Cardinal Health's Q3 2025: Dissecting Key Contradictions in Specialty Drugs, Generics, and Margins

Impact of IRA on specialty drug volumes, generics market dynamics and pricing, specialty distribution growth drivers, pharma margin expansion, and impact of tariffs on pricing are the key contradictions discussed in Cardinal Health's latest 2025Q3 earnings call.



Strong Financial Performance:
- Cardinal Health reported strong third quarter results, with 21% growth in operating earnings and 13% increase in EPS.
- This performance was driven by broad-based demand across key segments, particularly Pharmaceutical and Specialty Solutions.

Growth in Specific Business Segments:
- The company's three growth businesses reported a combined 22% growth, with 14% profit growth in GMPD.
- This growth was attributed to new customer wins, notably the successful onboarding of Publix, and positive contributions from acquisitions like GI Alliance and Integrated Oncology Network.

Impact of Tariffs:
- Cardinal Health anticipates $200 million to $300 million in gross tariff costs in fiscal '26 before mitigation efforts.
- The company is proactively addressing this through operational actions, including increased U.S. manufacturing and diversification of supplier networks, which have already mitigated several hundred million dollars in exposure.

Strategic Investments and Acquisitions:
- The acquisition of Advanced Diabetes Supply Group was announced, further enhancing Cardinal Health's at-Home Solutions segment.
- The company continues to invest in expanding its domestic manufacturing, distribution nodes, and technology, totaling approximately $7 billion over the past two years.