MRK · Q2 FY2026
Merck & Co., Inc. Q2 FY2026 earnings analysis
By SageNoodle ResearchNeutral
| Metric | Actual | Estimate | Result |
|---|---|---|---|
| Revenue | $16.61B | $15.81B (yr ago) | Beat |
| EPS | -$0.54 | $1.76 (yr ago) | Miss |
| Free Cash Flow | $4.48B | $2.53B (yr ago) | Beat |
| Gross Margin | 73.5% | 77.5% (yr ago) | Miss |
| Operating Margin | -4.1% pretax margin | 31.6% pretax margin (yr ago) | Miss |
What changed
Revenue increased 5.1% year over year to $16.61 billion, supported by oncology, WINREVAIR, Animal Health and acquired or newly launched products. A $5.7 billion Terns acquisition charge pushed GAAP EPS to a $0.54 loss and pretax margin to -4.1%, while gross margin declined 4.0 percentage points; full-year sales guidance rose, but reported EPS guidance fell because it now includes the Terns charge and related costs.
Impact on the investment thesis
With no prior SageNoodle valuation, we establish a $145 base-case fair value rather than record a change. The quarter supports the revenue outlook but does not justify a higher valuation because acquisition spending, rising net debt and weaker reported profitability offset the improving product mix.