McKesson (MCK) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, Nov. 5, 2025, at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Brian S. Tyler
• Executive Vice President & Chief Financial Officer — Britt J. Vitalone

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RISKS

• Medical-Surgical Solutions Segment Demand — Lower illness-season product volumes, including vaccines and testing, created a revenue and operating profit headwind of approximately 4% in Q2 FY2026 and Illness season variability continues to be a key factor. according to Britt J. Vitalone, introducing ongoing variability.
• Guidance on Medical-Surgical Performance — Management stated, "Moving to the Medical Surgical Solutions segment, due to lower than anticipated illness season product volumes compared to the prior year—including vaccines and testing—and lower volumes across ambulatory and extended care settings, we anticipate revenue and operating profit at the low end of 2% to 6% growth for FY2026." signaling reduced expectations for the segment.
• Quarterly Tax Rate Outlook — Fiscal Q3 FY2026 tax rate is expected to increase to 23%-25%, above the Q2 FY2026 rate of 17.5% and previous guidance.

TAKEAWAYS

• Consolidated Revenue -- $103 billion, representing a 10% increase in Q2 FY2026 (adjusted), driven by growth in core segments and highlighted as record quarterly revenue.
• Adjusted Diluted EPS -- Adjusted earnings per diluted share rose 39% to $9.86 in Q2 FY2026, with the full-year fiscal 2026 outlook raised to $38.35-$38.85.
• Operating Profit -- $1.6 billion in operating profit for the quarter, up 26% year-over-year supported by growth across all segments.
• Segment Reorganization -- New segmentation introduces Oncology and Multispecialty, and North American Pharmaceutical segments, with first reported results under this structure and an aim of "enhanced transparency" according to Britt J. Vitalone in growth areas.
• Oncology & Multispecialty Segment -- Revenue grew 32% to $12 billion in Q2 FY2026, with operating profit rose 71% to $397 million in Q2 FY2026; approximately 12% of segment revenue growth and half of segment operating profit growth in Q2 FY2026 attributed to acquisitions (Prism and Core Ventures).
• North American Pharmaceutical Segment -- Revenue increased 8% to $86.5 billion in Q2 FY2026; operating profit rose 13% to $851 million in Q2 FY2026, reflecting increased prescription volumes, specialty product launches, and operating expense leverage.
• Prescription Technology Solutions Segment -- Revenue increased 9% to $1.4 billion in Q2 FY2026, operating profit rose 20% to $261 million in Q2 FY2026 (adjusted), driven by demand for access solutions, technology services, and prior authorization services for GLP-1 medications.
• GLP-1 Medication Revenues -- $13.2 billion, up 24% year-over-year and 6% sequentially in Q2 FY2026, with management expects continued growth but notes variability by quarter, as discussed in the fiscal 2026 outlook.
• Medical-Surgical Solutions Segment -- Revenue was flat at $2.9 billion in Q2 FY2026; operating profit rose 2% to $249 million in Q2 FY2026, with higher specialty pharmaceutical volume offset by a 4% headwind from lower vaccines and testing product demand.
• Operating Expenses -- Decreased 1% to $2 billion in Q2 FY2026, attributed to Canadian divestitures and cost optimization, offset by investments in Oncology and Multispecialty.
• Interest Expense -- Declined 6% to $68 million in Q2 FY2026, driven by cash and portfolio management improvements.
• Free Cash Flow -- $2.2 billion in free cash flow in Q2 FY2026, including $196 million in capital expenditures in Q2 FY2026, reflecting "disciplined working capital management."
• Share Repurchases & Dividends -- $818 million in share buybacks in Q2 FY2026 and $89 million in dividend payments in Q2 FY2026.
• Full Fiscal 2026 Guidance -- Revenue growth expected at 11%-15% in FY2026, operating profit growth at 12%-16% in FY2026, and free cash flow of $4.4-$4.8 billion in FY2026 alongside $2.5 billion in planned share repurchases in FY2026.
• Spin-off Update -- Medical-Surgical Solutions business targeted for separation via IPO and potential spin-off or split-off by the second half of calendar 2027, subject to market conditions and customary regulatory approvals.
• Tax Rate Outlook -- Effective annual tax rate guided to 18%-19% in FY2026, with a projected tax rate of 23%-25% in Q3 FY2026; $96 million in discrete tax benefits from a valuation allowance release in Q2 FY2026.
• Market Decisions & Gains -- Non-recurring $51 million gain recorded in the Oncology and Multispecialty segment from an equity investment sale and exits from two markets in Q2 FY2026.
• Acquisition Contributions -- Acquisitions of Prism and Core Ventures are expected to contribute 30%-34% of segment operating profit growth in FY2026; Prism is performing "slightly ahead" according to Britt J. Vitalone of previous targets.
• Automation & Technology Investments -- Significant capital has been allocated to automation, such as North America order storage retrieval systems, which reduced manual touches in pick, pack, and ship from eight to two per order.
• Compliance -- Achieved Drug Supply Chain Security Act compliance, actively exchanging serialized transaction data in the U.S. Pharmaceutical business with minimal customer disruption.

SUMMARY

McKesson (MCK +0.10%) management credited a technology-first, cost-optimization approach led to a 570 basis point year-over-year decline in operating expenses as a percentage of gross profit in Q2 FY2026 (adjusted), improving operating leverage. The realigned segment structure enabled clear reporting that highlights rapid, acquisition-fueled expansion in Oncology and Multispecialty while establishing North American Pharmaceutical as a growth leader, with large-scale GLP-1 revenues and sustained share gains in health system partnerships. Guidance for full-year FY2026 adjusted earnings per diluted share was raised, reflecting continued outperformance, stronger margins, and high cash conversion, while management reaffirmed its commitment to completing the Medical-Surgical Solutions separation and balanced deployment of capital for shareholder value.

