Eli Lilly & Co. (NYSE:LLY)

The income tax expense and benefit components demonstrate significant fluctuations over the five-year period. Current tax expense exhibits a consistent upward trend, while deferred tax benefits show a more volatile pattern, though generally remaining negative. The net income tax figure, representing the sum of these components, also increases substantially throughout the period.

Current Tax Expense

Current tax expense increased steadily from US$1,376 million in 2021 to US$6,798 million in 2025. This represents a substantial increase, suggesting growing taxable income. The year-over-year increases were particularly pronounced between 2021 and 2022, and again between 2023 and 2024, indicating accelerating growth in tax obligations.

Deferred Tax Benefit

Deferred tax benefits are consistently negative, indicating a net increase in deferred tax liabilities. The magnitude of these benefits fluctuated, moving from -US$802 million in 2021 to -US$2,185 million in 2022, then to -US$2,341 million in 2023, -US$2,683 million in 2024, and finally decreasing to -US$1,707 million in 2025. While generally negative, the reduction in the absolute value of the benefit in 2025 suggests a potential slowing in the creation of deferred tax liabilities or a realization of some deferred tax assets.

Net Income Taxes

The net income tax expense, calculated as the sum of current tax expense and deferred tax benefit, shows a marked increase over the period. Starting at US$574 million in 2021, it rose to US$562 million in 2022, then increased significantly to US$1,314 million in 2023, US$2,090 million in 2024, and culminated in US$5,091 million in 2025. This growth is primarily driven by the substantial increase in current tax expense, partially offset by the deferred tax benefits.

The increasing net income tax expense suggests a growing profitability and taxable income base. The interplay between current and deferred taxes warrants further investigation to understand the underlying drivers of these changes, including potential changes in tax rates, the utilization of tax loss carryforwards, and the recognition of temporary differences.

The effective income tax rate exhibited considerable fluctuation over the five-year period. While the U.S. federal statutory tax rate remained constant at 21.00%, the effective income tax rate demonstrated significant variance from this benchmark.

Initial Period (2021-2022)

A downward trend in the effective income tax rate is observed from 2021 to 2022, decreasing from 9.32% to 8.25%. This suggests a potential increase in tax benefits, adjustments to income recognized in tax jurisdictions with lower rates, or changes in the mix of income sources.

Significant Increase (2022-2023)

The effective income tax rate increased substantially in 2023, rising to 20.05% from 8.25% the prior year. This represents a convergence towards the statutory rate, potentially indicating a reduction in tax benefits or a shift in the geographic distribution of profits.

Subsequent Fluctuation (2023-2025)

Following the increase in 2023, the effective income tax rate decreased to 16.49% in 2024 before increasing again to 19.80% in 2025. This continued volatility suggests ongoing changes in factors influencing the company’s tax obligations, such as tax credits, deductions, or international tax implications. The rate in 2025 remains below the statutory rate, but is closer to it than in the earlier years of the period.

Overall Trend

The five-year period demonstrates a lack of a consistent trend in the effective income tax rate. The rate moved from a low of 8.25% to a high of 20.05% and ended at 19.80%. This variability warrants further investigation into the underlying drivers of these changes to understand the company’s tax position and potential exposures.

The composition of deferred tax assets and liabilities exhibits significant changes over the five-year period. A consistent increase is observed in both gross deferred tax assets and deferred tax liabilities, though the net position demonstrates a substantial positive trend. Key drivers of these changes include capitalized research and development, sales rebates, and fluctuations in foreign earnings.

Capitalized Research and Development

Capitalized research and development represents a consistently growing component of gross deferred tax assets, increasing from US$275 million in 2021 to US$4,518 million in 2025. This substantial growth suggests an increasing investment in research and development activities, leading to a larger future tax benefit as these expenses become deductible.

Sales Rebates and Discounts

The value associated with sales rebates and discounts also demonstrates a notable upward trend, rising from US$832 million in 2021 to US$2,779 million in 2025. This increase likely reflects changes in sales strategies or increased sales volumes subject to rebate programs, creating future tax benefits.

Tax Loss and Credit Carryforwards

Tax loss and other tax carryforwards show a fluctuating pattern, initially decreasing from US$645 million in 2021 to US$527 million in 2023, before increasing to US$911 million in 2025. Tax credit carryforwards exhibit a steady increase over the period, from US$464 million to US$649 million. These carryforwards represent potential future tax reductions.

