JPMorgan is further raising its expectations for Eli Lilly's (LLY.US) earnings growth over the coming years. The research team led by analyst Chris Schott reiterated an "Overweight" rating and the bank's "top pick" status for Lilly, lifting its December 2027 target price from $1,500 to $1,650, implying roughly 20.1% upside from the October 29 closing price of $1,373.70. The bank's bullish case rests not only on the current strong growth in obesity drug sales, but also on the long-term growth potential from overseas market expansion, rising U.S. obesity treatment penetration, and the succession of new oral products. As the AI capital expenditure cycle prompts the market to reassess tech stock valuations and earnings delivery, Lilly is emerging as another growth theme drawing Wall Street's attention. As of the October 29 U.S. market close, Lilly surged 6.63% against the trend, while the Nasdaq 100 Index and the Philadelphia Semiconductor Index fell 1.38% and 1.42%, respectively. Behind the stock performance, the most direct catalyst was the company's third-quarter results beating market expectations, along with a substantial upward revision to full-year revenue guidance. Lilly's revenue and core obesity drug sales both performed strongly, further validating the growth momentum of its metabolic business and providing the earnings basis for JPMorgan's upward revision of long-term profit forecasts.
JPMorgan raised its 2026 revenue and adjusted earnings per share forecasts for Lilly to $91.884 billion and $35.91, respectively, close to the upper end of company guidance; for 2027, it lifted them to $109.714 billion and $55.20, up 5.0% and 10.2% from its previous model, and raised revenue forecasts for 2027 and beyond by roughly $4 billion to $6 billion overall. The bank's core thesis is that overseas Mounjaro sales growth, rising U.S. obesity treatment penetration, and the gradual commercialization of new oral GLP-1 products will together extend Lilly's growth cycle, allowing it to consolidate its leading position in an incretin market exceeding $200 billion in size. At the same time, clinical progress in non-obesity areas is also expected to expand the company's long-term earnings sources.
Price cuts haven't blocked expansion: where does obesity drug growth come from?
In the third quarter, Lilly reported revenue of $24.397 billion, up 39% year-over-year, about 7.9% above the LSEG analyst consensus of $22.61 billion cited by Reuters; adjusted earnings per share came in at $7.48, compared with $7.02 a year earlier and about 19.5% above the $6.26 market estimate. The two core brands continued to exceed expectations: weight-loss and diabetes drug Mounjaro posted global sales of $10.723 billion, up 65% year-over-year and above the $10.16 billion consensus; flagship obesity drug Zepbound recorded global sales of $5.352 billion, up 49% year-over-year and above the $5.09 billion consensus. Based on disclosed figures, the two together contributed about 66% of group revenue and roughly 88% of the year-over-year revenue increment, showing that Lilly's growth is still primarily driven by its core metabolic business. The shared active ingredient in Mounjaro and Zepbound is tirzepatide, a dual glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide-1 (GLP-1) receptor agonist that works through blood sugar regulation as well as appetite and food intake control. What JPMorgan values is the growth in the actual number of treated patients driven by both clinical value and expanded payer coverage. In the third quarter, Lilly's volume-price analysis showed volume growth of 53%, offsetting a 15% decline in realized prices; Mounjaro revenue outside the U.S. was about $5.7 billion, up 93% year-over-year. JPMorgan expects Mounjaro overseas revenue to grow from about $21 billion in 2026 to about $28 billion in 2027, while Zepbound is expected to rise from about $20 billion to more than $25 billion over the same period. This means the bank's bullish logic does not depend on drug prices continuing to rise. On the contrary, JPMorgan still assumes prices will decline significantly over the remainder of this decade, but patient expansion and volume growth are expected to outweigh the negative impact of price cuts, driving overall revenue and profit growth to continue.
Expanded insurance coverage is providing new evidence of growth. Management said that since launching the Medicare GLP-1 Bridge program in July, more than 500,000 people have obtained Lilly medicines through the program, with about 70% of newly enrolled patients choosing Lilly; after the initial patient transition phase, about 80% of participating treated patients had not previously used incretin therapies. This means the new insurance coverage not only changes the payment channel but also expands the actual treated population. The oral small-molecule GLP-1 drug Foundayo (orforglipron) is expected to further lower the treatment threshold. Unlike injectables, it requires no injection and no scheduling of dosing around food and water intake, offering another pathway to expand the patient population and international market presence. However, its quarterly revenue of $184 million fell short of the $216.86 million market estimate, indicating that the strong sales delivery of injectables and the commercial ramp-up of oral drugs are still at different stages. JPMorgan listed four sets of catalysts for Lilly's subsequent growth: approval and launch of Foundayo for type 2 diabetes, expected in late 2026 to early 2027; entry into more than 40 international markets in 2027; launch of next-generation candidate retatrutide, expected in late 2027; and 2027 data readouts from TRAILBLAZER-3 in preclinical Alzheimer's disease and EMBER-4 in early breast cancer.
Beyond the metabolic business, Lilly's non-obesity therapeutic areas have also shown a growth foundation. In the third quarter, Jaypirca and Ebglyss sales grew 59% each, while Kisunla grew 175%; revenue from the company's key new product portfolio across immunology, oncology, and neuroscience doubled. Another layer of long-term value JPMorgan values is that the cash and profit generated by the metabolic business can support more new product R&D and commercialization, thereby reducing Lilly's long-term growth dependence on a single product cycle.
What underpins the $1,650 target price: how does revenue expansion translate into profit and cash?