• Company leadership stated, "We have market-leading capabilities and scale through our strong presence in the community provider setting," underlining strategic position in specialty distribution.
• Launches such as InspiroCare and a purpose-built cold chain facility for cell and gene therapy demonstrate the focus on innovative infrastructure supporting oncology growth.
• Management disclosed that Nonrecurring gains and market exits together drove a $51 million benefit in the Oncology and Multispecialty segment in Q2 FY2026, with Britt J. Vitalone confirming, "the gains in the market decisions together represent the $51 million."
• Management indicated that Medical-Surgical Solutions' results are expected to be at the low end of projections (2% to 6% growth) due to seasonality and changing demand patterns.
• Discrete tax benefits from a valuation allowance and ongoing debt optimization contributed meaningfully to quarterly earnings and a lower effective tax rate in Q2 FY2026.

INDUSTRY GLOSSARY

• GLP-1 Medications: A class of type 2 diabetes and obesity drugs (glucagon-like peptide-1 receptor agonists) with growing pharmaceutical distribution revenue impact, tracked separately in company segment disclosures.
• Cold Chain Facility: A distribution center with specialized climate and cryogenic storage for temperature-sensitive medications like cell and gene therapies.
• Drug Supply Chain Security Act (DSCSA): U.S. federal legislation requiring serialization and electronic transaction data for enhanced pharmaceutical supply chain security and traceability.
• Prior Authorization: A pharmacy benefits process that requires payer or system approval before certain medications can be dispensed, increasingly managed via technology platforms.
• Practice Management: Operational support tools and services for medical practices, featured in the Oncology & Multispecialty segment.

Full Conference Call Transcript

Brian S. Tyler: Thank you, Jeni. Good afternoon, everyone. Thank you for joining our call today. Earlier today, we reported strong second quarter results. Reflect sustained momentum in our business and the strength of our diversified portfolio. Consolidated revenues in the quarter increased 10% year over year to $103 billion and adjusted earnings per diluted share increased 39% to $9.86. These results demonstrate the impact of focused execution across the enterprise with notably three of our segments delivering double-digit adjusted operating profit growth. Given our first half performance and our confidence in the outlook for the year, we are raising our guidance on adjusted earnings per diluted share to $38.35 to $38.85.

This builds on the 80¢ increase announced at our Investor Day in September. At the event, we also affirmed our company priorities highlighted the differentiated capabilities that underpin McKesson Corporation's long-term growth. We achieved in the second quarter. At that conference, we also our new reporting structure that sharpens our strategic alignment and provides enhanced transparency into the growth areas of our business. The newly formed Oncology and Multispecialty segment will focus on accelerating our strategy in the higher growth, higher margin segments. And we established a North American pharmaceutical segment, bringing together our pharmaceutical distribution capabilities in the U.S. and Canada.

This quarter marks our first set of results under this structure, and I am pleased with how our teams have come together to deliver consistent financial performance. We are confident that the new reporting structure will optimize our portfolio management and drive sustainable long-term value creation for shareholders. Britt will share more about the quarterly results in his remarks. But let me start, by talking a minute about our people and culture. Team McKesson is the driving force for the continued innovation and excellence it's the foundation of everything that we accomplish.

Our best talent strategy, continues to raise the bar across McKesson Corporation and is evident in the way our teams and our board approach service, integrity, teamwork, and performance. That commitment is exemplified by our Chairman of the Board, Don Knauss, who was recently honored with the B. Kenneth West Lifetime Achievement Award from the National Association of Corporate Directors. This is a well-earned recognition of his leadership and I am grateful for his many, many contributions to McKesson Corporation. We believe that a strong culture is an integral part of our talent strategy that's reflected in how we support our communities and our people.

In September, McKesson Corporation team members came together to participate in our annual Community Impact Days. We supported more than 60 organizations nationwide giving back to our communities and reinforcing the values that drive our everyday work. We support and care for our people through extensive resources and programs. And in October, employees across McKesson Corporation took part in our annual wellness day. We refer to it as your day, your way. It's now in its fifth year, and it underscores our continuing commitment to our team's well-being. Let's move on to our two strategic growth pillars, oncology and multi-specialty. And our biopharma services.

Our differentiated specialty platform remains a central pillar of our growth strategy and is now reported within the newly established oncology and multispecialty segment. Our differentiated capabilities have us well-positioned to advance cancer care and expand into other therapeutic areas through scale, connectivity, and innovation. Foundational to our oncology and multispecialty business is our unparalleled distribution breadth. Specialty is a growing market with many unique medications and distribution requirements. We have market-leading capabilities and scale through our strong presence in the community provider setting. Serving more than 14,000 providers across a wide range of specialties. Complementary to the core distribution capabilities, are our group purchasing organizations, specialty pharmacy offerings, and infusion management services.

Our diverse capabilities enable us to support a wide range of customers with varying needs and accessing specialty meds. Including innovative therapies that are transforming care. This includes the launch and commercialization of cell and gene therapies. In August, we launched InspiroCare, a patient hub designed to simplify the complex journey of cell and gene therapies in provide personalized compassionate support for patients. September, we opened a world-class cold chain facility dedicated to cell and gene therapy distribution. This 12,000-foot facility is equipped with ultra-frozen and cryogenic storage technology. Specifically designed for the unique requirements of these medications ensuring proper storage and the highest standards of compliance and care.

Through a comprehensive suite of services including practice management that empower them. The US Oncology Network has been leading the cancer care transformation for more than fifteen years and is now supporting over 3,300 providers across more than 700 sites. In October, the US Oncology Network formed a collaboration with Blood Cancer United around a shared goal of strengthening cancer care and access clinical trials close to home. The collaboration will provide personalized clinical trial education as well as clinical trial matching through the Sarah Cannon Research Institute. It will also offer patient navigation services to facilitate participation in clinical trials for patients with all types of blood cancer.

During the second quarter, progress continued with the integration of Florida Cancer Specialists and Prism Vision, bringing both practice groups onto our distribution and GPO agreements to unlock the of our broader services and take advantage of the expanded relationships. Prism Vision recently expanded its footprint with the addition of Spokane Eye Clinic located in Spokane, Washington. Extending its reach now beyond the Mid-Atlantic region Spokane Eye Clinic has a growing team of 27 eye care specialists in four clinic locations it marked an important milestone for Prism in building a comprehensive national eye care platform and continuing to enhance patient experiences. Let's move on to our biopharma services platform within our prescription technology services segment.

