Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors

You're looking at Cardinal Health, Inc. (CAH) and seeing a stock that's surged, but you're wondering if the underlying financials support the hype, especially after a major customer contract expiration. The direct takeaway is this: Fiscal Year 2025 was a masterclass in profit protection, with the company delivering a non-GAAP diluted EPS of $8.24, a 9% jump year-over-year, even as reported revenue landed flat at $222.6 billion, which is a neat trick. Here's the quick math: Non-GAAP operating earnings grew 15% to $2.8 billion, driven by the higher-margin Pharmaceutical and Specialty Solutions segment, which tells you the business mix is improving. The company is defintely executing on its strategy to pivot into specialty services, like the Solaris Health acquisition, but integrating these new businesses-while managing a massive distribution network-is a near-term risk that can't be ignored. The market is still a little skittish, but the cash flow is strong. We need to look past the headline revenue miss and see where the real value is being built.

Revenue Analysis

You're looking at Cardinal Health, Inc. (CAH)'s top-line numbers, and the first glance at the fiscal year 2025 total revenue of approximately $222.6 billion shows a slight dip. This is the critical context you need: while the reported year-over-year (YoY) revenue growth was a decline of about -1.9% compared to fiscal year 2024, that number is defintely misleading. The real story is the underlying strength, as revenue actually increased by a robust 18% when you exclude the impact of a major customer contract expiration.

The core of Cardinal Health's business is distribution, and its revenue streams are heavily concentrated in one area. This is a classic distribution model risk, so you need to pay close attention to the segment breakdown. The Pharmaceutical and Specialty Solutions segment is the undisputed giant, but the smaller segments are showing impressive momentum, which is where the future growth will come from.

Here is the quick math on where the $222.6 billion in fiscal year 2025 revenue came from, showing just how dominant the Pharmaceutical segment is:

The Pharmaceutical and Specialty Solutions segment, which primarily handles the distribution of branded and generic pharmaceuticals, accounts for over 91% of all revenue. This segment saw a reported decline of -2.56%, a direct result of the key supply deal with OptumRx terminating. This contract loss was a near-term headwind, but the segment's underlying performance in specialty pharmaceuticals and its generics program remains a strong driver.

Looking at the other segments, you see a clear growth strategy taking hold. The Global Medical Products and Distribution (GMPD) unit, which provides Cardinal Health-branded medical, surgical, and lab products, grew by 2.06%. But the real standout is the 'Other Operating Segment,' which includes high-growth areas like at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics. This segment surged by nearly 20%, or $870 million, from fiscal year 2024 to 2025.

The shift in revenue streams isn't about moving away from pharmaceuticals-that's the core engine-but about building out higher-margin, specialized services. The company is doubling down on areas with strong secular trends, like oncology and home-based care. The geographic concentration is also extreme, with approximately 99.3% of total revenue originating from the United States, a factor that limits regional diversification risk but increases exposure to US healthcare policy changes. If you want a deeper dive, check out the full post on Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors.

• OptumRx Contract Loss: Caused the headline revenue decline, masking a strong 18% core growth.
• Specialty Focus: Acquisitions like Integrated Oncology Network (ION) and a stake in GI Alliance (GIA) are bolstering the Pharmaceutical segment's specialty solutions.
• High-Growth 'Other': The nearly 20% growth in the 'Other' segment shows successful investment in businesses like at-Home Solutions and Nuclear and Precision Health Solutions.

Your action here is to model the Pharmaceutical segment's revenue without the OptumRx contract for future projections, and ensure the 19.28% growth trajectory for the 'Other' segment is sustainable.

Profitability Metrics

You're looking at Cardinal Health, Inc. (CAH) because you know the healthcare distribution model is a high-volume, low-margin game, and you want to see if their operational improvements are actually moving the needle. The short answer is yes, they are, but the margins are still razor-thin, which is the nature of this business. The key takeaway for fiscal year 2025 is that CAH is successfully executing on its strategy to improve profitability, particularly by focusing on higher-margin specialty products and cost control.

