Gilead Sciences Balances Strong Growth With EPS Hit

Gilead Sciences ((GILD)) has held its Q1 earnings call. Read on for the main highlights of the call.

Gilead Sciences’ latest earnings call mixed upbeat operational news with blunt discussion of near‑term earnings pain. Management highlighted strong momentum in HIV, oncology and the rapid Libdelzi launch, alongside higher revenue and base business guidance. Yet hefty upfront R&D charges for recent deals and unusual tax effects will drag reported EPS into the red, tempering otherwise solid fundamentals.

Top-line growth and raised full-year guidance

Gilead reported total product sales of $6.9 billion, up 5% year over year, with $6.8 billion excluding COVID drug Veklury rising 8%. On the back of this performance, management lifted its 2026 revenue outlook by $400 million and now sees base business sales of $29.4 billion to $29.8 billion and total product sales of $30.0 billion to $30.4 billion.

Robust HIV franchise and PrEP momentum

The HIV portfolio remained the company’s growth engine, with sales climbing 10% to $5.0 billion and Biktarvy contributing $3.4 billion while holding more than 52% U.S. share. Gilead’s U.S. PrEP business surged 87%, led by Descovy and the long‑acting injection Yes2Go, pushing management to lift full‑year HIV growth expectations to about 8% and raise Yes2Go’s 2026 sales target to roughly $1.0 billion.

Oncology momentum — Trodelvy and strategic acquisitions

Oncology continued to scale, with Trodelvy sales rising 37% year over year to $402 million as uptake broadened across breast cancer lines and guidelines recognized it as a preferred option in first‑line metastatic triple‑negative disease. Management pointed to several Phase 3 readouts and regulatory decisions in the second half of 2026 and emphasized that the Tubulis acquisition adds both a differentiated ADC platform and TUB‑40, which has shown promising ovarian‑cancer data.

Successful specialty launches — Libdelzi

Libdelzi, a key liver‑disease launch, generated $133 million in the quarter, more than tripling year over year and capturing over half of the U.S. second‑line primary biliary cholangitis market. The company expects an IDEAL Phase 3 update in the second half of 2026, which could support label expansion and broaden the patient population, reinforcing Libdelzi’s role as a meaningful new growth pillar.

Profitability, margins, and shareholder returns

Despite heavy investment, core profitability remained strong, with product gross margin improving to 87% and non‑GAAP diluted EPS rising 12% to $2.03, supported by a 47% operating margin. Gilead returned more than $1.4 billion to shareholders in the quarter, including over $400 million of share repurchases, and indicated that roughly 60% of free cash flow flowed back via dividends and buybacks.

Broad and advancing pipeline

The pipeline expanded to 47 clinical programs following the closing of the Arcellx deal and pending acquisitions of Oral Medicines and Tubulis, underscoring management’s push into oncology and next‑generation modalities. Upcoming milestones include FDA decisions for Biclen, anitocel and bulevirtide, plus multiple Phase 3 updates in HIV and cancer during 2026, giving investors a steady cadence of potential value inflection points.

Strategic cell therapy positioning for anitocel

Gilead’s Kite unit will be the home for anitocel, acquired via Arcellx, which management views as offering differentiated efficacy and safety in multiple myeloma. The company sees a roughly $3.5 billion market opportunity in fourth‑line‑plus CAR‑T and aims for initial revenue contribution in early 2027, noting that the IMagine‑3 trial is enrolling faster than expected.

Large transaction-related charges depress reported EPS

The flip side of this deal spree is a large wave of upfront intellectual‑property and R&D charges, estimated at about $11.5 billion to $11.8 billion for the year, plus associated financing costs. Including these, Gilead guided to a full‑year non‑GAAP loss per share of $1.05 to $0.65, versus an underlying EPS range of $8.45 to $8.85 if the one‑time transaction impacts were excluded.

Extremely high effective tax rate from nondeductible costs

Adding to the optical hit, Gilead expects a full‑year effective tax rate in a highly unusual 140% to 190% range, driven by nondeductible expenses tied to the Arcellx, Oral Medicines and Tubulis deals. Management stressed that this tax spike is accounting‑driven rather than a structural change, highlighting that the first‑quarter non‑GAAP tax rate was a more normal 18.3% and that the inflated full‑year figure largely reflects the transaction charges.

Seasonality and inventory drawdowns weigh on sequential trends

Sequentially, total product sales fell 12%, which management framed as in line with usual first‑quarter seasonality after year‑end channel stocking. HIV revenue slipped 13% quarter over quarter, with Biktarvy down 15%, while Libdelzi and the broader liver‑disease portfolio declined around 11% and 9%, respectively, largely due to inventory drawdowns rather than underlying demand weakness.

Cell therapy revenue pressure from competition

Cell therapy sales dropped to $407 million, down 12% year over year and 11% sequentially, as newer competitors intensified both in‑class and out‑of‑class pressure across several regions. Management acknowledged that this will weigh on near‑term cell therapy growth, but argued that the addition of anitocel and continued innovation should help reposition the franchise over the medium term.

Rising SG&A and near-term R&D increases

Operating expenses moved higher, with SG&A up 12% year over year, mainly reflecting marketing and field spending to support the Yes2Go launch and other growth products. R&D guidance was revised upward to a mid‑single‑digit increase, as the company absorbs acquisition‑related clinical programs while still aiming to keep R&D below 20% of product sales over the full year.

Uncertainties in early data and legacy declines

Management flagged that persistence and adherence data for Yes2Go are still early, with limited longitudinal evidence even as initial signals look promising, leaving some execution risk in the long‑acting PrEP rollout. Meanwhile, declines in Veklury due to fewer COVID‑19 hospitalizations and softer hepatitis C patient starts partially offset growth in HIV, oncology and liver disease, underscoring the drag from legacy antiviral franchises.

Guidance and outlook

Looking ahead, Gilead’s raised 2026 outlook calls for 5% to 6% base business growth and total product sales of $30.0 billion to $30.4 billion, with HIV expected to advance about 8% and Yes2Go now targeted at around $1.0 billion by 2026. The company forecasts operating income of $2.4 billion to $2.9 billion, or $14.0 billion to $14.5 billion excluding upfront IPR&D, and plans mid‑single‑digit increases in both R&D dollars and SG&A despite a policy headwind and an elevated tax rate.

Gilead’s earnings call painted a picture of a company trading near‑term headline earnings pain for longer‑term growth options, as strong HIV and oncology trends offset erosion in COVID and hepatitis C. For investors, the key takeaway is that underlying demand, margins and pipeline momentum look solid, but the heavy spending on deals and associated tax quirks will cloud reported results until the new assets begin contributing meaningfully.