ZTS · Q3 2025 Earnings

Cautious

Zoetis

Reported November 4, 2025

30-second summary

30-second take: Zoetis lowered FY2025 organic operational revenue growth guidance to 5.5–6.5% from 6.5–8.0% — a full 100–150bps cut just one quarter after raising it — and trimmed adjusted net income while holding EPS flat via "share count dynamics or other offsets." Q3 organic operational revenue grew only 4% (reported revenue +1% to $2.40B), with U.S. -2% reported / +3% organic operational and Companion Animal +2%; Livestock was the bright spot at +10% organic operational. The structural concern: management acknowledged therapeutic vet visits are now declining across all major categories for three consecutive quarters — a break from Zoetis's historical insulation narrative — and Q4 implied organic growth of ~3% sits well below the 6–8% algorithm investors had been underwriting for 2026.

Headline numbers

EPS

Q3 FY2025

$1.70

Revenue

Q3 FY2025

$2.40B

+1.0% YoY

Gross margin

Q3 FY2025

71.5%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$2.40B	+1.0%	$2.46B	-2.4%
EPS	$1.70	—	$1.76	-3.4%
Gross margin	71.5%	—	73.6%	-210bps

Guidance

Zoetis lowered full-year FY2025 revenue and adjusted net income guidance while maintaining EPS ranges, citing measured macro and operational headwinds in the back half.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2025	$9.450B to $9.600B	$9.400B to $9.475B	−$50M to −$125M (low end down $50M, high end down $125M)	Lowered
Organic Operational Revenue Growth	FY2025	6.5% to 8.0%	5.5% to 6.5%	−100 to −150 bps (low end down 100 bps, high end down 150 bps)	Lowered
Organic Operational Adjusted Net Income Growth	FY2025	5.5% to 7.5%	5.5% to 7.0%	−50 bps at high end (low end unchanged, high end down 50 bps)	Lowered
Adjusted Net Income	FY2025	$2,825B to $2,875B	$2,800B to $2,840B	−$25B to −$35B (low end down $25B, high end down $35B)	Lowered

Reaffirmed unchanged this quarter: Adjusted Diluted EPS ($6.30 to $6.40), Reported Diluted EPS ($5.90 to $6.00)

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Companion Animal	$1.652B	+2.0%
Livestock	$0.725B	-5.0%
U.S. Segment	$1.322B	-2.0%
International Segment	$1.055B	+1.0%
Dogs and Cats	$1.586B	+1.0%
U.S. Companion Animal Revenue	$1,069 million	—
International Companion Animal Revenue	$583 million	—
Livestock Organic Operational Growth	10%	—

Other KPIs

Q3 FY2025

Segment	Q3 FY2025
Organic Operational Revenue Growth	4%
Organic Operational Adjusted Net Income Growth	9%
U.S. Gross Margin	83.2%
International Gross Margin	68.6%
Adjusted Net Income	$754 million

Management tone

Q4-24 anchor → Q1-25 anchor → Q2-25 anchor → Q3-25 anchor: insulation from vet softness → Librela headwinds isolated → "deliberate market development" + guide-up → broadening therapeutic-visit declines + guide cut.

Last quarter management raised guidance while reframing Librela's stall as a "deliberate market development phase." This quarter the framing has flipped: a guide cut, language about "a more measured view of the macro and operational environment in the back half of the year," and explicit acknowledgement that "we saw declining visits across all major therapeutic areas during the third quarter, which impacted new patient starts." The phrase "across all major therapeutic areas" is the key tonal break — Zoetis has spent quarters arguing its therapeutic mix insulates it from generic vet-visit softness, and that argument has now been retired by management itself.

The Librela narrative has moved from "deliberate market development" to "early signs that Librela is beginning to stabilize." Three quarters ago this was a confident breakthrough launch; last quarter it was a managed transition with third-party studies as the catalyst; this quarter it's a fragile stabilization read described as "early." The hedging language is stacked — "early read," "early signs," "encouraged by recent trends showing signs of stabilization" — and the lack of a hard data point on U.S. patient starts suggests the number remains uncomfortable. Librela has 30M+ doses distributed globally per CFO Wetteny Joseph.

The most rehearsed sentence on the call was the defensive framing: "We are operating from a position of strength, supported by the broadest portfolio in the industry, even while we are navigating some temporary headwinds." This is the kind of construction management reaches for when both halves need to be true at once — and the "temporary" qualifier is now bearing significant weight given three consecutive quarters of therapeutic visit declines.

