- Eli Lilly's P/E has collapsed from a peak of 135.24 to roughly 33x - not because the business slowed, but because earnings accelerated faster than the stock
- Q1 2026 revenue surged 56% to $19.8 billion; non-incretin revenue (everything outside the GLP-1 weight-loss franchise) continues growing 20%+ year over year
- Kisunla (donanemab) for Alzheimer's is now approved in both the U.S. and Europe, with analysts forecasting $8 billion in peak sales - a second blockbuster track, not a moonshot
- Free cash flow hit $16.8 billion in 2025 and $2.8 billion in Q1 2026 alone, giving the company capital flexibility even as it invests heavily in pipelines
- The dividend yield sits near 0.6% - this is not an income play. The thesis is earnings compounding and FCF conversion at a valuation that hasn't felt this thin relative to growth in years
The false narrative around Eli Lilly has been running for months, and it's simple enough to repeat: this is a weight-loss drug company, the GLP-1 growth will eventually slow, and the multiple will contract when it does. It's the kind of logic that sounds structural but is actually backward - because it assumes the stock's entire future rests on a single category, and it ignores what happened between the panic and the price.
Here's what actually happened. Eli Lilly's stock was trading at 135 times earnings near the peak of the GLP-1 mania. As of early June 2026, the P/E sits around 33x - a 75% compression. The stock didn't collapse. Earnings exploded past what even the most bullish analysts modeled. In Q1 2026, Lilly reported $8.55 in diluted EPS, well above the $6.73 consensus estimate. Revenue hit $19.8 billion, up 56% year over year. The market called it a valuation correction. In my opinion, it was an earnings re-rating - the kind that happens when growth outpaces narrative.
The P/E drop looks scary on a chart. But a collapsing multiple with accelerating revenue and earnings doesn't signal weakness. It signals that the market had to catch up to a company that stopped being what everyone thought it was.
Now to the "other reason" - because the diversification story is the structural shift, and it's already happening.
Lilly's so-called "non-incretin" revenue - everything outside the Mounjaro and Zepbound GLP-1 drugs - has been growing 20% or more year over year for several consecutive quarters. That's not a rounding error. For context, 20% growth on a multi-billion-dollar non-GLP-1 base means the company isn't just riding one wave. It's building secondary engines.
Three pillars carry this diversification.
First, diabetes. Trulicity remains one of the largest diabetes drugs in the world. It's mature, it's generating cash, and it's funding the pipeline. The incretin franchise (Mounjaro for diabetes, Zepbound for weight loss) and Trulicity together create a dual-track diabetes business where one drug funds the next generation.
Second, oncology. Lilly has spent the last decade building an immuno-oncology portfolio - not by chasing the latest antibody fad, but by stacking assets across tumor types and treatment modalities. The company is showcasing its oncology portfolio across multiple categories at the 2026 ASCO annual meeting, which signals pipeline depth. Oncology is where Lilly's R&D scale compounds over time. These drugs won't hit peak sales overnight, but the pipeline breadth matters: when you're running dozens of trials across multiple indications, you're insuring against the binary risk that kills smaller biotechs.
Third, and most important for the next two years, Alzheimer's. Kisunla (donanemab) was FDA-approved in July 2024 and received European Commission approval in September 2025. That gives Lilly access to both the largest and the fastest-growing Alzheimer's markets. Analysts forecast $8 billion in peak sales. The Alzheimer's drug market itself is projected to grow from $6.2 billion in 2026 to $12.7 billion by 2033. Kisunla isn't a pipeline dream. It's an approved, marketed drug in two regions with growing clinical evidence. That is structural, not speculative.
Lilly's 2025 revenue guidance range was $58 billion to $61 billion. Full-year 2024 came in around $45 billion. That trajectory - from $45 billion to a likely $60+ billion in two years - is growth that few pharmaceutical companies outside the GLP-1 category have matched. And the non-incretin businesses are doing the heavy lifting that the market hasn't priced in yet.
Now, the honest accounting. Eli Lilly is not a dividend stock. The yield sits around 0.6%, and that's by design. Lilly is reinvesting its cash flow into R&D, manufacturing scale-up, and pipeline execution rather than returning it to shareholders. For income-focused investors, this stock does nothing. I don't rate it for yield because the yield isn't the point.
The point is free cash flow. Lilly generated $16.8 billion in FCF for fiscal 2025 - a step up from $8.8 billion in 2024. In Q1 2026 alone, FCF reached $2.8 billion. At that run rate, the company is building a war chest that allows it to fund its oncology and neuroscience pipelines without leverage while the GLP-1 franchise continues printing cash. FCF generation at this scale, combined with a strong balance sheet, is what lets a company of Lilly's size make transformational bets without betting the farm.
Here's the contradiction that keeps the false narrative alive: investors are pricing in a GLP-1 slowdown while paying a valuation that already reflects one. The 33x P/E on 56% revenue growth is a multiple that would be rich for a mature pharma company and cheap for a growth story still accelerating. The market is trying to have it both ways - acknowledging the revenue surge but refusing to let go of the "what happens when Zepbound peaks" fear.
That fear is real, but it's not the whole story. When non-incretin revenue grows 20%+, when Kisunla opens the Alzheimer's market, and when oncology pipeline assets start converting from trials to approvals, the question shifts. It stops being "what if GLP-1 slows down?" and becomes "how diversified is this company now?"
The answer is more diversified than anyone realized six months ago.
That being the case, I rate Eli Lilly as a Buy. The P/E compression to roughly 33x on 56% revenue growth, $16.8 billion in annualized FCF, and a three-pillar diversification play across diabetes, oncology, and Alzheimer's creates an asymmetric setup. The GLP-1 slowdown risk is real, but the non-incretin growth rate and Kisunla's European approval mean it's no longer the only thing that matters. In my opinion, this is the kind of position where the market's narrative lag works in the investor's favor - not against them.