Cardinal Health supplies medicines and medical products to pharmacies, hospitals and other care providers, and increasingly helps run specialty physician practices. In the fiscal year ended June 30, 2026, stronger pharmaceutical operations and acquired businesses helped operating profit rise 15% to $2.61 billion. The expansion also brought continuing physician-compensation costs, more interest expense and an oncology write-down, making the profit earned after those costs the next test of its strategy.
Analysis period: fiscal 2026, with fiscal 2025 and fiscal 2024 comparisons. Information cutoff: October 13, 2026; subsequent developments are identified separately from annual results.
Source: Cardinal Health fiscal 2026 Form 10-K, MD&A, pp. 3–12, and consolidated statements of earnings, p. 51.
1. Drug distribution remains the engine, but sales growth alone misses the change
Cardinal earned more profit from its pharmaceutical business, even though some fast-growing drug sales contributed little profit. The company buys medicines from manufacturers and supplies pharmacies and healthcare providers. It also receives compensation from manufacturers for distribution and related services. Because Cardinal generally records the full selling price as revenue, most of each sales dollar goes toward buying the products it delivers.
This explains the scale of the business: annual revenue reached $254.25 billion, but operating profit was about one cent per revenue dollar. The useful question is whether Cardinal can earn more from the products and services moving through its network without costs rising equally fast.
| Consolidated results; USD millions except percentages and per-share amounts | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue | 226,827 | 222,578 | 254,248 |
| Gross profit, after product costs | 7,414 | 8,168 | 9,774 |
| Reported operating profit | 1,243 | 2,275 | 2,613 |
| Calculated operating margin | 0.55% | 1.02% | 1.03% |
| Net profit attributable to Cardinal Health | 852 | 1,561 | 1,714 |
| Reported diluted earnings per share, USD | 3.45 | 6.45 | 7.23 |
Source: Fiscal 2026 Form 10-K, consolidated statements of earnings, p. 51; Note 1, revenue recognition, p. 62. Margins are calculated from reported operating profit and revenue.
Pharmaceutical and Specialty Solutions supplied $30.19 billion of the $31.67 billion increase in consolidated revenue. Its profit grew faster than its sales, supported by branded and specialty products, generic medicines and acquired physician-service businesses. Its calculated segment margin increased from 1.10% to 1.19%.
| Business results; USD millions | FY2025 revenue | FY2026 revenue | FY2025 segment profit | FY2026 segment profit |
|---|---|---|---|---|
| Pharmaceutical and Specialty Solutions | 204,644 | 234,833 | 2,258 | 2,783 |
| Global Medical Products and Distribution | 12,636 | 12,719 | 135 | 258 |
| Other: home supplies, nuclear medicine and logistics | 5,382 | 6,792 | 516 | 707 |
| Segment totals | 222,662 | 254,344 | 2,909 | 3,748 |
| Corporate items and eliminations | -84 | -96 | -634 | -1,135 |
| Consolidated revenue and operating profit | 222,578 | 254,248 | 2,275 | 2,613 |
Reporting basis: Segment profit excludes several costs retained at Corporate, including acquisition amortization, certain acquisition compensation, restructuring and impairments. It includes the share of subsidiary results belonging to owners other than Cardinal. The Corporate row reconciles these measures to consolidated operating profit; segment profit is not profit available to Cardinal’s shareholders.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 8–11, and Note 13, pp. 78–79.
The mix of medicines matters. Growing demand for GLP-1 medicines helped revenue, but Cardinal says those additional sales did not meaningfully contribute to segment profit. Management also reported moderating demand growth during fiscal 2026. Slower growth in these sales could therefore reduce headline revenue growth more than profit growth.
Generic medicines have a different profit pattern. Cardinal earns discounts, rebates and service fees, with margins generally highest soon after a new generic product launches. Red Oak Sourcing, its purchasing venture with CVS, negotiates supply contracts for both companies. That program helped fiscal 2026 profit, although the filing notes that pricing and volume changes have overwhelmed sourcing benefits in some previous years. Future results depend on Cardinal continuing to manage those purchase and selling prices effectively.
Source: Fiscal 2026 Form 10-K, MD&A, p. 6; Business, pp. 25–26; Risk Factors, p. 37.
The history also matters. OptumRx’s distribution contracts expired in June 2024; that customer represented 17% of fiscal 2024 revenue. Fiscal 2025 sales subsequently fell even as pharmaceutical segment profit rose from $2.02 billion to $2.26 billion. Fiscal 2026 is the first comparison in this table in which neither year includes those contracts. The pharmaceutical business has therefore increased profit both during and after that customer transition.
The smaller businesses are adding a second source of growth. Home-supply revenue rose 30.3% to $4.54 billion, including the effect of acquiring Advanced Diabetes Supply, or ADS. Nuclear-medicine revenue rose 17.3% to $1.85 billion, and logistics revenue rose 25.0% to $405 million. Together, their reported segment profit increased 37.0% to $707 million. The filing does not separate ADS’s contribution from growth in the existing home-supply business, so that increase should not be described as wholly organic.
