Johnson & Johnson reported second-quarter 2026 sales of $25.31 billion, up 6.6%. It is the first quarter above $25 billion in the company's history; the previous record was $24.56 billion. It is also $270 million short of the roughly $25.6 billion we said yesterday the $100 billion year needed from each of the remaining three quarters — and J&J raised the target anyway, which moves the shortfall onto the second half. The two quarters left now need about $25.9 billion each.
Underneath the record, the GAAP income statement did this:
| 2Q25 | 2Q26 | Change | |
|---|---|---|---|
| Reported sales | $23,743M | $25,310M | +$1,567M |
| Gross profit | $16,115M | $17,259M | +$1,144M |
| Earnings before taxes | $6,491M | $6,747M | +$256M |
| Provision for taxes | $954M | $1,213M | +$259M |
| Net earnings | $5,537M | $5,534M | −$3M |
| Diluted EPS | $2.29 | $2.27 | −0.9% |
An extra $1.57 billion of revenue, an extra $1.14 billion of gross profit, and three million dollars less net income. The tax line alone consumed the entire pre-tax gain — the effective rate went from 14.7% to 18.0%, and the provision rose by $259 million against a pre-tax increase of $256 million.
What we learned
- Excluding STELARA, the other 96% of Innovative Medicine grew over 14%, not 6.8%. STELARA is now only 4% of the segment, EVP Jennifer Taubert said on the call, so the 760-basis-point drag the release reports is concentrated in a shrinking sliver of the business.
- TREMFYA had its first $2 billion quarter, up more than 70%. Taubert framed it as the heir to STELARA's old IBD franchise, where STELARA once drew over 75% of sales, arguing TREMFYA can match or beat that share.
- Net debt is about $28 billion, on $21 billion of cash against $49 billion of debt. CFO Joseph Wolk gave both sides on the call; the article's free cash flow and guidance figures say nothing about the balance sheet this quarter added $1.57 billion of revenue against.
- 400 basis points of MedTech's shortfall was a China inventory dynamic, not demand. EVP Tim Schmid said global MedTech growth would have topped 7% without it, against the 3.6% operational growth the segment actually reported.
Adjusted earnings tell a different, and also true, story
| 2Q25 | 2Q26 | Change | |
|---|---|---|---|
| Net earnings, GAAP | $5,537M | $5,534M | −0.1% |
| Adjusted net earnings | $6,699M | $7,081M | +5.7% |
| Adjusted diluted EPS | $2.77 | $2.90 | +4.7% |
Against the $2.84 consensus — which is set on this adjusted line, not the GAAP one — $2.90 is a 2.1% beat.
The bridge from $5,534 million to $7,081 million is worth reading item by item, because it is where the flat GAAP quarter goes:
- Intangible asset amortization $1,245M. The largest single item, and it recurs every quarter. A pharmaceutical company that buys assets carries this forever; excluding it is standard practice and it is still $1.2 billion of real purchase price.
- Restructuring-related $276M, of which $200M is a brand-new supply-chain program in Innovative Medicine, announced with this release. Estimated total cost $650–750 million, running to fiscal 2029.
- Orthopaedics separation-related $258M in the quarter, $377 million year to date — the cost of the separation J&J is executing, on top of a legacy Orthopaedics restructuring program that finishes in the fourth quarter at about $1 billion all-in.
- Litigation-related $267M, against $57 million a year earlier.
- Gains on securities −$213M, the one item running the other way.
Three of those five are programs with announced end dates in 2026, 2026 and 2029 respectively. The amortization is not.
The six-month GAAP number is unreadable without its footnote
Year-to-date net earnings fell 34.9%, to $10,769 million from $16,536 million. Nothing in the business did that. The first half of 2025 contained a $6,909 million litigation credit — a reserve reversal, booked as income — which is why the first quarter of 2025 shows GAAP EPS of $4.54 against $2.14 this March. On the adjusted line, first-half net earnings rose 2.2%.
