Item 1. Financial Statements

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Item 1. Financial Statements

ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)	2025		2024		2025		2024
Revenue	$	2,460	$	2,361	$	4,680	$	4,551
Costs and expenses:
Cost of sales	649		668		1,271		1,311
Selling, general and administrative expenses	617		581		1,180		1,128
Research and development expenses	172		171		329		333
Amortization of intangible assets	33		35		65		72
Restructuring charges and certain acquisition and divestiture-related costs	30		42		30		46
Interest expense, net of capitalized interest	53		59		107		117
Other (income)/deductions—net	4		25		(14)		17
Income before provision for taxes on income	902		780		1,712		1,527
Provision for taxes on income	184		156		363		304
Net income before allocation to noncontrolling interests	718		624		1,349		1,223
Less: Net income/(loss) attributable to noncontrolling interests	—		—		—		—
Net income attributable to Zoetis Inc.	$	718	$	624	$	1,349	$	1,223
Earnings per share attributable to Zoetis Inc. stockholders:
Basic	$	1.61	$	1.37	$	3.02	$	2.68
Diluted	$	1.61	$	1.37	$	3.02	$	2.67
Weighted-average common shares outstanding:
Basic	445.1		455.5		446.3		456.7
Diluted	445.5		456.0		446.7		457.4
Dividends declared per common share	$	0.500	$	0.432	$	1.000	$	0.864

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Net income before allocation to noncontrolling interests	$	718	$	624	$	1,349	$	1,223
Other comprehensive income/(loss), net of tax(a):
Unrealized losses on derivatives for cash flow hedges, net of tax of $(1) and $0 for the three months ended June 30, 2025 and 2024, respectively, and $(5) and $0 for the six months ended June 30, 2025 and 2024, respectively	(4)		(1)		(17)		(1)
Unrealized (losses)/gains on derivatives for net investment hedges, net of tax of $(21) and $0 for the three months ended June 30, 2025 and 2024, respectively, and $(31) and $1 for the six months ended June 30, 2025 and 2024, respectively	(74)		2		(107)		18
Foreign currency translation adjustments	218		(5)		187		(23)

Total other comprehensive income/(loss), net of tax	140		(4)		63		(6)
Comprehensive income before allocation to noncontrolling interests	858		620		1,412		1,217
Less: Comprehensive income/(loss) attributable to noncontrolling interests	—		—		—		—
Comprehensive income attributable to Zoetis Inc.	$	858	$	620	$	1,412	$	1,217

(a) Presented net of reclassification adjustments, which are not material in any period presented.

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,		December 31,
	2025		2024
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)	(Unaudited)
Assets
Cash and cash equivalents(a)	$	1,435	$	1,987

Accounts receivable, less allowance for doubtful accounts of $17 in 2025 and $18 in 2024	1,540		1,316
Inventories	2,439		2,306


Other current assets	509		377
Total current assets	5,923		5,986
Property, plant and equipment, less accumulated depreciation of $2,796 in 2025 and $2,635 in 2024	3,537		3,391
Operating lease right-of-use assets	302		219
Goodwill	2,758		2,724
Identifiable intangible assets, less accumulated amortization	1,075		1,127
Noncurrent deferred tax assets	617		540
Other noncurrent assets	267		250
Total assets	$	14,479	$	14,237

Liabilities and Equity

Current portion of long-term debt	$	1,350	$	1,350
Accounts payable	508		433
Dividends payable	222		224
Accrued expenses	770		746
Accrued compensation and related items	293		441
Income taxes payable	93		93

Other current liabilities	130		125
Total current liabilities	3,366		3,412
Long-term debt, net of discount and issuance costs	5,231		5,220
Noncurrent deferred tax liabilities	156		167
Operating lease liabilities	210		174
Other taxes payable	265		272

Other noncurrent liabilities	274		222
Total liabilities	9,502		9,467
Commitments and contingencies (Note 15)
Stockholders’ equity:

Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 443,945,593 and 448,743,073 shares outstanding at June 30, 2025, and December 31, 2024, respectively	5		5
Treasury stock, at cost, 57,945,650 and 53,418,170 shares of common stock at June 30, 2025 and December 31, 2024, respectively	(8,226)		(7,445)
Additional paid-in capital	1,203		1,182
Retained earnings	12,872		11,968
Accumulated other comprehensive loss	(877)		(940)
Total Zoetis Inc. equity	4,977		4,770
Equity attributable to noncontrolling interests	—		—
Total equity	4,977		4,770
Total liabilities and equity	$	14,479	$	14,237

(a) As of June 30, 2025 and December 31, 2024, includes $0 million and $2 million of restricted cash, respectively.

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


Three months ended June 30, 2025
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, March 31, 2025		501.9	$	5	55.8	$	(7,888)	$	1,180	$	12,375	$	(1,017)	$	—	$	4,655
Net income		—	—		—	—		—		718		—		—		718
Other comprehensive income		—	—		—	—		—		—		140		—		140

Share-based compensation awards (a)		—	—		—	3		23		—		—		—		26
Treasury stock acquired (b)		—	—		2.1	(341)		—		—		—		—		(341)

Dividends declared		—	—		—	—		—		(221)		—		—		(221)
Balance, June 30, 2025		501.9	$	5	57.9	$	(8,226)	$	1,203	$	12,872	$	(877)	$	—	$	4,977

Three months ended June 30, 2024
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, March 31, 2024		501.9	$	5	44.9	$	(5,928)	$	1,126	$	10,696	$	(841)	$	(6)	$	5,052
Net income		—	—		—	—		—		624		—		—		624
Other comprehensive loss		—	—		—	—		—		—		(4)		—		(4)

Share-based compensation awards (a)		—	—		(0.1)	2		20		—		—		—		22
Treasury stock acquired (b)		—	—		3.2	(538)		—		—		—		—		(538)

Dividends declared		—	—		—	—		—		(196)		—		—		(196)
Balance, June 30, 2024		501.9	$	5	48.0	$	(6,464)	$	1,146	$	11,124	$	(845)	$	(6)	$	4,960

Shares may not add due to rounding.

