Johnson & Johnson Projects Strong Growth Beyond STELARA

Johnson & Johnson ((JNJ)) has held its Q4 earnings call. Read on for the main highlights of the call.

Johnson & Johnson Earnings Call Signals Portfolio-Driven Growth Despite Near-Term Headwinds

Johnson & Johnson’s latest earnings call struck a distinctly positive tone, centered on accelerating, portfolio-driven growth across its pharmaceutical and MedTech franchises. Management highlighted strong top- and bottom-line expansion, powerful free cash flow generation, and tangible R&D productivity, all supporting a confident multi-year growth story. While they acknowledged meaningful pressures from STELARA biosimilar erosion, litigation costs, tariffs, and competitive dynamics in certain MedTech niches, executives repeatedly emphasized that broad-based momentum and a deep pipeline more than offset these headwinds.

Top-Line Acceleration: Strong Full-Year and Q4 Revenue

The company delivered solid revenue growth for both the full year and the fourth quarter, underscoring the strength of its diversified portfolio. Full-year 2025 worldwide sales reached $94.2 billion, up 5.3% on an operational basis. In the fourth quarter, sales climbed to $24.6 billion, representing 7.1% operational growth even after absorbing roughly a 650-basis-point drag from STELARA’s steep decline. Management framed this performance as evidence that newer and faster-growing assets are now more than compensating for legacy product erosion.

EPS Momentum: Adjusted Earnings and Profitability Growth

Profitability improved even faster than revenue, highlighting operational leverage. Full-year adjusted net earnings came in at $26.2 billion, with adjusted diluted EPS of $10.79, up 8.1% year-over-year. The fourth quarter was particularly strong, with adjusted diluted EPS of $2.46, a 21.5% increase versus the prior year period. Management pointed to disciplined cost control and mix shift toward higher-margin growth drivers as key factors, though they also cautioned that litigation, tariffs and certain cost items add volatility to quarterly profit trends.

Cash Engine: Robust Free Cash Flow and Balance Sheet Strength

J&J’s cash generation remains a central pillar of its investment case. The company produced $19.7 billion of free cash flow in 2025 and ended the year with about $20 billion in cash and marketable securities against net debt of roughly $28 billion. This balance sheet strength gives the company significant flexibility for R&D, acquisitions, and shareholder returns. Management expects free cash flow to increase to around $21 billion in 2026, reinforcing confidence in ongoing investment capacity and resilience through cycles.

Innovation at Scale: R&D Productivity and Pipeline Momentum

The call emphasized an unusually rich period of innovation and pipeline execution. In 2025, J&J secured 51 approvals, filed 32 submissions across major markets, delivered positive readouts from 17 key studies, and initiated 11 new Phase III programs. Management framed these milestones as evidence that elevated R&D investments are translating into tangible, commercializable assets across oncology, immunology, neuroscience, and MedTech. This innovation engine is central to the company’s view that it can reaccelerate to double-digit revenue growth later in the decade.

Oncology Outperformance: DARZALEX and CARVICTI Lead the Charge

Oncology remains one of J&J’s standout growth drivers. The franchise delivered approximately 21% operational sales growth in 2025, anchored by the continued surge of DARZALEX, now the company’s largest pharmaceutical product with more than $14 billion in annual sales and growth in the low-20% range. Cell therapy product CARVICTI also impressed, having treated more than 10,000 patients, while quarterly sales reached $555 million, up 63.2%. Management cast oncology as a multi-year growth engine, benefiting from both current blockbuster performance and a deep late-stage pipeline.

Immunology Momentum: Tremfya and Emerging Pipeline Assets

In immunology, J&J showcased Tremfya as a key offset to STELARA erosion. Tremfya’s full-year sales surpassed $5 billion, and Q4 growth approached 65.4%, making it the fastest-growing IL-23 therapy on the market. The company believes Tremfya can exceed $10 billion in peak sales, driven by continued penetration and additional indications. Management also highlighted the anticipated 2026 approval and launch of oral icotide, which is expected to further strengthen the immunology portfolio and reinforce the company’s shift towards newer, differentiated assets.

Neuroscience and New Launches: Building a Third Growth Leg

Neuroscience is emerging as another important pillar. Spravato continued its strong trajectory, posting year-over-year growth in the 57%–67.8% range and treating more than 200,000 patients worldwide, illustrating substantial demand in treatment-resistant depression. CAPLYTA’s U.S. launch for adjunctive major depressive disorder was highlighted as a particularly meaningful opportunity, with management pointing to a peak sales potential around $5 billion. These assets are intended to help diversify growth beyond oncology and immunology and capture expanding mental health markets.

MedTech Expansion: Cardiovascular, Surgery and Vision Momentum

MedTech delivered steady growth with pockets of strong outperformance, particularly in cardiovascular. Quarterly MedTech sales reached $8.8 billion, up 5.8% operationally, with cardiovascular growing roughly 15% for the year. Abiomed posted 18.3% growth, while Shockwave surged 22.9%, supporting J&J’s positioning in high-acuity cardiac care. The Surgery and Vision businesses also showed accelerating momentum, underpinned by 15 major launches and more than 40 regulatory approvals in 2025. Management views MedTech as an attractive, innovation-driven growth area, despite some localized competitive and pricing pressures.

