Cardinal Health Q1 Soars on Pharma, MSO Acquisitions

TL;DR

**CAH is crushing it with pharma and MSO acquisitions, buy the dip if you can find one.**

AI Summary

Cardinal Health Inc. (CAH) reported a robust Q1 Fiscal 2026, with revenue increasing 22% to $64.0 billion, driven by strong branded and specialty pharmaceutical sales. GAAP operating earnings rose 18% to $668 million, while non-GAAP operating earnings surged 37% to $857 million, primarily due to the acquisitions of MSO platforms and Advanced Diabetes Supply Group (ADS), alongside increased contributions from branded and specialty pharmaceutical products. GAAP diluted EPS increased 11% to $1.88, and non-GAAP diluted EPS jumped 36% to $2.55. The Pharmaceutical and Specialty Solutions segment saw a 23% revenue increase to $59.2 billion and a 26% profit increase to $667 million. The company announced a definitive agreement to acquire Solaris Health for approximately $1.9 billion in cash, further expanding its MSO platforms. Increased demand for GLP-1 pharmaceuticals positively impacted revenue but did not significantly contribute to segment profit. Risks include the unpredictable future demand for GLP-1 medications, potential impacts from the 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' Executive Order, and the adoption of the 'One Big Beautiful Bill Act' (OBBBA) which could reduce Medicare/Medicaid participation. Tariffs also pose a risk to the Global Medical Products and Distribution segment, which saw a 2% revenue increase to $3.2 billion and a significant profit increase to $46 million.

Why It Matters

This strong performance, particularly in the Pharmaceutical and Specialty Solutions segment, signals Cardinal Health's successful strategy in expanding its MSO platforms and leveraging branded and specialty pharmaceutical demand. For investors, the 36% non-GAAP diluted EPS growth and the $1.9 billion Solaris Health acquisition demonstrate aggressive growth and potential for future value. Employees in acquired MSO platforms like Solaris Health will see integration into a larger healthcare ecosystem. Customers, including hospitals and pharmacies, benefit from enhanced supply chain efficiency and integrated care coordination, while the broader market sees a consolidating healthcare services landscape, potentially increasing competitive pressure on smaller distributors and MSOs.

Risk Assessment

Risk Level: medium — The risk level is medium due to significant reliance on acquisitions for growth and exposure to regulatory changes. The company's ability to successfully integrate MSO platforms like Solaris Health and realize expected value depends on factors such as physician recruitment and retention, and successful negotiations with payors. Furthermore, potential impacts from the 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' Executive Order and the 'One Big Beautiful Bill Act' (OBBBA) introduce regulatory uncertainty that could affect future sales or profitability of branded pharmaceutical products, including GLP-1s, and overall demand for services.

Analyst Insight

Investors should monitor the integration progress of recent MSO acquisitions, particularly Solaris Health, and assess the long-term impact of GLP-1 demand and potential regulatory changes on Cardinal Health's profitability. Consider CAH as a growth-oriented healthcare services play, but be aware of the execution risks associated with large-scale acquisitions and evolving government healthcare policies.

Financial Highlights

revenue

$64.0B

net Income

$668M

eps

$1.88

cash Position

$4.6B

revenue Growth

+22%

Revenue Breakdown

Key Numbers

• $64.0B — Total Revenue (Increased 22% from prior-year quarter)
• $668M — GAAP Operating Earnings (Increased 18% from prior-year quarter)
• $857M — Non-GAAP Operating Earnings (Increased 37% from prior-year quarter)
• $1.88 — GAAP Diluted EPS (Increased 11% from prior-year quarter)
• $2.55 — Non-GAAP Diluted EPS (Increased 36% from prior-year quarter)
• $59.2B — Pharmaceutical and Specialty Solutions Revenue (Increased 23% from prior-year quarter)
• $667M — Pharmaceutical and Specialty Solutions Profit (Increased 26% from prior-year quarter)
• $1.9B — Solaris Health Acquisition Price (Cash purchase price for MSO platform)
• $4.6B — Cash and Equivalents (Balance at September 30, 2025, up from $3.9 billion at June 30, 2025)
• $1.0B — Net Cash Provided by Operating Activities (For the three months ended September 30, 2025)

