Zoetis Inc. (ZTS) Q3 2025 Earnings Summary

Executive Summary

Q3 delivered modest topline growth and solid profitability: revenue $2.40B (+1% y/y; +4% organic operational), GAAP diluted EPS $1.63, and adjusted diluted EPS $1.70; adjusted net income +9% organic operational, with gross margin expansion supported by price and mix .
Versus S&P Global consensus, EPS beat while revenue was roughly in line/slightly below: adj/“primary” EPS $1.70 vs $1.62 consensus (beat), revenue $2.400B vs $2.406B consensus (slight miss)* .
FY25 outlook was trimmed on revenue/margins and narrowed for adjusted net income growth; adjusted EPS range maintained at $6.30–$6.40, reflecting cost discipline and lower effective tax rate (~20.5%) .
Operational drivers: International grew 6% organic with strength in Simparica and derm; livestock +8–10% organic; U.S. companion animal flat amid softer therapeutic visits, derm competition, and OA mAb headwinds (Librela/Solensia) that management says are stabilizing into 2026 .
Near‑term catalysts: Canadian approval of Lenivia (3‑month canine OA mAb), EU approval of Portela (3‑month feline OA mAb), U.S. conditional approval of Dectomax‑CA1 for screwworm, and a U.S. commercial realignment; innovation webcast on Dec 2 to update pipeline and strategy .

What Went Well and What Went Wrong

What Went Well

Adjusted gross margin expanded ~90 bps y/y to 71.6% on price and mix; adjusted opex up just ~1% operational, supporting adjusted EPS growth despite mixed volumes .
International segment +6% organic operational revenue; Simparica franchise strong globally (International Simparica revenue $93M, +22% op; Trio $41M, +32% op), with derm growth (+7% op) offsetting OA pressure .
Livestock momentum: +8–10% organic operational growth, broad‑based across species; U.S. livestock +14% organic operational on improved ceftiofur supply and vaccine strength .

Management quote: “We reported 4% organic operational revenue growth and 9% growth in adjusted net income… we achieved significant regulatory milestones… and are well positioned to… deliver sustainable growth and value” — CEO Kristin Peck .

What Went Wrong

OA pain franchise declined 11% operationally (global), with Librela facing perception issues amplified via social media in primarily English‑speaking markets; U.S. Librela down 26% to $41M; Solensia $17M (‑4%) .
U.S. therapeutic visits were down for three consecutive quarters, pressuring new patient starts in derm and OA; distributor inventory normalized by quarter‑end but remains below the low end of historical range .
Derm competition led to promotional pressure and “modest share loss” in U.S. derm; U.S. derm sales $306M grew just 1% with clinic softness, partially offset by Apoquel Chewable and retail strength .

Financial Results

Headline Metrics by Period (oldest → newest)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($B)	$2.388	$2.460	$2.400
GAAP Diluted EPS ($)	$1.50	$1.61	$1.63
Adjusted Diluted EPS ($)	$1.58	$1.76	$1.70
Adjusted Cost of Sales (% of revenue)	29.3%	26.3%	28.4%

Q3 2025 Actual vs S&P Global Consensus

Metric	Consensus	Actual	Result
Revenue ($B)	$2.405*	$2.400	Slight miss (~$0.005B)*
Primary/Adj EPS ($)	$1.622*	$1.70	Beat (~$0.08)*

*Values retrieved from S&P Global.

Segment & Species Revenue (Q3 2025 vs Q3 2024)

Category	Q3 2024 ($M)	Q3 2025 ($M)	y/y
Companion Animal	1,609	1,652	+3%
Livestock	758	725	-4%
Contract Mfg & Human Health	21	23	+10%
U.S. Revenue (Total)	1,346	1,322	-2%
- U.S. Companion Animal	1,068	1,069	~0%
- U.S. Livestock	278	253	-9%
International Revenue (Total)	1,021	1,055	+3%
- International Companion Animal	541	583	+8%
- International Livestock	480	472	-2%

Selected Franchise KPIs (Q3 2025)

KPI	Q3 2025	y/y
Global Simparica franchise revenue ($M)	356	+7%
Global key Dermatology revenue ($M)	469	+3%
Global OA pain franchise revenue ($M)	138	-11%
U.S. Simparica revenue ($M)	263	+2%
U.S. Dermatology revenue ($M)	306	+1%
U.S. Librela revenue ($M)	41	-26%
U.S. Solensia revenue ($M)	17	-4%
International Simparica revenue ($M)	93	+22% op
- Simparica Trio ($M)	41	+32% op
- Simparica ($M)	52	+15% op
International Dermatology revenue ($M)	162	+7% op
International OA pain revenue ($M)	80	-3% op
- Librela ($M)	62	-6% op
- Solensia ($M)	18	+9% op

