Eli Lilly (LLY): GLP‑1 Surge, CapEx Strain and the Cash‑Flow Inflection Investors Must Track

Opening: GLP‑1 Revenue Lift Meets a Cash‑Flow Reality#

Eli Lilly’s most consequential development over the last 18 months is the rapid commercialization of its GLP‑1 portfolio: the company reported combined GLP‑1 revenues of $8.57 billion in Q2 2025, a tidal shift that helped company revenues accelerate materially. That commercial surge coincides with a heavy step‑up in capital deployment: for fiscal 2024 Lilly recorded capital expenditures of $8.4 billion and free cash flow of only $414 million, producing an acute near‑term cash‑flow inflection despite $10.59 billion of reported net income in the year. The juxtaposition — blockbuster product momentum on one hand, and cash‑flow compression from capex and working‑capital drag on the other — is the single most important dynamic now shaping strategic choices and market valuation for [LLY].

Q4 2024 and Q2 2025: Revenue and product drivers#

Fiscal 2024 posted unmistakable acceleration. Total revenue rose to $45.04 billion in 2024 from $34.12 billion in 2023, a year‑over‑year increase of +32.01% based on company financials (filling date 2025‑02‑19). Net income more than doubled to $10.59 billion (++102.08% YoY), driven largely by GLP‑1 product momentum and higher operating leverage. Those topline gains are reflected in margin expansion: operating income rose to $17.50 billion, representing an operating margin of 38.86%, while EBITDA of $15.23 billion produced an EBITDA margin of 33.81% for the year.

The revenue acceleration continued into 2025: Lilly’s Q2 2025 GLP‑1 haul — the combined receipts from tirzepatide (Zepbound/Mounjaro) and related GLP‑1 sales — reached $8.57 billion in the quarter, according to company disclosures and industry coverage of the Q2 results A‑Invest. This volume‑led expansion has driven management’s upward revision of full‑year revenue expectations and reshaped near‑term growth assumptions across the sector.

The commercial engine is clear: clinical differentiation for tirzepatide in head‑to‑head studies and rapid channel execution translated into outsized unit growth. But beneath the revenue headline the cash‑flow picture is mixed, a point we turn to because it carries direct implications for capital allocation and balance‑sheet strategy.

Cash flow, capex and working capital: where the headline margin story meets reality#

Fiscal 2024 illustrates the tension between reported profitability and cash generation. Net income for 2024 was $10.59 billion, but net cash provided by operating activities was $8.82 billion, meaning cash conversion lagged reported earnings. The principal reason: a significant working‑capital outflow of $5.38 billion in 2024 that reduced operating cash relative to net income, combined with elevated capital spending. Free cash flow fell to $414.3 million in 2024, down sharply from prior‑year levels (2023 free cash flow was negative $3.15 billion due to earlier investment activity and 2022 free cash flow of $4.60 billion).

Capital expenditures were $8.4 billion in 2024, equivalent to roughly 18.65% of 2024 revenue — a materially higher intensity than peers typically show in a stable cycle and a clear sign Lilly is investing to scale manufacturing and distribution capacity to meet GLP‑1 demand. Those investments included acquisitions and facility spending (acquisitions net $947.7 million in 2024) and drove higher gross property, plant and equipment. The combination of heavy capex and working‑capital absorption created the free‑cash‑flow squeeze despite large operating profits.

The consequences are practical: Lilly’s ability to sustain buybacks, dividend growth and opportunistic M&A now depends on the pace at which operating cash flow normalizes as supply‑chain and working‑capital cycles stabilize. Management increased dividends and continued buybacks in 2024 (dividends paid $4.68 billion, share repurchases $2.5 billion), but those actions coincided with elevated investment, resulting in a slim free cash flow cushion in 2024.

Calculated financial snapshot (FY 2021–2024)#

The table below presents independently calculated key income‑statement and cash‑flow metrics derived from company filings (annual periods ending December 31). All percentage changes and ratios are our calculations using the line items reported in the fiscal filings (filed 2025‑02‑19 for FY2024).

Source: Company financial statements (income statement entries, filing dates 2022–2025).

