Item 7. Management’s discussion and analysis of results of operations and financial condition

Organization and business segments

Description of the company and business segments

Johnson & Johnson and its subsidiaries (the Company) have approximately 138,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the healthcare field. The Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being.

The Company is organized into two business segments: Innovative Medicine and MedTech. The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolism. Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals and healthcare professionals for prescription use. The MedTech segment includes a broad portfolio of products used in the Surgery, Orthopaedic, Cardiovascular and Vision fields. These products are distributed to wholesalers, hospitals and retailers, and used principally in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics.

In October 2025, the Company announced its intention to separate its Orthopaedics business. The Company intends to explore multiple paths to effect the planned separation with a targeted completion within 18 to 24 months after the initial announcement.

The Chief Operating Decision Maker (CODM) is the Company's Chief Executive Officer (Principal Executive Officer). The Executive Committee is Johnson & Johnson’s senior leadership team responsible for setting the strategy and priorities of the Company and driving accountability at all levels. Within the strategic parameters provided by the Executive Committee, senior management groups at U.S. and international operating companies are each responsible for their own strategic plans and the day-to-day operations of those companies.

In all of its product lines, the Company competes with other companies both locally and globally, throughout the world. Competition exists in all product lines without regard to the number and size of the competing companies involved. Competition in research, involving the development and the improvement of new and existing products and processes, is particularly significant. The development of new and innovative products, as well as protecting the underlying intellectual property of the Company's product portfolio, is important to the Company’s success in all areas of its business. The competitive environment requires substantial investments in continuing research.

Management’s objectives

With Our Credo as the foundation, the Company believes health is everything. The Company's strength in healthcare innovation empowers us to build a world where complex diseases are prevented, treated, and cured, where treatments are smarter and less invasive, and solutions are personal. Through the Company's expertise in Innovative Medicine and MedTech, the Company is uniquely positioned to innovate across the full spectrum of healthcare solutions today to deliver the breakthroughs of tomorrow, and profoundly impact health for humanity.

New products introduced within the past five years accounted for approximately 25% of 2025 sales. In 2025, $14.7 billion was invested in research and development reflecting management’s commitment to create life-enhancing innovations and to create value through partnerships that will profoundly impact of health for humanity.

Our approximately 138,200 employees are critical drivers of the Company’s success. Employees are empowered and inspired to lead with Our Credo and purpose as guides. This allows every employee to use the Company’s reach and size to advance the Company’s purpose, and to also lead with agility and urgency. Leveraging the extensive resources across the enterprise enables the Company to innovate and execute with excellence. This ensures the Company can remain focused on addressing the unmet needs of society every day and invest for an enduring impact, ultimately delivering value to its patients, consumers and healthcare professionals, employees, communities and shareholders.

Research &

development

Acquisitions*

(net of cash acquired)

Dividends paid

per share

* Includes business combinations and asset acquisitions

Results of operations

Analysis of consolidated sales

For discussion on results of operations and financial condition pertaining to the fiscal years 2024 and 2023 see the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2024, Item 7. Management's discussion and analysis of results of operations and financial condition.

In 2025, worldwide sales increased 6.0% to $94.2 billion as compared to an increase of 4.3% in 2024. These sales changes consisted of the following:

Sales increase/(decrease) due to: 2025 2024

The net impact of acquisitions and divestitures on the worldwide sales growth was a positive impact of 1.1% in 2025, primarily related to CAPLYTA and Shockwave and a positive impact of 0.5% in 2024 primarily related to Shockwave.

Sales by U.S. companies were $53.8 billion in 2025 and $50.3 billion in 2024. This represents increases of 6.9% in 2025 and 8.3% in 2024. In the fiscal year 2025, acquisitions and divestitures had a net positive impact of 2.0% on the U.S. sales growth primarily related to CAPLYTA and Shockwave. Sales by international companies were $40.4 billion in 2025 and $38.5 billion in 2024. This represents an increase of 5.0% in 2025, and a decrease of 0.5% in 2024. In fiscal 2025, acquisitions and divestitures had a net positive impact of 0.1% on the international operational* sales growth, primarily related to Shockwave. In the fiscal year 2025, the negative impact of the STELARA sales decline, due to biosimilar competition, was approximately 6.2%, 7.6% and 4.4% on worldwide, U.S. and international operational sales, respectively.

The five-year compound annual growth rates for worldwide, U.S. and international sales were 6.7%, 7.9% and 5.2%, respectively. The ten-year compound annual growth rates for worldwide, U.S. and international sales were 5.2%, 5.8% and 4.5%, respectively.

In 2025, sales by companies in Europe achieved growth of 6.5% as compared to the prior year, which included operational growth of 2.4% and a positive currency impact of 4.1%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 3.4% as compared to the prior year, which included operational growth of 8.4%, and a negative currency impact of 5.0%. Sales by companies in the Asia-Pacific, Africa region achieved growth of 3.2% as compared to the prior year, including operational growth of 3.1% and a positive currency impact of 0.1%.

In 2025, the Company utilized three wholesalers distributing products for both segments that represented approximately 21.8%, 15.5% and 11.1% of the total gross revenues. In 2024, the Company had three wholesalers distributing products for both segments that represented approximately 20.5%, 15.6% and 12.3% of the total gross revenues.

2025 Sales by geographic region (in billions)

2025 Sales by segment (in billions)

Note: values may have been rounded

*operational excludes the effect of translational currency

Analysis of sales by business segments

Innovative Medicine segment

Innovative Medicine segment sales in 2025 were $60.4 billion, an increase of 6.0% from 2024, which included operational growth of 5.3% and a positive currency impact of 0.7%. U.S. sales were $36.3 billion, an increase of 7.0%. International sales were $24.1 billion, an increase of 4.6%, which included operational growth of 2.9% and a positive currency impact of 1.7%. In 2025, the net impact of acquisitions and divestitures on the worldwide Innovative Medicine segment operational sales growth was a positive 1.2%, related to CAPLYTA. In 2025, the negative impact of the STELARA sales decline, primarily due to biosimilar competition, was an approximate 10.4%, 12.3% and 7.9% on worldwide, U.S. and international Innovative Medicine segment operational sales, respectively.

Major Innovative Medicine therapeutic area sales:

(Dollars in Millions) 2025 2024 TotalChange OperationsChange CurrencyChange

RYBREVANT/ LAZCLUZE(1) 734 327 * * *

Other Immunology 61 3 * * *

CAPLYTA(3) 700 — * * —

INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA 3,810 4,222 (9.8) (9.9) 0.1

(1)Previously in Other Oncology, Includes the sales of RYBREVANT and RYBREVANT + LAZCLUZE

(2)Previously in Other Oncology

(3)Acquired with Intra-Cellular Therapies on April 2, 2025

(4)OPSYNVI was previously in Other Pulmonary Hypertension

(5)Includes the Covid-19 Vaccine in 2024

* Percentage greater than 100% or not meaningful

Oncology products achieved sales of $25.4 billion in 2025, representing an increase of 22.1% as compared to the prior year. Strong sales of DARZALEX (daratumumab) were driven by continued share gains and market growth. Growth of ERLEADA (apalutamide) was primarily due to continued share gains and market growth partially offset by the impact of Medicare Part D redesign. Increased sales of CARVYKTI (ciltacabtagene autoleucel) were driven by continued share gains and capacity expansion. Additionally, sales from the ongoing launches and share gains of TECVAYLI (teclistamab-cqyv), TALVEY (talquetamab-tgvs) and RYBREVANT (amivantamab)/LAZCLUZE (lazertinib) contributed to the growth. Growth was partially offset by ZYTIGA (abiraterone acetate) due to loss of exclusivity and IMBRUVICA (ibrutinib) due to competitive pressures and the impact of Medicare Part D redesign.

Immunology products sales were $15.7 billion in 2025, a decline of 11.8% as compared to the prior year primarily due to the decline of STELARA (ustekinumab) sales driven by the impact of biosimilar competition and Medicare Part D redesign. The growth of TREMFYA (guselkumab) was due to share gains and market growth. The increase in SIMPONI/SIMPONI ARIA sales was primarily driven by the Merck, Sharp & Dohme return of rights in Europe in the fiscal fourth quarter of 2024. The increase in REMICADE (infliximab) sales was due to favorable patient mix, market growth and the Merck, Sharp & Dohme return of rights in Europe in the fiscal fourth quarter of 2024, partially offset by continued biosimilar competition.

Sales of STELARA in the United States were approximately $3.8 billion in fiscal 2025. Third parties have filed biologics license applications with the U.S. FDA, the European Medicines Agency, and other government authorities seeking approval to market biosimilar versions of STELARA around the globe. The Company expects continued launches of biosimilar versions of STELARA globally which will continue to negatively impact the Company’s sales of STELARA.

At least two biosimilars are pursuing regulatory approval for a SIMPONI biosimilar in the United States, which would likely result in a significant reduction in future sales.