Almost all sales remain American: U.S. revenue represented 99.3% of segment revenue before Corporate eliminations. Growth is broadening across healthcare activities much more than across countries.
Source: Fiscal 2026 Form 10-K, Note 1, major customers, p. 57; Note 2, p. 64; Note 13, pp. 78–79.
2. Acquisition costs kept much of the operating improvement from reaching net profit
The businesses improved, but reported pretax profit rose only 3.5%. Reported results follow U.S. generally accepted accounting principles, or GAAP. Gross profit increased 19.7%, faster than revenue, and its share of sales rose from 3.67% to 3.84%. Management attributes much of this improvement to acquired physician-service businesses, alongside better pharmaceutical contributions. Increased sales of branded medicines partly diluted that benefit because their product cost consumes a large share of revenue.
Acquired businesses also brought operating expenses. Distribution, selling and administrative costs increased by $750 million, primarily because of the physician-platform and ADS acquisitions. Other expenses included acquisition compensation and write-downs. As a result, the improvement in the consolidated operating margin was much smaller than the improvement in gross margin.
The comparison also faced lower litigation gains. Antitrust recoveries fell from $171 million to $24 million. These payments helped reported profit but came from legal claims rather than customer sales.
Higher operating profit added $338 million before financing costs and taxes. Additional net interest expense consumed $133 million of that gain. A $122 million write-down of Cardinal’s 16% interest in Outcomes and $10 million less other income further reduced it. Pretax profit therefore increased by only $73 million, to $2.17 billion.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 9–12, consolidated statements of earnings, p. 51, and Note 7, antitrust recoveries, p. 71.
A lower tax rate helped net profit. The effective rate fell from 25.3% to 21.6%, and tax expense declined by $63 million despite higher pretax earnings. The fiscal 2026 tax reconciliation includes a $156 million benefit from a deduction for qualifying income connected with foreign business. In the opposite direction, some Specialty Alliance compensation could not be deducted for tax purposes, adding $50 million to the tax reconciliation. These figures describe parts of the current-year tax bill; they are not each a year-over-year change.
Net profit attributable to Cardinal rose 9.8%, while diluted earnings per share rose 12.1%. Repurchases helped explain the difference: the diluted average share count fell from 242 million to 237 million. The business earned more, and that profit was spread over fewer shares.
Its net profit margin nevertheless slipped from 0.70% to 0.67%. After taxes and the share of results belonging to other owners, Cardinal kept slightly less profit from each dollar of sales.
Source: Fiscal 2026 Form 10-K, Note 8, pp. 71–73; Note 12, p. 77; consolidated statements of earnings, p. 51.
Management’s adjusted operating profit rose 30%, compared with the reported 15% increase. Amortization spreads the recorded cost of acquired assets, such as customer relationships, over their expected useful lives. The adjustment removes acquisition amortization, transaction and integration costs, certain physician-compensation costs, restructuring, impairments and specified litigation items. The full reconciliation appears in the calculation notes.
That adjusted measure helps identify progress within the operating businesses. It also leaves out costs closely connected with management’s chosen expansion strategy. Acquiring and retaining physician practices can require payments over several years. The larger adjusted increase consequently supports a finding of stronger operations, while reported results show how much of that progress the expansion still consumes.
Source: Fiscal 2026 Form 10-K, non-GAAP definitions and reconciliation, pp. 20–22.
3. Keeping physicians adds costs beyond the purchase price
The specialty strategy adds services and relationships, but its cost continues after the purchase closes. Cardinal’s stated purpose is to support community specialists through practice-management services and a wider set of products and capabilities. Physicians can receive administrative support while Cardinal gains a larger role in their practices’ operations and supply needs.
The November 3, 2025 Solaris Health purchase expanded that strategy in urology. Solaris brought more than 750 providers across more than 250 locations in 14 states. Cardinal paid approximately $1.9 billion in cash through The Specialty Alliance, and its ownership of that wider platform became approximately 76%. Fiscal 2026 includes about eight months of Solaris, whereas acquisitions completed during fiscal 2025 contributed for a full year in fiscal 2026. Both changes help explain growth without establishing a comparable growth rate for the original businesses alone.
Sources: Fiscal 2026 Form 10-K, MD&A, p. 6, and Note 2, pp. 64–65; Solaris acquisition announcement, August 12, 2025, transaction rationale. The announcement’s expected ownership was approximately 75%; the completed-transaction figure above is from the filing.
The agreements also reward physicians and managers who remain with the practices. Specialty Alliance ownership units can be forfeited if their holders leave before completing service periods of three to five years. Accounting treats these awards as liabilities, and their estimated value is updated regularly. They are subsidiary units, not newly issued Cardinal Health common shares.
The liability increased from $843 million to $1.28 billion during fiscal 2026. New acquisitions added units, and physicians earned more of their awards by completing service. Cardinal recognized $245 million of expense for these units and spent $45 million repurchasing them. Another $407 million of compensation cost for unvested units remained to be recognized over approximately four years, based on current estimates.