(a) Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-based Payments and Note 13. Stockholders’ Equity.

(b) Reflects the acquisition of treasury shares in connection with the share repurchase program and includes excise tax accrued on net share repurchases. For additional information, see Note 13. Stockholders’ Equity.

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED) - Continued


Six months ended June 30, 2025
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, December 31, 2024		501.9	$	5	53.4	$	(7,445)	$	1,182	$	11,968	$	(940)	$	—	$	4,770
Net income		—	—		—	—		—		1,349		—		—		1,349
Other comprehensive income		—	—		—	—		—		—		63		—		63

Share-based compensation awards (a)		—	—		(0.3)	7		21		—		—		—		28
Treasury stock acquired (b)		—	—		4.8	(788)		—		—		—		—		(788)

Dividends declared		—	—		—	—		—		(445)		—		—		(445)
Balance, June 30, 2025		501.9	$	5	57.9	$	(8,226)	$	1,203	$	12,872	$	(877)	$	—	$	4,977

Six months ended June 30, 2024
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, December 31, 2023		501.9	$	5	43.5	$	(5,597)	$	1,133	$	10,295	$	(839)	$	(6)	$	4,991
Net income		—	—		—	—		—		1,223		—		—		1,223
Other comprehensive loss		—	—		—	—		—		—		(6)		—		(6)

Share-based compensation awards (a)		—	—		(0.5)	13		13		—		—		—		26
Treasury stock acquired (b)		—	—		5.0	(880)		—		—		—		—		(880)

Dividends declared		—	—		—	—		—		(394)		—		—		(394)
Balance, June 30, 2024		501.9	$	5	48.0	$	(6,464)	$	1,146	$	11,124	$	(845)	$	(6)	$	4,960

Shares may not add due to rounding.

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	June 30,
(MILLIONS OF DOLLARS)	2025		2024
Operating Activities
Net income before allocation to noncontrolling interests	$	1,349	$	1,223
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization expense	242		253
Share-based compensation expense	39		37
Asset write-offs and asset impairments	33		13


Net loss on sale of business, excluding transaction costs	3		22

Provision for losses on inventory	32		42
Deferred taxes	12		(144)


Other non-cash adjustments	(5)		11
Other changes in assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	(194)		(112)
Inventories	(168)		(115)
Other assets	(162)		(35)
Accounts payable	24		20
Other liabilities	(104)		(88)
Other tax accounts, net	(28)		(30)
Net cash provided by operating activities	1,073		1,097
Investing Activities
Capital expenditures	(327)		(272)

Acquisitions, net of cash acquired	(10)		(8)

Purchase of investments	(3)		(3)

(Payments of)/proceeds from derivative instrument activity, net	(76)		21
Proceeds from sale of business, net of cash sold and working capital adjustments	(4)		—
Net proceeds from sale of assets	—		1
Other investing activities	(2)		(2)
Net cash used in investing activities	(422)		(263)
Financing Activities
Decrease in short-term borrowings, net	—		(3)


Payment of consideration related to previous acquisitions	—		(5)

Share-based compensation-related proceeds, net of taxes paid on withholding shares	(12)		(12)
Purchases of treasury stock, including excise taxes paid	(781)		(872)
Cash dividends paid	(447)		(395)

Other financing activities	(1)		—
Net cash used in financing activities	(1,241)		(1,287)
Effect of exchange-rate changes on cash and cash equivalents	38		(14)
Net decrease in cash and cash equivalents	(552)		(467)
Cash and cash equivalents at beginning of period	1,987		2,041
Cash and cash equivalents at end of period	$	1,435	$	1,574
Supplemental cash flow information
Cash paid during the period for:
Income taxes(a)	$	475	$	481
Interest, net of capitalized interest	137		138
Amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	34		30
Financing cash flows - finance leases	2		1
Non-cash transactions:
Capital expenditures	3		3
Excise tax accrued on net share repurchases, not paid	7		8

Lease obligations obtained in exchange for right-of-use assets - operating	58		26
Lease obligations obtained in exchange for right-of-use assets - finance	1		—
Dividends declared, not paid	222		197

(a) For the six months ended June 30, 2025, includes $88 million related to the purchase of transferable federal tax credits.

See notes to condensed consolidated financial statements.

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ZOETIS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization

Zoetis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health. We organize and operate our business in two geographic regions: the United States (U.S.) and International.

We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed and emerging markets. We have a diversified business, marketing products across eight core species: dogs, cats and horses (collectively, companion animals) and cattle, poultry, swine, fish and sheep (collectively, livestock); and within seven major product categories: parasiticides, vaccines, dermatology, anti-infectives, pain and sedation, other pharmaceutical and animal health diagnostics. On October 31, 2024, we completed the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, and, as a result, our major product categories no longer include the category of medicated feed additives. See Note 5. Divestitures.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three and six months ended May 31, 2025 and 2024.

Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

Certain reclassifications of prior year information have been made to conform to the current year presentation.

We are responsible for the unaudited condensed consolidated financial statements included in this Form 10-Q. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The information included in this interim report should be read in conjunction with the financial statements and accompanying notes included in our 2024 Annual Report on Form 10-K.

In the third quarter of 2024, we concluded that we were no longer the primary beneficiary of a variable interest entity (VIE) that was previously consolidated. The effects of the deconsolidation were not material to the condensed consolidated financial statements.

3. Accounting Standards

Recently Adopted Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance requires standardized categories for the effective tax rate reconciliation, disaggregation of income taxes paid and other income tax-related disclosures. This update is effective for fiscal years beginning after December 15, 2024. We adopted this guidance as of January 1, 2025, which will result in additional disclosures in the notes to our annual consolidated financial statements.

Recently Issued Accounting Standards

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The new guidance requires a public business entity to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our notes to the condensed consolidated financial statements.

