Johnson & Johnson shares fell sharply Tuesday even after the healthcare giant beat Wall Street’s third-quarter earnings expectations and raised its full-year outlook, as another disappointing quarter from its MedTech business overshadowed stronger pharmaceutical growth.
The stock closed down about 5.7% on October 13 after falling more than 6% earlier in the session. Johnson & Johnson reported third-quarter revenue of $25.4 billion, up 5.9% from a year earlier and slightly above Wall Street expectations of roughly $25.3 billion. Adjusted earnings were $2.59 per share, five cents ahead of the consensus estimate.
Those headline numbers were solid, but the composition of the quarter was less convincing. Innovative Medicine continued to carry the company while MedTech, a business Johnson & Johnson has positioned as an important long-term growth engine, missed investor expectations for a second consecutive quarter.
MedTech Misses Again
MedTech sales increased just 2.5% to $8.64 billion, below the roughly $8.71 billion analysts had expected. Growth was supported by cardiovascular products, including electrophysiology and Shockwave, along with contact lenses and trauma products, but international weakness limited the division’s performance.
Chief Financial Officer Joe Wolk said pressure outside the United States included healthcare budget constraints in the Middle East, austerity measures in Europe and pricing challenges in China. Management acknowledged that the performance fell short of its own expectations, particularly in cardiovascular and surgery outside the U.S., and said improving MedTech execution is a priority for the fourth quarter.
That weakness helps explain why investors looked past the earnings beat. Johnson & Johnson is increasingly concentrating its portfolio around faster-growing pharmaceuticals and medical technology, making the pace of MedTech expansion more important after the separation of its consumer-health business. Another quarter of low-single-digit growth raises questions about how quickly recent acquisitions and new products can translate into stronger segment-level performance.
The company is also moving toward a separation of its DePuy Synthes orthopedics business, with management maintaining its target of completing the transaction around the middle of 2027. Wolk said a spin remains the company’s preferred path as Johnson & Johnson shifts resources toward businesses with stronger long-term growth prospects.
Pharmaceutical Growth Provides the Counterweight
Innovative Medicine delivered a much stronger quarter, with sales rising 7.7% to $16.76 billion. Tremfya was one of the largest contributors, with revenue climbing 68% to roughly $2.4 billion as the immunology drug expands into inflammatory bowel disease indications. That exceeded analysts’ expectations of about $2.2 billion.
The gains helped offset the continuing erosion of Stelara following the arrival of biosimilar competition. Stelara sales dropped 54% to $716 million, although that was still ahead of Wall Street’s roughly $591 million estimate. Darzalex revenue increased about 16% to $4.24 billion, but came in below expectations of approximately $4.4 billion.
Johnson & Johnson’s ability to replace declining Stelara revenue has been one of the more important questions surrounding its pharmaceutical portfolio. Third-quarter results showed that newer products including Tremfya, Carvykti, Rybrevant/Lazcluze, Spravato and Caplyta are increasingly helping absorb that loss, allowing the Innovative Medicine business to maintain strong growth despite one of the company’s largest drugs facing competitive pressure.
Guidance Rises, but Only Modestly
Management increased its 2026 outlook following the quarter. Johnson & Johnson now expects reported sales of $101.0 billion to $101.4 billion, putting the midpoint at $101.2 billion compared with $101.1 billion previously. Adjusted EPS is projected at $11.05 to $11.15, raising the midpoint to $11.10 from $11.04.
Operational sales guidance was also tightened and lifted slightly, with the company forecasting $100.5 billion to $100.9 billion and growth of 6.7% to 7.1%. The higher outlook confirms that Johnson & Johnson still expects a strong finish to 2026, but the relatively small increase was not enough to outweigh concerns about the MedTech division.
Cash generation remains substantial. Johnson & Johnson said it produced more than $6 billion of free cash flow during the third quarter and continues to expect approximately $21 billion for the full year. The company finished the quarter with about $17 billion in cash and marketable securities against roughly $45 billion of debt, leaving net debt near $28 billion.
GAAP earnings were distorted by several large special items. Reported net income fell to $210 million, or $0.09 per share, from $5.15 billion, or $2.12 per share, a year earlier. The quarter included a charge associated with Johnson & Johnson’s proposed $5.5 billion resolution of ovarian talc litigation, along with costs tied to its Firefly Bio acquisition and collaboration with Sail Biomedicines. The talc agreement remains conditioned on participation by at least 95% of remaining ovarian claimants, a threshold management said it is trending toward achieving.
The next test is whether MedTech can begin closing the gap between Johnson & Johnson’s portfolio ambitions and its reported growth. Management expects improvement in the fourth quarter, while new products including the OTTAVA robotic surgery platform and additional cardiovascular launches could eventually strengthen the division. Until that acceleration becomes visible in reported sales, investors may continue placing more weight on MedTech execution than on incremental increases to companywide guidance.