Gilead Sciences (GILD)

Biopharmaceutical company Gilead Sciences (NASDAQ:GILD) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 3% year on year to $7.77 billion. On the other hand, the company’s full-year revenue guidance of $28.55 billion at the midpoint came in 1% below analysts’ estimates. Its non-GAAP profit of $2.47 per share was 15.7% above analysts’ consensus estimates.

Company Overview

From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ:GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.

Over the next few years, therapeutic companies, which develop a wide variety of treatments for diseases and disorders, face strong tailwinds from advancements in precision medicine (including the use of AI to improve hit rates) and growing demand for treatments targeting rare diseases. However, headwinds such as rising scrutiny over drug pricing, regulatory unknowns, and competition from larger, more resourced pharmaceutical companies could weigh on growth.

Gilead's competitors include major pharmaceutical companies such as Merck (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and GlaxoSmithKline (NYSE:GSK) in the HIV space; AbbVie (NYSE:ABBV) in hepatitis C; and Bristol Myers Squibb (NYSE:BMY), Novartis (NYSE:NVS), and Roche (OTCQX:RHHBY) in oncology.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $29.09 billion in revenue over the past 12 months, Gilead Sciences sports economies of scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Gilead Sciences’s sales grew at a mediocre 4.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the healthcare sector and is a rough 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. Gilead Sciences’s recent performance shows its demand has slowed as its annualized revenue growth of 3% over the last two years was below its five-year trend.

We can better understand the company’s revenue dynamics by analyzing its most important segment, HIV. Over the last two years, Gilead Sciences’s HIV revenue was flat. This segment has lagged the company’s overall sales.

This quarter, Gilead Sciences reported modest year-on-year revenue growth of 3% but beat Wall Street’s estimates by 3.7%.

Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.

Gilead Sciences has been a well-oiled machine over the last five years. It demonstrated elite profitability for a healthcare business, boasting an average adjusted operating margin of 41%.

Looking at the trend in its profitability, Gilead Sciences’s adjusted operating margin decreased by 6.9 percentage points over the last five years, but it rose by 7.3 percentage points on a two-year basis. Still, shareholders will want to see Gilead Sciences become more profitable in the future.

In Q3, Gilead Sciences generated an adjusted operating margin profit margin of 50.5%, up 7.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Gilead Sciences’s EPS grew at a remarkable 9% compounded annual growth rate over the last five years, higher than its 4.7% annualized revenue growth. However, we take this with a grain of salt because its adjusted operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q3, Gilead Sciences reported adjusted EPS of $2.47, up from $2.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Gilead Sciences’s full-year EPS of $8.19 to grow 4.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Gilead Sciences has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the healthcare sector, averaging an eye-popping 32.4% over the last five years.

Taking a step back, we can see that Gilead Sciences’s margin dropped by 3.7 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Gilead Sciences’s free cash flow clocked in at $3.96 billion in Q3, equivalent to a 51% margin. The company’s cash profitability regressed as it was 4.3 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Gilead Sciences hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.3%, impressive for a healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Gilead Sciences’s ROIC averaged 3.2 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Gilead Sciences reported $8.00 billion of cash and $24.95 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $15.31 billion of EBITDA over the last 12 months, we view Gilead Sciences’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $767 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Gilead Sciences beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance slightly missed. This outlook seemed to weigh on shares, and the stock traded down 4.3% to $113.31 immediately following the results.

Updated: December 4, 2025 at 10:53 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Gilead Sciences doesn’t top our investment wishlist, but we understand that it’s not a bad business. Although its revenue growth was mediocre over the last five years and analysts expect growth to slow over the next 12 months, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. Tread carefully with this one, however, as its declining adjusted operating margin shows the business has become less efficient.

Gilead Sciences’s P/E ratio based on the next 12 months is 14.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $130.63 on the company (compared to the current share price of $122.40).