MCKESSON CORP (MCK)

CIK: 0000927653. SIC: 5122 Wholesale-Drugs, Proprietaries & Druggists' Sundries. Latest 10-K as of: 2026-05-08.

SIC breadcrumb: Wholesale Trade > Wholesale Trade - Nondurable Goods > SIC 5122 Wholesale-Drugs, Proprietaries & Druggists' Sundries

SEC company page: https://www.sec.gov/edgar/browse/?CIK=927653. Latest filing source: 0000927653-26-000069.

Selected Fundamentals

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• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
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• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
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• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
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Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-05-08. Report date: 2026-03-31.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

INDEX TO MANAGEMENT’S DISCUSSION AND ANALYSIS

Section

Page

General

33

Overview of Our Business

33

Executive Summary

35

Trends and Uncertainties

36

Overview of Consolidated Results

37

Overview of Segment Results

42

Foreign Operations

45

Business Combinations

45

Fiscal 2027 Outlook

45

Critical Accounting Estimates

46

Financial Condition, Liquidity, and Capital Resources

51

Related Party Balances and Transactions

56

New Accounting Pronouncements

56

GENERAL

Management’s discussion and analysis of financial condition and results of operations, referred to as the “Financial Review,” is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of McKesson Corporation together with its subsidiaries (collectively, the “Company,” “McKesson,” “we,” “our,” or “us” and other similar pronouns). This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying financial notes in Item 8 of Part II of this Annual Report on Form 10-K (“Annual Report”).

Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year refer to our fiscal year.

Our Financial Review within this Annual Report generally discusses fiscal 2026 and fiscal 2025 results and year-over-year comparisons between fiscal 2026 and fiscal 2025. For a discussion of our year-over-year comparisons between fiscal 2025 and fiscal 2024, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Part II of our Annual Report on Form 10-K for the year ended March 31, 2025, previously filed with the Securities and Exchange Commission on May 9, 2025.

Certain statements in this Annual Report constitute forward-looking statements. See Item 1 - Business - Forward-Looking Statements in Part I of this Annual Report for additional factors relating to these statements and Item 1A - Risk Factors in Part I of this Annual Report for a list of certain risk factors applicable to our business, financial condition and liquidity, and results of operations.

Overview of Our Business:

We are a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services to help make quality care more accessible and affordable.

We implemented a new segment reporting structure commencing in the second quarter of fiscal 2026, which resulted in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and

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FINANCIAL REVIEW (Continued)

Medical-Surgical Solutions. Our former Norwegian operations were included in Other. All prior segment information has been recast to reflect our new segment structure and current period presentation. Our organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects, as well as the results of certain investments. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of individual business activities. We evaluate the performance of our operating segments on a number of measures, including revenues and operating profit before interest expense and income taxes.

The following summarizes our four reportable segments. Refer to Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report for further information regarding our reportable segments.

•North American Pharmaceutical segment provides distribution and logistics services for branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs along with other healthcare-related products to customers in the United States (“U.S.”) and Canada. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate sites) and provides consulting, outsourcing, technological, and other services. The U.S. distribution operations were previously included in the former U.S. Pharmaceutical reportable segment and the Canadian operations were previously included in the former International reportable segment.

•Oncology & Multispecialty segment includes provider solutions that encompass specialty drug distribution, group purchasing organizations, infusion services, direct to patient pharmacy capabilities, cell and gene therapy services with InspiroGene, technology solutions, practice consulting services, and vaccine distribution. In addition, the segment supports the U.S. Oncology Network, one of the largest networks of physician-led, integrated, community-based oncology practices dedicated to advancing high-quality, evidence-based cancer care in the U.S., and includes PRISM Vision Holdings, LLC (“PRISM Vision”), which drives patient outcomes in a retina and ophthalmology setting. Combined with Sarah Cannon Research Institute and our technology business, Ontada, this segment provides research, insights, technologies, and services that address and improve cancer and specialty care. This segment was previously reflected in the former U.S. Pharmaceutical reportable segment.

