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CARDINAL HEALTH INC (CAH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 non-GAAP EPS was $2.35, above Wall Street consensus of ~$2.15*, while revenue was $54.9B versus consensus of ~$55.3B*; GAAP EPS was $2.10 .
  • Management raised FY25 non-GAAP EPS guidance to $8.05–$8.15 (from $7.85–$8.00) and tightened multiple outlook items (interest & other, tax rate, segment targets) .
  • Strength was broad-based: pharma segment profit +14% to $662M; “Other” +22% to $134M; GMPD profit +77% to $39M as cost initiatives gained traction .
  • Key catalysts: $10B of new customer onboarding now completed; specialty/MSO strategy progressing (GI Alliance expansion; ADSG acquisition) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based segment profit growth across all five operating segments; pharma profit +14% driven by brand/specialty, MSO (GI Alliance), BioPharma Solutions, and positive generics program performance .
  • Specialty momentum and customer wins: “successful onboarding of Publix” and ~$10B of new customer revenue for FY25; specialty revenue strength contributed meaningfully to pharma growth .
  • Raised FY25 EPS guidance and tightened outlook; CEO emphasized “strong momentum” and “strength and resilience” of the business .

What Went Wrong

  • Revenue flat YoY due to the previously communicated customer contract expiration (ex-OptumRx, consolidated revenue +19%) .
  • Higher interest and other expense (financing costs from recent acquisitions) and higher non-GAAP tax rate pressured EPS; management narrowed FY25 “interest & other” to $200–$215M .
  • Ongoing tariff overhang in GMPD: management quantified ~$200–$300M gross tariff costs in FY26 before mitigation, with plans to offset “majority” through operational actions and pricing .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$52.277 $55.264 $54.878
Consensus Revenue ($USD Billions)*$50.82$55.02$55.31
GAAP Diluted EPS ($)$1.70 $1.65 $2.10
Non-GAAP Diluted EPS ($)$1.88 $1.93 $2.35
Consensus Primary EPS ($)*$1.62$1.76$2.15
Gross Margin ($USD Billions)$1.902 $1.941 $2.123
SG&A ($USD Billions)$1.277 $1.306 $1.315
GAAP Effective Tax Rate (%)23.0% 21.4% 23.6%

Note: Consensus values marked with * are from S&P Global.

Segment revenues

Segment Revenue ($USD Billions)Q1 2025Q2 2025Q3 2025
Pharmaceutical & Specialty Solutions$47.990 $50.849 $50.433
Global Medical Products & Distribution (GMPD)$3.123 $3.154 $3.160
Other (NPHS, at-Home Solutions, OptiFreight)$1.186 $1.283 $1.304

Segment profits

Segment Profit ($USD Millions)Q1 2025Q2 2025Q3 2025
Pharmaceutical & Specialty Solutions$530 $531 $662
GMPD$8 $18 $39
Other$104 $118 $134

KPIs

KPIQ1 2025Q2 2025Q3 2025
Non-GAAP Adjusted Free Cash Flow ($USD Billions)$(1.361) $(0.254) $2.792
Cash & Equivalents ($USD Billions)$2.867 $3.810 $3.326
Diluted Weighted Avg Shares (Millions)245 243 241
Interest Expense ($USD Millions)32 35 74
Other (Income)/Expense, net ($USD Millions)(5) 3 (9)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP EPSFY 2025$7.85–$8.00 $8.05–$8.15 Raised
Pharma Segment Profit GrowthFY 202510%–12% 11.5%–12.5% Raised
Other Segment Profit GrowthFY 2025≈10% (reiterated in Q2) 16%–18% Raised
GMPD Segment ProfitFY 2025$130–$150M $130–$140M Narrowed/lowered
Interest & Other ExpenseFY 2025$200–$230M $200–$215M Narrowed
Non-GAAP Effective Tax RateFY 202523%–24% 23%–23.5% Narrowed
Diluted Weighted Avg SharesFY 2025~243M (prior) ~242M Lower
FY26 EPS GrowthFY 2026—Anticipates double-digit non-GAAP EPS growth New update
Dividend per ShareQ3 FY25—$0.5107 per share (payable July 15, 2025) Increased

