Eli Lilly knockout quarter: beat and raise widens the lead

Key takeaways

• Capacity ramp decides outcomes: fewer stock-outs, steadier revenue, and better margins.
• Coverage and adherence drive results. Wider cover and fewer drop-outs keep patients on treatment longer.
• 2026 playbook hinges on Orforglipron versus Novo’s pipeline; rich valuation demands clean execution.

The big picture

The global pharma market is about USD 1.1 trillion and growing steadily. Eli Lilly sits near the top. It sells treatments for diabetes, obesity, cancer, immune disorders, brain diseases and rare conditions.

Revenue splits into New Products such as Mounjaro, Zepbound, Omvoh and Jaypirca, and Growth Products like Trulicity, Jardiance and Verzenio. In 2024, revenue was USD 45.04 billion, up from USD 34.12 billion in 2023, driven by GLP-1 demand and resilient oncology and immunology.

Since 2020 Lilly has poured more than USD 50 billion into research and manufacturing, including a new USD 3 billion injectable-drug site in Wisconsin. Rivals include Novo Nordisk, Pfizer, Merck and AbbVie. Lilly stands out with late-stage assets such as oral GLP-1 Orforglipron and strong manufacturing scale. Risks remain from cheaper copycats, oral newcomers and pricing pushback.

The quarter: growth shipped, guidance lifted

Lilly beat expectations and lifted guidance. Revenue was USD 17.60 billion versus Bloomberg consensus of USD 16.07 billion. Adjusted earnings per share (EPS) were also above expectations at USD 7.02. Management raised full-year sales to USD 63.0–63.5 billion and adjusted EPS to USD 23.00–23.70. Growth came from diabetes drug Mounjaro at USD 6.52 billion and obesity drug Zepbound at USD 3.59 billion, both ahead of Bloomberg markers.  

R&D ran at USD 3.47 billion as Lilly leans into late-stage assets. At roughly USD 813 per share, Lilly trades near 51x forward earnings and 13.8x EV/Sales, well above peers. The Street is firmly positive, with most analysts rating the shares as a buy. Expectations are high and execution must match.

Three questions frame the next leg: can Lilly deliver enough units, will coverage keep widening, and how fast will pills and newer combos shift pricing and share.

Capacity and coverage: the two levers

Capacity is strategy. Lilly is adding active-ingredient lines, pen assembly and fill-finish across Virginia, Texas and Puerto Rico, which should cut pharmacy stock-outs, normalise wholesaler inventory and lift gross margin as fixed costs spread over more units.

Simple tells matter: fewer stock-outs, shorter wait times, cleaner channel inventory. Access drives duration. New United States labels broaden reimbursable pools. Novo’s Wegovy carries a cardiovascular-risk-reduction claim for at-risk adults with obesity. Zepbound is approved for obstructive sleep apnoea in adults with obesity.

Over the next few quarters, watch covered lives, approval rates and discontinuations. If approvals rise and side effects stay manageable, treatment lasts longer, refills are steadier and unit economics improve. Outside the United States, reimbursement is slower and prices are lower, but fuller factories still support margins.

Pills and the next-gen arms race

Competition is moving. Novo is pushing CagriSema and Amycretin, with major data due into 2026. Lilly’s reply is Orforglipron, a once-daily oral GLP-1 with Phase 3 wins and planned obesity filings this year, plus diabetes in 2026.

Tablets can widen the funnel in primary care by removing injection friction. Economics decide the winner as much as efficacy. If both firms add supply, payers may push step therapy or higher rebates, testing net prices. Watch pivotal read-outs, filings and launch windows.

The firm that pairs better efficacy and tolerability with secure supply and broad access, while holding the rebate line, will protect both market share and margins.

Valuation and sentiment

Lilly’s quality is clear. Operating margin near 32% and return on invested capital close to 26% sit well above market levels. Beta at roughly 0.55 keeps moves calmer than the index.

Capital discipline remains tight, with a USD 15 billion buyback and steady dividend growth, even as free cash flow dipped in 2024 due to inventory build and new plants.

On sentiment, analysts are broadly positive with high institutional ownership and low short interest. The flip side is valuation risk. At near 51x forward earnings, the bar is high and misses bite.

Scenarios

Base. Supply ramps on schedule. Coverage widens without heavy rebates. Orforglipron filings land on time. Margins expand on utilisation. Valuation stays rich but defensible.

Bear. Start-ups slip or device bottlenecks persist. Payers tighten criteria. Discontinuations rise. Novo’s next-gen data reset efficacy expectations. Rebates rise. Multiple compresses.

Bull. Capacity beats plan. Coverage accelerates at large employers and government plans. Orforglipron approval lands cleanly with strong tolerability. Next-gen Lilly data narrows Novo’s lead. Cash flow jumps as working capital normalises.

Risks

• Start-up or device setbacks that slow dose availability.

• Tighter payer criteria, higher rebates or step edits.

• Safety or tolerability headlines that shorten duration.

• Net price pressure as orals arrive and capacity constraints ease.

• Premium valuation that amplifies any disappointment.

Investor playbook

• Track validation-to-commercial hand-offs and quarterly output step-ups in Virginia, Texas and Puerto Rico.

• Watch coverage momentum tied to Zepbound’s sleep-apnoea label and large United States plan adoption.

• Monitor adherence and discontinuations. Longer duration is the quiet profit lever.

• Map 2026–2027 using Novo’s Amycretin and CagriSema timelines versus Lilly’s Orforglipron filings.

• Re-check multiples against growth and margin cadence each quarter.

Scale decides the winner: can Lilly turn demand into staying power?

This quarter shows the simple truth of obesity care. Scale beats theory. If deliveries keep accelerating, coverage broadens and discontinuations stay contained, operating leverage appears in plain sight.

Pills and higher-efficacy combos will raise the bar, but a scale lead holds if factories run on time and access improves. For long-term investors, focus on durability. Durable demand, durable access and durable production support steadier cash flow even if list prices face pushback.

Novo will keep pressing, but execution across plants, payers and pipeline is the real moat. If Lilly keeps shipping what it sells while advancing orforglipron, today’s beat looks less like a spike and more like a runway into 2026.