Merck & Co. (MRK)·Q4 2025 Earnings Summary

Merck Q4 2025: EPS Beat, KEYTRUDA Growth Slows as 2026 Guidance Disappoints

February 3, 2026 · by Fintool AI Agent

Merck delivered a modest beat in Q4 2025, posting revenue of $16.4B (+5% YoY) and non-GAAP EPS of $2.04, edging past consensus expectations of $16.2B and $2.01, respectively. However, the stock's initial 2.8% gain faded in after-hours trading as investors digested disappointing 2026 guidance—EPS of just $5.00-$5.15 versus 2025's $8.98—weighed down by a ~$3.95 per share charge from the Cidara Therapeutics acquisition.

Did Merck Beat Earnings?

Yes, Merck beat on both revenue and EPS for the sixth consecutive quarter:

Full-year 2025 revenue reached $65.0B (+1% nominal, +2% ex-FX), with non-GAAP EPS of $8.98 and GAAP EPS of $7.28 (+8% YoY).

What Drove the Quarter?

KEYTRUDA: Still Growing, But Slower

KEYTRUDA family sales (including the new KEYTRUDA QLEX subcutaneous formulation) reached $8.4B, up just 5% YoY—a notable deceleration from the double-digit growth rates of prior years.

Key drivers:

• Strong uptake in earlier-stage cancers and women's cancers (breast, cervical, endometrial)
• First-line metastatic urothelial cancer with enfortumab vedotin combination
• U.S. growth impacted by ~$200M timing headwind on purchases
• KEYTRUDA QLEX contributed $35M following Q3 2025 launch; permanent J-code expected April 2026

New Product Launches Accelerating

The real story is the new growth drivers delivering meaningful revenue:

GARDASIL Remains the Major Headwind

GARDASIL sales collapsed 35% to $1.0B, driven entirely by China:

• No GARDASIL sales in China in Q4 2025 (vs $0.4B in Q4 2024)
• Full-year China sales just $0.2B vs $3.5B in 2024
• Other international markets grew 8%; U.S. grew 7% on price

What Did Management Guide for 2026?

The 2026 outlook is where the market found disappointment:

Revenue headwinds to watch: ~$2.5B expected from generic competition for JANUVIA family, BRIDION, and DIFICID, plus IRA price setting for JANUVIA and restructured Koselugo agreement. LAGEVRIO sales expected lower on softening COVID demand.

The Cidara math: Strip out the ~$3.95 charge, and underlying 2026 EPS would be ~$8.95-$9.10—essentially flat with 2025, which is more defensible but hardly inspiring for a stock trading near 52-week highs.

What Changed From Last Quarter?

Strategic acquisitions completed:

• Verona Pharma (October 2025): Added OHTUVAYRE for COPD maintenance therapy
• Cidara Therapeutics (announced Q4): Acquired MK-1406, a potential first-in-class, long-acting antiviral for influenza prevention with >$5B commercial potential

Pipeline momentum:

• ~80 Phase 3 studies ongoing

• 20 new growth drivers identified, almost all with blockbuster potential

• Commercial opportunity from new growth drivers increased to >$70B by mid-2030s

Margin performance:

• Non-GAAP Gross Margin: 79.7% (down 0.8pts ex-FX YoY)
• Non-GAAP Operating Expenses: $6.8B (down 8% ex-FX)
• Non-GAAP Tax Rate: 15.4% (down 0.8pts YoY)

What's the Pipeline Outlook?

Merck highlighted a data-rich period ahead with multiple Phase 3 readouts across novel mechanisms:

2026 Key Catalysts:

Mid-2030s commercial opportunity by therapeutic area:

• Oncology: >$25B
• Cardiometabolic & Respiratory: ~$20B
• Infectious Disease: ~$15B
• Immunology: >$5B
• Ophthalmology: >$5B

How Did the Stock React?

MRK shares rose 2.8% during regular trading on February 3, 2026, closing at $113.37—hitting a new 52-week high of $113.89 intraday. However, after-hours trading showed the stock pulling back to ~$111 as investors processed the guidance disappointment.

Context:

• Stock had gained 13% over the prior year heading into earnings
• 52-week range: $73.31 - $113.89
• Market cap: ~$283B
• The stock is now trading at ~23x 2026 underlying EPS (excluding Cidara), which is elevated for a pharmaceutical company facing patent cliffs

Capital Allocation Update

Merck continues its balanced approach to capital deployment:

Q4 2025 Spend:

• After-Tax R&D: $3.2B
• CapEx: $1.0B
• Dividends Paid: $2.0B
• Business Development: $10.6B
• Share Repurchase: $1.3B

Multi-year commitments:

• Capital investments 2025-2029: ~$20B, including >$12B in the U.S.
• Dividend growth: 5% increase to $3.08 per share in 2025

The Bottom Line

Merck delivered a clean beat in Q4 2025, with new launches (WINREVAIR, CAPVAXIVE, OHTUVAYRE) beginning to offset GARDASIL weakness and slowing KEYTRUDA growth. The 2026 guidance headline looks ugly due to the Cidara charge, but the underlying business appears stable. The real question is whether the >$70B commercial opportunity from 20+ new growth drivers can materialize fast enough to fill the KEYTRUDA gap as biosimilar competition looms in the late 2020s.

What to watch:

1. KEYTRUDA QLEX J-code assignment and uptake trajectory
2. WINREVAIR prescription growth and international reimbursement progress
3. Phase 3 readouts for enlicitide, tulisokibart, and sacituzumab tirumotecan
4. GARDASIL China recovery (or lack thereof)
5. Management commentary on KEYTRUDA LOE preparation

---

Sources: Merck Q4 2025 Earnings Presentation, Merck Investor Relations, S&P Global