Zoetis Inc.
For the period ended Jun 30, 2026. Filed Aug 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 6, 2026
ZTS$79.40-3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001555280-26-000024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001555280-26-000040
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 206 previous paragraphs and 247 current paragraphs.
151 unchanged; 43 reworded; 34 added; 10 removed; 2 previous and 19 current paragraphs rearranged.
Tables are not compared: 21 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (34)
Current report
Foreign exchange favorably impacted total revenue by approximately $35 million, or 2%.
Current report
Foreign exchange favorably impacted total revenue by approximately $111 million, or 2%.
Current report
•favorable manufacturing costs.
Current report
•unfavorable product mix; and
Current report
SG&A expenses decreased by $22 million, or 4%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, primarily as a result of:
Current report
•lower compensation-related costs;
Current report
•lower charitable contributions;
Current report
•lower certain significant items; and
Current report
•lower depreciation expense,
Current report
•higher professional and consulting expense.
Current report
SG&A expenses decreased by $8 million, or 1%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, primarily as a result of:
Current report
•lower depreciation expense;
Current report
•lower certain significant items; and
Current report
•lower charitable contributions,
Current report
•unfavorable foreign exchange; and
Current report
•an increase in professional and consulting expense.
Current report
R&D expenses increased by $25 million, or 8%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, primarily as a result of:
Current report
•unfavorable foreign exchange.
Current report
Restructuring charges and certain acquisition and divestiture-related costs in the three and six months ended June 30, 2025, primarily consisted of asset impairment charges and employee termination costs related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site.
Current report
The change in Other (income)/deductions—net in the six months ended June 30, 2026 versus the comparable prior year period was primarily as a result of lower foreign currency losses and the gain on sale of a distribution facility in the current period, as well as asset impairment charges in the prior year period, partially offset by lower interest income in the current period.
Current report
Our effective tax rate was 20.4% and 21.2% for the six months ended June 30, 2026 and 2025, respectively. The lower effective tax rate for the six months ended June 30, 2026, compared with the six months ended June 30, 2025, was primarily attributable to a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions) and lower net discrete tax expenses.
Current report
U.S. operating segment
Current report
U.S. segment revenue decreased by $183 million, or 7%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, reflecting a decrease of $240 million in companion animal products, partially offset by an increase of $57 million in livestock products.
Current report
International operating segment
Current report
Corporate expenses decreased by $9 million, or 3%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, primarily due to a decrease in compensation-related costs and technology investments, partially offset by higher expenses in global diagnostics.
Current report
The lower effective tax rate for the three months ended June 30, 2026, compared with the three months ended June 30, 2025, was primarily attributable to lower net discrete tax expenses, partially offset by a less favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Current report
(b) For the three and six months ended June 30, 2026, primarily driven by employee termination costs under a comprehensive cost and productivity program, with the six-month period also reflecting employee termination costs from additional organizational structure refinements.
Current report
For the three and six months ended June 30, 2025, primarily consisted of employee termination costs related to a transition from internal to external innovation
Current report
and manufacturing of certain products and the closure of a related site.
Current report
(d)For the three and six months ended June 30, 2025, represents certain asset impairment charges related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site, as well as charges related to our aquaculture product portfolio.
Current report
Short-term investments increased as a result of the purchase of time deposits.
Current report
Other current assets increased primarily due to the timing of income taxes paid and the jurisdictional netting of income taxes receivable and income
Current report
The decrease in Operating lease right-of-use assets reflects lease amortization in the current period.
Current report
Identifiable intangible assets, less accumulated amortization decreased primarily due to amortization expense. See Note 11. Goodwill and Other Intangible Assetsof the Notes to Condensed Consolidated Financial Statements.
Removed paragraphs (10)
Previous report
In connection with the Fiscal Year Alignment, revenue in the International segment for the reported fourth quarter of 2025 benefited from operational changes resulting in the acceleration of the timing of sales into the reported fourth quarter of 2025, which led to an approximate 2.5% to 3.5% increase in sales in the International segment in the reported fourth quarter of 2025, a trend that we do not expect to recur at the end of fiscal year 2026.
Previous report
*Calculation not meaningful
Previous report
Foreign exchange increased reported revenue growth by approximately $76 million, or 4%.