On 2026, management was forced into a defensive posture in Q&A. The Stifel exchange explicitly modeled an implied Q4 organic growth of ~3% off easing comps with zero volume, and pressed management on what reverses that. The answer leaned on belief that competitive launch promotions are "historically short-lived" and on the dermatology franchise's 11-year market presence with 120M+ Apoquel/Cytopoint doses combined — pattern-matching arguments rather than quantified inflection paths. February guidance will be the credibility test.

Recurring themes management leaned on this quarter:

Macro headwinds and clinic visit softness affecting near-term growthLabrella recovery strategy and stabilization signalsInnovation pipeline delivering on commitments with 130+ geographic expansionsLivestock segment demonstrating resilience with 10% growthU.S. market softness requiring commercial restructuringInternational strength offsetting domestic challenges

Risks management surfaced:

Declining veterinary clinic visits across all major therapeutic areas impacting new patient startsLabrella perception challenges amplified on social media, particularly in English-speaking marketsCompetitive promotional activity and discounting in dermatology category affecting shareMacro and operational environment uncertainty for back half of 2025Tariffs and policy changes (noted as not assumed in guidance)

Q&A highlights

Erin Wright · Morgan Stanley

What changed quarter-over-quarter after raising guidance last quarter? What are key surprises (competition, macro)? How are practices viewing JAK inhibitor competition and category dynamics? Is guidance conservative enough, and how does below-guidance year-to-date performance fit with typical 6-8% top-line growth guidance for 2026?

Management attributed deceleration to strong comps, competitive launches, macro impact on U.S. clinics (particularly therapeutic visit pressure for three consecutive quarters), and veterinary price increases. Management emphasized they do not view Q4 exit as indicative of 2026 due to expected price contribution (2-4% range), high confidence in Derm and Parasiticide franchises, signs of Librella stabilization, and strong livestock growth. Stated they will provide 2026 guidance in February.

Therapeutic visits declined for three consecutive quartersPrice contribution running at ~4% (historically 2-4%)120 million doses of Apoquil and CiderPoint combinedDerm in international markets grew 7% despite competitive pressure

Michael Reiskin · Bank of America

Why has companion animal performance deteriorated so markedly in Q3 when Zoetis has historically outperformed despite vet challenges? Is competition playing a bigger role than macro, and could impacts last longer? What are distributor inventory levels and customer inventory trends heading into Q4/2026?

Management distinguished between overall visits (down ~2%, consistent with history) and therapeutic visits (newly declining, which is different). Highlighted that Derm visits, which grew 3-4% last year, and OA Pain visits have reversed this year, translating to fewer patient starts. Alternative channels grew 21%, offsetting some headwinds. Distributor inventory dipped mid-quarter but recovered; remains below historical range since early 2023. Management attributed impact to significant vet price increases on services and products, especially at larger corporate accounts.

Overall visits down ~2% (historically worse)Therapeutic visits declining (new phenomenon vs. prior years)Derm visits grew 3-4% last year but declining this yearAlternative channels grew 21% in quarter

John Block · Stiefel

Given implied Q4 3% organic growth off easing comps, zero volume in H2 2025, and expectations of increasing competition in key franchises like Derm, why wouldn't Q4 exit be indicative of 2026? What changes in price-volume algorithm—does price go higher or do volumes bounce, and what would drive that bounce?

Management reiterated Q4 exit not indicative of 2026 due to: (1) Librella showing signs of stabilization and expected return to growth in 2026; (2) competitive launch period promotions historically short-lived; (3) strong market position (11 years in market, 120M doses, high lock-in with vets and pet owners); (4) limited patient share gains by competitors despite aggressive pricing; (5) international Derm growth of 7% despite competition shows market expansion possible; (6) management will make disciplined adjustments but sees no reason for permanent headwind. Acknowledged macro headwinds but expressed confidence in portfolio strength.

Librella 120 million doses distributed, 11 years in marketPatient share gains from competitors remain limitedInternational Derm grew 7% despite competitive pressureInitial launch promotions described as historically short-lived

Brandon Vasquez · William Blair

Librella launch underperformed due to safety/efficacy concerns amplified by social media. What have you learned and what will change with the new long-acting OA drugs (Lanivia, Pertella)? What gives confidence that these launches will be more successful and support 6-8% organic growth guidance?

Management detailed learnings from Librella: (1) start with early education of specialists before broad rollout; (2) continue raising OA awareness as serious, progressive disease requiring proactive management; (3) deepen education with vets; (4) invest in long-term Phase 4 research. Lanivia (3-month dosing) will expand market via convenience and lower entry barrier. Pertella targets different NGF location, targets cats (where monthly dosing is barrier), and aligns with strong cat visit growth. Both will cannibalize some Librella but expand overall OA market. Expected launch first half 2026.

