Animal health company Zoetis (NYSE: ZTS) missed Wall Street’s revenue expectations in Q1 CY2026 as sales only rose 1.9% year on year to $2.26 billion. The company’s full-year revenue guidance of $9.82 billion at the midpoint came in 0.8% below analysts’ estimates. Its non-GAAP profit of $1.53 per share was 5.3% below analysts’ consensus estimates.
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Zoetis (ZTS) Q1 CY2026 Highlights:
- Revenue: $2.26 billion vs analyst estimates of $2.31 billion (1.9% year-on-year growth, 2.1% miss)
- Adjusted EPS: $1.53 vs analyst expectations of $1.62 (5.3% miss)
- Adjusted EBITDA: $789 million vs analyst estimates of $1.05 billion (34.9% margin, 24.6% miss)
- The company dropped its revenue guidance for the full year to $9.82 billion at the midpoint from $9.93 billion, a 1.1% decrease
- Management lowered its full-year Adjusted EPS guidance to $6.93 at the midpoint, a 1.8% decrease
- Operating Margin: 33.5%, down from 38.1% in the same quarter last year
- Market Capitalization: $46.77 billion
Company Overview
Originally spun off from Pfizer in 2013 as the world's largest pure-play animal health company, Zoetis (NYSE: ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Zoetis’s 6.3% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the healthcare sector, but there are still things to like about Zoetis.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Zoetis’s recent performance shows its demand has slowed as its annualized revenue growth of 4.3% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Zoetis’s revenue grew by 1.9% year on year to $2.26 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, similar to its two-year rate. This projection is above average for the sector and indicates its newer products and services will help sustain its recent top-line performance.
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Adjusted Operating Margin
Zoetis’s adjusted operating margin has more or less stayed the same over the last 12 months , averaging 38.1% over the last five years. This profitability was elite for a healthcare business thanks to its efficient cost structure and economies of scale.
Looking at the trend in its profitability, Zoetis’s adjusted operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
In Q1, Zoetis generated an adjusted operating margin profit margin of 33.5%, down 6.4 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Zoetis’s EPS grew at 9.2% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its adjusted operating margin didn’t improve.
We can take a deeper look into Zoetis’s earnings quality to better understand the drivers of its performance. A five-year view shows that Zoetis has repurchased its stock, shrinking its share count by 11.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
In Q1, Zoetis reported adjusted EPS of $1.53, up from $1.48 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Zoetis’s full-year EPS of $6.47 to grow 10.3%.
Key Takeaways from Zoetis’s Q1 Results
We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 13% to $96.81 immediately following the results.
Zoetis’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