Previous report
SG&A expenses increased by $14 million, or 2%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily as a result of:
Previous report
•an increase in certain compensation-related costs,
Previous report
•lower depreciation expense; and
Previous report
•lower advertising and promotion expense.
Previous report
(b) For the three months ended March 31, 2026, primarily related to employee termination costs due to organizational structure refinements.
Previous report
Accounts payable increased as a result of the timing of vendor and value-added tax payments.
Previous report
Accrued expenses decreased primarily as a result of a decrease in accrued contract rebates and the timing of interest payments.
Reworded paragraphs (43)
Previous wording
A summary of our 2026 performance compared with the comparable 2025 period follows:
Current wording
A summary of our 2026 performance compared with the comparable 2025 periods follows:
Previous wording
Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the three months ended March 31, 2026, approximately 47% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, euro and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the three months ended March 31, 2026, approximately 53% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was favorably impacted by approximately 4% from changes in foreign currency values relative to the U.S. dollar. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.
Current wording
Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the six months ended June 30, 2026, approximately 46% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, euro and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the six months ended June 30, 2026, approximately 54% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was favorably impacted by approximately 2% from changes in foreign currency values relative to the U.S. dollar. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.
Previous wording
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Historically our consolidated financial statements, which have a year-end of December 31, have reflected financial information of subsidiaries operating outside the U.S. (the “International Subsidiaries”) on a one-month financial reporting lag with a year-end of November 30. In connection with our multi-year process to transition our enterprise resource planning (ERP) system, effective January 1, 2026, we eliminated the one-month financial reporting lag by our International Subsidiaries and adjusted their year-end to December 31 (the “Fiscal Year Alignment”).
Current wording
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Historically our consolidated financial statements, which have a year-end of December 31, have reflected financial information of subsidiaries operating outside the U.S. (the “International Subsidiaries”) on a one-month financial reporting lag with a year-end of November 30. In
Previous wording
The elimination of this financial reporting lag represented a change in accounting principle which the Company considers preferable because it provides investors more timely access to financial information about these subsidiaries. This change in accounting principle was applied retrospectively to all periods since January 1, 2024. The condensed consolidated financial statements as of and for the three months ended March 31, 2025, the Condensed Consolidated Balance Sheet as of December 31, 2025 and the related Notes to Condensed Consolidated Financial Statements have been recast to reflect this change in accounting principle. In addition, we plan to recast the condensed consolidated financial statements as of and for the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025 and the consolidated financial statements as of and for the twelve months ended December 31, 2025 and 2024 when they are presented as comparatives in future financial statements.
Current wording
The elimination of this financial reporting lag represented a change in accounting principle which the company considers preferable because it provides investors more timely access to financial information about these subsidiaries. This change in accounting principle was applied retrospectively to all periods since January 1, 2024. The condensed consolidated financial statements as of and for the three and six months ended June 30, 2025, the Condensed Consolidated Balance Sheet as of December 31, 2025 and the related Notes to Condensed Consolidated Financial Statements have been recast to reflect this change in accounting principle. In addition, we plan to recast the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2025 and the consolidated financial statements as of and for the twelve months ended December 31, 2025 and 2024 when they are presented as comparatives in future financial statements.
Previous wording
The operational changes in connection with the Fiscal Year Alignment to date also included a shift implemented in the first quarter of 2026 to the timing of annual price increases in certain International Subsidiaries so that the price increase and anticipated customer buying preceding the price increase would occur in the same calendar year. In addition, processing of certain customer orders from December 2025 was delayed to the first quarter of 2026.
Current wording
The operational changes in connection with the Fiscal Year Alignment to date included a shift implemented in the first quarter of 2026 to the timing of annual price increases in certain International Subsidiaries so that the price increase and anticipated customer buying preceding the price increase would occur in the same calendar year. In addition, processing of certain customer orders from December 2025 was delayed to the first quarter of 2026.