This structure gives physicians a financial reason to stay, which matters because the practices depend on their services. It also creates future expense and potential cash demands that do not disappear when management excludes acquisition compensation from adjusted earnings. Total acquisition-related cash and share-based compensation was $287 million, a broader category than the unit expense alone.
Source: Fiscal 2026 Form 10-K, Note 1, pp. 61–62; Note 9, p. 74; Note 14, pp. 80–81; MD&A, p. 11.
The oncology acquisition provides the clearest contrary evidence to an entirely successful expansion story. Cardinal purchased Integrated Oncology Network, or ION, in December 2024 to expand its Navista practice network. In March 2026, it wrote down Navista & ION goodwill by $184 million after revising its business plans and assessment of operating risk. Goodwill is the part of an acquisition’s recorded value assigned to benefits such as future growth, workforce and business relationships rather than separately identified assets.
The write-down did not itself use cash in fiscal 2026, but it reduced the amount of the earlier investment supported by management’s updated expectations. After a $23 million tax benefit and the $23 million portion attributable to minority owners, the charge reduced Cardinal-attributable profit by $138 million. No additional goodwill impairment was recorded in the final quarter. That is useful counterevidence, although the affected business still carried $909 million of goodwill immediately after the March charge.
Sources: Fiscal 2026 Form 10-K, MD&A, pp. 5 and 17–18; Notes 1, 2 and 4, pp. 58–66; ION completion announcement, December 3, 2024, planned integration into Navista.
Cardinal is also competing with companies pursuing similar relationships. McKesson’s September 2025 reorganization placed specialty distribution, group purchasing and physician-practice management within an Oncology and Multispecialty segment. That overlap shows why acquisition size alone does not settle the competitive question. Cardinal must retain providers, help practices operate effectively and manage reimbursement and compliance while competing against established specialty-service businesses.
Source: McKesson organizational announcement, September 18, 2025, description of Oncology and Multispecialty; Cardinal fiscal 2026 Form 10-K, MD&A, p. 6, and Risk Factors, p. 40.
4. The tariff refund changes how the medical-products recovery should be read
Medical-products profit improved for the year, but the final-quarter result relied heavily on a refund. Global Medical Products and Distribution (GMPD) sells products such as gloves, syringes and surgical supplies, including Cardinal’s own brands. Its own-brand products generally carry higher margins. That business grew, but lower distribution volumes and expected repayments to customers kept total segment revenue almost flat.
During the final quarter, Cardinal recorded a receivable of approximately $200 million for expected refunds of tariffs imposed under the International Emergency Economic Powers Act. It also recognized amounts expected to go back to customers who had paid higher prices. The resulting benefit to operating profit was approximately $100 million. The $200 million receivable was a claim for future payment, not cash already collected.
The company’s results release separates the refund benefit as follows:
| GMPD segment profit; USD millions | FY2025 | FY2026 | Fourth quarter FY2025 | Fourth quarter FY2026 |
|---|---|---|---|---|
| Reported segment profit | 135 | 258 | 70 | 150 |
| Refund benefit deducted | 0 | 100 | 0 | 100 |
| Segment profit excluding that benefit | 135 | 158 | 70 | 50 |
Sources: Fiscal 2026 Form 10-K, MD&A, pp. 7–10, and Note 1, p. 56; August 11, 2026 results release, Schedule 7. The last row is a management-adjusted measure, not consolidated GAAP operating profit.
Removing the refund leaves tariff costs incurred earlier in the year in the comparison. It therefore does not reconstruct a business that never faced tariffs. The 10-K says the full-year profit effect of tariff costs and the refund was not significant overall, and attributes the annual segment improvement primarily to growth from existing customers. Both points matter: underlying operations improved over the year, while the final quarter was weaker without its refund recognition.
Management has responded to higher costs with price increases, cost reductions and manufacturing changes. Restructuring expenses were $106 million company-wide, primarily connected with GMPD initiatives. The filing says cost recovery remained incomplete and that higher supply-chain costs hurt GMPD in each of fiscal 2024–2026. The business consequence is a continuing need to improve its product mix and costs without pricing itself out of customer contracts.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 7 and 10–11; Risk Factors, p. 37; Note 3, p. 65.
5. Supplier-payment timing helped cash grow much faster than profit
Operating cash flow covered the year’s investment and shareholder payments, with substantial help from payment timing. Cash from operations rose from $2.40 billion to $5.17 billion. Consolidated net earnings increased by only $136 million, so most of the $2.78 billion cash-flow improvement came from other sources.
Cardinal had more cash available because the increase in amounts it owed suppliers was much larger than the increases in unpaid customer bills and inventory. Those three movements supplied a net $2.57 billion of operating cash in fiscal 2026, compared with only $83 million in fiscal 2025. Inventory still used cash, but substantially less than a year earlier.
| Operating cash reconciliation; USD millions | FY2025 | FY2026 |
|---|---|---|
| Consolidated net earnings, including minority interests | 1,569 | 1,705 |
| Noncash and other profit adjustments | 1,351 | 1,808 |
| Cash used by additional unpaid customer bills | -833 | -408 |
| Cash used by additional inventory | -1,816 | -488 |
| Cash retained through higher supplier payables | 2,732 | 3,463 |
| Specialty Alliance unit repurchases and other operating movements | -606 | -906 |
| Reported operating cash flow | 2,397 | 5,174 |
Source: Fiscal 2026 Form 10-K, consolidated statements of cash flows, p. 55. Operating-asset movements exclude acquisition and disposal effects; the calculation notes identify grouped adjustments.