Key Players & Entities

• Cardinal Health, Inc. (company) — registrant
• Solaris Health (company) — acquisition target
• Advanced Diabetes Supply Group (company) — acquired company
• GI Alliance (company) — acquired MSO platform
• Urology America (company) — acquired MSO platform
• Integrated Oncology Network (company) — acquired MSO platform
• CVS Health Corporation (company) — partner in Red Oak Sourcing, LLC
• Red Oak Sourcing, LLC (company) — generics program venture
• New York Stock Exchange (regulator) — exchange where CAH is listed
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• GLP-1 Pharmaceutical Demand Volatility [medium — market]: The future demand for GLP-1 medications is unpredictable. Increased demand positively impacted revenue in Q1 Fiscal 2026 but did not significantly contribute to segment profit, indicating potential margin sensitivity.
• Executive Order on Prescription Drug Pricing [medium — regulatory]: The 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' Executive Order poses a risk. The potential impact on Medicare/Medicaid participation and pricing strategies remains uncertain.
• One Big Beautiful Bill Act (OBBBA) [medium — regulatory]: The adoption of the 'One Big Beautiful Bill Act' (OBBBA) could reduce Medicare/Medicaid participation. This legislation presents a regulatory risk that may affect the company's market access and revenue streams.
• Tariffs on Medical Products [low — operational]: Tariffs pose a risk to the Global Medical Products and Distribution segment. While revenue increased by 2%, the impact of tariffs on profitability and supply chain costs needs to be monitored.
• Acquisition Integration Risks [medium — financial]: The company is actively acquiring MSO platforms, including Solaris Health for $1.9 billion. Integration of these acquisitions carries inherent operational and financial risks that could impact future performance.

Industry Context

Cardinal Health operates in the pharmaceutical distribution and medical product manufacturing sectors, a highly competitive and regulated industry. Key trends include the increasing demand for specialty pharmaceuticals, the growing importance of MSO platforms in healthcare delivery, and the ongoing scrutiny of drug pricing. The company's strategy involves strategic acquisitions to expand its service offerings and market reach.

Regulatory Implications

The company faces significant regulatory risks, including potential impacts from the 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' Executive Order and the 'One Big Beautiful Bill Act' (OBBBA). These could affect pricing, reimbursement, and participation in Medicare/Medicaid programs.

What Investors Should Do

1. Monitor GLP-1 demand and pricing impact
2. Assess acquisition integration success
3. Evaluate regulatory risk mitigation strategies
4. Analyze non-GAAP vs. GAAP performance

Key Dates

• 2025-09-30: End of Q1 Fiscal 2026 — Reported robust revenue growth of 22% and significant increases in operating earnings and EPS, driven by acquisitions and pharmaceutical sales.
• 2025-09-30: Solaris Health Acquisition Agreement — Announced definitive agreement to acquire Solaris Health for $1.9 billion, expanding MSO platforms and indicating strategic growth initiatives.
• 2025-09-30: Cash and Equivalents Balance — Reported $4.6 billion in cash and equivalents, an increase from $3.9 billion at June 30, 2025, indicating strong liquidity.
• 2025-09-30: Net Cash Provided by Operating Activities — Generated $1.0 billion in operating cash flow for the three months ended September 30, 2025, demonstrating healthy cash generation from core operations.

Glossary

MSO platforms

Management Services Organization platforms, which provide administrative and management services to healthcare providers. (Acquisitions of these platforms are a key driver of revenue and profit growth for Cardinal Health.)

ADS

Advanced Diabetes Supply Group, a company acquired by Cardinal Health. (The acquisition of ADS contributed to the increase in GAAP operating earnings.)

GLP-1 pharmaceuticals

Glucagon-like peptide-1 receptor agonists, a class of drugs often used for diabetes management and weight loss. (Increased demand for these drugs positively impacted Cardinal Health's revenue, though profit contribution is noted as not significant.)

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting. (Used to report financial results, with GAAP operating earnings and EPS showing solid growth.)

Non-GAAP

Financial measures that exclude certain items from GAAP measures, providing a different view of financial performance. (Non-GAAP operating earnings and EPS showed stronger growth (37% and 36% respectively) than GAAP, highlighting the impact of acquisitions and excluding certain costs.)

Most-Favored Nation Prescription Drug Pricing

A policy that aims to lower prescription drug prices by linking them to prices paid in other developed countries. (An Executive Order related to this policy presents a potential regulatory risk for the company.)

One Big Beautiful Bill Act (OBBBA)

A proposed legislative act that could impact Medicare/Medicaid participation. (Its potential adoption is identified as a regulatory risk for the company.)

Year-Over-Year Comparison

Compared to the prior-year period, Cardinal Health reported a strong Q1 Fiscal 2026 with a 22% increase in revenue to $64.0 billion, driven by pharmaceutical sales and acquisitions. Operating earnings saw significant growth, with non-GAAP up 37% to $857 million, outpacing GAAP growth of 18% to $668 million, largely due to acquisitions. Diluted EPS also increased, with non-GAAP EPS jumping 36% to $2.55. New risks related to GLP-1 demand volatility and potential regulatory changes like the OBBBA have emerged or become more prominent since the last filing.

