tapebrief
ZTS · Q3 2025

ZTS · Q4 2025 Earnings

Cautious

Zoetis

Reported February 12, 2026

30-second summary

30-second take: Zoetis answered last quarter's credibility test by guiding FY2026 organic operational revenue growth to just 3–5% — a 100–300bps step down from FY2025's achieved 6% and well below the 6–8% algorithm investors had been underwriting through mid-2025. Q4 FY2025 organic operational revenue grew only 4% (reported revenue +3% to $2.39B) with U.S. revenue down 2% reported, and the headline "raise" to FY2026 absolute revenue and EPS guidance masks the deceleration: reported diluted EPS guide midpoint of $6.70 is +11.3% vs FY2025 reported EPS of $6.02, while adjusted diluted EPS midpoint of $7.05 is +10.0% vs FY2025 adjusted EPS of $6.41 — both well ahead of organic operational growth of 3–5%, meaning EPS optics are flattering an underlying algorithm that has reset lower. The Lenivia/Portela launch year is now framed as "groundwork for the next phase" rather than acceleration — defensive language that confirms the macro caution flagged in Q3 FY2025 has hardened into the FY2026 plan.

Headline numbers

EPS

Q4 FY2025

$1.48

Revenue

Q4 FY2025

$2.39B

+3.0% YoY

Gross margin

Q4 FY2025

70.3%

Operating margin

Q4 FY2025

31.9%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$2.39B+3.0%$2.40B-0.5%
EPS$1.48—$1.70-12.9%
Gross margin70.3%—71.5%-120bps
Operating margin31.9%———

Guidance

Zoetis raised FY2026 absolute revenue and earnings guidance but guided meaningfully lower organic growth (3-5% vs. 6% in FY2025), signaling macro caution and a strategic shift to near-term execution constraints.

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueFY2025$9.400 billion to $9.475 billion$9.467 billionwithin guidance range (at high end)Beat
Adjusted Diluted EPSFY2025$6.30 to $6.40$6.41+0.01 above guideBeat
Organic Operational Revenue GrowthFY20255.5% to 6.5%6%within guidance range (midpoint)Beat
Organic Operational Adjusted Net Income GrowthFY20255.5% to 7.0%7%at high end of rangeMet

New guidance

MetricPeriodGuideYoY
RevenueFY2026$9.825 billion to $10.025 billion—
Diluted EPS (Reported)FY2026$6.65 to $6.75—
Adjusted Diluted EPSFY2026$7.00 to $7.10—
Adjusted Net IncomeFY2026$2.975 billion to $3.025 billion—
Organic Operational Revenue GrowthFY20263% to 5%—

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
U.S. Revenue$1.236B-2.0%
International Revenue$1.121B+8.0%
Companion Animal$1.601B+2.0%
Livestock$0.756B+4.0%
U.S. Companion Animal$1.002B-1.0%
U.S. Livestock$0.234B-6.0%
International Companion Animal$0.599B+7.0%
International Livestock$0.522B+9.0%
Dogs and Cats Revenue (Q4)$1,500M—
Cattle Revenue (Q4)$415M—
Fish Revenue (Q4)$81M—

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Organic Operational Revenue Growth (Q4)4%
Organic Operational Revenue Growth (FY2025)6%
Adjusted Net Income Organic Operational Growth (Q4)4%
Adjusted Net Income Organic Operational Growth (FY2025)7%
FY2026 Guidance Organic Operational Revenue Growth3% to 5%

Management tone

Q1 anchor → Q2 anchor → Q3 anchor → Q4 anchor: Librela headwinds isolated → deliberate market development + guide-up → broadening therapeutic-visit declines + guide cut → algorithm reset to 3–5%.

Three quarters ago management was raising guidance and framing Librela as a deliberate market development. Last quarter the language shifted to "operating from a position of strength" while cutting the guide. This quarter that defensive scaffolding has been formalized into an FY2026 plan: 3–5% organic growth and the framing that FY2026 will "lay the groundwork for the next phase of our innovation cycle." Groundwork is not a growth word — it is the language of a stabilization year, and it confirms the algorithm reset that Q3 FY2025's defensive Q&A foreshadowed.

