Gilead (GILD) Q2 2026 earnings review
Core Business Accelerates While M&A Triggers $11 Billion Accounting Shock
Gilead's second quarter presents a massive divergence between underlying commercial momentum and reported earnings. The base business is firing on all cylinders: product sales excluding Veklury grew an accelerating 10% year-over-year to $7.6 billion, fueled by a dominant HIV franchise and strength in Oncology. However, the bottom line is reversing violently. Non-GAAP diluted EPS collapsed to a $(6.75) loss strictly due to an $11.2 billion Acquired IPR&D charge from closing the Arcellx, Tubulis, and Ouro Medicines deals. Management remains highly confident, raising full-year revenue and underlying EPS guidance, proving the core cash-generation engine is intact despite the one-time accounting hit.
🐂 Bull Case
HIV sales grew 12% to $5.7 billion, driven by robust Biktarvy demand (+7%) and an explosive 48% surge in Descovy sales. The PrEP (pre-exposure prophylaxis) expansion is working flawlessly.
Trodelvy sales jumped 26% year-over-year following key FDA approvals in first-line metastatic triple-negative breast cancer (mTNBC), doubling the addressable patient market.
🐻 Bear Case
The Cell Therapy segment continues to collapse under competitive pressure, dropping 14% year-over-year to $417M. Yescarta and Tecartus are losing ground to both in-class and out-of-class alternatives.
Gilead just deployed over $11 billion in a single quarter for early-stage and clinical assets (Arcellx, Tubulis, Ouro). Integrating these platforms while protecting operating margins presents a massive execution hurdle.
⚖️ Verdict: 🟢
Bullish. Look past the $(6.75) EPS loss. The core business is accelerating, generating $3.6B in operating cash flow this quarter alone, which completely funds their aggressive M&A pipeline build-out without damaging the balance sheet.
Key Themes
HIV Prevention (PrEP) Driving Acceleration
The HIV segment is accelerating, up 12% YoY (compared to 10% in Q1 and 6% in Q4). Biktarvy remains the stable anchor (+7%), but the real star is the prevention market. Descovy sales surged 48% to $967 million, showcasing successful commercial execution in expanding the PrEP user base and securing favorable average realized prices.
Trodelvy Momentum Building
Trodelvy sales are accelerating, up 26% YoY to $457 million. The recent FDA approval for first-line mTNBC allows Gilead to move Trodelvy earlier in the treatment paradigm, which significantly extends the duration of therapy and doubles the addressable patient population.
Liver Disease Stabilizes on Livdelzi Growth
The legacy HCV/HBV declines are finally being offset by new innovation. Liver Disease sales grew 10% YoY to $877 million, primarily driven by Livdelzi, which generated $167 million in the quarter. Positive Phase 3 IDEAL study results present a clear path to expand Livdelzi to patients inadequately controlled by standard of care.
Cell Therapy Freefall Continues
Cell Therapy is decidedly reversing its prior growth trajectory. Sales declined 14% YoY to $417 million, marking a worsening trend from the 12% decline in Q1 and 7% decline in Q4 25. Management explicitly cites 'ongoing competitive headwinds'—both Yescarta (-12%) and Tecartus (-24%) are losing share to entrenched competitors and out-of-class therapies.
Massive Expense Base Contradicts Operating Narrative
While management praises operating leverage, actual operating expenses surged. Even excluding the $11.2B IPR&D charge, non-GAAP SG&A jumped 12% to $1.5 billion, driven by acquisition integration and higher HIV promotional activities. Despite incredible top-line growth, the company relies heavily on non-GAAP exclusions to present a picture of cost control.
Veklury Eradication
Veklury (remdesivir) sales decelerated violently, plunging 81% YoY to just $23 million. The drug has essentially evaporated as a material revenue stream due to lower COVID-19 hospitalizations. Management has accordingly slashed full-year Veklury guidance by 50% to roughly $300 million.
Macro Policy Headwinds Persist
As noted in prior quarters, the company continues to navigate the impact of Medicare Part D pricing reforms under the Inflation Reduction Act, as well as shifts in the Affordable Care Act subsidies. While the HIV franchise powered through these hurdles this quarter, these macro policies remain a structural cap on net price realization.
Aggressive Next-Gen Platform Acquisition
Gilead's $3.15 billion acquisition of Tubulis brings in-house the NaPi2b-directed topoisomerase-I inhibitor ADC (GS-8824) and a proprietary platform to build novel antibody-drug conjugates. Paired with the Arcellx and Ouro Medicines deals, Gilead is heavily betting that buying external platforms is the fastest path to oncology and inflammation dominance.
Other KPIs
Stable and incredibly strong. Despite reporting a $10.5 billion GAAP net loss, operating cash flow jumped to $3.6 billion for the quarter (up from $827M a year ago). This proves the underlying cash-generation power of the HIV franchise remains completely insulated from the M&A accounting noise.
Stable. Gross margin was exactly flat year-over-year at 86.9%. The pricing headwinds and Part D redesigns have not degraded the fundamental profitability of the products being sold.
Reversing. Cash dropped significantly from $10.6 billion at year-end 2025 to $3.18 billion, entirely driven by $11.3 billion in cash outflows for the Arcellx, Tubulis, and Ouro Medicines acquisitions, alongside $2.8 billion in debt repayments.
Guidance
Accelerating. Management raised both the low and high ends of the prior guidance ($29.4B - $29.8B). This implies continued double-digit momentum in the base business, particularly relying on HIV and Oncology strength in the second half of the year.
Decelerating. Cut in half from the previous guidance of ~$600 million, acknowledging the reality of plummeting COVID-19 hospitalizations.
Improved. Management raised this guidance from the previous $(1.05) - $(0.65). It is crucial to note this includes a rigid $(9.08) per share hit from Acquired IPR&D. Adding that back, implied operational EPS is well over $8.40, showing operational strength underlying the reported loss.
Key Questions
Cell Therapy Turnaround
With Yescarta and Tecartus sales continuing to decline by double digits due to in-class and out-of-class competition, what specific strategic changes are being implemented to stabilize the business before the anticipated anito-cel launch in 2027?
Descovy vs. Yeztugo Dynamics
Descovy sales surged 48% this quarter. As Yeztugo (lenacapavir) continues its launch ramp for PrEP, how much of Descovy's current run rate is at risk of direct cannibalization versus expanding the total addressable market?
M&A Integration and Margin Tolerance
Having just deployed over $11 billion in capital for Arcellx, Tubulis, and Ouro Medicines, what is the expected SG&A and R&D run-rate required to integrate these platforms, and is the appetite for further large-scale M&A now paused?