The company's full-year 2025 revenue was a massive $222.6 billion. Against that colossal number, the margins look tiny, but that's what we expect in drug and medical supply distribution. Here's the quick math on the core profitability ratios:

• Gross Profit Margin: 3.7%
• Operating Profit Margin (GAAP): 1.03%
• Net Profit Margin (GAAP, estimated): 0.70%

Gross profit margin rose by 40 basis points (bps) in FY2025 from the prior year, reaching 3.7%. This increase is a defintely a positive signal, driven by favorable changes in product mix, specifically the increased contribution from branded and specialty pharmaceutical products, and the strategic unwinding of the OptumRx contracts.

Operational Efficiency and Margin Trends

The operational efficiency story is compelling. The GAAP operating earnings for FY2025 were $2.3 billion. On a non-GAAP basis (which strips out one-time and non-cash items, giving a cleaner view of core operations), operating earnings were $2.8 billion, representing a 15% increase from the prior year. This growth is directly tied to segment-level strength:

• Pharmaceutical and Specialty Solutions segment profit grew by 12%.
• Global Medical Products and Distribution (GMPD) segment profit skyrocketed by 47% to $135 million, showing the multi-year improvement plan is finally gaining traction.

The jump in operating profit margin, even with a slight revenue decrease (due to the contract expiration), confirms that cost management and strategic acquisitions, like the MSO platforms (management services organizations), are working. You're seeing the benefits of a shift from pure volume-based wholesaling to higher-value, data-rich service models, which is the future of this space, as discussed in our deep dive Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors.

Comparison to Industry Averages

In the healthcare distribution and services sector, the margins are notoriously tight. To assess CAH's profitability, we look at direct peers like McKesson Corporation and Cencora. CAH's 3.7% gross margin is competitive, sitting comfortably above McKesson Corporation's 3.4% and Cencora's gross margin, which was around 3.55% (adjusted Q3 2025).

The real story is in the bottom-line net profit. The industry average for net profits in healthcare distribution is extremely low, often around 0.26% of revenue, according to 2024 industry data, with distributors relying on vendor discounts to generate positive margins.

Compare CAH's estimated GAAP Net Profit Margin of 0.70% to its peers' GAAP Net Profit Margins for FY2025:

What this estimate hides is the impact of non-recurring items and the reliance on non-GAAP metrics, which management often uses to show the underlying business health. CAH's GAAP Net Profit Margin is slightly lower than McKesson's 0.92%, but its non-GAAP operating margin of 1.26% is very close to Cencora's adjusted operating margin of 1.31%. This indicates that operationally, CAH is right in line with its major competitors, but its GAAP figures are more heavily impacted by one-time charges or adjustments. The operational improvements are real; they just need to be sustained and translated into stronger GAAP net income. Your next step should be to look closely at the reconciliation of GAAP to non-GAAP to see what costs are consistently being excluded.

Debt vs. Equity Structure

The core takeaway for Cardinal Health, Inc. (CAH) is that its growth strategy is heavily reliant on debt financing, a situation compounded by a persistent negative equity position. This isn't necessarily a crisis for a high-volume distributor, but it demands close attention to cash flow and leverage ratios.

As of the fiscal year ending June 2025, Cardinal Health, Inc.'s total debt stood at approximately $8.52 billion. This is split between a long-term debt and capital lease obligation of roughly $7.977 billion and a short-term portion of about $550 million. Here's the quick math: that long-term debt figure represents a significant increase-up over 71% from the prior fiscal year-reflecting a clear choice to use the debt markets to fund strategic expansion.

• Long-Term Debt (FY 2025): $7.977 Billion
• Short-Term Debt (Q4 2025): $550 Million
• Total Debt (June 2025): $8.52 Billion

The company's Debt-to-Equity (D/E) ratio for the quarter ending June 2025 was approximately -3.07. This negative ratio is a direct result of the company's negative total stockholders' equity, which was about $-2.781 billion as of June 2025. What this estimate hides is that negative equity means total liabilities exceed total assets, a common but still concerning characteristic for major healthcare distributors like Cardinal Health, Inc. and its peer McKesson.

To be fair, the industry benchmark for Healthcare Distributors is a D/E ratio of around 1.299, so Cardinal Health, Inc.'s negative figure puts it far outside the norm, but it's a structural issue tied to the business model and historical financial events. You need to look beyond the D/E ratio and focus on a metric like the Consolidated Net Leverage Ratio, which the company is covenanted to keep no greater than 3.75 to 1.00.

