MCKESSON CORP

Overview of Consolidated Results:

Revenues

Revenues increased for the three months ended June 30, 2025 compared to the same prior year period largely due to market growth in our U.S. Pharmaceutical segment, including higher volumes largely from retail national account customers and growth in specialty pharmaceuticals. Market growth includes growing drug utilization and newly launched products, partially offset by branded to generic drug conversion.

Gross Profit

Gross profit increased for the three months ended June 30, 2025 compared to the same prior year period primarily in our U.S. Pharmaceutical segment driven by growth of specialty pharmaceuticals and retail national account customers, partially offset by a decrease from net cash proceeds received representing our share of antitrust legal settlements in the first quarter of fiscal 2026 compared to the same prior year period. Gross Profit was also driven by higher volumes in our Prescription Technology Solutions segment and unfavorably impacted by a decline in our International segment driven by the completed divestiture of our Canadian retail disposal group.

We recognized gains of $8 million and $90 million for the three months ended June 30, 2025 and 2024, respectively, related to our share of antitrust legal settlements. We recognized these amounts within "Cost of sales" in the Condensed Consolidated Statements of Operations within our U.S. Pharmaceutical segment.

Total Operating Expenses

A summary of the components of our total operating expenses for the three months ended June 30, 2025 and 2024 is as follows:

•Selling, distribution, general, and administrative expenses (“SDG&A”): consists of personnel costs, transportation costs, depreciation and amortization, lease costs, professional fee expenses, administrative expenses, provision for bad debts and related recoveries, remeasurement charges to fair value less costs to sell, and other general charges.

•Claims and litigation charges, net: These charges include adjustments for estimated probable settlements related to our controlled substance monitoring and reporting, and opioid-related claims, as well as any applicable income items or credit adjustments due to subsequent changes in estimates. Legal fees to defend claims, which are expensed as incurred, are included within SDG&A.

•Restructuring, impairment, and related charges, net: Charges recorded under this component include those incurred for programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted, as well as long-lived asset impairments.

For the three months ended June 30, 2025, total operating expenses increased and total operating expenses as a percentage of revenues decreased compared to the same prior year period. Total operating expenses were impacted by the following significant items:

•SDG&A for the three months ended June 30, 2025 includes a provision for bad debts of $189 million related to the bankruptcy of Rite Aid. Refer to the Rite Aid Bankruptcy Proceedings section of“Trends and Uncertainties” for further discussion;

•SDG&A for the three months ended June 30, 2025 was impacted by higher operating expenses related to the acquisitions completed during the first quarter of fiscal 2026, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements in this Quarterly Report;

•SDG&A for the three months ended June 30, 2025 was impacted by lower operating expenses from the completed divestiture of our Canadian retail disposal group in fiscal 2025, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements in this Quarterly Report;

•Claims and litigation charges, net were nil for the three months ended June 30, 2025 and primarily consists of a charge of $114 million for the three months ended June 30, 2024 related to our estimated liability for opioid-related claims as previously discussed in the Opioid-Related Litigation and Claims section of “Trends and Uncertainties;” and

•Restructuring, impairment, and related charges, net were $47 million and $10 million for the three months ended June 30, 2025 and 2024, respectively, as discussed below under “Restructuring Initiatives.”

Goodwill Impairment

We evaluate goodwill for impairment on an annual basis in the first fiscal quarter, and at an interim date if indicators of potential impairment exist. The annual impairment testing performed in fiscal 2026 and fiscal 2025 did not indicate any impairment of goodwill, and no goodwill impairment charges were recorded during the three months ended June 30, 2025 and 2024. However, other risks, expenses, and future developments, such as government actions, increased regulatory uncertainty, and material changes in key market assumptions limit our ability to estimate projected cash flows, which could adversely affect the fair value of various reporting units in future periods.

For additional disclosure of our policy regarding goodwill, refer to the “Critical Accounting Estimates” section within Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2025 Annual Report.