Neuroscience products, which include sales of CAPLYTA (lumateperone) acquired with the Intra-Cellular Therapies (Intra-Cellular) acquisition on April 2, 2025, achieved sales of $7.8 billion in 2025, representing an increase of 10.1% as compared to the prior year. Growth of SPRAVATO (esketamine) was driven by continued increased physician and patient demand. Growth was partially offset by the sales decline of INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA primarily due to the impact of Medicare Part D redesign.

Pulmonary Hypertension products achieved sales of $4.4 billion, representing an increase of 3.6% as compared to the prior year. Sales growth of OPSUMIT (macitentan)/OPSYNVI (macitentan/tadalafil) was driven by share gains and market growth partially offset by the impact of Medicare Part D redesign and UPTRAVI (selexipag) was driven by market growth partially offset by the impact of Medicare Part D redesign. The Company expects generic competition for OPSUMIT in 2026, which would likely result in a significant reduction in future sales.

Infectious disease products sales were $3.2 billion in 2025, a decline of 4.6% as compared to the prior year primarily driven by declines across the portfolio including COVID-19 vaccine revenue in Other Infectious Diseases. The decline was partially offset by growth of EDURANT/rilpivirine.

Cardiovascular/Metabolism/Other products achieved sales were $3.8 billion, representing an increase of 6.1% as compared to the prior year. The growth of XARELTO (rivaroxaban) sales was primarily driven by the impact of Medicare Part D redesign and market growth partially offset by continued share loss.

The Company maintains a policy that no end customer will be permitted direct delivery of product to a location other than the billing location. This policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions. Both grantee and non-grantee covered entities can maintain certain contract pharmacy arrangements under policy exceptions. The Company has been and will continue to offer 340B discounts to covered entities on all of its covered outpatient drugs, and it believes its policy will improve its ability to identify inappropriate duplicate discounts and diversion prohibited by the 340B statute. The 340B Drug Pricing Program is a U.S. federal government program requiring drug manufacturers to provide significant discounts on covered outpatient drugs to covered entities.

During 2025, the Company advanced its pipeline with several regulatory submissions and approvals for new drugs and additional indications for existing drugs as follows:

Product Name(Chemical Name) Indication USApproval EUApproval USFiling EUFiling

CAPLYTA (lumateperone) Adjunctive treatment for Major Depressive Disorder •

ICOTYDE (icotrokinra) Treatment for Psoriasis (ICONIC) • •

IMBRUVICA (ibrutinib) Treatment for frontline MCL (Triangle) •

RYBREVANT (amivantamab) Treatment for subcutaneous (PALOMA-3) • •

STELARA (ustekinumab) Treatment of Patients with Pediatric Crohn's Disease • •

TECVAYLI (teclistamab) Multiple Myeloma 1-3PLs (MajesTEC-3) •

TREMFYA (guselkumab) Treatment of Patients with Ulcerative Colitis (QUASAR) •

TREMFYA (guselkumab) Treatment of Patients with Crohn's Disease (GALAXI) • •

MedTech segment

The MedTech segment sales in 2025 were $33.8 billion, an increase of 6.1% from 2024, which included operational growth of 5.4% and a positive currency impact of 0.7%. U.S. sales were $17.4 billion, an increase of 6.6% as compared to the prior year. International sales were $16.4 billion, an increase of 5.5% as compared to the prior year, which included operational growth of 4.1% and a positive currency impact of 1.4%. In 2025, the net impact of acquisitions and divestitures on the MedTech segment worldwide operational sales growth was a positive 1.1% primarily related to the Shockwave acquisition.

Major MedTech franchise sales:

(Dollars in Millions) 2025 2024 TotalChange OperationsChange CurrencyChange

(1)Acquired on May 31, 2024

* Percentage greater than 100% or not meaningful

The Surgery franchise achieved sales of $10.1 billion in 2025, representing an increase of 3.0% from 2024. Growth in Advanced Surgery was primarily due to the strength of the portfolio and commercial execution in Biosurgery as well as new products in Endocutters. This was partially offset by China volume-based procurement across all platforms and competitive pressures in Energy and Endocutters. Growth in General Surgery was primarily driven by technology penetration and upgrades within the differentiated Wound Closure portfolio. This growth was partially offset by the impact from divestitures.

The Orthopaedics franchise achieved sales of $9.3 billion in 2025, representing an increase of 1.1% from 2024. All platforms were negatively impacted by revenue disruption from the previously announced Orthopaedics restructuring, which is now substantially complete, the negative impact of volume-based procurement in China and selling days. The growth in Hips was primarily due to new product launches. The growth in Knees was primarily driven by the ATTUNE portfolio, pull through related to the VELYS Robotic assisted solution. Growth in Trauma was driven by the adoption of recently launched products and commercial execution. The decline in Spine, Sports & Other was primarily driven by competitive pressures and price pressures in the U.S. Early Interventional segment partially offset by new product launches.

The Cardiovascular franchise achieved sales of $8.9 billion in 2025, representing an increase of 15.8% from 2024. Electrophysiology growth was driven by procedure growth, new product performance and commercial execution. This was partially offset by competitive pressures in Pulsed Field Ablation catheters. Abiomed sales reflect the continued strong adoption of Impella 5.5 and Impella CP. Shockwave sales growth was driven by Coronary and Peripheral portfolios and new product launches.

The Vision franchise achieved sales of $5.5 billion in 2025, representing an increase of 6.3% from 2024. Contact Lenses/Other growth was primarily driven by market growth, continued strong performance in the ACUVUE OASYS 1-Day family of products (including recent launches) and strategic price actions. Surgical growth was primarily driven by the continued strength of recent product innovations, robust demand and commercial execution.

Analysis of consolidated earnings before provision for taxes on income

Consolidated earnings before provision for taxes on income was $32.6 billion and $16.7 billion for the years 2025 and 2024, respectively. As a percent to sales, consolidated earnings before provision for taxes on income was 34.6% and 18.8%, in 2025 and 2024, respectively.

Earnings before provision for taxes

(Dollars in billions. Percentages in chart are as a percent to total sales)

Cost of products sold and selling, marketing and administrative expenses:

Cost of products sold

Selling, marketing & administrative

(Dollars in billions. Percentages in chart are as a percent to total sales)

Cost of products sold:

Cost of products sold increased as a percent to sales driven by:

•Unfavorable product mix driven by the decline of STELARA sales and unfavorable transactional currency in the Innovative Medicine business

•Tariffs, unfavorable transactional currency and macroeconomic factors in the MedTech business

partially offset by

•Non-recurring, acquisition related fair value Inventory step-up of $0.1 billion in 2025 versus $0.4 billion in 2024 related to the business combination accounting associated with the Shockwave acquisition in the MedTech business

The intangible asset amortization expense included in cost of products sold was $4.6 billion in fiscal 2025 and $4.5 billion in fiscal 2024.

Selling, Marketing and Administrative expense:

Selling, Marketing and Administrative Expenses decreased as a percent to sales driven by:

•Corporate administrative expense rationalization

•Planned leverage in the Innovative Medicine business

partially offset by

•Increased investment related to the acquisition of Intra-Cellular (CAPLYTA)

Research and Development expense:

Research and development expense by segment of business was as follows:

(Dollars in Millions) Amount % of Sales* Amount % of Sales*

Percent increase/(decrease) over the prior year (14.9 %) 14.2 %

*As a percent to segment sales

Research and development activities represent a significant part of the Company's business. These expenditures relate to the processes of discovering, testing and developing new products, upfront payments and developmental milestones, improving existing products, as well as ensuring product efficacy and regulatory compliance prior to launch. The Company remains committed to investing in research and development with the aim of delivering high quality and innovative products.

Research and Development decreased as a percent to sales primarily driven by:

•Acquired in-process research & development expense of $1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in the Innovative Medicine business in 2024

•Acquired in-process research & development expense of $0.5 billion from the V-Wave acquisition and a Laminar milestone of $0.3 billion in the MedTech business in 2024

•Leverage resulting from investment prioritization in the Innovative Medicine business

In-Process Research and Development Impairments (IPR&D): In the fiscal year 2025, the Company recorded a charge of approximately $0.1 billion primarily related to a non-strategic asset acquired with Abiomed in 2022. In the fiscal year 2024, the Company recorded a charge of approximately $0.2 billion primarily associated with the M710 (biosimilar) asset acquired as part of the acquisition of Momenta Pharmaceuticals in 2020. There was also a partial impairment of this asset for $0.2 billion in the fiscal 2023. This asset is fully impaired.

Other (Income) Expense, Net: Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson Innovation - JJDC, Inc. (JJDC), changes in the fair value of securities, investment (income)/loss related to employee benefit programs, gains and losses on divestitures, certain transactional currency gains and losses, acquisition and divestiture related costs, litigation accruals and settlements, as well as royalty income.

