Johnson & Johnson (JNJ) Q1 2026 earnings review
Top-Line Triumph Against the Patent Cliff, but Earnings Squeeze
Johnson & Johnson is successfully outrunning the STELARA patent cliff. Q1 revenue grew an accelerating 9.9% to $24.1B, proving the underlying portfolio can absorb a massive $1B+ YoY drop from a single legacy drug. However, this top-line triumph didn't reach the bottom line. Adjusted EPS reversed trend, falling 2.5% YoY to $2.70, reflecting margin pressures and a tough year-over-year comparison. Despite the earnings squeeze, management raised full-year guidance for both sales and EPS, signaling deep confidence that the Oncology and Cardiovascular growth engines will overpower short-term profitability hurdles.
🐂 Bull Case
The Oncology segment is a powerhouse, growing 22.8% globally. High-margin blockbusters like DARZALEX and CARVYKTI are driving this acceleration and easily offsetting legacy product declines.
Management increased the midpoint of FY26 estimated reported sales to $100.8B and adjusted EPS to $11.55, projecting confidence in a second-half margin recovery.
🐻 Bear Case
Adjusted Net Earnings fell 1.4% while sales grew 9.9%. If the company cannot stabilize gross margins against unfavorable product mix and international headwinds, EPS growth will continually lag.
While Cardiovascular is thriving, the Surgery segment grew a meager 1.2% operationally, dragged down by competitive pressures and Volume-Based Procurement (VBP) policies in China.
⚖️ Verdict: ⚪
Cautiously Bullish. The sheer gravity of J&J's top-line acceleration through a major patent cliff is impressive. If they can execute on their promise to lift margins by 50 basis points in FY26, the current earnings contraction will be a short-lived blip.
Key Themes
Oncology Engine Powers Through
Oncology remains the cornerstone of J&J's growth, accelerating 22.8% YoY to nearly $7B for the quarter. DARZALEX surged 22.5% globally to $3.96B, while CARVYKTI grew a massive 62.1% YoY to $597M. This segment is providing the exact high-growth, high-margin buffer management promised to counter the STELARA decline.
TREMFYA Successfully Replaces STELARA
The immunology baton pass is working. STELARA sales collapsed by 77.6% in the U.S. (down to $220M) due to biosimilar competition. However, TREMFYA perfectly absorbed the shock, accelerating 73.9% in the U.S. to $1.04B, driven by strong market share gains and a significant launch momentum in Inflammatory Bowel Disease (IBD).
Cardiovascular Leads MedTech
MedTech's Cardiovascular segment is accelerating, posting 13.0% reported growth to $2.37B. The strategy of using targeted acquisitions is paying off: Abiomed posted double-digit growth driven by Impella adoption, while Shockwave added $305M in the quarter. Core Electrophysiology also grew 12.6%, validating the unit's underlying strength.
Surgery Segment Sputters Amid Macro Pressures
A clear data point contradicting the broad growth narrative is the MedTech Surgery division. It decelerated to a weak 1.2% operational growth. Specifically, the Endocutters sub-segment contracted by ~3% operationally. Management cited direct macro headwinds: Volume-Based Procurement (VBP) policies in China and intense competitive pressures in energy devices.
Earnings Squeeze from Product Mix
Reversing the trend from late 2025, Adjusted Net Earnings declined 1.4% to $6.6B despite the $2.1B increase in revenue. The rapid erosion of STELARA—historically a very high-margin product—coupled with the costs of ramping up new launches and integrations, is actively compressing the bottom line.
Other KPIs
Reversing sharply from $3.37B in 25Q1. While Q1 is historically a lower cash generation period for J&J, a 50%+ drop highlights the near-term cash drag of the STELARA transition and ongoing MedTech transformation.
Accelerating slightly. R&D grew 9.4% YoY, maintaining a stable 14.7% of sales. Management is heavily funding the pipeline in the first half of the year to ensure new product launches meet their ambitious second-half expectations.
Guidance
Accelerating. The midpoint of $100.8B implies 7.0% YoY growth, an upgrade from the January estimate of 6.7%. This indicates management sees faster-than-expected uptake of new launches offsetting legacy declines.
Accelerating. The midpoint of $11.55 implies 7.1% YoY growth. Because Q1 Adjusted EPS declined 2.5%, achieving this full-year target demands a severe acceleration in the second half of 2026, creating execution risk.
Stable. Management maintained their January commitment to expand margins by 50 basis points for the full year, relying on operating leverage and manufacturing efficiencies kicking in during the second half.
Key Questions
Margin Cadence for 2026
With Q1 Adjusted EPS declining 2.5%, achieving the full-year 7.1% growth guidance requires massive second-half leverage. What specific catalysts bridge the gap between today's margin compression and H2 expansion?
MedTech Surgery Turnaround
The Surgery division posted anemic 1.2% operational growth, with Endocutters contracting 3%. Is this purely a China VBP timing issue, or are structural market share losses occurring in the U.S.?
STELARA Floor
U.S. STELARA sales plummeted nearly 78% YoY this quarter. Has the bulk of the biosimilar damage been priced in, or do you expect further aggressive step-downs in the remaining $656M global quarterly run rate?