J&J Earnings: Baby Powder Lawsuit Offer Nearly Erased Profit
Johnson & Johnson’s third-quarter profit fell 96% to $210 million, mainly because of a one-time legal charge of about $5.5 billion that J&J ties to its offer to settle the baby powder lawsuits. Sales still rose 5.9% to $25.4 billion, and the company raised its outlook for the year. By our reading of J&J’s tables, the whole legal line, not talc alone, cost about $1.75 a share, so without it J&J would have earned about $1.84 against $2.12 a year earlier, a gap that a roughly $1 billion research charge helps explain. The July offer is smaller in headline dollars than the plans in the bankruptcy cases courts dismissed in 2023 and 2025, worth $8 billion to $8.9 billion in present value over 25 years, future claims included.
J&J third quarter 2026 at a glance
On this page
- Sales rose while profit nearly vanished
- The terms of the proposed baby powder settlement
- The size of the charge, and profit without it
- This offer and the failed bankruptcy plans
- The cash would leave later than the charge
- The outlook rose after a larger cut in July
- Signals that would change the picture
- How we counted
- Frequently asked questions
Sales rose while profit nearly vanished
J&J’s quarter was a strong sales quarter with almost no profit left at the bottom, and the gap between the two is a legal bill. The company reported on October 13, 2026 that sales for the quarter ended September 27 reached $25.399 billion, up from $23.993 billion a year earlier, while net earnings dropped to $210 million from $5.152 billion and earnings per share fell from $2.12 to $0.09. The same figures sit in the Form 8-K J&J filed at 8:12 a.m. Eastern time.
The release explains the drop in one line, saying the $0.09 “reflects a one-time special charge for the proposed talc litigation resolution, the acquisition of Firefly Bio, Inc., and the strategic collaboration with Sail Biomedicines.” Three different things are bundled there. The talc part is the baby powder litigation, Firefly Bio is a cancer-drug company J&J bought in July, and Sail Biomedicines is a partner it is paying to develop a new kind of cell therapy.
J&J also reports a second set of figures it calls adjusted, which leave out one-time items such as legal settlements, along with the yearly write-off of the value of products it acquired (our explainer on GAAP and non-GAAP earnings covers why companies publish both). On that basis earnings were $2.59 a share, down 7.5% from $2.80, and the company says the deals weigh on that figure too. The outlook it raised is on the adjusted basis as well: J&J now expects $11.05 to $11.15 a share for 2026, up from $10.96 to $11.11, and sales of about $101.2 billion at the middle of its range.
The company held its call with analysts at 8:30 a.m. Eastern time; no transcript or prepared remarks had been published when this article was written, so nothing from the call appears here.
The terms of the proposed baby powder settlement
The offer is a proposal to pay $5.5 billion to end what the July release calls the “Remaining Roughly 76,000 Ovarian Talc Claims,” and it only takes effect if almost all of those claimants join. J&J announced it on July 27, 2026, and its Form 8-K of the same day sets out the terms: an agreement with the plaintiff firms leading the federal case and related state cases, “conditioned upon, among other things, the express participation of at least of 95% of the remaining claims,” with “per claim payments, with a $5.5 billion commitment by the Company, and the first payment of no more than $3 billion to be made in 2027 and no additional payments due before 2028.”
The lawsuits are about body powders that contained talc, mainly JOHNSON’S Baby Powder. J&J’s quarterly report for the period ended June 28, 2026 put the count at “approximately 76,000 plaintiffs in the United States with direct claims” and says the company has won some trials and lost others, with many of the losses reversed on appeal. J&J stopped selling talc-based baby powder worldwide in 2023, and when it spun off its consumer health business as Kenvue that year it kept the talc liabilities and agreed to cover Kenvue’s costs from talc cases in the United States and Canada, according to the July release.
The offer followed a turn in the main federal case, which is a multi-district litigation, the court process that groups thousands of similar lawsuits in front of one judge. The quarterly report says plaintiffs withdrew two of their experts on whether talc caused any particular claimant’s cancer after hearings in May 2026, and the July release says that “On July 22, 2026, the MDL court ordered plaintiffs to show why the remaining pending talc claims should not be dismissed for inability to prove specific causation.”
The two sides disagree on the core question. The suits are, in the words of J&J’s 2025 annual report, “claims alleging that talc causes cancer,” while the June 2026 quarterly report refers to “the Company's confidence in the safety of its talc products,” and J&J’s litigation chief, Erik Haas, said in July that the offer “allows the Company to put this matter behind it.” This article takes no view on the merits of the claims.
