Eli Lilly Q2 2026 Earnings: Incretin Demand Drives 48% Revenue Growth as Guidance Rises

Eli Lilly reported another strong quarter, with revenue up 48% year over year, led by continued growth in Mounjaro and Zepbound. The company raised its 2026 revenue and non-GAAP earnings outlook, while profitability improved despite higher launch spending, R&D investment, and acquired in-process R&D charges.

The central investment question is shifting from whether Lilly can sustain incretin demand to how much of that demand it can convert into durable, reimbursed volume at acceptable net pricing. The company is expanding access through the new Medicare GLP-1 Bridge program and advancing its oral GLP-1, Foundayo, but U.S. pricing pressure and the growing importance of self-pay prescriptions remain important variables.

Earnings Snapshot

The Bigger Story

Lilly’s second-quarter results again demonstrated that its cardiometabolic franchise remains the company’s dominant earnings engine. Mounjaro and Zepbound generated $14.9B in combined quarterly revenue, contributing $6.3B of year-over-year growth. That scale means changes in incretin market access, net pricing, and international penetration now have an outsized effect on Lilly’s financial trajectory.

The next phase of growth is becoming more complex. U.S. obesity demand remains strong, but management acknowledged that pricing will decline as access broadens, particularly as Zepbound returns to CVS coverage beginning in the fourth quarter. Meanwhile, international markets are expanding rapidly, though future growth will increasingly depend on patient penetration rather than the initial benefit from launching Mounjaro in new countries.

Lilly is also trying to broaden the investment case beyond injectable incretins. Foundayo, its oral GLP-1 product, is gaining prescription momentum in the U.S. and has begun launching internationally. Retatrutide delivered positive Phase 3 results and could become a future high-efficacy obesity platform, although its planned first-quarter 2027 U.S. filing remains subject to regulatory-pathway and manufacturing documentation work.

Revenue and Operating Performance

Revenue increased 48% from the prior-year quarter, driven primarily by Mounjaro and Zepbound. The two products together accounted for $14.9B of revenue and $6.3B of the company’s growth versus Q2 2025, underscoring the concentration of Lilly’s current expansion in diabetes and obesity treatments.

U.S. revenue increased 33%, with volume growth in Mounjaro and Zepbound as the primary contributor. Lilly also cited contributions from its immunology, oncology, and neuroscience portfolio. However, U.S. price declined 3% during the quarter, and management said the figure included a favorable adjustment to estimated rebates and discounts. Excluding that adjustment, U.S. price declined 9%.

That distinction matters. The quarter’s reported revenue performance benefited from favorable rebate and discount estimate changes that management does not expect to recur in the second half. Lilly also expects net pricing to decline as broader formulary access reduces the role of medical exceptions and other higher-net-price channels.

International growth was especially strong. Europe revenue rose 55% in constant currency, supported by Mounjaro volume growth and a $250M Jardiance milestone payment. The milestone was a meaningful but non-recurring contributor to European growth. Japan revenue rose 30% in constant currency, led by Mounjaro and Kisunla, while China grew 93% and rest-of-world revenue increased 136%, both driven primarily by Mounjaro adoption.

Management highlighted Mounjaro strength in China, Korea, Germany, the U.K., and Mexico. Lilly said it had achieved global leadership in the international incretin market, reaching approximately 55% share after gaining almost 2 percentage points from the first quarter, based on IQVIA gross-sales data.

Outside cardiometabolic health, several newer products continued to gain traction. Ebglyss worldwide sales more than doubled year over year, while Jaypirca sales increased 56%. Inluriyo became the U.S. leader in new prescriptions in the metastatic breast cancer oral SERD market after two full quarters, according to management, with more than 50% share of new prescriptions.

Kisunla also posted strong growth, helped by U.S. anti-amyloid therapy demand and international performance in China and Japan. Lilly said the number of P-tau217 blood tests more than doubled versus Q2 2025, suggesting that diagnostic testing may be helping enlarge the pool of patients identified for Alzheimer’s treatment.

Profitability and Margins

Gross margin reached 86.3%, up approximately 1.3 percentage points from the prior-year quarter. Lilly attributed the increase to favorable product mix and improved production costs. The result indicates that manufacturing scale and the mix of high-margin incretin revenue continued to outweigh cost pressures from an expanding commercial footprint.

