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CARDINAL HEALTH INC

CAH
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Business Summary

Cardinal Health operates in the global healthcare services and products industry, providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. The company connects patients, providers, payers, pharmacists, and manufacturers for integrated care coordination, and its offerings enhance healthcare system and supply chain efficiency.

The company competes in a highly competitive industry where competition is based on brand recognition, product quality, price, and innovation. Primary competitors are not named in the filing, but the company's competitive advantages include its generics program through the Red Oak Sourcing venture with CVS Health, its multi-specialty MSO platforms (The Specialty Alliance and Navista), and its broad distribution network across pharmaceuticals and medical products.

Cardinal Health generates revenue through two reportable segments: Pharmaceutical and Specialty Solutions (Pharma) and Global Medical Products and Distribution (GMPD), with additional operating segments in Other (Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics). Revenue is primarily transactional from pharmaceutical and medical product distribution, with growing recurring income from managed services organization platforms that provide physician practice support and management services. Primary customer segments include hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home.

The Pharmaceutical and Specialty Solutions segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. This segment also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products, pharmacy management services to hospitals, operates a limited number of pharmacies including in community health centers, repackages generic pharmaceuticals and over-the-counter healthcare products, and includes managed services organization platforms for physician offices. Pharma segment revenue for fiscal 2026 was $234.833 billion , an increase of 15% from the prior year, and segment profit was $2.783 billion , up 23% from the prior year.

The Global Medical Products and Distribution segment manufactures, sources, and distributes Cardinal Health brand medical, surgical, and laboratory products sold in the United States, Canada, Europe, Asia, and other markets, and also distributes national brand medical, surgical, and laboratory products to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers in the United States and Canada. GMPD segment revenue for fiscal 2026 was $12.719 billion , relatively flat year-over-year, and segment profit was $258 million , an increase of 91% from the prior year. The Other segment, comprising Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics, generated revenue of $6.792 billion in fiscal 2026, up 26% from the prior year, and segment profit of $707 million , up 37%.

During fiscal 2026, the company completed the acquisition of Solaris Health, a urology MSO, through The Specialty Alliance for a purchase price of approximately $1.9 billion in cash, and issued common units in The Specialty Alliance with an estimated grant date fair value of approximately $500 million . The company deployed $1.4 billion for share repurchases, $649 million for capital expenditures, $600 million for debt repayment, and $491 million for dividends. New long-term debt of $1.0 billion was issued to fund a portion of the Solaris Health acquisition. The company also paid $417 million related to opioid litigation, including the fifth annual payment of $366 million under the National Opioid Settlement Agreement. A pre-tax goodwill impairment charge of $184 million was recognized related to the Navista & ION reporting unit within the Pharma segment, and a pre-tax impairment charge of $122 million was recognized on the equity interest in Outcomes.

Total revenue for fiscal 2026 increased 14% to $254.248 billion from $222.578 billion in the prior year. GAAP operating earnings increased 15% to $2.613 billion from $2.275 billion , and Non-GAAP operating earnings increased 30% to $3.624 billion from $2.786 billion . GAAP diluted EPS increased 12% to $7.23 from $6.45 , while Non-GAAP diluted EPS increased 37% to $11.26 from $8.24 . Gross margin increased 20% to $9.774 billion from $8.168 billion , and the gross margin rate grew 17 basis points from the prior year. Net cash provided by operating activities was $5.2 billion in fiscal 2026, compared to $2.4 billion in fiscal 2025.

Business Outlook

The company expects capital expenditures in fiscal 2027 to be approximately $700 million , primarily related to manufacturing and distribution infrastructure projects and technology investments. On August 4, 2026, the Board of Directors approved a new $5.0 billion share repurchase program. The quarterly dividend was increased to $0.5158 per share, or $2.06 per share on an annualized basis, approved for payment on October 15, 2026.

The Pharma segment's growth is driven by branded and specialty pharmaceutical sales growth from existing and new customers, the performance of the generics program including the Red Oak Sourcing venture with CVS Health, and the acquisitions of MSO platforms (The Specialty Alliance, including GI Alliance, Urology America, and Solaris Health, and Navista including Integrated Oncology Network). Demand for GLP-1 medications positively impacted Pharma segment revenue during fiscal 2026, though demand growth began to moderate and is expected to continue moderating, and these sales did not meaningfully contribute to segment profit.

The GMPD segment's growth is driven by Cardinal Health brand growth and growth from existing customers, partially offset by lower distribution volumes and the expected IEEPA tariff refund repayment to customers. The Other segment's growth is driven by performance across at-Home Solutions (including the acquisition of Advanced Diabetes Supply Group), Nuclear and Precision Health Solutions, and OptiFreight Logistics.