Other (income) expense, net for the fiscal year 2025 reflected an increase in income of $11.9 billion as compared to the prior year primarily due to the following:

(Dollars in Billions)(Income)/Expense 2025 2024 Change

Employee benefit plan related (0.5) (0.9) 0.4

Changes in the fair value of securities(2) (0.4) 0.3 (0.7)

Acquisition, Integration and Divestiture related(3) 0.2 0.8 (0.6)

Monetization of royalty rights 0.0 (0.3) 0.3

Total Other (Income) Expense, Net $ (7.2) 4.7 (11.9)

(1)The fiscal year 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve and an expense of $0.8 billion for the Auris shareholder litigation. The fiscal year 2024 includes charges of approximately $5.1 billion for talc matters (See Note 19 to the Consolidated Financial Statements for additional details).

(2)The fiscal year 2024 includes the loss of $0.4 billion on the completion of the debt for equity exchange of the retained stake in Kenvue.

(3)The fiscal year 2025 is primarily related to the acquisitions of Intra-Cellular (CAPLYTA) and Halda Therapeutics partially offset by the reduction of the Abiomed contingent value right (CVR) liability. The fiscal year 2024 is primarily related to the acquisition of Shockwave.

Interest (Income) Expense: Interest income in the fiscal year 2025 was $1.1 billion as compared to $1.3 billion in 2024. Interest income decreased as compared to the prior year driven by lower interest rates earned on cash balances. Interest expense in the fiscal year 2025 was $1.0 billion as compared to $0.8 billion in 2024. Interest expense was higher as compared to the prior year due to a higher average debt balance. Cash, cash equivalents and marketable securities totaled $20.1 billion at the end of 2025, and averaged $22.3 billion as compared to the cash, cash equivalents and marketable securities total of $24.5 billion and $23.7 billion average balance in 2024. The total debt balance at the end of 2025 was $47.9 billion with an average debt balance of $42.3 billion as compared to $36.6 billion at the end of 2024 and an average debt balance of $33.0 billion. The higher debt balance was due to the senior unsecured notes issued by the Company in the fiscal first quarter of 2025. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition which closed on April 2, 2025 and for general corporate purposes.

Income before tax by segment

Income before tax by segment of business was as follows:

Income Before Tax Segment Sales Percent of SegmentSales

(Income) Expenses not allocated to segments(2) (6,202) 5,972

(1)See Note 17 to the Consolidated Financial Statements for more details.

(2)Amounts not allocated to segments include interest (income) expense and general corporate (income) expense. The fiscal year 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal year 2024 includes charges for talc matters of approximately $5.1 billion and a loss of approximately $0.4 billion related to the debt to equity exchange of the Company's remaining shares of Kenvue Common Stock.

Innovative Medicine segment:

In 2025, the Innovative Medicine segment income before tax as a percent to sales was 36.9% versus 33.2% in 2024. The increase in the income before tax as a percent of sales was primarily driven by the following:

•Acquired in-process research and development expense of $1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in 2024

•Litigation income of $0.1 billion in 2025 versus expense of $0.4 billion in 2024, primarily related to Risperdal Gynecomastia

•Research & development leverage resulting from investment prioritization

partially offset by

•Acquisition, integration and divestiture related net expense of $0.4 billion in 2025 primarily related to Intra-Cellular and Halda Therapeutics and $0.1 billion in 2024

•Monetization of royalty rights of $0.3 billion in 2024

•Unfavorable Product mix, the impact of Medicare Part D redesign and unfavorable transactional currency

•Increased investment related to the acquisition of Intra-Cellular (CAPLYTA)

MedTech segment:

In 2025, the MedTech segment income before tax as a percent to sales was 12.2% versus 11.7% in 2024. The increase in the income before tax as a percent to sales was primarily driven by the following:

•Acquisition, integration and divestiture related net income of $0.2 billion in 2025 primarily driven by a contingent value right liability reduction associated with Abiomed versus net costs of $1.0 billion in 2024 primarily related to the Shockwave acquisition

•Acquired in-process research and development expense of $0.5 billion from the V-Wave acquisition and $0.3 billion for a Laminar milestone in 2024

•Gain on the sale of securities of $0.2 billion in 2025

partially offset by

•Litigation expense of $0.9 billion in 2025, primarily related to Auris shareholder litigation

•Higher restructuring related costs of $0.5 billion in 2025 versus $0.2 billion in 2024

•Tariffs, unfavorable transactional currency and macroeconomic factors in Cost of products sold

Restructuring: In fiscal 2025, the company initiated a restructuring program of its Surgery franchise within the MedTech segment to simplify and focus operations by exiting certain non-strategic product lines and optimize select sites across the network. The pre-tax restructuring expense was $205 million in the fiscal year 2025, of which $76 million was recorded in Restructuring, $122 million in Other income and expense and $7 million in Cost of products sold on the Consolidated Statement of Earnings. The pre-tax restructuring expense in the fiscal year 2025 primarily included costs related to asset impairments as well as product exits. The estimated costs of the total program are between $0.9 billion - $1.0 billion and is expected to be substantially completed by the end of fiscal year 2026.

In fiscal 2023, the Company initiated a restructuring program of its Orthopaedics franchise within its MedTech segment to streamline operations by exiting certain markets, product lines and distribution network arrangements. The pretax restructuring expense was $307 million in the fiscal year 2025, of which $152 million was recorded in Restructuring, $84 million in Cost of products sold and $71 million in Other (Income)/Expense on the Consolidated Statement of Earnings primarily for costs related to asset impairments as well as market and product exits. The pre-tax restructuring expense was $167 million in the fiscal year 2024, of which $132 million was recorded in Restructuring and $35 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included costs related to market and product exits. The pre-tax restructuring expense was $319 million in the fiscal year 2023, of which $40 million was recorded in Restructuring and $279 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included inventory and instrument charges related to market and product exits. Total project costs of approximately $0.8 billion have been recorded since the restructuring was announced and the program has been substantially completed in the fiscal year 2025.

In fiscal 2023, the Company completed a prioritization of its research and development (R&D) investment within the Innovative Medicine segment to focus on the most promising medicines with the greatest benefit to patients. This resulted in the exit of certain programs within therapeutic areas. The pre-tax restructuring charge of $102 million in the fiscal year 2024 was recorded in Restructuring on the Consolidated Statement of Earnings, and included the termination of partnered and non-partnered development program costs, asset impairments and asset divestments. The pre-tax restructuring expense was $479 million in the fiscal year 2023, of which $449 million was recorded in Restructuring and $30 million was recorded in Cost of products sold on the Consolidated Statement of Earnings included the termination of partnered and non-partnered program costs and asset impairments. Total project costs of approximately $0.6 billion have been recorded since the restructuring was announced and the program was completed in the fiscal fourth quarter of 2024.

See Note 20 to the Consolidated Financial Statements for additional details related to the restructuring programs.

Provision for Taxes on Income: The worldwide effective income tax rate from continuing operations was 17.7% in 2025 and 15.7% in 2024. For discussion related to the fiscal year 2025 provision for taxes refer to Note 8 to the Consolidated Financial Statements.

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide. Several EU and non-EU countries have enacted Pillar Two legislation with an initial effective date of January 1, 2024, with other aspects of the law effective in 2025 or later. While countries continue to enact new provisions or issue new regulations this could have an impact to the Company’s effective tax rate. The Company will continue to monitor further developments to determine any potential impact in the countries in which we operate, such as the recently issued administrative guidance on the side-by-side system that will fully exclude U.S. parented groups from certain provisions of the Pillar Two Framework.

Liquidity and capital resources

Liquidity & cash flows

Cash and cash equivalents were $19.7 billion at the end of 2025 as compared to $24.1 billion at the end of 2024.

The primary sources and uses of cash that contributed to the $4.4 billion decrease were:

(Dollars in billions)

$24.1 Q4 2024 Cash and cash equivalents balance

24.5 cash generated from operating activities

(23.6) net cash used for investing activities

(5.5) net cash used for financing activities

0.2 effect of exchange rate and rounding

$19.7 Q4 2025 Cash and cash equivalents balance

In addition, the Company had $0.4 billion in marketable securities at the end of fiscal year 2025 and $0.4 billion at the end of fiscal year 2024. See Note 1 to the Consolidated Financial Statements for additional details on cash, cash equivalents and marketable securities.