Our leading technology platform is designed to make medicine more accessible, and more affordable for everyone. What differentiates McKesson Corporation is the breadth and depth of our capabilities to address the most pressing challenges of access and affordability. Our network spans approximately 1,000,000 providers and more than 50,000 pharmacies processing approximately 23 billion transactions annually. This connectivity and scale is the foundation that enables us to streamline access to life-saving therapies reduce friction across the healthcare continuum, and deliver measurable impacts for our customers and patients. Our platforms combine tech-driven patient support services, automated prior authorization, copay, and voucher programs, all designed to help patients start, stay on, and afford their therapies.

We complement these offerings with best-in-class third-party logistics, advanced analytics, and AI-enabled solutions that optimize efficiency and unlock value for our biopharma partners. This integrated approach positions McKesson Corporation as a trusted leader, not only solving today's challenges but continuing to invest in the future. Expanding our solutions for specialty therapies, modernizing technology, and leveraging innovation to advance health outcomes for all. Let me touch on our pharmaceutical distribution business in North America. This is a foundational business that continues to deliver strong growth underpinned by operational discipline and a differentiated value proposition.

The sustained momentum of the business driven by leading scale strong operating leverage, and robust cash flow generation enables us to continue to reinvest in the business to advance all of our enterprise priorities. We have made focused and significant investments in automation to these investments improve operating efficiency, enhance customer experience, and unlock productivity in our workforce. An example of the advanced automation technologies we have implemented is the order storage retrieval system. Which has been introduced in facilities across North America. The most recent application being in our US national redistribution center serving as the core of our hub and spoke distribution model. This sophisticated system improves our service levels and accuracy.

Streamlines processes, and expands our storage capacity to better serve our customers. As an example, what would have normally taken eight physical human touches to complete a pick, pack, and ship process now only takes two human touches. We are committed to investing in technology and automation, which will continue to position us for long-term growth in the future. In August, our U.S. Pharmaceutical business achieved a major milestone in the implementation of the Drug Supply Chain Security Act. We are now actively exchanging serialized transaction data with supply chain participants in compliance with these new FDA requirements. Behind this achievement was the extraordinary collaboration across the enterprise from technology and operations to regulatory affairs and customer support.

Throughout this very complex implementation, we maintained an exceptional service level accuracy with almost no disruption to our customers. We are proud to lead in this initiative that will enhance the safety, transparency, and integrity of the pharmaceutical supply chain. Now let me provide a brief update on our portfolio actions. Our teams continue to actively execute on multiple work streams to separate the medical surgical business. Positioning it to become an independent, well-capitalized operating company. I shared at Investor Day, we are targeting to exit the Medical Surgical Solutions business through an initial public offering. Following a customary lockup period, we intend to exit our remaining interest through a spin-off or split-off transaction or possibly a combination of both.

We anticipate that this separation could be completed by 2027. Subject, of course, to market conditions and customary regulatory approvals. In summary, McKesson Corporation delivered another strong quarter of performance. Our strategy and execution are driving outstanding results and this momentum continues to build across the enterprise. We operate in a dynamic market and policy backdrop, and we are highly engaged in that process across the organization. Importantly, executing from a position of strength and credibility. We remain committed to collaborating closely with policymakers and stakeholders to advocate for changes that align with the values of our company and are good for healthcare.

We are confident that our differentiated capabilities will continue to deliver value to customers and patients and be an important part of addressing healthcare's most pressing challenges. Lastly, I want to thank my fellow McKesson Corporation team members for their dedication and their contribution to advancing our mission. Together, we are advancing health outcomes for all, and we are excited about the opportunities that lie ahead. With that, I will hand it over to Britt for some additional financial details.

Britt J. Vitalone: Thank you, Brian, and good afternoon. I am pleased to report another quarter of strong execution and financial performance exceeding our expectations reflecting the strength of our diversified healthcare platform. My comments today will refer to our adjusted results. I will begin with our second quarter fiscal 2026 performance. Followed by an update on our fiscal 2026 outlook. As previewed at our Investor Day in September, we implemented a new reporting structure beginning in the second quarter. To enhance transparency and sharpen visibility into our growth platforms. This framework highlights the differentiated capabilities within our oncology and multi-specialty and biopharma services platforms. Verticals where McKesson Corporation is best positioned to deliver sustainable long-term growth.

This realignment reinforces our commitment to disciplined execution. Strengthens our strategic focus, and accelerates long-term value creation for all stakeholders. Turning now to results for our second quarter. McKesson Corporation delivered another strong quarter achieving record quarterly revenues $103 billion an increase of 10% compared to the prior year driven by robust performance across our portfolio of businesses. Growth was led by the North American pharmaceutical segment, reflecting increased prescription volumes from retail national account customers and by the oncology multi-specialty segment. Supported by expanded distribution of oncology and multispecialty products and contributions from recent acquisitions. Gross profit increased 9% to $3.5 billion primarily due to strong specialty distribution and provider growth within the oncology and multi-specialty segment.

Operating expenses decreased 1% to $2 billion reflecting divestitures in our Canadian business and disciplined cost optimization initiatives in the Medical Surgical Solutions segment. These reductions were partially offset by continued investment in the oncology and multi-specialty segment including acquisitions completed in 2026. Our underlying focus on cost discipline and operational efficiency powered by a technology-first mindset and AI-driven modernization continues to create value for all stakeholders. This progress is evident again in the second quarter. Operating expenses as a percentage of gross profit declined 570 basis points delivering significant operating leverage as we accelerate and modernize our operations.

