CARDINAL HEALTH INC (CAH)

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 March 31, 2026 and June 30, 2025, and in our condensed consolidated statements of earnings and our condensed consolidated statements of cash flows for the three and nine months ended March 31, 2026 and 2025. 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.

Overview of Consolidated Results

Revenue

Revenue for the three months ended March 31, 2026 increased 11 percent to $60.9 billion from the comparative prior-year quarter, primarily due to branded and specialty pharmaceutical sales growth from existing customers. Revenue for the nine months ended March 31, 2026 increased 17 percent to $190.6 billion from the comparative prior-year period, primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.

GAAP and Non-GAAP Operating Earnings

The sum of the components and certain computations may reflect rounding adjustments.

GAAP operating earnings for the three and nine months ended March 31, 2026 decreased 30 percent to $509 million and increased 2 percent to $1.9 billion from the comparative prior-year periods, respectively. GAAP operating earnings for the three and nine months ended March 31, 2026 was unfavorably impacted by the $184 million pre-tax non-cash goodwill impairment charge related to the Navista & ION reporting unit within the Pharma segment recognized in the current quarter, the $106 million and $165 million of net recoveries in class action antitrust litigation recognized in the comparative prior-year periods, respectively, and higher cash and share-based compensation costs resulting from the timing of acquisitions within The Specialty Alliance. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to the Condensed Consolidated Financial Statements" for further information on the goodwill impairment.

Non-GAAP operating earnings for the three and nine months ended March 31, 2026 increased 18 percent to $956 million and 30 percent to $2.7 billion from the comparative prior-year periods, respectively. GAAP and non-GAAP operating earnings for the three and nine months ended March 31, 2026 were favorably impacted by increased contribution from branded and specialty pharmaceutical products, the impact of the acquisitions of management services organization ("MSO") platforms and Advanced Diabetes Supply Group ("ADS"), and the performance of our generics program.

GAAP and Non-GAAP Diluted EPS

The sum of the components and certain computations may reflect rounding adjustments.

(1)Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").

(2)The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."

GAAP diluted EPS for the three months ended March 31, 2026 decreased 20 percent to $1.69 from the comparative prior-year quarter, primarily due to the factors impacting GAAP operating earnings discussed in the preceding section, partially offset by favorable changes in discrete tax items. GAAP diluted EPS for the nine months ended March 31, 2026 increased 2 percent to $5.54 from the comparative prior-year period, primarily due to the factors impacting GAAP operating earnings discussed in the preceding section and favorable changes in discrete tax items, partially offset by increased interest expense.

Non-GAAP diluted EPS for the three and nine months ended March 31, 2026 increased 35 percent to $3.17 and 36 percent to $8.35 from the comparative prior-year periods, respectively, primarily due to the factors impacting non-GAAP operating earnings discussed in the preceding section and favorable changes in discrete tax items, partially offset by increased interest expense.

Significant Developments in Fiscal 2026 and Trends

Pharmaceutical and Specialty Solutions Segment

Solaris Health Acquisition

On November 3, 2025, we, through The Specialty Alliance, completed the acquisition of Solaris Health, a urology MSO, for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments. In connection with the closing of this transaction, we issued common units in The Specialty Alliance to certain physicians and members of management which are estimated to have a grant date fair value of approximately $500 million, a portion of which will be recognized as post-combination expense within acquisition-related cash and share-based compensation costs.

Solaris Health includes more than 750 providers across more than 250 practice locations in 14 states. Solaris Health is part of The Specialty Alliance, our multi-specialty MSO platform, and their results are reported within our Pharma segment. With the closing of this transaction, we own approximately 76% of The Specialty Alliance. We funded the acquisition with a combination of cash proceeds from the recent debt financing and cash on hand. See Note 5 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the debt financing.

Management Service Organization Platforms

The performance of our MSO platforms positively impacted the year-over-year comparison of Pharma segment profit during the three and nine months ended March 31, 2026, primarily due to the impact of the acquisitions of GI Alliance ("GIA"), Urology America, and Solaris Health. The Specialty Alliance is our multi-specialty MSO platform, which is primarily comprised of GIA, Urology America, Solaris Health and other gastroenterology- and urology-focused practices. Navista is our oncology MSO platform, which is primarily comprised of ION and other oncology-focused practices. Our ability to successfully provide physician practice support and management services, and to receive the value we expect to receive from our recent acquisitions of MSO platforms, depends upon a number of factors, including: the ability to develop or acquire and integrate appropriate practice management and support expertise; the ability to support recruitment, integration, and retention of sufficient numbers of local providers and staff; ensuring the alignment of interests between Cardinal Health and the physicians; the ability to successfully support negotiations with vendors, suppliers, and payors; the reimbursement and regulatory environment; and competition from other healthcare organizations.