Previous wording
Total revenue increased by $64 million, or 3%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, a decrease of $12 million, or 1%, on an operational basis. The decrease in operational revenue was primarily due to the following:
Current wording
Total revenue increased by $58 million, or 1%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, a decrease of $53 million, or 1%, on an operational basis. The decrease in operational revenue was primarily due to the following:
Previous wording
•price growth of approximately 2%; and
Current wording
•price growth of approximately 1%; and
Previous wording
Cost of sales as a percentage of revenue was 28.3% in the three months ended March 31, 2026, compared with 28.1% in the three months ended March 31, 2025. The increase was primarily a result of:
Current wording
Cost of sales as a percentage of revenue was 27.3% in the three months ended June 30, 2026, compared with 26.8% in the three months ended June 30, 2025. The increase was primarily a result of:
Previous wording
•unfavorable manufacturing and other costs,
Current wording
•favorable manufacturing and other costs; and
Previous wording
R&D expenses increased by $18 million, or 11%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily as a result of:
Current wording
R&D expenses increased by $7 million, or 4%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, primarily as a result of:
Previous wording
•an increase in certain compensation-related costs to support innovation and portfolio progression; and
Current wording
•an increase in compensation-related costs to support innovation and portfolio progression; and
Previous wording
Amortization of intangible assets decreased in the three months ended March 31, 2026 versus the comparable prior year period.
Current wording
Amortization of intangible assets decreased in the three and six months ended June 30, 2026 versus the comparable prior year period primarily due to assets that became fully amortized in the prior year.
Previous wording
Restructuring charges and certain acquisition and divestiture-related costs in the three months ended March 31, 2026 primarily related to employee termination costs due to organizational structure refinements.
Current wording
Restructuring charges and certain acquisition and divestiture-related costs in the three and six months ended June 30, 2026 were primarily driven by employee termination costs under a comprehensive cost and productivity program, with the six-month period also reflecting employee termination costs from additional organizational structure refinements.
Previous wording
Interest expense, net of capitalized interest, increased in the three months ended March 31, 2026 versus the comparable prior year period primarily as a result of a higher average debt balance in the current period.
Current wording
Interest expense, net of capitalized interest, increased in the three and six months ended June 30, 2026 versus the comparable prior year periods primarily as a result of a higher average debt balance in the current periods.
Previous wording
The change in Other (income)/deductions—net in the three months ended March 31, 2026 versus the comparable prior year period was primarily as a result of the gain on sale of a distribution facility in the current period.
Current wording
The change in Other (income)/deductions—net in the three months ended June 30, 2026 versus the comparable prior year period was primarily as a result of asset impairment charges in the prior year period, partially offset by lower interest income in the current period.
Previous wording
Our effective tax rate was 20.7% and 22.1% for the three months ended March 31, 2026 and 2025, respectively. The lower effective tax rate for the three months ended March 31, 2026, compared with the three months ended March 31, 2025, was primarily attributable to a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Current wording
Our effective tax rate was 20.2% and 20.4% for the three months ended June 30, 2026 and 2025, respectively. The lower effective tax rate for the three months ended June 30, 2026, compared with the three months ended June 30, 2025, was primarily attributable to lower discrete tax expenses, partially offset by a less favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Previous wording
U.S. segment revenue decreased by $93 million, or 8%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, reflecting a decrease of $108 million in companion animal products, partially offset by an increase of $15 million in livestock products.
Current wording
U.S. segment revenue decreased by $90 million, or 7%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, reflecting a decrease of $132 million in companion animal products, partially offset by an increase of $42 million in livestock products.
Previous wording
U.S. segment earnings decreased by $82 million, or 11%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily due to lower gross profit, partially offset by lower operating expenses.
Current wording
U.S. segment earnings decreased by $93 million, or 10%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, primarily due to lower gross profit, partially offset by lower operating expenses.
Previous wording
•Additionally, International segment revenue was favorably impacted by foreign exchange which increased revenue by $76 million, or 8%, primarily driven by the euro, Brazilian real, Australian dollar, Mexican peso, and British pound.
Current wording
•Additionally, International segment revenue was favorably impacted by foreign exchange which increased revenue by $35 million, or 3%, primarily driven by the Brazilian real, Australian dollar, euro and Mexican peso.
Previous wording
•Livestock revenue growth was primarily due to increased demand for our cattle, poultry and swine products. Cattle products grew due to improved supply availability and strong results from our seasonal promotion. Poultry products grew due to price and increased demand for vaccines. Sales of our swine products grew due to improved supply, as well as increased demand for anti-infective products.
