Abbott's operating margin moved by -7.6 pp from the prior quarter, while sales kept growing. Revenue still grew; operating costs took a bigger share of each sales dollar.
The profit share of each sales dollar shrank
Abbott has filed its results for the third quarter of 2026. Sales look fine. The profit side is where the surprise sits. Operating margin The slice of sales left over after both production costs and running costs are paid. It tells you how much of each sales dollar the business keeps from its day-to-day work. moved by -7.6 pp between the two most recent quarters in the company's filed statements. In 2025Q4, 19.6% of every sales dollar became operating profit. In 2026Q1 that share was 12.0%. One caution on timing: the quarterly statement data available here runs through 2026Q1, so these margins describe earlier quarters than the news release itself.
Data table
| order | category | amount | kind |
|---|---|---|---|
| 0 | 2025Q4 operating margin | 19.6% | total |
| 1 | Gross margin change | -0.8% | delta |
| 2 | Opex ratio change | -6.7% | delta |
| 3 | 2026Q1 operating margin | 12.0% | total |
So what slipped? Gross margin The slice of sales left after the direct cost of making or buying the product. It says nothing yet about salaries, research or advertising., the money left after making the product, barely moved: -0.8 pp. My reading is that the pressure sits further down the income statement, in operating costs, whose share of sales rose 6.7 pp. Research, selling and administration all live in that bucket, and together they took a much bigger bite of each sales dollar than three months earlier.
Glossary
- Operating margin
- The slice of sales left over after both production costs and running costs are paid. It tells you how much of each sales dollar the business keeps from its day-to-day work.
- Gross margin
- The slice of sales left after the direct cost of making or buying the product. It says nothing yet about salaries, research or advertising.
Sales did not stall, they sped up
A headline stops at the margin. The sales line tells the other half of the story. Revenue in 2026Q1 was 7.8% higher than the same quarter a year earlier. In the quarter before that, 2025Q4, the year-on-year pace was 4.4%. On the twelve quarters in the chart, 2026Q1 is the quickest year-on-year pace of the lot.
Data table
| period | revenue | yoy |
|---|---|---|
| 2023Q2 | $10.0bn | — |
| 2023Q3 | $10.1bn | -2.6% |
| 2023Q4 | $10.2bn | 1.5% |
| 2024Q1 | $10.0bn | 2.2% |
| 2024Q2 | $10.4bn | 4.0% |
| 2024Q3 | $10.6bn | 4.9% |
| 2024Q4 | $11.0bn | 7.2% |
| 2025Q1 | $10.4bn | 4.0% |
| 2025Q2 | $11.1bn | 7.4% |
| 2025Q3 | $11.4bn | 6.9% |
| 2025Q4 | $11.5bn | 4.4% |
| 2026Q1 | $11.2bn | 7.8% |
There is a counterweight to that, though. Measured against the quarter right before it, revenue in 2026Q1 was -2.6% lower, so the year-on-year jump sits next to a smaller sequential quarter. Stretch the view out and the pace is calmer: revenue compounded at 4.6% a year over three years. So the top line is not the problem here. A company can sell more and still keep less of it, and that is the pattern in these two quarters.
A weak year for the shares, and still no discount
Holders have had a rough year. The total return The change in the value of a holding over a period, with dividends treated as reinvested in the stock. on the stock was -15.9% over the year to 2026-10-23. The market measure returned 14.4% in the same window. The price data stops on 2026-10-23.
Valuation is not cheap either. Abbott trades at 28.9x trailing earnings. The peer median is 27.4x. That is a premium of 5.2%. The peer group here is small: 4 companies with a usable P/E Price divided by earnings per share. A rough measure of how many years of current profit you are paying for one share., namely Intuitive Surgical, Stryker, Medtronic and Boston Scientific. My reading is that the market is still paying a slightly above-average multiple for Abbott even after a poor year for the shares.
Glossary
- P/E
- Price divided by earnings per share. A rough measure of how many years of current profit you are paying for one share.
- total return
- The change in the value of a holding over a period, with dividends treated as reinvested in the stock.
Over the past year, what was the total return on Abbott shares?
Actual-15.9%
The answer is -15.9%. The surprise is that sales were still growing while the shares went the other way, and the market measure returned 14.4% in the same window.
Show answer
-15.9% The answer is -15.9%. The surprise is that sales were still growing while the shares went the other way, and the market measure returned 14.4% in the same window.
Risks
- One-off items can inflate or deflate a single quarter's costs, so one margin drop may not repeat.
- The peer basket is small and the companies differ, so peer comparisons say little on their own.
- Currency swings and accounting changes can distort year-on-year comparisons.
Sources
- SEC EDGAR XBRL companyfacts, ABBOTT LABORATORIES — data as of 2026-03-31; fetched 2026-10-24 17:15 UTC