CARDINAL HEALTH INC

Previous wording

The discussion and analysis presented below is concerned with material changes in financial condition and results of operations, including amounts and certainty of cash flows from operations and from outside sources, between the periods specified in our condensed consolidated balance sheets at September 30, 2025 and June 30, 2025, and in our condensed consolidated statements of earnings and our condensed consolidated statements of cash flows for the three months ended September 30, 2025 and 2024. All comparisons presented are with respect to the prior-year period, unless stated otherwise. The discussion and analysis in this Form 10-Q should be read in conjunction with the MD&A included in our 2025 Form 10-K.

Current wording

The discussion and analysis presented below is concerned with material changes in financial condition and results of operations, including amounts and certainty of cash flows from operations and from outside sources, between the periods specified in our condensed consolidated balance sheets at December 31, 2025 and June 30, 2025, and in our condensed consolidated statements of earnings and our condensed consolidated statements of cash flows for the three and six months ended December 31, 2025 and 2024. All comparisons presented are with respect to the prior-year period, unless stated otherwise. The discussion and analysis in this Form 10-Q should be read in conjunction with the MD&A included in our 2025 Form 10-K.

Previous wording

Revenue for the three months ended September 30, 2025 increased 22 percent to $64.0 billion from the prior-year quarter due to branded and specialty pharmaceutical sales growth from existing and new customers.

Current wording

Revenue for the three and six months ended December 31, 2025 increased 19 percent to $65.6 billion and 21 percent to $129.6 billion from the comparative prior-year periods, respectively, primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.

Previous wording

GAAP operating earnings for the three months ended September 30, 2025 increased 18 percent to $668 million from the prior-year quarter primarily due to the impact of the acquisition of management services organization ("MSO") platforms and the acquisition of Advanced Diabetes Supply Group ("ADS") and increased contribution from branded and specialty pharmaceutical products, partially offset by acquisition-related cash and share-based compensation costs.

Current wording

GAAP operating earnings for the three and six months ended December 31, 2025 increased 29 percent to $707 million and 23 percent to $1.4 billion from the comparative prior-year periods, respectively, primarily due to the impact of the acquisitions of management services organization ("MSO") platforms and Advanced Diabetes Supply Group ("ADS"), increased contribution from branded and specialty pharmaceutical products, and growth from existing customers within the GMPD segment, partially offset by acquisition-related cash and share-based compensation costs.

Previous wording

Non-GAAP operating earnings for the three months ended September 30, 2025 increased 37 percent to $857 million from the prior-year quarter primarily due to the impact of the acquisition of MSO platforms and the acquisition of ADS, increased contribution from branded and specialty pharmaceutical products, and growth from existing customers within the GMPD segment.

Current wording

Non-GAAP operating earnings for the three and six months ended December 31, 2025 increased 38 percent to $877 million and to $1.7 billion from the comparative prior-year periods, respectively, primarily due to the impact of the acquisitions of MSO platforms and ADS, increased contribution from branded and specialty pharmaceutical products, and growth from existing customers within the GMPD segment.

Previous wording

(1) Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").

Current wording

(1)Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").

Previous wording

(2) The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."

Current wording

(2)The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."

Previous wording

For the three months ended September 30, 2025, GAAP and non-GAAP diluted EPS increased 11 percent to $1.88 and 36 percent to $2.55, respectively, from the prior-year quarter due to the factors impacting operating earnings in the preceding section, partially offset by increased interest expense.

Current wording

Non-GAAP diluted EPS for the three and six months ended December 31, 2025 increased 36 percent to $2.63 and $5.18 from the comparative prior-year periods, respectively, primarily due to the factors impacting non-GAAP operating earnings discussed in the preceding section, partially offset by increased interest expense.

Previous wording

On August 12, 2025, we announced that we, through the Specialty Alliance, have entered into a definitive agreement to acquire Solaris Health for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments. Solaris Health is the country's leading urology MSO and supports more than 750 providers across more than 250 practice locations in 14 states. In connection with the closing of this transaction, we will issue common units in the Specialty Alliance to certain physicians and management which are estimated to have a grant date fair value of approximately $500 million, a portion of which will be recognized as post-combination expense within acquisition-related cash and share-based compensation costs. We consolidate the results of the Specialty Alliance in our consolidated financial statements and report those consolidated results within our Pharma segment.