•Prescription Technology Solutions segment combines automation and our ability to navigate the healthcare ecosystem to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies to address patients’ medication access, affordability, and adherence challenges. Prescription Technology Solutions offers technology services, which includes electronic prior authorization, prescription price transparency, benefit insight, dispensing support services, and patient enrollment, in addition to third-party logistics, and wholesale distribution support across various therapeutic categories and temperature ranges to biopharma customers throughout the product lifecycle.

•Medical-Surgical Solutions segment provides medical-surgical, laboratory, and pharmaceutical distribution, logistics, and other services to U.S. healthcare providers operating in the non-acute settings. These include ambulatory care environments, such as physician offices, surgery centers, and hospital reference labs, as well as extended care settings, including nursing homes, hospice and home health care agencies, government facilities, and online marketplaces and retailers. This segment offers national brand medical-surgical products as well as our own line of more than 4,000 high-quality products through a network of distribution centers within the U.S. During fiscal 2026, we announced our intention to separate this segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced a definitive agreement under which funds managed by affiliates of Apollo Global Management, Inc. (“Apollo Funds”) will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. The transaction is subject to regulatory approvals and customary closing conditions.

Our former Norwegian operations, which provided distribution and services to wholesale and retail customers in Norway where we owned, partnered, or franchised with retail pharmacies, were included in Other. During fiscal 2026, we completed the transaction to sell our businesses in Norway (“Norway disposal group”). This divestiture is further described in the “Business Acquisitions and Divestitures” section below.

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FINANCIAL REVIEW (Continued)

Business Acquisitions and Divestitures

Norwegian Divestiture Activities

On January 30, 2026, we completed the sale of our Norway disposal group for an adjusted purchase price of $821 million. We recorded a net gain of $480 million for the year ended March 31, 2026 in total operating expenses. The gain includes a $164 million loss related to the accumulated other comprehensive loss balances associated with the disposal group.

PRISM Vision Holdings, LLC

On April 1, 2025, we completed the acquisition of a controlling interest in PRISM Vision, a leading provider of general ophthalmology and retina administrative services. We acquired an 80% interest in PRISM Vision for $875 million in cash, and prior owners, including management and physicians in PRISM Vision practices, retained a 20% ownership interest. As of the acquisition date, the financial results of PRISM Vision are reported within our Oncology & Multispecialty segment.

Community Oncology Revitalization Enterprise Ventures, LLC

On June 2, 2025, we completed the acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (“Core Ventures”), a business and administrative services organization established by Florida Cancer Specialists & Research Institute, LLC, (“FCS”). We acquired a 70% controlling interest in Core Ventures for $2.5 billion in cash and FCS physicians retained a 30% ownership interest. As of the acquisition date, Core Ventures is a part of the Oncology platform and financial results are reported within our Oncology & Multispecialty segment.

Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information regarding these transactions.

Executive Summary:

The following summary provides highlights and key factors that impacted our business, operating results, financial condition, and liquidity for the year ended March 31, 2026:

•For the year ended March 31, 2026 compared to the prior year, revenues increased by 12%, gross profit increased by 9%, total operating expenses decreased by 6%, and other income, net increased by 17%. Refer to the “Overview of Consolidated Results” section below for an analysis of these changes;

•Diluted earnings per common share attributable to McKesson Corporation increased to $38.38 in fiscal 2026 from $25.72 in the prior year;

•For the year ended March 31, 2026, we recorded restructuring charges of $170 million related to an enterprise-wide initiative to drive operational efficiencies as further described in the “Restructuring Initiatives” section of “Overview of Consolidated Results” below;

•On April 1, 2025, we completed the acquisition of a controlling interest in PRISM Vision for $875 million in cash, as discussed in further detail in the “Business Acquisitions and Divestitures” section above;

•On May 8, 2025, we entered into a syndicated $1.0 billion 364-Day senior unsecured credit facility (the “364-Day Credit Facility”) that was scheduled to mature in May 2026 but was terminated on April 24, 2026 and replaced with the 2026 5-Year Facility described in the “Recent Developments” section below. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;

