Johnson & Johnson just proved its drug business can grow without Stelara. That was the easy part of this quarter. The harder question, whether its device business can be trusted as a second growth engine, got murkier instead of clearer. That's why a beat-and-raise quarter barely moved the stock.
The beat was real, but modest
J&J reported $25.31 billion in second-quarter revenue, up 6.6% as reported and 5.6% on an operational basis. Adjusted earnings per share rose 4.7% to $2.90. Revenue beat the roughly $25.05 billion analysts expected, according to LSEG data, and EPS topped the $2.85 estimate.
That's a real beat, but not a big one. Innovative Medicine, the drug business, beat expectations. MedTech, the device business, came in at $8.93 billion, just short of the roughly $8.97 billion analysts wanted. Gross margin improved slightly, but marketing spending on new launches grew faster than sales, so profit margins shrank across both segments. Adjusted pretax margin fell to 34.2% from 34.5% company-wide.
J&J also excluded $1.25 billion in amortization costs and hundreds of millions more in restructuring, litigation, and separation costs from its adjusted numbers. Those exclusions are standard practice, but they're a reminder that the adjusted profit picture and the raw one tell different stories.
The drug business doesn't need Stelara anymore
Here's the clearest win in the quarter. Stelara, once J&J's second-biggest drug, is now just 4% of the drug unit's sales. It fell 55% this quarter. But the rest of the portfolio grew more than 14% without it, according to management. That's a real shift. Investors can now judge J&J on its new drugs instead of worrying about the size of the patent cliff.
The growth is broad. Oncology sales jumped 17.3% to $7.41 billion. Darzalex, the multiple myeloma drug, grew 18.9% to $4.21 billion, roughly matching what analysts expected. Newer cancer drugs grew faster. Carvykti rose nearly 50%. Tecvayli rose 56%. Talvey grew more than 60%.
Tremfya did the real replacement work for Stelara. Sales rose 72.5% to $2.05 billion, well ahead of the $1.74 billion analysts expected. Tremfya now leads the market in new patient starts for both ulcerative colitis and Crohn's disease, the same conditions that drove most of Stelara's old business. Management argues Tremfya can match or beat what Stelara used to generate. That's a reasonable claim based on early data, but Tremfya still has to prove it can keep patients on the drug long-term and hold off competitors.
A newer psoriasis drug, Icotide, backs this up. More than 11,000 patients have started it, and over half of insurance plans already cover it within 90 days of launch, ahead of J&J's own projections. The company hasn't said how much of that early activity is turning into real revenue, since free samples and early discounts often inflate prescription counts before profits show up.
The device business has a bigger problem
MedTech grew 3.6%, just $44 million short of what analysts expected. The dollar gap was tiny. The reason behind it was not.
Cardiovascular device sales, J&J's electrophysiology and heart pump business, grew just 3.1%, way down from double-digit growth earlier in the year. Part of that came from a one-time inventory issue in China. The bigger part came from Abiomed, J&J's heart pump maker, which J&J bought for $16.6 billion in 2022.
Abiomed sales fell 2% this quarter after growing 14% in the first quarter. The cause was a UK medical study called CHIP-BCIS3, which tested 300 patients across 21 hospitals and found no benefit, and some added risk, from using Abiomed's heart pumps during a certain type of heart procedure. Doctors have grown more cautious using the devices since the study came out.
Management calls this a temporary shift in doctor behavior, not a sign the product doesn't work. That may be true. The study only covered one specific patient group. But J&J can't simply market its way past the concern. A bigger trial called PROTECT IV, expected to report in 2027, will decide whether doctors regain confidence. Until then, growth stays modest.
The rest of the device business looks fine
This isn't a sign that hospital procedures are collapsing broadly. J&J's surgery, eye care, and bone repair units all grew faster than expected this quarter. Eye care benefited from strong contact lens sales. Bone repair improved on better sales execution.
That split suggests the cardiovascular problems are specific to J&J, not a sign of a broader slowdown in hospital visits, even though some big hospital chains have recently flagged softer demand for elective procedures. J&J says it hasn't seen that pressure show up in its own numbers.
New products like a next-generation surgical robot and updated heart-mapping tools could help MedTech's growth rate later this decade. Those are promising ideas, not results.
Why the stock didn't move much
J&J raised its full-year sales guidance to $101.1 billion at the midpoint and its earnings guidance to $11.68 per share. Shares initially fell more than 2% before recovering some of that loss during the day, a muted reaction for a beat-and-raise quarter.
Part of the guidance increase comes from an extra week in this year's fiscal calendar, worth about one percentage point of growth, and from lower expected taxes and interest costs. Those are real tailwinds, but they aren't new demand for J&J's drugs. CFO Joseph Wolk acknowledged on the earnings call that the guidance mix reflects stronger drug assumptions partly offset by a more cautious view of Abiomed.
What investors are really deciding
J&J has answered the question that worried investors most a year ago: can the drug business survive losing its biggest product? Yes. Oncology is broad and growing. Tremfya is replacing Stelara. Newer drugs are gaining real traction.
What's left unanswered is whether the device business can be trusted as a reliable second growth engine, rather than a business that needs regular explaining. Abiomed's stumble shows that growth there now depends partly on convincing doctors, not just building better products. That's a slower, harder path than pure commercial execution.
The drug side of J&J's turnaround is working faster than the device side. The stock's flat reaction suggests investors have priced that gap in already, and now want to see it close.