Management attributes part of the result to normal timing of payments to vendors. The previous year also included the unwinding of funding associated with the expired OptumRx contracts: when that business ended, Cardinal no longer retained the same supplier-funded cash within its operating cycle. Opioid-related payments were lower as well, at $417 million versus $798 million. Those payments are already reflected in operating cash flow and should not be added as a second improvement to the table.
This history limits how far the cash increase can be projected forward. Supplier credit is a normal part of Cardinal’s distribution model, but payment dates and customer changes can shift cash substantially between years. The cash was available during fiscal 2026; repeating the same increase in supplier balances is a separate question.
Source: Fiscal 2026 Form 10-K, MD&A, p. 13, and Note 7, p. 70.
For a direct view of cash available after physical and software investment, this analysis defines free cash flow as operating cash flow minus cash additions to property and equipment. It includes the litigation and physician-unit payments actually made. On that basis, free cash flow rose from $1.85 billion to $4.53 billion.
| FY2026 cash allocation; USD millions | Amount |
|---|---|
| Cash from operations | 5,174 |
| Capital spending, shown as a positive use | 649 |
| Free cash flow after capital spending | 4,525 |
| Acquisitions, net of cash acquired | 1,991 |
| Cash paid for treasury shares | 1,358 |
| Cash dividends paid | 491 |
| Remainder after these uses | 685 |
Source: Fiscal 2026 Form 10-K, consolidated statements of cash flows, p. 55. The remainder is before debt movements and other investing and financing flows; the complete cash-balance reconciliation is in the notes.
This coverage was a meaningful improvement from fiscal 2025, when acquisitions alone cost $5.25 billion and required additional funding. Cardinal nevertheless issued $990 million of net debt proceeds in fiscal 2026, principally to help fund Solaris, while reducing long-term obligations by $653 million. Financing decisions and acquisition payments occur throughout the year; annual cash coverage does not mean no borrowing was needed when the transaction closed.
Capital spending rose to $649 million from $547 million. Net property and equipment increased from $2.86 billion to $3.03 billion, with construction in progress rising from $577 million to $698 million. Acquired property also contributed. Management plans approximately $700 million of fiscal 2027 capital spending, primarily for manufacturing, distribution infrastructure and technology. The disclosed uses support a focus on operating capacity and systems, but no maintenance-versus-expansion split is provided.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 13–14; Note 1, pp. 57–58; Note 2, p. 65; consolidated statements of cash flows, p. 55.
6. Cash improved, while acquisitions and near-term repayments reshaped the balance sheet
Cardinal has a larger cash cushion, alongside greater reliance on supplier credit and acquired-business assets. Cash increased by $982 million. Receivables and inventory also increased, but much less than supplier payables. Acquisitions account for part of the balance-sheet changes, which is why these changes differ from the cash-flow movements above.
| Consolidated financial position; USD millions | June 30, 2025 | June 30, 2026 |
|---|---|---|
| Cash and equivalents | 3,874 | 4,856 |
| Net trade receivables | 13,242 | 13,815 |
| Net inventory | 16,831 | 17,297 |
| Prepaid expenses and other current assets | 2,414 | 2,764 |
| Net property and equipment | 2,858 | 3,031 |
| Goodwill and other net intangible assets | 12,177 | 13,631 |
| Total assets | 53,122 | 57,299 |
| Supplier payables | 34,713 | 38,283 |
| Debt and finance-lease obligations, including current portion | 8,527 | 8,886 |
| Other current accrued liabilities | 3,634 | 3,739 |
| Deferred income taxes and other long-term liabilities | 8,882 | 9,115 |
| Total liabilities, calculated | 55,756 | 60,023 |
| Total shareholders’ deficit, including minority interests | -2,634 | -2,724 |
Source: Fiscal 2026 Form 10-K, consolidated balance sheets, p. 53. Selected asset rows do not list every asset; total assets includes the remaining reported categories.
The expected tariff refund accounts for approximately $200 million within prepaid expenses and other assets. Goodwill increased by $1.75 billion after the oncology impairment, primarily because of Solaris. Other net intangible assets declined from $2.49 billion to $2.19 billion; the company recorded $361 million of intangible amortization during the year. Altogether, goodwill and other intangibles reached $13.63 billion. More of Cardinal’s asset base therefore depends on the future performance of purchased businesses and relationships.
Other liabilities contain business obligations beyond bank and bond debt. Specialty Alliance units increased by $434 million. Operating-lease liabilities, spread across current and long-term accounts, increased from $818 million to $1.06 billion, primarily because of acquisitions. Payments on previously accrued opioid settlements worked in the opposite direction by reducing obligations. These items help explain why changes in total liabilities extend beyond borrowing for acquisitions.