•On May 30, 2025, we completed a public debt offering of 4.65% Notes due May 30, 2030 in a principal amount of $650 million, 4.95% Notes due May 30, 2032 in a principal amount of $650 million, and 5.25% Notes due May 30, 2035 in a principal amount of $700 million, for total proceeds received, net of discounts and debt offering expenses, of 2.0 billion. The net proceeds from these notes in addition to cash on hand were utilized to fund the purchase of our interest in Core Ventures. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;

•On June 2, 2025, we completed the acquisition of a controlling interest in Core Ventures for $2.5 billion in cash, as discussed in further detail in the “Business Acquisitions and Divestitures” section above;

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•On November 14, 2025, our €600 million outstanding principal amount of 1.50% Notes matured and were repaid using cash on hand;

•On December 3, 2025, our $500 million outstanding principal amount of 0.90% Notes matured and were repaid using cash on hand;

•On January 30, 2026, we completed the sale of our Norway disposal group, as discussed in further detail in the “Business Acquisitions and Divestitures” section above;

•During fiscal 2026, we returned $5.1 billion of cash to shareholders through $4.8 billion of common stock repurchases and $381 million of dividend payments. The total remaining authorization outstanding for repurchases of the Company’s common stock at March 31, 2026 was $2.7 billion; and

•On July 29, 2025, our Board of Directors (the “Board”) raised our quarterly dividend to $0.82 from $0.71 per share of common stock.

Recent Developments:

The following highlights events that impacted our business subsequent to March 31, 2026:

•On April 1, 2026, certain of our subsidiaries within the Medical-Surgical Solutions segment entered into a syndicated credit agreement for: a $750 million principal senior secured term loan due in 2031 and a $250 million principal senior secured term loan due in 2028, for total proceeds received, net of discounts and debt offering expenses, of $993 million; and a $1.0 billion senior secured revolving credit facility scheduled to mature in April 2031. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;

•During fiscal 2026, we announced our intention to separate our Medical-Surgical Solutions segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced a definitive agreement under which Apollo Funds will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. This transaction is subject to regulatory approvals and customary closing conditions;

•On April 24, 2026, we terminated our 2022 revolving credit facility and our 364-Day credit facility and entered into a new Credit Agreement (the “2026 Credit Facility”) that provides a syndicated $5.0 billion senior unsecured credit facility with a $4.5 billion aggregate sublimit of availability in Canadian dollars, British pound sterling, and Euro. The 2026 Credit Facility is scheduled to mature in April 2031. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information; and

•On April 29, 2026, the Board approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion as of April 2026.

Trends and Uncertainties:

Government Policies

As described in “Item 1. Government Regulation” and “Item 1A - Risk Factors” in Part I of this Annual Report, our industry is highly regulated and is subject to risks and uncertainty caused by the volume and speed of changes to regulatory policies. Changes in regulatory posture and law may result in significant changes in healthcare policy, government funding of healthcare costs, and other laws affecting our operations, but the ultimate outcomes are difficult to predict.

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RESULTS OF OPERATIONS

Overview of Consolidated Results:

(In millions, except per share data)

Years Ended March 31,

2026

2025

Change

Revenues

$

403,430 

$

359,051 

12 

%

Gross profit

14,550 

13,323 

9 

Gross profit margin

3.61 

%

3.71 

%

(10)

bp

Total operating expenses

$

(8,338)

$

(8,901)

(6)

%

Total operating expenses as a percentage of revenues

2.07 

%

2.48 

%

(41)

bp

Other income, net

$

236 

$

202 

17 

%

Interest expense

(247)

(265)

(7)

Income before income taxes

6,201 

4,359 

42 

Income tax expense

(1,102)

(878)

26 

Reported income tax rate

17.8 

%

20.1 

%

(230)

bp

Net income

5,099 

3,481 

46 

Net income attributable to noncontrolling interests

(337)

(186)

81 

Net income attributable to McKesson Corporation

$

4,762 

$

3,295 

45 

%

Diluted earnings per common share attributable to McKesson Corporation

$

38.38 

$

25.72 

49 

%

Weighted-average diluted common shares outstanding

124.1 

128.1 

(3)

%

Any percentage changes displayed above which are not meaningful are displayed as zero percent.

bp - basis point

Revenues

Revenues increased for the year ended March 31, 2026 compared to the prior year largely due to market growth in our North American Pharmaceutical segment, including higher volumes primarily from retail national account customers. Market growth includes growing drug utilization and newly launched products, partially offset by branded to generic drug conversion and branded pharmaceutical price decreases. Revenue growth was also favorably impacted by growth in our Oncology & Multispecialty segment primarily due to higher specialty pharmaceutical sales.

