Johnson & Johnson’s 2026 Margin Guidance Narrows, Growth Targets Shift From 5-7% to Double-Digit

Date of Call: Jan 21, 2026

Financials Results

• Revenue: $24.6B for Q4, up 7.1% YOY; $94.2B for full year 2025, up 5.3% YOY
• EPS: $2.10 per diluted share for Q4 vs $1.41 prior year; $11.03 for full year 2025 vs $5.79 prior year, including $7B talc reserve reversal
• Operating Margin: Adjusted income before tax as percentage of sales increased from 24.1% to 28.7% in Q4 2025

Guidance:

• Operational sales growth for 2026 expected in range of 5.7% to 6.7% (midpoint 6.2%), with adjusted operational growth midpoint of 5.9%.
• Reported sales growth expected between 6.2% to 7.2% with a midpoint of 6.7%, including benefit from a 53rd week.
• Adjusted operational EPS growth expected at midpoint of 5.5%, with range of $11.28 to $11.48; reported adjusted EPS expected to be $11.53 at midpoint.
• Adjusted pretax operating margin expected to improve by at least 50 basis points.
• Net interest expense expected between $300M and $400M.
• Effective tax rate projected in range of 17.5% to 18.5%.

Business Commentary:

Revenue Growth and Strategic Positioning:

• Johnson & Johnson reported worldwide sales of $94.2 billion for the full year 2025, with a 5.3% increase despite a significant 620 basis point headwind from STELARA.
• The growth was driven by strong commercial execution, innovation, and a focus on high-growth areas like Oncology, Immunology, and Neuroscience.

Oncology Segment Performance:

• The Oncology segment achieved 21% operational sales growth, with expectations to exceed $50 billion in annual sales by 2030.
• This growth was fueled by the success of key products like DARZALEX and CARVYKTI, along with promising developments in solid tumors.

Immunology Segment Growth:

• TREMFYA demonstrated remarkable growth with 65.4% increase in sales, making it the fastest-growing IL-23 therapy in the U.S.
• The growth was attributed to strong market demand and successful launches in key indications like IBD.

MedTech Segment Expansion:

• MedTech sales reached $34 billion in 2025, with 5.4% operational growth driven by strong performance in Cardiovascular, Surgery, and Vision segments.
• Growth was supported by significant new product launches and regulatory approvals, particularly in electrophysiology and surgical robotics.

Financial Outlook and Investments:

• For 2026, the company anticipates operational sales growth in the range of 5.7% to 6.7%, with a projected adjusted operational sales growth midpoint of 5.9%.
• This outlook is supported by continued investments in R&D and M&A, along with strategic initiatives to enhance operational efficiencies.

Sentiment Analysis:

Overall Tone: Positive

• CEO Joaquin Duato stated: 'I'm excited to discuss our very strong full year results' and 'We have line of sight to double-digit growth by the end of the decade.' CFO Joe Wolk said: 'We are entering 2026 with significant momentum' and 'We anticipate another solid year ahead.' Strong growth highlighted across oncology, immunology, and medtech segments, with multiple blockbuster products driving optimism.

Q&A:

• Question from Asad Haider (Goldman Sachs): What are the key levers to bridge to double-digit growth, and how much comes from pipeline vs acquisitions vs portfolio pruning?
  Response: Growth drivers are the strength of the portfolio and pipeline across Oncology, Immunology, Neuroscience, Cardiovascular, Surgery, and Vision, with specific focus on blockbusters like TREMFYA, ICOTYDE, SPRAVATO, and new product launches.

• Question from Larry Biegelsen (Wells Fargo): How are you thinking about the MedTech market in 2026, J&J's adjusted operational growth vs 2025, and the outlook for the EP business?
  Response: MedTech market outlook is positive with no material impact expected from ACA subsidy changes. J&J expects 2026 to be better than 2025, with accelerated growth in Cardiovascular and Vision, and EP business showing strong momentum with VARIPULSE success.

• Question from Christopher Schott (JPMorgan Chase & Co): How should we think about margin progression over time with higher top-line growth?
  Response: Margin expansion is expected to continue with improvements in infrastructure, gross margins in MedTech manufacturing, and reduced STELARA erosion. Earnings should be commensurate with sales growth, with at least 50 bps improvement anticipated for 2026.

• Question from Joanne Wuensch (Citigroup): Can you discuss the health of the contact lens market and Vision Care performance?
  Response: Vision Care is a focus area with strong contact lens growth driven by ACUVUE OASYS 1-Day Family products and strategic price actions. Surgical Vision grew nearly 11% in Q4, driven by premium intraocular lenses like TECNIS Odyssey.