The company’s non-GAAP performance margin rose 9 percentage points year over year to 54.8%, reflecting the operating leverage created by revenue growth. Marketing, selling and administrative expenses increased 25% as Lilly funded promotional activity for existing and planned product launches. R&D spending rose 14%, driven by continued pipeline investment, including more than 40 active Phase 3 programs.

Non-GAAP EPS was $8.38, compared with $6.31 in the prior-year period. Management said the quarter included $3.03 of acquired in-process R&D charges, versus $0.14 in the year-earlier quarter. The heavier acquired IPR&D expense reflects Lilly’s stepped-up business-development activity and should not be viewed as a recurring operating cost in the same way as commercial or internal R&D spending.

Demand, Customers and Pricing

U.S. incretin demand remained robust, although market growth differed sharply between obesity and diabetes. Total U.S. incretin prescriptions increased 31% year over year. Obesity-market prescriptions grew 78%, while the more mature type 2 diabetes incretin market grew 9%.

Lilly said its obesity portfolio captured approximately six of every 10 total obesity prescriptions and roughly seven of every 10 injectable obesity prescriptions in the U.S. Injectable products remain the main source of new-patient growth, accounting for three out of four new starts across the market.

Self-pay remains an important part of Zepbound’s demand base. Management said self-pay accounted for approximately 45% of total Zepbound prescriptions and around 55% of new prescriptions in the quarter. This creates a large opportunity for Lilly to expand access, but it also leaves part of volume more exposed to affordability and consumer-demand dynamics than fully reimbursed prescriptions.

The Medicare GLP-1 Bridge program, which began July 1, could improve the reimbursement picture. Lilly said the program gives 20 million eligible Americans access to obesity GLP-1 medicines with a $50 monthly out-of-pocket cost and expands coverage for its obesity medicines by 35%. Management described early feedback as positive and said roughly 60% to 70% of patients entering the program appear to be new to treatment. About 80% of early program utilization has been in injectables, according to management.

Foundayo’s U.S. launch is another demand indicator to watch. Lilly said prescriptions nearly doubled over the month preceding the call, with nearly one in four new patients starting on Foundayo in the most recent period cited by management. The prescriber base increased from 8,000 to 36,000, aided by broad sampling, expanded commercial access, and direct-to-consumer promotion.

Those figures suggest the oral product is gaining traction, but it remains early. Management said it is using extensive sampling, which may mean standard prescription-tracking data do not capture all early patient starts. Foundayo also faces a more competitive market as other oral obesity therapies launch internationally.

What is Eli Lilly and’s guidance and outlook?

Lilly raised its 2026 revenue guidance to $85B to $87B, increasing the low end by $3B and the high end by $2B. Management attributed the increase to stronger-than-expected first-half performance from key products.

The company also raised its expected non-GAAP performance margin to 49% to 50.5%, up 2 percentage points at both the low and high end of the prior range. Non-GAAP EPS guidance increased to $35.50 to $36.50. Management said the midpoint rose by $2.78 before updating guidance for the $3.03 impact of second-quarter acquired IPR&D charges.

The outlook nevertheless embeds several offsets to recent momentum. Management said favorable rebate and discount estimate adjustments from recent quarters are not expected to continue. The company also expects pricing to decline as wider access, including CVS coverage for Zepbound, reduces reliance on medical exceptions. Seasonal factors are also expected to affect the second half, including lower European activity in the third quarter and typical U.S. diabetes seasonality in the fourth quarter.

International growth should remain meaningful, but management noted that the large wave of Mounjaro launches across overseas markets occurred in the second half of 2025. Future growth is expected to depend more on market penetration and reimbursement expansion than on the initial contribution from entering new countries.

Pipeline and Strategic Developments

Lilly reported positive Phase 3 results from three retatrutide obesity trials. Management said the completed TRIUMPH-2 and TRIUMPH-3 studies provide the clinical package needed to support global filings in obesity, obstructive sleep apnea, and knee osteoarthritis pain.

