AbbVie (ABBV)

Pharmaceutical company AbbVie (NYSE:ABBV) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 9.1% year on year to $15.78 billion. Its non-GAAP profit of $1.86 per share was 4.2% 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 $59.64 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.

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, AbbVie’s sales grew at a tepid 3.8% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the healthcare sector, but there are still things to like about AbbVie.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. AbbVie’s annualized revenue growth of 4% 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 4.7% 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 9.1%, and its $15.78 billion of revenue exceeded Wall Street’s estimates by 1.2%.

Looking ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and indicates its newer products and services will fuel better top-line performance.

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%.

Looking at the trend in its profitability, AbbVie’s operating margin decreased by 15 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 12.2 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q3, AbbVie generated an operating margin profit margin of 12.1%, down 14.4 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

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.

AbbVie’s flat EPS over the last five years was below its 3.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into AbbVie’s earnings to better understand the drivers of its performance. As we mentioned earlier, AbbVie’s operating margin declined by 15 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 Q3, AbbVie reported adjusted EPS of $1.86, down from $3.01 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 4.2%. Over the next 12 months, Wall Street expects AbbVie’s full-year EPS of $9.46 to grow 44.6%.

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 36.3% over the last five years.

Taking a step back, we can see that AbbVie’s margin dropped by 4.5 percentage points during that time. We’re willing to live with its performance for now but hope its cash conversion can rise soon. Continued declines could signal it is in the middle of an investment cycle.

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).

AbbVie’s five-year average ROIC was 18.7%, beating other healthcare companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

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. Uneventfully, AbbVie’s ROIC has stayed the same over the last few years. Rising returns would be ideal, but this is still a noteworthy feat since they're already high.

AbbVie reported $22.36 billion of cash and $77.72 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 $22.56 billion of EBITDA over the last 12 months, we view AbbVie’s 2.5× net-debt-to-EBITDA ratio as safe. We also see its $1.25 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see AbbVie narrowly top analysts’ constant currency revenue expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed. Overall, this was a weaker quarter. The stock remained flat at $229 immediately after reporting.

Updated: December 3, 2025 at 11:00 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.

AbbVie doesn’t top our investment wishlist, but we understand that it’s not a bad business. Although its revenue growth was uninspiring over the last five years, its growth over the next 12 months is expected to be higher. And while AbbVie’s declining adjusted operating margin shows the business has become less efficient, its scale makes it a trusted partner with negotiating leverage.

AbbVie’s P/E ratio based on the next 12 months is 16.3x. This valuation multiple is fair, but we don’t have much faith in the company. 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 $243.55 on the company (compared to the current share price of $230.35).