Eli Lilly (NYSE: LLY) has once again caught the attention of the markets, combining blistering growth with what appears to be a still-reasonable valuation. Its Q3 2025 earnings report delivered eye-popping increases in revenue, profit, and cash flow, driving both excitement and questions about sustainability. In this article we will dive into Eli Lilly recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.
About Eli Lilly
Eli Lilly and Company which
founded in 1876, by Colonel Eli Lilly, is a leading U.S. pharmaceutical firm
headquartered in Indianapolis, Indiana. Over nearly 150 years, it has grown
from a small local drugmaker into one of the world’s largest research-based
pharmaceutical companies. Lilly develops, manufactures, and markets
prescription medicines focused on diabetes and obesity, oncology, immunology,
and neuroscience. Its success in diabetes and obesity treatments, notably
Mounjaro and Zepbound, has driven significant recent growth.
Eli Lilly Financial
Performance
Eli Lilly delivered an
exceptional financial performance in Q3 2025, showcasing strong growth across
all key metrics. Revenue for the quarter reached $17.6 billion, a 53.86%
increase from $11.44 billion in Q3 2024, while quarterly EPS surged 480.37% to $6.21
from $1.07 a year earlier. On a trailing twelve-month basis, revenue rose 45.41%
to $59.42 billion, and EPS grew 121.02% to $20.44. Free cash flow per share
also jumped 564.52% year-over-year to $10.30. The company maintained excellent
profitability with a gross margin of 83.03%, net profit margin of 30.99%, and free
cash flow margin of 15.6%. Returns were equally impressive, with ROA at 17.6%
and ROE at 96.47%, supported by a moderate debt-to-equity ratio of 1.79.
Over the past five years, Eli
Lilly has grown its revenue at a 20.5% CAGR, net income at 25.8%, and free cash
flow at 13.4%. The company has demonstrated consistent growth in the past and
is still projected to expand rapidly.
Eli Lilly Fiscal 2025
Financial Forecast
Looking ahead, analysts forecast 2025
revenue of $63.39 billion, representing a 40.74% increase from 2024 $45.04
billion, and expect non-GAAP EPS of $23.60, up 81.71% from $12.99 in 2024.
Analysts maintain a Buy rating on Eli Lilly’s stock, with an average price
target of $967.43, offering a potential upside of 4.5%, while the highest
target price of $1,190 suggests a potential upside of 28.56%, reflecting
continued confidence in the company’s growth trajectory and strong market
position.
LLY Stock Price Performance
and Valuation
At the time this article was written Eli Lilly stock was trading at $925.81 per share, Eli Lilly’s stock has gained 14.8% over the past year, slightly underperforming the S&P 500’s 17.4% rise during the same period. However, over the past five years, the stock has surged an impressive 548.6%, significantly outperforming the S&P 500’s 93.5% gain.
The company offers a modest dividend yield of 0.65%, providing
additional return to the stock. In terms of valuation, Eli Lilly trades at a P/S
(TTM) ratio of 13.71 and forward P/S of 12.81. The non-GAAP P/E (TTM) is 41.24
and the forward P/E is 38.42. While the P/FCF (TTM) ratio is 89.41.
Based on Fiscal.ai data, if we
look at the valuation over the past five years, the forward P/S is above the
average, while the forward P/E is below the average. Although it’s not low, the
forward P/E suggests a lower valuation than historical levels and remains at a
reasonable level as Eli Lilly continues to grow rapidly.
Eli Lilly Growth Potential
Eli Lilly growth prospect remains
strong, driven by several factors.
- Dominant Incretin Portfolio
Driving Record Revenue Growth
Eli Lilly's incretin franchise, led by Mounjaro and Zepbound, is driving unprecedented revenue growth. In Q3 2025, the company’s total revenue soared 54% to $17.60 billion, marking its fastest quarterly growth ever, fueled mainly by GLP-1 drugs. Mounjaro sales surged 109% year-over-year to $6.52 billion, while Zepbound’s revenue jumped 185% to $3.59 billion. Together, these two drugs accounted for $10.11 billion, or 57%, of total quarterly revenue.
