Cardinal Health deployed $5.3 billion for acquisitions in fiscal 2025, including significant investments in Advanced Diabetes Supply Group ($1.1 billion), GI Alliance ($2.8 billion for 73% ownership), Urology America ($360 million), and Integrated Oncology Network ($1.1 billion). These acquisitions expand the company's presence in specialty physician office support and home healthcare.

The expiration of the OptumRx contracts, which represented 17% of fiscal 2024 consolidated revenue, necessitated a strategic pivot for the Pharma segment. The company is now focusing on increased contribution from branded and specialty pharmaceutical products and leveraging its newly acquired MSO platforms to drive future growth.

Capital expenditures totaled $547 million in fiscal 2025, up from $511 million in fiscal 2024, and are projected to increase to approximately $600 million in fiscal 2026. These investments are primarily directed towards manufacturing and distribution infrastructure projects and technology enhancements, supporting both organic growth and integration of new acquisitions.

The acquisitions of MSO platforms (GIA, ION) and ADS positively impacted segment profit in fiscal 2025, with Pharma segment profit increasing 12% to $2.3 billion and Other segment profit increasing 22% to $516 million. Management's ability to integrate these new businesses despite the OptumRx contract expiration demonstrates effective strategic execution.

While SG&A expenses increased 8% to $5.4 billion in fiscal 2025, driven by acquisitions and higher costs to support sales growth, the company reported a 'beneficial impact of enterprise-wide cost savings measures.' This indicates management's efforts to control costs and improve operational efficiency, particularly in the GMPD segment where cost optimization contributed to a 47% profit increase.

Management effectively responded to the significant challenge of the OptumRx contract expiration, which caused a 3% revenue decrease in the Pharma segment. The strategic decision to invest heavily in MSO platforms and at-Home Solutions through $5.3 billion in acquisitions helped offset this revenue loss and rebalance the portfolio towards higher-growth specialty areas.

The company has $4.9 billion accrued for opioid-related matters at June 30, 2025, having made payments of $798 million in fiscal 2025, and expects majority of payments through 2038. Additionally, ongoing product quality issues, such as the FDA warning letter regarding plastic syringes, and potential violations of anti-kickback statutes, highlight persistent legal and regulatory compliance risks that could lead to substantial costs and operational disruptions.

The company is exposed to market price changes for commodities (oil-based resins, nitrile, cotton, diesel fuel, latex) due to inflationary impacts, and recent U.S. tariffs could result in substantial additional sourcing costs and supply disruptions. Global operations are also affected by local economic environments, divergent regulatory systems, and labor markets, increasing the risk of adverse financial impacts.

The company acknowledges increasing sophistication of cybersecurity threats, including AI-powered attacks, and notes that recently acquired MSO businesses add incremental cybersecurity risks. Furthermore, the failure to effectively integrate acquired businesses' systems and processes, or manage critical business process improvements like ERP and AI/ML initiatives, could negatively impact operations and financial results.

The acquisition of GI Alliance, Integrated Oncology Network, and Advanced Diabetes Supply Group for a combined $5.3 billion in fiscal 2025 significantly expands Cardinal Health's MSO platforms and at-Home Solutions. These moves position the company to offer more integrated care coordination and specialized services, enhancing its competitive advantage in growing healthcare segments.

The Pharma segment operates in a highly competitive environment, facing challenges from national and regional wholesale distributors, specialty distributors, and manufacturers. The expiration of the OptumRx contracts, which represented 17% of fiscal 2024 revenue, underscores the vulnerability to large customer contract changes and the ongoing need to differentiate through branded and specialty pharmaceutical sales growth.

Despite a challenging revenue environment, the company's gross margin rate increased by 40 basis points in fiscal 2025, primarily due to favorable changes in overall product and customer mix, particularly from branded and specialty pharmaceutical products and MSO platform acquisitions. This indicates some pricing power and effective management of product portfolio in a competitive market.

SG&A expenses increased 8% to $5.4 billion in fiscal 2025, driven by acquisitions and higher costs to support sales growth. However, the company noted a 'beneficial impact of enterprise-wide cost savings measures,' indicating ongoing efforts to improve operational efficiency and mitigate the impact of increased expenses.