4. Revenue

A. Revenue from Product Sales

We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers or e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top-selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network.

Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to all different brands of a particular product, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both companion animals and livestock, within each of our major product categories.

On October 31, 2024, we completed the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets,

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and, as a result, our major product categories no longer include the category of medicated feed additives*.* See Note 5. Divestitures.

Our major product categories are:

parasiticides:** products that prevent or eliminate external and internal parasites such as fleas, ticks, lice and worms;
vaccines:** biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response;
dermatology:** products that relieve itch associated with allergic conditions and atopic dermatitis;
anti-infectives:** products that prevent, kill or slow the growth of bacteria, fungi or protozoa;
pain and sedation:** products that alleviate pain, primarily associated with osteoarthritis and postoperative pain;
other pharmaceutical:** antiemetic, reproductive and oncology products; and
animal health diagnostics:** testing and analysis of blood, urine and other animal samples and related products and services, including point-of-care diagnostic products, instruments and reagents, rapid immunoassay tests, reference laboratory kits and services and blood glucose monitors.

Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals, as well as products and services in biodevices, genetic tests and precision animal health.

Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, deepening the human-animal bond, receiving increased medical treatment and benefiting from advances in animal health medicine, vaccines and diagnostics.

Our livestock products primarily help prevent or treat diseases and conditions to allow veterinarians and producers to care for their animals and to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive demand for improved nutrition, particularly through increased consumption of animal protein. Second, population growth leads to greater natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve and the global food chain faces increased scrutiny, there is more focus on food quality, safety and reliability of supply.

The following tables present our revenue disaggregated by geographic area, species and major product category:

Revenue by geographic area


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
United States	$	1,356	$	1,308	$	2,539	$	2,471
Australia	83		83		158		156
Brazil	93		99		181		200
Canada	73		75		140		136
Chile	36		31		70		62
China	72		68		132		144
France	33		34		73		75
Germany	58		58		109		109
Italy	38		36		67		64
Japan	45		39		81		76
Mexico	38		46		75		90
Spain	37		33		70		65
United Kingdom	77		73		154		150
Other developed markets	162		138		295		265
Other emerging markets	225		222		473		450
	2,426		2,343		4,617		4,513
Contract manufacturing & human health	34		18		63		38
Total Revenue	$	2,460	$	2,361	$	4,680	$	4,551

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Revenue by major species


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
U.S.
Companion animal	$	1,176	$	1,080	$	2,149	$	1,978
Livestock	180		228		390		493
	1,356		1,308		2,539		2,471
International
Companion animal	612		569		1,185		1,121
Livestock	458		466		893		921
	1,070		1,035		2,078		2,042
Total
Companion animal	1,788		1,649		3,334		3,099
Livestock	638		694		1,283		1,414
Contract manufacturing & human health	34		18		63		38
Total Revenue	$	2,460	$	2,361	$	4,680	$	4,551

Revenue by species


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Companion Animal:
Dogs and Cats	$	1,716	$	1,581	$	3,197	$	2,965
Horses	72		68		137		134
	1,788		1,649		3,334		3,099
Livestock:
Cattle	320		350		678		741
Swine	119		130		230		257
Poultry	103		132		209		271
Fish	74		62		127		107
Sheep and other	22		20		39		38
	638		694		1,283		1,414
Contract manufacturing & human health	34		18		63		38
Total Revenue	$	2,460	$	2,361	$	4,680	$	4,551

Revenue by major product category


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Parasiticides	$	673	$	600	$	1,235	$	1,104
Vaccines	504		445		951		897
Dermatology	463		418		853		781
Anti-infectives	219		264		468		545
Pain and sedation	217		221		427		415
Other pharmaceutical	172		153		331		309
Animal health diagnostics	110		103		213		185
Other non-pharmaceutical	63		65		129		126
Medicated feed additives	5		74		10		151
	2,426		2,343		4,617		4,513
Contract manufacturing & human health	34		18		63		38
Total Revenue	$	2,460	$	2,361	$	4,680	$	4,551

B. Revenue from Contracts with Customers

Contract liabilities reflected within Other current liabilities as of December 31, 2024 and 2023, and subsequently recognized as revenue during each of the first six months of 2025 and 2024 were $5 million and $3 million, respectively. Contract liabilities as of June 30, 2025 and December 31, 2024 were $19 million and $18 million, respectively.

Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of June 30, 2025 is not material.

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5. Divestitures

On October 31, 2024, we completed the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets to Phibro Animal Health for a net purchase price of $299 million. During 2024, we received $303 million in sales proceeds, less cash sold of $11 million, resulting in $292 million net sales proceeds, and recorded a net pre-tax loss of $25 million within Other (income)/deductions—net, subject to final post-closing adjustments. During the six months ended June 30, 2025, we paid $4 million, net of proceeds received, and recognized an additional loss of $3 million within Other (income)/deductions—net associated with the final post-closing adjustments.

6. Restructuring Charges and Other Costs Associated with Acquisitions and Divestitures

In connection with our cost-reduction/productivity initiatives, we typically incur restructuring charges associated with workforce reductions and site closings. In connection with our acquisition and divestiture activities, we typically incur costs associated with executing the transactions. Acquisition activity may also include integrating the acquired operations, which may include expenditures for consulting and the integration of systems and processes, product transfers and restructuring the company, which may include charges related to employees, assets and activities that will not continue in the company. Divestiture activity may also include costs to separate the divested operations, which may include expenditures for consulting and the disintegration of systems and processes, transfer costs, and restructuring charges which may include charges related to employees, assets and activities that will not continue in the company's ongoing operations. All operating functions can be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as functions such as business technology, shared services and corporate operations.