Cash flow from operations of $24.5 billion was the result of:

(Dollars In billions)

$26.8 Net Earnings

(6.2) an increase in other current and non-current assets

(5.7) a decrease in other current and non-current liabilities

2.4 an increase in accounts payable and accrued liabilities

(3.2) an increase in accounts receivable and inventories

$24.5 Cash flow from operations

Cash flow used for investing activities of $23.6 billion was primarily due to:

(Dollars in billions)

$(4.8) additions to property, plant and equipment

(17.5) acquisitions, net of cash acquired

0.7 proceeds from the disposal of assets/businesses, net

(0.4) acquired in-process research and development /related milestones

0.7 net sales of investments

(2.1) credit support agreements activity, net

(0.2) other (including capitalized licenses and milestones)

$(23.6) Net cash used for investing activities

Cash flow used for financing activities of $5.5 billion was primarily due to:

(Dollars in billions)

$(12.4) dividends to shareholders

(6.0) repurchase of common stock

9.6 net proceeds from short and long-term debt

(0.2) credit support agreements activity, net

0.1 other and rounding

$(5.5) Net cash used for financing activities

As of December 28, 2025, the Company's notes payable and long-term debt was in excess of cash, cash equivalents and marketable securities. As of December 28, 2025, the net debt position was $27.8 billion as compared to the prior year of $12.1 billion. The debt balance at the end of 2025 was $47.9 billion as compared to $36.6 billion in 2024. In the fiscal first quarter of 2025, the Company issued senior unsecured notes for a total of $9.2 billion. For additional details on borrowings, see Note 7 to the Consolidated Financial Statements. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition for approximately $14.5 billion which closed on April 2, 2025, and for general corporate purposes. Considering recent market conditions, the Company has re-evaluated its operating cash flows and liquidity profile and does not foresee any significant incremental risk. The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company’s reserve balance of approximately $3.4 billion related to talc matters, $2.0 billion related to the current portion of Corporate bonds due and the remaining

approximately $1.1 billion to settle opioid litigation (See Note 19 to the Consolidated Financial Statements for additional details). In addition, the Company monitors the global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable.

The following table summarizes the Company’s material contractual obligations and their aggregate maturities as of December 28, 2025: To satisfy these obligations, the Company intends to use cash from operations.

(Dollars in Millions) Debt Obligations Interest onDebt Obligations Total

For tax matters, see Note 8 to the Consolidated Financial Statements. For talc matters, see Note 19 to the Consolidated Financial Statements.

Financing and market risk

The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows. Accordingly, the Company enters into forward foreign exchange contracts to protect the value of certain foreign currency assets and liabilities and to hedge future foreign currency transactions primarily related to product costs. Gains or losses on these contracts are offset by the gains or losses on the underlying transactions. A 10% appreciation of the U.S. Dollar from the December 28, 2025 market rates would increase the unrealized value of the Company’s forward contracts by approximately $0.2 billion. Conversely, a 10% depreciation of the U.S. Dollar from the December 28, 2025 market rates would decrease the unrealized value of the Company’s forward contracts by approximately $0.3 billion. In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future anticipated earnings and cash flows.

The Company hedges the exposure to fluctuations in currency exchange rates, and the effect on certain assets and liabilities in foreign currency, by entering into currency swap contracts. A 1% change in the spread between U.S. and foreign interest rates on the Company’s interest rate sensitive financial instruments would either increase or decrease the unrealized value of the Company’s swap contracts by approximately $1.5 billion. In either scenario, at maturity, the gain or loss on the swap contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future anticipated cash flows.

The Company does not enter into financial instruments for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with parties that have at least an investment grade credit rating. The counterparties to these contracts are major financial institutions and there is no significant concentration of exposure with any one counterparty. Management believes the risk of loss is remote. The Company entered into credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. See Note 6 to the Consolidated Financial Statements for additional details on credit support agreements.

The Company invests in both fixed rate and floating rate interest earning securities which carry a degree of interest rate risk. The fair market value of fixed rate securities may be adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. A 1% (100 basis points) change in spread on the Company’s interest rate sensitive investments would either increase or decrease the unrealized value of cash equivalents and current marketable securities by less than $5.0 million.

The Company has access to substantial sources of funds at numerous banks worldwide. In June 2025, the Company secured a new 364-day Credit Facility of $10 billion, which expires on June 24, 2026. Interest charged on borrowings under the credit line agreement is based on either Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rate as allowed plus applicable margins. Commitment fees under the agreement are not material.

Total borrowings at the end of 2025 and 2024 were $47.9 billion and $36.6 billion, respectively. The increase in the borrowings was primarily due to the issuance of new debt in the fiscal first quarter of 2025. The Company issued senior unsecured notes for approximately $9.2 billion. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition for approximately $14.5 billion which closed on April 2, 2025, and for general corporate purposes. In 2025, net debt (cash and current marketable securities, net of debt) was $27.8 billion compared to net debt of $12.1 billion in 2024. Total debt represented 37.0% of total capital (shareholders’ equity and total debt) in 2025 and 34.0% of total capital in 2024. Shareholders’ equity per share at the end of 2025 was $33.86 compared to $29.70 at year-end 2024.

A summary of borrowings can be found in Note 7 to the Consolidated Financial Statements.

Dividends

The Company increased its dividend in 2025 for the 63rd consecutive year. Cash dividends paid were $5.14 per share in 2025 and $4.91 per share in 2024.

On January 2, 2026, the Board of Directors declared a regular cash dividend of $1.30 per share, payable on March 10, 2026 to shareholders of record as of February 24, 2026.

Other information

Critical accounting policies and estimates

Management’s discussion and analysis of results of operations and financial condition are based on the Company’s consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The preparation of these financial statements requires that management make estimates and assumptions that affect the amounts reported for revenues, expenses, assets, liabilities and other related disclosures. Actual results may or may not differ from these estimates. The Company believes that the understanding of certain key accounting policies and estimates are essential in achieving more insight into the Company’s operating results and financial condition. These key accounting policies include revenue recognition, income taxes, legal and self-insurance contingencies, valuation of long-lived assets, assumptions used to determine the amounts recorded for pensions and other employee benefit plans and accounting for stock based awards.

Revenue Recognition: The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. The Company's global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns, discounts to customers and governmental clawback provisions are accounted for as variable consideration and recorded as a reduction in sales.

Sales returns are estimated and recorded based on historical sales and returns information. Products that have lost patent exclusivity, or that otherwise exhibit unusual sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as part of the accounting for sales return accruals.

Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field, or in specific areas, product recall. In accordance with the Company’s accounting policies, the Company generally issues credit to customers for returned goods. The Company’s sales returns reserves are accounted for in accordance with the U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales value. Sales returns in the Innovative Medicine segment are almost exclusively not resalable. Sales returns for certain franchises in the MedTech segment are typically resalable but are not material. The Company infrequently exchanges products from inventory for returned products. The sales returns reserve for the total Company has been approximately 1.0% of annual net trade sales during the fiscal years 2025, 2024 and 2023.

Promotional programs are recorded in the same period as related sales and include volume-based sales incentive programs. Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as products are sold. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as a reduction of revenue. The Company also earns profit-share payments through collaborative arrangements of certain products, which are included in sales to customers. Profit-share payments were less than 2.0% of the total revenues in the fiscal year 2025, 2024 and 2023.

In addition, the Company enters into collaboration arrangements that contain multiple performance obligations. Amounts due from collaborative partners for these arrangements are recognized as each performance obligation is satisfied, based on the relative selling price. Upfront fees received as part of these arrangements are generally deferred and recognized over the performance period. See Note 1 to the Consolidated Financial Statements for additional disclosures on collaborations.

Reasonably likely changes to assumptions used to calculate the accruals for rebates, returns and promotions are not anticipated to have a material effect on the financial statements. The Company currently discloses the impact of changes to assumptions in the quarterly or annual filing in which there is a material financial statement impact.

Below are tables that show the progression of accrued rebates, returns, promotions, reserve for doubtful accounts and reserve for cash discounts by segment of business for the fiscal years ended December 28, 2025 and December 29, 2024.

Innovative Medicine segment

Accrued promotions 3 1 (4) 0

Reserve for doubtful accounts 41 0 (3) 38

Accrued promotions 6 3 (6) 3

Reserve for doubtful accounts 33 14 (6) 41

(1)Includes reserve for customer rebates of $262 million at December 28, 2025 and $187 million at December 29, 2024, recorded as a contra asset.

(2)Includes adjustments to revenue recognized as a result of changes in estimates for prior year transactions

MedTech segment

Reserve for cash discounts 6 89 (88) 7

Reserve for cash discounts 5 92 (91) 6

(1)Includes reserve for customer rebates of $767 million at December 28, 2025 and $704 million at December 29, 2024, recorded as a contra asset.

Income Taxes: Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax law and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities in the future.

The Company records unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would not have a material effect on the Company's results of operations, cash flows or financial position.

The Company has not provided deferred taxes on the undistributed earnings on certain international subsidiaries where the earnings are considered to be indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the U.S., the Company would be required to record the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $0.6 billion under currently enacted tax laws and regulations and at current currency exchange rates. This amount does not include the possible benefit of U.S. foreign tax credits, which may substantially offset this cost.

See Note 1 and Note 8 to the Consolidated Financial Statements for further information regarding income taxes.

Legal and Self Insurance Contingencies: The Company records accruals for various contingencies, including legal proceedings and product liability claims as these arise in the normal course of business. The accruals are based on management’s judgment as to the probability of losses and, where applicable, actuarially determined estimates. The Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be reasonably estimated.

See Notes 1 and 19 to the Consolidated Financial Statements for further information regarding product liability and legal proceedings.