The company plans to submit retatrutide in the U.S. in the first quarter of 2027 under a biologics license application pathway. However, management said the BLA classification remains an active matter involving the FDA, and additional chemistry, manufacturing and controls work is still required. The timing target is therefore an expectation rather than a completed regulatory milestone.

Lilly also completed a U.S. submission for Foundayo in type 2 diabetes and expects regulatory action later this year. Internationally, Foundayo has launched for obesity in the UAE and has received approvals in Saudi Arabia and Mexico. Management expects a broader global rollout in major markets during 2027.

Business development broadened Lilly’s pipeline into vaccines and psychiatry. The company announced agreements involving Curevo, LimmaTech Biologics, the Vaccine Company, and AtaiBeckley. These programs may add longer-term growth options, but most are early-stage or development assets rather than near-term revenue contributors.

Balance Sheet, Cash Flow and Capital

Lilly did not provide quarter-end cash, debt, operating cash flow, or capital-expenditure figures on the call. It did disclose $1.5B in dividends and $1.6B in share repurchases during the second quarter.

The company continues to invest heavily in manufacturing capacity, opening a dedicated genetic-medicine facility in Lebanon, Indiana, and producing its first commercial material at a new Limerick, Ireland site. These investments support future pipeline and supply needs, though the call did not quantify the associated capital commitments.

What Investors Should Watch

1. U.S. Net Pricing and Formulary Access

The company’s underlying U.S. price declined 9% excluding favorable rebate and discount adjustments. Investors should monitor whether volume growth from expanded coverage offsets lower realized net prices, particularly after CVS access begins in the fourth quarter.

2. Medicare GLP-1 Bridge Adoption

The program could broaden the obesity-treatment market by bringing previously untreated seniors into the category. The key indicators will be patient starts, persistence, prior-authorization execution, and the balance between injectable and oral uptake.

3. Foundayo’s Prescription Ramp

Foundayo is becoming more important to Lilly’s longer-term cardiometabolic strategy. Growth in prescribers, new-patient share, commercial reimbursement, and international launch execution will show whether the oral product can expand the market rather than merely shift patients from injectable treatments.

4. International Mounjaro Penetration

International incretin sales are growing rapidly, but Lilly has already completed many of its largest initial launches. Sustained growth will increasingly rely on reimbursement gains, especially in diabetes, and deeper penetration in markets where Lilly has already established leading share.

5. Retatrutide Filing Progress

The Phase 3 data expand Lilly’s future obesity opportunity, including potential comorbidity indications. Investors should watch for clarity on the BLA pathway, manufacturing documentation, and whether the planned first-quarter 2027 U.S. submission remains on track.

AlgovestIQ Takeaway

Lilly’s second quarter reinforced the strength of its current earnings engine. Mounjaro and Zepbound continue to drive extraordinary revenue growth, while gross margin and non-GAAP operating margin improved despite substantial commercial and R&D investment. International expansion is also reducing Lilly’s dependence on the U.S. market, even though the U.S. remains the largest contributor to earnings.

The quality of growth deserves closer attention as the business becomes larger. U.S. price declined meaningfully on an underlying basis, and recent revenue benefited from rebate-estimate adjustments that are not expected to recur. The $250M Jardiance milestone payment also flattered European growth. These items do not undermine the underlying volume story, but they help explain why management’s raised guidance still contemplates a more moderated second-half trajectory.

Lilly’s access strategy is now as important as its product efficacy. The Medicare GLP-1 Bridge program, broader commercial coverage, and LillyDirect expansion could add new patients and reduce the role of self-pay demand. At the same time, expanded access appears likely to come with lower net pricing. The investment case depends on whether patient volume can rise faster than price pressure.

The pipeline offers meaningful optionality beyond the current incretin franchise. Retatrutide could extend Lilly’s obesity leadership if its regulatory pathway and manufacturing work proceed as planned, while Foundayo offers a potential oral route to expand the treated population. Oncology, immunology, neuroscience, and vaccine investments are strategically relevant, though their financial contribution is likely to be more gradual.

For investors, the core question is no longer whether Lilly has demand. It is whether it can maintain strong volume growth while broadening access, managing price concessions, and converting its pipeline into the next generation of cardiometabolic and specialty-medicine revenue.