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs/macroDiscussed dynamic tariff environment; GMPD mitigation plans; stable generics dynamics Quantified ~$200–$300M gross tariff costs in FY26 before mitigation; plan to offset majority via operations and pricing; AI deployed for tariff planning Heightened focus; mitigation actions advancing
Specialty/MSO strategyION agreement; Specialty Networks integration; strong specialty growth GI Alliance expansion into urology; ADSG acquisition completed (4/1); specialty downstream services expanding Scaling and diversifying
Supply chain/resiliency90% of syringe production now U.S.-made; new distribution centers; managing storms/hurricanes Continued cost optimization benefits in GMPD; AI tools for compliance; positive service metrics Improving resilience
Customer onboardingOver $10B incremental revenue targeted; ramping ~$10B onboarding completed, setting up FY26 growth Completed and supportive
Nuclear (Moly-99 shortage)Expected Q2 impact; volumes to return Managed Q2 shortage; Theranostics revenue growth 30%+ continues Recovering; strong Theranostics
GLP-1 impact~5pp of pharma revenue growth in Q1 ~7pp of pharma revenue growth in Q3 Growing contribution
Logistics/techOptiFreight product enhancements; TotalView insights Continued strong OptiFreight growth; expanding customer platform use Steady investment

Management Commentary

  • “Our strong momentum continued into our third quarter… broad-based performance, with all five of our operating segments contributing to our strong growth. We are pleased to raise our fiscal 2025 guidance…” — CEO Jason Hollar .
  • “Q3 delivered segment profit of $662 million, growth of 14%… driven by brand and specialty products, our MSO platforms including GI Alliance, BioPharma Solutions… and positive generics program performance.” — CFO Aaron Alt .
  • “We anticipate roughly $200–$300 million of remaining gross tariff costs in fiscal ’26 before further mitigation. We anticipate mitigating the majority… through continued operational actions and price adjustments…” — CEO Jason Hollar .
  • “We have now completed customer onboarding that make up approximately $10 billion of new customer revenue in fiscal year ’25, setting us up for further growth in fiscal year ’26.” — CFO Aaron Alt .

Q&A Highlights

  • Tariff impact and mitigation: Majority of remaining FY26 gross tariff costs expected to be addressed via pricing and operations; national brand is largely fee-for-service pass-through .
  • Specialty growth drivers: Broad-based strength across specialty distribution and biopharma solutions; MSO platforms (GI Alliance, ION) are higher-margin contributors and early days are tracking to expectations .
  • Customer wins/onboarding: ~$10B of new customers onboarded; contributes to FY26 growth narrative .
  • GMPD trajectory: Sequential improvement expected; Q4 highest seasonal profit; cost optimization and U.S. manufacturing investments support resiliency .
  • Inventory/utilization: Inventory levels remain normal; pharma demand resilient even in weaker macro; GLP-1 inventory levels kept low and steady .

Estimates Context

  • Q3 FY25: Non-GAAP EPS $2.35 vs consensus ~$2.15* (beat); revenue $54.9B vs consensus ~$55.3B* (slight miss) .
  • Q2 FY25: Non-GAAP EPS $1.93 vs consensus ~$1.76* (beat); revenue $55.3B vs consensus ~$55.0B* (beat) .
  • Q1 FY25: Non-GAAP EPS $1.88 vs consensus ~$1.62* (beat); revenue $52.3B vs consensus ~$50.8B* (beat) .

Note: Consensus values marked with * are from S&P Global.

Key Takeaways for Investors

  • Earnings quality improving: broad-based segment profit growth and cost control drove EPS beats; outlook raised and narrowed, signaling confidence .
  • Specialty/MSO strategy is accretive: GI Alliance, ION, Specialty Networks, and ADSG deepen higher-margin capabilities and diversify profit streams .
  • Pharma resilience: GLP-1s are a growing top-line driver but not the sole engine; core brand/specialty and generics program underpinned strength .
  • GMPD turning the corner: profit up sharply YoY with cost optimization; Q4 seasonal uplift expected; tariff mitigation and pricing actions underway .
  • Cash flow inflection: Adjusted FCF swung to +$2.8B in Q3; supports debt paydown, baseline buybacks/dividends, and tuck-in M&A .
  • Near-term trading: Guidance raise and strong specialty/MSO narrative are positives; watch tariff headlines and any revenue opticals tied to past contract expiration .
  • Medium-term thesis: Double-digit EPS growth targeted for FY26; completed customer onboarding, specialty scaling, and portfolio mix shift should sustain margin/earnings trajectory .