Merck 2025 Q2 Earnings Misses Targets as Net Income Declines 18.9%

Merck, ranking 56th by market capitalization, reported its fiscal 2025 Q2 earnings on Jul 28th, 2025. The company announced revenue of $15.81 billion, slightly below analysts' expectations of $15.87 billion. Merck's EPS of $2.13 surpassed the consensus projection of $2.03. The firm narrowed its full-year guidance for 2025, projecting adjusted EPS between $8.87 and $8.97, compared to the previous range of $8.82 to $8.97. Sales are expected to range from $64.3 billion to $65.3 billion, tightening from prior guidance of $64.1 billion to $65.6 billion. The revised outlook does not factor in the anticipated impact of the planned acquisition of Verona Pharma.

Revenue

Merck's total revenue for 2025 Q2 decreased by 1.9% to $15.81 billion, compared to $16.11 billion in the same quarter last year. The pharmaceutical segment contributed $14.05 billion, with oncology leading at $8.86 billion. Keytruda alone accounted for $7.96 billion. Alliance revenues included Lynparza at $370 million and Lenvima at $265 million. Welireg generated $162 million, while Reblozyl brought in $107 million. The vaccines segment added $2.25 billion, with Gardasil/Gardasil 9 making up $1.13 billion and ProQuad/M-M-R II/Varivax following at $609 million. Vaxneuvance and RotaTeq contributed $229 million and $121 million respectively, while Capvaxive and Pneumovax 23 closed at $129 million and $38 million. Hospital and specialty care reached $2.35 billion, and animal health generated $1.65 billion.

Earnings/Net Income

Merck's EPS declined 18.0% to $1.76 in 2025 Q2 from $2.15 in 2024 Q2, while net income dropped to $4.43 billion, down 18.9% from $5.46 billion in the previous year. Despite the decrease, Merck's EPS exceeded analyst expectations, indicating a better-than-anticipated performance.

Post-Earnings Price Action Review

Merck’s strategy of buying shares post-earnings with a revenue beat and holding for 30 days delivered moderate returns, although it underperformed the broader market. The compound annual growth rate of the strategy was 3.22%, significantly trailing the benchmark by 71.64%. Despite a maximum drawdown of 0.00%, the Sharpe ratio stood at 0.15, reflecting low risk but modest returns. The strategy is seen as suitable for investors prioritizing stability over high growth, given its consistent albeit modest performance metrics. Investors seeking steady returns with minimal risk may find this approach appealing, although they should be aware of its historical underperformance compared to broader indexes.

CEO Commentary

"Earlier this month, we were pleased to announce our pending acquisition of Verona Pharma, which augments our portfolio and pipeline and is another example of acting decisively when science and value align," said Robert M. Davis, Chairman and Chief Executive Officer. He emphasized the announced multiyear optimization initiative, aimed at reallocating investments from mature business areas to new growth drivers, which he believes will enable the transformation of the portfolio and drive innovation-driven growth. Davis expressed confidence that these strategies position the company to generate significant value for shareholders and effectively serve patients.

Guidance

Merck narrowed its expected worldwide sales range for the full year 2025 to between $64.3 billion and $65.3 billion and adjusted its non-GAAP EPS guidance to a range of $8.87 to $8.97. The outlook does not account for the anticipated impact of the Verona Pharma acquisition.

Additional News

Merck announced its plan to acquire Verona Pharma, expanding its portfolio with Ohtuvayre, a novel treatment for chronic obstructive pulmonary disease. The acquisition, valued at approximately $10 billion, is expected to close in the fourth quarter of 2025. Merck also launched a multiyear optimization initiative aimed at achieving $3 billion in annual cost savings by 2027, to be reinvested in product launches and pipeline development. As part of this initiative, Merck will reduce its global real estate footprint and optimize its manufacturing network, aligning with customer geography and reflecting business changes. Additionally, Merck plans to implement job cuts in administrative, sales, and R&D roles as part of a new restructuring program approved in July 2025.