    		$442Mflat organic operational——
    Global Simparica Trio
    Impacted by U.S. market dynamics, but continued market share gains internationally.
    		$350M-1% organic operational——
    Global Simparica
    Broad-based performance across most international markets.
    		$91M+4% organic operational——
    Global Companion Animal Diagnostics
    Driven by continued adoption of innovative diagnostic technologies, including Vetscan Imagyst and OptiCell.
    		$118M+12% organic operational——
    Global Livestock
    Supported by broad-based demand for healthy and affordable protein globally, improved supply, and elevated cattle demand.
    		$731M+11% organic operational——
    U.S. Companion Animal
    Reflected continued pressure from clinic traffic and affordability dynamics alongside intensifying competition in key franchises.
    		$1.0B-11% organic operational——
    U.S. Key Dermatology
    Apoquel faced lower realized price due to gross-to-net investments to defend volume and slow share loss. Cytopoint's decline reflects broader clinic and affordability pressures.
    In-clinic share: 86% in Q2In-clinic share change: down 5 points sequentiallyIn-clinic share change: down 10 points year-over-year
    		$251M-18% organic operational——
    U.S. Simparica franchise
    Reflecting softer flea, tick, and heartworm visits and a more competitive and promotional environment.
    Simparica Trio in-clinic market share: 21% in Q2Simparica Trio puppy share: 28%
    		$308M-6% organic operational——
    U.S. OA Pain mAbs
    Reflecting a high year-over-year comparison, softer clinic visit trends, and value-conscious environment.
    		$51M-18% organic operational——
    U.S. Canine OA Pain mAbs
    Impacted by high year-over-year comparison and clinic trends.
    		$34M-24% organic operational——
    U.S. Feline OA Pain mAbs
    Pet owner affordability pressures on premium therapies offset encouraging improvement in feline clinic visits.
    		$17M-2% organic operational——
    U.S. Livestock
    Driven by broad-based strength in cattle, supported by favorable producer economics, improved product supply, and elevated demand for parasiticides in response to New World screwworm outbreak.
    		$222M+23% organic operational——
    International Companion Animal
    Developed markets, particularly in Europe, remain more competitive and demand has been uneven. Emerging markets provided a meaningful tailwind.
    		$664M+5% organic operational——
    International Simparica franchise
    Reflecting continued expansion of the triple combination standard of care and broad-based demand.
    		$134M+19% organic operational——
    International Simparica Trio
    Driven by market share gains and key account wins.
    		$67M+34% organic operational——
    International Simparica
    Reflecting continued strength of the brand and effective commercial execution.
    		$67M+7% organic operational——
    International Key Dermatology
    Pressure most pronounced in developed European markets where competitive penetration has been deepest and promotional environment most intense.
    		$144M-13% organic operational——
    International OA Pain mAbs
    Driven by early launch contribution of Lenvia and Portela in the EU and Canada.
    		$96M+7% organic operational——
    International Canine OA Pain mAbs
    Driven by contributions from Lenvia, with some moderation in Librela as patients migrated to the new long-acting formulation.
    		$71M+2% organic operational——
    International Feline OA Pain mAbs
    Driven by the launch of Portela, reflecting limited early experience launches.
    		$24M+24% organic operational——
    International Livestock
    Cattle delivered strong growth, supported by continued global protein demand and improved product availability. Partially offset by weaker performance in Brazil due to macroeconomic headwinds.
    		$509M+6% organic operational——

    Operational metrics

    10
    Adjusted gross margin
    72.9%down 40 bps reported
    Q2 FY26

    Demonstrates strong P&L discipline.

    Adjusted operating expenses
    $764Mdown 2% operationally
    Q2 FY26

    Reflects continued progress in comprehensive cost and productivity program and disciplined spend management.

    Adjusted SG&A
    $586Mdown 4% operationally
    Q2 FY26

    Part of cost and productivity program.

    Adjusted R&D
    $173Mup 4% operationally
    Q2 FY26

    Prioritizing investment behind highest-return growth opportunities and innovation pipeline.

    Share repurchases
    >$550Mabove historical quarterly average
    Q2 FY26

    Deliberate and attractive use of capital at current valuation, reflecting confidence in long-term strength.

    FX headwind (revenue)
    ~$60M-$65M
    FY26

    Impact on full-year guidance.

    FX headwind (net income)
    ~$30M
    FY26

    Impact on full-year guidance.

    Canine pruritic clinic visits
    down >2%YoY
    Q2 FY26

    Reflects broader end-market softness across the category.

    Canine pain-related visits
    down >2%YoY
    Q2 FY26

    Contributed to pressure on U.S. OA pain mAbs performance.

    Flea, tick, and heartworm visits
    down ~7%YoY
    Q2 FY26

    Impacted U.S. Simparica franchise performance.

    Industry KPIs

    6
    MetricValueDetails
    EPS revenue guidance$9.12B to $9.32BUSD
    Pipeline clinical milestones12 potential blockbusters
    Regulatory approvals filingsanticipated U.S. approval
    Therapeutic drug market share86%%
    Price volume mix decompositionprice approximately flat
    Geographic regional revenue growth6%%

    Deals & partnerships

    1
    VitalRADSAcquisition of a veterinary teleradiology services platform.

    Completed the acquisition of VitalRADS.

