McKesson reported a solid Q4’25 with revenue of $90.82 billion and net income of $1.26 billion, translating to diluted EPS of $10.01. The quarter demonstrated meaningful year-over-year growth in revenue (YoY +18.95%) but showed sequential pressure in the quarter-over-quarter comparison (QoQ -4.69%), suggesting typical seasonality and mix effects within a large healthcare distribution platform. Gross margin remained modest at ~4.01%, with operating margin around 1.75%, reflecting the low-margin, high-volume nature of pharmaceutical and medical-surgical distribution, along with ongoing investment in technology-enabled solutions. Free cash flow was robust at $7.47 billion driven by strong operating cash flow of $7.75 billion and disciplined capital expenditure of ~$278 million, enabling meaningful liquidity and flexible capital allocation (dividends and modest share repurchases). Net debt stood at approximately $1.70 billion against a cash balance of about $5.69 billion, underscoring solid liquidity despite a large asset base and significant non-cash intangibles. The balance sheet shows total assets of ~$75.14 billion against total liabilities of ~$76.83 billion and stockholders’ equity of approximately -$2.07 billion, highlighting the impact of heavy non-cash asset bases (goodwill and intangibles) and evolving capital structure. Management commentary specific to forward guidance was not provided in the available materials, thus forward guidance must be sourced from official filings or the earnings call transcript when released.
Net income: $1.26 billion; net margin: 1.39% (0.0139); earnings per share (diluted): $10.01; weighted-average shares: 125.9 million.
YoY and QoQ trends (revenue, gross profit, operating income, net income, and EPS) indicate a strong YoY expansion (revenue YoY +18.95%, net income YoY +59.29%, EPS YoY +66.28%) but a QoQ decline in the latest quarter (revenue QoQ -4.69%, gross profit QoQ +10.81%, operating income QoQ +29.98%, net income QoQ +43.34%, EPS QoQ +44.13%).
Cash flow and liquidity
Operating cash flow: $7.748 billion; free cash flow: $7.47 billion; capital expenditures: $278 million; cash at end of period: $5.956 billion; net change in cash: $4.674 billion.
Financial Highlights
Revenue and profitability
- Q4’25 revenue: $90.823 billion; cost of revenue: $87.184 billion; gross profit: $3.639 billion; gross margin: 4.01% (0.0401).
- Operating income: $1.591 billion; operating margin: 1.75% (0.0175); EBITDARatio: ~1.88%.
- Net income: $1.26 billion; net margin: 1.39% (0.0139); earnings per share (diluted): $10.01; weighted-average shares: 125.9 million.
- YoY and QoQ trends (revenue, gross profit, operating income, net income, and EPS) indicate a strong YoY expansion (revenue YoY +18.95%, net income YoY +59.29%, EPS YoY +66.28%) but a QoQ decline in the latest quarter (revenue QoQ -4.69%, gross profit QoQ +10.81%, operating income QoQ +29.98%, net income QoQ +43.34%, EPS QoQ +44.13%).
Cash flow and liquidity
- Operating cash flow: $7.748 billion; free cash flow: $7.47 billion; capital expenditures: $278 million; cash at end of period: $5.956 billion; net change in cash: $4.674 billion.
- Working capital and cash convertibility metrics show a cash-rich position with strong operating execution, supporting ongoing dividend and a modest share repurchase program.
Balance sheet and capital structure
- Total assets: ~$75.14 billion; total liabilities: ~$76.83 billion; total stockholders’ equity: approximately -$2.07 billion (negative equity).
- Goodwill: ~$10.02 billion; intangible assets: ~$1.464 billion; total goodwill and intangible assets: ~$11.486 billion, contributing to the negative equity figure.
- Debt metrics: total debt ~$7.39 billion; net debt ~ $1.70 billion; cash and cash equivalents ~ $5.69 billion; current ratio ~0.899; quick ratio ~0.526; cash ratio ~0.0924.
Valuation and efficiency
- Price-to-book and price-to-book-value metrics reflect the negative equity context; P/B and P/BV are notably negative in the ratios provided, signaling accounting equity base concerns alongside strong cash flow generation and asset-light operating leverage typical of a large distributor with substantial intangible assets.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
90.82B
18.95%
-4.69%
Gross Profit
3.64B
5.08%
10.81%
Operating Income
1.59B
15.96%
29.98%
Net Income
1.26B
59.29%
43.34%
EPS
10.06
66.28%
44.13%
Key Financial Ratios
currentRatio
0.9
grossProfitMargin
4.01%
operatingProfitMargin
1.75%
netProfitMargin
1.39%
returnOnAssets
1.68%
returnOnEquity
-60.8%
debtEquityRatio
-3.56
operatingCashFlowPerShare
$61.89
freeCashFlowPerShare
$59.66
dividendPayoutRatio
7.22%
priceToBookRatio
-40.63
priceEarningsRatio
16.72
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript was provided in the dataset. Consequently, no management quotes or thematic highlights from the call could be extracted. Topic areas typically expected include strategic focus (e.g., RxTS rollout, international expansion), cost discipline, working capital management, and potential capital allocation changes (dividends, buybacks, M&A). Once the transcript is available, the highlights can be added under the following themes: strategy and capital allocation, operations and efficiency, market conditions and patient access, and regulatory/commercial considerations.
