Company Overview ELI Lilly & Co is a global pharmaceutical company focused on developing and commercializing specialty medicines and biologics, and its recent financial profile shows strong margin expansion and rapid per‑share earnings growth alongside sizable investing outlays. Operating Performance & Key Metrics The company’s operating performance has been robust: diluted EPS rose to $28.11
ELI Lilly & Co is a global pharmaceutical company focused on developing and commercializing specialty medicines and biologics, and its recent financial profile shows strong margin expansion and rapid per‑share earnings growth alongside sizable investing outlays.
The company’s operating performance has been robust: diluted EPS rose to $28.11 most recently while revenue per share reached $72.48, with year‑over‑year revenue‑per‑share growth about 44.7% and one‑year diluted EPS growth reported at 127.6%—evidence of accelerating per‑share economics (EPS Diluted & Revenue per Share, Revenue & EPS Growth).
Profitability is pronounced: gross margin was 83.0%, operating margin 66.0% and net profit margin 31.7% in the latest periods, and trailing twelve‑month net income reached $25.28B as revenue climbed to $19.29B in the most recent quarter (Profit Margin Trends, Revenue & Net Income).
Cash generation is meaningful as well, with a free cash flow margin of about 13.8% and operating cash flow TTM of $16.81B (Strategic Capital Allocation).
Areas of concern include a widening gap between accounting earnings and cash flow: net income TTM is $25.28B while operating cash flow TTM is $16.81B, leaving a material earnings‑to‑cash gap that warrants monitoring (Earnings Quality Analysis).
Investing cash flow has become significantly outflow‑weighted, moving to a TTM investing cash flow of –$10.97B after peaking near –$11.48B, which reflects heavy capital deployment and inorganic activity that could pressure free cash conversion if sustained (Strategic Capital Allocation).
Longer‑term variability in returns is also notable: quarterly ROE has surged to 81.0% most recently but the series has been highly volatile historically (a trough of -1.2% in 2018 and a prior spike to 319.1%), so persistent high ROE should be tracked in context (Return on Equity (ROE)).
Key fundamentals to watch going forward are convergence between net income and operating cash flow (current TTM gap $8.47B), the level and persistence of investing cash outflows (TTM –$10.97B), continued trends in revenue per share and diluted EPS ($72.48 and $28.11 most recently), and margin durability (gross 83.0%, net 31.7%). Also monitor the company’s reported P/E trajectory (most recent 32.7x) as earnings normalize and cash conversion evolves (Price-to-Earnings (PE) Ratio Trend, Revenue & Net Income).
The foundation of business quality and long-term value creation
ELI LILLY & Co's revenue shows a clear multi-year upward trend, rising from mid-single-digit billions in 2019 to a much higher run rate by 2025. Revenue climbed through 2024 and accelerated in 2025, moving sequentially from $12.73B in 2025-Q1 to $15.56B in 2025-Q2, $17.60B in 2025-Q3 and $19.29B in 2025-Q4, indicating stronger top-line growth in the most recent quarters.
Net income has been more variable historically, including a small loss of $57.4M in 2023-Q3, followed by recovery beginning in 2024. After a dip to $2.76B in 2025-Q1, net income increased through 2025 and into early 2026, reaching $6.64B in 2025-Q4 and $7.40B in 2026-Q1. The latest reported revenue was $19.29B for the quarter ended 2025-12-31, and the latest reported net income was $7.40B for the quarter ended 2026-03-31.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Revenue composition by disclosure category for the latest period
- Sale of human pharmaceutical products across therapeutic areas, including cardiometabolic health, oncology, immunology, and neuroscience (product names disclosed include Basaglar, Humalog family, Humulin family, Jardiance, Mounjaro/Zepbound, Trulicity, Cyramza, Erbitux, Inluriyo, Jaypirca, Retevmo, Tyvyt, Verzenio, Ebglyss, Olumiant, Omvoh, Taltz, Emgality, and Kisunla).
