Healthcare distributor and services company Cardinal Health (NYSE:CAH) fell short of the market’s revenue expectations in Q2 CY2025, with sales flat year on year at $60.16 billion. Its non-GAAP profit of $2.08 per share was 2.4% above analysts’ consensus estimates.
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Cardinal Health (CAH) Q2 CY2025 Highlights:
- Revenue: $60.16 billion vs analyst estimates of $60.75 billion (flat year on year, 1% miss)
- Adjusted EPS: $2.08 vs analyst estimates of $2.03 (2.4% beat)
- Adjusted EBITDA: $637 million vs analyst estimates of $832.1 million (1.1% margin, 23.5% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $9.40 at the midpoint, beating analyst estimates by 1.6%
- Operating Margin: 0.7%, in line with the same quarter last year
- Market Capitalization: $34.94 billion
StockStory’s Take
Cardinal Health’s second quarter results were met with a significant negative market reaction, largely due to flat sales and a notable miss on adjusted EBITDA versus Wall Street expectations. Management cited robust demand in pharmaceutical distribution and growth in specialty services, but also acknowledged that individually small, unexpected expenses and ongoing cost pressures weighed on the bottom line. CEO Jason Hollar highlighted operational efficiencies and the impact of recent acquisitions, but the quarter’s performance reflected the challenge of offsetting customer contract losses and external cost headwinds. CFO Aaron Alt noted that gross profit growth outpaced expenses, but investments and acquisition integration increased SG&A costs.
Looking ahead, Cardinal Health’s updated profit guidance is underpinned by continued expansion in specialty services, particularly through the acquisition of Solaris Health and ongoing growth in Biopharma Solutions. Management expects double-digit revenue growth in specialty and anticipates higher-margin contributions from new service offerings and automation investments. CFO Aaron Alt highlighted that cost containment, integration synergies, and advancements in logistics and automation are key levers for future profitability. However, management remains cautious about tariff-related headwinds and regulatory uncertainties, acknowledging, “the tariff environment continues to evolve,” and emphasizing a proactive approach to cost mitigation.
Key Insights from Management’s Remarks
Management attributed quarterly results to strong pharmaceutical demand, specialty segment expansion, and improving branded product sales, but flagged external cost pressures and recent acquisitions as important factors.
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Specialty segment expansion: Management emphasized the acquisition of Solaris Health, which nearly doubles Cardinal’s urology provider network and accelerates the company’s push into multi-specialty managed services. CEO Jason Hollar said the deal “significantly expands the reach of our urology alliance physician network” and is expected to strengthen the specialty platform’s diverse revenue streams.
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Growth in Biopharma Solutions: The Biopharma Solutions business, anchored by Sonexus patient access services, is on track for over 20% revenue growth, driven by increased demand for support in new product launches and automation of patient support processes. Management expects this area to be a major contributor to future margin improvement.
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Cardinal Health branded product momentum: The GMPD segment posted its highest profit quarter, underpinned by 6% U.S. growth in Cardinal Health branded products. Management credited cost optimization and a focus on branded offerings for driving profitability, with further improvement targeted through ongoing supply chain initiatives and product innovation.
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Tariff mitigation and cost control: Management described ongoing efforts to offset tariff-related headwinds, including expanding U.S. manufacturing, diversifying suppliers, and selective price adjustments. CFO Aaron Alt noted that “up to two-thirds” of incremental tariff costs are being mitigated operationally, with the remainder addressed through pricing strategies.
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Integration of recent acquisitions: The integration of at-Home Solutions and ADS was highlighted as a positive, with management reporting tangible synergy capture and plans to leverage automation and expanded distribution to drive additional growth and efficiency in home healthcare logistics.
Drivers of Future Performance
Cardinal Health’s outlook is anchored in specialty segment growth, cost containment initiatives, and navigating regulatory and tariff uncertainties.
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Specialty and MSO platform growth: Management projects double-digit revenue growth in specialty, fueled by acquisitions like Solaris Health and expanded services in urology, autoimmune, and oncology. This segment is expected to deliver higher margins and become a larger driver of enterprise profitability.
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Operational and automation investments: The company is investing in new distribution centers, automation, and technology platforms such as Vantus HQ and TotalVue Insights. These initiatives are designed to enhance efficiency, reduce costs, and support growth in pharmaceutical and at-home distribution businesses.
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Tariff and regulatory headwinds: Ongoing tariffs and evolving regulatory requirements remain risks. Management’s mitigation strategy includes supplier diversification, selective price increases, and process optimization. The potential for changes in reimbursement or competitive bidding in home solutions may create further uncertainty, particularly for certain product categories.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will watch (1) the pace and profitability of specialty platform expansion following the Solaris Health acquisition, (2) the company’s ability to deliver margin improvements through automation and cost control in GMPD and at-Home Solutions, and (3) management’s response to ongoing tariff and regulatory developments. Execution on acquisition integration and the ramp-up of new distribution capabilities will also be key markers of progress.
Cardinal Health currently trades at $146.75, down from $157.89 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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