Restructuring Initiatives

We recorded restructuring, impairment, and related charges of $47 million and $10 million for the three months ended June 30, 2025 and 2024, respectively. These charges were included in “Restructuring, impairment, and related charges, net” in the Condensed Consolidated Statements of Operations.

During the second quarter of fiscal 2025, we approved enterprise-wide initiatives to modernize and accelerate our technology service operating model, which were intended to improve business continuity, compliance, operating efficiency and advance investments to streamline the organization. These initiatives include cost reduction efforts and support other rationalization efforts within Corporate, and the Medical-Surgical Solutions, and U.S. Pharmaceutical segments to help realize long-term sustainable growth. We anticipate total charges related to these initiatives of $650 million to $700 million, consisting primarily of employee severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset impairments. These programs are anticipated to be substantially complete in fiscal 2028. For the three months ended June 30, 2025, we recorded charges of $38 million related to the initiatives, which primarily includes severance and other employee-related costs as well as facility exit and other related costs, including long-lived asset impairments.

Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further information on our restructuring initiatives.

Other Income, Net

Other income, net decreased for the three months ended June 30, 2025 compared to the same prior year period primarily due to a prior year net gain of $110 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, partially offset by a prior year loss of $43 million related to one of our equity method investments, and a favorable impact from interest income.

Interest Expense

Interest expense decreased for the three months ended June 30, 2025 compared to the same prior year period primarily due to changes in our derivative portfolio in fiscal 2026 and increased capitalized interest from higher capital spending, partially offset by interest from increased average balances of the Company’s loan portfolio in fiscal 2026. Interest expense may fluctuate based on timing, amounts, and interest rates of term debt repaid and new term debt issued, as well as amounts incurred associated with financing fees. Refer to Financial Note 8, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

Income Tax Expense

For the three months ended June 30, 2025 and 2024, we recorded income tax expense of $220 million and $124 million, respectively. Our reported income tax rates were 20.9% and 11.4% for the three months ended June 30, 2025 and 2024, respectively. Fluctuations in our reported income tax rates are primarily due to changes in our business mix of earnings between various taxing jurisdictions and discrete tax items recognized in the quarters. Refer to Financial Note 4, “Income Taxes,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law, introducing modifications to various U.S. federal tax provisions. We are currently evaluating the potential implications of the legislation. Based on preliminary analysis, we do not expect the provisions of the OBBBA to have a material impact on our consolidated financial position, results of operations, or cash flows.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the three months ended June 30, 2025 primarily represents the proportionate results of third-party equity interests in ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and SCRI Oncology, LLC.

Noncontrolling interests with redemption features, such as put rights, that are not solely within our control are considered redeemable noncontrolling interests. During the three months ended June 30, 2025, we recognized redeemable noncontrolling interests of $700 million and $25 million related to our acquisitions of Core Ventures and PRISM Vision, respectively. Redeemable noncontrolling interests are presented outside of stockholders’ deficit in the Company’s Condensed Consolidated Balance Sheet. Refer to the “Selected Measures of Liquidity and Capital Resources” section of this Financial Review and Financial Note 5, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information on changes to our redeemable and noncontrolling interests during the first quarter of fiscal 2026.

Net Income Attributable to McKesson Corporation

Net income attributable to McKesson Corporation was $784 million and $915 million for the three months ended June 30, 2025 and 2024, respectively. Diluted earnings per common share attributable to McKesson Corporation was $6.25 and $7.00 for the three months ended June 30, 2025 and 2024, respectively. Our diluted earnings per share includes the cumulative effects of share repurchases during each period.

Weighted-Average Diluted Common Shares Outstanding

Diluted earnings per common share was calculated based on a weighted-average number of shares outstanding of 125.5 million and 130.7 million for the three months ended June 30, 2025 and 2024, respectively. Weighted-average diluted shares outstanding for the three months ended June 30, 2025 decreased from the same prior year period primarily due to the cumulative effect of share repurchases, as discussed in the “Share Repurchases Plans” section of this Financial Review.