The July announcement leaves some questions open. It describes the offer as covering the remaining claims and says nothing about people who might file in the future, a group the earlier bankruptcy plans were built to cover, and as of the October release J&J had not said whether the 95% threshold has been reached.
The size of the charge, and profit without it
The legal charge in the quarter was $5.519 billion before tax and $4.289 billion after tax, which on J&J’s 2.4486 billion diluted shares works out to about $1.75 a share. Those figures come from the reconciliation table at the back of the results release, where J&J lists each item it leaves out of adjusted earnings with its tax effect; the pre-tax lines also appear in Exhibit 99.2 of the 8-K. The line is labelled “Litigation related,” so it may hold legal costs beyond talc; a year earlier it was $15 million.
Put the $1.75 back and J&J would have earned about $1.84 a share, by our arithmetic. That is still below the $2.12 of the third quarter of 2025, and the Firefly purchase weighs on that comparison. J&J said when it closed the $1 billion deal that it would be treated as buying a research project, “resulting in an in-process research and development charge of approximately $1 billion in the third quarter of 2026” (Firefly release, July 29). Research and development spending rose $980 million to $4.652 billion, consistent with that charge, though the release does not itemize it, and other items moved in both quarters, so the $0.28 gap cannot be split item by item.
Show the data
| Step | Value |
|---|---|
| Reported profit | $210M |
| Legal charges | +$4,289M |
| Amortization | +$1,001M |
| Other items | +$839M |
| Adjusted profit | $6,339M |
Before tax, the legal line explains most of the collapse on its own. Pre-tax earnings were $34 million against $7.493 billion a year earlier, and adding back the $5.519 billion legal line gives about $5.55 billion, still 26% below the year-earlier figure once its own $15 million legal line is added back. The rest of the gap is spread across the cost of past acquisitions, the planned separation of the orthopaedics business, write-downs of research projects and the deals.
About the per-share figures. The $1.75 and $1.84 are our calculations from the release’s reconciliation, using after-tax amounts and the quarter’s diluted share count. They are neither J&J’s reported earnings nor its adjusted earnings, and the release does not say how much of the legal line is talc alone.
This offer and the failed bankruptcy plans
By our count of its releases, this is J&J’s fifth public proposal since 2021 to end the talc cases in one move, and the first that does not run through a bankruptcy filing by a subsidiary. The earlier proposals all ran through Chapter 11 cases filed by companies J&J created to hold the talc liabilities, a route the company described as a way to resolve current and future claims together. Courts dismissed all three of those bankruptcy cases.
| Amount as J&J stated it | Claims covered | Outcome | |
|---|---|---|---|
| Oct 2021, LTL Management bankruptcy | $2B trust plus court-set funding | All talc claims, current and future | Dismissed April 2023 |
| Apr 2023, LTL Management re-filing | Up to $8.9B present value, 25 years | North American talc claims, with future | Dismissed July 28, 2023 |
| May 2024, proposed prepackaged plan | $6.475B present value ($8.0B nominal) | Ovarian claims, current and future | Became the Red River case |
| Sep 2024, Red River Talc bankruptcy | About $8B present value ($10B nominal) | Ovarian claims, current and future | Dismissed March 2025 |
| Jul 2026, proposed settlement | $5.5B, first payment up to $3B in 2027 | Remaining ovarian claims, about 76,000 | Pending, needs 95% participation |
The amounts are stated on different bases, which matters for any comparison. The 2023 and 2024 plans were stated as present values, meaning the value now of payments spread over 25 years; J&J’s annual report for 2025 says the May 2024 plan had a present value of about $6.475 billion and a nominal value of about $8.0 billion, discounted at 4.4%. The September 2024 Red River plan was about $8 billion in present value and about $10 billion nominal, according to J&J’s release. The 2026 offer is a $5.5 billion commitment paid from 2027, and the July filing does not call it a present value.
The claims covered differ too. The April 2023 plan aimed to resolve “all the current and future talc claims” in North America, including the mesothelioma cases, while the 2024 plans covered ovarian cancer claims, current and future, and the 2026 offer covers the remaining ovarian claims. J&J says it has separately settled about 95% of the mesothelioma lawsuits filed, the state consumer protection claims and its disputes with its talc suppliers.