A second table focuses on balance‑sheet and cash‑flow items that explain the cash‑generation dynamics:

Net debt = total debt - cash and short‑term investments (company reported net debt reconciled to 30.38B for 2024). Source: company balance‑sheet and cash‑flow statements.

These tables demonstrate two things. First, Lilly’s fundamental profitability expanded sharply in 2024 as GLP‑1 revenues scaled. Second, balance‑sheet changes (debt issuance and working‑capital absorption) and a sustained capex program materially depressed free cash flow in 2024 relative to net income.

Debt, leverage and financing: a deliberate increase to fund growth#

Lilly added leverage in 2024: long‑term debt rose to $28.53 billion from $18.32 billion in 2023, reflecting approximately $10.21 billion of incremental long‑term funding. Total debt increased to $33.64 billion, and reported net debt was $30.38 billion at year‑end 2024. Using the fiscal 2024 EBITDA of $15.23 billion, net debt-to‑EBITDA based on fiscal year numbers is roughly 1.99x (30.38 / 15.23), while certain trailing measures in third‑party summaries show ~1.57x — a discrepancy driven by different timing windows and TTM adjustments. Regardless of the precise multiple, Lilly’s leverage sits at a level consistent with investment‑grade large pharma but is meaningfully higher than two years earlier.

Why borrow? The capital was directed at scaling manufacturing capacity, supply‑chain resilience and targeted acquisitions to support GLP‑1 manufacture and distribution. From a strategic perspective the decision is defensible: securing production capacity is a gating factor to revenue growth in an environment with demand surging quickly and supply constraints tight.

Competitive dynamics: Zepbound, Mounjaro and the changing GLP‑1 map#

Eli Lilly’s commercial momentum rests on two pillars: the established growth of Mounjaro (tirzepatide for diabetes) and the rapid market adoption of Zepbound (tirzepatide for obesity). Head‑to‑head clinical evidence — notably SURMOUNT‑5 and related data — showed tirzepatide produced larger mean weight loss and higher responder rates versus semaglutide‑based treatment in pivotal comparisons, a clinical advantage that materially shifted prescriber behavior and payer conversations in 2025 PharmExec, Proactive Investors.

The competitive consequence has been rapid share gains: industry trackers and company commentary put Lilly’s combined GLP‑1 footprint markedly higher in 2025 versus a year earlier. Estimates in the market and management disclosures suggested that Lilly held a sizeable share of the U.S. GLP‑1 market by mid‑2025, with Novo Nordisk responding via pricing, supply and pipeline adjustments. The strategic takeaway is straightforward: when a product demonstrates clear head‑to‑head superiority on clinically meaningful endpoints, adoption (and thereby revenue) can accelerate faster than earlier diffusion curves suggested.

However, the window is not uncontested. Pricing pressure has already appeared: company commentary and industry reporting point to negative price realization in some quarters (price realization decline noted in company Q2 2025 disclosures), and oral GLP‑1 entrants (and alternatives such as small‑molecule candidates) will compress pricing and broaden access over time. That means market‑share leadership requires sustained manufacturing, payer engagement and lifecycle investment.

Margin story: scale is working but some gains are temporary#

Lilly reported meaningful margin expansion in 2024 as gross margins climbed to 81.31% and operating margins to 38.86%. Those increases reflect product mix (higher‑margin specialty medicines), strong sales growth, and operating leverage. EBITDA margin reached 33.81% in 2024, a step‑change from prior years. These are durable benefits as long as the GLP‑1 franchise maintains pricing power and mix benefits.

But margin expansion faces two opposing forces. First, pricing pressure and payer negotiations can compress per‑unit realization over time, reducing margin leverage. Second, elevated capex and maintenance of increased manufacturing capacity imply a carry cost: until that capacity is fully utilized and cash flows stabilize, reported margins will coexist with constrained free cash flow.

Historical execution and management credibility#

Management execution over the past three years shows a pattern of converting clinical data into rapid commercial scale. Revenues rose from $28.32B in 2021 to $45.04B in 2024, a compound growth dynamic amplified by GLP‑1 launches. Management has also continued a consistent dividend program (annualized dividend per share $5.8, dividend yield ~0.79%) and sustained repurchases, indicating a balanced but aggressive capital‑allocation posture.