The components of costs incurred in connection with restructuring initiatives, acquisitions and divestitures are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Restructuring charges and certain acquisition and divestiture-related costs:
Acquisition-related costs	$	1	$	1	$	1	$	1


Divestiture-related costs	—		4		—		4
Restructuring charges, net(a):
Employee termination costs, net	5		37		$	5	$	41

Asset impairment charges	22		—		22		—
Exit costs	2		—		2		—
Total Restructuring charges and certain acquisition and divestiture-related costs	$	30	$	42	$	30	$	46

(a) Restructuring charges for the three and six months ended June 30, 2025 primarily consisted of asset impairment charges and employee termination costs related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site.

Restructuring charges for the three and six months ended June 30, 2024 primarily consisted of employee termination costs related to organizational structure refinements. Restructuring charges for the six months ended June 30, 2024 were partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative.

The change in our restructuring accrual is as follows:



(MILLIONS OF DOLLARS)	Accrual
Balance, December 31, 2024(a)	$	28
Provision	29

Non-cash activity	(22)
Utilization and other(b)	(15)

Balance, June 30, 2025(a)	$	20

(a) At June 30, 2025 and December 31, 2024, included in Accrued expenses ($18 million and $26 million, respectively) and Other noncurrent liabilities ($2 million).

(b) Includes adjustments for foreign currency translation.

7. Other (Income)/Deductions—Net

The components of Other (income)/deductions—net are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024

Interest income	$	(19)	$	(24)	$	(42)	$	(56)
Identifiable intangible asset impairment charges(a)	5		11		5		11




Net loss on sale of business(b)	3		22		3		22
Foreign currency loss(c)	14		18		22		37

Other, net	1		(2)		(2)		3
Other (income)/deductions—net	$	4	$	25	$	(14)	$	17

(a) For the three and six months ended June 30, 2025 and 2024, represents asset impairment charges related to our aquaculture product portfolio.

(b) Represents a net loss related to the sale of our medicated feed additive product portfolio, certain water soluble products and related assets sold in 2024. For additional information, see Note 5. Divestitures.

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8. Income Taxes

A. Taxes on Income

Our effective tax rate was 20.4% and 20.0% for the three months ended June 30, 2025 and 2024, respectively, and 21.2% and 19.9% for the six months ended June 30, 2025 and 2024, respectively. The higher effective tax rate for the three and six months ended June 30, 2025, compared with the three and six months ended June 30, 2024, was primarily attributable to a lower benefit in the U.S. related to foreign-derived intangible income, higher net discrete tax expenses, partially offset by a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).

In 2024, the company implemented an initiative to maximize its cash position in the U.S. This initiative resulted in a tax benefit in the U.S. in connection with a prepayment from a related foreign entity in Belgium which qualifies as foreign-derived intangible income; however, this income tax benefit was deferred to 2025 and 2026. A portion of this benefit was recognized during the three and six months ended June 30, 2025.

B. Deferred Taxes

As of June 30, 2025, the total net deferred income tax asset of $461 million is included in Noncurrent deferred tax assets ($617 million) and Noncurrent deferred tax liabilities ($156 million).

As of December 31, 2024, the total net deferred income tax asset of $373 million is included in Noncurrent deferred tax assets ($540 million) and Noncurrent deferred tax liabilities ($167 million).

C. Tax Contingencies

Uncertain Tax Positions

As of June 30, 2025, the net tax liabilities associated with uncertain tax positions of $219 million (exclusive of interest and penalties related to uncertain tax positions of $45 million) are included in Other taxes payable.

As of December 31, 2024, the net tax liabilities associated with uncertain tax positions of $213 million (exclusive of interest and penalties related to uncertain tax positions of $38 million) are included in Other taxes payable.

Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

Status of Tax Audits and Potential Impact on Accrual for Uncertain Tax Positions

We are currently under income tax audit by the U.S. Internal Revenue Service (IRS) for tax years 2017 and 2018. In July 2024, the IRS issued Notices of Proposed Adjustment (NOPA) related to the one-time mandatory deemed repatriation tax incurred on the 2018 U.S. Federal Income Tax return. In September 2024, the IRS issued a Revenue Agent Report (RAR) for the adjustments identified in the NOPA and a protest was filed with the IRS on November 15, 2024. As of June 30, 2025, the additional tax liability, based on the income adjustment proposed by the IRS under the RAR, is approximately $450 million, excluding interest and penalties.

Based on current facts and circumstances, we disagree with the IRS’ position and will defend our position taken on the 2018 U.S. Federal Income Tax return. We believe the amount previously accrued related to this uncertain tax position remains appropriate, but we will continue to evaluate the adequacy of our tax reserve as the audit progresses. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are not consistent with management’s expectations, we could be required to adjust our provision for income taxes and this amount could be material to our financial statements.

9. Financial Instruments

A. Debt

Credit Facilities

In December 2022, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility), which expires in December 2027. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. In addition, the credit facility contains other customary covenants.

We were in compliance with all financial covenants as of June 30, 2025 and December 31, 2024. There were no amounts drawn under the credit facility as of June 30, 2025 or December 31, 2024.

We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of June 30, 2025, we had access to

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$53 million of lines of credit which expire at various times and are generally renewed annually. There were no borrowings outstanding related to these facilities as of June 30, 2025 and December 31, 2024.

Commercial Paper Program

In February 2013, we entered into a commercial paper program with a capacity of up to $1.0 billion. As of June 30, 2025 and December 31, 2024, there was no commercial paper outstanding under this program.

Senior Notes and Other Long-Term Debt

Our senior notes are governed by an indenture and supplemental indentures (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our and certain of our subsidiaries’ ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which the senior notes may be declared immediately due and payable.

Pursuant to the indenture, we are able to redeem the senior notes of any series, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. Upon the occurrence of a change of control of us and a downgrade of the senior notes below an investment grade rating by each of Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding senior notes at a price equal to 101% of the aggregate principal amount of the senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase.