Source: Fiscal 2026 Form 10-K, Notes 1, 4, 5, 7 and 9, pp. 56 and 66–74.
Current liabilities exceeded current assets by $5.15 billion, compared with $2.52 billion a year earlier. Much of this reflects supplier credit and debt becoming due within the next year. For a distributor, that deficit must be read together with the cash collected from customers and the timing of supplier payments. The operating model supplies funding while merchandise keeps moving; a large customer departure or faster supplier payments can reverse that benefit.
Gross debt and finance-lease obligations increased by $359 million, but those obligations minus cash declined from $4.65 billion to $4.03 billion. This simple subtraction is not the leverage ratio used in loan agreements. It shows that the cash balance improved faster than the reported debt balance.
The most immediate refinancing concentration is fiscal 2027. The contractual schedule below separates principal from interest and leases so that readers can see what cash must serve each purpose.
| Contractual debt payments; USD millions | FY2027 | FY2028–2029 | FY2030–2031 | Thereafter | Total |
|---|---|---|---|---|---|
| Debt principal and short-term borrowings, excluding finance leases | 1,835 | 1,345 | 1,339 | 4,171 | 8,690 |
| Interest on long-term debt | 429 | 685 | 495 | 2,589 | 4,198 |
| Finance-lease payments, including interest | 53 | 75 | 42 | 43 | 213 |
| Operating-lease payments, including interest | 233 | 405 | 288 | 354 | 1,280 |
Source: Fiscal 2026 Form 10-K, contractual obligations, p. 15, and Notes 5–6, pp. 67–69. These are undiscounted contractual payments; they differ from debt and lease carrying amounts. Future interest includes the filing’s assumptions for interest-rate swaps and can change with rates.
The fiscal 2027 principal amount is about one-fifth of total contractual debt principal. The new Solaris-related notes added $1 billion of principal due in 2030 and 2035. Their stated coupons imply $47.6 million of annual interest before swaps, issuance-cost accounting and other financing effects. That is one reason the enlarged business needs sustained operating profit rather than revenue growth alone.
Liquidity arrangements improved after year-end. On August 7, Cardinal replaced three facilities with a $4 billion revolving credit facility extending to August 2031. The new agreement limits debt after specified deductions relative to a defined measure of earnings—the net leverage ratio—to 4.00 times, subject to its terms. The old facilities required no more than 3.75 times, and Cardinal reported compliance at June 30. The new limit applies under the replacement agreement.
Sources: Fiscal 2026 Form 10-K, Note 6, pp. 68–69; August 11, 2026 Form 8-K concerning the August 7 credit agreement, Items 1.01–1.02.
There were no year-end borrowings under the old revolving credit lines, commercial-paper program or receivables facility. Commercial paper provides short-term borrowing; the receivables facility provides funding against customer invoices. Combined borrowings under those last two programs reached approximately $2 billion during the third quarter. The new facility therefore supports real fluctuations in daily funding needs; it should not be added to the commercial-paper program as though both were independent cash resources.
Repurchases return cash to shareholders who sell and reduce the number of shares outside the company. The company spent $1.35 billion on accelerated repurchase programs, with $8 million of excise-tax payments bringing the cash-flow statement’s treasury-share purchases to $1.358 billion. Repurchased shares are held in treasury for general corporate purposes, including employee awards. Rounded shares issued stayed at 271 million, while treasury shares rose from 32 million to 38 million. Fiscal 2026 repurchases should not be confused with the separate retirement of 56 million shares in fiscal 2025.
Retained earnings increased by $1.23 billion, but repurchases helped leave total shareholders’ equity negative at $2.72 billion. That accounting deficit does not by itself measure an immediate inability to pay bills. It means recorded liabilities exceed recorded assets, partly because repurchases reduce equity. Future repurchases compete with acquisitions, debt repayment and legal obligations for the same cash.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 13–14; statements of shareholders’ deficit and cash flows, pp. 54–55; Notes 6, 11 and 14, pp. 69 and 77–80.
7. Customer continuity helps, but tax disputes could still absorb substantial cash
The latest CVS development supports business continuity, while tax disputes present a large quantified cash risk. CVS accounted for 28% of revenue and 22% of gross trade receivables in fiscal 2026. Those shares were lower than the prior year’s 30% and 26%, but the relationship remains large enough to shape both earnings and cash collections.
On October 1, 2026, Cardinal announced a binding letter of intent to extend the existing CVS distribution agreement through June 30, 2032, continuing the current scope of services. This is a subsequent development, not additional fiscal 2026 revenue. It reduces uncertainty around continuity of the largest customer relationship, while the announcement does not disclose the economics needed to quantify future profit. The separate Red Oak sourcing arrangement runs through June 2029.
Sources: Fiscal 2026 Form 10-K, Note 1, p. 57, and Note 7, p. 69; CVS letter-of-intent announcement, October 1, 2026.
Drug-pricing policy can change sales dollars without changing the number of prescriptions delivered. Medicare’s first negotiated prices for ten selected Part D medicines took effect on January 1, 2026. Cardinal says the Inflation Reduction Act reduced revenue but had not negatively affected profitability. That distinction is important because manufacturer-service compensation is typically linked to wholesale acquisition prices, and future pricing changes may require Cardinal to negotiate different compensation for its work.