• Question from Terence Flynn (Morgan Stanley): How are you positioning the TECVAYLI franchise relative to CARVYKTI in multiple myeloma, and how might MRD guidance impact development?
  Response: TECVAYLI and CARVYKTI are positioned to cover different patient settings with tailored treatment goals; TECVAYLI is community-ready, while CARVYKTI is a single-dose cure option. MRD negativity could accelerate development for new agents like ramantamig.

• Question from Danielle Antalffy (UBS): What is the aspirational peak for high-growth markets participation, and what other growth markets are you targeting?
  Response: Target is over 70% participation in high-growth markets post-Ortho separation. Expansion is focused within Cardiovascular, Surgery, and Vision, with OTTAVA robotic surgery system as a major growth driver in Surgical.

• Question from Vamil Divan (Guggenheim Securities): What is initial feedback on INLEXZO, timing for a permanent J-code, and updates on SunRISe-5 and SunRISe-3 data?
  Response: INLEXZO launch is seeing strong interest and receptivity. Permanent J-code anticipated in early Q2 2026. SunRISe-5 data will expand addressable population; SunRISe-3 timing not specified.

• Question from Shagun Singh Chadha (RBC Capital Markets): What are next steps and implications of the initial Daubert decision in Talc litigation, and what are plans for resolution?
  Response: The Special Master's recommendation excluded some plaintiffs' expert opinions but failed to apply gatekeeping duties; J&J will appeal and continue litigating all claims, viewing the business as a clean story of strength.

• Question from Alexandria Hammond (Wolfe Research): What is confidence in milvexian and how will you leverage Xarelto commercialization experience?
  Response: Confidence is high due to milvexian's superior potency and safety profile, with data expected in 2026 for atrial fibrillation and secondary stroke prevention; aim is to show clear superiority in bleeding risk similar to Xarelto's success.

Contradiction Point 1

Margin Improvement Outlook Post-Ortho Separation

Guidance on near-term margin expansion appears inconsistent.

How should we view margin progression—should we link top-line growth to margin expansion, or is the 50 bps improvement in 2026 a reasonable proxy? - Christopher Schott (JPMorgan Chase & Co)

2025Q4: Margin expansion will continue... The 2026 target of at least 50 bps improvement reflects these factors, but future margins will track with sales growth. - Joseph Wolk(CFO)

Can you clarify the 75 bps potential margin post-Ortho spin-off and the factors influencing this estimate? - Danielle Antalffy (UBS Investment Bank)

2025Q3: The 75 bps margin improvement (top line and operating margin) is a forward-looking estimate. - Joseph Wolk(CFO)

Contradiction Point 2

2026 Growth Target and Confidence

Statements regarding confidence in exceeding 2026 growth targets show a shift.

What are the key levers to drive double-digit revenue growth by the end of the decade? - Asad Haider (Goldman Sachs)

2025Q4: The confidence in double-digit growth stems from the strength of the portfolio and pipeline... - Joaquin Duato(CEO)

Okay, let's see. The user wants me to rewrite the earnings call question into a concise question. The original input is: "What gets you to exceed [the 5-7% growth target]?... Why is 5% a good number given that you have easy comps? Could you do better?" First, I need to understand the core of the question. The user is asking about factors that could lead to exceeding the growth target, specifically 5-7%. The second part is questioning why 5% is considered a good target when there are easy comparisons (comps), and if there's potential for better performance.The task is to condense this into a single, concise question without any explanations or prefaces. The user emphasized strict output constraints: only the rewritten question, ending with a question mark.Let me break it down. The original question has three parts: exceeding the target, justifying the 5% number with easy comps, and the possibility of doing better. To make it concise, I need to combine these elements into a single question.Perhaps start with "What factors could lead to exceeding the 5-7% growth target?" That covers the first part. Then, the second part is about why 5% is a good number given easy comps. Maybe rephrase that as "and why is 5% a reasonable target despite easy comps?" Finally, the last part is "Could you do better?" which can be included as "Is there potential for higher growth?"Putting it all together: "What factors could lead to exceeding the 5-7% growth target, and why is 5% a reasonable target despite easy comps? Is there potential for higher growth?" Wait, but the user wants it as one question. Hmm. The original input uses three sentences, but the user might want a single question. Let me check the example given in the input. The input has three parts but the output is a single question. So maybe combine them into one question using "and" or rephrase.Alternatively, "What factors could lead to exceeding the 5-7% growth target, and why is 5% considered a good target despite easy comps?" That covers the first two parts. The third part is "Could you do better?" which is a separate question. But the user might want all three parts combined. However, the example output in the input might have two questions. Wait, looking back at the input, the original has three parts but the user wants a concise question. Maybe the best way is to merge the first and second parts into one question and leave the third as a separate question. However, the user specified to output only the rewritten question. The input has three parts, but the output should be a single question. Let me try again.Original input: What gets you to exceed [the 5-7% growth target]? Why is 5% a good number given that you have easy comps? Could you do better?Rewriting as a single question: "What factors could lead to exceeding the 5-7% growth target, and why is 5% considered a good target despite easy comps? Is there potential for higher growth?" But the user wants only one question. Hmm. Maybe combine all three into one question. For example: "What factors could lead to exceeding the 5-7% growth target, why is 5% a good target despite easy comps, and is there potential for higher growth?" But that's a bit long. Alternatively, "What factors could lead to exceeding the 5-7% growth target and why is 5% a reasonable target given easy comps? Could you achieve higher growth?" But the user wants a single question. Maybe the best way is to merge the first two parts into one question and the third as a separate question. However, the user's example might have two questions. Wait, the user's instruction says "Output ONLY the rewritten question" and "End with a question mark." So perhaps the answer should be a single question that encapsulates all parts. Let me try: "What factors could lead to exceeding the 5-7% growth target, and why is 5% considered a good target despite easy comps? Is there potential for higher growth?" But the user might expect a single question. Alternatively, "What factors could lead to exceeding the 5-7% growth target, and is there potential for higher growth given easy comps?" That combines the first and third parts. But the second part is about justifying 5% as a good number. Maybe "What factors could lead to exceeding the 5-7% growth target, and why is 5% a reasonable target despite easy comps?" That's two parts in one question. The user might accept that. The original input had three questions, but the output should be concise. So perhaps the best approach is to merge the first two into one question and leave the third as a separate question. However, the user's example might require a - Shagun Singh Chadha (RBC Capital Markets)