Current wording

On November 3, 2025, we, through The Specialty Alliance, completed the acquisition of Solaris Health, a urology MSO, for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments. In connection with the closing of this transaction, we issued common units in The Specialty Alliance to certain physicians and members of management which are estimated to have a grant date fair value of approximately $500 million, a portion of which will be recognized as post-combination expense within acquisition-related cash and share-based compensation costs.

Previous wording

We intend to finance the acquisition with a combination of cash proceeds from the recent debt financing and cash on hand. See Note 5 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the debt financing.

Current wording

Solaris Health includes more than 750 providers across more than 250 practice locations in 14 states. Solaris Health is part of The Specialty Alliance, our multi-specialty MSO platform, and their results are reported within our Pharma segment. With the closing of this transaction, we own approximately 76% of The Specialty Alliance. We funded the acquisition with a combination of cash proceeds from the recent debt financing and cash on hand. See Note 5 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the debt financing.

Previous wording

The performance of our MSO platforms, which consists of the Specialty Alliance and Navista, positively impacted the year-over-year comparison of Pharma segment profit during the three months ended September 30, 2025, primarily due to the impact of the acquisitions of GI Alliance ("GIA"), Urology America, and Integrated Oncology Network ("ION"). The Specialty Alliance is our multi-specialty MSO platform, which is primarily comprised of GIA, Urology America, and other gastroenterology- and urology-focused practices. Navista is our oncology MSO platform, which is primarily comprised of ION and other oncology-focused practices. Our ability to successfully provide physician practice support and management services, and to receive the value we expect to receive from our recent acquisitions of MSO platforms, depends upon a number of factors, including: the ability to develop or acquire and integrate appropriate practice management and support expertise; the ability to support recruitment, integration, and retention of sufficient numbers of local providers and staff; ensuring the alignment of interests between Cardinal Health and the physicians; the ability to successfully support negotiations with vendors, suppliers, and payors; the reimbursement and regulatory environment; and competition from other healthcare organizations.

Current wording

The performance of our MSO platforms, which consists of The Specialty Alliance and Navista, positively impacted the year-over-year comparison of Pharma segment profit during the three and six months ended December 31, 2025, primarily due to the impact of the acquisitions of GI Alliance ("GIA"), Urology America, Integrated Oncology Network ("ION") and Solaris Health. The Specialty Alliance is our multi-specialty MSO platform, which is primarily comprised of GIA, Urology America, Solaris Health and other gastroenterology- and urology-focused practices. Navista is our oncology MSO platform, which is primarily comprised of ION and other oncology-focused practices. Our ability to successfully provide physician practice support and management services, and to receive the value we expect to receive from our recent acquisitions of MSO platforms, depends upon a number of factors, including: the ability to develop or acquire and integrate appropriate practice management and support expertise; the ability to support recruitment, integration, and retention of sufficient numbers of local providers and staff; ensuring the alignment of interests between Cardinal Health and the physicians; the ability to successfully support negotiations with vendors, suppliers, and payors; the reimbursement and regulatory environment; and competition from other healthcare organizations.

Previous wording

During the three months ended September 30, 2025, we saw increased demand for GLP-1 pharmaceuticals and our sales increased significantly. These increased sales positively impacted our Pharma segment and consolidated revenue for the three months ended September 30, 2025; however, increased GLP-1 sales did not meaningfully contribute to segment profit. Future demand for these medications is unpredictable and our ability to meet demand may be impacted by supply constraints. Additionally, the recently issued Executive Order titled “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” may impact sales or profitability of branded pharmaceutical products, including GLP-1 products; however, the extent of the impact is uncertain and may vary depending on the timeline for implementation and the extent of any price reductions. It is also possible that the adoption of the One Big Beautiful Bill Act ("OBBBA") could reduce participation in Medicare and Medicaid programs, resulting in a change in utilization of the healthcare system. This may adversely affect demand for our products and services; however, the extent of any reduction is unpredictable.

Current wording

During the three and six months ended December 31, 2025, we saw increased demand for GLP-1 pharmaceuticals and our sales increased significantly. These increased sales positively impacted our Pharma segment and consolidated revenue for the three and six months ended December 31, 2025; however, increased GLP-1 sales did not meaningfully contribute to segment profit. Future demand for these medications is unpredictable and our ability to meet demand may be impacted by supply constraints. Additionally, the recently issued Executive Order titled “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” may impact sales or profitability of branded pharmaceutical products; however, the extent of the impact is uncertain and may vary depending on the timeline for implementation and the extent of any price reductions.

Previous wording

The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during the three months ended September 30, 2025. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.

Current wording

The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during the three and six months ended December 31, 2025. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.