Sources: CMS explanation of negotiated prices for 2026, implementation date and scope; Fiscal 2026 Form 10-K, MD&A, p. 6; Business, p. 25; Risk Factors, pp. 34–37.
Two IRS notices received during fiscal 2026 create a more direct cash question. One challenges deductions for captive-insurance losses and related claims to apply those losses to earlier tax years. The other concerns the structure of the Patient Recovery acquisition.
| Disclosed tax dispute; USD millions, before interest | Possible additional tax expense disclosed | Possible additional tax liability disclosed |
|---|---|---|
| Captive-insurance losses and carryback claims | Approximately 400 | Approximately 1,400 |
| Patient Recovery restructuring | Not separately quantified | Approximately 160 |
Source: Fiscal 2026 Form 10-K, Note 7, tax contingencies, p. 71.
The $400 million expense and $1.4 billion liability describe different consequences of the same dispute. The first is the possible additional charge against profit; the second is the possible additional amount owed. They should not be added together. Cardinal believes its tax reserves are adequate, but a successful IRS challenge could require much more cash than the additional income-statement expense suggests. The company reported $907 million of unrecognized tax benefits across all tax matters and $75 million of related interest and penalties. These amounts cover disputed tax positions across the company; the filing does not allocate them solely to these two cases.
Opioid obligations remain another recurring claim on cash. Cardinal had approximately $4.3 billion accrued at year-end, including $468 million classified as current. It paid another $374 million under the national settlement in July 2026, with most remaining payments expected through 2038. The filing’s contractual schedule lists $403 million of fiscal 2027 opioid-settlement payments; that contractual amount has a different scope from the current accounting accrual.
The national settlement does not resolve every case. Private lawsuits remain, the Cabell County/Huntington case returned to further proceedings, and insurer disputes could affect cash recoveries and tax-related insurance reserves. Cardinal also disclosed a Justice Department investigation concerning a rheumatology investment and group purchasing organization. The filing does not give a separate loss range for these unresolved matters. For the older Cordis filter litigation, the company retained a $29 million accrual and reported nine pending claims as of August 6.
These exposures matter to capital allocation even when they produce little new expense in a particular year. Settlement payments reduce cash available for the next acquisition or repurchase; adverse tax outcomes could create a much larger call on funding.
Source: Fiscal 2026 Form 10-K, contractual obligations, p. 15; Note 7, pp. 69–71; Note 8, p. 73.
8. The next test is profit growth after the expansion’s full costs
Cardinal enters fiscal 2027 with stronger operations and improved liquidity; the quality of the expansion depends on retaining more of that progress after its costs. Management’s initial business outlook anticipates further growth:
| Management’s FY2027 outlook, issued August 11, 2026 | Forecast |
|---|---|
| Pharmaceutical segment revenue growth | 3%–5% |
| Pharmaceutical segment profit growth | 8%–11% |
| GMPD segment profit, USD millions | 200–220 |
| Other segment revenue growth | 11%–13% |
| Other segment profit growth | 15%–18% |
Source: August 11, 2026 results release, fiscal 2027 outlook. These are management forecasts, not achieved results; segment profit retains the exclusions explained above.
The pharmaceutical outlook would mean profit again growing faster than sales. In medical products, the forecast is below reported fiscal 2026 profit but above the result after removing the refund benefit. That comparison captures the operating task: improve supply, product mix and costs while absorbing the tariff costs that remain.
The overall evidence supports a stronger and more varied business. Core pharmaceutical profit improved, home supplies and other services contributed more, and fiscal 2026 operating cash covered capital spending, acquisitions and cash distributions. The biggest unresolved issue is whether physician-platform expansion can earn enough after retention compensation, integration costs and financing expenses. Navista & ION’s write-down makes that a present operating issue rather than a distant possibility.
Further progress would come from practices retaining providers and improving their results, medical products recovering costs, and cash generation holding up when supplier-payment timing is less favorable. Weaker practice performance or a large adverse tax settlement would instead absorb resources intended for expansion. Cardinal has room to pursue its strategy, but its success should be measured in profit and cash left after those commitments.
Sources: Fiscal 2026 Form 10-K, MD&A, pp. 6–18; Notes 4, 7, 9 and 14, pp. 66–81. The overall assessment is an inference from the operating results, funding position and disclosed obligations discussed above.
Reporting basis:
The selected report is Cardinal Health, Inc.’s Form 10-K for July 1, 2025 through June 30, 2026, filed August 11, 2026, SEC accession 0000721371-26-000038, CIK 0000721371. Fiscal 2025 and fiscal 2024 mean the years ended June 30 of those years. Balance-sheet comparisons are June 30, 2026 versus June 30, 2025. The accounts are consolidated U.S. GAAP accounts, including controlled subsidiaries and consolidated physician-practice entities, with intercompany amounts eliminated. Acquisitions enter results from their closing dates.
