Novartis (SWX:NOVN) Earnings Jump 22%—Profit Beat Reinforces Margin and Value Narratives

Novartis (SWX:NOVN) delivered 22.4% earnings growth over the past year, a major leap from its five-year average of just 0.09% per year. Net profit margin ticked up to 25.5% from last year's 23.6%, with earnings expected to grow 7.53% per year going forward, even as both earnings and revenue growth are forecast to lag the broader Swiss market. Investors will note the company’s Price-To-Earnings ratio sits at just 16.4x, offering more value than both the peer average (75.1x) and the wider European pharmaceuticals sector (22.4x). Profitability and dividends remain key strengths.

See our full analysis for Novartis.

The next section examines how these fresh numbers compare with the prevailing narratives around Novartis. Some beliefs may get reinforced, while others could be challenged.

See what the community is saying about NovartisSWX:NOVN Earnings & Revenue History as at Oct 2025

Innovative Therapies Drive Margin Uptrend

Net profit margins have risen to 25.5%, up from 23.6% last year, supported by the ongoing expansion of high-value brands and an improved product mix in innovative therapies. Analysts' consensus view highlights that substantial growth in therapies like Kisqali, Kesimpta, Scemblix, and Pluvicto is amplifying Novartis’ margin upside.

With sustained double-digit sales gains for these priority drugs, consensus expects margin to increase from 24.7% today to 29.3% within three years. This reinforces confidence in durable, high-quality earnings. At the same time, operational efficiency achieved through previous portfolio streamlining is cited as a margin enhancer. This supports expectations for improved long-term profitability. The consensus narrative sees continued demand for breakthrough therapies and emerging market expansion as core pillars ensuring Novartis’ resilience against lower overall Swiss market growth.

This positive scenario is reinforced by a robust late-stage pipeline and proactive management of the product portfolio. Together, these factors are expected to maintain the upward momentum in margins and cash flows. Regular reinvestment of higher free cash flow supports both research and attractive shareholder returns, linking the company’s profit growth to patient demand and scientific advances.

See what long-term drivers and risks lie behind this consensus view. Full narrative here: 📊 Read the full Novartis Consensus Narrative.

Patent Risks and Pricing Pressures Intensify

Patent expirations and global pricing policies have become more significant, as consensus notes upcoming loss of exclusivity for key blockbusters including Entresto and new pressures from pricing dynamics in China and Europe. Critics highlight that pipeline and portfolio strengths must now counter regulatory uncertainties and loss of pricing power.

Long-term competitive intensity, including biosimilar threats and tougher reimbursement hurdles, is already impacting Cosentyx’s market share and anticipated margins. This presents a genuine test for management execution. Additional pipeline risks in major therapy areas, especially with programs like Sjogren’s disease and new renal assets, create the possibility of underperformance if clinical or regulatory hurdles prove more severe than reflected in current analyst estimates.

Story Continues

Valuation Discounts Versus Sector Peers

Novartis trades at a Price-To-Earnings ratio of 16.4x, well below both its peer average of 75.1x and the European pharmaceuticals average of 22.4x. This suggests a clear discount despite steady profitability. The analysts' consensus view contends that this valuation gap could close if forecasted growth in earnings and margins is realized, potentially leading to a rerating of the stock.

With the current share price at 98.50, just slightly below the consensus price target of 101.33, the market seems aligned with the view that Novartis is fairly priced relative to short-term risk and opportunity. Upcoming share buybacks and strong dividend policies further highlight value for shareholders, particularly given the company’s solid cash position and outlook for EPS growth.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Novartis on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Novartis research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Novartis’ outlook faces challenges from looming patent expirations, pricing pressures, and the risk of underperformance if new drug launches do not deliver as forecast.

If steady performance and reliable growth appeal to you, focus on stable growth stocks screener (2121 results) that have not been derailed by patent cycles or unpredictable market forces.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NOVN.SW.

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