Current wording
•Livestock revenue growth was primarily due to increased demand for our cattle, poultry and swine products. Cattle products grew due to improved supply availability and elevated demand in response to the New World screwworm outbreak. Poultry products grew due to increased demand for vaccines, as well as price. Sales of our swine products grew due to increased demand for vaccine products.
Previous wording
International segment revenue increased by $164 million in the three months ended March 31, 2026 compared with the three months ended March 31, 2025. Operational revenue increased by $88 million, or 9%, driven by growth of $39 million in companion animal products and $49 million in livestock products. Growth in the current period was positively impacted by operational changes made in connection with the Fiscal Year Alignment.
Current wording
International segment revenue increased by $252 million, or 12%, in the six months ended June 30, 2026 compared with the six months ended June 30, 2025. Operational revenue increased by $141 million, or 7%, driven by growth of $72 million in companion animal products and $69 million in livestock products. Growth in the current period was positively impacted by operational changes made in connection with the Fiscal Year Alignment.
Previous wording
•Companion animal operational revenue growth was driven primarily by increased sales of Simparica Trio, as well as an increase in demand for vaccines and small animal diagnostics, partially offset by decreased sales of key dermatology products and Librela.
Current wording
•Companion animal operational revenue growth was driven primarily by increased sales of our parasiticides portfolio, as well as an increase in demand for small animal diagnostics and vaccines, partially offset by decreased sales of key dermatology products.
Previous wording
•Livestock operational revenue growth was due to increased sales in our cattle, swine, poultry and fish products. Sales of cattle products grew largely due to a mix of volume and price. Sales of swine products were volume driven due to momentum across our key brands. Sales of poultry products grew due to increased demand, key account penetration, geographic expansion and price. Sales of our fish products grew due to increased vaccine sales and pricing.
Current wording
•Livestock operational revenue growth was due to increased sales in our cattle, swine, poultry and fish products. Sales of cattle products grew largely due to a mix of volume and price. Sales of poultry products grew due to increased demand, key account penetration, geographic expansion and price. Sales of swine products were volume-driven due to momentum across our key brands. Sales of our fish products grew due to increased pricing.
Previous wording
International segment earnings increased by $112 million, or 21%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025. Operational earnings growth was $79 million, or 15%, primarily due to higher gross profit, partially offset by higher operating expenses.
Current wording
International segment earnings increased by $181 million, or 16%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025. Operational earnings increased by $127 million, or 11%, primarily due to higher gross profit, partially offset by higher operating expenses.
Previous wording
Other business activities net loss increased by $8 million in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, reflecting an increase in R&D costs related to projects and other strategic investments.
Current wording
Other business activities net loss increased by $6 million in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, reflecting lower revenue from client supply services and an increase in R&D costs related to projects and other strategic investments.
Previous wording
Corporate expenses increased by $37 million, or 13%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily due to an increase in compensation-related costs, unfavorable foreign exchange and higher expenses in global diagnostics.
Current wording
Corporate expenses increased by $28 million, or 5%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, primarily due to unfavorable foreign exchange, higher expenses in global diagnostics and an increase in compensation-related costs.
Previous wording
Other unallocated expenses decreased by $19 million, or 23%, in the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily due to lower manufacturing costs and other charges, as well as lower inventory obsolescence, partially offset by unfavorable foreign exchange and freight charges.
Current wording
Other unallocated expenses decreased by $25 million, or 16%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, primarily due to lower manufacturing costs and other charges, as well as lower inventory obsolescence, partially offset by unfavorable foreign exchange and freight charges.
Previous wording
Adjusted net income is calculated excluding certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be nonrecurring; or items that relate to products that we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be costs related to a major non-acquisition or divestiture-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition or divestiture-related cost-reduction and productivity initiatives; costs related to our business process transformation program; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S. GAAP; certain asset impa irment charges; adjustments related to the resolution of certain tax positions; significant currency devaluation; the impact of adopting certain significant, event-driven tax legislation; or charges related to legal matters. See Notes to Condensed Consolidated Financial Statements—Note 15. Commitments and Contingencies. Our normal, ongoing defense costs or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items.