Operating profit reached a quarterly record of $1.6 billion an increase of 26% year over year reflecting growth across all operating segments. This strong performance was driven by increased specialty distribution volumes in both the oncology and multi-specialty and North America pharmaceutical segments. Increased demand for access solutions in our prescription technology solutions segment, and continued benefits from cost optimization initiatives in the medical Surgical Solutions segment. The acquisitions of Prism and Core Ventures in the oncology and multi-specialty segment, contributed approximately 6% to year over year growth. Additionally, the sale of an equity investment and market decisions within The U.S. Oncology network contributed approximately 4%.

Excluding these two items, organic growth was approximately 16% in the quarter underscoring the strength momentum of our core business. Interest expense declined 6% to $68 million resulting from effective cash and portfolio management including our derivative portfolio. The effective tax rate was 17.5% compared to 21% in the prior year. In 2026, we recognized net discrete tax benefits of $96 million primarily related to the release of a valuation allowance compared to net discrete tax benefits of $44 million in 2025. Second quarter diluted weighted average shares was 124.4 million, a decrease of 4%. Second quarter earnings per diluted share increased 39% to $9.86 driven by several key factors.

Robust core operational performance, contributions from the first quarter acquisitions of Prism and Core Ventures and our Oncology and Multispecialty segment approximately $0.30 or 44% from net gains related to the sale of an equity investment and market decisions within the US oncology network in our oncology and multi-specialty segment and a lower effective tax rate. Turning to second quarter segment results, which can be found on Slide eight, 12 and starting with North American Pharmaceutical. Revenues were $86.5 billion, an increase of 8%. This growth reflects a continuation of solid pharmaceutical utilization, including higher volumes from retail national account customers and specialty products. Our ongoing focus on operational excellence also delivered operating expense leverage during the quarter.

Revenues from GLP one medications were $13.2 billion in the quarter, an increase of approximately $2.6 billion or 24%. When compared to the prior year. On a sequential basis GLP-one revenue increased 6%. Segment operating profit increased 13 percent $851 million driven by growth in the distribution of specialty products to health systems, the impact of new product launches, and continued operating expense efficiencies. In the oncology and multi-specialty segment, revenues increased 32% to $12 billion. Driven by strong provider and specialty distribution growth including contributions from acquisitions completed in 2026. The acquisitions of Prism and Core Ventures contributed approximately 12% of the second quarter segment revenue growth.

Operating profit increased 71% to $397 million driven by increased provider and specialty distribution volumes, and contributions from the acquisitions of Prism and Core Ventures. These acquisitions contributed approximately half of the segment operating profit growth in the quarter. Second quarter operating profit results also included non-recurring net gains of $51 million from the sale of an equity investment and market decisions with the within the US oncology network. Excluding the impact from the acquisitions Prism and Core Ventures, and non-recurring net gains, segment organic operating profit increased 13% highlighting the strength and momentum of the core business.

In the prescription technology solutions segment, revenues increased 9% to $1.4 billion driven by increased prescription volumes across our third-party logistics and technology services businesses. Operating profit rose 20% to $261 million reflecting increased demand for access solutions including prior authorization services for GLP one medications. Turning to medical surgical solutions. During the second quarter, we observed softer illnesses in product demand compared to the prior year. Including vaccines and testing. And lower volumes across ambulatory and extended care settings. Revenues were $2.9 billion flat compared to the prior year. Higher volumes of specialty pharmaceuticals were offset by lower contributions from illness season products and testing, across the ambulatory and extended care settings.

Compared to the prior year, revenues from seasonal vaccines and testing volumes represented an approximate 4% headwind. Operating profit increased 2% to $249 million driven by operational efficiencies and cost optimization initiatives. This was partially offset by the headwind from lower contributions related to illness season products and testing. Wrapping up our review with corporate. Corporate expenses were a $151 million in the quarter. As a reminder, in 2025, we recorded pretax losses of $15 million or $0.09 per share related to equity investments within the McKesson Ventures portfolio. Compared to gains of $3 million or $0.02 per share in 2026. Excluding these impacts, corporate expenses were flat compared to the prior year.

Return to cash and capital deployment for the second quarter is shown on Slide 13. We ended the quarter with $4 billion in cash and cash equivalents. Underscoring the strength of our strong liquidity position and capacity to deploy capital in a value-creating manner. Second quarter free cash flow was $2.2 billion included $196 million in capital expenditures. This robust cash flow performance reflects disciplined working capital management and continued operating execution strength. To shareholders which included $818 million of share repurchases and $89 million in dividend payment. These actions underscore our commitment to balance capital deployment and long-term shareholder value creation. Before reviewing our updated fiscal 2026 outlook, I would like to provide two portfolio updates.

At Investor Day in September, we reaffirmed McKesson Corporation's long track record of consistent financial performance driven by strategic clarity, consistency, disciplined execution. Our new segmentation reflects the portfolio evolution leading to sharper strategic focus enhanced transparency and increased long-term financial targets. Our strategic clarity and execution position the company to deliver sustained value across multiple environments in different cycles of health care leading to sustained value creation. Let me start with Norway. Our fiscal 2026 outlook contemplates contributions for operations in Norway for the full fiscal year. Beginning in 2026, we discontinued recording depreciation and amortization on the involved in the transaction, due to held for sale accounting treatment.

This resulted in an accretive impact of $0.03 in the second quarter. For the full year, we now anticipate approximately $0.13 of earnings accretion due to held for sale accounting in fiscal 2026. Which compares to our prior guidance of $0.20. Next, we are committed to executing the separation of our medical surgical solutions business in a tax-free transaction maximizing shareholder value. Since it was announced in May, we have made significant progress towards establishing the medical surgical business as an independent operating company. As I mentioned at Investor Day, we anticipate exiting the business by way of an initial public offering.

Following a customary lock-up period, McKesson Corporation intends to exit its remaining interest or a split-off transaction or essentially a combination of both. We currently anticipate that this separation could be completed by the second half calendar 2027, subject to market conditions and customary regulatory approvals. Fiscal 2026 outlook assumes a 100% ownership of the medical segment. Our portfolio transformation is delivered consistently outstanding financial results growth, returns to shareholders. Now moving to our fiscal 2026 outlook. Our strategy continues to deliver outstanding results propelled by the growth and differentiation of our oncology and multi-specialty and biopharma services platforms. Distribution assets and capabilities. These platforms are supported by a durable foundation of positioning McKesson Corporation for sustained success.

