Zoetis Inc.

Previous wording

Our business is subject to risks related to, among other factors, tariffs and other trade protection measures put in the place by the United States or other countries, as well as U.S. international trade relations, including those with China, Canada and the European Union. Starting in early 2025, the United States government announced additional tariffs on certain goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. While the final tariffs and other measures to be imposed, and their applicability to our business, remain uncertain, such actions may negatively impact demand and result in an increase in some product costs. We will continue to actively monitor the situation and evaluate actions that can be taken to moderate and/or minimize its effects. For further information regarding the impact of potential additional tariffs and trade protection measures on the Company, see Part I., Item 1A, Risk Factors in our 2025 Annual Report on Form 10-K.

Current wording

Our business is subject to risks related to, among other factors, tariffs and other trade protection measures put in place by the U.S. or other countries, as well as U.S. international trade relations, including those with China, Canada and the European Union. Starting in early 2025, the U.S. government announced additional tariffs on certain goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. While the final tariffs and other measures to be imposed, and their applicability to our business, remain uncertain, such actions may negatively impact demand and result in an increase in some product costs. We will continue to actively monitor the situation and evaluate actions that can be taken to moderate and/or minimize its effects, including seeking refunds related to prior tariff assessments where applicable. For further information regarding the impact of potential additional tariffs and trade protection measures on the Company, see Part I., Item 1A, Risk Factors in our 2025 Annual Report on Form 10-K.

Previous wording

Sales of our livestock products have in the past, and may in the future be, adversely affected by the outbreak of disease carried by animals. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.

Current wording

Sales of our livestock products have in the past been, and may in the future be, adversely affected by the outbreak of disease carried by animals. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.

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 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.

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 nine months ended September 30, 2026, approximately 45% 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 nine months ended September 30, 2026, approximately 55% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was favorably impacted by approximately 1% 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

We report information in accordance with U.S. generally accepted accounting principles (GAAP). Management also measures performance using non-GAAP financial measures that may exclude certain amounts from the most directly comparable GAAP measure. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other companies. We present certain identified non-GAAP measures solely to provide investors with useful information to more fully understand how management assesses performance.

Current wording

We report information in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Management also measures performance using non-GAAP financial measures that may exclude certain amounts from the most directly comparable GAAP measure. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other companies. We present certain identified non-GAAP measures solely to provide investors with useful information to more fully understand how management assesses performance.

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 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.

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 prior to January 1, 2026. The condensed consolidated financial statements as of and for the three and nine months ended September 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 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 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 increases and anticipated customer buying preceding the price increases 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 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 wording

Total revenue decreased by $31 million, or 1%, for the three months ended September 30, 2026, compared with the three months ended September 30, 2025, a decrease of $44 million, or 2%, on an operational basis. The decrease in operational revenue was primarily due to the following:

Previous wording

•volume decrease from key franchises of approximately 3%,

Current wording

•volume decrease from key franchises of approximately 1%;

Previous wording

Foreign exchange favorably impacted total revenue by approximately $35 million, or 2%.

Current wording

Foreign exchange favorably impacted total revenue by approximately $13 million, or 1%.

Previous 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:

Current wording

Total revenue increased by $27 million, which was relatively flat, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025, a decrease of $97 million, or 1%, on an operational basis. The decrease in operational revenue was primarily due to the following:

Previous wording

•volume decrease from key franchises of approximately 3%; and

Current wording

•volume decrease from key franchises of approximately 2%,

Previous wording

•volume growth from other in-line products of approximately 2%.

Current wording

•volume growth from other in-line products of approximately 1%.

Previous wording

Foreign exchange favorably impacted total revenue by approximately $111 million, or 2%.

Current wording

Foreign exchange favorably impacted total revenue by approximately $124 million, or 1%.

Previous 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:

Current wording

Cost of sales as a percentage of revenue was 29.2% in the three months ended September 30, 2026, compared with 28.8% in the three months ended September 30, 2025. The increase was primarily a result of:

Previous wording

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 wording

Cost of sales as a percentage of revenue was 28.3% in the nine months ended September 30, 2026, compared with 27.9% in the nine months ended September 30, 2025. The increase was primarily a result of:

Previous wording

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 wording

SG&A expenses decreased by $8 million, which was relatively flat, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025, primarily as a result of:

Previous wording

•an increase in professional and consulting expense.

Current wording

•an increase in professional and consulting expense; and

Previous 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:

Current wording

R&D expenses increased by $24 million, or 5%, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025, primarily as a result of:

Previous 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.

Current wording

Amortization of intangible assets decreased in the three and nine months ended September 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 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.

Current wording

Restructuring charges and certain acquisition and divestiture-related costs in the three and nine months ended September 30, 2026 were primarily driven by employee termination costs and asset impairment charges under a comprehensive cost and productivity program, with the nine-month period also reflecting employee termination costs from additional organizational structure refinements.

