Why did Cardinal Health raise its fiscal 2026 outlook?

Management pointed to strong second-quarter execution with at least double-digit segment profit growth across all five operating segments. The raise reflects higher segment profit targets for Pharmaceutical and Specialty Solutions (20%-22%) and Other (33%-35%), a higher GMPD profit target of about $150 million, a lower non-GAAP tax rate (21%-23%), and a reduced share count of 237-238 million shares.

How much of the EPS growth came from operations versus share count and other items?

Non-GAAP diluted EPS rose 36% to $2.63, while non-GAAP operating earnings rose 38%. The company attributes the EPS gain to higher operating earnings and a lower share count, partially offset by higher interest and other expense from acquisition financing. Operating performance is the primary driver, with buybacks providing a smaller boost.

What is the difference between GAAP and non-GAAP results, and why does it matter?

The gap is mainly driven by amortization and other acquisition-related costs ($130 million in Q2), acquisition-related cash and share-based compensation ($67 million), and restructuring charges ($21 million). Management argues these items are not part of ongoing operations, but investors should weigh recurring acquisition-related costs as a real and continuing expense given the company's active M&A strategy.

Is Cardinal Health's balance sheet and cash generation improving?

Leverage is at 3.2x, within the company's target range, and year-to-date operating cash flow was $1.66 billion versus an outflow of $2.04 billion last year. However, the improvement was heavily supported by a $4.2 billion increase in accounts payable, and the company still has a shareholders' deficit of $(2.7) billion. Cash fell to $2.8 billion from $3.9 billion at fiscal year-end, largely due to acquisitions and share repurchases.

What risks could affect the outlook?

The release cites uncertainty around branded pharmaceutical pricing, regulatory changes including pharmaceutical pricing and tariffs, the integration of recent acquisitions, the GMPD Improvement Plan, competitive pressures and contract renewals, ongoing Department of Justice investigations under the Anti-Kickback Statute and False Claims Act, and the pace of generic deflation. Weather or geopolitical events affecting supply are also flagged.

CAH 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed February 5, 2026. Cited figures are marked; the original filing is the authoritative source.

Cardinal Health (CAH) reported second-quarter fiscal 2026 results (quarter ended December 31, 2025) that beat on growth and raised its full-year outlook.

Revenue rose 19% year over year to $65.6 billion^a, GAAP operating earnings rose 29% to $707 million, and GAAP diluted EPS rose 19% to $1.97. On a non-GAAP basis, operating earnings rose 38% to $877 million and diluted EPS rose 36% to $2.63. Growth was broad: management said all five operating segments delivered at least double-digit segment profit growth.

The Pharmaceutical and Specialty Solutions segment, which generates nearly all revenue, grew segment profit 29% to $687 million^b on brand and specialty product growth, the MSO platform acquisitions, and generics performance. Global Medical Products and Distribution profit more than doubled to $37 million, and Other segment profit rose 52% to $179 million. The company raised fiscal 2026 non-GAAP EPS guidance to $10.15-$10.35 (roughly 23%-26% growth), up from prior guidance, driven by higher segment profit targets for Pharma and Specialty Solutions (20%-22%) and Other (33%-35%), a higher GMPD profit target of about $150 million, a lower non-GAAP tax rate (21%-23%), and a slightly lower share count.

Capital allocation was active: the company completed a $750 million^c baseline share repurchase for the year and reported leverage at 3.2x Adjusted Debt to EBITDA as of December 31, 2025, within its 2.75x-3.25x target range. Year-to-date operating cash flow turned strongly positive at $1.66 billion, versus a $2.04 billion outflow a year earlier, though this was helped by a $4.2 billion swing in accounts payable and the company's non-GAAP adjusted free cash flow of $1.83 billion is also well above last year. Investors should note that GAAP results carry significant acquisition-related costs, and interest expense more than doubled to $88 million in the quarter from $35 million, reflecting financing for recent acquisitions.

The GAAP effective tax rate was 25.2%^d versus a non-GAAP rate of 21.4%. Shareholders' deficit persisted at $(2.7) billion. Forward-looking non-GAAP metrics and outlook are subject to the risk factors cited in the release, including drug pricing and tariff policy, generic deflation, and Department of Justice investigations related to the Anti-Kickback Statute and False Claims Act.

02—Key points

Key Highlights

Revenue up 19% to $65.6 billion; Pharmaceutical and Specialty Solutions contributed $60.7 billion, or about 92% of the total.
GAAP diluted EPS of $1.97 (+19%) and non-GAAP diluted EPS of $2.63 (+36%), with non-GAAP operating earnings up 38% to $877 million.
FY2026 non-GAAP EPS guidance raised to $10.15-$10.35 from prior guidance, implying roughly 23%-26% growth.
Pharma and Specialty Solutions segment profit up 29% to $687 million; full-year segment profit growth guidance raised to 20%-22%.
$750 million share repurchase completed year-to-date, including a $375 million accelerated share repurchase in Q2.
Leverage reached 3.2x Adjusted Debt to EBITDA, within the targeted 2.75x-3.25x range.
Interest expense more than doubled to $88 million from $35 million, reflecting acquisition financing and a meaningful drag on GAAP earnings growth.

03—Questions

Frequently Asked Questions

Why did Cardinal Health raise its fiscal 2026 outlook?
Management pointed to strong second-quarter execution with at least double-digit segment profit growth across all five operating segments. The raise reflects higher segment profit targets for Pharmaceutical and Specialty Solutions (20%-22%) and Other (33%-35%), a higher GMPD profit target of about $150 million, a lower non-GAAP tax rate (21%-23%), and a reduced share count of 237-238 million shares.
How much of the EPS growth came from operations versus share count and other items?
Non-GAAP diluted EPS rose 36% to $2.63, while non-GAAP operating earnings rose 38%. The company attributes the EPS gain to higher operating earnings and a lower share count, partially offset by higher interest and other expense from acquisition financing. Operating performance is the primary driver, with buybacks providing a smaller boost.
What is the difference between GAAP and non-GAAP results, and why does it matter?
The gap is mainly driven by amortization and other acquisition-related costs ($130 million in Q2), acquisition-related cash and share-based compensation ($67 million), and restructuring charges ($21 million). Management argues these items are not part of ongoing operations, but investors should weigh recurring acquisition-related costs as a real and continuing expense given the company's active M&A strategy.
Is Cardinal Health's balance sheet and cash generation improving?
Leverage is at 3.2x, within the company's target range, and year-to-date operating cash flow was $1.66 billion versus an outflow of $2.04 billion last year. However, the improvement was heavily supported by a $4.2 billion increase in accounts payable, and the company still has a shareholders' deficit of $(2.7) billion. Cash fell to $2.8 billion from $3.9 billion at fiscal year-end, largely due to acquisitions and share repurchases.
What risks could affect the outlook?
The release cites uncertainty around branded pharmaceutical pricing, regulatory changes including pharmaceutical pricing and tariffs, the integration of recent acquisitions, the GMPD Improvement Plan, competitive pressures and contract renewals, ongoing Department of Justice investigations under the Anti-Kickback Statute and False Claims Act, and the pace of generic deflation. Weather or geopolitical events affecting supply are also flagged.

04—Continue

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