Previous wording

Recent U.S. tariffs imposed or threatened to be imposed on goods, materials, and products imported into the United States from countries where we do business and any retaliatory or responsive actions taken by such countries have resulted in us incurring substantial additional costs to source products and materials, directly and indirectly, from affected countries, and are requiring us to raise prices on certain products and seek alternative sources of supply. It is also possible that we could experience supply disruptions or shortages as a result of tariffs or other protective measures.

Current wording

Recent U.S. tariffs imposed or threatened to be imposed on goods, materials, and products imported into the United States from countries where we do business and any retaliatory actions taken by such countries have resulted in us incurring substantial additional costs to source products and materials, directly and indirectly, from affected countries, resulting in raising prices on certain products and evaluating alternative sources of supply. It is also possible that we could experience supply disruptions or shortages as a result of tariffs or other protective measures.

Previous wording

We have taken action to reduce the potential impact of tariffs on our costs; however, at this time, the countries that will be subject to tariffs and the tariff rate that may be imposed on each country is uncertain and dynamic and we do not expect to be able to establish alternative sources of supply or otherwise mitigate the potential impact of tariffs on all of the products that we source, manufacture, or distribute. If we are not able to offset the impact of tariffs through price increases or otherwise mitigate the impacts, our financial results could be negatively impacted. Additionally, if tariffs are modified in the future, or our preliminary information is incorrect regarding their impact, we may not be able to respond to such changes adequately or in a timely manner and our financial results could be negatively impacted. Furthermore, if our competitors do not increase prices, or increase prices to a lesser extent than we do, or are able to offset the impact of tariffs through other actions, our competitive and financial position may be adversely affected.

Current wording

We have taken action to reduce the potential impact of tariffs on our costs; however, at this time, the countries that will be subject to tariffs and the tariff rate that may be imposed on each country remains dynamic and we do not expect to be able to establish alternative sources of supply or otherwise mitigate the potential impact of tariffs on all of the products that we source, manufacture or distribute. If we are not able to offset the impact of tariffs through price increases or otherwise mitigate the impacts, our financial results could be negatively impacted. Additionally, if tariffs are modified in the future, or our preliminary information is incorrect regarding their impact, we may not be able to respond to such changes adequately or in a timely manner and our financial results could be negatively impacted. Furthermore, if our competitors do not increase prices, or increase prices to a lesser extent than we do, or are able to offset the impact of tariffs through other actions, our competitive and financial position may be adversely affected.

Previous wording

Pharma segment revenue increased 23 percent to $59.2 billion from the prior-year quarter primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.

Current wording

Pharma segment revenue for the three and six months ended December 31, 2025 increased 19 percent to $60.7 billion and 21 percent to $119.9 billion from the comparative prior-year periods, respectively, primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.

Previous wording

GMPD segment revenue increased 2 percent to $3.2 billion from the prior-year quarter primarily due to volume growth from existing customers.

Current wording

GMPD segment revenue for the three and six months ended December 31, 2025 increased 3 percent to $3.3 billion and $6.4 billion from the comparative prior-year periods, respectively, primarily due to volume growth from existing customers.

Previous wording

Other segment revenue increased 38 percent to $1.6 billion from the prior-year quarter due to growth across at-Home Solutions (including the acquisition of ADS), Nuclear and Precision Health Solutions, and OptiFreight® Logistics.

Current wording

Other segment revenue for the three and six months ended December 31, 2025 increased 34 percent to $1.7 billion and 36 percent to $3.4 billion from the comparative prior-year periods, respectively, due to growth across at-Home Solutions (including the acquisition of ADS), Nuclear and Precision Health Solutions, and OptiFreight® Logistics.

Previous wording

Cost of products sold increased 22 percent to $61.7 billion from the prior-year quarter due to the factors affecting the changes in revenue and gross margin.

Current wording

Cost of products sold for the three and six months ended December 31, 2025 increased 19 percent to $63.2 billion and 20 percent to $124.9 billion from the comparative prior-year periods, respectively, primarily due to the factors affecting the changes in revenue and gross margin.

Previous wording

Gross margin increased 22 percent to $2.3 billion from the prior-year quarter primarily due to the acquisition of MSO platforms and the acquisition of ADS and the increased contribution from branded pharmaceutical and specialty pharmaceutical products.

Current wording

Gross margin for the three and six months ended December 31, 2025 increased 23 percent to $2.4 billion and $4.7 billion from the comparative prior-year periods, respectively, primarily due to the acquisitions of MSO platforms and ADS and the increased contribution from branded and specialty pharmaceutical products.