Previous wording

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 wording

Restructuring charges and certain acquisition and divestiture-related costs in the three and nine months ended September 30, 2025, primarily related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site.

Previous 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.

Current wording

Interest expense, net of capitalized interest, increased in the three and nine months ended September 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 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 wording

The change in Other (income)/deductions—net in the three and nine months ended September 30, 2026 versus the comparable prior year periods was primarily as a result of impairment charges on in-process research and development assets, acquired from PetMedix in 2023, resulting from updated estimates of development and commercial assumptions, as well as lower interest income in the current periods, partially offset by lower foreign currency losses in the current periods, as well as the gain on sale of a distribution facility in the current nine-month period.

Previous 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).

Current wording

Our effective tax rate was 18.9% and 18.6% for the three months ended September 30, 2026 and 2025, respectively. The higher effective tax rate for the three months ended September 30, 2026, compared with the three months ended September 30, 2025, was primarily attributable to lower net discrete tax benefits, partially offset by 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).

Previous wording

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 wording

Our effective tax rate was 20.0% and 20.3% for the nine months ended September 30, 2026 and 2025, respectively. The lower effective tax rate for the nine months ended September 30, 2026, compared with the nine months ended September 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), partially offset by lower net discrete tax benefits.

Previous 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.

Current wording

U.S. segment revenue decreased by $76 million, or 6%, in the three months ended September 30, 2026, compared with the three months ended September 30, 2025, reflecting a decrease of $89 million in companion animal products, partially offset by an increase of $13 million in livestock products.

Previous wording

•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 wording

•Companion animal revenue decreased primarily due to softer end-market demand and an increasingly competitive landscape. The company's key dermatology franchise faced heightened competitive pressure and persistent macroeconomic-driven price sensitivity. Also contributing to the decline was the impact of generic competition on Convenia and Cerenia, as well as lower sales of vaccines and Librela, partially offset by an increase in demand for small animal diagnostics.

Previous 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.

Current wording

U.S. segment earnings decreased by $69 million, or 8%, in the three months ended September 30, 2026, compared with the three months ended September 30, 2025, primarily due to lower gross profit, partially offset by lower operating expenses.

Previous 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.

Current wording

•Companion animal operational revenue was flat, primarily due to increased sales of our parasiticides portfolio and our mAb products for pain with the launch of Lenivia® and Portela™, the company's long-acting monoclonal antibody pain products, as well as an increase in demand for small animal diagnostics, offset by decreased sales of key dermatology products.

Previous wording

•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 wording

•Livestock operational revenue growth was due to increased sales in our cattle and fish products. Sales of cattle products grew largely due to increased demand and price. Sales of our fish products grew due to higher vaccination rates in Norway.

Previous wording

•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 wording

•Additionally, International segment revenue was favorably impacted by foreign exchange which increased revenue by $13 million, or 1%, primarily driven by the Australian dollar, Brazilian real, Mexican peso and Chinese renminbi.

Previous wording

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 wording

International segment earnings increased by $37 million, or 7%, in the three months ended September 30, 2026, compared with the three months ended September 30, 2025. Operational earnings increased by $26 million, or 5%, primarily due to higher gross profit.

Previous wording

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 wording

U.S. segment revenue decreased by $259 million, or 7%, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025, reflecting a decrease of $329 million in companion animal products, partially offset by an increase of $70 million in livestock products.

Previous wording

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 wording

U.S. segment earnings decreased by $244 million, or 9%, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025, primarily due to lower gross profit, partially offset by lower operating expenses.

Previous 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.

Current wording

International segment revenue increased by $294 million, or 9%, in the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. Operational revenue increased by $170 million, or 5%, driven by growth of $72 million in companion animal products and $98 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 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 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, our mAb products for pain with the launch of Lenivia and Portela, the company's long-acting monoclonal antibody pain products, as well as 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 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.

Current wording

•Livestock operational revenue growth was due to increased sales in our cattle, fish, poultry and swine products. Sales of cattle products grew largely due to a mix of volume and price. Sales of our fish products grew due to higher vaccination rates and increased pricing. 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.

Previous 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.

Current wording

•Additionally, International segment revenue was favorably impacted by foreign exchange which increased revenue by $124 million, or 4%, primarily driven by the euro, Brazilian real, Australian dollar, and Mexican peso.

Previous 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.

Current wording

International segment earnings increased by $218 million, or 13%, in the nine months ended September 30, 2026, compared with the nine months ended September 30, 2025. Operational earnings increased by $153 million, or 9%, due to higher gross profit and lower operating expenses.

Previous wording

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 wording

Other business activities net loss decreased by $9 million in the three months ended September 30, 2026, compared with the three months ended September 30, 2025, reflecting a decrease in R&D costs related to projects and other strategic investments, as well as higher earnings from our contract manufacturing business.