Gross Profit

Gross profit increased for the year ended March 31, 2026 compared to the prior year primarily due to growth in our Oncology & Multispecialty segment, driven by the addition of providers in practice management and growth of specialty pharmaceuticals, and in our Prescription Technology Solutions segment driven by higher volumes.

Gross profit for the years ended March 31, 2026 and 2025 included gains of $23 million and $444 million, respectively, representing our share of antitrust legal settlements. We recognized these amounts within "Cost of sales" in the Consolidated Statements of Operations within our North American Pharmaceutical segment.

Gross profit for the years ended March 31, 2026 and 2025 also included a last-in, first-out (“LIFO”) credit of $210 million and charge of $82 million, respectively. The LIFO credit in fiscal 2026 was primarily due to brand deflation compared to the prior year charge which was primarily due to brand inflation. Refer to the “Critical Accounting Estimates” section included in this Financial Review for further information regarding the use of the LIFO method of accounting within our North American Pharmaceutical business.

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FINANCIAL REVIEW (Continued)

Gross profit for the year ended March 31, 2025 was impacted by an inventory impairment charge of $58 million related to restructuring initiatives to drive operational efficiencies and increase cost optimization efforts as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements in this Annual Report. We recorded this amount within "Cost of sales" in the Consolidated Statements of Operations within our North American Pharmaceutical segment.

Total Operating Expenses

A summary and description of the components of our total operating expenses for the years ended March 31, 2026 and 2025 is as follows:

•Selling, distribution, general, and administrative expenses (“SDG&A”): consists of personnel costs, transportation costs, depreciation and amortization, lease costs, professional fee expenses, administrative expenses, provision for bad debts and related recoveries, gains and losses on the sale of certain businesses, remeasurement charges to fair value less costs to sell, and other general charges.

•Claims and litigation charges, net: These charges include adjustments for estimated probable settlements related to our controlled substance monitoring and reporting, and opioid-related claims, as well as any applicable income items or credit adjustments due to subsequent changes in estimates. Legal fees to defend claims, which are expensed as incurred, are included within SDG&A.

•Restructuring, impairment, and related charges, net: Charges recorded under this component include those incurred for programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted, as well as long-lived asset impairments.

Years Ended March 31,

(Dollars in millions)

2026

2025

Change

Selling, distribution, general, and administrative expenses

$

8,096 

$

8,507 

(5)

%

Claims and litigation charges, net

(3)

108 

(103)

Restructuring, impairment, and related charges, net

245 

286 

(14)

Total operating expenses

$

8,338 

$

8,901 

(6)

%

Percent of revenues

2.07 

%

2.48 

%

(41)

bp

Any percentage changes displayed above which are not meaningful are displayed as zero percent.

bp - basis point

Total operating expenses and total operating expenses as a percentage of revenues decreased for the year ended March 31, 2026 compared to the prior year. Total operating expenses for the years ended March 31, 2026 and 2025 were affected by the following significant items:

Fiscal 2026

•SDG&A includes a net gain of $480 million related to the sale of our Norway disposal group. The net gain includes a $164 million loss related to the accumulated other comprehensive loss balances associated with this disposal. Of the total net gain recorded during the period, a gain of $503 million is included within Other and a net charge of $23 million is included within Corporate expenses, net;

•SDG&A includes net charges of $77 million related to our planned separation of the Medical‑Surgical Solutions segment;

•SDG&A was impacted by lower operating expenses from the completed divestiture of our Canadian retail disposal group in fiscal 2025, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report;

•SDG&A was impacted by higher operating expenses related to the acquisitions completed during fiscal 2026, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report; and

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•Restructuring, impairment, and related charges, net of $245 million, are discussed below under “Restructuring Initiatives” as well as Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.