Gross margin rate for fiscal 2026 grew 17 basis points from the prior year, primarily due to the acquisition of MSO platforms, partially offset by the impact of unfavorable changes in product mix in the Pharma segment driven by increased pharmaceutical distribution branded sales which have a dilutive impact on the overall gross margin rate. Restructuring and employee severance costs in fiscal 2026 were $106 million , primarily resulting from initiatives to rationalize manufacturing operations and other cost-savings initiatives within the GMPD segment.

Capital expenditures during fiscal 2026 were $649 million , and the company expects capital expenditures in fiscal 2027 to be approximately $700 million primarily related to manufacturing and distribution infrastructure projects and technology investments. The company deployed $1.4 billion for share repurchases during fiscal 2026, and as of June 30, 2026, had $1.4 billion remaining under the existing share repurchase authorization. On August 4, 2026, the Board approved a new $5.0 billion share repurchase program. Dividends paid during fiscal 2026 totaled $2.04 per share, an increase of 1% from fiscal 2025.

The tariff environment remains dynamic, and the company does not expect to be able to establish alternative sources of supply or otherwise mitigate the potential impact of tariffs on all products sourced, manufactured, or distributed. Since February 2025, the company has paid approximately $200 million in IEEPA tariffs, primarily in the GMPD segment. An April 2026 proclamation imposed tariffs on imports of branded pharmaceutical products and associated ingredients, and a statement indicated that generic pharmaceutical products will be subject to 100% tariffs beginning in 2028 and 200% tariffs beginning in 2029, though there remains significant uncertainty about ultimate implementation.

The Inflation Reduction Act has and will continue to adversely impact revenue by capping prices for certain drugs, though profitability has not been negatively impacted. The Executive Order titled 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' and other administrative policies or actions may impact sales or profitability of branded pharmaceutical products, with the extent of future impacts uncertain and varying depending on timeline for implementation and extent of price reductions.

The company faces execution risks related to its MSO platforms, including the ability to develop or acquire and integrate appropriate practice management and support expertise, support recruitment and retention of providers and staff, ensure alignment of interests between Cardinal Health and physicians, successfully support negotiations with vendors and payors, and manage the reimbursement and regulatory environment and competition from other healthcare organizations.

Risk Factors

The company faces material risks from the dynamic tariff environment, having paid approximately $200 million in IEEPA tariffs since February 2025, primarily in the GMPD segment, with additional tariffs imposed under Sections 122, 232, and 301 of the Trade Act and potential future tariffs on generic pharmaceuticals at 100% beginning in 2028 and 200% beginning in 2029. The company has $4.3 billion accrued at June 30, 2026 related to national opioid litigation settlements, with the majority of remaining payments expected through 2038, and made payments totaling $417 million during fiscal 2026. The Navista & ION reporting unit within the Pharma segment carries $909 million in goodwill after a $184 million impairment charge in fiscal 2026, and adverse changes in key assumptions such as a 0.5% increase in the discount rate to 11.0% or a 1.0% decrease in the terminal growth rate to 2.0% could further decrease fair value by approximately $70 million , potentially leading to additional impairment. The company's MSO platform acquisitions, including Solaris Health for approximately $1.9 billion , carry risks related to integration, provider retention, and alignment of interests with physicians, and the carrying amount of recent acquisitions approximates fair value with minimal excess, increasing impairment risk.