Internationally, Mounjaro sales outside the U.S. exploded by 308%, reaching $2.97 billion, illustrating global demand in obesity and diabetes markets. With the global obesity market forecast to hit $150 billion by 2030, and Lilly’s dual-mechanism advantage, management raised full-year 2025 revenue guidance to $63-$63.5 billion, positioning the company for substantial long-term growth. This momentum underscores Lilly's dominant position in a rapidly expanding market. - Orforglipron Oral GLP-1
Potential to Expand Market Addressability
Orforglipron is a promising once-daily oral GLP-1 medication targeting type 2 diabetes and obesity, offering a needle-free alternative to injectable treatments. In Q3 2025, Lilly advanced orforglipron through multiple Phase 3 trials demonstrating positive efficacy and safety outcomes. The company aims to submit regulatory applications for obesity treatment by the end of 2025, with potential FDA approval expected around mid-2026. Clinical data reveal about 12% weight loss over 72 weeks in obese patients and superior performance versus oral semaglutide in diabetes control.
Although less potent than injectable tirzepatide, orforglipron’s oral form removes injection barriers, broadening patient access. Analysts estimate peak annual sales could reach $25 billion. Lilly is expanding manufacturing capacity in new U.S. facilities in Texas, Virginia, and Puerto Rico dedicated to orforglipron, underlining strong commercial confidence in this transformative therapy. - International Expansion with
Strong Payer and Out-of-Pocket Demand Supporting Geographic Growth
Eli Lilly's international markets are a vital growth area, with Q3 2025 international revenue jumping 74% to $6.30 billion, fueled mainly by a 66% volume increase in Mounjaro and favorable foreign exchange. Approximately 75% of international Mounjaro obesity revenue comes from out-of-pocket payments, demonstrating strong patient demand despite limited insurance coverage, creating a robust economic moat. In the U.S., Zepbound vial prescriptions represent 30% of total and over 45% of new prescriptions, showing growing patient access and choice.
Lilly dominates with about two-thirds of new incretin analog prescriptions in the U.S., highlighting strong competitive positioning. The company raised full-year guidance, confident in continued international expansion across Europe, Asia, and emerging markets. With growing obesity and diabetes worldwide, Lilly’s international footprint offers multi-year revenue opportunities as market penetration and reimbursement improve.
Risks to Consider
While Eli Lilly growth prospect
is strong, we should be mindful of potential risks.
- Pipeline and Approval
Execution Risk
Eli Lilly has a promising drug pipeline with major Phase 3 trials underway, such as retatrutide and orforglipron, targeting obesity and diabetes. However, execution risks persist, including potential clinical trial failures, strategic halts, and regulatory delays. These risks could delay or prevent approvals, thereby impacting future growth prospects significantly. Timely and successful clinical development and regulatory filings remain crucial for sustaining Eli Lilly's market position and growth trajectory. - Competition Risk
There is fierce competition in obesity and diabetes treatments, with Eli Lilly and Novo Nordisk vying for leadership. Eli Lilly’s oral drug orforglipron recently showed superior blood sugar and weight loss results versus Novo’s oral semaglutide in a key trial. However, Novo Nordisk leads on marketing and sales scale. More effective or affordable therapies from either could disrupt market share and pricing before patents expire, intensifying rivalry. - Regulatory and Pricing
Pressure Risk
There is growing political and regulatory pressure to lower drug prices, especially targeting costly GLP-1 obesity and diabetes drugs. The U.S. administration is close to deals with Eli Lilly and Novo Nordisk to reduce weight-loss drug prices to around $149 monthly for some patients in exchange for limited Medicare coverage. Such government interventions and pricing constraints could restrict revenue growth from these high-priced, key products despite their clinical benefits and demand.
Conclusion
Eli Lilly demonstrates an exceptional blend of strong growth, profitability, and innovation. The company’s Q3 2025 results highlight remarkable increases in revenue, earnings, and cash flow, supported by high margins and returns. While the stock trades at a premium valuation, it remains justified by robust fundamentals, expanding market opportunities, and a promising drug pipeline. With continued momentum in diabetes and obesity treatments, Eli Lilly stands out as a compelling long-term investment for growth-oriented investors.
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