The company experienced continued fluctuations in commodity prices (oil-based resins, nitrile, cotton, diesel fuel, latex) in fiscal 2025 due to inflationary impacts, and recent U.S. tariffs could lead to substantial additional sourcing costs and supply disruptions. These factors negatively impacted the GMPD segment's profit in prior years and pose an ongoing challenge to cost-effective operations.

Restructuring and employee severance costs of $88 million in fiscal 2025 (down from $175 million in fiscal 2024) were primarily related to initiatives to rationalize manufacturing operations and implement enterprise-wide cost-savings measures. These ongoing efforts reflect management's commitment to optimizing the cost structure and improving overall operational efficiency.

The acquisitions of MSO platforms (GI Alliance, ION) and Advanced Diabetes Supply Group in fiscal 2025 enhance Cardinal Health's technological capabilities, particularly in physician practice support, management services, and direct-to-patient medical supply distribution. The GMPD segment also utilizes its Wavemark division for automated inventory management, indicating a focus on technology for operational efficiency.

Capital expenditures are expected to be approximately $600 million in fiscal 2026, with a primary focus on manufacturing and distribution infrastructure projects and 'technology investments.' This indicates a continued commitment to enhancing technological capabilities and digital transformation efforts across the business.

The company maintains a robust cybersecurity program, led by a CISO with over 25 years of experience, and invests in measures like benchmarking, penetration testing, and incident response. With the expansion into new MSO platforms and increased reliance on data, these investments are crucial to protect patient-identifiable health information and sensitive financial data from escalating AI-powered cyber-attacks.

In fiscal 2025, Cardinal Health deployed $5.3 billion for acquisitions, including GI Alliance, Integrated Oncology Network, and Advanced Diabetes Supply Group. This demonstrates a clear priority on M&A as a key growth driver, expanding into specialty healthcare services and at-Home Solutions.

To finance a portion of its fiscal 2025 acquisitions and for general purposes, the company issued new long-term debt with net proceeds of $2.9 billion and an $800 million term loan. This significant increase in long-term obligations, which rose to $8.5 billion at June 30, 2025 from $5.1 billion in the prior year, indicates a strategic shift in its capital structure to support growth initiatives.

The company paid quarterly dividends totaling $2.02 per share in fiscal 2025, a 1% increase from fiscal 2024, and repurchased $765 million of common shares. With $2.7 billion remaining under its share repurchase authorization, Cardinal Health continues to demonstrate a commitment to returning capital to shareholders while also investing heavily in growth.

The company has $4.9 billion accrued for opioid-related matters as of June 30, 2025, having made payments of $798 million in fiscal 2025. While the company has resolved claims with all 50 states and the District of Columbia, the ongoing financial obligations and legal proceedings underscore the significant social responsibility challenges related to its past distribution of controlled substances.

The Board of Directors, through its Human Resources and Compensation Committee, oversees human capital management strategies, including attracting, developing, and retaining employees. Management reinforces a positive work environment, monitors turnover, and assesses culture through employee engagement surveys, with results reviewed by the Board, indicating a commitment to social responsibility and governance.

The company acknowledges its reliance on ethylene oxide (EtO) for sterilizing medical products and the regulatory actions taken by environmental authorities to reduce EtO emissions. This indicates a recognition of environmental risks and efforts to comply with evolving regulations, although increased costs or supply disruptions could negatively impact the business.

The U.S. healthcare industry continues to experience shifts, including declining Medicare and Medicaid reimbursement, a transition to value-based payments, and a move from traditional hospital settings to clinics and home care. These trends create both challenges and opportunities, influencing demand for Cardinal Health's products and services.

New regulations like the 'Delivering Most-Favored Nation Prescription Drug Pricing to American Patients' Executive Order and the recently signed One Big Beautiful Bill Act (OBBBA) could impact branded pharmaceutical sales, profitability, and participation in government programs. The company is actively evaluating the impact of these complex and dynamic tax and healthcare policy changes.

Cardinal Health's global operations are exposed to local economic environments, including inflation and recession, and geopolitical risks such as trade sanctions and tariffs. Recent U.S. tariffs on goods from certain countries could result in substantial additional sourcing costs and supply disruptions, potentially affecting the company's competitive and financial position.