At our Investor Day, we raised our earnings per diluted share outlook by $0.80 to a range of $38.5 to $38.55 which was a testament to the clarity of our strategy, strength of our portfolio, and disciplined execution. Building on our strong second quarter performance and continued confidence in our outlook over the remainder of the year, we are further increasing our fiscal 2026 earnings per diluted share outlook by $0.30 to a new range of $38.35 to $38.85. Which represents 16% to 18% growth over the prior year. This update builds on the $0.80 increase announced at Investor Day in September. For fiscal 2026, we anticipate revenue growth of 11% to 15%. Reflecting growth across all core businesses.

And operating profit growth of 12% to 16%, driven by continued momentum in execution. Let me start with a review of our segments. In the North American pharmaceutical segment, our core pharmaceutical distribution operations continued to demonstrate a strong and diversified value proposition to customers. We anticipate revenue to increase 10% to 14% and we are increasing our guidance for operating profit. To 5% to 9% growth. The increased operating profit outlook is driven by solid utilization trends volume growth, continued strong specialty distribution expansion. In the core distribution business, we also anticipate continued growth of GLP-one medications. We anticipate this growth may vary from quarter to quarter.

And as a reminder, prior year results include the impact of the divestiture of our Canada-based rexallandwell.ca businesses, at the end of 2025. In the Oncology and Multispecialty segment, we anticipate revenue growth of 27% to 31% and operating profit growth of 49% to 53%. The guidance includes the acquisitions of Prism Vision and Core Ventures. Completed in 2026. We are pleased with the performance of these acquisitions. We anticipate that they will contribute approximately 30% to 34% to the fiscal 2026 operating profit growth in the segments. Our full-year outlook reflects the impact of these acquisitions and strong organic specialty distribution volume growth. Our oncology multi-specialty platform continued to deliver across distribution practice management, data and analytics, clinical research.

In the prescription technology solutions segment, we anticipate revenues to increase by nine to 13% and we are increasing the operating profit outlook to 13% to 17% growth. The improved operating profit outlook reflects strong organic volume growth and momentum across our access and affordability solutions. Particularly higher contribution from prior authorization services including those related to GLP-one medication. As I previously discussed, the revenue and operating profit trajectory in this segment is not linear.

It may vary from quarter to quarter driven by several factors, including utilization trends, the timing and trajectory of new product drug launches, the evolution of a product's program support requirements as it matures, which could result in a shift to other services or a program termination practical delays in supply shortages, payer requirements including utilization management and formulary strategies, the annual verification programs that we provide for our customers that occur in our fiscal quarter. And the size and timing of investments to support and expand our product portfolio.

Moving to the Medical Surgical Solutions segment, due to lower than anticipated illness season product volumes compared to the prior year, including vaccines and testing, and lower volumes across ambulatory and extended care settings we anticipate revenue and operating profit at the low end of 2% to 6% growth. Illness season variability remains a key factor. And the timing and severity level of each illness season can drive variability from quarter to quarter and year to year. We anticipate corporate expenses to be in the range of $600 million to $650 million which incorporates the impact of $4 million of pretax gains related to equity investments within the McKesson Ventures portfolio in the first half of the fiscal year.

Turning now to items below the line. We anticipate interest expense to be in the range of $210 million to $240 million reduced interest expense target compared to the range provided at Investor Day reflects continued strong debt portfolio management and commitment to maintaining our strong investment-grade credit ratings. We anticipate income attributable to non-controlling interest to be in the range of $215 million to $235 million which includes the impact from fiscal 2026 acquisitions. And we anticipate the full-year effective tax rate will be in the range of 18% to 19%. We also anticipate that the quarterly tax rate will be higher in the third quarter than in the fourth quarter due to the timing of discrete tax items.

We anticipate the third quarter tax rate to be in the range of 23% to 25%. Wrapping up our outlook with cash flow and capital deployment. One of McKesson Corporation's enduring strengths is our proven ability consistently generate strong free cash flow and execute value-creating capital allocation. For fiscal 2026, we anticipate free cash flow of approximately $4.4 billion to $4.8 billion. Our outlook includes plans to repurchase approximately $2.5 billion of shares. With estimated weighted average diluted shares outstanding of approximately $124 million. Our strong operating performance combined with disciplined working capital management continues to provide ample liquidity and financial flexibility. We have also strengthened our financial position by reducing leverage and optimizing our debt portfolio over time.

Our focused and disciplined approach to capital remains a cornerstone of our strategy and a key driver of long-term shareholder value creation. In summary, McKesson Corporation delivered strong second quarter results. Including record quarterly consolidated revenue and double-digit operating profit growth across three segments. Our updated earnings per diluted share range of $38.35 to $38.85 reflects both our second quarter results and our confidence in the business for the remainder of fiscal 2026. As we continue to execute against our strategic and financial framework. The ongoing evolution of our portfolio was aligned with the increased long-term targets that we committed to.

And this transformation continues to translate in stronger earnings higher returns on invested capital and a fortress balance sheet positioning McKesson Corporation for discipline, and strategic capital deployment. And with that, let's move to the Q and A session.

Operator: Thank you. If you would like to signal with questions, please press 1 please make sure the mute function is turned off to allow your signal to reach our equipment. Again, that is 1 if you would like to ask questions. And our first question will come from Lisa Gill with JPMorgan.

Lisa Christine Gill: Thanks very much. Good afternoon. Great results again this quarter. Just really want to understand two things. When I look at the revenue growth versus the operating profit expansion, especially in North America pharmaceutical as well as technology solutions. I heard what you said Britt, especially in your last comments around it all being organic growth when we think about prescription technology solutions. But is it new products you are bringing to the market? Is it enhanced programs that are driving that margin? So if I could just understand really what is happening on the margin profile there?