Valuation Allowance

The valuation allowance against deferred tax assets has increased steadily throughout the period, from US$876 million in 2021 to US$1,223 million in 2025. This suggests a growing uncertainty regarding the realization of certain deferred tax assets, potentially due to concerns about future profitability or changes in tax laws.

Deferred Tax Liabilities

Deferred tax liabilities are primarily driven by earnings of foreign subsidiaries and intangible assets. While both components decreased from 2021 to 2023, they began to stabilize and show smaller decreases in 2024 and 2025. The liability related to intangibles consistently represents the largest portion of the total deferred tax liabilities.

Net Deferred Tax Position

The net deferred tax position, calculated as deferred tax assets less deferred tax liabilities, has increased significantly from US$756 million in 2021 to US$9,841 million in 2025. This substantial increase indicates a growing expectation of future tax benefits exceeding future tax obligations. The growth is largely attributable to the increasing deferred tax assets, particularly those related to research and development and sales rebates, outpacing the growth in deferred tax liabilities.

Overall, the trends suggest a growing investment in research and development and sales-related activities, resulting in a substantial increase in deferred tax assets. The increasing valuation allowance indicates a degree of caution regarding the realization of these assets, while the net deferred tax position demonstrates a significant shift towards a future tax benefit position.

Over the five-year period, significant fluctuations are observed in both deferred tax assets and deferred tax liabilities. Deferred tax assets demonstrate a consistent upward trend, while deferred tax liabilities exhibit a substantial decrease followed by a period of relative stability.

Deferred Tax Assets

The value of deferred tax assets increased from US$2,489 million in 2021 to US$9,959 million in 2025. This represents a more than fourfold increase over the period. The most substantial growth occurred between 2022 and 2023, rising from US$2,793 million to US$5,477 million. Growth continued, albeit at a decreasing rate, through 2025. This suggests a growing capacity to utilize future tax deductions or credits.

Deferred Tax Liabilities

Deferred tax liabilities experienced a dramatic decline from US$1,734 million in 2021 to US$87 million in 2022. Following this significant reduction, the value remained relatively stable, fluctuating between US$74 million and US$118 million from 2023 to 2025. This decrease could indicate the realization of previously deferred tax obligations or changes in temporary differences.

Net Deferred Tax Position

The net deferred tax position, calculated as deferred tax assets less deferred tax liabilities, has shifted considerably. In 2021, the net position was US$755 million. By 2022, this increased to US$2,706 million. This positive trend continued, reaching US$9,841 million in 2025. The widening gap between assets and liabilities suggests an increasingly favorable long-term tax position.

The substantial increase in deferred tax assets, coupled with the decrease in deferred tax liabilities, indicates a significant change in the company’s deferred tax profile. Further investigation into the specific sources of these deferred tax items would be necessary to fully understand the underlying drivers of these trends.

The financial information reveals a consistent pattern of adjustments related to income taxes, resulting in lower reported asset, liability, and equity values when these adjustments are applied. These adjustments also significantly impact reported net income. Over the five-year period, the magnitude of these adjustments has generally increased, particularly in later years.

Total Assets

Reported total assets demonstrate a substantial upward trend, increasing from US$48,806 million in 2021 to US$112,476 million in 2025. However, the adjusted total assets, reflecting the removal of deferred tax items, show a comparatively smaller increase, moving from US$46,317 million to US$102,517 million over the same period. The difference between reported and adjusted assets widens considerably from 2023 onwards, indicating a growing impact from deferred tax adjustments.

Total Liabilities

Similar to assets, reported total liabilities exhibit an increasing trend, rising from US$39,651 million in 2021 to US$85,941 million in 2025. The adjusted total liabilities follow a similar trajectory, increasing from US$37,918 million to US$85,823 million. The gap between reported and adjusted liabilities remains relatively consistent until 2024 and 2025, where it narrows slightly.

Shareholders’ Equity

Reported total shareholders’ equity shows growth, increasing from US$8,979 million in 2021 to US$26,535 million in 2025. Conversely, adjusted shareholders’ equity demonstrates a more volatile pattern. It declines from US$8,223 million in 2021 to US$5,399 million in 2023 before increasing to US$16,694 million in 2025. The difference between reported and adjusted equity is most pronounced in 2023 and 2024, suggesting a significant impact of deferred tax adjustments on equity in those years.

Net Income

Reported net income increases substantially over the period, from US$5,582 million in 2021 to US$20,640 million in 2025. The adjusted net income, however, is consistently lower than the reported figure and also demonstrates a different growth pattern. It declines from US$4,779 million in 2021 to US$2,899 million in 2023 before rising to US$18,933 million in 2025. The difference between reported and adjusted net income grows significantly in later years, indicating a substantial impact from the removal of deferred tax effects on reported profitability.