Fiscal 2025

•SDG&A includes charges of $667 million to remeasure the sale of our Rexall and Well.ca businesses in Canada (“Canadian retail disposal group”) to fair value less costs to sell. The remeasurement adjustment includes a $48 million loss related to the accumulated other comprehensive loss balances associated with this disposal. Of the total charges recorded during the period, $605 million were included within our North American Pharmaceutical segment and $62 million were included within Corporate expenses, net;

•SDG&A includes a credit of $206 million related to the bankruptcy of our customer Rite Aid Corporation (including certain of its subsidiaries, “Rite Aid”);

•Claims and litigation charges, net primarily consists of a charge of $108 million related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report; and

•Restructuring, impairment, and related charges, net of $286 million, are discussed below under “Restructuring Initiatives” as well as Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.

Goodwill Impairment

We evaluate goodwill for impairment on an annual basis in the first fiscal quarter, and at an interim date if indicators of potential impairment exist. The annual impairment testing performed in fiscal 2026 and fiscal 2025 did not indicate any impairment of goodwill, and no goodwill impairment charges were recorded in fiscal 2026 and fiscal 2025. However, other risks, expenses, and future developments, such as government actions, increased regulatory uncertainty, and material changes in key market assumptions limit our ability to estimate projected cash flows, which could adversely affect the fair value of various reporting units in future periods. Refer to “Critical Accounting Estimates” included in this financial review for further information.

Restructuring Initiatives

We recorded restructuring, impairment, and related charges of $245 million and $286 million for the years ended March 31, 2026 and 2025, respectively. These charges were included in “Restructuring, impairment, and related charges, net” in the Consolidated Statements of Operations.

During the fourth quarter of fiscal 2026, we approved an initiative within our Prescription Technology Solutions segment to increase operational efficiencies and cost optimization efforts, with the intent of aligning with our long-term strategy. This initiative includes headcount reductions, the exit or downsizing of certain facilities, and other costs. We anticipate total charges between $200 million and $250 million, consisting primarily of employee severance and other employee-related costs, and facility and other exit-related costs, including long-lived asset impairments. We recorded immaterial charges in fourth quarter of fiscal 2026 associated with this initiative. This program is anticipated to be substantially complete by the end of fiscal 2029.

During the second quarter of fiscal 2025, we approved enterprise-wide initiatives to modernize and accelerate our technology service operating model, which were intended to improve business continuity, compliance, operating efficiency, and advance investments to streamline the organization. These initiatives include cost reduction efforts and support other rationalization efforts within Corporate, and the Medical-Surgical Solutions and North American Pharmaceutical segments to help realize long-term sustainable growth. We anticipate total charges related to these initiatives of $650 million to $700 million, consisting primarily of employee severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset impairments. These programs are anticipated to be substantially complete in fiscal 2028. For the year ended March 31, 2026, we recorded charges of $170 million related to the initiatives, which primarily includes facility, exit and other related costs as well as severance and other employee-related costs recorded within “Restructuring, impairment, and related charges, net” in the Consolidated Statement of Operations. For the year ended March 31, 2025, we recorded charges of $240 million related to the initiatives, which primarily included severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset impairments recorded within “Restructuring, impairment, and related charges, net” in the Consolidated Statement of Operations, and $58 million for the year

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ended March 31, 2025 related to inventory impairments recorded within “Cost of sales” in the Consolidated Statements of Operations.

Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for more information.

Other Income, Net

Other income, net increased for the year ended March 31, 2026 compared to the prior year primarily due to prior year charges of $87 million related to the termination of the U.K. pension plan, a prior year loss of $43 million related to one of our equity method investments, and a favorable year-over-year impact from interest income, partially offset by a prior year net gain of $101 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry.

Interest Expense

Interest expense decreased for the year ended March 31, 2026 compared to the prior year primarily due to changes in our derivative portfolio in fiscal 2026 and increased capitalized interest from higher capital spending, partially offset by interest from increased average balances of the Company’s loan portfolio in fiscal 2026. Interest expense may fluctuate based on timing, amounts, and interest rates of term debt repaid and new term debt issued, amounts and interest rates of commercial paper borrowings, as well as amounts incurred associated with financing fees. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for more information.