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Forward Guidance
Forward-looking guidance is not included in the provided materials. Given the results, the company displayed strong annual revenue growth with meaningful free cash flow, but QoQ sequential weakness suggests seasonality and potential mix effects. If management provides explicit guidance, it will be important to assess: (1) expected revenue growth trajectory in core US Pharmaceutical and RxTS segments, (2) continued margin pressure and potential cost optimization/uppricing strategies, (3) cash flow expectations and capital allocation framework (dividends, share repurchases, and potential debt management), and (4) international growth initiatives and acceleration in Medical-Surgical Solutions. In absence of stated targets, investors should monitor key variables such as gross margin trajectory, operating margin expansion, working capital efficiency (CCC), and the evolution of goodwill/intangible asset impairment risk. Overall assessment: the near-term outlook hinges on continued volume stability in healthcare distribution, execution of RxTS and technology-enabled solutions to drive efficiency, and disciplined capital allocation to maintain liquidity while addressing equity/base considerations.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JZU.L Focus
4.01%
1.75%
-60.80%
16.72%
0ID1.L
32.80%
28.70%
2.42%
17.10%
0J6Z.L
0.00%
-1.86%
-4.23%
-11.02%
0HOY.L
58.60%
12.90%
2.60%
58.19%
0LQO.L
82.30%
32.20%
32.20%
26.49%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Qualitative thesis: McKesson’s strength lies in its diversified platform, strong cash generation, and potential upside from RxTS and international expansion. The company trades with a robust cash flow profile, which supports resilience in volatile healthcare markets and provides capacity for strategic investments and capital returns. However, the near-term margin framework remains challenged by the low-margin distribution model and the presence of substantial non-cash asset bases that contribute to a negative equity position. Quantitatively, Q4’25 shows solid YoY growth (Revenue +18.95%, Net Income +59.29%, EPS +66.28%), but QoQ declines suggest seasonality and product mix effects that warrant closer monitoring of margin trends and working capital efficiency. Over the next 12–18 months, an investor should focus on: (1) trajectory of gross and operating margins as RxTS and international initiatives scale, (2) cash flow stability and the free cash flow conversion given working capital dynamics, (3) any formal guidance regarding revenue growth targets, and (4) the company's handling of its balance sheet with regards to goodwill/intangible assets impairment risk and equity normalization. Relative to peers CAH and ABC, McKesson benefits from scale and cash generation but must manage margin compression risks and balance-sheet considerations. The investment thesis remains contingent on evidence of margin stabilization, efficient capital allocation, and clear strategic execution in RxTS and international growth.
Key Investment Factors
Growth Potential
Growth catalysts include expansion of Rx Technology Solutions (RxTS) and technology-enabled services, scaled international distribution in Europe and Canada, and the ongoing integration of US Pharmaceutical logistics with practice management and analytics offerings. Revenue growth YoY signals market demand resilience; potential upside from higher-margin phasing, pharmaceutical product mix optimization, and expansion of value-added services.
Profitability Risk
Key risks include continued margin compression in a low-margin distribution model, competitive intensity from Cardinal Health and AmerisourceBergen, regulatory and pricing pressures in healthcare, goodwill/intangible asset impairment risk given the large non-cash asset base, and exposure to working capital volatility given healthcare purchasing cycles. Negative reported equity also flags potential balance-sheet integrity concerns that warrant monitoring.
Financial Position
Strong operating cash flow and substantial liquidity underpin flexibility in capital allocation (dividends and modest buybacks). However, the balance sheet shows negative stockholders’ equity driven by large intangible assets and goodwill. Leverage is moderate with net debt ~$1.7B against cash ~$5.69B, ensuring headroom for strategic opportunities while maintaining credit discipline.
SWOT Analysis
Strengths
Large, diversified healthcare distribution platform with exposure to US Pharmaceutical, International Medical-Surgical Solutions, and RxTS (prescription technology solutions).
Robust free cash flow generation and substantial operating cash flow enable strong liquidity and capital allocation flexibility.
Scale advantages in distribution with potential cross-segment synergies and data-enabled services.
Weaknesses
Low gross margins (~4.0%), reflective of a high-volume, low-margin distribution model.
Negative stockholders’ equity, driven by sizable intangible assets and goodwill, which can complicate capital structure analysis.
Seasonality and mix effects evidenced by QoQ revenue decline in Q4’25.
Opportunities
Expansion and monetization of RxTS and related technology-enabled services.
International growth in Europe and Canada leveraging established distribution channels.
Cost optimization and supply chain efficiencies to improve operating margins.
Threats
Intense competition among healthcare distributors (CAH, ABC) and pricing pressure from healthcare payers.
Regulatory risk, reimbursement changes, and potential impairment risk for goodwill/intangibles.
Macroeconomic shifts affecting healthcare spending and capital-intensive investments.