    Risks & headwinds

    5
    Decline in veterinary clinic visits and pet owner affordability pressuresQ2 FY26 and near-term

    Canine pruritic clinic visits down >2% in U.S.; Canine pain-related visits down >2% in U.S.; Flea, tick, and heartworm visits down ~7%.

    Mitigation: Targeted pricing (gross-to-net), enhanced pet owner promotions, sharpening commercial execution, cost discipline.

    Intensified competitive activity (discounting, rebates, bundling) in key Companion Animal categoriesQ2 FY26 and near-term

    Key Dermatology revenue down 16% globally; U.S. Key Dermatology down 18%; U.S. Simparica franchise down 6%.

    Mitigation: Compete with discipline, reinforce differentiated value, direct incremental sales/marketing, targeted pricing/affordability actions.

    Generic competition for Cerenia and ConveniaQ2 FY26 and ongoing

    Continued decline in revenue for these products.

    Mitigation: Adjusted pricing to support dose recapture.

    Macroeconomic headwinds and lower medicalization in BrazilQ2 FY26

    Weaker performance in International Livestock (Brazil).

    Mitigation: Diversified portfolio, global footprint provides resilience.

    Foreign exchange headwinds impacting full-year guidanceFY26

    ~$60M-$65M top-line impact; ~$30M bottom-line impact.

    Mitigation: Reflected in revised full-year guidance.

    What to watch in Q3 FY26

    4

    Long-acting Cytopoint U.S. approval

    Later this year (2026)
    CurrentAnticipated later this year
    TargetApproval decision

    Why it matters

    Strengthens Dermatology portfolio with a differentiated option, helping veterinarians deliver effective care.

    The anticipated U.S. approval of long-acting Cytopoint later this year would strengthen our Dermatology portfolio with another differentiated option, helping veterinarians deliver effective care with greater convenience and value for pet owners.

    Q&A highlights

    5

    Clarify the nature of targeted price actions (gross-to-net) and their impact on guidance, quantify anticipated share loss in Derm/Simparica, and discuss the balance of organizational stability with ongoing leadership evolution.

    Kristin Peck clarified that gross-to-net refers to targeted, time-bound investments like promos, bundling, and point-of-sale discounts to protect volume and share, not changes to list price. Wetteny Joseph added that guidance assumes persistence or acceleration of macro/competitive pressures, leading to increased gross-to-net actions. Kristin expressed confidence in the leadership team's ability to execute in the current environment.

    “What we're talking about is investments in what -- in the industry will call gross-to-net. So a promo to maintain share at a clinic, it might be a cross-portfolio bundling that if you buy a product, you get a discount. It would be at point of sale to a pet owner to make it more affordable.”

    asked by Erin Wilson Wright · answered by Kristin Peck

    2 min read5 chapters

    Detailed Narrative

    01

    Operating Environment and Market Dynamics

    Veterinary clinic visits declined across markets, extending a multiyear trend, with price increases outpacing broader consumer inflation. This has led pet owners to be more selective in spending, impacting visitation patterns and purchasing decisions. Clinic revenue has increasingly shifted toward urgent and emergency care, while premium preventative and chronic care remain under pressure. Competitive intensity has increased, with new entrants using higher levels of discounting, rebates, and bundling to compete for existing patients in a slower-growth market.

    02

    Strategic Response to Headwinds

    Zoetis is responding with focus and discipline, sharpening commercial execution, strengthening its competitive position, exercising greater cost discipline, and continuing to invest in innovation. Targeted pricing and affordability actions, specifically gross-to-net investments, are being deployed to protect volume and share without changing overall list prices. The company is also evolving its leadership team, including the promotion of Abhay Nayak to EVP and President of U.S. Commercial Operations and the appointment of Jay Saccaro as EVP, CFO, and COO, to enable faster decision-making and greater connectivity across the supply chain.

    03

    Dermatology and Parasiticides Challenges

    The Key Dermatology franchise experienced significant pressure, with revenue declining 16% globally, due to softening demand (canine pruritic clinic visits down over 2% in the U.S.) and intensified competitive activity. The Simparica franchise was flat globally, with double-digit international growth offset by continued pressure in the U.S. from clinic dynamics and a more competitive promotional environment. The company is taking targeted actions, including competitive pricing and enhanced pet owner promotions, to stabilize performance.

    04

    OA Pain Portfolio Expansion

    Canine OA pain revenue declined against a strong comparison, with U.S. pain-related visits down over 2%. However, early contributions from Lenivia and Portela in the EU and Canada are encouraging, with full launches expected to broaden the OA pain franchise internationally. Feline OA pain mAbs grew 24% internationally, demonstrating continued traction in an early-stage category, with innovation like Solensia and Portela helping to close the gap in underdiagnosed and undertreated feline OA pain.

    05

    Diagnostics and Livestock Strength

    Companion Animal Diagnostics revenue grew 12%, reflecting sustained demand for diagnostic tools and services, particularly in urgent and emergency care. The company expanded Vetscan OptiCell capabilities and acquired VitalRADS, a veterinary teleradiology platform, reinforcing its end-to-end virtual reference lab vision. Livestock delivered strong 11% growth, driven by broad-based demand for healthy protein, improved supply, and elevated cattle demand in the U.S., including increased demand for Dectomax due to New World screwworm incursion.

    AI-generated summary of the company’s earnings call. Not investment advice.