Income Tax Expense

We recorded income tax expense of $1.1 billion and $878 million for the years ended March 31, 2026 and 2025, respectively. Our income tax rates were 17.8% and 20.1% in 2026 and 2025, respectively.

Fluctuations in our reported income tax rates are primarily due to changes in our business mix of earnings between various taxing jurisdictions and recognized discrete tax items. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for more information.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the years ended March 31, 2026 and 2025 primarily represents the proportionate results of third-party equity interests in ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and SCRI Oncology, LLC.

Noncontrolling interests with redemption features, such as put rights, that are not solely within our control are considered redeemable noncontrolling interests, and are presented outside of stockholders’ deficit in our Consolidated Balance Sheet. During the year ended March 31, 2026, we initially recognized redeemable noncontrolling interests of $700 million and $25 million related to our acquisitions of Core Ventures and PRISM Vision, respectively. On a quarterly basis, we determine the fair value and redemption value of the redeemable noncontrolling interests. As a result of this valuation process, we recorded fair value adjustments to redeemable noncontrolling interests within additional paid-in capital. We also recorded an adjustment to redemption value of the redeemable noncontrolling interests for the year ended March 31, 2026, which was recorded within “Net income attributable to noncontrolling interests”. Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the consolidated financial statements included in this Annual Report for additional information on changes to our redeemable and noncontrolling interests during fiscal 2026.

The increase in net income attributable to noncontrolling interests was primarily driven by contributions from the Core Ventures and PRISM Vision acquisitions and higher volumes in our ClarusONE joint venture. Net income attributable to noncontrolling interest was also impacted by the $122 million charge to remeasure the redeemable noncontrolling interest balance for Core Ventures to redemption value.

Net Income Attributable to McKesson Corporation

Net income attributable to McKesson Corporation was $4.8 billion and $3.3 billion for the years ended March 31, 2026 and 2025, respectively. Diluted earnings per common share attributable to McKesson Corporation was $38.38 and $25.72 for the years ended March 31, 2026 and 2025, respectively. Our diluted earnings per share includes the cumulative effects of share repurchases during each period.

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FINANCIAL REVIEW (Continued)

Weighted-Average Diluted Common Shares Outstanding

Diluted earnings per common share was calculated based on a weighted-average number of shares outstanding of 124.1 million and 128.1 million for the years ended March 31, 2026 and 2025, respectively. Weighted-average diluted shares outstanding for fiscal 2026 decreased from the prior year primarily due to the cumulative effect of share repurchases, as discussed in the “Share Repurchases Plans” section of this Financial Review.

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FINANCIAL REVIEW (Continued)

Overview of Segment Results:

Segment Revenues:

Years Ended March 31,

(Dollars in millions)

2026

2025

Change

Segment revenues

North American Pharmaceutical

$

336,652 

$

304,507 

11 

%

Oncology & Multispecialty

48,423 

36,862 

31 

Prescription Technology Solutions

5,805 

5,216 

11 

Medical-Surgical Solutions

11,507 

11,380 

1 

Other

1,043 

1,086 

(4)

Total revenues

$

403,430 

$

359,051 

12 

%

Any percentage changes displayed above which are not meaningful are displayed as zero percent.

North American Pharmaceutical

North American Pharmaceutical revenues for the year ended March 31, 2026 increased $32.1 billion or 11% compared to the prior year. Within the segment, sales to U.S. pharmacies and healthcare providers increased $31.6 billion primarily due to higher volumes from retail national account customers, partially offset by branded to generic drug conversions and branded pharmaceutical price decreases.

Oncology & Multispecialty

Oncology & Multispecialty revenues for the year ended March 31, 2026 increased $11.6 billion or 31% compared to the prior year primarily driven by growth in provider solutions due to the addition of providers within practice management and higher specialty pharmaceutical sales.

Prescription Technology Solutions

Prescription Technology Solutions revenues for the year ended March 31, 2026 increased $589 million or 11% compared to the prior year due to increased volumes from our third-party logistics and higher technology services revenues.