Long-Lived and Intangible Assets: The Company assesses changes, both qualitatively and quantitatively, in economic conditions and makes assumptions regarding estimated future cash flows in evaluating the value of the Company’s property, plant and equipment, goodwill and intangible assets. As these assumptions and estimates may change over time, it may or may not be necessary for the Company to record impairment charges.

Employee Benefit Plans: The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. These plans are based on assumptions for the discount rate, expected return on plan assets, mortality rates, expected salary increases, healthcare cost trend rates and attrition rates. See Note 10 to the Consolidated Financial Statements for further details on these rates.

Stock Based Compensation: The Company recognizes compensation expense associated with the issuance of equity instruments to employees for their services. Based on the type of equity instrument, the fair value is estimated on the date of grant using either the Black-Scholes option valuation model or a combination of both the Black-Scholes option valuation model and Monte Carlo valuation model, and is expensed in the financial statements over the service period. The input assumptions used in determining fair value are the expected life, expected volatility, risk-free rate and expected dividend yield. For performance share units, the fair market value is calculated for the two component goals at the date of grant: adjusted operational earnings per share and relative total shareholder return. The fair values for the earnings per share goal of each performance share unit was estimated on the date of grant using the fair market value of the shares at the time of the award, discounted for dividends, which are not paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. See Note 16 to the Consolidated Financial Statements for additional information.

New accounting pronouncements

Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 28, 2025.

Economic and market factors

The Company is aware that its products are used in an environment where, for more than a decade, policymakers, consumers and businesses have expressed concerns about the rising cost of healthcare. In response to these concerns, the Company has a long-standing policy of pricing products responsibly. For the period 2015 - 2025, in the U.S., the weighted average compound annual growth rate of the Company’s net price increases for healthcare products (prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index (CPI).

The Company operates in certain countries where the economic conditions continue to present significant challenges. The Company continues to monitor these situations and take appropriate actions. Inflation rates continue to have an effect on worldwide economies and, consequently, on the way companies operate. The Company has accounted for operations in Argentina, Venezuela, Turkey and Egypt (beginning in the fiscal fourth quarter of 2024) as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. This did not have a material impact to the Company's results in the period. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.

In July 2023, Janssen Pharmaceuticals, Inc. (Janssen) filed litigation against the U.S. Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the IRA's Medicare Drug Price Negotiation Program. The litigation requests a declaration that the IRA violates Janssen’s rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRA’s mandatory pricing scheme. While the impact of the IRA on our business and the broader pharmaceutical industry remains uncertain, as litigation filed by Janssen and other pharmaceutical companies remains ongoing, CMS has publicly announced the maximum fair price for each of the selected drugs and has recently begun implementing the program. In December 2025, Janssen sought review by the U.S. Supreme Court of the Third Circuit's majority affirmance of the district court’s ruling in favor of the government.

The long-term implications of regional conflicts on the Company are difficult to predict. The financial impact of known existing conflicts in the fiscal 2025 was not material.

The Company is exposed to fluctuations in currency exchange rates. A 1% change in the value of the U.S. Dollar as compared to all foreign currencies in which the Company had sales, income or expense in 2025 would have increased or decreased the translation of foreign sales by approximately $0.4 billion and net income by approximately $0.2 billion.

Governments around the world consider various proposals to make changes to tax laws, which may include increasing or decreasing existing statutory tax rates. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. A change in statutory tax rate in any country would result in the revaluation of the Company’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company’s Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted.

The Company may be further impacted by the imposition of tariffs, trade protection measures or other policies adopted by any jurisdiction that favor domestic companies and technologies over foreign competitors.

The Company faces various worldwide healthcare changes that may continue to result in pricing pressures that include healthcare cost containment and government legislation relating to sales, promotions, pricing and reimbursement of healthcare products.

Changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing healthcare insurance coverage may continue to impact the Company’s businesses.

The Company also operates in an environment increasingly hostile to intellectual property rights. Firms have filed Abbreviated New Drug Applications or Biosimilar Biological Product Applications with the U.S. FDA or otherwise challenged the coverage and/or validity of the Company's patents, seeking to market generic or biosimilar forms of many of the Company’s key pharmaceutical products prior to expiration of the applicable patents covering those products. In the event the Company is not successful in defending the patent claims challenged in the resulting lawsuits, generic or biosimilar versions of the products at issue will be introduced to the market, resulting in the potential for substantial market share and revenue losses for those products, and which may result in a non-cash impairment charge in any associated intangible asset. There is also a risk that one or more competitors could launch a generic or biosimilar version of the product at issue following regulatory approval even though one or more valid patents are in place.

Legal proceedings

Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability, intellectual property, commercial, employment, indemnification and other matters; governmental investigations; and other legal proceedings that arise from time to time in the ordinary course of business.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. As of December 28, 2025, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25, Contingencies. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. To the extent adverse awards, judgments or verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

In the Company's opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company's balance sheet, is not expected to have a material adverse effect on the Company's financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company's results of operations and cash flows for that period.

See Note 19 to the Consolidated Financial Statements included in Item 8 of this report for further information regarding legal proceedings.

Common stock

The Company’s Common Stock is listed on the New York Stock Exchange under the symbol JNJ. As of February 4, 2026, there were 108,358 record holders of Common Stock of the Company.

Item 7A. Quantitative and qualitative disclosures about market risk

The information called for by this item is incorporated herein by reference to Item 7. Management’s discussion and analysis of results of operations and financial condition - Liquidity and capital resources - Financing and market risk of this Report; and Note 1 Summary of significant accounting policies - Financial instruments of the Notes to Consolidated Financial Statements included in Item 8 of this Report.

Item 8. Financial statements and supplementary data

Index to audited Consolidated Financial Statements

Consolidated balance sheets 43

Consolidated statements of earnings 44

Consolidated statements of comprehensive income 45

Consolidated statements of equity 46

Consolidated statements of cash flows 47

Notes to consolidated financial statements 49

Report of independent registered public accounting firm (PCAOB ID 238) 108

Management’s report on internal control over financial reporting 111

Johnson & Johnson and subsidiaries consolidated balance sheets

At December 28, 2025 and December 29, 2024

(Dollars in Millions Except Share and Per Share Amounts) (Note 1)

Assets

Current assets

Marketable securities (Notes 1 and 2) 393 417

Prepaid expenses and other receivables 4,153 4,085

Property, plant and equipment, net (Notes 1 and 4) 23,169 20,518

Liabilities and Shareholders’ Equity

Current liabilities

Accrued rebates, returns and promotions 19,124 17,580

Accrued compensation and employee related obligations 4,534 4,126

Employee related obligations (Notes 9 and 10) 6,957 7,255

Long-term taxes payable (Note 1) 486 390

Commitments and Contingencies (Note 19)

Shareholders’ equity

Accumulated other comprehensive income (loss) (Note 13) (14,930) (11,741)

Retained earnings and Additional-paid-in-capital 168,978 155,791

See Notes to Consolidated Financial Statements

Johnson & Johnson and subsidiaries consolidated statements of earnings

(Dollars and Shares in Millions Except Per Share Amounts) (Note 1)

In-process research and development impairments 81 211 313

Interest expense, net of portion capitalized (Note 4) 971 755 772

Net earnings from discontinued operations, net of tax (Note 21) — — 21,827

Net earnings per share (Notes 1 and 15)

Discontinued operations - basic — — 8.62

Discontinued operations - diluted — — 8.52

Total net earnings per share - diluted $11.03 5.79 13.72

Average shares outstanding (Notes 1 and 15)

See Notes to Consolidated Financial Statements

Johnson & Johnson and subsidiaries consolidated statements of comprehensive income

(Dollars in Millions) (Note 1)

Other comprehensive income (loss), net of tax

Securities:

Unrealized holding gain (loss) arising during period (1) 2 26

Reclassifications to earnings — — —

Employee benefit plans:

Prior service credit (cost), net of amortization (144) (154) (149)

Consumer settlement/ curtailment — — 23

Effect of exchange rates (128) 62 (90)

Derivatives & hedges:

Unrealized gain (loss) arising during period 1,953 (511) 422

Reclassifications to earnings (493) (862) (569)

The tax cost/(benefit) effects in other comprehensive income for the fiscal years 2025, 2024 and 2023 respectively: Foreign Currency Translation; $2.5 billion, $(1.1) billion and $797 million; Employee Benefit Plans: $214 million, $86 million and $(289) million, Derivatives & Hedges: $388 million, $(365) million and $(39) million.

