AstraZeneca’s third-quarter profit beats expectations: expense timing and one-off gains amplify the surprise

Why did third-quarter profit beat expectations by such a wide margin?

AstraZeneca’s third-quarter product sales were 15.066 billion dollars, 1% above the company-compiled market consensus; total revenue was 16.209 billion dollars, 2% above consensus. Core operating profit of 5.855 billion dollars and core earnings per share of 2.79 dollars exceeded consensus by 9% and 8%, respectively.
Expenses and other operating income provided an additional boost to profit: growth in research and development and selling, general and administrative expenses was lower than expected, with some expenses shifted to the fourth quarter; core other operating income exceeded consensus by 135 million dollars, of which approximately 100 million dollars came from the disposal of rights to Zoryve.
Higher finance costs and tax rates offset some of the gains. Morgan Stanley estimates that, excluding expense timing and one-off gains, the beats on core operating profit and earnings per share fall to low single-digit percentages.

Sales of cancer drug Tagrisso were 2.087 billion dollars, 4% above consensus. Demand remained strong across multiple indications and major regions, despite slowing growth in the relevant Chinese drug market and new competition in other mature markets.
Sales of rare disease drug Ultomiris were 1.432 billion dollars, 4% above consensus, driven by continued patient demand and patients switching from Soliris. Conversely, Soliris sales were 14% below consensus, affected by patient switching and biosimilar competition in the United States and Europe.
Lynparza sales were 5% below consensus, reflecting factors including gross-to-net adjustments in the United States and pricing pressure from generics and centralized procurement in China. Truqap was 16% below consensus, mainly due to inventory drawdown following the US market’s transition from bottles to blister packs.

The company reiterated its 2026 guidance: at constant exchange rates, revenue is expected to grow by a mid- to high-single-digit percentage and core earnings per share by a low-double-digit percentage. Morgan Stanley and market consensus forecasts are approximately 7% revenue growth and 11% earnings-per-share growth, respectively.
Morgan Stanley does not expect the third-quarter operating profit beat to lead to higher full-year forecasts, because some expenses will fall in the fourth quarter. The bank also expects higher full-year finance costs, partly due to new debt, lower interest income and increased lease expenses from a new research and development center.
The company also announced a restructuring plan, with one-off charges of up to 2 billion dollars expected to generate 1.5 billion dollars in annualized pretax savings, mainly to be reinvested in the research and development pipeline. Most of the plan’s implementation will be completed by the end of 2029. Morgan Stanley therefore expects a limited impact on the income statement.

Morgan Stanley expects the company to guide for sales growth in the mid- to high-single digits and core earnings-per-share growth in the low double digits at constant exchange rates in 2027. The bank forecasts sales and earnings-per-share growth of 7% and 11%, respectively, versus market consensus of 7% and 12% for the same period.
The bank expects growth from existing key brands and new launches to offset pressure from Farxiga’s loss of exclusivity, implementation of policies relating to Calquence, and the expiry of Lynparza’s US exclusivity in the latter part of 2027. With continued investment needed in the research pipeline and new products, Morgan Stanley forecasts a core operating margin of 34.1% in 2027, below consensus of 34.5%.
Four key phase-three trial readouts are due in the first half of 2027, including the delayed AVANZAR, AZURE-LDL for an oral PCSK9 drug, and two trials of combination therapies for kidney disease. Morgan Stanley maintains its Overweight rating and 14800 pence price target.