Branded Pharmaceuticals

During the three and nine months ended March 31, 2026, we saw an increased demand for GLP-1 pharmaceuticals which positively impacted our Pharma segment and consolidated revenue for the three and nine months ended March 31, 2026; however, increased GLP-1 sales did not meaningfully contribute to segment profit. Future demand for these medications is unpredictable and our ability to meet demand may be impacted by supply constraints. Additionally, the recently issued Executive Order titled “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” and other administrative policies or actions may impact sales or profitability of branded pharmaceutical products; however, the extent of the impact is uncertain and may vary depending on the timeline for implementation and the extent of any price reductions.

Generics Program

The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during the three and nine months ended March 31, 2026. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.

The frequency, timing, magnitude, and profit impact of generic pharmaceutical customer volumes, pricing changes, customer contract renewals, generic pharmaceutical manufacturer pricing changes, and generic pharmaceutical contract manufacturing and sourcing costs all impact Pharma segment profit and are subject to risks and uncertainties. These risks and uncertainties may impact Pharma segment profit and consolidated operating earnings during the remainder of fiscal 2026 and beyond.

Tariffs

In February 2025, the United States imposed tariffs under the International Emergency Economic Powers Act ("IEEPA") on certain goods, materials and products imported into the United States from countries where we do business. In February 2026, the U.S. Supreme Court ruled that the IEEPA tariffs were unlawful but did not establish a mechanism for issuing refunds. Subsequent

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

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 services and solutions that enhance the healthcare system and 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.

Pharmaceutical and Specialty Solutions Segment

Our Pharma segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. This segment also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products; provides pharmacy management services to hospitals and operates a limited number of pharmacies, including pharmacies in community health centers; repackages generic pharmaceuticals and over-the-counter healthcare products; and includes our managed services organization ("MSO") platforms for physician offices.

Global Medical Products and Distribution Segment

Our GMPD segment manufactures, sources, and distributes Cardinal Health brand medical, surgical, and laboratory products, which are sold in the United States, Canada, Europe, Asia, and other markets. This segment also distributes a broad range of medical, surgical, and laboratory products known as national brand products to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers in the United States and Canada.

Other Operating Segments

Our Nuclear and Precision Health Solutions operating segment operates nuclear pharmacies and manufacturing facilities, which manufacture, prepare, and deliver radiopharmaceuticals for use in nuclear imaging, theranostics, and other procedures in hospitals and physician offices. This segment also contract manufactures a radiopharmaceutical treatment (Xofigo®) and holds the rights to manufacture and distribute Lymphoseek®, a radiopharmaceutical diagnostic imaging agent.

Our at-Home Solutions operating segment has two main businesses: Edgepark, including Advanced Diabetes Supply Group ("ADS"), directly providing medical supplies to patients with chronic conditions in the home; and at-Home, a business-to-business distribution service that delivers medical supplies and over-the-counter products to home medical equipment providers, home health and hospice agencies, and e-commerce providers.

Our OptiFreight® Logistics operating segment supports the shipping and logistics needs of healthcare providers by optimizing direct shipments through integrated technology solutions. This operating segment serves hospitals, pharmacies, labs, and surgery centers.

Consolidated Results

Fiscal 2026 Overview

Revenue

Revenue for fiscal 2026 increased 14 percent to $254.2 billion from the prior year, primarily due to branded and specialty pharmaceutical sales growth from existing and new customers.

GAAP and Non-GAAP Operating Earnings

The sum of the components and certain computations may reflect rounding adjustments.

GAAP operating earnings for fiscal 2026 increased 15% to $2.6 billion from the prior year. The increase in GAAP operating earnings was driven by the increased contribution from branded and specialty pharmaceuticals and the performance of our generics program in our Pharma segment, the impact of the acquisitions of MSO platforms and ADS, and growth from existing customers in our GMPD segment. This increase was partially offset by the $184 million pre-tax goodwill impairment charge recognized in fiscal 2026 related to the Navista & Integrated Oncology Network ("ION") reporting unit within our Pharma segment, higher cash and share-based compensation costs resulting from the timing of acquisitions within The Specialty Alliance, and $171 million of net recoveries in class action antitrust litigation recognized in fiscal 2025. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to the Consolidated Financial Statements" for further information on the goodwill impairment.