See Notes to Consolidated Financial Statements

Amounts presented for 2023 have not been recast to exclude discontinued operations

Johnson & Johnson and subsidiaries consolidated statements of equity

(Dollars in Millions) (Note 1)

Employee compensation and stock option plans 2,193 (336) 2,529

Repurchase of common stock (5,054) (5,054)

Other comprehensive income (loss), net of tax (4,741) (4,741)

Employee compensation and stock option plans 2,094 (295) 2,389

Repurchase of common stock (2,407) (2,407)

Other comprehensive income (loss), net of tax 786 786

Employee compensation and stock option plans 4,773 (1,236) 6,009

Repurchase of common stock (5,953) (5,953)

Other comprehensive income (loss), net of tax (3,189) (3,189)

See Notes to Consolidated Financial Statements

Johnson & Johnson and subsidiaries consolidated statements of cash flows

(Dollars in Millions) (Note 1)

Cash flows from operating activities

Adjustments to reconcile net earnings to cash flows from operating activities:

Depreciation and amortization of property and intangibles 7,503 7,339 7,486

Charges for acquired in-process research and development 109 1,841 483

Gain on Kenvue separation — — (20,984)

Net gain on sale of assets/businesses (263) (226) (117)

Credit losses and accounts receivable allowances (1) 11 —

Increase in accounts receivable (1,781) (406) (624)

Increase in accounts payable and accrued liabilities 2,377 1,621 2,346

Cash flows (used by) from investing activities

Additions to property, plant and equipment (4,832) (4,424) (4,543)

Proceeds from the disposal of assets/businesses, net 720 675 358

Acquisitions, net of cash acquired (Note 18) (17,541) (15,146) —

Credit support agreements activity, net (2,129) 1,517 (2,963)

Other (including capitalized licenses and milestones) (162) (174) 12

Net cash (used by)/from investing activities (23,588) (18,599) 878

Cash flows (used by) from financing activities

Proceeds from long-term debt, net of issuance costs 9,138 6,660 —

Credit support agreements activity, net (226) 272 (219)

Settlement of convertible debt acquired from Shockwave — (970) —

Proceeds from Kenvue initial public offering — — 4,241

Cash transferred to Kenvue at separation — — (1,114)

Effect of exchange rate changes on cash and cash equivalents 201 (289) (112)

(Decrease)/Increase in cash and cash equivalents (4,396) 2,246 7,732

Cash and cash equivalents from discontinued operations, end of period — — —

Supplemental cash flow data

Cash paid during the year for:

Income taxes, inclusive of discontinued operations 6,539 6,714 8,574

Supplemental schedule of non-cash investing and financing activities

See Notes to Consolidated Financial Statements

Amounts presented for 2023 have not been recast to exclude discontinued operations.

Notes to consolidated financial statements

1. Summary of significant accounting policies

Principles of consolidation

The consolidated financial statements include the accounts of Johnson & Johnson and its subsidiaries (the Company). Intercompany accounts and transactions are eliminated. Columns and rows within tables may not add due to rounding. Percentages have been calculated using actual, non-rounded figures.

Description of the company

The Company has approximately 138,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the healthcare field. The Company conducts business in virtually all countries of the world and its primary focus is on products related to human health and well-being.

Business segments

The Company is organized into two business segments: Innovative Medicine and MedTech. The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolic. Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals and healthcare professionals for prescription use. The MedTech segment includes a broad portfolio of products used in the Surgery, Orthopaedic, Cardiovascular and Vision fields. These products are distributed to wholesalers, hospitals and retailers, and used principally in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics. In October 2025, the Company announced its intention to separate its Orthopaedics business. The Company intends to explore multiple paths to effect the planned separation with a targeted completion within 18 to 24 months after the initial announcement.

New accounting standards

Recently adopted accounting standards

ASU 2023-09: Income Taxes (Topic 740) - Improvements to Income Tax Disclosures

This update standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. The Company adopted this standard prospectively for fiscal year 2025. As this accounting standard only impacts disclosures, it did not have an impact on the Company’s consolidated financial results. See Note 8 to the Company's financial statements for the required disclosures.

Recently issued accounting standards

Not adopted as of December 28, 2025

ASU 2024-03: Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses

This update requires disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. This update will be effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. As this accounting standard only impacts disclosures, it will not have a material impact on the Company’s Consolidated Financial Statements.

Cash equivalents

The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of purchase as current marketable securities. The Company has a policy of making investments only with commercial institutions that have at least an investment grade credit rating. The Company invests its cash primarily in government securities and obligations, corporate debt securities, money market funds and reverse repurchase agreements (RRAs).

RRAs are collateralized by deposits in the form of Government Securities and Obligations for an amount not less than 102% of their value. The Company does not record an asset or liability as the Company is not permitted to sell or repledge the associated collateral. The Company has a policy that the collateral has at least an A (or equivalent) credit rating. The Company utilizes a third party custodian to manage the exchange of funds and ensure that collateral received is maintained at 102% of the value of the RRAs on a daily basis. RRAs with stated maturities of greater than three months from the date of purchase are classified as marketable securities.

Investments

Investments classified as held to maturity investments are reported at amortized cost and realized gains or losses are reported in earnings. Investments classified as available-for-sale debt securities are carried at estimated fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income. Available-for-sale securities available for current operations are classified as current assets; otherwise, they are classified as long term. Management determines the appropriate classification of its investment in debt and equity securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company reviews its investments for impairment and adjusts these investments to fair value through earnings, as required.

The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company measures equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost. The Company utilizes the straight-line method of depreciation over the estimated useful lives of the assets:

Building and building equipment 30 years

Land and leasehold improvements 10 - 20 years

Machinery and equipment 2 - 13 years

The Company capitalizes certain computer software and development costs, included in machinery and equipment, when incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are amortized over the estimated useful lives of the software, which generally range from 5 to 8 years.

The Company reviews long-lived assets to assess recoverability using undiscounted cash flows. When certain events or changes in operating or economic conditions occur, an impairment assessment may be performed on the recoverability of the carrying value of these assets. If the asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows.

Revenue recognition

The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. The Company's global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns, discounts to customers and governmental clawback provisions are accounted for as variable consideration and recorded as a reduction in sales. The liability is recognized within Accrued rebates, returns, and promotions on the consolidated balance sheet.

Adjustments to revenue recognized as a result of changes in estimates for the Company's most significant U.S. rebates and discounts liability balances for products shipped in previous periods were approximately 3.0% and 2.0% of U.S. Innovative Medicine revenue during the fiscal years 2025 and 2024, respectively.

Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including consideration of competitor pricing. Rebates and discounts are estimated based on contractual terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets served. A significant portion of the liability related to rebates is from the sale of the Company's pharmaceutical products within the U.S., primarily the Managed Care, Medicare and Medicaid programs, which amounted to $13.0 billion and $12.3 billion as of December 28, 2025 and December 29, 2024, respectively. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information.

See Note 17 to the Consolidated Financial Statements for further disaggregation of revenue.

Shipping and handling

Shipping and handling costs incurred were $0.9 billion during each of the fiscal years 2025, 2024 and 2023, and are included in selling, marketing and administrative expense. The amount of revenue received for shipping and handling is less than 1.0% of sales to customers for all periods presented.

Inventories

Inventories are stated at the lower of cost or net realizable value determined by the first-in, first-out method.

Intangible assets and goodwill

The authoritative literature on U.S. GAAP requires that goodwill and intangible assets with indefinite lives be assessed annually for impairment. The Company completed its annual impairment test for 2025 in the fiscal fourth quarter, which did not result in an impairment. Future impairment tests will be performed annually in the fiscal fourth quarter, or sooner if warranted. In-process research and development purchased as part of a business combination is accounted for as an indefinite lived intangible asset until the underlying project is completed, at which point the intangible asset will be accounted for as a definite lived intangible asset. If warranted the purchased in-process research and development could be written off or partially impaired depending on the underlying program.

Intangible assets that have finite useful lives continue to be amortized over their useful lives and are reviewed for impairment when facts or circumstances indicate that the carrying value of the assets may not be recoverable. See Note 5 for further details on Intangible Assets and Goodwill.

Financial instruments

As required by U.S. GAAP, all derivative instruments are recorded on the balance sheet at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.

The Company documents all relationships between hedged items and derivatives. The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1) minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; and (4) manage the enterprise risk associated with financial institutions. See Note 6 for additional information on Financial Instruments.

Leases

The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right of Use (ROU) Assets and Lease Liabilities for operating leases are included in Other assets, Accrued liabilities, and Other liabilities on the consolidated balance sheet. The ROU Assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Commitments under finance leases are not significant.

ROU Assets and Lease Liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, when the implicit rate is not readily determinable. Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected the following policy elections: use of portfolio approach on leases of assets under master service agreements, exclusion of short term leases on the balance sheet, and not separating lease and non-lease components.

The Company primarily has operating lease for space, vehicles, manufacturing equipment and data processing equipment. The ROU asset pertaining to leases was $1.3 billion and $1.1 billion in fiscal years 2025 and 2024, respectively. The lease liability was $1.4 billion and $1.2 billion in fiscal years 2025 and 2024, respectively. The operating lease costs from continuing operations were $0.2 billion in fiscal years 2025, 2024 and 2023. Cash paid for amounts included in the measurement of lease liabilities from continuing operations were $0.3 billion in 2025 and $0.2 billion in fiscal years 2024 and 2023.

Product liability

Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially determined estimates where applicable. The accruals are adjusted periodically as additional information becomes available. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

The Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be reasonably estimated.