Amounts described as attributable to Cardinal exclude minority owners’ share of results. Consolidated net earnings of $1,705 million include a $9 million loss attributable to minority interests, producing $1,714 million attributable to Cardinal. The cash-flow statement starts with consolidated net earnings, not the Cardinal-attributable figure.
Sources: SEC filing detail; 10-K, cover, Introduction, consolidated statements and Note 1; SEC company facts. XBRL cross-checks used this accession, annual start/end dates, U.S. GAAP concepts and USD, shares or USD-per-share units as applicable. Fiscal labels alone were not used to select comparison periods.
Calculation notes:
Earnings and margins. Growth is the current-year amount divided by the prior-year amount, minus one. Thus revenue growth is 254,248 / 222,578 − 1 = 14.23%; operating-profit growth is 2,613 / 2,275 − 1 = 14.86%; Cardinal-attributable profit growth is 1,714 / 1,561 − 1 = 9.80%. Operating margin is operating profit divided by revenue. Gross margin is gross profit divided by revenue. The pharmaceutical segment calculation uses that segment’s own revenue and profit. Net profit margin uses profit attributable to Cardinal divided by revenue: 1,714 / 254,248 = 0.67%, versus 1,561 / 222,578 = 0.70%. All profit and revenue inputs here are USD millions. Rounded share counts cannot reproduce reported earnings per share to every cent; reported per-share amounts are retained.
Reported and adjusted earnings. The table shows the exact categories management removes. Positive amounts add expenses back; negative amounts remove benefits. Net-profit columns use the disclosed after-tax amount attributable to Cardinal, after minority-interest effects.
| Reconciliation; USD millions | FY2025 operating profit | FY2026 operating profit | FY2025 Cardinal net profit | FY2026 Cardinal net profit |
|---|---|---|---|---|
| Reported GAAP amount | 2,275 | 2,613 | 1,561 | 1,714 |
| Prior-year state opioid assessment | 0 | -17 | 0 | -13 |
| Restructuring and severance | 88 | 106 | 67 | 82 |
| Amortization and other acquisition costs | 464 | 469 | 360 | 349 |
| Acquisition cash and share-based compensation | 126 | 287 | 125 | 275 |
| Asset impairments and disposal gains/losses, net | 18 | 177 | 13 | 132 |
| Litigation recoveries/charges, net | -185 | -10 | -131 | 9 |
| Outcomes investment impairment | 0 | 0 | 0 | 119 |
| Rounding needed to reconcile displayed amounts | 0 | -1 | 0 | 0 |
| Management’s non-GAAP amount | 2,786 | 3,624 | 1,995 | 2,667 |
The company also adjusts taxes to reflect each excluded item’s tax treatment. These totals show the tax basis of the adjusted results:
| Tax reconciliation; USD millions | FY2025 | FY2026 |
|---|---|---|
| Reported pretax profit | 2,101 | 2,174 |
| Adjusted pretax profit | 2,612 | 3,308 |
| Reported tax expense | 532 | 469 |
| Adjusted tax expense | 609 | 628 |
For litigation, the FY2026 adjustment removes $10 million of pretax recovery and $19 million of tax expense. Its net-profit adjustment is therefore positive $9 million. Outcomes’ $122 million pretax impairment had a $3 million tax benefit, giving the $119 million after-tax adjustment.
The $177 million asset-impairment/disposal line combines several items. The $184 million Navista & ION goodwill charge is one component, so the two figures should not be used interchangeably. Minority-interest and rounding effects are included in the net-profit reconciliation above.
Management’s adjusted earnings still include the tariff refund benefit discussed in section 4. Acquisition amortization of $361 million and transaction/integration costs of $108 million make up the FY2026 $469 million category. Removing these expenses helps compare operations but does not establish that all excluded costs cease in future years.
Source: Fiscal 2026 Form 10-K, MD&A, p. 11, and reconciliation, pp. 20–22.
Cash and funding. Expenses such as depreciation reduce profit without requiring payment in the same period. The cash-flow statement adds them back, then accounts for customer collections, supplier payments and other cash movements. Amortization has the same broad cash effect as depreciation: both spread earlier asset costs across periods. Deferred tax records differences between when profit is taxed and when it is reported. The grouped profit adjustments used in section 5 are:
| Adjustments from profit toward operating cash; USD millions | FY2025 | FY2026 |
|---|---|---|
| Depreciation and amortization | 790 | 956 |
| Other investment adjustments | 3 | 21 |
| Outcomes impairment | 0 | 122 |
| Asset impairments and disposal gains/losses | 18 | 177 |
| Share-based compensation | 244 | 367 |
| Deferred tax expense | 243 | 91 |
| Bad-debt provision | 53 | 74 |
| Total | 1,351 | 1,808 |
Other operating movements combine two reported lines. FY2026 unit repurchases of $45 million plus $861 million of other operating cash uses total $906 million. The equivalent FY2025 amounts are $19 million plus $587 million, totaling $606 million.