The consistent adjustments to all balance sheet and income statement items suggest a significant deferred tax position. The increasing magnitude of these adjustments, particularly in the later years of the period, warrants further investigation to understand the underlying causes and potential implications for future financial reporting.

The financial performance metrics exhibit notable variations when analyzed with and without the impact of deferred taxes. Generally, the adjusted ratios present a more conservative view of profitability and returns. A review of the period between 2021 and 2025 reveals distinct trends in several key areas.

Profitability

Reported net profit margin initially increased from 19.71% in 2021 to 21.88% in 2022, then decreased to 15.36% in 2023 before recovering significantly to 23.51% in 2024 and reaching 31.67% in 2025. The adjusted net profit margin, however, demonstrates a different pattern. It declined from 16.88% in 2021 to 14.22% in 2022, continued to fall to 8.50% in 2023, then increased to 17.55% in 2024 and 29.05% in 2025. The difference between reported and adjusted margins widens in later years, suggesting a growing influence of deferred tax assets or liabilities on reported earnings.

Asset Turnover

Reported total asset turnover remained relatively stable between 2021 and 2023, fluctuating around 0.58-0.53, before increasing to 0.57 in 2024 and 0.58 in 2025. The adjusted total asset turnover shows a similar trend, with a slight increase from 0.61 in 2021 and 2022 to 0.58 in 2023, then rising to 0.64 in both 2024 and 2025. The adjusted ratio consistently exceeds the reported ratio, indicating that removing deferred tax effects results in a higher assessment of asset utilization.

Financial Leverage

Reported financial leverage decreased from 5.44 in 2021 to 4.65 in 2022, increased to 5.94 in 2023 and 5.55 in 2024, then decreased to 4.24 in 2025. Conversely, adjusted financial leverage increased from 5.63 in 2021 to 5.88 in 2022, then rose sharply to 10.84 in 2023 and 11.29 in 2024, before decreasing to 6.14 in 2025. This substantial divergence highlights the significant impact of deferred taxes on the perception of financial risk. The adjusted leverage ratio suggests a considerably higher degree of financial risk in 2023 and 2024 than indicated by the reported figures.

Return on Equity (ROE)

Reported ROE decreased from 62.16% in 2021 to 58.64% in 2022, then fell to 48.65% in 2023 before increasing substantially to 74.62% in 2024 and 77.78% in 2025. The adjusted ROE follows a similar pattern but with lower values overall. It decreased from 58.12% in 2021 to 51.10% in 2022, increased to 53.71% in 2023, then rose dramatically to 126.20% in 2024 and 113.41% in 2025. The adjusted ROE demonstrates a more pronounced increase in later years, but remains significantly higher than the reported ROE in 2024 and 2025.

Return on Assets (ROA)

Reported ROA decreased from 11.44% in 2021 to 8.19% in 2023, then increased to 13.45% in 2024 and 18.35% in 2025. The adjusted ROA exhibits a similar downward trend initially, falling from 10.32% in 2021 to 4.95% in 2023, before increasing to 11.18% in 2024 and 18.47% in 2025. The adjusted ROA consistently underperforms the reported ROA, particularly in the later years, indicating that deferred tax effects positively influence the reported return on assets.

In conclusion, the removal of deferred tax effects generally leads to lower profitability ratios and higher leverage ratios. The magnitude of these adjustments varies over time, with the impact becoming more substantial in the later years of the analyzed period. This suggests that deferred taxes play an increasingly important role in shaping the reported financial performance.

The period under review demonstrates fluctuating performance in both reported and adjusted net income, which consequently impacts associated profit margins. Reported net income initially increased from 2021 to 2022, then decreased in 2023 before experiencing substantial growth in 2024 and 2025. A similar, though more pronounced, pattern is observed in adjusted net income.

Reported Net Profit Margin

The reported net profit margin exhibited an initial increase from 19.71% in 2021 to 21.88% in 2022. This was followed by a decline to 15.36% in 2023. A significant recovery occurred in 2024, reaching 23.51%, and continued upward to 31.67% in 2025. This suggests increasing efficiency in converting revenue into profit, particularly in the later years of the period.