Research and development

Research and development expenses are expensed as incurred in accordance with ASC 730, Research and Development. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the related product. Amounts capitalized for such payments are included in other intangibles, net of accumulated amortization.

The Company enters into collaborative arrangements, typically with other pharmaceutical or biotechnology companies, to develop and commercialize drug candidates or intellectual property. These arrangements typically involve two (or more) parties who are active participants in the collaboration and are exposed to significant risks and rewards dependent on the commercial success of the activities. These collaborations usually involve various activities by one or more parties, including research and development, marketing and selling and distribution. Often, these collaborations require upfront, milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development. Amounts due from collaborative partners related to development activities are generally reflected as a reduction of research and development expense because the performance of contract development services is not central to the Company’s operations. In general, the income statement presentation for these collaborations is as follows:

Nature/Type of Collaboration Statement of Earnings Presentation

Third-party sale of product & profit share payments received Sales to customers

Royalties received from collaborative partner Other income (expense), net

* Milestones are capitalized as intangible assets and amortized to cost of products sold over the useful life.

For all years presented, there was no individual project that represented greater than 5% of the total annual consolidated research and development expense other than the acquired in-process research & development expense of $1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in fiscal year 2024.

The Company has a number of products and compounds developed in collaboration with strategic partners including XARELTO, co-developed with Bayer HealthCare AG, IMBRUVICA, developed in collaboration and co-marketed with Pharmacyclics LLC, an AbbVie company and CARVYKTI, licensed and developed in collaboration with Legend Biotech USA Inc. and Legend Biotech Ireland Limited.

Separately, the Company has a number of licensing arrangements for products and compounds including DARZALEX, licensed from Genmab A/S.

Advertising

Costs associated with advertising are expensed in the year incurred and are included in selling, marketing and administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and Internet advertising, were $1.6 billion, $0.6 billion and $0.5 billion in fiscal years 2025, 2024 and 2023, respectively.

Income taxes

Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax law and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities in the future.

The United States enacted into law on July 4, 2025, the One Big Beautiful Bill Act, (OBBBA). The OBBBA includes provisions modifying the corporate income tax code, including the immediate expensing of domestic research and development expenditures for tax purposes, 100% bonus depreciation for qualified assets, and an increase in the statutory tax rate on foreign earnings from 10.5% to 12.6%. The law also renamed the provision for taxes on foreign earnings from Global Intangible Low-Taxed Income (GILTI) to Net Controlled Foreign Corporation (CFC) Tested Income (NCTI). The Company will continue to account for NCTI under the deferred method as discussed below under the previous U.S. Tax Cuts and Jobs Act (TCJA) provisions.

Previous to the OBBBA, the United States had passed legislative changes in 2017, the TCJA which included provisions for a comprehensive overhaul of the corporate income tax code, including a reduction of the statutory corporate tax rate from 35% to 21%, effective on January 1, 2018. The TCJA included a provision for a tax on all previously undistributed earnings of U.S. companies located in foreign jurisdictions. Undistributed earnings in the form of cash and cash equivalents were taxed at a rate of 15.5% and all other earnings were taxed at a rate of 8.0%. This tax is payable over 8 years and did not accrue interest. The final payment of $2.5 billion was made in fiscal year 2025.

The TCJA also included provisions for a tax on GILTI, which is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the FASB issued guidance that allows companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., period cost) or provide for deferred tax assets and liabilities related to basis differences that exist and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., deferred method). The Company has elected to account for GILTI, now NCTI, under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as NCTI is incurred in future periods.

See Note 8 to the Consolidated Financial Statements for further information regarding income taxes.

Net earnings per share

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock using the treasury stock method.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

The Company follows the provisions of U.S. GAAP when recording litigation related contingencies. A liability is recorded when a loss is probable and can be reasonably estimated. The best estimate of a loss within a range is accrued; however, if no estimate in the range is better than any other, the minimum amount is accrued.

Supplier finance program obligations

The Company has agreements for supplier finance programs with third-party financial institutions. These programs provide participating suppliers the ability to finance payment obligations from the Company with the third-party financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program.

Confirmed obligations under the program as of December 28, 2025, and December 29, 2024, were $0.8 billion and $0.8 billion, respectively. The obligations are presented as Accounts payable on the Consolidated Balance Sheets.

The rollforward of the Company's valid obligations under the program were as follows:

(Dollars in Millions)

Confirmed obligations - beginning of the year $788 704

Invoices confirmed during the year 2,997 3,048

Confirmed invoices paid during the year 3,016 2,964

Effect of exchange rates 15 —

Confirmed obligations - end of the year $784 788

Kenvue IPO/separation and discontinued operations

On May 8, 2023, Kenvue, completed an initial public offering (the IPO) resulting in the issuance of 198,734,444 shares of its common stock, par value $0.01 per share (the Kenvue Common Stock), at an initial public offering of $22.00 per share for net proceeds of $4.2 billion. The excess of the net proceeds from the IPO over the net book value of the Johnson & Johnson divested interest was $2.5 billion and was recorded to additional paid-in capital. As of the closing of the IPO, Johnson & Johnson owned approximately 89.6% of the total outstanding shares of Kenvue Common Stock.

On August 23, 2023, Johnson & Johnson completed the disposition of an additional 80.1% ownership of the shares of Kenvue through an exchange offer. Following the exchange offer, the Company owned 9.5% of the shares of Kenvue which were accounted for as an equity investment carried at fair value within continuing operations. The historical results of the Consumer Health business (which previously represented the Consumer Health business segment) are reflected as discontinued operations in the Company’s Consolidated Financial Statements through the date of the exchange offer (see Note 21 for additional details). Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to Johnson & Johnson’s continuing operations.

In the fiscal second quarter of 2024 the Company completed a debt for equity exchange of the retained stake in Kenvue. Upon completion of the debt for equity exchange, the Company no longer owns any shares of Kenvue Common Stock.

Annual closing date

The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026.

2. Cash, cash equivalents and current marketable securities

At the end of the fiscal year 2025 and 2024, cash, cash equivalents and current marketable securities comprised:

(Dollars in Millions) 2025

Total cash, cash equivalents and current marketable securities $19,709 393

(Dollars in Millions) 2024

Total cash, cash equivalents and current marketable securities $24,105 417

(1)Held to maturity investments are reported at amortized cost and realized gains or losses are reported in earnings.

(2)Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.

Fair value of government securities and obligations and corporate debt securities were estimated using quoted broker prices and significant other observable inputs.

The contractual maturities of the available for sale debt securities at December 28, 2025 are as follows:

(Dollars in Millions) Cost Basis Fair Value

Due after one year through five years 25 25

Due after five years through ten years — —

The Company invests its excess cash in both deposits with major banks throughout the world and other high-quality money market instruments. The Company has a policy of making investments only with commercial institutions that have at least an investment grade credit rating.

3. Inventories

At the end of fiscal years 2025 and 2024, inventories comprised:

4. Property, plant and equipment

At the end of fiscal years 2025 and 2024, property, plant and equipment at cost and accumulated depreciation were:

Land and land improvements $701 718

Total property, plant and equipment, gross $54,364 48,768

Total property, plant and equipment, net $23,169 20,518

The Company capitalizes interest expense as part of the cost of construction of facilities and equipment. Interest expense capitalized in fiscal years 2025, 2024 and 2023 was $114 million, $79 million and $70 million, respectively.

Depreciation expense, including the amortization of capitalized interest in fiscal years 2025, 2024 and 2023 was $2.9 billion, $2.8 billion and $2.6 billion, respectively.

Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds are recorded in earnings.

5. Intangible assets and goodwill

At the end of fiscal years 2025 and 2024, the gross and net amounts of intangible assets were:

Intangible assets with definite lives:

Customer relationships and other intangibles — gross $21,361 20,310

Customer relationships and other intangibles — net(2) $6,363 6,766

Intangible assets with indefinite lives:

Purchased in-process research and development 15,619 12,281

Total intangible assets with indefinite lives $17,391 12,281

(1)See Note 18 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.

(2)The majority is comprised of customer relationships.

(3)In October 2025, the Company announced its intention to separate its Orthopaedics business, to be named DePuy Synthes. In connection with this strategic decision, the Company determined the DePuy Synthes trademarks will continue to be used on existing and future products. Therefore, $1.7 billion of trademarks associated with the DePuy Synthes brand were reclassified from definite lived to indefinite lived. This reclassification reflects management’s revised expectations regarding the future economic life and continued use of these trademarks through and following the planned separation. Based on a qualitative assessment, the Company concluded that the trademarks are not impaired.

Goodwill as of December 28, 2025 and December 29, 2024, as allocated by segment of business, was as follows:

(Dollars in Millions) Innovative Medicine MedTech Total

Goodwill, related to divestitures — (56) (56)

Goodwill, related to acquisitions 3,488 — 3,488

Goodwill, related to divestitures — (29) (29)

The weighted average amortization period for patents and trademarks is approximately 12 years. The weighted average amortization period for customer relationships and other intangible assets is approximately 19 years. The amortization expense of amortizable assets included in Cost of products sold was $4.6 billion, $4.5 billion and $4.5 billion before tax, for the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively. Intangible asset write-downs are included in Other (income) expense, net.