And then if I go back to your Investor Day, I had thought that you had talked about some incremental investments that you needed to make in that business. So, how do we think about the sequential quarters, as we go throughout '26?

Britt J. Vitalone: Thanks for the question, Lisa. Let me with your first question. What we did see in the quarter is a continuation of the strong performance in all of our segments. And we actually saw operating margin expansion in our three core segments. There are a number of things that are driving this, specifically in the Rx technology business. Are seeing good mix. So we are seeing more growth in our technology services components. That is really all of the things that you mentioned. There are new products in and programs that we are seeing growth in. And we are certainly seeing growth in some of our access programs like prior authorizations. Particularly for GLP one.

So it is a little bit of all of those things that are all driving in the right direction and the mix those technology services is driving more margin growth in that segment. As it relates to the investments, yes, you did hear that right, and we do anticipate a higher level of investments in the second half of the year. So you think about the cadence for the year, certainly, had very strong operating profit growth in that segment in the first half of the year.

We expect that to continue to be strong in the second half of the year and that is going to be against an increased level of investment spending that we have included in our guidance. For the balance of the year. So we are really pleased with the performance of the first half of the year, our ability to increase that guidance for the full year, but also while we are making additional investments through the back half of the year. And I would just add that these growth investments have been part of the algorithm for many, many years now. And it is not always linear.

It is measured up against what we see as opportunities to continue to innovate continue to expand the market that the markets that we can go after and support our future growth. So we are actually glad when we have these opportunities.

Operator: Question, please.

Operator: And next will be Brian Tanquilut with Jefferies.

Brian Gil Tanquilut: Hey. Good afternoon, Congrats on the quarter. Hey, Rick. Maybe just as I think about oncology and multi-specialty, you know, strong results there, but you are maintaining the guidance. Just curious was the beat in the quarter essentially already contemplated in your guide when you did Investor Day and highlighted expectations for that business? Thanks.

Britt J. Vitalone: Yeah. Thanks for that. Brian. So a couple of things. We did call out some nonrecurring gains. Most of there were three items really that made up that. All happened in this quarter. The majority of those were known and included in the guidance at Investor Day. There was a third item here that the cadence of that was more back half weighted in our guidance than we had at Investor Day. But really, you break the business down, as I mentioned, the strong growth about half of that is being driven by the acquisition performance, the two acquisitions that Brian and I both talked about that happened in the first quarter of fiscal year. Those businesses are performing well.

And as Brian pointed out, we are adding to that platform on the Prism and we are pleased to be able to do that. The organic business, as I talked about, is growing at about 13% year over year. And that is right in line with the long-term guidance that we provided for the segment. So we are pleased that not only are we adding from an acquisition perspective some strong assets to the portfolio, but from an organic perspective, the business is performing as we had anticipated.

Operator: Question, please.

Operator: And next will be Elizabeth Anderson with Ever ISI.

Elizabeth Hammell Anderson: Hi, guys. Good afternoon and congrats on the nice quarter. I was wondering if we could double click on the health system strength you called out in the quarter. Obviously, were some good strength all around, but, know, I think we do not talk about that business as much, and that seems like it was an incremental source of strength in the quarter. So I would be curious if you could talk about that in a little bit more detail. Thanks.

Brian S. Tyler: I think we are very pleased with the way our health system business continues to perform. It is a segment of the market that we put some focus on a few years back. We think we are at a point now where we have market-leading share. We think the volumes have been strong in that space. And so we are benefit as our customers see strong traffic flows through their settings, we are benefiting from that volume and that expansion, and I think it speaks to the quality of the partners that we have. In the health system. So thank you for calling that out. We do not often talk about it.

Operator: Question, please.

Operator: And next will be Charles Rhyee with TD Cowen.

Charles Rhyee: Yeah. Thanks for the question. Britton, might have missed it a little bit before, but when we are thinking about the tax rate for the year, if I remember when you first gave guidance, you said you gave the range and said the first half would be higher than the second half. And the first quarter higher than the second. And obviously, we saw, I think, was a little over 21% First quarter, I think it was 17.5% this quarter. Full year, you are still guiding 18% to 19 actually brought it up towards the higher end. How should we think about tax rate in the back half of the year? Thanks.

Britt J. Vitalone: Yeah. Thanks for that question. Obviously, we have talked about the tax rate could vary from quarter to quarter, not only the mix of income, will be an important factor to that, but timing of discretes. And you know, we are anticipating that the second half will have a slightly higher rate than we had at Investor Day, yet what is really driving the guidance from 17 to 19 to 18 to 19. That is really just a modest change in our outlook there. But as I provided here, we gave you specific tax rate guidance for the third quarter. We anticipate that the third quarter will come in right around 23% to 25%.

And we would anticipate that the timing of some discrete and mix of income will drive a lower rate in our fourth quarter.

Operator: Question, please.

Operator: And next will be Eric Percher with Nephron Research.

Eric R. Percher: Thank you. There are several macro indicators, especially volume treatment acuity that have expanded the last two quarters. And want to ask, do you agree that the trend has been elevated in first half? Do you expect that the same type of specialty trend continues in the second half of the year if it is an elevated level? And then I would ask just on the edge of that, can you help decode what a market decision with within The U.S. Oncology network means?

Brian S. Tyler: So a 100% sure I know what dataset or set of the statistics you are anchoring your question in. But what I would say is that in our oncology business, we have continued to see good foot traffic volumes in our existing footprint, complemented, by the new partners that we bring into the network as we continue to expand. So we see good patient flow. And as you know, our view of the community setting is it being the low cost most accessible at a high quality to receive cancer care. As the network has matured over the years, we find ourselves able to take on and treat more and more complicated oncology type patients.

And so that is certainly been part of our algorithm. And, obviously, if you look at the therapies, the more complicated therapies that are coming to market, that also supports the strength that we have seen in that segment.