Previous wording

Gross margin rate was relatively flat compared to the prior-year quarter with impact of the unfavorable changes in product mix for the Pharma segment mostly offset by the beneficial gross margin rates due to the acquisition of MSO platforms. The changes in product mix were primarily driven by increased pharmaceutical distribution branded sales, which have a dilutive impact on our overall gross margin rate.

Current wording

Gross margin rates for the three and six months ended December 31, 2025 grew 14 basis points to 3.65 percent and 7 basis points to 3.64 percent from the comparative prior-year periods, respectively, primarily due to the acquisition of MSO platforms, partially offset by the impact of the unfavorable changes in product mix for the Pharma segment. These changes in product mix were primarily driven by increased pharmaceutical distribution branded sales, which have a dilutive impact on our overall gross margin rate.

Previous wording

SG&A expenses increased 14 percent to $1.5 billion from the prior-year quarter primarily due to the inclusion of the acquisition of MSO platforms and the acquisition of ADS.

Current wording

SG&A expenses for the three and six months ended December 31, 2025 increased 15 percent to $1.5 billion and $3.0 billion from the comparative prior-year periods, respectively, primarily due to the acquisitions of MSO platforms and ADS.

Previous wording

Pharma segment profit increased 26 percent to $667 million from the prior-year quarter primarily due to increased contribution from branded and specialty pharmaceutical products, the acquisition of MSO platforms, and the performance of our generics program.

Current wording

Pharma segment profit for the three and six months ended December 31, 2025 increased 29 percent to $687 million and 28 percent to $1.4 billion from the comparative prior-year periods, respectively, primarily due to increased contribution from branded and specialty pharmaceutical products, the acquisition of MSO platforms, and the performance of our generics program.

Previous wording

Other segment profit increased 60 percent to $166 million from the prior-year quarter primarily due to the performance of all of at-Home Solutions (including the acquisition of ADS), OptiFreight® Logistics, and Nuclear and Precision Health Solutions.

Current wording

Other segment profit for the three and six months ended December 31, 2025 increased 52 percent to $179 million and 55 percent to $345 million from the comparative prior-year periods, respectively, primarily due to the performance of at-Home Solutions (including the acquisition of ADS) and OptiFreight® Logistics.

Previous wording

The changes in Corporate during the three months ended September 30, 2025 are due to the factors discussed in the "Other Components of Consolidated Operating Earnings" section that follows.

Current wording

The changes in Corporate for the three and six months ended December 31, 2025 were due to the factors discussed in the "Other Components of Consolidated Operating Earnings" section that follows.

Previous wording

During the three months ended September 30, 2025 and 2024, restructuring and employee severance costs were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations.

Current wording

During the three and six months ended December 31, 2025, restructuring and employee severance costs were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations.

Previous wording

Amortization of acquisition-related intangible assets was $87 million and $68 million for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Amortization of acquisition-related intangible assets was $84 million and $171 million for the three and six months ended December 31, 2025, respectively, and $69 million and $137 million for the three and six months ended December 31, 2024, respectively.

Previous wording

Transaction and integration costs associated with acquisitions were $17 million for the three months ended September 30, 2025.

Current wording

Transaction and integration costs associated with acquisitions were $46 million and $63 million for the three and six months ended December 31, 2025, respectively, and $36 million and $42 million for the three and six months ended December 31, 2024, respectively.

Previous wording

Acquisition-related cash and share-based compensation costs were $64 million for the three months ended September 30, 2025, primarily resulting from the acquisition of GIA.

Current wording

Acquisition-related cash and share-based compensation costs were $67 million and $131 million for the three and six months ended December 31, 2025, respectively, primarily resulting from the acquisitions within The Specialty Alliance.

Previous wording

During the three months ended September 30, 2024, we recognized income of $43 million for net recoveries in class action antitrust lawsuits in which we were a class member or plaintiff.

Current wording

We recognized income for net recoveries in class action antitrust litigation in which we were a class member or plaintiff of $19 million during both the three and six months ended December 31, 2025 and $16 million and $59 million during the three and six months ended December 31, 2024, respectively. We recognized $15 million in opioid-related insurance recoveries during the three and six months ended December 31, 2024.

Previous wording

In addition to the items discussed above, earnings before income taxes was impacted by the following:

Current wording

In addition to the items discussed above, earnings before income taxes were impacted by the following:

Previous wording

Interest expense, net, increased to $80 million from the prior-year quarter primarily due to the additional debt financing for our recent acquisitions.