Adjusted Net Profit Margin

The adjusted net profit margin showed a decreasing trend from 16.88% in 2021 to 14.22% in 2022, and a more substantial decrease to 8.50% in 2023. Similar to the reported margin, 2024 saw a considerable increase to 17.55%, followed by a further rise to 29.05% in 2025. The adjusted margin consistently remains below the reported margin throughout the period, indicating that adjustments reduce the stated profitability. The magnitude of the difference between the reported and adjusted margins appears to be widening in the later years.

The divergence between reported and adjusted net income, as reflected in their respective margins, warrants further investigation. The substantial increases in both metrics from 2023 to 2024 and 2025 suggest a significant positive shift in the underlying business performance or the impact of specific adjustments. The consistent gap between the two margins indicates the presence of recurring items that are excluded from the adjusted figures, potentially impacting the perceived quality of earnings.

The information presents a five-year trend of total assets and associated asset turnover ratios. Reported total assets demonstrate a consistent increase over the period, growing from US$48,806 million in 2021 to US$112,476 million in 2025. Adjusted total assets, which are consistently lower than reported assets, also exhibit a similar upward trajectory, rising from US$46,317 million to US$102,517 million during the same timeframe.

Reported Total Asset Turnover

The reported total asset turnover ratio remains relatively stable, fluctuating between 0.53 and 0.58 over the five-year period. A slight dip to 0.53 is observed in 2023, followed by a recovery to 0.57 in 2024 and a return to 0.58 in 2025. This suggests a consistent, but not improving, efficiency in generating revenue from its asset base as measured by reported assets.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio shows a similar pattern to the reported ratio, but with slightly higher values. It begins at 0.61 in both 2021 and 2022, decreases to 0.58 in 2023, and then increases to 0.64 in both 2024 and 2025. The increase in the adjusted ratio in the later years indicates a potentially improved efficiency in revenue generation when considering the adjusted asset base. The difference between the reported and adjusted ratios suggests that the adjustments to total assets impact the efficiency metric.

The consistent growth in total assets, coupled with the relatively stable asset turnover ratios, indicates that revenue growth is generally keeping pace with asset expansion. The slight increase in the adjusted total asset turnover in the final two years suggests that the adjustments made to total assets may be revealing a more accurate picture of asset utilization efficiency.

An examination of the financial information reveals notable trends in both reported and adjusted financial leverage over the five-year period. While reported financial leverage demonstrates a generally decreasing trend, adjusted financial leverage exhibits more volatility, increasing significantly in the middle of the period before declining.

Reported Total Assets

Reported total assets increased consistently throughout the period, growing from US$48,806 million in 2021 to US$112,476 million in 2025. This represents a substantial expansion of the company’s asset base.

Adjusted Total Assets

Adjusted total assets also increased over the period, mirroring the trend in reported assets, though at a slightly lower magnitude. Growth progressed from US$46,317 million in 2021 to US$102,517 million in 2025.

Reported Shareholders’ Equity

Reported total shareholders’ equity increased from US$8,979 million in 2021 to US$26,535 million in 2025, indicating a strengthening of the company’s equity position. The rate of increase appears to accelerate in later years.

Adjusted Shareholders’ Equity

Adjusted total shareholders’ equity presents a more complex pattern. It decreased from US$8,223 million in 2021 to US$5,399 million in 2023 before increasing substantially to US$16,694 million in 2025. This suggests potential adjustments impacting equity valuation in the earlier part of the period.

Reported Financial Leverage

Reported financial leverage, calculated as total assets divided by total shareholders’ equity, decreased from 5.44 in 2021 to 4.24 in 2025. This decline suggests a decreasing reliance on financial leverage from a reported perspective, potentially due to faster equity growth relative to asset growth.

Adjusted Financial Leverage

Adjusted financial leverage demonstrates a different trajectory. It increased from 5.63 in 2021 to a peak of 11.29 in 2024 before decreasing to 6.14 in 2025. The increase between 2021 and 2024 is significant, indicating a substantial increase in leverage when considering the adjustments made to assets and equity. The subsequent decrease in 2025 suggests a partial reversal of this trend. The volatility in adjusted financial leverage warrants further investigation into the nature of the adjustments being applied.

The divergence between reported and adjusted financial leverage highlights the impact of the adjustments made to assets and equity. While reported leverage indicates a decreasing risk profile, adjusted leverage suggests a more dynamic and, at times, elevated risk profile. The significant fluctuations in adjusted leverage, particularly the peak in 2024, require further scrutiny to understand the underlying drivers and their implications for the company’s financial health.

