Cardinal Health, Inc. (CAH) - Q3 Fiscal 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026 (Q3 Fiscal 2026). Cardinal Health operates as a global healthcare services and products company with two primary reportable segments: Pharmaceutical and Specialty Solutions (Pharma) and Global Medical Products and Distribution (GMPD). The company also reports an "Other" segment comprising Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Revenue | $60.94 billion | $54.88 billion | $190.58 billion | $162.42 billion |
| GAAP Operating Earnings | $509 million | $730 million | $1.88 billion | $1.85 billion |
| Non-GAAP Operating Earnings | $956 million | $807 million | $2.69 billion | $2.07 billion |
| GAAP Diluted EPS | $1.69 | $2.10 | $5.54 | $5.44 |
| Non-GAAP Diluted EPS | $3.17 | $2.35 | $8.35 | $6.16 |
| Net Earnings (Attributable to CAH) | $399 million | $506 million | $1.32 billion | $1.32 billion |
| Cash and Equivalents | $3.94 billion | $3.87 billion (Jun 2025) | N/A | |
| Total Debt (Long-term + Current) | $8.92 billion | $8.53 billion (Jun 2025) | N/A | |
| Operating Cash Flow (YTD) | N/A | $3.48 billion | $0.88 billion |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenue increased 11% in Q3 and 17% YTD, driven primarily by branded and specialty pharmaceutical sales growth in the Pharma segment.
- GAAP Earnings Decline: GAAP operating earnings decreased 30% in Q3 due to a $184 million goodwill impairment charge related to the Navista & ION reporting unit and the absence of $106 million in litigation recoveries recognized in the prior year.
- Non-GAAP Earnings Growth: Non-GAAP operating earnings increased 18% in Q3 and 30% YTD, reflecting strong performance in branded/specialty pharma, the generics program, and contributions from recent MSO acquisitions (Solaris Health, GI Alliance, Urology America).
- Segment Performance:
- Pharma: Profit increased 18% (Q3) and 24% (YTD).
- GMPD: Profit decreased 36% (Q3) to $25 million due to the adverse net impact of tariffs, though YTD profit increased 66%.
- Other: Profit increased 34% (Q3) and 47% (YTD) driven by at-Home Solutions and OptiFreight Logistics.
- Interest Expense: Net interest expense increased 36% in Q3 and 91% YTD due to additional debt financing for acquisitions.
Guidance, Outlook, Risks, and Unusual Items
- Acquisitions: Completed the acquisition of Solaris Health (urology MSO) for ~$1.9 billion in cash in November 2025. Also acquired Advanced Diabetes Supply Group (ADS) and Urology America.
- Tariff Impact: The company has paid approximately $200 million in IEEPA tariffs. While the Supreme Court ruled these unlawful, refund timing remains uncertain. Tariffs continue to negatively impact GMPD profitability.
- Goodwill Impairment: A $184 million pre-tax charge was recorded for Navista & ION due to changes in risk profiles and increased discount rates. Management notes that further adverse changes in assumptions could trigger additional impairments.
- Opioid Litigation: Accrued liability stands at $4.3 billion. The company made $417 million in payments YTD. Future payments are expected through 2038.
- Capital Deployment: YTD, the company deployed $1.9 billion for acquisitions, $1.0 billion for share repurchases, $371 million for dividends, and $385 million for capital expenditures.
- Outlook: Management cites unpredictable demand for GLP-1 medications and potential supply constraints. Regulatory changes regarding drug pricing (e.g., "Most-Favored Nation" Executive Order) remain a risk.
Investor Verification Checklist
- Goodwill Impairment Sensitivity: Verify the assumptions used in the Navista & ION valuation (discount rate of 10.5%, terminal growth of 3%) and the potential for further impairment if these metrics shift.
- Tariff Refund Timeline: Monitor updates from U.S. Customs and Border Protection regarding the Phase 2 refund process for the $200 million in IEEPA tariffs paid.
- Opioid Settlement Cash Flow: Confirm the schedule and magnitude of future opioid settlement payments against projected operating cash flows.
- MSO Integration: Assess the integration progress and profitability contribution of the Solaris Health, GI Alliance, and Urology America acquisitions.
- Debt Covenants: Verify continued compliance with the 3.75-to-1 consolidated net leverage ratio covenant given the increased debt load from recent financing.