Britt J. Vitalone: Eric, as it relates to your question on market decisions, I mean, we had two things. That happened in the quarter. We had the realization of an equity investment that created a gain and then the market decision aspect. From time to time, we will either enter or exit a market. Depending on really the profile of that particular set you know, that particular marketplace. And how it aligns with The US oncology market and The US oncology strategy. And so in this particular quarter, we exited two markets. And from time to time, we will see exits from markets. We will also see, obviously, entries into new markets.

So this is unusual in the sense that we had a couple of these items all in the same quarter. Does not usually we do not usually have three of these type of items in one particular quarter. Yes. And we are more typically, in our recent history, been adding, but it is important that we maintain the discipline to continually review the portfolio and the footprint of our practices, and that is something we will remain committed to.

Operator: Next question, please.

Operator: And next will be Kevin Caliendo with UBS.

Kevin Caliendo: Hi. Thanks for taking my question. Wanna unpack the guidance a little bit or at least the implied guidance. If I look at the pharma segment growth in the first half of the year, the actual north of 11%. And imply the second half is you know, less than 4%, three and a half percent roughly. I know there is some investments in spend. Is there anything else to call out incrementally from what you have achieved in the first half of the year? Versus what would happen in the second half of the year just in The US pharma segment?

Britt J. Vitalone: Yeah. Kevin, thanks for that question. I would point two things. As you may recall last year, we onboarded a new strategic customer into this segment. That is started in the second quarter of fiscal 2025. So first half of this year would have one incremental quarter of operations from that particular customer. And last year, as I mentioned in my remarks, we exited our Canada-based rexallandwell.ca businesses. And as a result of that, we had some held for sale accounting accretion in last year's number. Those two things are really the key drivers for the first half versus second half.

Operator: Question, please.

Operator: And next will be Daniel Grosslight with Citi.

Daniel R. Grosslight: Hi, guys. Thanks for taking the question and congrats on another strong one here. There has been a lot of chatter about the cash pay channel recently. Know, folks going away from their insured benefit. For calendar year, 2026, if we do see an increase in uninsured and more insured people paying cash for their prescriptions, through Trump Rx. How do you anticipate that will impact your prior off business, your Rx2S business? And what is contemplated in guidance there. And are you planning to work with the Trump administration to integrate some of your technologies into the Trump Rx website? Thanks.

Brian S. Tyler: Sure. Let me start. I mean, that Trump Rx are these direct to patient I think there has been three or four announced as part of the MSN letter that went out from Trump. You know, our view on these right now is first, you know, step back, and there has been direct to patient pharmacy for, like, over a decade. I mean so it is not really new in the marketplace. And, you know, the view that we would hold right now is that the population that is eligible and can afford even the discounted prices really remains pretty small based on assessment that we have done to this point in time.

And therefore, we do not see a big impact on the prior authorization business. As part of our affordability offerings, we do have tools. We have built these tools that allow us to automate pharmacy to interface with patients, just support patient inquiries, last mile delivery. So we have a lot of the tools that, can play a role, and we are playing a role in some instances in this in this today. As far as the Trump administration, our commitment is to work with all governments, policymakers, legislators, to try to advance The US health care system in a way that brings cost down. Makes it more accessible for people, and delivers high-quality outcomes.

I do not I cannot tell you exactly what that might look like, but we are you know, highly engaged at all levels. You know, trying to bring the tools whether it is in prescription technology solutions or distribution tools, to bear on the challenges that our leaders are trying to solve today. And we think we have got many, many tools and resources that can be important parts of the solutions to those challenges.

Operator: Question, please.

Operator: And next will be Allen Lutz with Bank of America.

Allen Charles Lutz: Good afternoon and thanks for taking the questions. Britt, one for you. This was the third straight quarter where SG and A was down year over year and gross profit is actually accelerating. I know that you do not give quarterly guidance around those metrics or those metrics in general, but it seems like a pretty unique dynamic. You talked a little bit about first half, second half. How should we think about that trend in the first half of the year? And the trajectory of gross profit and SG and A into the back half of fiscal 2026? Thanks.

Britt J. Vitalone: Yes. Thanks for the question. Maybe I will start with expenses. If you think about expenses, I did mention that last year, we exited our Canada-based Rexall and well.ca businesses. So that is going to have an impact both on the gross profit and the operating expense line. Certainly, operating expenses you are going to have just a gross amount of operating expenses that leave the business. And then from a mix perspective, certainly, have a more favorable mix of businesses now than we did when we had the Canada-based businesses that we sold last year.

The other thing I think is important is just our continued focus on efficiency, and I talked about how we lead with a technology first and focusing on AI and modernizing our businesses and that is driving a significant amount of operating expense efficiency, which certainly is good for all stakeholders that McKesson Corporation deals with. So I think we are very pleased with the quality of the operations and the quality of relationships we have that are driving a more favorable gross margin mix. Certainly, the growth that we are seeing in our technology-based businesses like RxTS which grew 20% in the quarter, and then the efficiencies that we are seeing in our operating expense leverage.

I mean, this is really in many ways some of the manifestation of investments we made in years prior. Whether to do physical automation, use digital technologies to automate processes, and, you know, those these are big projects often. They can take years. And then as they come online, this kind of results we expect to see and which is why we think continued investment is a key part of the algorithm.

Operator: Question, please.

Operator: The next will be Erin Wright with Morgan Stanley.

Erin Wright: Great. Thanks. So a two-parter here. Just first, on those gains in terms of rationalization across U.S. Oncology. It sounds like that is purely one-off, but any reason we should anticipate those being more frequent? I assume there is no future contributions anticipated in the guidance. Today? And then wanted to just get an update on Prism, how that is progressing relative to your expectations now, how you are thinking about opportunities outside of oncology with that in that context? Thanks.

Britt J. Vitalone: Thanks for your question. I will start and then certainly Brian can add on. As it relates to those gains, like I said, time from time to time, you will make market decisions, whether be or an entrance into a new market or an exit from a market. These are nonrecurring in nature, and they also included the realization of an equity investment that generated a gain. So that is not something that we would certainly include in the normal operations and normal profit streams. But certainly, we wanted to call it out it was material in the quarter. As it relates to Prism, we are really pleased with the progress that we have seen.