Management Priorities

Management's message emphasizes the company's strong financial performance in fiscal 2026, with total revenue increasing 14% to $254.248 billion , GAAP operating earnings up 15% to $2.613 billion , and Non-GAAP diluted EPS increasing 37% to $11.26 . Key strategic priorities emphasized include the continued expansion of managed services organization platforms through acquisitions such as Solaris Health for approximately $1.9 billion , the performance of the generics program and branded pharmaceutical sales growth, and navigating the dynamic tariff environment. Management also highlights the company's capital deployment strategy, including $1.4 billion in share repurchases, $649 million in capital expenditures, and $491 million in dividends during fiscal 2026, as well as the new $5.0 billion share repurchase program approved by the Board on August 4, 2026.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 7, MD&A — Results of Operations, Revenue
  2. [2] Item 7, MD&A — Results of Operations, Segment Profit
  3. [3] Item 7, MD&A — Results of Operations, Revenue
  4. [4] Item 7, MD&A — Results of Operations, Segment Profit
  5. [5] Item 7, MD&A — Results of Operations, Revenue
  6. [6] Item 7, MD&A — Results of Operations, Segment Profit
  7. [7] Item 7, MD&A — Significant Developments, Solaris Health Acquisition
  8. [8] Item 7, MD&A — Significant Developments, Solaris Health Acquisition
  9. [9] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  10. [10] Item 7, MD&A — Liquidity and Capital Resources, Capital Expenditures
  11. [11] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  12. [12] Item 7, MD&A — Liquidity and Capital Resources, Dividends
  13. [13] Item 7, MD&A — Liquidity and Capital Resources, Long-Term Debt and Other Short-Term Borrowings
  14. [14] Item 7, MD&A — Liquidity and Capital Resources, Opioid Litigation Settlement Agreement
  15. [15] Item 7, MD&A — Liquidity and Capital Resources, Opioid Litigation Settlement Agreement
  16. [16] Item 7, MD&A — Critical Accounting Policies, Navista & ION Goodwill
  17. [17] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Impairment of Equity Interest in Outcomes
  18. [18] Item 7, MD&A — Overview, Consolidated Results, Revenue
  19. [19] Item 7, MD&A — Overview, Consolidated Results, Revenue
  20. [20] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  21. [21] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  22. [22] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  23. [23] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  24. [24] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  25. [25] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  26. [26] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  27. [27] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  28. [28] Item 7, MD&A — Results of Operations, Gross Margin
  29. [29] Item 7, MD&A — Results of Operations, Gross Margin
  30. [30] Item 7, MD&A — Results of Operations, Gross Margin
  31. [31] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  32. [32] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  33. [33] Item 7, MD&A — Liquidity and Capital Resources, Capital Expenditures
  34. [34] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  35. [35] Item 7, MD&A — Liquidity and Capital Resources, Dividends
  36. [36] Item 7, MD&A — Liquidity and Capital Resources, Dividends
  37. [37] Item 7, MD&A — Results of Operations, Gross Margin
  38. [38] Item 7, MD&A — Other Components of Consolidated Operating Earnings, Restructuring and Employee Severance
  39. [39] Item 7, MD&A — Liquidity and Capital Resources, Capital Expenditures
  40. [40] Item 7, MD&A — Liquidity and Capital Resources, Capital Expenditures
  41. [41] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  42. [42] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  43. [43] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  44. [44] Item 7, MD&A — Liquidity and Capital Resources, Dividends
  45. [45] Item 7, MD&A — Significant Developments, Tariffs, IEEPA Tariffs
  46. [46] Item 7, MD&A — Significant Developments, Tariffs, IEEPA Tariffs
  47. [47] Item 7, MD&A — Liquidity and Capital Resources, Opioid Litigation Settlement Agreement
  48. [48] Item 7, MD&A — Liquidity and Capital Resources, Opioid Litigation Settlement Agreement
  49. [49] Item 7, MD&A — Critical Accounting Policies, Navista & ION Goodwill
  50. [50] Item 7, MD&A — Critical Accounting Policies, Navista & ION Goodwill
  51. [51] Item 7, MD&A — Critical Accounting Policies, Navista & ION Goodwill
  52. [52] Item 7, MD&A — Significant Developments, Solaris Health Acquisition
  53. [53] Item 7, MD&A — Overview, Consolidated Results, Revenue
  54. [54] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  55. [55] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  56. [56] Item 7, MD&A — Significant Developments, Solaris Health Acquisition
  57. [57] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  58. [58] Item 7, MD&A — Liquidity and Capital Resources, Capital Expenditures
  59. [59] Item 7, MD&A — Liquidity and Capital Resources, Dividends
  60. [60] Item 7, MD&A — Liquidity and Capital Resources, Share Repurchases
  61. [61] Item 7, MD&A — Overview, Consolidated Results, Revenue
  62. [62] Item 7, MD&A — Overview, Consolidated Results, Revenue
  63. [63] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  64. [64] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Diluted EPS
  65. [65] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  66. [66] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  67. [67] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  68. [68] Item 7, MD&A — Overview, Consolidated Results, GAAP and Non-GAAP Operating Earnings
  69. [69] Item 7, MD&A — Results of Operations, Gross Margin
  70. [70] Item 7, MD&A — Results of Operations, Gross Margin
  71. [71] Item 7, MD&A — Results of Operations, Gross Margin
  72. [72] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  73. [73] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  74. [74] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  75. [75] Item 7, MD&A — Liquidity and Capital Resources, Cash and Equivalents
  76. [76] Item 7, MD&A — Liquidity and Capital Resources, Long-Term Debt and Other Short-Term Borrowings
  77. [77] Item 7, MD&A — Critical Accounting Policies, Navista & ION Goodwill
  78. [78] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Impairment of Equity Interest in Outcomes
  79. [79] Item 7, MD&A — Other Components of Consolidated Operating Earnings, Litigation (Recoveries)/Charges, Net
  80. [80] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Interest Expense, Net
  81. [81] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Interest Expense, Net
  82. [82] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Provision for Income Taxes
  83. [83] Item 7, MD&A — Other Components of Earnings Before Income Taxes, Provision for Income Taxes
  84. [84] Item 7, MD&A — Results of Operations, Segment Profit
  85. [85] Item 7, MD&A — Results of Operations, Segment Profit
  86. [86] Item 7, MD&A — Results of Operations, Segment Profit
  87. [87] Item 7, MD&A — Results of Operations, Segment Profit
  88. [88] Item 7, MD&A — Results of Operations, Segment Profit
  89. [89] Item 7, MD&A — Results of Operations, Segment Profit

Analysis on 8/11/2026