Could you elaborate on the performance of the 'Other' segment, specifically if Advanced Diabetes Supply (ADS) is performing ahead of expectations and how the underlying businesses are contributing to the outperformance?

All three businesses within the 'Other' segment demonstrated strong core double-digit growth, independent of the ADS acquisition. The ADS integration is proceeding as anticipated, possibly slightly better, and the company is focused on organic investments in distribution, theranostics, and OptiFreight expansion. “That acquisition has gone at least consistent, perhaps a little bit better than what we had anticipated.”

Given the company has returned to its target leverage ratio earlier than expected, what are the plans for capital allocation, and what is the capacity or opportunity for further transactions, particularly regarding MSOs and the 'Other' segment?

The company has fulfilled its baseline share repurchase commitment and returned to target leverage, providing flexibility for future capital deployment. M&A will be opportunistic, with no large gaps identified. The company is pleased with its MSO platforms and sees potential for smaller, synergistic acquisitions, especially in the fragmented at-Home space, while prioritizing internal investments. “I don't see that there is a large gap or anything that we're going to be really leaning into. We're really pleased on the MSO side with the 3 different platforms that we have now acquired and/or built oncology, autoimmune and neurology.”

How will brand drug price decreases, particularly from IRA and MFN, impact revenue or operating income in calendar '26, and what offsets are being used to preserve operating earnings?

There is no new information regarding IRA or MFN. The company anticipates that any top-line changes will be offset by adjustments in its cost structure and DSA fees with manufacturers to preserve margin. They were successful in this for 2026 items and expect similar outcomes for 2027 and 2028, with revenue adjustments due to WACC levels not significantly impacting original guidance. “We communicated at the recent industry conference that we indeed were successful with that for all the '26 items. And there's nothing at this moment that we see with the '27 and '28 items that would make us believe it would be any different than that.”

CAH

Cardinal Health (CAH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q2 FY26)· Health Care· Feb 5, 2026

Source: earnings call transcript

Executive summary

Cardinal Health Q2 FY26 — Strong Profit Growth Across All Segments and Raised Outlook

Cardinal Health delivered a strong Q2 FY26, marked by double-digit profit growth across all five operating segments, driven by robust demand in Pharmaceutical and Specialty Solutions and significant contributions from Other Growth Businesses. The company raised its full-year EPS guidance, reflecting confidence in continued momentum and strategic execution, particularly in specialty expansion and core business optimization.

Highlights

Total revenue increased 19% to $66 billion.
Operating earnings increased 38% to $877 million.
Non-GAAP diluted EPS increased 36% to $2.63.
Pharmaceutical and Specialty Solutions segment profit increased 29% to $687 million.
Other Growth Businesses segment profit increased 52% to $179 million.

Concerns

Interest and other expense increased to $77 million compared to $38 million in the prior year, driven by financing costs for acquisitions.
GMPD segment profit was partially offset by the adverse net impact of tariffs.
3-4 percentage points of GMPD Cardinal Health brand revenue growth in Q2 was due to timing of inventory restocking, anticipated to offset in Q3.

Guidance & targets

Category	Target	Timeline	Confidence
Fiscal Year 2026 Adjusted EPS	$10.15 to $10.35 high materiality	FY26 · 2026	High
Fiscal Year 2026 Adjusted EPS Growth	23% to 26% high materiality	FY26 · 2026	High
Fiscal Year 2026 Pharmaceutical and Specialty Solutions Segment Profit Growth	20% to 22% high materiality	FY26 · 2026	High
Second Half Fiscal Year 2026 Pharmaceutical and Specialty Solutions Segment Profit Growth	mid-teens medium materiality	H2 FY26 · 2026	Medium
Fiscal Year 2026 GMPD Revenue Growth	1% to 3% medium materiality	FY26 · 2026	High
Fiscal Year 2026 GMPD Segment Profit	approximately $150 million medium materiality	FY26 · 2026	High
Fiscal Year 2026 Other Growth Businesses Revenue Growth	26% to 28% medium materiality	FY26 · 2026	High
Fiscal Year 2026 Other Growth Businesses Segment Profit Growth	33% to 35% medium materiality	FY26 · 2026	High
Fiscal Year 2026 Effective Tax Rate	21% to 23% low materiality	FY26 · 2026	High
Fiscal Year 2026 Diluted Weighted Average Shares	237 million to 238 million shares low materiality	FY26 · 2026	High
Fiscal Year 2026 Adjusted Free Cash Flow	$3 billion and $3.5 billion high materiality	FY26 · 2026	High
Biopharma Services Revenue	$1 billion medium materiality	FY28 · 2028	High
Specialty Revenues	surpass $50 billion high materiality	FY26 · 2026	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Pharmaceutical and Specialty Solutions Growth driven by existing and new customers, strong pharmaceutical demand, and contributions from brand and specialty products, MSO platforms, and generics program. Segment profit increased 29%. GLP-1 sales: 6 percentage points of revenue growth	$61 billion	19%	—	$687 million
GMPD Revenue growth driven by volume from existing customers. Segment profit increased from $18 million in the prior year, driven by volume growth and cost optimization, partially offset by tariff headwinds. Cardinal Health brand portfolio revenue growth (US): 10%	$3.3 billion	3%	—	$37 million
Other Growth Businesses (Nuclear and Precision Health Solutions, at-Home Solutions, OptiFreight Logistics) Growth driven by strong demand across all three businesses and the contribution from the acquisition of Advanced Diabetes Supply (ADS). Segment profit increased 52%. Nuclear and Precision Health Solutions theranostics revenue growth: exceeding 30%OptiFreight Logistics revenue growth: over 30%	$1.7 billion	34%	—	$179 million

