Metric	FY2024	FY2025	% Change
Revenue	$308.95B	$359.05B	+16.22%
Gross Profit	$12.58B	$13.32B	+5.83%
Operating Income	$3.91B	$4.42B	+13.05%
Net Income	$3.00B	$3.29B	+9.76%
Operating Margin	1.27%	1.23%	-0.04pp
Net Margin	0.97%	0.92%	-0.05pp

While margins show slight compression, likely due to investments and restructuring costs associated with the divestiture and expansion, the overall profitability remains stable. McKesson’s gross profit margin softened from 4.07% to 3.71%, reflecting the impact of divesting lower-margin segments and shifting toward higher-margin but cost-intensive oncology and biopharma services.

The company’s balance sheet demonstrates solid liquidity with cash and equivalents increasing to $5.69 billion and a manageable net debt of $1.7 billion as of March 31, 2025, down from $2.81 billion a year earlier. This improved cash position supports strategic acquisitions and shareholder returns.

Strategic Divestiture: Medical-Surgical Solutions Spin-off#

A critical milestone in McKesson’s transformation is the divestiture of its Medical-Surgical Solutions segment. This move is intended to streamline the company’s portfolio, focusing capital and management attention on the faster-growing oncology and biopharma markets. By spinning off a lower-margin business, McKesson aims to enhance operational efficiency and improve overall profitability.

The financial implications are expected to be positive, with the divestiture likely reducing operating expenses and improving margins over the medium term. This is evidenced by the company’s focus on reallocating resources toward oncology, where sales in the U.S. Pharmaceutical segment surged by 23% in Q2 FY25 to $85.7 billion.

Oncology and Biopharma Growth: Market Opportunity and Acquisitions#

McKesson’s oncology and biopharma platforms are at the core of its growth strategy. The company’s acquisition of Florida Cancer Specialists & Research Institute LLC’s Core Ventures marks a strategic effort to deepen its footprint in community oncology. This acquisition provides access to a network of community clinics, enabling McKesson to deliver specialized distribution and tailored support services for cancer care providers.

Industry projections indicate that oncology and biopharma markets will continue to expand at a compound annual growth rate (CAGR) exceeding the broader pharmaceutical sector. McKesson anticipates revenue growth between 11% and 15% for FY2026, with the U.S. Pharmaceutical segment expected to grow 12% to 16%.

Segment	FY2025 Sales	Growth Outlook FY2026
U.S. Pharmaceutical	$85.7B (Q2)	+12% to +16%
Oncology Network	N/A	Outpacing pharma market

This growth is propelled by increasing demand for innovative cancer treatments and biologics, as well as McKesson’s expanding portfolio of biotech partnerships.

Capital Allocation and Shareholder Returns#

McKesson’s capital allocation strategy balances investment in growth initiatives with returning value to shareholders. The company generated $6.08 billion in free cash flow in FY2025, up +67.77% from the previous year, providing ample flexibility for acquisitions, dividends, and debt reduction.

Dividend payments totaled approximately $345 million in FY2025, representing a payout ratio of 10.47%, which is conservative relative to earnings, indicating strong dividend sustainability and potential for future increases.

Capital Allocation Metric	FY2024	FY2025	% Change
Free Cash Flow	$3.63B	$6.08B	+67.77%
Dividends Paid	$314M	$345M	+9.87%
Net Debt	$2.81B	$1.7B	-39.5%

The reduction in net debt alongside increased free cash flow reflects disciplined financial management, enhancing strategic flexibility.

Competitive Landscape and Market Positioning#

Within the competitive healthcare distribution industry, McKesson stands out due to its scale, integrated logistics, and focused expansion into high-margin specialty sectors. Its growing oncology network, supported by strategic acquisitions, differentiates it from peers who may have broader but less specialized portfolios.

The company’s return on invested capital (ROIC) at 26.59% significantly exceeds industry averages, underscoring efficient capital deployment and competitive strength. However, the negative return on equity (ROE) of -132.73% reflects the company’s substantial liabilities and negative shareholders’ equity, a result of historical acquisitions and restructuring.

Earnings Performance and Analyst Outlook#

McKesson has demonstrated consistent earnings growth, with earnings per share (EPS) rising by +14.87% in the trailing twelve months. Recent earnings surprises, such as the Q1 FY2025 beat with actual EPS of 10.12 versus estimates of 9.83, reinforce market confidence in management’s execution.

Looking forward, analysts project EPS growth reaching $36.75 to $37.55 for FY2026, supported by the oncology and biopharma expansion. The forward price-to-earnings (P/E) ratio is expected to decline from the current 27x to approximately 18.21x in 2026, suggesting improved valuation as growth accelerates.

What This Means For Investors#

McKesson’s strategic realignment toward oncology and biopharma services positions the company to capitalize on high-growth, high-margin segments within healthcare. The divestiture of the Medical-Surgical Solutions segment is a decisive move to sharpen focus and improve financial metrics.

Investors should note the robust revenue growth, strong free cash flow generation, and conservative dividend payout as indicators of financial health and strategic discipline. While margin compression signals ongoing investments and restructuring costs, the long-term outlook remains positive given the expanding oncology market.

Key Takeaways#

McKesson reported +16.22% revenue growth and +9.76% net income growth in FY2025, driven by oncology and specialty pharmaceutical sales.
The strategic divestiture of the Medical-Surgical Solutions segment aims to enhance profitability and operational focus.
Acquisition of Florida Cancer Specialists & Core Ventures strengthens McKesson’s community oncology presence.
Free cash flow increased by +67.77% to $6.08 billion, supporting dividends and debt reduction.
Forward EPS estimates for FY2026 range from $36.75 to $37.55, with a declining forward P/E ratio signaling improved valuation.
ROIC of 26.59% highlights efficient capital use despite negative equity position.

Financial Summary Table#

Financial Metric	Value (FY2025)
Revenue	$359.05B
Net Income	$3.29B
EPS	25.74
Free Cash Flow	$6.08B
Dividend Yield	0.41%
P/E Ratio	27.0x
ROIC	26.59%
Net Debt	$1.7B

Analyst Estimates for FY2026 to FY2030#

Year	Estimated Revenue	Estimated EPS	Forward P/E	Forward EV/EBITDA
2026	$406.18B	37.40	18.21x	23.10x
2027	$438.35B	41.96	16.12x	21.41x
2028	$472.72B	47.17	14.36x	19.85x
2029	$530.62B	53.90	12.57x	17.68x
2030	$576.73B	60.83	11.14x	16.27x