Cardinal Health Reports 4% Revenue Decline in Q2 Fiscal 2025, Despite Increased Operating Earnings

Cardinal Health, Inc. reported a decrease in revenue for the second quarter of fiscal 2025, with total revenue of $55.3 billion for the three months ending December 31, 2024, down 4% from $57.4 billion in the same period last year. For the first half of the fiscal year, revenue also fell by 4% to $107.5 billion compared to $112.1 billion in the prior year. The decline was primarily attributed to the expiration of contracts with OptumRx, which had previously accounted for 17% of the company's consolidated revenue in fiscal 2024. However, this was partially offset by growth in branded and specialty pharmaceutical sales from both existing and new customers.

In terms of profitability, Cardinal Health's GAAP operating earnings increased by 9% to $549 million for the quarter, and 136% to $1.1 billion for the six-month period, compared to the previous year. Non-GAAP operating earnings also rose by 9% to $635 million for the quarter and by 10% to $1.3 billion for the half-year. The growth in operating earnings was driven by cost-saving measures and increased contributions from the BioPharma Solutions segment, despite the negative impact from the OptumRx contract expiration.

Strategically, Cardinal Health has been active in expanding its portfolio through acquisitions. Notably, the company completed the acquisition of Integrated Oncology Network (ION) for $1.1 billion in cash on December 2, 2024. This acquisition is expected to enhance efficiency and profitability for independent community oncologists. Additionally, Cardinal Health announced the acquisition of a 73% ownership interest in GI Alliance for approximately $2.8 billion, set to close on January 30, 2025, and entered into an agreement to acquire Advanced Diabetes Supply Group for about $1.1 billion, pending regulatory approvals.

Operationally, Cardinal Health's Pharmaceutical and Specialty Solutions segment reported a revenue decline of 4% to $50.8 billion for the quarter, while the Global Medical Products and Distribution segment saw a slight increase of 1% to $3.2 billion. The company also reported a gross margin increase of 5% to $1.9 billion for the quarter, attributed to improved product mix and contributions from BioPharma Solutions. Cardinal Health's cash and equivalents decreased to $3.8 billion as of December 31, 2024, down from $5.1 billion at the end of June 2024, largely due to cash used in operating activities and the funding of acquisitions.

Looking ahead, Cardinal Health anticipates that the acquisitions of ION and GI Alliance, along with the proposed acquisition of Advanced Diabetes Supply Group, will positively impact segment revenue and profit. However, the company also expects continued adverse effects from the expiration of the OptumRx contracts throughout the remainder of fiscal 2025. The company remains focused on onboarding new customers and leveraging cost-saving initiatives to mitigate these impacts.