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Novartis (NVS) Q3 2026 earnings: core profit up 10%, guidance raised

Editorial illustration for Novartis (NVS) Q3 2026 earnings: core profit up 10%, guidance raised
Ddrillr ResearchOriginal research
Published 6 min read

Summary

Novartis Q3 2026 core operating income rose 10% in constant currencies to a 41.6% margin and full-year guidance rose, while sales grew 4% as generic erosion faded.

Novartis (NVS) Q3 2026 earnings showed core operating income growing again: the company published its third-quarter results (July to September 2026) in a 6-K filed on October 27, 2026, and raised its full-year core operating income guidance [1]. Earlier analysis focused on three questions. Could the drag from US generic Entresto narrow? Could core profit grow once roughly 5 percentage points of one-time Q2 profit phasing reversed? Could growth brands carry the top line [2]? This quarter confirmed the profit question. Sales grew 4%, but mostly because the generic base effect faded. Kisqali and Rhapsido were strong, while Pluvicto's growth stayed limited after a new approval [3]. Overall, profit conversion came in better than the earlier view, while cash conversion weakened.

Novartis is an innovative medicines company based in Basel, Switzerland. After spinning off its generics business in 2023, it focuses on four areas: cardiovascular-renal-metabolic, immunology, neuroscience and oncology [4]. Its medicines reach hospitals and patients through wholesalers and specialty pharmacies. Profitability depends on whether high-margin patented medicines can replace older products that have lost patent protection.

Core operating income rose 10% and full-year guidance went up

Third-quarter core operating income was USD 6.04 billion, up 10% year over year in constant currencies. The core operating income margin was 41.6%, 2.0 percentage points above the prior-year quarter [1]. The earlier baseline was flat core operating income in Q2, with about 5 percentage points of that coming from phasing expected to reverse in the second half [2]. At that time, the company guided full-year core operating income to decline low single digits [5]. Q3 beat that baseline, and the company raised full-year guidance to in line to growing low single digits [1].

The profit gain came from both gross profit and costs. Core gross profit was USD 12.15 billion, up 5% in constant currencies and faster than sales. That indicates newer brands replaced older products without diluting the gross margin structure. Core SG&A fell from USD 3.30 billion to USD 3.08 billion [3]. Management said the reduction came from cuts in third-party spending such as agencies, travel and consulting, and described it as durable [6]. Based on the reconciliation table, core operating income rose by USD 576 million. Gross profit added about USD 640 million and SG&A savings about USD 226 million, while higher R&D and other expenses subtracted about USD 289 million [3].

R&D and financing costs kept rising. Core R&D expense was USD 2.79 billion, or 19.2% of sales, which the company attributed to recently acquired assets. Core interest expense was USD 468 million, compared with USD 281 million a year earlier [3]. IFRS operating income was only USD 1.84 billion. The main reasons were a USD 1.94 billion impairment of del-desiran, acquired with Avidity, after its Phase III trial missed the primary endpoint, plus a USD 0.6 billion contract provision. Neither item is included in core profit [3].

Sales returned to growth, mainly as generic erosion faded

Q3 net sales were USD 14.52 billion, up 4% in constant currencies, compared with 1% in Q2 [1]. Volume contributed 14 percentage points, generic competition subtracted 9 points and pricing subtracted 1 point. US sales grew 7% [3]. In Q2, generic competition subtracted 14 points and volume added 18 points [7]. The improvement therefore came mainly from the disappearance of the prior-year US Entresto base.

Two caveats apply to sales. Cosentyx US growth benefited from prior-year revenue deduction adjustments, and the amount was not disclosed [3]. According to the earnings call summary, the company expects mid-to-high single-digit sales growth in the second half, which would require a clear acceleration in Q4 [6].

Growth brands diverged

Kisqali sales were USD 1.82 billion in Q3, up 37% in constant currencies. Rhapsido sales were USD 101 million [3], up from USD 64 million in Q2 [8]. Pluvicto received US and China approvals in Q3 for metastatic hormone-sensitive prostate cancer [1]. Its quarterly sales were USD 674 million, and US sales grew only 9% [3]. The call summary said this launch is still at an early stage [6].

Conclusion

The quarter shows that Novartis profit has returned to growth, while the sales recovery still needs confirmation. Cash generation weakened. Free cash flow was USD 5.11 billion, down 18%, because of unfavorable working capital changes and higher interest payments. Net debt stood at USD 37.37 billion at the end of September [3].

Several questions remain open. The company did not say when the Q2 profit phasing will reverse. The durability of the cost savings rests only on management statements. The remaining USD 5.54 billion carrying amount of del-desiran could be impaired again [3]. The next report needs to show whether Q4 core operating income keeps growing at a high single-digit rate or better, whether sales accelerate, and whether the new Pluvicto and Rhapsido indications turn into sales.

Sources

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