In JPMorgan's forecast model, Lilly's growth runway extends far beyond the next quarter or two. The bank expects Lilly's overall incretin business revenue to grow from $65 billion in 2026 to $82 billion in 2027, approaching $110 billion by 2030. Group revenue is projected to reach $122.392 billion in 2028, with adjusted earnings per share of $61.92; by 2030 and 2032, earnings per share are expected to reach about $74 and $86, respectively. Among these, JPMorgan's 2027 adjusted earnings per share forecast for Lilly is $55.20, about 16.4% above the then-Bloomberg consensus of $47.44 cited in the report, constituting an important expectation gap behind the bank's target price increase. Incretins are hormones secreted by the gut after eating that participate in blood sugar regulation, with the two most important core hormones being GLP-1 (glucagon-like peptide-1) and GIP (glucose-dependent insulinotropic polypeptide).
It is worth noting that JPMorgan's earnings growth forecasts do not rely on continuously rising gross margins. Its model projects Lilly's gross margins at approximately 84.2%, 84.0%, and 83.5% for 2026-2028, while the selling, general and administrative expense ratio will decline from 14.1% to 12.4%. This means that as revenue scale expands, expense dilution is expected to bring operating leverage, becoming an important source of profit growth. At the same time, the 2027 earnings increase also includes the base effect from the larger acquisition-related R&D expenses in 2026. Therefore, when analyzing future earnings growth, it is necessary to distinguish between improvements brought by core business expansion and accounting effects from changes in M&A-related expenses. Cash flow performance determines how high a valuation this growth can support. JPMorgan expects Lilly's free cash flow to the firm (FCFF) to rise from $32.550 billion in 2026 to $39.168 billion in 2027 and $48.793 billion in 2028, assuming capital expenditure of $6.5 billion in each of those three years. The above are all brokerage forecasts. Based on the report's stock price, the forecast price-to-earnings ratios for 2027 and 2028 are 24.9 times and 22.2 times, respectively. JPMorgan's $1,650 target price uses a discounted cash flow (DCF) method, applying an 8.5% weighted average cost of capital (WACC) and a 2.5% perpetual growth rate, while also considering the gradual decay of existing products and incorporating risk-adjusted pipeline value. Its long-term confidence comes from double-digit growth expectations extending into the early 2030s and relatively limited patent and market exclusivity expiration risk over the next decade or so. However, whether the target price can be realized still depends on whether volume growth, expense efficiency, and new product success rates can absorb competitive and policy-driven price-cut pressure, rather than simply relying on maintaining high valuation multiples.
Company raises full-year revenue guidance, core business profitability continues to improve
Lilly's strong third-quarter performance was reflected not only on the sales side but also in its full-year operating outlook. The company raised its 2026 revenue guidance from $85 billion-$87 billion to $91 billion-$92 billion, an increase of $5.5 billion at the midpoint; its company-defined Performance Margin guidance was raised from 49.0%-50.5% to 52.0%-52.5%. Notably, however, adjusted earnings per share guidance was lowered from $35.50-$36.50 to $35-$36. This is not because expectations for the core business weakened, but because the $4.07 per share contribution from improved underlying operations was offset by a $4.57 per share impact from third-quarter acquired in-process research and development (IPR&D) expenses. IPR&D here specifically refers to expenses recognized in the current period under applicable accounting rules for assets such as acquired drug programs that have not yet completed R&D, and therefore weighs on current profit. Lilly's adjusted earnings per share measure still includes such expenses. As a result, the upward revision to revenue and operating margin guidance reflects that core business profitability is still improving; M&A-related expenses, meanwhile, created a temporary drag on reported earnings per share. Understanding the difference between these two effects helps assess the true changes in Lilly's current earnings performance.
Wall Street cross-check: injectable delivery drives upward revisions, oral drugs determine the next wave of growth
Beyond JPMorgan, other institutions also adjusted their views on Lilly after the earnings release, though their assessments of upside potential were not uniform. Jefferies maintained a "Buy" rating and raised its target price from $1,440 to $1,610, implying about 17.2% upside from the $1,373.70 closing price. Barclays' October 29 rating record maintained a $1,400 target price, implying about 1.9% upside. BMO analyst Evan Seigerman believes Foundayo is still behind expectations, but the strong performance of Lilly's broader commercial business reduces the importance of this shortfall; Guggenheim analyst Seamus Fernandez emphasized the cardiovascular-metabolic business beating expectations and the potential for Kisunla to gradually grow into a blockbuster drug. Overall, Lilly's third-quarter adjusted gross margin reached 84.4%, and its company-defined Performance Margin reached 54.2%, up 5.9 percentage points year-over-year, further validating the profitability of its core business. At the same time, the company still needs to continue investing in capacity expansion and R&D; this is not a growth story that requires no capital expenditure. Lilly's investment thesis is expanding from single obesity drug product sales growth to patient population expansion, overseas market penetration, commercialization of new oral products, and succession of non-obesity area products. What JPMorgan and other institutions value is the earnings foundation already established by the existing metabolic business and whether these growth drivers can further translate into sustained cash flow and upward earnings forecast revisions. For Lilly, the key in the next stage is not just how many obesity drugs it can sell, but whether it can convert its current market leadership into sustained profit growth and reduce dependence on a single product cycle through new product succession. As growth assets beyond AI trades regain attention, Lilly's ability to deliver long-term earnings will also remain a key focus of Wall Street evaluation.
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