- Revenues from collaborations, licensing, and other arrangements with third parties (examples of collaborators named in the filing include Boehringer Ingelheim, Innovent Biologics, Inc., Almirall S.A., and Incyte Corporation).
- Direct-to-patient sales through the company’s digital health care platform (LillyDirect), including delivery of medicines dispensed by third-party pharmacies and patient support tools available on the platform.
- Contractual revenues and transactions tied to promotional, distribution, and co-marketing arrangements with other pharmaceutical companies and commercial partners.
- Customers and account relationships explicitly include wholesalers, pharmacy benefit managers, insurers, plan sponsors, employers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.
- Primary professional customers addressed through sales representatives and account managers include physicians and other healthcare professionals.
- End customers include patients reached through third-party pharmacies, direct-to-patient channels (LillyDirect), and direct-to-consumer advertising and information channels in the U.S.
- The company also transacts with government purchasers and public payers, with specific reference to national reimbursement processes in certain countries.
- Products are manufactured and distributed through facilities located in the United States (including Puerto Rico), Europe, and Asia.
- Products are sold in many countries worldwide and the company adapts marketing and distribution by country to meet local needs and regulations.
- Explicit reference to market access activities in specific jurisdictions includes efforts to obtain inclusion on national reimbursement lists and interactions with regulators and payers in the U.S., the EU, Japan, and China.
- In the U.S., distribution is primarily through wholesalers that serve pharmacies, physicians and other healthcare professionals, and hospitals.
- The company maintains its own sales organizations in many countries and also utilizes third parties for commercial sales operations, including distribution and promotion arrangements.
- Promotional channels include employee or contracted sales representatives engaging with healthcare professionals, online and other promotional channels, distribution of product information and samples to physicians, medical meeting exhibits, direct-to-consumer advertising in the U.S., and company websites and social media.
- LillyDirect is used for direct-to-patient delivery of select medicines dispensed by third-party pharmacies and for patient support tools; the platform is explicitly described as growing and as part of new partnerships and tools to expand access.
- Account managers explicitly service wholesalers, PBMs, insurers, plan sponsors, employers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.
- Certain products are marketed in arrangements with other pharmaceutical companies under collaboration or co-promotion agreements.
- Revenue is explicitly described as arising from direct product sales and from collaboration and other arrangements (filing refers to "direct product and/or collaboration and other revenues").
- Commercial arrangements with healthcare intermediaries often include contractual discounts or rebates on products, which are described as part of the company’s ongoing arrangements with wholesalers, PBMs, and others.
- Sales occur through ongoing distribution channels (wholesalers, third-party commercial operations, company sales organizations) and through an expanding direct-to-patient channel (LillyDirect), indicating multiple revenue-generating transaction types disclosed in the filing.
- The company discloses dependence on a relatively small number of named products for a significant portion of total revenue; the filing names specific products that materially contribute to revenues (examples include Mounjaro/Zepbound, Verzenio, Trulicity, Taltz, and Jardiance).
- The filing identifies certain named U.S. wholesale distributors (McKesson Corporation, Cencora, Inc., and Cardinal Health, Inc.) as accounting for a significant portion of consolidated revenue, and notes that no other single customer exceeded a specified reporting threshold.
- Reliance on third-party suppliers and contract manufacturers is explicitly described, including single-source procurement for certain materials and dependence on suppliers in particular geographies (the filing explicitly references reliance on China-based suppliers for portions of the supply chain).
- Manufacturing and supply depend on company-owned facilities in the U.S., Europe, and Asia and on third-party manufacturing and finishing operations; regulatory inspection outcomes at third-party sites are identified as factors that can delay or prevent product approvals or launches.
- The company’s commercial performance is explicitly dependent on payer coverage and reimbursement decisions, formulary placement, negotiated discounts and rebates, and other actions by public and private payers that can restrict access or reduce net prices.