And I think the addition of Spokane this quarter is testament to the fact that we are seeing good progress. We are pleased with the integration thus far. And being able to add to our vision platform is testament to that. And I think we are really focused on oncology and, obviously, building out the vision platform that we have started with Prism, and we are pretty excited about progress thus far.

Operator: Question, please.

Operator: And next will be Stephen Baxter with Wells Fargo.

Stephen C. Baxter: Hi. Thanks for the question. Just to follow-up on that, enough to belabor the point too much. I guess it is pretty clear. In terms of these network decisions, you know, what you are actually doing here. But just in terms of the actual, like, item, that you recorded in the quarter, I mean, it sounds like the gain was something separate and related to an equity investment. Just trying to understand, like, what the actual economic impact in the quarter is, and is that included in the $1 million that you sized? Or is that something that is incremental? Thank you.

Britt J. Vitalone: Yep. Thanks for the question. Just to clarify, the gains in the market decisions together represent the $51 million.

Operator: Question, please.

Operator: And next will be George Hill with Deutsche Bank.

George Robert Hill: Yeah. Good afternoon, Bill. I thought I heard you mention the Drug Supply Chain Security Act in the prepared comments. And what I wanted to try to understand, is there any operating impact to this as it relates to the financials? And what I think about is sometimes you see regulatory change or technology change, increased customer stickiness, or increased like barriers to competition from some of your competitors in the market, especially the second and third tier guys? So I am just wondering if there is any operating benefit from you guys being able to be agile around the Drug Supply Chain Security Act.

Brian S. Tyler: So first, I want to recognize the team for know, what was a very, very complicated technology implementation that was pulled off very, very well. As I mentioned in my prepared remarks, we have had terrific service quality, very, very few disruptions as we have been transmitting the information back and forth to our supply chain partners. So very, very pleased with how it has gone and, and, you know, it was a lot of work in the years leading up to this, and to have it have it be implemented so smoothly was, really good to see and a testament to the great work our teams do. I mean, it is a big investment. It is the industry.

For McKesson Corporation, it was. I mean, to that extent, you know, when we talk about the value of the services that we deliver, this just adds another component to that a new entrant or someone else would have to replicate and be able to have be able to have the capability to participate in this market. You know, given the structure of our markets, you know, I do not I am not thinking this is going to be a material driver of anything. Our key focus was to make sure we serve both our upstream manufacturer partners well. Our downstream partners as well.

And that we could transmit the business and keep the supply chain operating reliably safely, and in compliance with laws. And I think we have accomplished that.

Operator: Question, please.

Operator: And next will be Michael Cherny with Leerink Partners.

Michael Aaron Cherny: Afternoon. Thanks for taking the question. Maybe if I can dive back to RCS. I know you highlighted the dynamics you are seeing on the prior authorization work. Are some of the other, call it, megatrends that you are thinking about as you build into not only the performance this year and versus and then into the next couple of years and how do think about the assets you have right now? And is this something where we could see platform expansion platform opportunities either organically or inorganically? Thank you.

Brian S. Tyler: Oh, you know, there is a lot of conversation going on across the industry right now. A lot relating to the medical parts of the business. So you know, we think that the networks we have, both in pharmacy and in the provider base, the technology that we have, you know, what we have done in Rx is take a manual complicated process that no one was really pleased with and find a way to streamline it and make it better for patients better for payers, better for pharmacists, take the friction out of that process. So we are always on the lookout for processes like that.

That can avail themselves to us leveraging the same assets we have to solve slightly different health care problem than our teams. Are always and actively engaged in that. And you know, it is one of the strengths of the company as we look at you know, evolutions, external changes, policy changes. We have this very broad diversity set of capabilities that we can lean in to help address these problems and advance the goals we have for our health care system. Last question.

Operator: Certainly. That question will come from Steven Valiquette with Mizuho Securities.

Steven Valiquette: Great. Thanks. I think at the beginning of this fiscal year, you guys provided some color around the accretion the two acquisitions. I think it was $0.04 to $0.60 from Florida Cancer Specialist and $0.2 to $0.30 from Prism. Guess, today, you are disclosing the two acquisitions combined are going to add, I think, was 30% to 34% percentage points to operating profit growth. But just curious, are you able to provide more color on just each individual acquisition how it is performing relative to those original EPS accretion guidance metrics, the way things stand right now? Thanks.

Britt J. Vitalone: Yes, Steve, thanks for the question. Let me just make one additional comment here. What we have provided you with that 30, 34% is the adjusted operating profit impact. I would remind you that in the acquisition of Core Ventures, we did raise debt against that. We also had some noncontrolling interest that goes below the line. That being said, as Brian and I both mentioned, we are really pleased with the progress of both acquisitions. And I would say that they are both relatively in line with guidance that we provided. I would say that, Prism is probably slightly ahead. And our ability to continue to add providers to that platform when we add to that.

So both are right really in the range that we provided. Prism maybe slightly a little bit ahead of the target that we provided you, but I think the accretion numbers that we gave you still apply. And I would also remind you, we gave you three-year accretion numbers, and we expect that the platforms will continue to expand over time and add additional synergies and value. So we are really pleased with the progress of both of those acquisitions.

Brian S. Tyler: Great. Well, thanks again, everyone. We really appreciate your time, joining the call this afternoon. And always your thoughtful questions. And thank you, Cynthia, for facilitating the call. I want to end by just, again, recognizing our 45,000 ish colleagues whose commitment make these results possible. We have a talented team. They have got a diverse set of capabilities. We operate a very disciplined operating model. And our strategy is quite resilient. We have tremendous confidence in our ability to continue to execute and deliver attractive long-term results for shareholders while advancing our role in the healthcare ecosystem. We appreciate very much your engagement, and we look forward to continuing to update you on our progress.

Hope everyone has a terrific evening. Thank you.

Operator: Thank you for joining today's conference call. You may now disconnect and have a great day.