The components of our long-term debt are as follows:


	June 30,		December 31,
(MILLIONS OF DOLLARS)	2025		2024
4.500% 2015 senior notes due 2025	$	750	$	750
5.400% 2022 senior notes due 2025	600		600
3.000% 2017 senior notes due 2027	750		750
3.900% 2018 senior notes due 2028	500		500
2.000% 2020 senior notes due 2030	750		750
5.600% 2022 senior notes due 2032	750		750
4.700% 2013 senior notes due 2043	1,150		1,150
3.950% 2017 senior notes due 2047	500		500
4.450% 2018 senior notes due 2048	400		400
3.000% 2020 senior notes due 2050	500		500
	6,650		6,650
Unamortized debt discount / debt issuance costs	(51)		(54)
Less current portion of long-term debt	1,350		1,350
Cumulative fair value adjustment for interest rate swap contracts	(18)		(26)
Long-term debt, net of discount and issuance costs	$	5,231	$	5,220

The fair value of our long-term debt was $6,229 million and $6,097 million as of June 30, 2025 and December 31, 2024, respectively, and has been determined using a third-party model that uses significant inputs derived from, or corroborated by, observable market data, including benchmark security prices and Zoetis’ credit spreads (Level 2 inputs).

The following table provides the principal amount of debt outstanding, as of June 30, 2025, by scheduled maturity date:


											After
(MILLIONS OF DOLLARS)	2025		2026		2027		2028		2029		2029		Total
Maturities	$	1,350	$	—	$	750	$	500	$	—	$	4,050	$	6,650

Interest Expense

Interest expense, net of capitalized interest, was $53 million and $107 million for the three and six months ended June 30, 2025, respectively, and $59 million and $117 million for the three and six months ended June 30, 2024, respectively. Capitalized interest expense was $11 million and $22 million for the three and six months ended June 30, 2025, respectively, and $9 million and $17 million for the three and six months ended June 30, 2024, respectively.

B. Derivative Financial Instruments

Foreign Exchange Risk

A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of various derivative financial instruments. These derivative financial instruments serve to manage the exposure of our net investment in certain foreign operations to changes in foreign exchange rates and protect net income against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.

All derivative financial instruments used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the

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Condensed Consolidated Balance Sheets. The derivative financial instruments primarily offset exposures in the Australian dollar, British pound, Canadian dollar, Chinese renminbi, euro and Norwegian krone. Changes in fair value are reported in earnings or in Accumulated other comprehensive loss, depending on the nature and purpose of the financial instrument, as follows:

For foreign currency forward-exchange contracts not designated as hedging instruments, we recognize the gains and losses that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. The vast majority of the foreign currency forward-exchange contracts mature within 60 days and all mature within three years.
For foreign exchange derivative instruments that are designated as hedging instruments against our net investment in foreign operations, changes in the fair value are recorded as a component of cumulative translation adjustment within Accumulated other comprehensive loss and reclassified into earnings when the foreign investment is sold or substantially liquidated. These instruments include cross-currency interest rate swaps and foreign currency forward-exchange contracts. Gains and losses excluded from the assessment of hedge effectiveness are recognized in earnings (Interest expense, net of capitalized interest). The cash flows from these contracts are reflected within the investing section of our Condensed Consolidated Statements of Cash Flows*.* These contracts have varying maturities of up to three years.

Interest Rate Risk

The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing.

In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. Unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in earnings over the life of the future fixed rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings.
During the period from 2019 to 2022, we entered into forward-starting interest rate swaps with an aggregate notional value of $650 million. We designated these swaps as cash flow hedges against interest rate exposure related principally to the issuance of fixed-rate debt to refinance our 3.250% 2013 senior notes due 2023. Upon issuance of our 2022 senior notes, we terminated these contracts and received $114 million in cash from the counterparties for settlement. The settlement amount, which represented the fair value of the contracts at the time of termination, was recorded in Accumulated other comprehensive loss, and will be amortized into income (offset to Interest expense, net of capitalized interest) over the life of the 5.600% 2022 senior notes due 2032.
As of June 30, 2025, we had outstanding forward-starting interest rate swaps, having an effective date and mandatory termination date in March 2026, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 4.500% 2015 senior notes due 2025.
We may use fixed-to-floating interest rate swaps that are designated as fair value hedges to hedge against changes in the fair value of certain fixed-rate debt attributable to changes in the benchmark of the Secured Overnight Financing Rate (SOFR). These derivative instruments effectively convert a portion of the company’s long-term debt from fixed-rate to floating-rate debt based on the daily SOFR rate plus a spread. Gains or losses on the fixed-to-floating interest rate swaps due to changes in SOFR are recorded in Interest expense, net of capitalized interest. Changes in the fair value of the fixed-to-floating interest rate swaps are offset by changes in the fair value of the underlying fixed-rate debt. As of June 30, 2025, we had outstanding fixed-to-floating interest rate swaps that correspond to a portion of the 3.900% 2018 senior notes due 2028 and the 2.000% 2020 senior notes due 2030. The amounts recorded during the three and six months ended June 30, 2025 for changes in the fair value of these hedges are not material to our condensed consolidated financial statements.

Outstanding Positions

The aggregate notional amount of derivative instruments are as follows:


	Notional
	June 30,		December 31,
(MILLIONS)	2025		2024
Derivatives not Designated as Hedging Instruments:
Foreign currency forward-exchange contracts	$	2,123	$	2,070

Derivatives Designated as Hedging Instruments:
Foreign exchange derivative instruments (in foreign currency):
Euro	925		800
Danish krone	400		475
Swiss franc	25		25


Forward-starting interest rate swaps	$	600	$	300

Fixed-to-floating interest rate swap contracts	$	250	$	250

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Fair Value of Derivative Instruments

The classification and fair values of derivative instruments are as follows:


		Fair Value of Derivatives
		June 30,		December 31,
(MILLIONS OF DOLLARS)	Balance Sheet Location	2025		2024
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward-exchange contracts	Other current assets	$	6	$	18
Foreign currency forward-exchange contracts	Other current liabilities	(11)		(6)
Total derivatives not designated as hedging instruments		$	(5)	$	12

