Global pharmaceutical company Eli Lilly (NYSE:LLY) reported Q1 CY2025 results exceeding the market’s revenue expectations , with sales up 45.2% year on year to $12.73 billion. The company expects the full year’s revenue to be around $59.5 billion, close to analysts’ estimates. Its non-GAAP profit of $3.34 per share was 3.4% below analysts’ consensus estimates.

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"Lilly had a solid start to the year, with 45% year-over-year revenue growth driven by strong sales of Mounjaro and Zepbound," said David A. Ricks, Lilly chair and CEO.

Company Overview

Founded in 1876 by a Civil War veteran and pharmacist who was frustrated with the poor quality of medicines available at the time, Eli Lilly (NYSE:LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Eli Lilly grew its sales at a solid 16.2% compounded annual growth rate. Its growth surpassed the average healthcare company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Eli Lilly’s annualized revenue growth of 33% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Eli Lilly reported magnificent year-on-year revenue growth of 45.2%, and its $12.73 billion of revenue beat Wall Street’s estimates by 0.9%.

Looking ahead, sell-side analysts expect revenue to grow 28.5% over the next 12 months, a deceleration versus the last two years. Still, this projection is eye-popping given its scale and implies the market is forecasting success for its products and services.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Eli Lilly has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 24.5%.

Looking at the trend in its profitability, Eli Lilly’s operating margin rose by 6.7 percentage points over the last five years, as its sales growth gave it operating leverage. The company’s two-year trajectory shows its performance was mostly driven by its recent improvements. These data points are very encouraging and shows momentum is on its side.

This quarter, Eli Lilly generated an operating profit margin of 29%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Eli Lilly’s EPS grew at an astounding 17.6% compounded annual growth rate over the last five years, higher than its 16.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Eli Lilly’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Eli Lilly’s operating margin was flat this quarter but expanded by 6.7 percentage points over the last five years. On top of that, its share count shrank by 1.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, Eli Lilly reported EPS at $3.34, up from $2.58 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Eli Lilly’s full-year EPS of $13.76 to grow 84.4%.

Key Takeaways from Eli Lilly’s Q1 Results

It was good to see Eli Lilly narrowly top analysts’ revenue expectations this quarter. On the other hand, its EPS in the quarter missed on lower-than-expected profitability and full-year EPS guidance also missed significantly. Overall, this was a softer quarter. The stock traded down 3.9% to $860.72 immediately after reporting.

Eli Lilly underperformed this quarter, but does that create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.