The Trio narrative has changed materially across three quarters. In Q2 FY2025, Trio grew 20% globally with management touting zero patient share loss to Quattro and triple-combination penetration at 45%. In Q3 FY2025, growth had decelerated. This quarter Q4 FY2025 global Trio growth came in at just 5% and U.S. Trio at just 1%, even as triple-combo penetration ticked up to ~50%. Management attributed the U.S. slowdown to "anticipated macro conditions and competitive activity" — but the gap between "zero share loss" two quarters ago and the current single-digit U.S. growth implies the competitive pressure is now denting growth even where share holds. Pricing assumption for FY2026 was disclosed at 2–3%, reverting from FY2025's 4% — meaning the 3–5% guide implies near-zero to 2% volume contribution, which is well below the historical algorithm.

The macro framing has moved from "temporary headwinds" (Q3 FY2025) to a more durable condition that management now plans around rather than waiting out. In Q&A, management said pet owners "still spending on animal health, especially emergency/urgent care" — but flagged that vets are now focusing on value. That is a structural diagnosis, not a transitory one, and it explains why the company is building FY2026 around a 2–3% pricing assumption rather than the 4% achieved in FY2025.

Pipeline confidence is the one place the language has held. "A significant approval in a major market every year for the next several years" appears verbatim from Q2 FY2025 through Q4 FY2025, and Lenivia/Portela are still on track for Canada and EU launches this year. But the pipeline is now framed as a forward bridge rather than a near-term growth driver.

Q&A highlights

Michael Riskin · Bank of America

How much conservatism is embedded in 2026 guidance regarding competitive pressure, especially for Key Dermatology which showed 6% full-year growth but only 1% in Q4? What are the assumptions for price vs. volume contribution to 2026 growth?

Management noted competitive launches and promotional activity were anticipated and factored into guidance. Expected to return to normal 2-3% price increase range with the balance being volume. Guidance range accounts for various competitive scenarios including potential new JAK and IL-31 competitors in dermatology.

2-3% price assumption for 2026Dermatology grew 6% full year, 1% in Q4Management anticipated launch-related promotions and competitive activity in guidancePotential new JAK competitor and IL-31 competition factored in

Erin Wright · Morgan Stanley

What U.S. companion animal operational growth is incorporated in 3-5% guidance? How does Apoquel perform against new competitors in efficacy? What is the impact of the one-month international reporting lag elimination on 2026 reported and operational revenue, and how is organic operational growth defined?

Management noted macro conditions and portfolio strength drive guidance. Organic operational growth (OOG) definition excludes FX and significant acquisitions/divestitures (1%+ of prior year revenue on annualized basis). International accounting changes factored into guidance but no extra month of revenue. Portfolio breadth and innovation support competitive positioning.

OOG definition: excludes FX and transactions ≥1% of prior year revenue annualizedClinic revenue grew 6% in Q4International one-month lag being eliminated in Q1 2026 but no extra month of revenue expectedMacro improvement expected through 2026

Chris Schott · J.P. Morgan

Why has Trio growth decelerated in past two quarters and how does management think about its 2026 profile? What is the magnitude of the delayed revenue recognition from Q4 2025 into Q1 2026, and is it included in the 3-5% organic guidance?

Trio remains the leading U.S. canine parasiticide and now exceeds $1 billion in U.S. revenue annually. Triple combination penetration is ~50% of vet visits (up from 30% two years ago) with significant room to expand. Deceleration attributed to anticipated macro conditions and competitive activity. Accounting shifts factored into guidance on same historical basis.

Trio U.S. sales exceeded $1 billion in 2025Triple combination market penetration: ~50% vs. 30% two years agoTrio global growth: 13% for year, 5% Q4, 1% U.S. Q4Number one canine parasiticide globally

Brandon Vasquez · William Blair

How will the 3-5% growth be distributed across quarters given competition, accounting changes, and comps? Is the issue that pet owners' financial situations are deteriorating, or that clinics raised prices too much and need to pull back?

Management expects tougher comps in H1 2026 due to strong 2025 H1 performance and delayed competitive launches. OA pain (particularly Librella) impacts will ease post-Q2. Macro improvement expected through year. Pet owner demand remains strong; the issue is pricing levels taken over 3 years were too aggressive; veterinarians now focusing on value. Pet owners still spending on animal health, especially emergency/urgent care.

