Zoetis (ZTS) Q4 2025 earnings review
Growth Engine Sputters: US Pet Market Stalls
Zoetis posted a mixed Q4, heavily reliant on International performance and accounting adjustments to mask significant weakness in its core US market. While headline revenue grew 3% reported (+4% organic operational), the US Companion Animal segment—historically the company's premium growth driver—was flat organically and down 1% reported. The company cited declines in key OA pain products (Librela/Solensia), continuing a worrying trend from Q3. FY26 guidance projects organic revenue growth of just 3-5%, a structural deceleration from the 6-8% historical norm, suggesting the 'misperceptions' around Librela and competitive pressures in Dermatology are lasting headwinds.
🐂 Bull Case
International operations grew 7% organically, with Livestock surging 12%. The segment remains robust across cattle, fish, and poultry, providing a critical buffer against US volatility.
Approvals for Lenivia (long-acting dog OA) and Portela (long-acting cat OA) in Canada and EU set the stage for H1 2026 launches. These next-gen products could arrest the decline in the pain franchise.
🐻 Bear Case
US Companion Animal revenue fell 1% reported and was flat organically. This is a dramatic deterioration for a segment that grew 7-9% in prior years, driven by the stalling OA pain franchise.
FY26 guidance calls for 3-5% organic revenue growth, significantly below the 6-8% long-term algorithm investors expect. This implies the current headwinds are not merely transitory quarterly blips.
⚖️ Verdict: 🔴
Bearish. The stalling of the US Companion Animal business—the highest quality segment—is a major red flag. Combined with decelerating guidance (3-5% organic) and reliance on international livestock to carry the quarter, the premium valuation multiple is at risk.
Key Themes
US Companion Animal Growth Evaporates
The most alarming data point in the release is US Companion Animal revenue: -1% reported and flat (0%) organically. This segment drives the company's margin profile. Management explicitly cited a decline in monoclonal antibody products for OA pain (Librela and Solensia) as the culprit, partially offset by Parasiticides and Dermatology. This confirms the 'social media misperceptions' issues cited in Q3 are continuing to degrade sales.
Earnings Quality: The 'Fiscal Year Alignment' Boost
International reported revenue (+8%) was artificially inflated by 2.5% to 3.5% due to the 'Expected Fiscal Year Alignment' (eliminating a one-month reporting lag). While the company disclosed this clearly, it means underlying reported growth was closer to ~5%. This accounting change pulled sales forward into Q4 2025, a benefit that will not recur in FY26.
Livestock Outperformance
International Livestock was a standout, growing 12% organically (9% reported). Growth was broad-based across cattle, fish, and poultry. Even in the US, despite the divestiture of the Medicatied Feed Additive (MFA) portfolio causing a 6% reported decline, organic livestock sales rose 3% due to strong biologics demand. This segment is currently the company's stabilizer.
Next-Gen OA Pain Approvals (Lenivia & Portela)
Zoetis received approvals in Canada and the EU for Lenivia (dogs) and Portela (cats), both offering 3-month dosing intervals compared to the monthly dosing of Librela/Solensia. Launching in 2026, these products are critical to defending the pain franchise franchise against adoption headwinds and potential competition.
Dermatology & Parasiticides Holding the Line
While OA pain struggled, the legacy blockbusters performed. In the US, the Simparica franchise and key dermatology products (Apoquel/Cytopoint) grew, preventing the segment from turning negative. International markets also saw growth in Simparica Trio and Cytopoint.
Other KPIs
Stable. Up 3% reported and 4% operationally. Growth was muted compared to the 10% organic growth seen in Q2 2025. Margins are being managed, but lack of top-line leverage is visible.
Reversing. Down 2% reported and flat organically. This marks a sharp reversal from the +6-7% organic growth rates seen in the first half of the year. The drag from the MFA divestiture (-6% impact on Livestock) was expected, but the weakness in Companion Animal was not.
Accelerating (Optical). Up 8% reported, but ~3% of this came from the one-time fiscal year accounting alignment. Organic operational growth of 7% remains healthy, driven by Livestock (+12%) and Companion Animal (+4%).
Guidance
Decelerating. The guidance implies 3% to 5% organic operational growth. This is a step down from the 6% delivered in FY25 and the 12% in FY24. It suggests management does not expect a V-shaped recovery in the US Companion Animal business.
Decelerating. Implies 3% to 6% organic operational growth, trailing the 7% delivered in FY25. The midpoint ($3.0B) represents roughly 7% reported growth vs FY25 ($2.8B), aided by the absence of divestiture costs.
Stable. Represents ~9-10% growth over FY25 ($6.41). EPS growth is outpacing Net Income growth, likely due to share buybacks, though specific repurchase assumptions were not detailed in the release text.
Key Questions
US OA Pain Floor
With US Companion Animal revenue flat and OA pain cited as the drag, precisely how much did Librela revenue decline in Q4, and have we reached the bottom yet?
Organic Growth Structural Reset
Guidance for 3-5% organic revenue growth is a departure from the historical 6-8% algorithm. Is this merely a reflection of the OA pain reset, or are you seeing saturation in Dermatology and Parasiticides?
Lenivia Cannibalization
With the upcoming launch of Lenivia (3-month OA), do you expect it to recapture lost Librela share, or will it primarily cannibalize existing stable patients?