The recent financing activity confirms this debt-centric strategy. In late 2024, Cardinal Health, Inc. issued $2.9 billion in new notes to fund major acquisitions, including a majority stake in GI Alliance, accelerating their multi-specialty growth. Furthermore, in October 2025, they secured a new 364-Day Credit Agreement, establishing a $1.0 billion revolving credit facility to support their commercial paper program and general corporate purposes. S&P Global Ratings affirmed the company's 'BBB' issuer credit rating in late 2024, but revised the outlook to stable from positive, reflecting the increased acquisition activity and the expectation that leverage will likely remain in the 2.5x-3x range over the near term.

The balance is clear: Cardinal Health, Inc. is using debt to fund high-growth, high-margin specialty services and acquisitions, relying on strong cash flow from its core distribution business to service that debt and maintain its credit rating. You can find a deeper dive into the full picture in Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Cardinal Health, Inc. (CAH) can cover its short-term bills, and the answer is a qualified yes. The company's liquidity position, while tight by traditional standards, is typical for a high-volume, low-margin distributor, but the strong cash flow from operations is the real story.

Looking at the fiscal year 2025 numbers, Cardinal Health, Inc. (CAH)'s core liquidity ratios show a reliance on inventory turnover, which is a common characteristic of the drug distribution business. The current ratio, which measures current assets against current liabilities, stood at just 0.94 for the fiscal year ending June 30, 2025. This means the company has only 94 cents in current assets for every dollar of current liabilities, a figure that would be a red flag for most industries.

• Current Ratio: 0.94
• Quick Ratio: 0.5

The quick ratio (or acid-test ratio), which strips out inventory because it's the least liquid current asset, was even lower at 0.5. This is defintely tight. But honestly, for a company like Cardinal Health, Inc. (CAH), which moves inventory fast-think of it as a logistics giant for pharmaceuticals-this isn't a crisis. Their business model relies on paying suppliers (a current liability) after they collect from customers (a current asset), keeping working capital low or even negative.

Here's the quick math on working capital: With current assets of $36.37 billion and current liabilities of $38.90 billion for FY 2025, the working capital is a negative $2.53 billion. This negative working capital trend is partially due to the unwinding of the negative net working capital associated with the OptumRx contracts, which is a known headwind the company has been managing. Still, the efficiency of their supply chain is what makes this manageable, but it leaves little room for operational slip-ups.

The cash flow statement, however, paints a much healthier picture of financial strength, which is where you should focus your attention. For the 2025 fiscal year, Cardinal Health, Inc. (CAH) generated a robust $2.40 billion in cash from operating activities. This strong operational cash generation is the true source of liquidity, allowing them to fund their strategic moves.

The company's investing activities reflect a period of significant strategic investment, consuming a net $5.59 billion in cash. This outflow was driven by key acquisitions, such as the majority stake in GI Alliance and the purchase of Advanced Diabetes Supply Group (ADSG), which are critical to their long-term growth strategy. To fund these investments and manage their capital structure, financing activities provided a net cash inflow of $1.94 billion, which included issuing additional long-term debt and deploying cash for share repurchases and dividends. The company also reported a strong adjusted free cash flow of $2.5 billion for the fiscal year. This capital deployment shows a management team confident in its ability to service its debt and fund growth, even with the tight current ratios. To understand the players behind these moves, check out Exploring Cardinal Health, Inc. (CAH) Investor Profile: Who's Buying and Why?

The potential strength here is the consistent, high-volume operating cash flow, which offsets the low quick ratio. The risk is that any disruption to the supply chain or a slowdown in collections could quickly expose the thin liquidity cushion. As an investor, you need to monitor the cash conversion cycle-the time it takes to turn inventory and receivables into cash-to ensure it remains efficient.

Valuation Analysis

You're looking for a clear signal on Cardinal Health, Inc. (CAH)-is the recent run-up justified, or are we staring at an overvaluation? The quick takeaway is that the market is pricing in significant future earnings growth, making the stock appear expensive on a trailing basis but more reasonable on a forward-looking one. The stock is defintely near its all-time highs, but analysts still see a small runway.