J&J’s filings describe how each bankruptcy case ended. For the case filed in October 2021 with a $2 billion trust, its quarterly report of mid-2023 says that “On January 30, 2023, the Third Circuit reversed the Bankruptcy Court’s ruling and remanded to the Bankruptcy Court to dismiss the LTL bankruptcy,” and the New Jersey bankruptcy court dismissed it in April 2023. The re-filed case was dismissed on July 28, 2023, per the same report, and Red River ended when the Texas bankruptcy court “issued an order dismissing the case” in March 2025, according to the 2025 annual report.
Each turn moved J&J’s talc reserve, the amount it sets aside on its balance sheet for expected costs. After a charge of about $2.7 billion in the first quarter of 2024, the reserve stood at about $11.0 billion in present value (May 2024 release), and it reached about $11.6 billion at the end of 2024. When Red River was dismissed, J&J “reversed substantially all, or approximately $ 7 billion” of it, which lifted its reported 2025 profit, and the reserve was about $3.4 billion at the end of 2025 and $3.7 billion on June 28, 2026.
Show the data
| Category | Value |
|---|---|
| Mar 2024 | $11.0B |
| Dec 2024 | $11.6B |
| Dec 2025 | $3.4B |
| Jun 2026 | $3.7B |
The quarterly report for the third quarter, which will show the reserve after the new charge, had not been filed when this article was written, so we do not state a new total. The charge J&J booked this quarter, $5.519 billion before tax, is within $19 million of the $5.5 billion commitment.
The cash would leave later than the charge
The charge hits this quarter’s profit, but the cash comes later: no more than $3 billion in 2027 and nothing further before 2028, if the offer goes ahead. That timing comes from the July filing, and it means no payment under the offer falls in 2026.
For scale, J&J estimates its free cash flow for the first nine months of 2026, the cash left after running the business and paying for new plants and equipment, at about $15.1 billion, against $14.226 billion a year earlier. The $5.5 billion commitment would be about 36% of that nine-month figure, and the first payment of up to $3 billion about 20%, ratios of two company figures that say nothing about how J&J will fund the payments. Because the payments are made per claim, the filing does not say whether the total could end up above or below the commitment.
The outlook rose after a larger cut in July
The sales figures show a business that kept growing: the medicines business grew 7.7% to $16.757 billion and the medical devices business, which J&J calls MedTech, grew 2.5% to $8.642 billion. Sales in the United States rose 9.1% while sales abroad rose 1.5%, so nearly all the growth came from the US.
The medicines figure hides a large handover between two drugs for immune diseases. STELARA, its older immune drug, sold about $0.7 billion in the quarter against about $1.6 billion a year earlier, and J&J says it cut about 6.9 percentage points from the medicines unit’s growth. TREMFYA, a newer J&J immune drug, sold about $2.4 billion against about $1.4 billion. The release also credits cancer drugs such as DARZALEX and CARVYKTI and the psychiatric drugs SPRAVATO and CAPLYTA.
The raised outlook needs a date next to it. J&J raised its forecast for adjusted earnings in April and again on July 15, to $11.68 a share at the middle of the range, then cut it to $11.04 on July 29, when its Form 8-K said the Firefly and Sail deals would “reduce the Company's adjusted operational earnings per share (Adjusted Operational EPS) and adjusted earnings per share (Adjusted EPS) by approximately $0.64 in 2026.” Today’s $11.10 is $0.06 above that cut forecast and $0.58 below the July 15 one.
Show the data
| Category | Value |
|---|---|
| Jan 21 | $11.53 |
| Apr 14 | $11.55 |
| Jul 15 | $11.68 |
| Jul 29 | $11.04 |
| Oct 13 | $11.10 |
If the $0.64 estimate still holds, adding it back gives $11.74, which is $0.06 above July 15, so on that reading the rest of the business is slightly ahead of where J&J saw it in mid-July. That is our inference from the two filings; the October release does not restate the deal cost. The same 8-K expects the deals to cut 2027 adjusted earnings by about $1.36 a share, a figure that, in the 8-K’s words, “assumes Sail's achievement of certain development milestones and the Company's option grant, if exercised.”
The forecast also asks a lot of the last quarter. J&J earned $8.19 a share on the adjusted basis in the first nine months, so the $11.10 midpoint implies about $2.91 in the fourth quarter, about 18% more than the $2.46 of the fourth quarter of 2025. That is arithmetic on the company’s range, and the company itself does not give a quarterly figure.
Signals that would change the picture
Participation is the signal that matters most for the talc story. The offer needs at least 95% of the remaining claims, and J&J has not said how many have joined; an announcement that the threshold was met, or missed, would change how final the $5.5 billion looks. The federal court’s order to show cause from July 22 is the other legal thread, since it concerns the remaining pending claims.
