McKesson Corporation posted a strong topline for QQ1 2026 with revenue of $97.827 billion, up 23.39% year over year and 7.71% quarter over quarter, reflecting continued scale and demand in its diversified healthcare platform. Despite robust revenue, reported profitability showed mixed dynamics: gross profit reached $3.279 billion for a gross margin of 3.35%, while operating income was $1.036 billion (about 1.06% operating margin) and net income was $0.784 billion (0.80% net margin). Year-over-year and quarter-over-quarter comparisons point to ongoing margin pressure versus prior periods, contributing to a subdued earnings trajectory (EPS $6.28; diluted $6.25). The quarter also featured material cash flow headwinds: operating cash flow was negative at $(0.918) billion and free cash flow was $(1.029) billion, with working capital movements and acquisitions driving cash consumption. The balance sheet shows substantial leverage and a negative book equity position despite a very large asset base, underscoring structural financing and capital allocation considerations going into the next quarters. Overall, the core business remains large and diversified across US and international distributions and RxTS enabled services, but near-term profitability and liquidity dynamics warrant close monitoring of working capital, debt levels, and cost discipline.
Key Performance Indicators
Revenue
97.83B
QoQ: 7.71% | YoY:23.39%
Gross Profit
3.28B
3.35% margin
QoQ: -9.89% | YoY:4.03%
Operating Income
1.04B
QoQ: -34.88% | YoY:0.68%
Net Income
784.00M
QoQ: -37.78% | YoY:-14.32%
EPS
6.28
QoQ: -37.57% | YoY:-10.92%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $97.827 billion in Q1 2026, YoY +23.39%, QoQ +7.71%
- Revenue: $97.827 billion in Q1 2026, YoY +23.39%, QoQ +7.71%
- Gross Profit: $3.279 billion, Gross Margin 3.35% (YoY +4.03%, QoQ -9.89%)
- Operating Income: $1.036 billion, Margin 1.06% (YoY +0.68%, QoQ -34.88%)
- Net Income: $0.784 billion, Net Margin 0.80% (YoY -14.32%, QoQ -37.78%)
- Earnings per Share (EPS): $6.28 (Diluted $6.25); YoY -10.92%, QoQ -37.57%
- Operating Cash Flow: $(0.918) billion; Free Cash Flow: $(1.029) billion
- Cash and Equivalents: $2.683 billion; Net Debt: ~$7.25 billion; Total Debt: $9.933 billion
- Total Assets: $81.311 billion; Total Liabilities: $82.174 billion; Total Equity: $(1.967) billion (negative)
- Net Change in Cash: $(3.273) billion; Cash at Beginning of Period: $5.956 billion
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
97.83B
23.39%
7.71%
Gross Profit
3.28B
4.03%
-9.89%
Operating Income
1.04B
0.68%
-34.88%
Net Income
784.00M
-14.32%
-37.78%
EPS
6.28
-10.92%
-37.57%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript highlights not available in the provided dataset. No earnings-call transcript content was supplied to extract management themes or quotes.
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Forward Guidance
No formal forward guidance was included in the QQ1 2026 release within the provided data. Given the topline strength but margin and cash-flow headwinds, the key guidance-like considerations for investors should focus on (1) sustaining revenue growth across US and International segments (US Pharmaceutical, International, Medical-Surgical Solutions, and RxTS), (2) improving cash conversion through better working capital management (receivables and inventories), and (3) deleveraging or stabilizing the balance sheet to address negative equity. Closely monitor management commentary on cost discipline, potential portfolio optimization, and any cadence to capital allocation (including acquisitions, share repurchases, or debt actions) as catalysts or risks over the coming quarters.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JZU.L Focus
3.35%
N/A
N/A
N/A
0ID1.L
51.80%
28.40%
2.72%
17.18%
0J6Z.L
1.00%
6.27%
7.01%
6.40%
0HOY.L
68.80%
20.10%
0.00%
54.88%
0LQO.L
80.30%
29.60%
12.00%
59.32%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Bottom-line View: QQ1 2026 shows robust topline expansion but earnings quality is challenged by margin and cash-flow headwinds. The company’s large scale and diversified platform remain structural strengths, with RxTS and international distribution offering growth catalysts. However, the negative equity position and substantial net debt raise balance-sheet risk, potentially limiting strategic flexibility in the near term. Investors should weigh the revenue growth against subdued profitability and cash flow, particularly given the capital-intensive nature of McKesson’s operations. Near-term catalysts include improved working capital performance, potential debt optimization, and any progress toward stabilizing margins through cost containment and portfolio optimization. If management communicates a disciplined capital allocation plan and tangible actions to restore balance-sheet health and cash conversion, the stock could re-rate on a more favorable risk-reward basis. Conversely, continued cash-flow strains and leverage could pressure valuation in the absence of offsetting margin improvements or defensible growth drivers.
Key Investment Factors
Growth Potential
Long-term growth potential rests on expanding RxTS capabilities, international distribution reach, and scalable Medical-Surgical Solutions logistics. The RxTS platform could unlock higher-margin scope through access and adherence solutions, third-party logistics, and wholesale distribution support for biopharma partners.
Profitability Risk
Key risks include persistent margin compression in the core distribution business, elevated working capital requirements, high leverage with net debt ~$7.25B, and a negative stockholders’ equity position which can constrain financing flexibility. Also, macro healthcare cost pressures and regulatory changes could impact pricing and reimbursement dynamics.
Financial Position
Presence of negative equity despite large asset base; liquidity is moderate with cash balance of ~$2.68B and leverage ~7x EBITDA; cash flow is weak in QQ1 2026, signaling tighter short-term liquidity and potential financing considerations.
SWOT Analysis
Strengths
Scale and scope: McKesson operates across US Pharmaceutical, International distribution, Medical-Surgical Solutions, and RxTS, providing diversified revenue streams and resilience against sector cycles.
Extensive logistics and distribution network: A deep, efficient supply chain backbone supports service levels and market share.
RxTS platform potential: Solutions addressing access and adherence, third-party logistics, and wholesale distribution support offer lucrative cross-sell opportunities.
Weaknesses
Negative book equity (Total Stockholders’ Equity negative at approximately $(1.97)B) despite sizable asset base, implying potential balance-sheet fragility and financing constraints.
Near-term profitability pressures: margin compression reflected in low gross margin (3.35%) and negative operating cash flow.
High leverage: Net debt around $7.25B with EBITDA of ~$1.036B yields a leverage signal (~7x EBITDA) that can constrain financial flexibility.
Opportunities
Expansion of RxTS services and digital health workflow solutions to leverage higher-margin adjacencies.
Potential international growth through the European and Canadian channels in the International segment.
Operational improvements and working capital optimization to convert revenue growth into stronger cash flow.
Threats
Regulatory and reimbursement pressures affecting pricing and margins in both US and international markets.
Supply chain disruptions or inventory misalignment impacting cash conversion cycles.
Competitive dynamics in healthcare distribution and technological outsourcing services that can pressure market share and returns.