Zoetis Inc.

Second quarter global revenue was $2.5 billion, flat on a reported basis and down 1% organically. Adjusted net income was $781 million, down 2% organically, and adjusted diluted EPS was $1.87, up 4% year over year. Adjusted gross margin was 72.9%, down about 40 basis points reported; excluding FX, gross margin increased about 10 basis points. For the quarter, U.S. revenue was $1.3 billion, down 7%, while international revenue was $1.2 billion, up 6%. By segment, Companion Animal revenue was $1.7 billion, down 6%, and Livestock revenue was $731 million, up 11%; Diagnostics revenue was $118 million, up 12%. Within key franchises, Key Dermatology was $395 million, down 16%, Simparica was $442 million, flat globally, and OA pain mAbs were $147 million, down 3%. For full year 2026, Zoetis now expects organic operational revenue growth of down 3% to down 1%, adjusted net income of $2.57 billion to $2.62 billion, adjusted diluted EPS of $6.15 to $6.25, and reported diluted EPS of $5.55 to $5.65. Management said the guidance assumes continued pressure in U.S. Companion Animal, FX headwinds of about $60 million to $65 million on revenue and about $30 million on bottom line, and continued strength in Livestock and Diagnostics.

Kristin Peck framed the quarter as the result of a tougher Companion Animal environment rather than a company-specific issue, emphasizing declining vet visits, value-conscious pet owners, and intensified competition. She said Zoetis is responding with urgency through sharper commercial execution, targeted gross-to-net investments, cost discipline, and continued innovation, including expected long-acting Cytopoint approval later this year. Her tone was realistic about near-term pressure but confident that Zoetis can defend its leading categories and build the next chapter of growth.

Wetteny Joseph gave the financial details and said the quarter reflected both softer market demand and deliberate actions to protect volume and share. He cited adjusted gross margin of 72.9%, SG&A down 4% operationally, R&D up 4% operationally, and over $550 million of share repurchases in the quarter; he also noted that lower share count helped lift adjusted EPS to $1.87. On guidance, he said the company is incorporating ongoing Companion Animal pressure, gross-to-net actions, and FX headwinds of about $60 million to $65 million on revenue and about $30 million on bottom line.

Analysts focused on how much of the weakness was market contraction versus competitive pressure, how long promotions and gross-to-net investments will last, and whether Zoetis can return to growth in 2027. Management said both macro softness and competition were meaningful, especially in Derm and parasiticides, but declined to quantify the split precisely; they said gross-to-net actions are targeted, time-bound, and aimed at protecting share and volume rather than cutting list prices. On duration, Kristin Peck said the company will likely keep promoting until share stabilizes and noted that some competitive pressure may take 6, 12, or 18 months to work through.