Derivatives Designated as Hedging Instruments:
Forward-starting interest rate swap contracts	Other current assets	$	19	$	—
Forward-starting interest rate swap contracts	Other noncurrent assets	—		26
Forward-starting interest rate swap contracts	Other current liabilities	(10)		—

Foreign exchange derivative instruments	Other current assets	7		55
Foreign exchange derivative instruments	Other noncurrent assets	—		4
Foreign exchange derivative instruments	Other current liabilities	(31)		—
Foreign exchange derivative instruments	Other noncurrent liabilities	(58)		—



Fixed-to-floating interest rate swap contracts	Other noncurrent liabilities	(18)		(26)
Total derivatives designated as hedging instruments		(91)		59
Total derivatives		$	(96)	$	71

The company’s derivative transactions are subject to master netting agreements that mitigate credit risk by permitting net settlement of transactions with the same counterparty. The company also has collateral security agreements with certain of its counterparties. Under these collateral security agreements each party is required to post cash collateral when the net fair value of derivative instruments covered by the collateral agreement exceeds contractually established thresholds. At June 30, 2025, there was $5 million of collateral received and $64 million of collateral posted related to derivative instruments recorded in Other current liabilities and Other current assets, respectively. At December 31, 2024, there was $51 million of collateral received and $20 million of collateral posted related to derivative instruments recorded in Other current liabilities and Other current assets, respectively.

We use a market approach in valuing financial instruments on a recurring basis. Our derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs in the calculation of fair value.

The amounts of net gains on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net, are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Foreign currency forward-exchange contracts	$	55	$	2	$	39	$	1

These amounts were substantially offset in Other (income)/deductions—net by the effect of changing exchange rates on the underlying foreign currency exposures.

The amounts of unrecognized net (losses)/gains on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive loss, are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Forward-starting interest rate swap contracts	$	(2)	$	1	$	(13)	$	3
Foreign exchange derivative instruments	$	(74)	$	2	$	(107)	$	18

Gains on interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Foreign exchange derivative instruments	$	5	$	4	$	10	$	8

The net amount of deferred gains related to derivative instruments designated as cash flow hedges that is expected to be reclassified from Accumulated other comprehensive loss into earnings over the next 12 months is not material.

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10. Inventories

The components of inventory are as follows:


	June 30,		December 31,
(MILLIONS OF DOLLARS)	2025		2024
Finished goods	$	1,041	$	996
Work-in-process	1,027		933
Raw materials and supplies	371		377
Inventories	$	2,439	$	2,306

11. Goodwill and Other Intangible Assets

A. Goodwill

The components of, and changes in, the carrying amount of goodwill are as follows:


(MILLIONS OF DOLLARS)	U.S.		International		Total
Balance, December 31, 2024	$	1,515	$	1,209	$	2,724


Other(a)	—		34		34
Balance, June 30, 2025	$	1,515	$	1,243	$	2,758

(a) Includes adjustments for foreign currency translation.

The gross goodwill balance was $3,294 million and $3,260 million as of June 30, 2025 and December 31, 2024, respectively. Accumulated goodwill impairment losses were $536 million as of June 30, 2025 and December 31, 2024.

B. Other Intangible Assets

The components of identifiable intangible assets are as follows:


	As of June 30, 2025						As of December 31, 2024
					Identifiable						Identifiable
	Gross				Intangible Assets		Gross				Intangible Assets
	Carrying		Accumulated		Less Accumulated		Carrying		Accumulated		Less Accumulated
(MILLIONS OF DOLLARS)	Amount		Amortization		Amortization		Amount		Amortization		Amortization
Finite-lived intangible assets:
Developed technology rights	$	1,926	$	(1,270)	$	656	$	1,891	$	(1,175)	$	716
Brands and tradenames	362		(246)		116		367		(246)		121
Other	290		(204)		86		278		(197)		81
Total finite-lived intangible assets	2,578		(1,720)		858		2,536		(1,618)		918
Indefinite-lived intangible assets:
Brands and tradenames	67		—		67		66		—		66
In-process research and development	144		—		144		136		—		136
Product rights	6		—		6		7		—		7
Total indefinite-lived intangible assets	217		—		217		209		—		209
Identifiable intangible assets	$	2,795	$	(1,720)	$	1,075	$	2,745	$	(1,618)	$	1,127

C. Amortization

Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as it benefits multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $41 million and $80 million three and six months ended June 30, 2025, respectively and $42 million and $86 million for the three and six months ended June 30, 2024, respectively.

12. Share-based Payments

The Zoetis 2013 Equity and Incentive Plan, Amended and Restated as of May 19, 2022 (Equity Plan), provides long-term incentives to our employees and non-employee directors. The principal types of share-based awards available under the Equity Plan may include, but are not limited to, stock options, restricted stock and restricted stock units (RSUs), deferred stock units (DSUs), performance-vesting restricted stock units (PSUs) and other equity-based or cash-based awards.

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The components of share-based compensation expense are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2025		2024		2025		2024
Stock options / stock appreciation rights	$	3	$	3	$	6	$	6
RSUs / DSUs	13		11		24		21
PSUs	6		5		9		10
Share-based compensation expense—total(a)	$	22	$	19	$	39	$	37

(a) For the three and six months ended June 30, 2025 and 2024, we capitalized less than $1 million of share-based compensation expense to inventory.

During the six months ended June 30, 2025, the company granted 320,498 stock options with a weighted-average exercise price of $156.80 per stock option and a weighted-average fair value of $40.22 per stock option. The fair-value based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 4.38%; expected dividend yield of 1.27%; expected stock price volatility of 26.42%; and expected term of 4.3 years. Stock options granted prior to 2023 generally vest after three years of continuous service from the date of grant and have a contractual term of 10 years. Beginning in 2023, stock options granted are subject to graded vesting over three years from the date of grant and have a contractual term of 10 years. The values determined through this fair-value based method generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.

During the six months ended June 30, 2025, the company granted 570,063 RSUs with a weighted-average grant date fair value of $156.87 per RSU. RSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. RSUs granted prior to 2023 generally vest after three years of continuous service from the date of grant. Beginning in 2023, RSUs granted are subject to graded vesting over three years from the date of grant. The values generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.