That said, the speed of scale has forced financing choices — notably greater long‑term debt and elevated capex — that managers must now demonstrate generate returns above the cost of capital. The company’s research‑and‑development spend remains high (R&D expense $10.99B in 2024, ~24.4% of revenue), supporting pipeline depth and future optionality beyond GLP‑1s.

Key risks and operational headwinds#

The principal risks to the thesis are executional rather than conceptual. First, payer pushback or formulary restrictions could materially lower pricing and slow uptake; early signs of negative price realization require monitoring. Second, supply‑chain or manufacturing setbacks would blunt revenue and amplify the return‑on‑capital question for the recent capex program. Third, competitive responses — notably from Novo Nordisk and oral‑GLP‑1 entrants — could compress margins and market share over the medium term. Finally, the current free‑cash‑flow profile requires normalization: continued dividend and buyback activity in the face of low free cash flow would force additional borrowing or slow buybacks/dividend growth.

What this means for investors#

Investors should view Lilly today as a company in the middle of a classic ‘scale‑up’ phase: it has converted clinical superiority into outsized revenue growth, but is also converting cash flows into capacity and access that temporarily depress free cash generation. The critical variables to monitor are near‑term operating cash flow (is working capital normalization underway?), capex run‑rate (does capex fall as facilities come online?), and realized pricing trends for GLP‑1s (are price declines accelerating or stabilizing?). Improvement across those three vectors would convert the current growth story into a sustainably cash‑generative platform.

From an analytical perspective, four forward‑looking indicators warrant continual tracking: quarterly GLP‑1 revenue ramp vs. guidance, sequential free cash flow (and the delta to net income), utilization metrics for new manufacturing capacity (if disclosed), and payer coverage changes in major markets.

Featured snippet opportunity (concise answer)#

What is driving Eli Lilly’s recent revenue surge? Lilly’s revenue acceleration is driven primarily by rapid uptake of tirzepatide‑based therapies (Mounjaro/Zepbound), which produced combined GLP‑1 sales of $8.57B in Q2 2025; this volume growth raised full‑year revenue expectations but coincided with higher capex ($8.4B in 2024) and working‑capital outflows that compressed free cash flow to $414.3M in 2024.

Key takeaways#

Lilly’s commercial execution on GLP‑1s is real and large: fiscal 2024 revenue climbed to $45.04B (++32.01% YoY) and the GLP‑1 franchise produced an outsized contribution to early‑2025 results. At the same time the business is in a capital‑intensive phase: capex and working‑capital absorption depressed free cash flow to $414.3M in 2024 despite $10.59B of net income. Leverage rose materially in 2024 to support capacity and acquisition spending, leaving the company with the near‑term task of converting investments into steady operating cash flow.

Investors should therefore separate two questions: Is demand durable? The clinical data and early uptake indicate yes. Can the company translate that demand into sustained cash flow and margin expansion after the build‑out? That remains conditional on manufacturing execution, working‑capital stabilization and pricing dynamics.

Closing synthesis#

Eli Lilly’s story over the last two years is a textbook example of pharmaceutical scale‑up: clinical differentiation accelerated prescribing and drove large revenue increases, prompting deliberate investment in manufacturing and capacity that temporarily suppresses free cash flow. The company is now moving from the ‘build’ phase toward the ‘harvest’ phase — the important near‑term metric is the speed of that transition. If operating cash flow re‑accelerates and capex normalizes while GLP‑1 volumes remain robust, the investments begun in 2023–2024 will look prescient. If supply, pricing or working‑capital trends deteriorate, the same investments could amplify volatility in cash returns.

For market participants the implication is clear: measure growth not only by revenue and margin headlines but by cash‑flow conversion and balance‑sheet flexibility. Lilly’s competitive position in the GLP‑1 era is strong, but its valuation story will pivot on execution of the cash‑generation leg of the thesis.

Sources: Company fiscal filings (FY2021–FY2024; filing dates through 2025‑02‑19), Q2 2025 company disclosures and market coverage A‑Invest; clinical reporting on SURMOUNT‑5 and Zepbound vs Wegovy PharmExec, Proactive Investors. Financial line items and ratios are calculated from the company’s reported income statement, balance sheet and cash‑flow statements as provided in the public filings.