Johnson & Johnson Reports Strong Q3 Earnings, Raises 2025 Sales Guidance, and Plans Orthopaedics Business Spin-Off

Johnson & Johnson Delivers Strong Third-Quarter Performance and Announces Strategic Orthopaedics Spin-Off

Johnson & Johnson (J&J) reported robust financial results for the third quarter, exceeding market expectations in both sales and earnings. The healthcare conglomerate also revised its 2025 sales forecast upward and unveiled plans to separate its orthopaedics business, DePuy Synthes, into an independent company. These announcements underscore J&J's ongoing strategic realignment aimed at enhancing focus and unlocking shareholder value within its core pharmaceutical and medical device segments.

Earnings Performance and Strategic Focus

For the third quarter, J&J reported sales of USD23.99 billion, a 6.8% increase year-over-year, surpassing analyst estimates of USD23.75 billion. Net earnings surged by 91% to USD5.15 billion, with adjusted net earnings climbing 15.7% to USD6.80 billion. Adjusted earnings per share (EPS) reached USD2.80, also a 15.7% increase from the prior year. This strong performance was attributed to the company's sharpened focus on six priority areas: Oncology, Immunology, Neuroscience, Cardiovascular, Surgery, and Vision. The Innovative Medicine division, encompassing oncology, immunology, and neuroscience, posted operational sales growth of 5.3%, driven by therapies like DARZALEX and CARVYKTI. Similarly, the MedTech segment, including cardiovascular, surgery, and vision care, achieved 5.6% operational sales growth, fueled by demand for electrophysiology products and surgical innovations.

DePuy Synthes Spin-Off: Unlocking Value

In a significant strategic move, J&J announced its intention to spin off DePuy Synthes, its orthopaedics business, within the next 18 to 24 months. This marks the second major spin-off for J&J since 2023, following the successful separation of its consumer health unit into Kenvue. The orthopaedics unit, which manufactures hip, knee, and shoulder implants, surgical instruments, and related products, generated approximately USD9.2 billion in sales in 2024, accounting for about 10% of J&J's total revenue. Chief Financial Officer Joe Wolk indicated that while profitable, J&J believes the next phase of innovation in orthopaedics would be "beyond our scope and probably in better hands somewhere else." The company is exploring multiple paths for the separation, with a primary focus on a tax-free spin-off, aiming to allow both the remaining J&J and the new DePuy Synthes to concentrate on their respective core competencies, potentially driving increased growth and operating margins.

Market Context: Orthopaedics Sector Dynamics

The global orthopaedics market was valued at approximately USD59 billion in 2024, with implants constituting USD50 billion of this total. The market saw a 6% increase in 2024, driven by patient demand, improved hospital staffing, and growth in Ambulatory Surgical Center (ASC) procedures. Projections indicate a 4% annual growth rate for the market in the coming years. The sector is characterized by intense competition and innovation, with major players like Stryker, Globus Medical, Zimmer Biomet, and Smith & Nephew actively engaged in mergers, acquisitions, and technological advancements, particularly in robotic-assisted surgical systems. For instance, Stryker acquired Inari Medical for USD4.9 billion in Q1 2025 and expects 8.0-9.0% organic sales growth in 2025. The increasing adoption of robotic systems in procedures like knee and hip replacements is anticipated to further expand these markets by improving accuracy and reproducibility. The spin-off of DePuy Synthes introduces a significant new independent entity into this dynamic and growing market.

Revised 2025 Outlook and Analyst Perspectives

Reflecting confidence in its strategic initiatives and product pipeline, J&J raised its 2025 full-year guidance. The company now projects adjusted operational sales growth of 3.5%–4.0%, up from its previous outlook. Estimated reported sales are anticipated to be in the range of USD93.5 billion–USD93.9 billion, an increase of approximately USD300 million from its prior forecast and above analyst expectations of USD93.4 billion. While the company reaffirmed its adjusted earnings per share guidance for fiscal 2025, maintaining a midpoint of USD10.85, the revised sales outlook signals strong operational momentum. Shares of Johnson & Johnson saw an increase of nearly 2% in premarket trading following these announcements.

Looking Ahead

The planned spin-off of DePuy Synthes represents a pivotal moment for Johnson & Johnson, further streamlining its portfolio to focus on high-growth, high-margin areas within pharmaceuticals and medical devices. The successful execution of this separation, alongside sustained innovation in its core therapeutic areas, will be key factors to monitor. The new DePuy Synthes will enter a competitive yet growing orthopaedics market, where its ability to innovate and capture market share will define its trajectory. Investors will be closely watching J&J's progress in capitalizing on its strategic realignment and the performance of both entities post-separation.