Merck Q2 Earnings Beat Estimates, Revenue Falls Short

Merck reported Q2 2025 non-GAAP EPS of $2.13, beating estimates by $0.11, while GAAP revenue of $15.8 billion missed expectations by $93 million. KEYTRUDA sales increased 9%, but GARDASIL revenue fell 55% due to lower demand in China. The company updated full-year 2025 sales and earnings guidance to include restructuring and tariff costs.

Merck & Co., Inc. (NYSE: MRK), a leading global pharmaceutical company, released its second-quarter (Q2) 2025 financial results on July 29, 2025. The company reported a non-GAAP earnings per share (EPS) of $2.13, surpassing analyst estimates by $0.11. However, GAAP revenue of $15.8 billion fell short of expectations by $93 million.

Key highlights of the quarter include:

- Oncology Sales: Sales of KEYTRUDA, Merck's blockbuster immuno-oncology drug, climbed 9% to $8.0 billion, driven by increased uptake across various cancer types and earlier treatment stages.
- Vaccine Sales: GARDASIL and GARDASIL 9 vaccine revenues plummeted 55% to $1.1 billion due to a significant drop in demand from China. Sales outside China fell by 3%.
- Animal Health Division: This division reported a 11% growth to $1.6 billion, boosted by strong livestock product demand and the Elanco acquisition.

The company also announced a multiyear optimization initiative, expected to generate approximately $3.0 billion in annual cost savings by 2027, which will be reinvested into strategic growth areas.

In response to the mixed financial results, Merck updated its full-year 2025 sales and earnings guidance to include restructuring and tariff costs. The company now projects full-year GAAP sales between $64.3 billion and $65.3 billion and non-GAAP EPS between $8.87 and $8.97.

Merck's gross margin improved to 82.2% on a non-GAAP basis, primarily due to favorable product mix and higher inventory write-offs. Research and development expenses increased by 16% due to a $200 million upfront licensing charge and broader clinical pipeline activities.

The company also announced several notable approvals and acquisitions, including new indications for its RSV vaccine and the pending acquisition of Verona Pharma for a COPD treatment. However, competitive pressures and market volatility, particularly in China and Japan, continue to pose challenges.

References:

[1] https://www.nasdaq.com/articles/merck-posts-q2-eps-beat-revenue-slips
[2] https://www.merck.com/news/merck-co-inc-rahway-n-j-usa-announces-second-quarter-2025-financial-results/