Medical-Surgical Solutions

Medical-Surgical Solutions revenues for the year ended March 31, 2026 increased $127 million or 1% compared to the prior year. Within the segment, sales to ambulatory care customers increased $60 million driven by underlying business growth, sales to extended care customers increased by $53 million, and other sales increased by $14 million.

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Other Segment Expense, Segment Operating Profit, and Corporate Expenses, Net:

Years Ended March 31,

(Dollars in millions)

2026

2025

Change

Other segment expense, net (1)

North American Pharmaceutical (2)

$

332,994 

$

301,562 

10 

%

Oncology & Multispecialty (3)

47,274 

36,095 

31 

Prescription Technology Solutions

4,761 

4,341 

10 

Medical-Surgical Solutions (4)

10,569 

10,601 

— 

Other (5)

453 

1,032 

(56)

Total other expense, net

$

396,051 

$

353,631 

12 

%

Segment operating profit

North American Pharmaceutical

$

3,658 

$

2,945 

24 

%

Oncology & Multispecialty

1,149 

767 

50 

Prescription Technology Solutions

1,044 

875 

19 

Medical-Surgical Solutions

938 

779 

20 

Other

590 

54 

993 

Subtotal

7,379 

5,420 

36 

Corporate expenses, net (6)

(931)

(796)

17 

Interest expense

(247)

(265)

(7)

Income from continuing operations before income taxes

$

6,201 

$

4,359 

42 

%

Segment operating profit margin

North American Pharmaceutical

1.09 

%

0.97 

%

12 

bp

Oncology & Multispecialty

2.37 

2.08 

29 

Prescription Technology Solutions

17.98 

16.78 

120 

Medical-Surgical Solutions

8.15 

6.85 

130 

Other

56.57 

4.97 

5,160 

bp - basis point

(1)Other segment expense, net includes cost of sales, total operating expenses, and other income, net, for our reportable segments.

(2)Other segment expense, net for our North American Pharmaceutical segment includes the following:

•a credit of $210 million and a charge of $82 million for the years ended March 31, 2026 and 2025, respectively, related to the LIFO method of accounting for inventories;

•cash receipts for our share of antitrust legal settlements of $23 million and $444 million for the years ended March 31, 2026 and 2025, respectively;

•a charge of $605 million for the year ended March 31, 2025 to remeasure the assets and liabilities of our Canadian retail disposal group to fair value less costs to sell, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report;

•a credit of $206 million for the year ended March 31, 2025 to reassess the previously reserved prepetition balance related to the bankruptcy of our customer Rite Aid;

•restructuring charges of $59 million for the year ended March 31, 2025 for restructuring initiatives, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report; and

•a charge of $57 million for the year ended March 31, 2025 related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report.

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(3)Other segment expense, net for our Oncology & Multispecialty segment includes the following:

•charges of $96 million for the year ended March 31, 2026 related to the acquisition and integration of PRISM Vision and Core Ventures;

•a net gain of $51 million for the year ended March 31, 2026 related to the sale of an investment and market decisions; and

•a loss of $43 million for the year ended March 31, 2025 related to one of our equity method investments.

(4)Other segment expense, net for our Medical-Surgical Solutions segment includes the following:

•charges of $25 million for the year ended March 31, 2026 related to our planned separation of the Medical‑Surgical Solutions segment; and

•restructuring charges of $43 million and $204 million for the years ended March 31, 2026 and 2025, respectively, related to a broad set of initiatives to drive operational efficiencies and increase cost optimization efforts, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.

(5)Other segment expense, net for Other for the year ended March 31, 2026 includes a net gain of $503 million related to the sale of our Norway disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report.

(6)Corporate expenses, net includes the following:

•charges of $52 million for the year ended March 31, 2026 related to our planned separation of the Medical‑Surgical Solutions segment;

•a net charge of $23 million for the year ended March 31, 2026 related to the sale of our Norway disposal group as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report;

•a charge of $87 million for the year ended March 31, 2025 related to the termination of the U.K. pension plan as discussed in Financial Note 13, “Pension Benefits,” to the consolidated financial statements included in this Annual Report;

•a charge of $62 million for the year ended March 31, 2025 related to the effect of accumulated other comprehensive loss components from our Canadian retail disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report;

•a net gain of $101 million for the year ended March 31, 2025 related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, as discussed in Financial Note 15, “Fair Value Measurements,” to the consolidated financial statements included in this Annual Report;

•charges of $51 million for the year ended March 31, 2025 related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report; and

•restructuring charges of $158 million and $68 million for the years ended March 31, 2026 and 2025, respectively, for restructuring initiatives as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.