2025Q3: J&J is striving for growth above the 5-7% target... The company is confident in exceeding the target over the long term and the balance of the decade. - Joseph Wolk(CFO)

Contradiction Point 3

MedTech Growth Outlook and Electrophysiology (EP) Business Performance

Contradiction on the EP business growth trajectory and its contribution to overall MedTech performance.

How is J&J positioning its MedTech market strategy for 2026 compared to 2025, and what is the outlook for accelerated adjusted operational growth and the underperforming EP business? - Larry Biegelsen (Wells Fargo Securities, LLC)

2025Q4: The **EP business is accelerating**, with U.S. growth nearing double digits... J&J is committed to launching a new catheter annually... and strengthening mapping leadership with CARTO. - Tim Schmid(Executive VP, Worldwide Chairman of MedTech)

What feedback have doctors provided on the adoption appetite for the EP strategy and VARIPULSE? - Shagun Singh Chadha (RBC Capital Markets)

2025Q2: Electrophysiology grew ~10% operationally in Q2 (a $5B base), driven by VARIPULSE adoption... The full EP portfolio... supports confidence in retaining global market leadership. - Tim Schmid(Executive VP, Worldwide Chairman of MedTech)

Contradiction Point 4

Gross Margin Outlook

The expected magnitude of gross margin improvement for the year differs significantly.

How should we view margin progression over time—is higher top-line growth linked to greater margin expansion, or is the 50 bps improvement in 2026 a reasonable proxy? - Christopher Schott (JPMorgan Chase & Co, Research Division)

2025Q4: Margin expansion will continue through operational efficiencies... The 2026 target of at least 50 bps improvement reflects these factors. - Joseph Wolk(CFO)

What caused the decline in gross margins below recent trends, and what's the outlook considering mix and tariffs? - Chris Schott (JPMorgan)

2025Q1: Looking ahead, gross margin should improve by about 50-100 basis points (300 bps total improvement, partly offset by tariffs). - Joseph Wolk(CFO)

Contradiction Point 5

Orthopedic Business Performance and Outlook

The characterization of recent performance and confidence in near-term recovery is inconsistent.

How is J&J positioning the MedTech market for 2026 compared to 2025, and what is the outlook for accelerated adjusted operational growth and the EP business, which is currently growing below market? - Larry Biegelsen (Wells Fargo Securities, LLC, Research Division)

2025Q4: The EP business is accelerating... J&J is committed to launching a new catheter annually... and strengthening mapping leadership... - Tim Schmid(Executive VP, Worldwide Chairman of MedTech) [Implies confidence in growth and transformation]

Can you explain the orthopedic sales decline, quantify contributing factors (e.g., one-time events), and discuss recovery outlook for H2 and next year? - Joanne Wuensch (Citibank)

2025Q1: Orthopedic sales were down 3.1%... underlying performance was slightly below market... but strong NPI uptake... provide confidence for improvement in H2. - Tim Schmid(Executive VP, Worldwide Chairman of MedTech) [Describes past performance as below market despite innovation]