AbbVie (ABBV)

Pharmaceutical company AbbVie (NYSE:ABBV) announced better-than-expected revenue in Q4 CY2025, with sales up 10% year on year to $16.62 billion. Its non-GAAP profit of $2.71 per share was 2.2% above analysts’ consensus estimates.

Company Overview

Born from a 2013 spinoff of Abbott Laboratories' pharmaceutical business, AbbVie (NYSE:ABBV) is a biopharmaceutical company that develops and markets medications for autoimmune diseases, cancer, neurological disorders, and other complex health conditions.

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.

AbbVie's main competitors include other large pharmaceutical companies such as Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), Novartis (NYSE:NVS), and Amgen (NASDAQ:AMGN). In the immunology space, it also competes with Bristol Myers Squibb (NYSE:BMY) and in aesthetics with Revance Therapeutics (NASDAQ:RVNC).

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 $61.16 billion in revenue over the past 12 months, AbbVie is one of the most scaled enterprises in healthcare. This is particularly important because therapeutics companies are volume-driven businesses due to their low margins.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, AbbVie’s sales grew at a mediocre 6% compounded annual growth rate over the last five years. This was below our standard for the healthcare sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. AbbVie’s annualized revenue growth of 6.1% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

AbbVie also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 6.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that AbbVie has properly hedged its foreign currency exposure.

This quarter, AbbVie reported year-on-year revenue growth of 10%, and its $16.62 billion of revenue exceeded Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to grow 8.6% over the next 12 months, an improvement versus the last two years. This projection is particularly noteworthy for a company of its scale and suggests its newer products and services will fuel better top-line performance.

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 with different levels of debt and tax rates because it excludes interest and taxes.

AbbVie 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 25.5%.

Analyzing the trend in its profitability, AbbVie’s operating margin decreased by 7.3 percentage points over the last five years, but it rose by 1.2 percentage points on a two-year basis. We like AbbVie and hope it can right the ship.

In Q4, AbbVie generated an operating margin profit margin of 27.3%, up 37.2 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.

Sadly for AbbVie, its EPS declined by 1.1% annually over the last five years while its revenue grew by 6%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of AbbVie’s earnings can give us a better understanding of its performance. As we mentioned earlier, AbbVie’s operating margin expanded this quarter but declined by 7.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, AbbVie reported adjusted EPS of $2.71, up from $2.17 in the same quarter last year. This print beat analysts’ estimates by 2.2%. Over the next 12 months, Wall Street expects AbbVie’s full-year EPS of $10.00 to grow 43.3%.

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.

AbbVie 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 36.8% over the last five years.

Taking a step back, we can see that AbbVie’s margin dropped by 12.5 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

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 AbbVie hasn’t been the highest-quality company lately because of its poor bottom-line (EPS) performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 16.5%, 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. Unfortunately, AbbVie’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

We enjoyed seeing AbbVie beat analysts’ constant currency revenue expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. Investors were likely hoping for more, and shares traded down 1.8% to $221.60 immediately after reporting.

Updated: February 4, 2026 at 8:02 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in AbbVie.

There are some bright spots in AbbVie’s fundamentals, but its business quality ultimately falls short. Although its revenue growth was mediocre over the last five years, its growth over the next 12 months is expected to be higher. And while AbbVie’s declining EPS over the last five years makes it a less attractive asset to the public markets, its scale makes it a trusted partner with negotiating leverage. On top of that, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

AbbVie’s P/E ratio based on the next 12 months is 15.7x. 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 $245.04 on the company (compared to the current share price of $221.60).