The stock has seen a massive surge, climbing approximately 74.91% over the last 12 months, pushing it near its 52-week high of $208.32. This performance has been fueled by strong operational execution, especially in the Pharmaceutical segment. The current price of around $206.97 (as of mid-November 2025) means the stock is trading right at the high end of its recent range, so you're not getting a bargain on past performance.

Here's the quick math on the key valuation multiples:

• Price-to-Earnings (P/E) Ratio: The Trailing Twelve Months (TTM) P/E stands at a high 32.17. This is well above the S&P 500 average and suggests the stock is expensive based on past earnings.
• Forward P/E Ratio: This drops significantly to 17.51, which is much closer to a fair value for a stable, growing healthcare distributor. This disparity shows the market is betting heavily on the company hitting its future earnings guidance.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA is 14.91. For a distribution business, this is a bit rich compared to historical medians, reflecting the company's improved profitability and scale.
• Price-to-Book (P/B) Ratio: The P/B ratio is a highly unusual -17.08. This negative value is not a sign of a bad business, but a structural quirk in the balance sheet, as the company has a negative book value per share of $-11.48 (as of September 2025), largely due to historical stock buybacks and large intangible assets, so it's not a useful metric here.

The dividend profile is stable but not a primary draw for investors seeking high income. Cardinal Health, Inc. pays an annualized dividend of $2.04 per share, resulting in a yield of roughly 1.0%. The payout ratio is conservative at about 30.77%, which means the dividend is very safe and has plenty of room to grow. This low payout ratio signals that the company is retaining capital to reinvest in the business, which is a good sign for long-term growth.

What this estimate hides is the ongoing transformation, which you can learn more about in the Mission Statement, Vision, & Core Values of Cardinal Health, Inc. (CAH).

The Wall Street consensus leans toward optimism. The average analyst rating is a 'Moderate Buy,' with 12 Buy ratings and 2 Hold ratings. The consensus 12-month price target is $206.46, which is essentially flat from the current price. This suggests that while the stock is not undervalued, analysts believe the current price is fair and that the company has already captured most of its near-term upside.

The action here is to hold if you own it, but wait for a pullback if you're looking to start a new position. The stock is priced for perfection right now.

Risk Factors

You're looking at Cardinal Health, Inc. (CAH) and seeing a company that's been strategically aggressive, but you need to map the risks that could defintely chip away at their bottom line. The biggest near-term challenge is the operational fallout from losing a massive contract, but regulatory and integration risks from new acquisitions are also high on the list.

Operational Headwinds: The OptumRx Contract Exit

The immediate risk is a revenue hit from the expiration of the key supply deal with OptumRx, the pharmacy benefits arm of UnitedHealth. For fiscal year 2025 (FY2025), Cardinal Health, Inc.'s total revenue was $222.6 billion, a 2% decrease from the prior year. Here's the quick math: revenue actually increased by a strong 18% when you exclude the impact of that contract loss, showing the core business is healthy, but the headline number still takes a hit. The company's strategy is to offset this with new, higher-margin business, having onboarded $10 billion in new contracts last year, with another $7 billion expected this year. They're streamlining operations post-Optum exit, too, which is smart.

• Revenue dip: $222.6 billion in FY2025.
• Core growth: 18% excluding the contract loss.
• New business: Targeting $7 billion in new contracts.

Regulatory and Legal Exposure

The healthcare distribution space is always a minefield of regulatory and legal costs, and Cardinal Health, Inc. is no exception. Beyond the typical compliance scrutiny, there's a key risk from potential legislative changes that could impact their new strategic direction. Specifically, certain states are proposing laws that would restrict or prohibit corporate entities from owning or managing physician practices, which directly threatens the long-term value of their Managed Services Organization (MSO) platform investments, like the majority stake acquisition of GI Alliance for approximately $2.8 billion in cash. Plus, you still have the ongoing risk of high-cost legal settlements related to medical products and drugs, which can swing earnings wildly. The company's adjusted free cash flow of $2.5 billion in FY2025 provides a buffer, but it's not infinite.