H1 2026 expected to face tougher comps vs. H2Librella impacts lapped by end of Q2Q4 2025 clinic revenue grew 6% (emergency/urgent care and price-driven)Pet owner macro expected to improve through 2026

David Westenberg · Piper Sandler

How will pricing strategy change in 2026 compared to 2025 when most revenue growth came from price? Will Zoetis bundle products with clinics or change its approach to drive volume growth? Has pricing methodology changed from raising prices on innovation vs. maintaining flat pricing on existing portfolio?

Pricing approach remains consistent: evaluated product-by-product and market-by-market based on clinical value. Zoetis leverages broad portfolio to drive volumes with customers within legal confines of each market. No significant shifts in approach; company continues to use portfolio strength as leverage while pricing individual products based on value delivered.

2025 revenue growth composition: 4% price, 2% volumePricing evaluated on individual product and market basisPortfolio leverage used to drive volumes with customersNo blanket pricing approach; value-driven methodology unchanged

Answers to last quarter's watch list

February FY2026 guidance vs. the implied Q4 FY2025 exit rate of ~3% organic operational — The guide came in at 3–5% organic operational, midpoint 4%. This sits within the credibility test's "below 6%" zone, confirming the algorithm has reset rather than the prior 6–8% framework extending into FY2026. Management did not provide a quantified bridge back to historical algorithm growth.
Resolved negatively
U.S. Companion Animal trajectory — U.S. Companion Animal came in at -1% in Q4 FY2025, a further step down from Q3 FY2025's flat reading, despite easier Q4 FY2024 comps. The deterioration thesis continued rather than inflecting.
Resolved negatively
Adjusted gross margin path — Q4 FY2025 adjusted gross margin came in at 70.3%, down 130bps from Q3 FY2025's 71.6%. The H2 expansion narrative management leaned on through mid-year did not hold into Q4.
Resolved negatively
Therapeutic vet visit cadence — Management did not disclose a specific therapeutic visit datapoint for Q4 FY2025. Q&A commentary indicated clinic revenue +6% in Q4 FY2025 (skewed toward emergency/urgent care and price), with pet owners continuing to prioritize spending on animal health even as volume and visits face pressure.
Continue monitoring
Librela U.S. patient starts disclosure — No hard U.S. patient starts figure was disclosed in the press release. Q4 FY2025 U.S. Librela revenue was $36 million, -32% YoY; management said monthly sales trends are stabilizing and the headwind should moderate as FY2026 progresses.
Not resolved
Lenivia and Portela launch readiness — Confirmed for Canada and EU launches in FY2026, but no pricing detail, market sizing for cat OA pain, or expected Librela cannibalization rates were disclosed. Pipeline framed as "groundwork" rather than near-term growth contribution.
Continue monitoring

What to watch into next quarter

Q1 FY2026 organic operational revenue growth print — watch whether Q1 lands at or below the FY 3–5% range. A Q1 below 3% would imply H2 needs to inflect for the FY midpoint to hold.

U.S. Companion Animal inflection — three consecutive quarters of deterioration; watch whether Q1 FY2026 stabilizes or extends the slide. The 2–3% pricing assumption gives no cushion if U.S. volumes don't improve.

Trio U.S. growth rate — went from +20% in Q2 FY2025 to +1% in Q4 FY2025 U.S. despite triple-combo penetration rising to 50%. Watch whether U.S. Trio holds positive against tougher H1 comps and competitive promotions, or turns negative.

Adjusted gross margin trajectory — Q4 FY2025's 70.3% breaks the H2 expansion thesis. Watch whether FY2026 implied adjusted gross margin holds above 71% or compresses further.

Librela U.S. patient starts disclosure ahead of Lenivia/Portela launches — management said impacts moderate through FY2026 but offered no patient-starts number. Any Q1 FY2026 datapoint quantifying U.S. patient start trends is the cleanest read on whether the franchise can be defended through the cannibalization transition.

Pricing realization vs. the 2–3% FY2026 assumption — if vets continue resisting price increases, even the 2–3% baked into guidance could prove optimistic, putting the lower end of the 3–5% range at risk.

Sources

  1. Zoetis Q4 FY2025 earnings press release (SEC EDGAR filing, exhibit9912-31x25q4.htm)
  2. Zoetis Q4 FY2025 earnings call prepared remarks and Q&A

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