During the six months ended June 30, 2025, the company granted 148,130 PSUs with a weighted-average grant date fair value of $171.21 per PSU. Beginning in 2025, the units underlying the PSUs will be earned and vested over a three-year performance period in two tranches, each subject to an independent achievement condition: (1) a market condition comprising the total shareholder return of the company in comparison to the total shareholder return of the companies comprising the S&P 500 Health Care index at the start of the performance period, excluding companies that during the performance period are acquired or no longer publicly traded (Relative TSR); and (2) a performance condition comprising a three-year average annual operational revenue growth metric (average PSU operational revenue growth). PSUs that are earned and vested based upon a market condition are accounted for at fair-value using a Monte Carlo simulation model and PSUs that are earned and vested based upon a performance condition are accounted for at fair-value using the closing price of Zoetis common stock on the date of grant. The Monte Carlo weighted-average fair value was estimated based on volatility assumptions of Zoetis common stock and an average of the S&P 500 Health Care index companies, which were 27.6% and 29.8%, respectively. Depending on the company’s Relative TSR performance and the average PSU operational revenue growth at the end of the performance period, the recipient may earn from 0% to 200% of the target number of units. Vested units are settled in shares of the company’s common stock. PSU values are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate. PSU amortization for units that are earned and vested based upon the average PSU operational revenue growth is adjusted for subsequent changes in the expected outcome of the performance-related condition.

13. Stockholders’ Equity

Zoetis is authorized to issue 6 billion shares of common stock and 1 billion shares of preferred stock.

In August 2024, our Board of Directors authorized a multi-year share repurchase program of up to $6 billion of our outstanding common stock. As of June 30, 2025, there was $4.9 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs.

Accumulated other comprehensive loss

Changes, net of tax, in accumulated other comprehensive loss, excluding noncontrolling interests were as follows:



			Currency Translation Adjustments
					Other Currency		Benefit Plans		Accumulated Other
	Cash Flow		Net Investment		Translation		Actuarial		Comprehensive
(MILLIONS OF DOLLARS)	Hedges		Hedges		Adjustments		Gains		Loss
Balance, December 31, 2024	$	89	$	62	$	(1,091)	$	—	$	(940)
Other comprehensive (loss)/income, net of tax	(17)		(107)		187		—		63

Balance, June 30, 2025	$	72	$	(45)	$	(904)	$	—	$	(877)

Balance, December 31, 2023	$	85	$	18	$	(944)	$	2	$	(839)
Other comprehensive (loss)/income, net of tax	(1)		18		(23)		—		(6)

Balance, June 30, 2024	$	84	$	36	$	(967)	$	2	$	(845)

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14. Earnings per Share

The following table presents the calculation of basic and diluted earnings per share:


		Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)		June 30,						June 30,
	2025			2024			2025			2024
Numerator
Net income before allocation to noncontrolling interests		$	718		$	624		$	1,349		$	1,223
Less: Net income/(loss) attributable to noncontrolling interests		—			—			—			—
Net income attributable to Zoetis Inc.		$	718		$	624		$	1,349		$	1,223
Denominator
Weighted-average common shares outstanding		445.1			455.5			446.3			456.7
Common stock equivalents: stock options, RSUs, PSUs and DSUs		0.4			0.5			0.4			0.7
Weighted-average common and potential dilutive shares outstanding		445.5			456.0			446.7			457.4
Earnings per share attributable to Zoetis Inc. stockholders—basic		$	1.61		$	1.37		$	3.02		$	2.68
Earnings per share attributable to Zoetis Inc. stockholders—diluted		$	1.61		$	1.37		$	3.02		$	2.67

The number of stock options outstanding under the company’s Equity Plan that were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive, were not material for the three and six months ended June 30, 2025 and 2024.

15. Commitments and Contingencies

We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 8. Income Taxes.

A. Legal Proceedings

Our non-tax contingencies include, among others, the following:

Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims.
Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings.
Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes.
Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries.

Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial.

We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid.

We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions.

The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent.

Ulianopolis, Brazil

In February 2012, the Municipality of Ulianopolis (State of Para, Brazil) filed a complaint against Fort Dodge Saúde Animal Ltda. (FDSAL), a Zoetis entity, and five other large companies alleging that waste sent to a local waste incineration facility for destruction, but that was not ultimately destroyed as the facility lost its operating permit, caused environmental impacts requiring cleanup.

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The Municipality is seeking recovery of cleanup costs purportedly related to FDSAL’s share of all waste accumulated at the incineration facility awaiting destruction, and compensatory damages to be allocated among the six defendants. We believe we have strong arguments against the claim, including defense strategies against any claim of joint and several liability.

At the request of the Municipal prosecutor, in April 2012, the lawsuit was suspended for one year. Since that time, the prosecutor has initiated investigations into the Municipality's actions in the matter as well as the efforts undertaken by the six defendants to remove and dispose of their individual waste from the incineration facility. On October 3, 2014, the Municipal prosecutor announced that the investigation remained ongoing and outlined the terms of a proposed Term of Reference (a document that establishes the minimum elements to be addressed in the preparation of an Environmental Impact Assessment), under which the companies would be liable to withdraw the waste and remediate the area.