Capital Allocation and Strategic Portfolio Actions

Management underscored active capital deployment as a key strategic lever. In 2025, J&J invested more than $32 billion in R&D and M&A, including deals such as Intracellular and Halda to deepen its pipeline in key therapeutic areas. The company also initiated new manufacturing facilities in the United States to support future launches and supply resilience. A major structural step is the planned separation of the orthopedics business, targeted for mid-2027, which is intended to sharpen portfolio focus and potentially unlock greater growth and margin visibility in both the remaining and separated entities.

STELARA Biosimilar Erosion: Major Drag Now Mostly Absorbed

A recurring theme was the significant hit from STELARA biosimilar competition. STELARA sales declined about 48.6% in the period, generating a sizable headwind of roughly 620 to 1,110 basis points across various reported results. Management acknowledged STELARA as a major drag on growth over the past year but suggested that much of the impact is now “in the rearview mirror.” The company believes its newer immunology assets, including Tremfya and upcoming oral therapies, are well positioned to fill the gap and restore higher growth rates.

Litigation and One-Time Charges Weigh on Reported Earnings

Legal and one-off items created noise in the P&L and were a key focus for investors on the call. Other income/expense swung to a net expense of $483 million, compared with $161 million of income in the prior year, primarily due to higher litigation costs, including roughly $900 million tied to an Aura shareholder resolution, and a $200 million nonrecurring charge related to equity awards. The company also continues to navigate talc-related matters, with reference to a prior $7 billion talc reserve reversal and ongoing appeals. Management emphasized that these items, while material, are episodic and do not change the underlying operating momentum.

Tariffs and Cost Pressures Embedded in the P&L

Tariff and cost pressures were another area of attention. The company noted that tariffs deleveraged cost of goods sold by about 80 basis points and flagged that MedTech tariffs are expected to total approximately $500 million in 2026. These costs have been incorporated into guidance, but they do contribute to margin pressure. Management indicated plans to offset these headwinds through efficiency programs and mix improvements, while acknowledging that global trade dynamics remain a swing factor for profitability.

Competitive and Market Headwinds in Select MedTech and Pharma Categories

Despite overall growth, J&J is facing targeted competitive and market pressures. In MedTech, the call flagged intensified competition in pulse field ablation electrophysiology, energy devices, and endocutters, as well as volume-based procurement in China affecting some categories. In pharmaceuticals, management noted upcoming generic competition for products such as Symphony and OPSUMIT beginning in 2026. These pressures underscore the need for continued innovation and portfolio refresh, which the company argues is already underway through its recent launches and pipeline.

Share Count Dilution and Margin Volatility

From a financial mechanics standpoint, the company highlighted that its diluted share count is expected to rise to about 2.44 billion (GAAP diluted) due to share price appreciation, creating an incremental EPS headwind of slightly more than $0.05 versus 2025. While adjusted margins improved overall, there were deleverages in cost of goods sold, lower interest income (net $23 million versus $144 million a year earlier), and other quarterly swings that contribute to near-term P&L variability. Management framed these as manageable moving pieces within an otherwise improving margin trajectory.

Execution and Timing Risks Around New Technologies

The call also acknowledged execution risk around certain new launches, particularly in MedTech. Products such as Inlexo and the Otava robotics platform require further reimbursement, coding, and regulatory milestones before they can fully scale. Inlexo is awaiting a permanent J-code expected in the second quarter, while Otava requires de novo regulatory clearance. Management views these as upside opportunities but cautioned that timing and reimbursement outcomes will influence the speed at which these innovations translate into meaningful revenue.

Guidance and Outlook: Steady Growth with Stronger Exit Velocity

For 2026, Johnson & Johnson guided to operational sales growth of 5.7%–6.7%, with a midpoint of 6.2% and total sales around $100 billion. Acquisitions and divestitures are expected to add roughly 30 basis points, and a fifty-third week contributes about 100 basis points, implying an adjusted operational midpoint of 5.9%. Reported sales growth is forecast at 6.2%–7.2%, with a midpoint of $100.5 billion, or 6.7%. Free cash flow is projected at approximately $21 billion, with at least 50 basis points of adjusted pretax operating margin improvement, net interest expense between $300 million and $400 million, net other income of $1.0–$1.2 billion, and an effective tax rate of 17.5%–18.5%. Adjusted operational EPS is guided to $11.28–$11.48, implying about 5.5% growth at the midpoint, with reported adjusted EPS reaching a midpoint of $11.53 after a $0.15 foreign exchange benefit. Management expects sales to be relatively steady throughout the year, with a stronger fourth quarter and higher EPS growth in the second half versus the first, and reiterated its line of sight to double-digit revenue growth by the end of the decade.

In summary, Johnson & Johnson’s earnings call painted a picture of a company navigating significant legacy and macro headwinds while steadily strengthening its growth profile. Oncology, immunology, neuroscience, and MedTech innovation are driving robust revenue and EPS expansion, backed by powerful free cash flow and an active capital allocation agenda. While STELARA erosion, litigation, tariffs, and competitive pressures remain important risk factors, management’s guidance and long-term targets suggest confidence that the current portfolio and pipeline can deliver accelerating, sustainable growth — a message likely to resonate with investors looking for durable, large-cap healthcare exposure.