The estimated amortization expense related to intangible assets for approved products, before tax, for the five succeeding years is approximately:

(Dollars in Millions)

See Note 18 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.

6. Fair value measurements

The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. Both types of derivatives are designated as cash flow hedges.

Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as hedges and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features. The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. As of December 28, 2025 and December 29, 2024, the total amount of cash collateral paid by the Company under the CSA amounted to $4.6 billion and $2.2 billion net respectively, related to net investment and cash flow hedges. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of December 28, 2025, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $40.6 billion, $38.9 billion and $8.0 billion, respectively. As of December 29, 2024, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $45.1 billion, $40.5 billion and $9.0 billion, respectively.

All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Cash exchanged for derivatives is primarily in cash flows from operating activities.

The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction.

Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted through the currency translation account within accumulated other comprehensive income. The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued.

The Company designated its Euro denominated notes with due dates ranging from 2028 to 2055 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates.

As of December 28, 2025, the balance of deferred net loss on derivatives included in accumulated other comprehensive income was $0.3 billion after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 13. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding interest rate contracts and net investment hedges. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.

The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 28, 2025 and December 29, 2024, net of tax:

The effects of fair value, net investment and cash flow hedging:

Gain (Loss) on fair value hedging relationship:

Interest rate swaps contracts:

Hedged items $— — — 338 — — — — 64 —

Derivatives designated as hedging instruments — — — (338) — — — — (64) —

Gain (Loss) on net investment hedging relationship:

Cross currency interest rate swaps contracts:

Amount of gain or (loss) recognized in AOCI — — — 193 — — — — 148 —

Gain (Loss) on cash flow hedging relationship:

Forward foreign exchange contracts:

Cross currency interest rate swaps contracts:

Amount of gain or (loss) recognized in AOCI $— — — 1,187 — — — — (597) —

As of December 28, 2025 and December 29, 2024, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustment for fair value hedges:

The following table is the effect of derivatives not designated as hedging instrument for the fiscal years ended

December 28, 2025 and December 29, 2024:

Foreign Exchange Contracts Other (income) expense $(265) 8

The following table is the effect of net investment hedges for the fiscal years ended December 28, 2025 and

December 29, 2024:

Debt $ (1,190) 282 Interest (income) expense — —

Cross Currency interest rate swaps $277 955 Interest (income) expense — —

The following table is a summary of the activity related to equity investments for the fiscal years ended December 28, 2025 and December 29, 2024:

Equity Investments with readily determinable value $451 230 (16) 665 665

Equity Investments without readily determinable value $773 253 (116) 910 910

Equity Investments without readily determinable value $696 (197) 274 773 773

(1)Recorded in Other Income/Expense

(2)Other includes impact of currency

* The December 31, 2023 balance includes the 9.5% remaining stake in Kenvue. A debt-for-equity exchange was completed in the fiscal second quarter of 2024.

On May 15, 2024, the Company issued $3.6 billion aggregate principal amount of commercial paper and received $3.6 billion of net cash proceeds to be used for general corporate purposes. On May 17, 2024, the Company completed a Debt-for-Equity Exchange of its remaining 182,329,550 shares of Kenvue Common Stock for the outstanding Commercial Paper. Upon completion of the Debt-for-Equity Exchange, the Commercial Paper was satisfied and discharged, and the Company no longer owns any shares of Kenvue Common Stock. This exchange resulted in a loss of approximately $0.4 billion recorded in Other (income) expense.

For the fiscal years ended December 28, 2025 and December 29, 2024 for equity investments without readily determinable market values, $115 million and $171 million, respectively, of the changes in fair value reflected in net income were the result of impairments. There were impacts of $368 million and $26 million, respectively, of changes in the fair value reflected in net income due to changes in observable prices and gains on the disposal of investments.

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 having the highest priority and Level 3 having the lowest.

The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations.

The following three levels of inputs are used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Significant other observable inputs.

Level 3 — Significant unobservable inputs.

The Company’s significant financial assets and liabilities measured at fair value as of the fiscal year ended December 28, 2025 and December 29, 2024 were as follows:

(Dollars in Millions) Level 1 Level 2 Level 3 Total Total(1)

Derivatives designated as hedging instruments:

Assets:

Forward foreign exchange contracts $— 686 — 686 660

Liabilities:

Forward foreign exchange contracts — 413 — 413 794

Derivatives not designated as hedging instruments:

Assets:

Forward foreign exchange contracts $— 38 — 38 50

Liabilities:

Forward foreign exchange contracts — 46 — 46 17

Available For Sale Other Investments:

Other Liabilities

Gross to Net Derivative Reconciliation 2025 2024

(Dollars in Millions)

Credit Support Agreements (CSA) (1,308) (2,172)

Total Net Asset 5 22

Credit Support Agreements (CSA) (5,903) (4,412)

Summarized information about changes in liabilities for contingent consideration is as follows:

(Dollars in Millions)

Changes in estimated fair value(6) (387) 88 29

(1)2024 assets and liabilities are all classified as Level 2 with the exception of equity investments of $451 million, which are classified as Level 1 and contingent consideration of $1,217 million, classified as Level 3.

(2)Includes cross currency interest rate swaps and interest rate swaps.

(3)Classified as non-current other assets.

(4)Classified as cash equivalents and current marketable securities.

(5)Includes $753 million, $1,217 million and $1,092 million, classified as non-current other liabilities as of December 28, 2025,

December 29, 2024 and December 31, 2023, respectively.

(6)In fiscal year 2025, the Company recorded a reduction of $364 million to the CVR liability associated with the 2022 Abiomed acquisition based on the reduced probability of the achievement of certain developmental and commercial milestones by the dates required in the CVR agreement. The remaining CVR balance is $0.4 billion.

(7)In fiscal year 2024, the Company recorded $105 million of contingent consideration related to Proteologix.

As of December 28, 2025 and December 29, 2024, cash and cash equivalents includes money market funds of $5,993 million and $6,123 million, respectively, which would be considered level 1 in the fair value hierarchy

See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.

7. Borrowings

The components of long-term debt are as follows:

(1)Translation rate at December 28, 2025.

(2)Translation rate at December 29, 2024.

(3)The excess of the carrying value over the fair value of debt was $1.7 billion and $2.0 billion at the end of the fiscal year 2025 and the fiscal year 2024, respectively.

(4)In the fiscal first quarter of 2025, the Company issued senior unsecured notes for approximately $9.2 billion. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition which closed on April 2, 2025, and for general corporate purposes.

Fair value of the long-term debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.

The Company has access to substantial sources of funds at numerous banks worldwide. In June 2025, the Company secured a new 364-day Credit Facility of $10 billion, which expires on June 24, 2026. Interest charged on borrowings under the credit line agreement is based on either the Term SOFR Reference Rate or other applicable market rates as allowed under the terms of the agreement, plus applicable margins. Commitment fees under the agreements are not material.

Throughout fiscal years 2025 and 2024, the Company continued to have access to liquidity through the commercial paper market. Short-term borrowings and the current portion of long-term debt amounted to approximately $8.5 billion and $6.0 billion at the end of fiscal years 2025 and 2024, respectively. The current portion of the long-term debt was $2.0 billion and $1.7 billion in 2025 and 2024, respectively, and the remainder is commercial paper and local borrowing by international subsidiaries.

The current debt balance as of December 28, 2025 includes $6.5 billion of commercial paper which has a weighted average interest rate of 3.81% and a weighted average maturity of approximately two months. The current debt balance as of December 29, 2024 includes $4.1 billion of commercial paper which has a weighted average interest rate of 4.46% and a weighted average maturity of approximately two months.

Aggregate maturities of long-term debt obligations commencing in 2026 are:

(Dollars in Millions)

8. Income taxes

The provision for taxes on income on continuing operations consists of:

Currently payable:

Deferred:

Below is a tabular rate reconciliation of the U.S. statutory income tax rate of 21% to the Company's effective income tax rate for the fiscal year 2025, pursuant to the new disclosure requirements of ASU 2023-09 (See Note 1 of the Consolidated Financial Statements):

(Dollars in Millions) 2025

Earnings before taxes on income: 32,581

Tax rates:

U.S. federal statutory rate 6,842 21.0 %

State & local taxes:(1) 162 0.5

Foreign tax effects: (861) (2.7)

JNJ US Equity

JNJ · 10-K · period ended 2025-12-28

Item 7. Management’s discussion and analysis of results of operations and financial condition

Item 7A. Quantitative and qualitative disclosures about market risk

Item 8. Financial statements and supplementary data

JNJ US Equity☆

JNJ · 10-K · period ended 2025-12-28

Item 7. Management’s discussion and analysis of results of operations and financial condition

Item 7A. Quantitative and qualitative disclosures about market risk

Item 8. Financial statements and supplementary data

JNJ US Equity