Product announcements

Product	Type	Timeline
SmartFlow intermittent pneumatic compression device	launch	—
Continued care pathways program	launch	—
Partnership with Publix Super Markets	expansion	—

Deals & partnerships

Solaris Health acquisition

acquisition of the country's leading urology MSO

Advanced Diabetes Supply (ADS) acquisition

integration of ADS into our at-Home Solutions business

Publix Super Markets customer contract

new customer in our pharma business to further expand our reach

Risks & headwinds

Increased interest and other expense Q2 FY26

$77 million compared to $38 million in the prior year

Mitigation:driven primarily by the financing costs associated with our announced acquisitions

Adverse net impact of tariffs Q2 FY26

not quantified, but offset by other drivers

Mitigation:segment's transitioned from past challenges to solid profitability is evident, and we remain committed to the improvement plan initiatives

Timing of inventory restocking by other distributors Q2 FY26, anticipated offsetting in Q3

3 to 4 percentage points of Cardinal Health brand revenue growth

Mitigation:anticipate offsetting in Q3

Lapping prior acquisitions and new customer revenue second half of fiscal '26

$10 billion of new customer revenue

Mitigation:incorporated some of the recent strength and anticipate mid-teens profit growth in the second half of the year

More difficult comparisons in nuclear business third quarter

not quantified

Mitigation:as we begin to lap some of the robust theranostics growth that we experienced a year ago

Q&A highlights

Can you break down the components of profit performance in Pharma Solutions, distinguishing organic from inorganic growth, and discuss the implied underlying organic growth for the second half, considering demand trends and specialty strength?

The Pharma business saw strong demand across all categories, with specialty trending above historical levels and MSO contributions consistent with expectations. The H2 guidance reflects strong Q2 performance and improved expectations, but also accounts for lapping $10 billion of new customer revenue and prior M&A. M&A is expected to contribute about 8% to total growth for the full year.

“M&A for the pharma business is expected to be about 8% of our total growth for the full year.”

asked by Erin Wilson Wright · answered by Jason Hollar

2 min read 6 chapters

Detailed narrative

Strategic Focus and Performance Drivers

Cardinal Health's Q2 FY26 performance was characterized by broad-based strength, with all five operating segments achieving double-digit profit growth. The company's strategy of strengthening its core distribution business while expanding into higher-margin specialty areas and other growth businesses is yielding tangible results.

Key drivers include robust demand in Pharmaceutical and Specialty Solutions, successful integration of acquisitions like Solaris Health, and progress in the GMPD segment's improvement plan.

Specialty Expansion and MSO Platforms

The strategic focus on specialty is delivering significant results, with specialty revenues expected to surpass $50 billion in fiscal '26. MSO platforms, particularly the Specialty Alliance's multi-specialty platform, are meaningful growth drivers. The acquisition of Solaris Health, the country's leading urology MSO, was completed in early November, positioning the company for further expansion by adding practices and capabilities.

GMPD Turnaround Progress

The GMPD segment continues to make progress against its improvement plan initiatives, focusing on Cardinal Health brand growth and simplification. The Cardinal Health brand portfolio saw 10% revenue growth in the United States, driven by improved operational health and execution. Cost optimization initiatives also contributed to a significant increase in segment profit despite tariff headwinds.

Other Growth Businesses Momentum

The Other Growth Businesses (Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics) delivered strong performance, with revenue up 34% and segment profit up 52%. This growth was fueled by strong demand, secular tailwinds, and contributions from the Advanced Diabetes Supply (ADS) acquisition.

Nuclear's theranostics offerings saw over 30% revenue growth, and OptiFreight Logistics grew revenues by over 30% by welcoming new customers and expanding utilization.

Capital Allocation and Financial Flexibility

The company achieved its targeted Moody's adjusted leverage ratio of 3.2x well ahead of schedule, providing flexibility for future capital deployment. Year-to-date, Cardinal Health has generated $1.8 billion in adjusted free cash flow, invested $240 million in CapEx, and returned $1 billion to shareholders through dividends and share repurchases. Management emphasized a disciplined approach to capital allocation, focusing on internal investments and opportunistic M&A.

Operational Excellence and Customer Focus

Investments in technology and infrastructure, such as the Ventus HQ e-commerce platform and Total View Insights for OptiFreight, are driving customer efficiency, streamlining operations, and supporting margin profiles. The company's commitment to service levels was highlighted by a 10% improvement in product availability over the past two years and its ability to ensure critical product delivery during recent storms.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.