Lanivia 3-month dosing vs. Librella monthlyLanivia provides long-lasting relief at 10x lower dosePertella targets cats (expanding cat market pain category)Silencia driving cat visit growth

Chris Schott · J.P. Morgan

Can you elaborate more on U.S. Derm trend break this quarter relative to prior year? What is happening with Zenrelia positioning ahead of potential Merck launch? On therapeutic visits, when can we expect recovery and what will it take?

Management stated competitive positioning not significantly different from earlier expectations; patient share gains remain limited. Factoring in full Numelvi launch in Europe Q4. No guidance on Merck U.S. approval timing (expected late 2025/early 2026). Key difference is therapeutic visit decline (new vs. prior year expansion), translating to fewer patient starts. Management unwilling to forecast when therapeutic visits will recover; factoring macro continuation into Q4. Librella stabilization signs encouraging. Management emphasized expense discipline (12% adjusted diluted EPS growth) and maintained full-year EPS guidance from August.

Librella over 30 million doses distributed globallyDerm therapeutic visits in U.S. clinics down less than 1% (vs. larger declines prior quarters)12% adjusted diluted EPS growth in quarterFull-year EPS guidance maintained from August

Answers to last quarter's watch list

Librela patient starts trajectory in Q3 — Management described "early signs that Librela is beginning to stabilize" and "sequential stabilization in trends observed over past 4-6 weeks," with 30M+ doses distributed globally. No hard U.S. patient starts figure was disclosed. The qualitative language is more constructive than Q2's, but the absence of a number alongside hedging like "early read" suggests stabilization is nascent rather than confirmed.

Continue monitoring

U.S. Livestock organic operational growth — U.S. Livestock organic operational was +14% in Q3 ($253M revenue, -9% reported reflecting the MFA divestiture), driven by improved supply of ceftiofur products and broader livestock vaccine strength. Consolidated Livestock organic operational was +10%, described as on track for a third consecutive year of above-market growth.

Resolved positively

Simparica franchise growth rate — Simparica franchise grew 7% operationally to $356M globally (U.S. +2% to $263M; International +22% to $93M). A deceleration from Q2's +17% franchise growth, with U.S. notably soft against a 27% prior-year comp while international remained robust. Status: Resolved — decelerating

Adjusted gross margin in H2 — Q3 adjusted gross margin came in at 71.6%, up 90bps YoY on a reported basis with FX a 20bps tailwind, helped by the MFA divestiture mix and price. Management framed this as consistent with the H2 expansion narrative.

Resolved positively

2026 framing on the Q3 or Q4 call — Management did not commit to a 2026 algorithm, deferring to February. The defensive posture in Q&A — leaning on price contribution of ~4% and qualitative belief that competitive promotions are short-lived — falls well short of an endorsement of the prior 6–8% organic operational revenue framework.

Resolved negatively

What to watch into next quarter

February 2026 guidance vs. the implied Q4 exit rate of ~3% organic operational — the single most important credibility test. A 2026 guide at or above 6% organic operational requires a quantified bridge from current trajectory; anything below 6% confirms the algorithm has reset.

U.S. Companion Animal trajectory — Q3 came in at +2% Companion Animal globally and U.S. companion animal flat; watch whether the U.S. inflects or continues to deteriorate against easing Q4 2024 comps.

Adjusted gross margin path — Q3 at 71.6% benefited from MFA mix and price; watch whether Q4 sustains expansion as FX and divestiture tailwinds anniversary.

Therapeutic vet visit cadence — management explicitly flagged this as the structural break from prior quarters' insulation thesis. A Q4 datapoint showing therapeutic visits flat or improving would meaningfully de-risk 2026; further deterioration extends the cut.

Librela U.S. patient starts disclosure — management used qualitative "stabilization" language without a number. If Q4 brings a hard U.S. patient starts figure, that's the cleanest read on whether the recovery is real or aspirational ahead of Lenivia/Portela launches in H1 2026.

Lenivia and Portela launch readiness — expected first half 2026; watch for any specifics on pricing, market sizing for cat OA pain (Portela), or expected cannibalization rates of Librela.

Sources

Zoetis Q3 2025 earnings press release (SEC EDGAR filing, exhibit99q32025.htm)
Zoetis Q3 2025 earnings call Q&A excerpts (extraction)

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