The full cash-balance check also includes investment, borrowing and distributions:
| Cash and equivalents reconciliation; USD millions | FY2025 | FY2026 |
|---|---|---|
| Opening cash | 5,133 | 3,874 |
| Operating cash flow | 2,397 | 5,174 |
| Investing cash flow | -5,593 | -2,584 |
| Financing cash flow | 1,940 | -1,602 |
| Exchange-rate effect | -3 | -6 |
| Closing cash | 3,874 | 4,856 |
This follows the filing’s cash-and-equivalents scope; the cash-flow statement does not present a separate restricted-cash component. Closing cash includes $364 million held by foreign subsidiaries.
Free cash flow here is $5,174 million − $649 million = $4,525 million, compared with $2,397 million − $547 million = $1,850 million. Management’s differently defined adjusted free cash flow adds back specified net litigation cash payments and Specialty Alliance unit repurchases: $4,525 million + $401 million + $45 million = $4,971 million, versus $1,850 million + $619 million + $19 million = $2,488 million. Those litigation adjustments are not identical to gross opioid payments.
Sources: Fiscal 2026 Form 10-K, MD&A, p. 13, and cash-flow statement, p. 55; August 11 results release, Schedule 6 and adjusted-free-cash-flow definition.
The new notes’ annual coupon calculation uses $600 million at 4.5%, giving $27 million, plus $400 million at 5.15%, giving $20.6 million. Together they require $47.6 million before the other financing effects described in section 6.
Source: Fiscal 2026 Form 10-K, Note 6, p. 68.
Assets, equity and compensation. Assets equal liabilities plus equity—the accounting balance left for owners after subtracting what the company owes. In USD millions, the FY2026 check is 57,299 = 60,023 − 2,724; the FY2025 check is 53,122 = 55,756 − 2,634. The subtraction reflects negative equity.
Goodwill started at $9,691 million. Acquisitions and purchase-price adjustments added $1,935 million, and the impairment removed $184 million, leaving $11,442 million. Adding other net intangibles of $2,189 million gives the combined $13,631 million balance.
| Equity reconciliation; USD millions | June 30, 2025 | FY2026 change | June 30, 2026 |
|---|---|---|---|
| Common-share capital | 2,956 | -69 | 2,887 |
| Retained earnings | 783 | 1,226 | 2,009 |
| Treasury shares at cost | -6,365 | -1,249 | -7,614 |
| Accumulated other comprehensive loss | -155 | -10 | -165 |
| Minority interests | 147 | 12 | 159 |
| Total shareholders’ deficit | -2,634 | -90 | -2,724 |
Common-share capital includes −$70 million from employee-plan activity and +$1 million of other activity. Retained earnings increased by Cardinal-attributable profit of $1,714 million less $488 million of declared dividends. Treasury stock changed by +$115 million from employee plans and −$1,364 million from repurchase-program accounting.
Some currency and financial-hedging changes enter equity outside reported net profit. The $10 million additional comprehensive loss comprises $1 million of currency/other income and $11 million of derivative losses, net of tax. Minority interests changed by −$9 million of losses + $33 million from acquisitions − $11 million of payments − $1 million of other changes. Declared dividends and equity entries are distinct from cash dividends of $491 million and cash treasury purchases of $1,358 million.
Specialty Alliance award liabilities reconcile as $843 million + $234 million from acquisitions + $258 million from vesting − $13 million from remeasurement − $45 million repurchased = $1,277 million. Vesting means physicians and managers completed service needed to earn their units; remeasurement updates the units’ estimated value.
Total share-based compensation in cash-flow adjustments combines $122 million for Cardinal plans and $245 million for Specialty Alliance units. The latter creates a subsidiary liability rather than direct dilution of Cardinal common shares.
Sources: Fiscal 2026 Form 10-K, consolidated statements, pp. 52–55; Notes 4, 9, 11 and 14, pp. 66–81.
Receivables and inventory accounting. Cardinal reduces recorded customer bills by an allowance for amounts it may not collect. That allowance declined from $213 million to $201 million. Schedule II reconciles it as opening $213 million + $101 million charged to costs/expenses + $1 million charged to other accounts − $114 million of deductions = closing $201 million. The allowance includes customer disputes and other items beyond credit losses, so it differs from the cash-flow statement’s bad-debt provision. The decline does not, by itself, show that Cardinal increased profit by reversing an earlier expense.
For 52% of inventory, Cardinal calculates cost as though the newest purchases were sold first, called last-in, first-out or LIFO. It then applies a market-value limit. Calculated LIFO cost exceeded replacement cost at both year-ends, so Cardinal did not increase the recorded inventory above replacement cost. It recorded no LIFO charges or credits in the periods presented.
The remaining inventory uses first-in, first-out or FIFO, which treats older purchases as sold first. Its recorded value cannot exceed expected sale proceeds after the relevant selling and completion costs. The separate allowance for excess or obsolete stock was $107 million, compared with $132 million a year earlier. That decline alone does not identify a profit benefit because the balance also changes when affected stock is removed.
Source: Fiscal 2026 Form 10-K, MD&A, pp. 16–17; Note 1, pp. 56–57; non-GAAP explanation, p. 20; Schedule II, p. 82.
This analysis is for general information and is not investment advice. Management forecasts and unresolved legal outcomes may differ from actual results.