Key Financial Figures

• $64.0 billion — tember 30, 2025 increased 22 percent to $64.0 billion from the prior-year quarter due to bran
• $668 million — tember 30, 2025 increased 18 percent to $668 million from the prior-year quarter primarily d
• $857 million — tember 30, 2025 increased 37 percent to $857 million from the prior-year quarter primarily d
• $1.88 — AAP diluted EPS increased 11 percent to $1.88 and 36 percent to $2.55, respectively,
• $2 — d 11 percent to $1.88 and 36 percent to $2.55, respectively, from the prior-year q
• $1.9 billion — h for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments
• $500 m — grant date fair value of approximately $500 million, a portion of which will be recog
• $59.2 billion — segment revenue increased 23 percent to $59.2 billion from the prior-year quarter primarily d
• $3.2 billion — segment revenue increased 2 percent to $3.2 billion from the prior-year quarter primarily d
• $1.6 billion — segment revenue increased 38 percent to $1.6 billion from the prior-year quarter due to grow
• $61.7 billion — f products sold increased 22 percent to $61.7 billion from the prior-year quarter due to the
• $2.3 billion — Gross margin increased 22 percent to $2.3 billion from the prior-year quarter primarily d
• $1.5 billion — SG&A expenses increased 14 percent to $1.5 billion from the prior-year quarter primarily d
• $667 million — segment profit increased 26 percent to $667 million from the prior-year quarter primarily d
• $46 million — ution GMPD segment profit increased to $46 million from the prior-year quarter primarily d

Filing Documents

• cah-20250930.htm (10-Q) — 1307KB
• a26q1_10qx093025xexhibit311.htm (EX-31.1) — 10KB
• a26q1_10qx093025xexhibit312.htm (EX-31.2) — 10KB
• a26q1_10qx093025xexhibit321.htm (EX-32.1) — 6KB
• a26q1_10qx093025xexhibit991.htm (EX-99.1) — 41KB
• cah-20250930_g1.jpg (GRAPHIC) — 21KB
• cah-20250930_g2.jpg (GRAPHIC) — 20KB
• cah-20250930_g3.jpg (GRAPHIC) — 17KB
• cah-20250930_g4.jpg (GRAPHIC) — 19KB
• cah-20250930_g5.jpg (GRAPHIC) — 28KB
• 0000721371-25-000130.txt ( ) — 8224KB
• cah-20250930.xsd (EX-101.SCH) — 50KB
• cah-20250930_cal.xml (EX-101.CAL) — 50KB
• cah-20250930_def.xml (EX-101.DEF) — 356KB
• cah-20250930_lab.xml (EX-101.LAB) — 711KB
• cah-20250930_pre.xml (EX-101.PRE) — 540KB
• cah-20250930_htm.xml (XML) — 1058KB

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 2 Explanation and Reconciliation of Non-GAAP Financial Measures 13

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 16

Controls and Procedures

Controls and Procedures 16

Legal Proceedings

Legal Proceedings 17

Risk Factors

Risk Factors 17 Unregistered Sales of Equity Securities and Use of Proceeds 18

Financial Statements

Financial Statements 19 Exhibits 38 Form 10-Q Cross Reference Index 39

Signatures

Signatures 40 About Cardinal Health Cardinal Health, Inc., an Ohio corporation formed in 1979, is a global healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. We connect patients, providers, payers, pharmacists, and manufacturers for integrated care coordination. We report our financial results in two reportable segments: Pharmaceutical and Specialty Solutions ("Pharma") segment and Global Medical Products and Distribution ("GMPD") segment. All remaining operating segments that are not significant enough to require separate reportable segment disclosures are included in Other, which is comprised of Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics. As used in this report, "we," "our," "us," and similar pronouns refer to Cardinal Health, Inc. and its majority-owned and consolidated subsidiaries, unless the context requires otherwise. Our fiscal year ends on June 30. References to fiscal 2026 and fiscal 2025 and to FY26 and FY25 are to the fiscal years ending or ended June 30, 2026 and June 30, 2025, respectively.

Forward-Looking Statements

Forward-Looking Statements This Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (this "Form 10-Q") (including any information incorporated by reference) includes "forward-looking statements" addressing expectations, prospects, estimates, and other matters that are dependent upon future events or developments. Many forward-looking statements appear in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), but there are others in this Form 10-Q, which may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook, and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those made, projected, or implied. The most significant of these risks and uncertainties are described in this Form 10-Q, including Exhibit 99.1, and in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 ("2025 Form 10-K"). Forward-looking statements in this Form 10-Q speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement. Non-GAAP Financial Measures In the "Overview of Consolidated Results" section of MD&A, we use financial measures that are derived from our consolidated financial data but are not presented in our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These measures are considered "non-GAAP financial measures" under the Securities and Exchange Commission ("SEC") rules. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in the

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 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. 2 Cardinal Health | Q1 Fiscal 2026 Form 10-Q MD&A Overview Overview of Consolidated Results Revenue 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. GAAP and Non-GAAP Operating Earnings Three Months Ended September 30, (in millions) 2025 2024 Change GAAP operating earnings $ 668 $ 568 18 % Restructuring and employee severance 20 24 Amortization and other acquisition-related costs 104 74 Acquisition-related cash and share-based compensation costs 64 — Impairments and (gain)/loss on disposal of assets, net 2 (1) Litigation (recoveries)/charges, net — (40) Non-GAAP operating earnings $ 857 $ 625 37 % The sum of the components and certain computations may reflect rounding adjustments. 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 contr

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