just delivered a message to Wall Street: the patent cliff everyone feared? They’re climbing over it.
The healthcare giant reported Q4 results Wednesday morning that topped estimates across the board—$24.6 billion in revenue against expectations of $24.16 billion, and adjusted earnings of $2.46 per share versus the Street’s $2.44. More importantly, J&J guided 2026 revenue to $99.5 billion to $100.5 billion, comfortably above analyst forecasts of $98.9 billion.
The kicker: management revealed these numbers absorb “hundreds of millions of dollars” in costs from their recently signed Trump administration drug pricing deal. And they still beat.
“2025 was a catapult year for Johnson & Johnson,” CEO Joaquin Duato said in the company’s release. The stock had already run 48% over the past year heading into earnings. Now investors are asking whether there’s more room to run.
The Numbers That Matter
Fourth-quarter results showed strength across both business segments:
Innovative Medicine (Pharma): Sales grew 10% to $15.76 billion, beating estimates of $15.37 billion. This is the division Wall Street had been most worried about, given the looming biosimilar competition for blockbuster psoriasis drug Stelara. The company’s oncology portfolio led the charge, with cancer franchise revenue climbing nearly 20% on strength from Darzalex and Carvykti.
MedTech (Devices): Continued its post-Shockwave integration momentum. The cardiovascular segment has become a growth engine following J&J’s $13.1 billion acquisition of the heart device maker in 2024.
For full-year 2025, J&J delivered $94.2 billion in sales, up 6%, with adjusted EPS of $10.79. Operating margin hit 29.5% for the year—remarkable for a company in the middle of a major portfolio transformation.
The 2026 guidance is what really caught attention. Management expects top-line growth of more than 5% and profit growth in a similar range, even while absorbing the Trump pricing deal impact. That’s the fastest expected revenue growth rate since 2023 for a company J&J’s size.
The Trump Deal Overhang
J&J signed a voluntary agreement with the Trump administration on January 8 to lower drug prices through the TrumpRx.gov platform in exchange for tariff exemptions on pharmaceutical imports.
CFO Joseph Wolk acknowledged the deal’s cost in an interview after the results.
“We can’t disclose specific details, but it’s hundreds of millions of dollars,” Wolk said. “It’s a credit to the team here that we were able to surpass what expectations are for 2026 by a pretty sizable amount while digesting that impact.”
The company is one of 15 pharma giants that have now signed similar deals with the administration, joining Pfizer (PFE), Merck (MRK), Bristol Myers Squibb (BMY), and others. Only AbbVie (ABBV) and Regeneron (REGN) remain outside the framework.
For J&J, the deal provides a three-year exemption from the 100% tariffs Trump threatened on imported pharmaceuticals last year. Given the company’s global supply chain, avoiding those levies was worth the pricing concession.
But here’s the tension: an NPR analysis this week found that all 16 companies that signed Trump deals still raised prices on 872 brand-name drugs in the first two weeks of January, including J&J. The median increase? 4%—exactly the same as last year.
The Trump pricing deals look more like tariff insurance than genuine price relief. For J&J shareholders, that’s probably the right trade.
The Stelara Question
The elephant in the room remains Stelara, J&J’s psoriasis and inflammatory bowel disease blockbuster that lost U.S. exclusivity on January 1, 2025.
Amgen’s (AMGN) Wezlana biosimilar became the first interchangeable competitor, with Teva (TEVA), Alvotech (ALVO), and Sandoz following close behind. Analysts had modeled significant revenue erosion starting in 2025.
Yet Innovative Medicine sales grew 10% in Q4 anyway.
How? J&J is executing a deliberate succession plan. Tremfya, approved for psoriasis and now Crohn’s disease, is absorbing some of the volume. Darzalex in oncology continues its blockbuster trajectory. And newer therapies like Spravato for depression and Carvykti for multiple myeloma are scaling faster than expected.
The company also just secured FDA approval for Caplyta as an add-on treatment for major depressive disorder, expanding its neuroscience franchise. Fresh Phase 3 data released January 16 showed 65% of patients achieved remission in a 6-month extension study.
Management’s implicit message: the patent cliff is real, but the replacement products are working.
MedTech’s Moment
J&J’s medical devices division has quietly become the more interesting story.
Following the spin-off of consumer health business Kenvue (KVUE) and the integration of Shockwave Medical and Abiomed, J&J is now a “pure-play” healthcare company focused on pharma and devices. The MedTech segment has emerged as the margin expansion engine.
The biggest catalyst ahead is OTTAVA, J&J’s robotic surgical system submitted to the FDA for De Novo classification earlier this month. If approved, it would mark J&J’s entry into soft-tissue robotics—a market long dominated by Intuitive Surgical (ISRG) and its da Vinci system.
OTTAVA won’t generate revenue in 2026, but its approval trajectory matters. J&J can bundle robotic platforms with its extensive line of surgical instruments and hospital contracts, creating a competitive moat that Intuitive lacks.
The company also announced plans for an Orthopaedics spin-off last October, which would shed lower-margin DePuy Synthes operations and further concentrate the portfolio on growth areas.
What to Watch
The talc litigation: A Maryland jury recently awarded $1.56 billion—the largest single-plaintiff verdict—for alleged mesothelioma from J&J’s baby powder. The company plans to appeal and maintains its products never contained asbestos. Settlement talks that could range from $10 billion to $15 billion remain possible. Resolution would remove the “litigation discount” currently weighing on shares.
OTTAVA approval timeline: FDA clearance would validate J&J’s multi-billion dollar bet on robotics and create a direct competitor to Intuitive Surgical’s 20-year dominance.
Stelara erosion rate: Q1 2026 will provide the first clean read on how fast biosimilars are capturing market share. Faster erosion would pressure 2026 numbers; slower erosion suggests J&J’s replacement strategy is working.
Trump deal compliance: Details remain confidential, but any indication that the pricing concessions are larger than “hundreds of millions” could reset expectations.
The Valuation Question
J&J trades at roughly 19 times forward earnings—a premium to the large-cap pharma industry average of 17.7 times but below its five-year mean of around 20 times.
The stock has been a standout performer, up nearly 50% over the past year against the S&P 500’s 15% gain. That run has priced in considerable optimism.
But the 2026 guidance suggests earnings momentum isn’t over. If J&J delivers the guided 5%+ revenue growth while maintaining 29%+ operating margins, the multiple looks reasonable. The company generates roughly $11 billion in annual free cash flow, funds a 2.3% dividend yield, and has increased that dividend for 63 consecutive years.
For income investors, that track record matters. For growth investors, the combination of pharma pipeline execution and MedTech optionality creates a rare profile in mega-cap healthcare.
The Bottom Line
J&J just proved it can navigate the Stelara cliff, absorb Trump tariff costs, and still raise guidance.
The stock isn’t cheap after its run. But the execution warrants attention. Oncology is working. The Stelara succession plan is working. MedTech is scaling. And the balance sheet provides flexibility for both acquisitions and shareholder returns.
The talc litigation remains the wild card. A settlement would likely be bullish; continued courtroom battles keep uncertainty elevated.
For now, J&J looks like a mega-cap compounder that’s actually compounding. In a market rattled by trade war fears and AI uncertainty, that’s worth something.