On the numbers, J&J’s quarterly report for the third quarter is where the talc reserve after the charge will appear, along with a breakdown of what else sat in the legal line, and a payment of up to $3 billion is due in 2027 if the offer goes ahead. On the business side, the 2027 earnings cost of the Sail option and the pace at which TREMFYA keeps filling the hole STELARA leaves are two figures worth tracking in the company’s next reports. Our J&J overview page and financials page update as those reports come in.
How we counted
Every figure for the quarter comes from J&J’s results release of October 13, 2026, which J&J filed as Exhibit 99.1 of its Form 8-K, with the pre-tax statement of earnings and reconciliation also in Exhibit 99.2; the after-tax amount of each item comes from the reconciliation table on the release page. The after-tax litigation line ($4.289 billion) divided by the quarter’s 2.4486 billion diluted shares gives $1.75 a share, and adding it to reported earnings of $210 million gives $4.499 billion, or about $1.84 a share.
The waterfall uses the after-tax amounts of each item in the release’s reconciliation. Amortization is the yearly write-off of the value of acquired products, and other items groups the orthopaedics separation ($301 million), research write-downs ($254 million), restructuring, tax-related items, securities losses and acquisition-related credits ($839 million in total).
The forecast path uses the midpoint of the adjusted earnings range from each release or filing on its date (January 21, April 14, July 15, July 29 and October 13). The comparison table takes each amount, basis and outcome from J&J’s own releases and SEC filings as cited, and the reserve figures are the present values J&J reported. The average of about $72,000 per claim mentioned in the FAQ divides $5.5 billion by 76,000 claims, which assumes every claim joins, and it is not a figure J&J has given for any individual claimant.
Frequently asked questions
Why did Johnson & Johnson’s profit drop 96% in the third quarter of 2026?
Mainly because of a one-time litigation-related charge of $5.519 billion before tax ($4.289 billion after tax), which J&J ties to its proposed settlement of the baby powder lawsuits, plus a roughly $1 billion research charge for the Firefly Bio purchase. Net earnings fell to $210 million from $5.152 billion while sales rose 5.9%.
How much is the J&J talc settlement offer?
J&J committed $5.5 billion in per-claim payments to resolve about 76,000 remaining ovarian cancer claims, provided at least 95% of those claims take part. Spread evenly across every claim that would average about $72,000, our arithmetic and not a payment J&J has stated for any claimant.
When would talc claimants be paid?
According to J&J’s July 27, 2026 filing, the first payment of no more than $3 billion would be made in 2027, with no additional payments due before 2028, if the participation condition is met.
Did Johnson & Johnson raise its 2026 guidance?
Yes. The midpoint of its adjusted earnings forecast rose $0.06 to $11.10 a share, within a new range of $11.05 to $11.15. That raise follows a $0.64 cut on July 29 for the Firefly and Sail deals, so the forecast is still below the $11.60 to $11.75 range J&J gave on July 15.
Where can I follow Johnson & Johnson news and filings on StockTitan?
The JNJ overview page collects J&J’s press releases and SEC filings as they arrive, and the JNJ financials page shows its quarterly results. The financial health score ranks companies on their reported financials, and our JPMorgan and Wells Fargo earnings article covers another set of results from the same week.
Sources
- Johnson & Johnson reports Q3 2026 results, raises 2026 guidance (October 13, 2026)
- Johnson & Johnson Announces a Proposed Resolution of Ovarian Talc Litigation (July 27, 2026)
- Johnson & Johnson Completes Acquisition of Firefly Bio (July 29, 2026)
- Johnson & Johnson reports Q2 2026 results (July 15, 2026)
- Johnson & Johnson reports Q1 2026 results (April 14, 2026)
- Johnson & Johnson reports Q4 and full-year 2025 results (January 21, 2026)
- Red River Talc bankruptcy filing release (September 20, 2024)
- LLT Management proposed plan release (May 1, 2024)
- LTL Management re-filing release (April 4, 2023)
- LTL Management Chapter 11 release (October 14, 2021)
- Form 8-K, third quarter 2026 results (October 13, 2026)
- Exhibit 99.1, third quarter 2026 results release (October 13, 2026)
- Exhibit 99.2, third quarter 2026 statement of earnings and reconciliations (October 13, 2026)
- Form 8-K, proposed talc resolution (July 27, 2026)
- Form 8-K, Firefly and Sail guidance update (July 29, 2026)
- Form 10-Q for the quarter ended June 28, 2026
- Form 10-K for fiscal 2025
- Form 10-Q for the quarter ended July 2, 2023
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