A one-off credit in a prior period makes the current period look like a collapse. The arithmetic is fine; the comparison is the trap, and it will be there again in the third-quarter and full-year prints.
Where the growth came from
| 2Q26 | 2Q25 | Reported | Operational | |
|---|---|---|---|---|
| Innovative Medicine | $16,384M | $15,202M | +7.8% | +6.8% |
| MedTech | $8,926M | $8,541M | +4.5% | +3.6% |
| U.S. | $14,533M | $13,544M | +7.3% | +7.3% |
| International | $10,777M | $10,199M | +5.7% | +3.4% |
Currency added 1.0 point to the reported figure — and all of it internationally, where reported growth of 5.7% was operational growth of 3.4%. The U.S., where there is no translation, grew 7.3% both ways and supplied $989 million of the $1,567 million increase.
STELARA still cost Innovative Medicine about 760 basis points of growth, and the segment grew 6.8% operationally regardless — driven by DARZALEX, CARVYKTI, TECVAYLI and RYBREVANT/LAZCLUZE in oncology, TREMFYA in immunology, and SPRAVATO and CAPLYTA in neuroscience. Absorbing a 7.6-point biosimilar drag and still compounding at 6.8% is the most impressive fact in the release, and it is not the one in the headline.
MedTech grew 3.6% operationally, roughly half Innovative Medicine's rate, with U.S. growth of 3.9% the weakest line in the geographic table.
The guidance moved twice
| ($B except EPS) | July | April |
|---|---|---|
| Reported sales, midpoint | $101.1 | $100.8 |
| Adjusted EPS, midpoint | $11.68 | $11.55 |
| Adjusted operational EPS, midpoint | $11.58 | $11.40 |
Adjusted EPS went up $0.13; adjusted operational EPS — the currency-neutral one — went up $0.18. The operational raise being larger than the reported raise is the tell that the underlying business, not the euro, did the work; J&J also moved its euro assumption from $1.17 to $1.15, which takes translation help out of the reported line.
Free cash flow for the first half was about $8.7 billion, against $6.2 billion a year earlier — the company's own estimate as of the release date, on operating cash flow of $11.13 billion less $2.37 billion of capital expenditure.
What to watch next quarter
- Whether the $25 billion quarter repeats. The full-year midpoint of $101.1 billion needs roughly $25.9 billion in each of the remaining two quarters. This one was a record; the next two have to beat it.
- The tax rate. 18.0% against 14.7% a year ago cost the entire pre-tax gain this quarter. If it stays there, GAAP earnings stay flat on growing revenue.
- The STELARA drag in basis points. 760 this quarter. The rate at which that number shrinks is the schedule for Innovative Medicine's growth re-accelerating.
- MedTech's operational growth against 3.6%. Two consecutive quarters near that level, with the Orthopaedics separation underway, makes the segment the question rather than the ballast.
- The size of the supply-chain restructuring charge. $200 million landed immediately out of a $650–750 million program running to 2029. How front-loaded the rest is determines how long the GAAP-to-adjusted wedge stays this wide.
All figures are as Johnson & Johnson reported them for the quarter ended June 28, 2026, in its earnings release and supplementary schedules of July 15, 2026, and are captured on our June-quarter page. Prior-period figures, the April guidance and the $6,909 million first-half 2025 litigation credit come from the same documents. Effective tax rates, the $989 million U.S. contribution to the sales increase, the $25.9 billion implied for each remaining quarter and the 2.1% beat against consensus are our arithmetic on disclosed figures. Operating cash flow and capital expenditure for the first half are from the quarterly report; the roughly $8.7 billion free cash flow figure is the company's own estimate as of the release date and may be restated. The $2.84 EPS consensus is press-reported from third-party estimate feeds this site does not store or verify, and is set on J&J's adjusted line rather than the GAAP one. No price, valuation or rating figure appears above.
