Johnson & Johnson reported $25.4 billion in third-quarter revenue and adjusted earnings of $2.59 per share on Tuesday, beating Wall Street forecasts as immune disease drug Tremfya more than offset weakness in medical devices overseas. Revenue topped the analysts’ average estimate of $25.28 billion, according to LSEG data. Adjusted earnings cleared expectations of $2.54 per share.
Innovation paid off this quarter. But geopolitics and government budgets can reshape a global business quickly.
The Drug That Carried the Quarter
Tremfya sales climbed 68% to $2.4 billion, well above analyst estimates of about $2.19 billion. Recent approvals for the drug in inflammatory bowel diseases have increasingly helped replace revenue lost on Stelara, which faces generic competition. Stelara sales fell 54% to $716 million, though that still beat Wall Street’s expectation of $591 million.
The pharmaceutical division grew 7.7% to $16.76 billion. Sales of Darzalex, the blood cancer treatment, rose about 16% to $4.24 billion, though they fell short of the $4.4 billion analysts had projected.
The pattern is familiar: a blockbuster loses patent protection, competitors rush in, and the company’s next product has to fill the gap. Here, the pipeline did its job.
Government Budgets Squeeze Medical Devices
The medical technology division told a different story. Sales rose just 2.5% to $8.6 billion overall, while sales outside the United States were basically flat.
Chief Financial Officer Joe Wolk cited three pressures: the Middle East conflict, austerity measures in Europe, and pricing in China. All three, he said in an interview, continued to weigh on international results, “but maybe in a little bit more pronounced way.”
The Middle East example stands out. Wolk said the conflict, which has driven fuel costs higher at home and abroad, hasn’t yet raised the company’s own costs. But it has hurt sales in the region. “These are countries that still value and actually want premium healthcare systems, think Kuwait, UAE, Saudi Arabia,” Wolk said. “They pride themselves on having solid healthcare, very good healthcare. But their budgets now are being resourced and allocated towards defense.”
When security threats rise, governments reorder spending. Hospital equipment drops down the list.
Europe’s austerity measures and China’s pricing pressures point the same way. In both cases, government purchasers hold the leverage, and they’re using it to hold down what they pay for medical technology.
A Slow Spot at Abiomed
Sales at the Abiomed heart pump business also remained slow. A UK study earlier this year raised questions about using Impella pumps during certain high-risk coronary procedures. The source gives no precise date for the study.
Raised Outlook and Market Reaction
J&J lifted its full-year reported-sales forecast to about $101.2 billion at the midpoint, up from $101.1 billion. It also raised its adjusted-earnings forecast range, setting a new midpoint of $11.10 per share, up from $11.04.
The increases are modest. They signal confidence without overpromising.
Shares closed at $263.73 on Monday and have risen 27% this year, outperforming the broader market and most healthcare peers.
Why This Matters:
J&J’s quarter shows where durable value comes from: a successful drug brought to market and expanded into new uses. Tremfya’s 68% jump came from investment in research and the approvals that followed, not from a policy mandate. The device side shows the other edge. Governments with tight budgets, whether due to defense priorities in the Gulf, austerity in Europe or price-setting in China, can cap what a global company earns regardless of demand for its products. That’s a reminder for investors and policymakers alike: healthcare revenue depends on public budgets as much as on clinical value. It also makes the case for rewarding innovation that fills the gap when older products lose protection.