Current wording
Adjusted net income is calculated excluding certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be nonrecurring; or items that relate to products that we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be costs related to a major non-acquisition or divestiture-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition or divestiture-related cost-reduction and productivity initiatives; costs related to our business process transformation program; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S. GAAP; certain asset impa irment
Previous wording
(a)The effective tax rate on adjusted pre-tax income was 20.7% and 21.9% for the three months ended March 31, 2026 and 2025, respectively.
Current wording
(a)The effective tax rate on adjusted pre-tax income was 20.2% and 20.4% for the three months ended June 30, 2026 and 2025, respectively and 20.5% and 21.1% for the six months ended June 30, 2026 and 2025, respectively.
Previous wording
The lower effective tax rate for the three months ended March 31, 2026, compared with the three months ended March 31, 2025, was primarily attributable to a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Current wording
The lower effective tax rate for the six months ended June 30, 2026, compared with the six months ended June 30, 2025, was primarily attributable to a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions) and lower net discrete tax expenses.
Previous wording
For a discussion about the changes in Cash and cash equivalents, Short-term borrowings, Current portion of long-term debt and Long-term debt, net of discount and issuance costs, see “Analysis of financial condition, liquidity and capital resources” below.
Current wording
For a discussion about the changes in Cash and cash equivalents and Long-term debt, net of discount and issuance costs, see “Analysis of financial condition, liquidity and capital resources” below.
Previous wording
Other current assets increased primarily due to higher prepaid expenses, partially offset by a decrease in collateral posted related to derivative contracts.
Current wording
taxes payable, partially offset by a decrease in collateral posted related to derivative contracts.
Previous wording
Accrued compensation and related items decreased primarily due to the payments of 2025 annual incentive bonuses, savings plan contributions to eligible employees and payments for sales incentive bonuses, partially offset by the accrual of 2026 annual incentive bonuses, savings plan contributions to eligible employees and sales incentive bonuses.
Current wording
Accrued compensation and related items decreased primarily due to the payments of 2025 annual incentive bonuses, savings plan contributions to eligible employees and payments for sales incentive bonuses, partially offset by the accrual of 2026 annual incentive bonuses, sales incentive bonuses and savings plan contributions to eligible employees.
Previous wording
Other current liabilities increased primarily due to the mark-to-market adjustments of derivative instruments and an increase in deferred revenue.
Current wording
Other current liabilities increased primarily due to the mark-to-market adjustments of derivative instruments.
Previous wording
Net cash provided by operating activities was $401 million for the three months ended March 31, 2026, compared with $515 million for the three months ended March 31, 2025. The decrease in operating cash flows was primarily attributable to the timing of receipts and payments in the ordinary course of business and higher inventory build-up of certain products, partially offset by higher net income adjusted by non-cash items and the timing of income taxes paid.
Current wording
Net cash provided by operating activities was $1,056 million for the six months ended June 30, 2026, compared with $1,120 million for the six months ended June 30, 2025. The decrease in operating cash flows was primarily attributable to lower net income adjusted by non-cash items and the timing of receipts and payments in the ordinary course of business, partially offset by the timing of income taxes paid and lower inventory build-up of certain products versus the comparable prior year period.
Previous wording
Our net cash used in investing activities was $87 million for the three months ended March 31, 2026, compared with $203 million for the three months ended March 31, 2025. The net cash used in investing activities for the three months ended March 31, 2026 was primarily due to capital expenditures, partially offset by net proceeds from derivative instrument activity. The net cash used in investing activities for the three months ended March 31, 2025 was primarily due to capital expenditures and net payments of derivative instrument activity.
Current wording
Our net cash used in investing activities was $387 million for the six months ended June 30, 2026, compared with $415 million for the six months ended June 30, 2025. The net cash used in investing activities for the six months ended June 30, 2026 was primarily due to capital expenditures and the purchase of short-term investments, partially offset by net proceeds from derivative instrument activity. The net cash used in investing activities for the six months ended June 30, 2025 was primarily due to capital expenditures and net payments of derivative instrument activity.
