Merck & Co., Inc. (MRK) pulled off a respectable quarter on Tuesday, but the future looks cloudier than investors hoped. The pharmaceutical giant reported fourth-quarter adjusted earnings of $2.04 per share, edging past the consensus estimate of $2.01 and well ahead of the $1.72 it earned a year ago.

Revenue hit $16.40 billion, marking a 5% year-over-year increase and comfortably exceeding analyst projections of $16.19 billion. So far, so good.

Where the Money Came From

The pharmaceutical segment did the heavy lifting, posting $14.84 billion in sales, up 6% year over year. Oncology drove much of that growth, alongside gains in cardiometabolic and respiratory treatments, though vaccine sales took a hit.

Meanwhile, the Animal Health division contributed $1.51 billion, an 8% increase powered primarily by stronger demand for livestock products. Turns out keeping animals healthy is good business.

The star of the show remains Keytruda, Merck's cancer immunotherapy juggernaut. The drug generated $8.37 billion in global sales, a 7% bump from last year. Growth came from both earlier-stage cancer treatment indications and sustained demand for metastatic cases.

Not everything sparkled, though. GARDASIL and GARDASIL 9, the HPV vaccines, brought in just $1.03 billion, down a whopping 34% from last year. The culprit? Plummeting demand in China and reduced sales in Japan following the end of a national catch-up immunization program.

The diabetes franchise of JANUVIA and JANUMET posted a modest 3% gain to $501 million. And newer products like Winrevair, which treats pulmonary arterial hypertension, more than doubled to $467 million in sales.

CEO Robert Davis sounded optimistic about where things are headed: "The transformation of our portfolio, bolstered by the acquisitions of Verona Pharma and Cidara Therapeutics, is well underway, and momentum is building as we continue to execute on our strategy. Our progress positions us to continue delivering on our purpose for patients and creating durable value for shareholders."

The Guidance Problem

Here's where the enthusiasm cooled. Merck issued fiscal 2026 adjusted earnings guidance of $5.00 to $5.15 per share. Wall Street was expecting $5.38. That's not a rounding error.

Revenue guidance didn't help either. The company expects 2026 sales between $65.50 billion and $67 billion, compared to the analyst consensus of $67.59 billion.

Despite the cautious outlook, Merck shares climbed 2.26% to $115.93 on Tuesday, hitting a new 52-week high. Sometimes beating the quarter is enough.