On March 5, 2015, we presented our response to the prosecutor’s proposed Term of Reference, arguing that the proposed terms were overly general in nature and expressing our interest in discussing alternatives to address the matter. The prosecutor agreed to consider our request to engage a technical consultant to conduct an environmental diagnostic of the contaminated area. On May 29, 2015, we, in conjunction with the other defendant companies, submitted a draft cooperation agreement to the prosecutor, which outlined the proposed terms and conditions for the engagement of a technical consultant to conduct the environmental diagnostic. On August 19, 2016, the parties and the prosecutor agreed to engage the services of a third-party consultant to conduct a limited environmental assessment of the site. The site assessment was conducted during June 2017, and a written report summarizing the results of the assessment was provided to the parties and the prosecutor in November 2017. The report noted that waste is still present on the site and that further (Phase II) environmental assessments are needed before a plan to manage that remaining waste can be prepared. On April 1, 2019, the defendants met with the Prosecutor to discuss the conclusions set forth in the written report. Following that discussion, on April 10, 2019, the Prosecutor issued a procedural order requesting that the defendants prepare and submit a technical proposal outlining the steps needed to conduct the additional Phase II environmental assessments. The defendants presented the technical proposal to the Prosecutor on October 21, 2019. On March 3, 2020, the Prosecutor notified the defendants that he submitted the proposal to the Ministry of the Environment for its review and consideration by the Prosecutor. On July 15, 2020, the Prosecutor recommended certain amendments to the proposal for the Phase II testing. On September 28, 2020, the parties and the Prosecutor agreed to the final terms and conditions concerning the cooperation agreement with respect to the Phase II testing. Phase II testing began the week of October 14, 2024. To date, the work has yet to be competed. We expect a report to be issued by the consultant upon conclusion of the testing.

B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of June 30, 2025, recorded amounts for the estimated fair value of these indemnifications were not material.

16. Segment Information

Operating Segments

We manage our operations through two geographic regions. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including parasiticides, vaccines, dermatology, anti-infectives, pain and sedation, other pharmaceutical and animal health diagnostics for both companion animal and livestock customers.

On October 31, 2024, we completed the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, and, as a result, our major product categories no longer include the category of medicated feed additives. See Note 5. Divestitures.

Our operating segments are the U.S. and International. The chief operating decision maker (CODM), our Chief Executive Officer and Chief Financial Officer, uses the information provided to compare segment performance with segment resource requests and allocates human and capital resources based on segment’s actual results and expected future results.

Other Costs and Business Activities

Certain costs are not allocated to our operating segment results, such as costs associated with the following:

Other business activities, includes our Client Supply Services contract manufacturing results, our human health business, and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment.
Corporate, includes enabling functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include certain compensation costs, certain procurement costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense.
Certain transactions and events such as (i) Purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition and divestiture-related costs, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs, as well as divestiture-related costs; and (iii) Certain significant items, which comprise substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis, such as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition or divestiture, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses.
Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) certain procurement costs.

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Segment Assets

We manage our assets on a total company basis, not by operating segment. Therefore, our CODM does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment.

Selected Statement of Income Information


	Earnings						Depreciation and Amortization(a)
	Three Months Ended						Three Months Ended
	June 30,						June 30,
(MILLIONS OF DOLLARS)	2025			2024			2025		2024
U.S.
Revenue	$	1,356		$	1,308
Cost of sales	208			232
Gross profit	1,148			1,076
Gross margin	84.7		%	82.3		%
Operating expenses(b)	218			204
Other (income)/deductions-net	—			—
U.S. Earnings	930			872			$	22	$	21

International
Revenue(c)	1,070			1,035
Cost of sales	314			342
Gross profit	756			693
Gross margin	70.7		%	67.0		%
Operating expenses(b)	173			175
Other (income)/deductions-net	—			—
International Earnings	583			518			25		25

Total operating segments	1,513			1,390			47		46

Other business activities	(134)			(142)			13		11
Reconciling Items:
Corporate	(321)			(299)			29		33
Purchase accounting adjustments	(33)			(35)			33		35
Acquisition and divestiture-related costs	(1)			(5)			—		—
Certain significant items	(47)			(70)			—		—
Other unallocated	(75)			(59)			1		2
Total Earnings(d)	$	902		$	780		$	123	$	127

(a) Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.

(b) Operating expenses primarily consisted of field selling, advertising and promotions, other marketing expenses, and freight and logistics costs.

(c) Revenue denominated in euros was $241 million and $237 million for the three months ended June 30, 2025 and 2024, respectively.

(d) Defined as income before provision for taxes on income.

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	Earnings						Depreciation and Amortization(a)
	Six Months Ended						Six Months Ended
	June 30,						June 30,
(MILLIONS OF DOLLARS)	2025			2024			2025		2024
U.S.
Revenue	$	2,539		$	2,471
Cost of sales	407			449
Gross profit	2,132			2,022
Gross margin	84.0		%	81.8		%
Operating expenses(b)	423			394
Other (income)/deductions-net	—			—
U.S. Earnings	1,709			1,628			$	45	$	45

International
Revenue(c)	2,078			2,042
Cost of sales	616			655
Gross profit	1,462			1,387
Gross margin	70.4		%	67.9		%
Operating expenses(b)	327			334
Other (income)/deductions-net	1			—
International Earnings	1,134			1,053			48		48

Total operating segments	2,843			2,681			93		93

Other business activities	(263)			(274)			24		20
Reconciling Items:
Corporate	(592)			(587)			58		65
Purchase accounting adjustments	(65)			(72)			65		72
Acquisition and divestiture-related costs	(1)			(5)			—		—
Certain significant items	(53)			(76)			—		—
Other unallocated	(157)			(140)			2		3
Total Earnings(d)	$	1,712		$	1,527		$	242	$	253

(b) Operating expenses primarily consisted of field selling, advertising and promotions, other marketing expenses, and freight and logistics costs.

(c) Revenue denominated in euros was $468 million and $460 million for the six months ended June 30, 2025 and 2024, respectively.

(d) Defined as income before provision for taxes on income.

17. Subsequent Event

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain provisions that were originally enacted in the 2017 Tax Cuts and Jobs Act and were set to expire on December 31, 2025, modifications to certain international tax provisions and the restoration of tax treatment for certain business provisions, including 100% bonus depreciation for certain qualified property, domestic research and experimental cost expensing, and the business interest expense limitation. The new legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently evaluating the impact of these provisions on our condensed consolidated financial statements, including the effect on our effective tax rate and deferred tax assets in 2025 and future periods.

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