Guidance Changes

Metric	Period	Previous Guidance (Aug 5, 2025)	Current Guidance (Nov 4, 2025)	Change
Revenue	FY 2025	$9.450–$9.600B	$9.400–$9.475B	Lowered
Organic Op Revenue Growth	FY 2025	6.5%–8.0%	5.5%–6.5%	Lowered
Adjusted Net Income	FY 2025	$2.825–$2.875B	$2.800–$2.840B	Lowered/Narrowed
Adjusted Diluted EPS	FY 2025	$6.30–$6.40	$6.30–$6.40	Maintained
Adjusted Cost of Sales (% rev)	FY 2025	~28.0%	~28.3%	Higher
Adjusted SG&A ($)	FY 2025	$2.355–$2.405B	$2.320–$2.360B	Lower
Adjusted R&D ($)	FY 2025	$0.690–$0.700B	$0.690–$0.700B	Maintained
Adj Interest & Other (net)	FY 2025	~ $170M	~ $175M	Higher
Effective Tax Rate (adj)	FY 2025	~21%	~20.5%	Lower

Rationale: Management cited macro/operational headwinds in H2 (U.S. therapeutic visits, competitive promotions), while maintaining adj EPS via cost discipline and tax rate reduction .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Q3 2025 Commentary	Trend
U.S. companion animal demand & clinic traffic	Q1: U.S. companion +8% with Simparica, derm, OA mAbs; livestock -21% on MFA divestiture . Q2: U.S. companion +9%; noted strong comps into H2 .	Therapeutic visits down three straight quarters, pressuring new starts; alternative channels (retail/home delivery) grew ~21% but clinic softness impacted derm/OA .	Deteriorating near term; channel mix shifting.
Dermatology competition	Q2: Key derm growth; competitive landscape noted but manageable .	Aggressive launch promotions led to modest U.S. share loss; International derm +7% despite competition .	Heightened competition near term; mgmt expects short‑lived promotions .
OA mAbs (Librela/Solensia)	Q1: OA mAbs contributed to growth . Q2: U.S. OA mAbs declined; still part of growth drivers internationally .	OA franchise -11% op; social media‑driven misperceptions hurt Librela; stabilization observed; aiming for 2026 return to growth .	Near‑term pressure; stabilization underway.
Parasiticides (Simparica)	Q1/Q2: Simparica Trio labeled expansions; strong growth across regions .	Global Simparica +7% op; Int’l +22% op; U.S. +2% against 27% comp .	Sustained growth; lapping tough U.S. comps.
Livestock	Q1: Int’l cattle and salmon vaccines strong . Q2: Int’l livestock +10% op .	Livestock +8–10% organic op; improved ceftiofur supply; poultry vaccine focus; Dectomax‑CA1 conditional approval in U.S. .	Durable growth, above market.
Diagnostics/AI	Earlier: expanding diagnostics footprint not highlighted;	Vetscan Opticell hematology analyzer expanded to EU; AI‑powered classification at point-of-care .	Building out diagnostics with AI.
Regulatory/approvals	Q2: Several label expansions across regions .	Health Canada approved Lenivia (3‑month canine OA); EU approved Portela (3‑month feline OA) .	Pipeline delivering annual major approvals.
U.S. commercial model	Not discussed in Q1/Q2.	U.S. field realignment to simplify/expand reach and efficiency .	Organizational optimization underway.

Management Commentary

CEO Kristin Peck: “While growth moderated in the third quarter in line with our expectations, we achieved significant regulatory milestones… With our manufacturing excellence, strong customer relationships and a robust pipeline, we are well positioned… to deliver sustainable growth and value” .
CFO Wetteny Joseph: “Adjusted gross margins of 71.6% grew 90 basis points… driven by the favorable impact of our MFA divestiture as well as benefits from price… Adjusted operating expense increased by a modest 1% operationally” .
On OA mAbs: “Our performance… has been affected by misperceptions amplified on social media… we are executing a focused multi‑pronged strategy to return Librela to growth… encouraged by recent trends showing signs of stabilization” — CEO .
On competition: “These [derm] impacts are typically short‑lived… we remain confident in the value our dermatology portfolio provides” — CFO .
On 2026: “We would expect a return to [Librela] growth in 2026… livestock has continued to demonstrate strength for us” — CFO .

Q&A Highlights

Guidance recalibration: Analysts pressed on why outlook changed after Q2 raise; management cited therapeutic visit declines, competitive promotions, and strong comps; emphasized these are near‑term dynamics and not read‑through to 2026 .
Derm competition: Management sees limited patient share gains by competitors; launch promotions are expected to be short‑lived; U.S. Merck timing uncertain; European competitor launches factored into Q4 .
OA mAb launch learning: For Lenivia/Portela, Zoetis plans specialist‑led early experience, deeper education, and Phase 4 data to reinforce benefit‑risk; expects launches to expand markets and support compliance in 2026 .
Channel inventory: Distributor inventory normalized by quarter‑end but remains below low end of historical range; alternative channels (retail/home delivery) growing strongly .

Estimates Context

Q3 2025: EPS beat and revenue roughly in line/slightly below consensus — Primary/adjusted EPS $1.70 vs $1.6216 consensus; revenue $2.400B vs $2.405B consensus; 12 EPS and 10 revenue estimate contributors* .
Implications: Lowered revenue guidance and higher adjusted cost of sales percentage may drive modest outer‑year revenue and margin estimate trims; adjusted EPS range maintained, aided by lower effective tax rate (20.5%), which may cushion EPS estimates .