Johnson & Johnson (JNJ) Q4 2025 earnings review
The Catapult Year: Growth Accelerates as Stelara Fades
Johnson & Johnson delivered a masterclass in portfolio rotation. Despite a massive 49% collapse in sales of its former top drug, Stelara, the Innovative Medicine division grew nearly 8%—its fastest pace of the year. The 'New Era' narrative is backed by hard data: Operational sales growth accelerated for the third consecutive quarter to 7.1%. While Talc litigation noise returned with a mixed court ruling and a $900M charge, the core business is firing on all cylinders. Management guided 2026 revenue to $100B (+6.2% midpoint), signaling that the patent cliff is effectively in the rearview mirror.
🐂 Bull Case
Tremfya is replacing Stelara faster than expected. Sales exploded 65% YoY to $1.6B in Q4, accelerating from 40% in Q3. It is capturing share in IBD and is on track to exceed $10B in peak sales.
The oncology portfolio grew 22% YoY. Darzalex is a juggernaut ($3.9B, +24%), and Carvykti sales jumped 63%. J&J is successfully treating patients earlier in the disease cycle, expanding the addressable market.
🐻 Bear Case
The 'Daubert' court ruling was mixed—excluding some junk science but failing to dismiss plaintiff experts entirely. J&J took a $900M charge in Q4 related to litigation, and the appeal process extends the timeline for final resolution.
MedTech cost of goods sold deleveraged due to tariffs, which are expected to cost ~$500M in 2026. While sales are growing, these external costs create a headwind to margin expansion in the device segment.
⚖️ Verdict: 🟢🟢
Strong Buy. J&J has pulled off the rarest feat in pharma: growing double-digits (ex-Stelara) while losing exclusivity on its biggest asset. With a $100B revenue guide for 2026 and accelerating momentum in both MedTech and Pharma, the fundamentals are pristine.
Key Themes
Tremfya's Hyper-Acceleration
Tremfya is not just growing; it is vertical. Growth surged from 30% in Q2 to 40% in Q3, and now 65% in Q4. This acceleration is driven by rapid uptake in Inflammatory Bowel Disease (IBD), effectively offsetting the 49% decline in Stelara. It is poised to be the primary growth engine for 2026.
MedTech Cardiovascular Powerhouse
J&J has successfully bought its way to leadership in high-growth cardiovascular markets. The segment grew 15.2% for the full year. In Q4, Shockwave (+23%) and Abiomed (+18%) outperformed, while the core Electrophysiology business accelerated to 9.5% growth in the US, shrugging off competitive concerns.
Talc & Litigation Costs
The legal battle drags on. Q4 Other Expense spiked to $483M (net) largely due to $900M in higher litigation costs. While J&J remains confident in its strategy and is appealing the recent 'Daubert' ruling, the financial noise persists and distracts from operations.
Neuroscience Expansion
Spravato continues to defy gravity with 68% growth in Q4. Combined with the successful integration of Caplyta (acquired via Intra-Cellular), which saw record new patient starts, J&J is building a dominant franchise in depression that grew 19% overall in Q4.
The 53rd Week Boost
Management noted that FY2026 includes a 53rd week, adding approximately 100 basis points to growth. While 2026 guidance is strong (6.2% midpoint), investors should mentally adjust 'organic' comparable growth to ~5.2%, which is still solid but less explosive than the headline suggests.
Tariff Impact
Tariffs are a tangible headwind. MedTech tariffs impacted Q4 margins and are guided to cost ~$500M in 2026. This is significantly higher than the $200M estimate provided earlier in 2025, pressuring gross margins despite sales leverage.
Other KPIs
Stable. Consistent with 2024 levels despite increased capital investments in US manufacturing and tariff headwinds. Management guides to elevate this to ~$21B in 2026, showcasing high cash conversion.
Accelerating. Improved from 24.1% a year ago. Driven by R&D leverage (lower IPR&D payments vs prior year) and administrative efficiencies, offsetting the gross margin pressure from product mix and tariffs.
Accelerating. The most critical metric for the thesis. If you strip out the dying Stelara revenue, the remainder of the pharma business is growing at double-digit rates, validating the pipeline quality.
Guidance
Accelerating. The midpoint of 6.2% is higher than the 5.3% delivered in FY25. This includes a ~1% benefit from the 53rd week, but even underlying growth remains robust at >5%.
Stable. Implies ~5.5% growth at the midpoint ($11.38) vs FY25 ($10.79). Earnings growth slightly trails revenue growth due to the higher tax rate (17.5-18.5% vs 3% benefit in Q4 GAAP) and tariff absorption.
Accelerating (Negative). Costs have risen from the ~$200M estimated in mid-2025. Management has absorbed this into guidance, but it remains a drag on gross margins.
Key Questions
Tremfya Sustainability
Tremfya growth accelerated violently to 65% in Q4. How much of this is one-time stocking or pipeline fill versus durable end-market demand in IBD?
Talc Legal Strategy
With the special master's mixed ruling on expert testimony, does this alter your timeline for resolution or your willingness to settle versus litigate?
MedTech China Exposure
You noted VBP (Volume Based Procurement) headwinds in China across the portfolio. Do you expect this pressure to intensify or stabilize in 2026?