Strategic and Financial Constraints

While management is driving growth in specialty areas, two critical financial and strategic risks stand out. First, the company is carrying a negative equity position, which is a red flag for more conservative investors, even if Fitch anticipates free cash flow will cover debt maturities. Second, competition is fierce, and coupled with increasing regulatory scrutiny, it puts pressure on profit margins. To mitigate supply chain risks-a constant threat-and potential 10% to 25% tariffs on Mexican and Chinese production, Cardinal Health, Inc. is shifting manufacturing to lower-cost Southeast Asian facilities. On the growth side, they are investing over $150 million in their Nuclear and Precision Health Solutions (NPHS) segment over the next three years to expand their cyclotron network and theranostics capabilities.

For a deeper dive into the valuation and strategy, you should read Breaking Down Cardinal Health, Inc. (CAH) Financial Health: Key Insights for Investors.

Your next step is to track state-level legislative proposals on physician practice ownership. That's the wild card here.

Growth Opportunities

You're looking for where Cardinal Health, Inc. (CAH) goes from here, and the short answer is: they are aggressively moving into higher-margin specialty areas. The company's core pharmaceutical distribution business is a reliable engine, but the real growth story is in the strategic pivot toward specialty pharmaceuticals and Management Services Organizations (MSOs), which is defintely where the money is now.

For the full 2025 fiscal year, Cardinal Health, Inc. reported total revenue of $222.6 billion, a 2% decrease year-over-year, but that number is misleading. Excluding the impact of a previously communicated customer contract expiration, revenue actually grew by 18%. More importantly, non-GAAP diluted earnings per share (EPS) hit $8.24, an impressive 9% increase, showing they are managing to extract better profit from their massive scale. Here's the quick math: they are getting more efficient and focusing on better-paying segments.

Key Growth Drivers: Specialty and Scale

The company is not just distributing; they are integrating into the care delivery model. This is the competitive advantage that positions them for sustained growth. Their strategy centers on three clear areas:

• Specialty Alliance: This new platform combines acquired Management Services Organizations (MSOs) like GI Alliance (gastroenterology) and Solaris Health (urology). This move captures higher-margin services and gives them a deep, direct relationship with high-volume physician groups.
• Nuclear and Precision Health Solutions: This segment, part of their 'Other' business, is a major focus. Cardinal Health, Inc. is investing $150 million to expand new locations and manufacturing capabilities to support theranostics (a combination of therapy and diagnostics). They anticipate this business will deliver 10% long-term profit growth.
• At-Home Solutions and Logistics: The 'Other' segment, which includes at-Home Solutions (bolstered by the Advanced Diabetes Supply acquisition) and OptiFreight Logistics, delivered 22% profit growth in fiscal year 2025. This taps directly into the growing decentralized care trend.

Plus, they are not ignoring the basics. Continued investments in automation and AI for their supply chain, including a new state-of-the-art facility in Indianapolis, are designed to drive operational efficiencies and reduce costs long-term.

Future Revenue and Earnings Outlook

The most recent guidance from November 2025 shows management's confidence in this strategy. They raised their full-year adjusted EPS guidance for fiscal year 2026 to a range of $9.65 to $9.85. This represents a substantial 17% to 20% growth year-over-year. To be fair, this is guidance, not a guarantee, but it reflects strong Q1 performance across all five operating segments. Their long-term target is even more compelling: a non-GAAP diluted EPS Compound Annual Growth Rate (CAGR) of 12% to 14% from fiscal year 2026 through fiscal year 2028.

What this estimate hides is the potential for integration challenges with all the recent acquisitions, but the focus on high-growth specialty segments like specialty pharmaceuticals, which saw a 12% segment profit increase in FY25, suggests the foundation is solid. The company also confirmed its commitment to returning capital to shareholders, raising its baseline share repurchase plans to at least $750 million per year for fiscal year 2026, on top of approximately $500 million in dividend payments.

For a deeper dive into the company's long-term direction, you can review the Mission Statement, Vision, & Core Values of Cardinal Health, Inc. (CAH).

The company is clearly shifting its capital allocation to support these growth areas, and the numbers show that strategy is paying off in increased profitability, even amid the complexity of a massive distribution network.