Non-GAAP operating earnings for fiscal 2026 increased 30% to $3.6 billion from the prior year, primarily driven by the increased contribution from branded and specialty pharmaceuticals and the performance of our generics program in our Pharma segment and the impact of the acquisitions of MSO platforms and ADS.

GAAP and Non-GAAP Diluted EPS

The sum of the components and certain computations may reflect rounding adjustments.

(1)Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").

(2)The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the section titled "Explanation and Reconciliation of Non-GAAP Financial Measures."

(3)For fiscal 2026, impairments and (gain)/loss on disposals of assets, net included a pre-tax goodwill impairment charge of $184 million related to the Navista & ION reporting unit within the Pharma segment. Net of the $23 million tax benefit and $23 million portion attributable to noncontrolling interests, this had an adverse impact of $0.58 per share to GAAP diluted EPS.

(4)During fiscal 2026, we recognized a pre-tax impairment charge of $122 million in connection with the observed reduction of the estimated fair value of the Outcomes business, of which we hold a 16 percent equity interest.

GAAP diluted EPS for fiscal 2026 increased 12 percent to $7.23 from the prior year, primarily due to the factors impacting GAAP operating earnings discussed in the preceding section and favorable changes in discrete tax items, partially offset by increased interest expense and the impairment of our equity interest in Outcomes.

Non-GAAP diluted EPS for fiscal 2026 increased 37 percent to $11.26 from the prior year due to the factors impacting non-GAAP operating earnings discussed in the preceding section and favorable changes in discrete tax items, partially offset by increased interest expense.

Significant Developments in Fiscal 2026 and Trends

Pharma Segment

Solaris Health Acquisition

On November 3, 2025, we, through The Specialty Alliance, completed the acquisition of Solaris Health, a urology MSO, for a purchase price of approximately $1.9 billion in cash, subject to certain adjustments. In connection with the closing of this transaction, we issued common units in The Specialty Alliance to certain physicians and members of management which are estimated to have a grant date fair value of approximately $500 million, a portion of which will be recognized as post-combination expense within acquisition-related cash and share-based compensation costs.

Solaris Health includes more than 750 providers across more than 250 practice locations in 14 states. Solaris Health is part of The Specialty Alliance, our multi-specialty MSO platform, and its results are reported within our Pharma segment. With the closing of this transaction, we own approximately 76% of The Specialty Alliance. We funded the acquisition with a combination of cash proceeds from the recent debt financing and cash on hand. See Note 6 of the "Notes to Consolidated Financial Statements" for additional information on the debt financing.

Management Service Organization Platforms

The performance of The Specialty Alliance positively impacted the year-over-year comparison of Pharma segment profit during fiscal 2026, primarily due to the impact of the acquisitions of GI Alliance ("GIA") and Solaris Health. The Specialty Alliance is our multi-specialty MSO platform, which is primarily comprised of GIA, Urology America, Solaris Health, and other gastroenterology- and urology-focused practices. Additionally, Navista is our oncology MSO platform, which is primarily comprised of ION and other oncology-focused practices. Our ability to successfully provide physician practice support and management services, and to receive the value we expect to receive from our recent acquisitions of MSO platforms, depends upon a number of factors, including: the ability to develop or acquire and integrate appropriate practice management and support expertise; the ability to support recruitment, integration, and retention of sufficient numbers of local providers and staff; ensuring the alignment of interests between Cardinal Health and the physicians; the ability to successfully support negotiations with vendors, suppliers, and payors; the reimbursement and regulatory environment; and competition from other healthcare organizations.

Branded Pharmaceuticals

There are a number of proposed and adopted U.S. government policy initiatives being considered that could directly or indirectly impact pharmaceutical manufacturer list prices for branded pharmaceutical products. The Inflation Reduction Act has and will continue to adversely impact our revenue by capping prices for certain drugs; however, our profitability has not been negatively impacted. Additionally, the Executive Order titled “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” and other administrative policies or actions may impact sales or profitability of branded pharmaceutical products. The extent of any future impacts is uncertain and may vary depending on the ti

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