Healthcare earnings roundup – innovation, resilience and what investors are watching

Our healthcare coverage extends to both pharmaceuticals and medical devices. Within that universe, the product sets and market dynamics are quite different from company to company. For those companies we provide research on and that report quarterly, both revenue and profitability improved across the board, with performance ranging from broadly as expected to significantly better than forecast.

Profit growth was particularly strong, with headline operating profit for the 5 out of the 6 companies that reported up by 19% on average, and beating expectations by 12%. But the relationship between business momentum and shifts in investor sentiment was far from clear-cut, underlining the complexity of the industry.

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Markets are demanding

The market reactions show how demanding investors have become.

Strong numbers were necessary, but not always enough. Eli Lilly delivered the cleanest combination of revenue growth, profit growth, sizeable forecast beats and upgraded guidance, and the shares responded positively.

GSK and AstraZeneca also rose, despite more modest growth. AstraZeneca left guidance unchanged, and GSK upgraded its outlook towards the upper end of previous guidance. For these steadier compounders, the bar was different. They didn’t need to transform the story – they just needed to show that execution remained on track.

The weaker reactions are more telling.

Novo Nordisk upgraded guidance, but investors were still disappointed. The focus was on competitive pressure, pricing and early Wegovy pill sales that were a little lighter than hoped. Smith & Nephew’s revenue miss and downgraded outlook were punished more straightforwardly.

Intuitive Surgical is the more nuanced case. Revenue and operating profit both beat forecasts, though the revenue beat was its weakest since the final quarter of 2024. Procedure growth guidance was left at 13.5%-15.5%, with management pointing to about the 14.5% midpoint. That was a little weaker than we had been hoping for.

Evidence suggests to us that this is timing rather than demand weakness, with some procedures delayed rather than lost. The latest da Vinci platform has shown early signs of higher utilisation, and added functionality should support that over time.

Rev = Revenue.

OP = Operating profit.

Guidance refers to whether each company raised, lowered or left its latest full-year outlook unchanged. Smith+Nephew reports some figures only half-yearly, so operating-profit comparisons are not available. Share-price reaction shows the move from the close before results to the close of the following day.

The industry is managing pricing pressure

Pricing pressure is showing up in different ways across the cohort. In GLP-1s (weight-loss medication), Lilly and Novo Nordisk face tougher competition, while health systems are still taking a cautious approach to wider access because the potential patient pool is so large and the drugs remain expensive.

For AstraZeneca and GSK, the pressure is more tied to regulatory change, lifecycle effects and China procurement. Medtech is exposed, too, although the pressure varies by category.

State-enforced discounting in China and tighter hospital budgets are clearer issues for more traditional device areas where Smith & Nephew operates. Meanwhile, Intuitive Surgical’s risk is more indirect through system placement timing, procedure volumes and hospital capital spending.

Despite those pressures, the chart below shows that gross margins and profitability are generally moving higher. Better product mix is doing a lot of the work, especially where newer medicines or higher-value platforms are scaling quickly. Production efficiency and operating leverage are also helping.

Eli Lilly versus Novo is the clearest contrast. Both are still benefitting from strong GLP-1 demand, but Eli Lilly’s faster growth and stronger operating leverage make the pricing debate feel less damaging. Novo’s Wegovy pill could help it fight back if an oral option makes broader access easier.

Early signs are encouraging, but the market still wants evidence that it can close the gap with Eli Lilly without giving too much away on margin.

Intuitive Surgical is the standout because its margin strength looks structural rather than temporary. Its dominant market position, growing installed base and high proportion of recurring revenue give it more protection than most as utilisation rises. The watch point is whether slower US growth proves temporary, with investors looking to the rollout of the latest platform to help reaccelerate procedure volumes.

GSK shows how product mix can help offset pricing pressure. Its shift towards higher-value specialty medicines and away from less differentiated general medicines is supporting margins and helping fund a step-up in pipeline development. Keeping that momentum going will depend on the pipeline delivering.

Demands on cash remain high

Cash demands are becoming more visible across the cohort. Net debt, or net cash where relevant, generally moved in the wrong direction year on year. That doesn’t mean that balance sheets are universally under pressure. Broadly, they still look in good shape. But the starting point matters, and some companies clearly have more room to manoeuvre than others.

That matters because healthcare companies are trying to fund several calls on cash at once. Some are still returning meaningful amounts to investors through dividends and buybacks, though these payouts are not guaranteed.

Meanwhile, others are investing more heavily into the pipeline, manufacturing capacity, acquisitions and licensing. Eli Lilly’s debt is large in cash terms but modest relative to its earnings. Intuitive's debt is in net cash. That gives both companies room to keep investing without debt becoming the main concern.

The higher-debt names need more context.

Smith & Nephew’s leverage is less comfortable because it comes alongside a recovery that has taken longer to come through. GSK’s higher-leverage forecast looks less concerning because it’s largely driven by the post-year-end acquisition of Nuvalent, for around £7.1bn of net cash.

But it does bring home the point that pharma investment, whether internal Research & Development or external acquisitions and licensing, requires patience and diversity.

Returns can take years to show up in revenue, and many assets will fail before they become commercially meaningful. That makes non-revenue-producing acquisitions higher risk, especially when they’re funded with debt or when the existing business is already under pressure.

Negative net debt denotes net cash. Green shows an improvement in debt or net cash, and red shows a deterioration. EBITDA (Earnings before interest, tax, depreciation and amortisation) is a common proxy for cash profit. FY 1 is the consensus forecast for the next financial year to be reported.

What it means for investors

Our verdict from this latest reporting season is that strong operating performance is no longer enough. Resilient margins, product innovation and earnings ahead of expectations were common themes, but the market is becoming far more selective in how it rewards them.

The key challenge for investors is distinguishing between companies facing tougher long-term headwinds and those whose competitive positions and growth prospects remain underappreciated.

In GLP-1s, simply being in the race is no longer enough. Investors are differentiating by market share, pricing pressure, next-generation products and pipeline credibility.

The long-term opportunity remains significant, and broader access could support faster adoption, but the market is becoming more selective about who it believes can translate that opportunity into profitable growth.

Eli Lilly’s execution is still being rewarded. Novo's recent performance offers some encouragement, but the market will likely need to see more consistent progress before regaining confidence in a sustainable return to growth.

That logic applies beyond obesity drugs. Pharma valuations are increasingly shaped by patent duration, lifecycle management, late-stage pipeline depth and the quality of external deals.

At GSK, investors are balancing ambitious long-term growth targets against upcoming HIV patent expiries, with management stepping up investment, partnerships and acquisitions to support the next phase of growth.

AstraZeneca's pipeline still offers scope for upside, but recent clinical setbacks are a reminder of how quickly sentiment can shift when expectations are high. Innovation remains strong, but investors are increasingly focused on execution.

Competitive positioning matters just as much in medtech.

Intuitive is carving out an entire category through robotic surgery, and Smith & Nephew is yet to prove it can stand out from the crowd in more competitive, traditional areas like knee implants. Both have faced pressure on their valuations, but Intuitive's growth outlook appears stronger, whereas Smith & Nephew still has more to prove in slower-growing markets.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.