- Intellectual property protection, regulatory approvals and ongoing compliance with global regulatory regimes are identified as critical dependencies for commercialization and for maintaining market exclusivity for products.
Analyzing long-term margin stability and competitive positioning
ELI LILLY & Co's margins show a clear upward trend over the period shown. Gross margin climbed gradually from the mid‑70s in 2021 to the low‑80s by the end of 2025, while operating margin moved from the low‑50s into the mid‑60s. Net profit margin was more variable—falling into the mid‑teens around late 2023—then recovered through 2024 and 2025, rising sharply in the most recent quarters.
Recent quarters emphasize that momentum: from 2025‑03 to 2025‑12, gross margin rose from 81.7% to 83.0%, operating margin from 63.1% to 66.0%, and net margin from 22.7% to 31.7%. The most recent gross margin was 83.0%, the most recent operating margin was 66.0%, and the most recent net profit margin was 31.7%.
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Eli Lilly Co converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
ELI LILLY & Co's trailing twelve‑month net income and operating cash flow have both risen over the past year, but net income has accelerated faster. Net income climbed from about $11.11B TTM at 2025-03-31 to $25.28B TTM at 2026-03-31, while operating cash flow increased from $9.32B TTM at 2025-03-31 to $16.81B TTM at 2025-12-31. The most pronounced inflection occurred through 2025 when both metrics stepped up, with net income outpacing operating cash flow and widening the earnings-to-cash gap.
The gap between reported earnings and cash generation remains material in the most recent data: net income TTM is substantially higher than operating cash flow TTM, despite operating cash flow also showing a meaningful increase late in 2025. The most recent Net Income (TTM) was $25.28B. The most recent Operating Cash Flow (TTM) was $16.81B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
ELI LILLY & Co's return on equity has been elevated and trending higher over the past year. Quarterly ROE rose from 70.5% at 2025-03 to 75.5% (2025-06), 77.4% (2025-09), 77.8% (2025-12) and 81.0% (2026-03), reflecting steady sequential gains after a recovery that began in mid-2024 from levels in the high 40s and 50s percent.
Over the longer run, ROE has been highly variable: mid‑teens in the 2013–2016 period, a trough of −1.2% in June 2018, a pronounced spike in 2019 (peaking at 319.1% on 2019-12) and elevated but fluctuating readings through 2020–2021 before moderating and recovering to the current high levels. The most recent Return on Equity was 81.0%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ELI LILLY & Co's trailing twelve-month operating cash flow has moved sharply higher over the last year. After a trough near $3.68B in 2024-03, it climbed steadily through 2024 and accelerated in 2025, rising from $9.32B in 2025-03 to $16.06B in 2025-09 and reaching $16.81B in 2025-12. The most notable inflection is the large step-up between early 2025 and mid‑2025.
Investing cash flow has been consistently negative and has become substantially more outflow‑weighted since 2022, moving from single-digit negative amounts (around -$3B) to a deepening outflow that peaked at -$11.48B in 2025-03 and remains near -$11B–$10B (most recently -$10.97B).
Financing cash flow shifted from sustained net outflows in 2021–2022 to net inflows in late 2023–2024 (peaking at $5.36B in 2024-06), then moved back toward net outflow in 2025 and is -$2.21B in 2025-12.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
Over the most recent year, ELI LILLY & Co's trailing twelve-month P/E has moved lower overall: it was 66.9x on , fell to 50.8x on , and 37.3x on . It ticked up to 46.8x on , then declined to 32.7x on . The last four quarters show a downward trajectory with a brief uptick in Q4 2025 before the most recent drop.
Historically, the P/E reached a peak of 112.0x on and stayed above 95x through , followed by a multi-quarter decline toward current levels. Earlier periods in the 2010s show substantially lower P/Es (single digits to the low 30s). The most recent Price-to-Earnings (P/E) ratio was 32.7x as of .
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.