Previous wording
Our net cash used in financing activities was $840 million for the three months ended March 31, 2026, compared with $677 million for the three months ended March 31, 2025. The net cash used in financing activities for the three months ended March 31, 2026 and 2025 was primarily attributable to the purchase of treasury shares and the payment of dividends.
Current wording
Our net cash used in financing activities was $1,653 million for the six months ended June 30, 2026, compared with $1,241 million for the six months ended June 30, 2025. The net cash used in financing activities for the six months ended June 30, 2026 and 2025 was primarily attributable to the purchase of treasury shares and the payment of dividends.
Previous wording
In August 2025, we entered into a new and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.3 billion senior unsecured revolving credit facility (the credit facility), which expires in December 2027. The credit facility replaced our previous revolving credit facility. Subject to certain conditions, we have the right to increase the credit facility to up to $1.75 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. In addition, the credit facility contains other customary covenants.
Current wording
In August 2025, we entered into a new revolving credit agreement with a syndicate of banks providing for a multi-year $1.25 billion senior unsecured revolving credit facility (the credit facility), which expires in August 2030. Subject to certain conditions, we have the right to increase the credit facility to up to $1.75 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. In addition, the credit facility contains other customary covenants.
Previous wording
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of March 31, 2026, we had access to $47 million of lines of credit which expire at various times and are generally renewed annually. There were no borrowings outstanding related to these facilities as of March 31, 2026 and December 31, 2025.
Current wording
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of June 30, 2026, we had access to $46 million of lines of credit which expire at various times and are generally renewed annually. There were no borrowings outstanding related to these facilities as of June 30, 2026 and December 31, 2025.
Previous wording
The convertible senior notes were issued pursuant to an indenture, dated as of December 18, 2025, between us and Deutsche Bank Trust Company Americas, as trustee. If we call any convertible senior notes for redemption, a "make-whole fundamental change" will occur under the indenture with respect to those convertible senior notes, in which case the conversion rate applicable to the conversion of those convertible senior notes will be increased if they are converted during a specified period of time after they are called for redemption. The convertible senior notes are convertible at an initial conversion price of approximately $148.20 per share of common stock. Prior to March 15, 2029, the convertible senior notes are convertible during certain periods only: (i) if the trading price of our common stock is greater than or equal to 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days prior to the end of a calendar quarter, (ii) the trading price per $1,000 principal amount of convertible senior notes for each trading day of the specified measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day, (iii) if we call the notes for redemption and (iv) upon the occurrence of certain corporate events, as set forth in the indenture. On or after March 15, 2029, holders may convert all or any portion of their notes, regardless of the foregoing conditions. Upon any conversion of the convertible senior notes, we will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination thereof, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted.
Current wording
The convertible senior notes were issued pursuant to an indenture, dated as of December 18, 2025, between us and Deutsche Bank Trust Company Americas, as trustee. If we call any convertible senior notes for redemption, a "make-whole fundamental change" will occur under the indenture with respect to those convertible senior notes, in which case the conversion rate applicable to the conversion of those convertible senior notes will be increased if they are converted during a specified period of time after they are called for redemption. The convertible senior notes are convertible at an initial conversion price of approximately $148.20 per share of common stock. Prior to March 15, 2029, the convertible senior notes are convertible during certain periods only: (i) if the trading price of our common stock is greater than or equal to 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days prior to the end of a calendar quarter, (ii) the trading price per $1,000 principal amount of convertible senior notes for each trading day of the specified measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day, (iii) if we call the notes for redemption and (iv) upon the occurrence of certain corporate events, as set forth in the indenture. On or after March 15, 2029, holders may convert all or any portion of their notes,
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (19)
Current report — wording carried from elsewhere
25 | connection with our multi-year process to transition our enterprise resource planning (ERP) system, effective January 1, 2026, we eliminated the one-month financial reporting lag by our International Subsidiaries and adjusted their year-end to December 31 (the “Fiscal Year Alignment”).
Current report — wording carried from elsewhere
Total revenue decreased by $6 million, which was relatively flat, for the three months ended June 30, 2026, compared with the three months ended June 30, 2025, a decrease of $41 million, or 2%, on an operational basis. The decrease in operational revenue was primarily due to the following:
Current report — wording carried from elsewhere
•volume growth from other in-line products of approximately 2%.
