Revenue Growth Remains Solid
MRK grew total revenue to $16.29B in Q1 FY2026, up 4.9% from $15.53B in Q1 FY2025, indicating continued underlying business momentum despite the headline net loss.
Source: 10-Q Income Statement
Computed from published fixed rules, not a model's judgement — though one input, the count of high-severity risks, comes from the AI analysis below.
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AI Takeaway
MRK reported Q1 FY2026 revenue of $16.3B (+4.9% YoY), but swung to a net loss of -$4.24B driven by a massive $12.6B R&D expense surge (+247.7% YoY), likely reflecting a large in-process R&D charge from an acquisition, while operating cash flow improved significantly to $3.9B.
Revenue
$16.29B
+4.87% YoY
EPS (Diluted)
-$1.72
-185.57% YoY
Source: SEC XBRL
Merck & Co (MRK) reported Q1 FY2026 revenue of $16.29B, up 4.9% year over year. Operating cash flow was $3.92B, up 56.7% year over year. MRK's fiscal Q1 FY2026 corresponds to calendar Q1 2026.
Last 4 quarters: 4 beats
| Quarter | Actual EPS (USD) | Consensus (USD) | Result |
|---|---|---|---|
| Jun 2026 | -0.13 | -0.27 | Beat +52.3% |
| Mar 2026This filing | -1.28 | -1.52 | Beat +16.0% |
| Dec 2025 | 2.09 | 2.03 | Beat +3.0% |
| Sep 2025 | 2.68 | 2.37 | Beat +13.1% |
Adjusted (non-GAAP) EPS of -$1.28 versus the -$1.52 analyst consensus — a +16.0% beat for Mar 2026. Analyst consensus is quoted on the adjusted (non-GAAP) basis the street uses. GAAP diluted EPS for this quarter was -$1.72.
Compiled by AI from this SEC filing
MRK grew total revenue to $16.29B in Q1 FY2026, up 4.9% from $15.53B in Q1 FY2025, indicating continued underlying business momentum despite the headline net loss.
Source: 10-Q Income Statement
R&D expense surged to $12.59B (+247.7% YoY from $3.62B), almost certainly reflecting a large in-process R&D (IPR&D) charge associated with a business acquisition or licensing deal, which caused the company to report a net loss of -$4.24B versus net income of $5.08B in the prior-year period.
Source: 10-Q Income Statement
Cost of revenue rose 22.7% YoY to $4.20B versus $3.42B, outpacing revenue growth of 4.9% and compressing gross profitability, suggesting product mix shifts or higher manufacturing/royalty costs.
Source: 10-Q Income Statement
Despite the accounting net loss, operating cash flow improved 56.7% YoY to $3.92B from $2.50B, suggesting the R&D charge is largely non-cash (IPR&D write-off) and the underlying business continues to generate healthy cash.
Source: 10-Q Cash Flow Statement
Long-term debt jumped 39.4% YoY to $46.67B from $33.48B, while cash fell 38.3% to $5.33B, and investing cash outflows surged to -$10.21B, all consistent with a major acquisition or licensing transaction completed in Q1 FY2026.
Source: 10-Q Balance Sheet & Cash Flow Statement
Compiled by AI from this SEC filing · 3 high, 2 medium, 0 low
The apparent large acquisition driving the $12.6B R&D charge and $10.2B investing outflow creates significant integration risk. If the acquired pipeline assets fail in clinical trials or do not achieve commercial success, the company may face further impairments or write-downs on top of the already-recognized charge.
Source: 10-Q Income Statement & Cash Flow Statement
Long-term debt surged to $46.67B (+39.4% YoY) while cash declined to $5.33B (-38.3% YoY), materially increasing the company's leverage ratio. This reduces financial flexibility for future investments, share buybacks, or weathering revenue downturns, and increases interest expense burden.
Source: 10-Q Balance Sheet
Cost of revenue grew at 22.7% YoY, nearly 4.6x the rate of revenue growth (4.9%), indicating meaningful gross margin compression. If this trend continues, it could erode profitability even as top-line growth continues.
Source: 10-Q Income Statement
The substantial capital deployed in Q1 FY2026 (evidenced by the $10.2B investing outflow) suggests MRK is betting heavily on new pipeline assets. Pharmaceutical R&D carries inherent high failure rates, and any clinical setbacks could impair the value of these investments.
Source: 10-Q Cash Flow Statement
Cash and equivalents fell 38.3% to $5.33B, while the current ratio stands at only 1.30x, leaving limited liquidity cushion. With $26.95B in current liabilities and ongoing capital commitments, any unexpected cash needs could pressure the balance sheet.
Source: 10-Q Balance Sheet
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue $B | 16.29 $B | 15.53 $B | +4.87% |
Cost of Revenue $B | 4.20 $B | 3.42 $B | +22.70% |
Net Income $B | -4.24 $B | 5.08 $B | -183.48% |
EPS (Basic) $ | -1.72 $ | 2.01 $ | -185.57% |
EPS (Diluted) $ | -1.72 $ | 2.01 $ | -185.57% |
R&D Expense $B | 12.59 $B | 3.62 $B | +247.75% |
SG&A Expense $B | 2.70 $B | 2.55 $B | +5.80% |
Answers draw on this SEC filing and the data on this page
Merck reported a net loss in Q2 FY2026 due to a $5.7 billion acquisition charge, even as revenue grew 5% to $16.6 billion driven by Keytruda and Winrevair.
Merck (MRK) delivered modest revenue growth of 1.3% to $65.0B in FY2025, with net income rising 6.6% to $18.3B and EPS up 8.0% to $7.28, though operating cash flow declined 23.3% and long-term debt surged 35.7% amid significant investing activity.
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