The financial information reveals significant fluctuations in both reported and adjusted net income, alongside corresponding changes in shareholders’ equity, impacting return on equity (ROE) calculations over the five-year period. A notable divergence exists between reported and adjusted figures for both net income and shareholders’ equity, leading to differing ROE values.

Reported Net Income & ROE

Reported net income increased from US$5,582 million in 2021 to US$6,245 million in 2022, before decreasing to US$5,240 million in 2023. A substantial increase is then observed in 2024, reaching US$10,590 million, followed by a further significant rise to US$20,640 million in 2025. Reported ROE generally follows this trend, beginning at 62.16% in 2021, decreasing to 48.65% in 2023, and then increasing sharply to 74.62% in 2024 and 77.78% in 2025. This indicates a strong correlation between net income and reported ROE.

Adjusted Net Income & ROE

Adjusted net income demonstrates a different pattern. It decreased from US$4,779 million in 2021 to US$4,060 million in 2022, and continued to decline to US$2,899 million in 2023. Similar to reported net income, adjusted net income increased significantly in 2024 to US$7,907 million and further to US$18,933 million in 2025. Adjusted ROE mirrors this pattern, starting at 58.12% in 2021, falling to 51.10% in 2022 and 53.71% in 2023, then rising dramatically to 126.20% in 2024 and 113.41% in 2025. The adjusted ROE values are consistently lower than the reported ROE values, except in 2023.

Shareholders’ Equity

Reported total shareholders’ equity increased steadily from US$8,979 million in 2021 to US$10,650 million in 2022 and US$10,772 million in 2023. A further increase is observed in 2024 to US$14,192 million, with a substantial rise to US$26,535 million in 2025. Adjusted total shareholders’ equity shows a different trend, increasing from US$8,223 million in 2021 to US$7,944 million in 2022, then decreasing to US$5,399 million in 2023. It then increases to US$6,265 million in 2024 and US$16,694 million in 2025. The divergence between reported and adjusted equity is most pronounced in 2023 and 2025.

ROE Discrepancy

The difference between reported and adjusted ROE widens considerably in 2024 and 2025. This suggests that the adjustments made to net income and shareholders’ equity have a substantial impact on the calculated ROE, particularly as net income increases. The magnitude of these adjustments warrants further investigation to understand the underlying reasons for the differences between reported and adjusted figures.

The period between 2021 and 2025 demonstrates fluctuating performance when examining reported and adjusted return on assets. Reported net income and total assets generally increased over the five-year period, while adjusted net income and total assets exhibited more volatility. This resulted in differing trends between the reported and adjusted ROA calculations.

Reported Return on Assets (ROA)

Reported ROA initially increased from 11.44% in 2021 to 12.62% in 2022. A subsequent decline to 8.19% occurred in 2023, followed by a substantial recovery to 13.45% in 2024. The most recent year, 2025, shows a further increase to 18.35%, representing the highest value within the observed period. This trend largely correlates with the fluctuations in reported net income.

Adjusted Return on Assets (ROA)

Adjusted ROA experienced a more pronounced downward trend from 2021 to 2023, decreasing from 10.32% to 4.95%. A recovery began in 2024, with adjusted ROA reaching 11.18%. This upward momentum continued into 2025, culminating in an adjusted ROA of 18.47%, nearly mirroring the reported ROA for that year. The adjusted ROA’s volatility suggests a greater sensitivity to adjustments made to net income and total assets.

The divergence between reported and adjusted ROA highlights the impact of specific adjustments. The difference between the two metrics widened in 2023, indicating significant adjustments impacting net income and/or total assets. As both reported and adjusted ROA increased substantially in 2025, it suggests that the underlying business performance improved significantly in that year, and the adjustments did not negate this improvement. The convergence of reported and adjusted ROA in 2025 suggests that the adjustments had a less substantial impact on the overall profitability picture in the most recent year.

Asset Trends

Reported total assets increased steadily from US$48,806 million in 2021 to US$112,476 million in 2025. Adjusted total assets followed a similar pattern, though at lower values, increasing from US$46,317 million to US$102,517 million over the same period. The consistent growth in both reported and adjusted assets indicates expansion of the company’s resource base.

Net Income Trends

Reported net income demonstrated a significant increase from US$5,582 million in 2021 to US$20,640 million in 2025. Adjusted net income also increased over the period, but experienced a dip in 2023, reaching US$2,899 million before recovering to US$18,933 million in 2025. The substantial growth in both reported and adjusted net income, particularly in the later years, contributed to the observed increases in ROA.