Current wording

Interest expense, net for the three and six months ended December 31, 2025 increased to $88 million and $168 million from the comparative prior-year periods, respectively, primarily due to the additional debt financing for our recent acquisitions.

Previous wording

During the three months ended September 30, 2025 and 2024, the effective tax rate was 24.1 percent and 23.0 percent, respectively. See Note 7 of the “Notes to Condensed Consolidated Financial Statements” for additional information.

Current wording

The effective tax rate was 25.2 percent and 21.4 percent for the three months ended December 31, 2025 and 2024, respectively, and 24.7 percent and 22.2 percent for the six months ended December 31, 2025 and 2024, respectively. See Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional information.

Previous wording

Our cash and equivalents balance was $4.6 billion at September 30, 2025 compared to $3.9 billion at June 30, 2025.

Current wording

Our cash and equivalents balance was $2.8 billion at December 31, 2025 compared to $3.9 billion at June 30, 2025.

Previous wording

During the three months ended September 30, 2025, net cash provided by operating activities was $1.0 billion, which includes the impact of payments totaling $403 million related to the opioid litigation.

Current wording

During the six months ended December 31, 2025, net cash provided by operating activities was $1.7 billion, which includes the impact of payments totaling $403 million related to the opioid litigation.

Previous wording

During the three months ended September 30, 2025, we deployed $500 million for debt repayment, $375 million for share repurchases, $129 million for dividends, and $108 million for capital expenditures. In addition, we issued new long-term debt and received net proceeds of approximately $1.0 billion to fund a portion of the consideration payable in connection with the Solaris Health acquisition and for general purposes.

Current wording

During the six months ended December 31, 2025, we deployed $1.9 billion for the Solaris Health acquisition, $500 million for debt repayment, $758 million for share repurchases, $251 million for dividends, and $239 million for capital expenditures. We issued new long-term debt and received net proceeds of approximately $1.0 billion to fund a portion of the consideration paid in connection with the Solaris Health acquisition and for general purposes.

Previous wording

The cash and equivalents balance at September 30, 2025 included $596 million of cash held by subsidiaries outside of the United States.

Current wording

The cash and equivalents balance at December 31, 2025 includes $505 million of cash held by subsidiaries outside of the United States.

Previous wording

In addition to cash and equivalents and operating cash flow, other sources of liquidity at September 30, 2025 include a $3.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility that expires in February 2028 and a $1.0 billion 364-Day revolving credit facility that expired in October 2025. We also have a $1.0 billion committed receivables sales facility through September 2028. At September 30, 2025, we had no amounts outstanding under our commercial paper program, revolving credit facility, or our committed receivables sales facility.

Current wording

In addition to cash and equivalents and operating cash flow, other sources of liquidity at December 31, 2025 include a $3.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility that expires in February 2028 and a $1.0 billion 364-Day revolving credit facility that expires in October 2026. We also have a $1.0 billion committed receivables sales facility through September 2028. At December 31, 2025, we had no amounts outstanding under our commercial paper program, revolving credit facilities, or our committed receivables sales facility.

Previous wording

In September 2025, we renewed our committed receivables sales facility program through Cardinal Health Funding, LLC (“CHF”) through September 28, 2028.

Current wording

In September 2025, we renewed our committed receivables sales facility program through Cardinal Health 23 Funding, LLC ("CHF") through September 2028.

Previous wording

During the three months ended September 30, 2025, we repaid the full principal of $500 million of the 3.75% Notes due 2025 at maturity with available cash.

Current wording

During the six months ended December 31, 2025, we repaid the full principal of $500 million of the 3.75% Notes due 2025 at maturity with available cash.

Previous wording

We had $4.3 billion accrued at September 30, 2025 related to certain national opioid litigation settlements, as further described within Note 6 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the remaining payment amounts to occur through 2038. During the three months ended September 30, 2025, we made our fifth annual payment of $366 million under National Opioid Settlement Agreement ("the NOSA") and other payments of $37 million related to the opioid litigation. The amounts of future annual payments under the NOSA may differ from the payments that we have already made.

Current wording

We had $4.3 billion accrued at December 31, 2025 related to certain national opioid litigation settlements, as further described within Note 6 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the remaining payment amounts to occur through 2038. During the six months ended December 31, 2025, we made our fifth annual payment of $366 million under National Opioid Settlement Agreement (the "NOSA") and other settlement payments of $37 million related to the opioid litigation. The amounts of future annual payments under the NOSA may differ from the payments that we have already made.