Zoetis Q3 2025 Earnings: Profitability Shines Amid Strategic Shifts

Zoetis (NYSE: ZTS), a global leader in the animal health industry, recently filed its financial results for the third quarter ending September 30, 2025. For anyone interested in the health of our furry and feathered friends—and the companies that support them—this latest 10-Q filing offers a detailed look under the hood. Let's break down the key numbers from the income statement to see how the company performed.

A Visual Guide to Zoetis's Q3 Performance

To understand how Zoetis generates its profits, the following flow diagram visualizes the company's revenue, costs, and earnings for the third quarter of 2025.

Revenue: A Story of Strategic Shifts

At first glance, Zoetis's revenue growth appears modest. The company posted $2.4 billion in revenue for the third quarter, a slight 1% increase compared to the same period last year. However, this headline number masks significant changes happening within its business segments.

The key drivers for this quarter were:

• Companion Animal Strength: Revenue from products for pets like dogs, cats, and horses grew 3% to $1.65 billion. This growth was particularly strong in international markets, which saw a 4% operational increase. Key product lines like parasiticides (flea and tick treatments), vaccines, and dermatology products all posted healthy gains.
• Livestock Headwinds: In contrast, the livestock segment, which serves cattle, swine, and poultry, saw a 4% decline in revenue to $725 million. A major factor here was the company's recent divestiture of its medicated feed additives (MFA) portfolio. This strategic sale caused a nearly $86 million drop in that specific product category, significantly impacting the livestock segment's overall performance.

This split performance highlights a clear trend: while strategic divestitures are creating short-term drags on total revenue, the core companion animal business remains a powerful growth engine for the company.

The Bottom Line: Growing Profits Through Efficiency

Despite the muted revenue growth, Zoetis demonstrated impressive profitability. Net income attributable to the company grew by 6% to $721 million, up from $682 million in the third quarter of 2024. This resulted in a diluted earnings per share (EPS) of $1.63, a 9% increase from the prior year.

How did profits grow faster than sales? The answer lies in improved cost management.

• Improved Gross Margin: Cost of sales as a percentage of revenue fell from 29.4% to 28.5%. The company attributed this to price increases and the favorable impact of shedding the lower-margin MFA business. In simple terms, Zoetis is making more profit on each dollar of sales.
• Controlled Spending: While operating expenses like selling, general & administrative (SG&A) and research & development (R&D) did increase slightly, they remained well-managed in proportion to revenue.

Furthermore, Zoetis continued to return capital to its shareholders, repurchasing nearly 2.5 million shares of its stock for approximately $381 million during the quarter.

Final Thoughts

Zoetis's third-quarter report reveals a company that is becoming leaner and more profitable. The strategic decision to divest its MFA portfolio is weighing on overall revenue growth but is simultaneously boosting margins. The sustained strength in the high-growth companion animal market, particularly in international regions, is a significant positive.

Looking ahead, the challenge for Zoetis will be to continue driving innovation and growth in its core areas to overcome the impact of divestitures and navigate a competitive landscape. For now, the focus on profitability appears to be paying off, delivering solid returns even in a period of modest top-line expansion.