Current report — wording carried from elsewhere
•volume decrease from key franchises of approximately 3%,
Current report — wording carried from elsewhere
Cost of sales as a percentage of revenue was 27.8% in the six months ended June 30, 2026, compared with 27.4% in the six months ended June 30, 2025. The increase was primarily a result of:
Current report — wording carried from elsewhere
•higher spend in project investments; and
Current report — wording carried from elsewhere
•an increase in compensation-related costs to support innovation and portfolio progression.
Current report — wording carried from elsewhere
•Companion animal revenue decreased primarily due to softer end-market demand and an increasingly competitive landscape. The company's key dermatology franchise and Simparica Trio faced heightened competitive pressure and persistent macroeconomic-driven price sensitivity. Also contributing to the decline was the impact of generic competition on Cerenia and Convenia, as well as lower sales of Librela.
Current report — wording carried from elsewhere
•Livestock revenue growth was primarily due to increased demand for our cattle products. Sales of cattle products grew due to improved supply availability and elevated demand in response to the New World screwworm outbreak.
Current report — wording carried from elsewhere
International segment revenue increased by $88 million, or 8%, in the three months ended June 30, 2026 compared with the three months ended June 30, 2025. Operational revenue increased by $53 million, or 5%, driven by growth of $33 million in companion animal products and $20 million in livestock products.
Current report — wording carried from elsewhere
•Companion animal operational revenue growth was driven primarily by increased sales of our parasiticides portfolio, as well as an increase in demand for small animal diagnostics and our mAb products for pain with the launch of Lenivia® and Portela™, the company's long-acting monoclonal antibody pain products, partially offset by decreased sales of key dermatology products.
Current report — wording carried from elsewhere
•Livestock operational revenue growth was due to increased sales in our cattle and poultry products. Sales of cattle products grew largely due to increased demand and price. Sales of poultry products grew due to increased demand, geographic expansion and price.
Current report — wording carried from elsewhere
International segment earnings increased by $69 million, or 12%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025. Operational earnings increased by $48 million, or 8%, primarily due to higher gross profit.
Current report — wording carried from elsewhere
U.S. segment earnings decreased by $175 million, or 10%, in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, primarily due to lower gross profit, partially offset by lower operating expenses.
Current report — wording carried from elsewhere
•Additionally, International segment revenue was favorably impacted by foreign exchange which increased revenue by $111 million, or 5%, primarily driven by the euro, Brazilian real, Australian dollar, and Mexican peso.
Current report — wording carried from elsewhere
Other business activities net loss increased by $14 million in the six months ended June 30, 2026, compared with the six months ended June 30, 2025, reflecting an increase in R&D costs related to projects and other strategic investments and lower revenue from client supply services.
Current report — wording carried from elsewhere
Other unallocated expenses decreased by $6 million, or 8%, in the three months ended June 30, 2026, compared with the three months ended June 30, 2025, primarily due to lower manufacturing costs and other charges, partially offset by unfavorable foreign exchange and freight charges.
Current report — wording carried from elsewhere
34 | charges; adjustments related to the resolution of certain tax positions; significant currency devaluation; the impact of adopting certain significant, event-driven tax legislation; or charges related to legal matters. See Notes to Condensed Consolidated Financial Statements—Note 15. Commitments and Contingencies. Our normal, ongoing defense costs or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items.
Current report — wording carried from elsewhere
39 | regardless of the foregoing conditions. Upon any conversion of the convertible senior notes, we will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination thereof, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
33 | capped calls met the criteria for classification as an equity transaction with no subsequent remeasurement, as long as they continue to meet the conditions for equity classification. These capped calls are recorded in stockholders’ equity on our balance sheet and are not accounted for as a bifurcated derivative. The cost of the capped calls of $187 million, net of $42 million in deferred tax assets, was recorded as a decrease to Additional paid-in capital on our Consolidated Balance Sheets as of December 31, 2025.
Previous report — wording carried elsewhere
34 | management, depending on market conditions and business needs. Share repurchases may be executed through various means, including open market or privately negotiated transactions. During the first three months of 2026, 4.8 million shares were repurchased for $606 million, which excludes a $6 million accrual for excise tax on net share repurchases.