ZTS · 10-Q · 2026Q2 · Full report
Gross Margin Drivers
Zoetis Inc. · 2026-08-06 · Importance 25 · Surprise 32 · No source text
Consolidated cost of sales increased to 27.8% of revenue in the six months ended June 30, 2026 from 27.4% in the prior-year period. The higher cost ratio reflected unfavorable product mix and foreign exchange, partly offset by favorable manufacturing and other costs and price increases. U.S. gross margin declined to 82.7% from 84.0%, while International gross margin improved to 71.0% from 70.2%, contributing to lower U.S. earnings and higher International earnings.
Key facts
- Cost of sales as a percentage of revenue increased to 27.3% in the three months ended June 30, 2026 from 26.8% in the three months ended June 30, 2025 primarily due to unfavorable product mix and unfavorable foreign exchange, partially offset by favorable manufacturing costs. source
- Cost of sales as a percentage of revenue increased to 27.8% in the six months ended June 30, 2026 from 27.4% in the six months ended June 30, 2025 primarily due to unfavorable product mix and unfavorable foreign exchange, partially offset by favorable manufacturing and other costs and price increases. source
- Cost of sales for the three months ended June 30, 2026 was $1,314 million and was 27.3% of revenue. source
- Cost of sales for the six months ended June 30, 2026 was $1,282 million and was 27.8% of revenue. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| margin | negative | realized | -0.5% | Cost of sales as a percentage of revenue increased to 27.3% in the three months ended June 30, 2026 from 26.8% in the three months ended… |
| margin | negative | realized | -0.4% | Cost of sales as a percentage of revenue increased to 27.8% in the six months ended June 30, 2026 from 27.4% in the six months ended June… |
| operating_income | negative | realized | — | Cost of sales for the three months ended June 30, 2026 was $1,314 million and was 27.3% of revenue. |
| operating_income | negative | realized | — | Cost of sales for the six months ended June 30, 2026 was $1,282 million and was 27.8% of revenue. |