Eli Lilly Q3 2026 Earnings: Revenue Up 39%, EPS Up 16% After a $4.2B Acquired R&D Charge

Eli Lilly's revenue rose 39% in the third quarter of 2026, to $24.4 billion, but earnings per share rose only 16%, to $7.22. The difference is one line: Lilly expensed $4.2 billion of acquired in-process research and development, the price of drug candidates it bought from other companies, against $656 million a year earlier. That single quarter's charge is larger than Lilly's acquired-R&D expense in any full year since at least 2021. Mounjaro and Zepbound, two-thirds of revenue, are paying for the next generation of the pipeline, and under US accounting most of that purchase hits the income statement at once.

Mounjaro and Zepbound carried a 39% revenue gain​

Revenue was $24,397 million against $17,601 million a year earlier (earnings release). Mounjaro, Lilly's tirzepatide for type 2 diabetes, rose 65% to $10,723 million, and Zepbound, the same molecule for obesity, rose 49% to $5,352 million. Together they were 66% of the quarter's revenue, by our computation. Lilly notes that revenue also included about $900 million of benefits that will not repeat in the same form, primarily $410 million of Jardiance milestones ("no further milestones remain") and favorable adjustments to rebate and discount estimates.

Cost of sales was $3,933 million, 16.1% of revenue against 17.1% a year earlier. Research and development rose 23% to $4,247 million and marketing, selling and administrative expense rose 14% to $3,125 million, both slower than revenue.

The treemap shows the quarter's costs: R&D at $4,247 million and acquired in-process R&D at $4,181 million are now the two largest lines, ahead of cost of sales. The ledger keeps acquired IPR&D in its own account, Expenses:AcquiredIPRD, rather than inside research and development, because it is the cost of buying programs rather than running them.

A quarter's acquired-R&D charge bigger than any full year​

When a company buys an unapproved drug candidate without buying a whole business, US GAAP generally treats the purchase price as research and development expense immediately, because the program has no proven alternative future use. Buying an entire company instead creates goodwill and intangible assets on the balance sheet. Lilly did both this year, and the ledger shows the two paths side by side:

Each row is one reported period: revenue as a negative credit, acquired IPR&D as a debit and Equity:Adjustments as net income. Acquired IPR&D was $874.9 million for all of 2021, $3,799.8 million in 2023 and $2,910 million in 2025. It was $2,776 million in the second quarter of 2026 alone and $4,181 million in the third. The release puts the third-quarter charge at $4.57 of EPS, against $0.71 a year earlier.

The other path, buying whole companies, landed on the balance sheet. Intangible assets were $6,521 million at the end of 2025 and $18,084 million on September 30, and goodwill rose to $9,874 million from $5,898 million; the 10-Q shows $10,692 million of cash paid for acquisitions and $7,548 million for in-process R&D in the first nine months. Those intangibles will be amortized over years; the IPR&D was expensed at once.

What the charge hides, and what it doesn't​

Adding the acquired IPR&D back to income before taxes gives $12,587 million against $7,889 million a year earlier, about 60% growth before tax, by our computation. That is closer to how fast the commercial business is growing than the 16% EPS figure, but it is not a reason to ignore the charge: Lilly has recorded acquired IPR&D every year in the ledger and spent cash on it, and buying pipeline is a recurring cost of staying ahead once Mounjaro and Zepbound mature. Lilly's own non-GAAP EPS of $7.48 keeps the IPR&D charge in.

The franchise generates the cash for it. Operating cash flow was $27,420 million in the first nine months, enough to cover $8,437 million of property and equipment, $18,240 million of acquisitions and IPR&D purchases together, $4,635 million of dividends and $4,334 million of share repurchases with help from $8,941 million of new long-term debt.

What to watch in the fourth quarter​

• The raised guide. Lilly raised its 2026 revenue range by $5.5 billion at the midpoint to $91.0 billion to $92.0 billion. Its non-GAAP EPS range of $35.00 to $36.00 already absorbs the $4.57 third-quarter IPR&D charge; any fourth-quarter deal adds to it.
• Without the one-offs. The $900 million of milestones and rebate-estimate adjustments flattered the third quarter; Jardiance milestones will not recur.
• Pricing and coverage. Watch the sales-rebates-and-discounts liability, $24,170 million on September 30 against $17,382 million in December, as the measure of how much of list price Lilly gives back.
• Debt. Long-term debt was $46,986 million, up from $15,346 million at the end of 2021; the buying spree is partly borrowed.