AbbVie 10-Qquarter ended 2026-03-31
Skyrizi and Rinvoq more than offset Humira’s decline, but contingent-consideration expense pulled GAAP earnings down despite operating growth.
Filed 2026-05-08 12:28 ET
Key figures · Q1 FY2026 · period ended 2026-03-31
- Revenue$15.0BYoY +12.4%QoQ −9.7%
- Operating income$4.0BYoY +6.9%QoQ −12.2%
- Net income$695.0MYoY −46.0%QoQ −61.7%
- Total assets$136.5BYoY +0.2%QoQ +1.9%
- Total debt$72.9B1YoY +4.2%QoQ +7.9%
How total debt adds up Long-term debt $64,532M + Current portion of long-term debt $8,326M + Short-term borrowings $0M Total debt $72,858M Lines as the filer presents them on its balance sheet.
- Shareholders' equity−$6.7BYear ago $1.4BQoQ −103.5%
- Tangible book value−$93.1BYoY −0.8%QoQ −1.7%
Notes (1)
- Total debt: Long-term debt and finance leases including the current portion, plus short-term borrowings.
How this filing reads
- Health−0.2Quarterly operating cash flow was $3.83B, while debt was $72.6B and capital returns exceeded free cash flow.
- Momentum+0.6Revenue rose 12.4% and operating earnings 6.9%, while GAAP net earnings fell 46.0%.
- Outlook−0.1The agreement lowers Medicaid prices, and government-set Medicare pricing for Botox begins in 2028.
Executive Summary
AbbVie’s Q1 2026 revenue grew 12.4% as Skyrizi, Rinvoq and neuroscience products more than offset continued Humira and Imbruvica declines. Operating earnings rose, but GAAP net earnings fell 46.0%: a large contingent-consideration remeasurement and higher business-development expense obscured the improvement in product sales. Operating cash flow exceeded net earnings substantially, while dividends and repurchases together exceeded free cash flow. For investors, the central question is whether growth from the newer portfolio and pipeline can sustain cash generation against pricing pressure, development spending and a debt-heavy balance sheet.
Key Financial Highlights
| Metric | Q1 2026 or 3/31/2026 | Investor interpretation |
|---|---|---|
| Revenue | $15.0B, +12.4% Y/Y | Skyrizi and Rinvoq are replacing lost Humira sales as growth drivers. |
| Gross profit | $10.8B, from $9.34B; margin 72%, from 70% | Higher sales and lower intangible amortization improved margin. |
| Operating earnings | $3.99B, +6.9% Y/Y | Growth persisted despite higher R&D and acquired research expenses. |
| GAAP net earnings | $695M, −46.0% Y/Y; diluted EPS $0.39, from $0.72 | Below-operating expenses and a higher tax rate reversed operating growth. |
| Operating cash flow / free cash flow | $3.83B / $3.56B | Cash generation diverged from GAAP earnings, substantially because of noncash contingent-consideration expense. |
| Total assets / total equity | $136B / $(6.61)B | The balance sheet has a substantial equity deficit. |
| Tangible common equity | $(93.1)B | Equity less $35.6B of goodwill and $50.9B of net intangible assets. |
| Total debt, book value | $72.6B | Financing capacity matters alongside operating cash generation. |
- Earnings bridge: Other expense, net, rose to $2.31B from $1.45B, including $2.39B of contingent-consideration fair-value expense versus $1.52B a year earlier. Acquired research and milestone expense rose to $744M from $248M, including the RemeGen upfront payment; the effective tax rate increased to 33% from 22%. These charges explain why operating growth did not reach shareholders’ earnings.
- Revenue mix: Skyrizi reached $4.48B, +30.9% Y/Y, and Rinvoq $2.12B, +23.3%; together they supplied $6.60B of revenue. Humira fell 38.6% to $688M, while growing migraine, movement-disorder and Botox Therapeutic products broadened the sources of growth.
- Capital returns: Dividends were $3.09B and repurchases were $1.1B for 5M shares. Shares outstanding fell only 1M, from 1.768B to 1.767B, net of issuance; repurchases therefore delivered limited share-count reduction. Stock-based compensation was $444M.
- Financing and liquidity: AbbVie issued $8.0B principal of senior notes and repaid a $2.0B term loan. Quarter-end cash was $9.39B, and its $8.0B revolving facilities were undrawn.
Business Developments
Management is directing cash toward pipeline expansion and manufacturing while maintaining dividends and investment-grade credit. The most consequential new commitment was a $650M upfront charge for exclusive rights outside China to RemeGen’s investigational cancer antibody RC148; the agreement also carries up to $5.0B in milestones plus royalties. That adds potential oncology growth, but future payments and returns depend on development and commercialization.
AbbVie’s pipeline includes ≈90 compounds, devices or indications, ≈60 in mid- or late-stage development. Recent progress included approval of Venclexta with acalabrutinib for previously untreated adult chronic lymphocytic leukemia and positive Phase 3 Skyrizi Crohn’s disease results. Epkinly improved progression-free survival in a Phase 3 trial without a statistically significant overall-survival benefit, while a proposed aesthetics treatment received a request for additional manufacturing information.
A January U.S. government agreement pairs lower Medicaid prices and expanded direct-to-patient affordability with a stated $100B U.S. R&D and capital-investment pledge over 10 years; it provides a three-year exemption from tariffs and future price mandates. Announced manufacturing projects support management’s longer-term neuroscience and obesity ambitions, but also increase the importance of execution and capital allocation.
Risk Assessment
- Pricing and exclusivity: Humira’s 38.6% decline reflects biosimilar competition; Imbruvica fell 24.7% amid pricing pressure and lower demand, while government-set Medicare pricing for Botox begins in 2028.
- Contingent-consideration valuation: Level 3 liabilities increased to $27.0B from $25.4B; changes in sales forecasts, milestone assumptions and discount rates can cause further large, noncash swings in GAAP earnings.
- Leverage and capital demands: Total debt book value was $72.6B against a $6.61B equity deficit; dividends and repurchases exceeded Q1 free cash flow, making sustained operating cash generation important.
- Pipeline execution: The RemeGen license and broader development portfolio require substantial investment before returns are established; Epkinly’s mixed trial outcome and the manufacturing-related regulatory request illustrate clinical and approval risk.
- Litigation: Accruals were ≈$1.7B, and AbbVie could not estimate additional losses for certain matters; opioid, breast-implant, antitrust and product-related disputes could add costs.
- Distribution concentration: Three U.S. wholesalers represented 78% of net accounts receivable, exposing collections and product distribution to a small group of counterparties.
A 10-Q does not have to restate the risk factors in the annual report. Full list: FY2025 10-K.
Strategic Outlook and Investor Actionables
AbbVie has demonstrated that newer immunology products can more than replace Humira’s lost quarterly revenue, but investors should separate that commercial progress from volatile contingent-consideration charges and assess whether cash flow can support both portfolio investment and capital returns.
- Growth replacement: Track Skyrizi and Rinvoq sales against Humira declines; sustained combined growth would confirm the portfolio transition.
- Earnings quality: Track contingent-consideration charges alongside operating earnings, operating cash flow and free cash flow; recurring large charges or weaker cash conversion would challenge the investment case.
- Financial flexibility: Track total debt, share count and dividends plus repurchases relative to free cash flow; debt reduction and meaningful net share-count shrinkage would strengthen it.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 9e47f58d3c