North American Pharmaceutical

Operating profit for this segment increased for the year ended March 31, 2026 compared to the prior year largely due to prior year remeasurement charges related to our Canadian retail disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report, higher pharmaceutical distribution volumes across the segment, a LIFO credit of $210 million in fiscal 2026 compared to a charge in the prior year period, and a prior year charge of $57 million related to our estimated liability for opioid-related claims. These increases were partially offset by a decrease in net cash proceeds received for our share of antitrust legal settlements, the prior year impact of the bankruptcy of Rite Aid, and an increase in operating expenses to support higher volumes.

Oncology & Multispecialty

Operating profit for this segment increased for the year ended March 31, 2026 compared to the prior year primarily due to growth in specialty pharmaceuticals, including contributions from FY26 business acquisitions, a net gain of $51 million related to the sale of an investment and market decisions, and a prior year loss of $43 million related to one of our equity method investments, partially offset by an increase in operating expenses to support higher volumes.

Prescription Technology Solutions

Operating profit increased for the year ended March 31, 2026 compared to the prior year primarily driven by higher demand for access solutions.

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FINANCIAL REVIEW (Continued)

Medical-Surgical Solutions

Operating profit increased for the year ended March 31, 2026 compared to the prior year primarily due to lower restructuring charges in fiscal 2026 compared to the prior year period and lower expenses resulting from business rationalization initiatives, partially offset by $25 million charges related to our planned separation of this segment and a decline in the contribution from our ambulatory care business.

Corporate

Corporate expenses, net increased for the year ended March 31, 2026 compared to the prior year primarily driven by higher restructuring charges in fiscal 2026, prior year gains of $101 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, a charge of $52 million related to our planned separation of the Medical‑Surgical Solutions segment, and charges related to the sale of our Norway disposal group as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report. These increases were partially offset by a prior year charge of $87 million related to the termination of the U.K. pension plan, lower litigation charges in the current year compared to prior year, and prior year remeasurement charges related to our Canadian retail disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report.

FOREIGN OPERATIONS

Our foreign operations represented approximately 4% of our consolidated revenues in each of fiscal 2026 and fiscal 2025, respectively. Foreign operations are subject to certain risks, including currency fluctuations. Refer to Item 1A - Risk Factors in Part I of this Annual Report for a risk factor related to fluctuations in foreign currency exchange rates, and risks from trade and tariffs. We monitor our operations and adopt strategies responsive to changes in the economic and political environment in each of the countries in which we operate. We conduct our business worldwide in local currencies, including the Canadian dollar. As a result, the comparability of our results reported in U.S. dollars can be affected by changes in foreign currency exchange rates. In discussing our operating results, we may use the term “foreign currency exchange fluctuations,” which refers to the effect of changes in foreign currency exchange rates used to convert the local currency results of our operations in foreign countries where the functional currency is not the U.S. dollar. We present this information to provide a framework for assessing how our business performed excluding the effect of foreign currency exchange rate fluctuations. In computing the foreign currency exchange fluctuations, we translate our current year results of our operations in foreign countries recorded in local currencies into U.S. dollars by applying their respective average foreign currency exchange rates of the corresponding prior year periods, and we subsequently compare those results to the previously reported results of the comparable prior year periods reported in U.S. dollars.

We completed the sale of our Norway disposal group and our Canadian retail disposal group in fiscal 2026 and 2025, respectively. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for more information.

Additional information regarding our foreign operations is also included in Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report.

BUSINESS COMBINATIONS

Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information.

FISCAL 2027 OUTLOOK

Information regarding the Company’s fiscal 2027 outlook is contained in the release of our fourth quarter fiscal 2026 financial results included as an exhibit to our Form 8-K furnished to the SEC on May 7, 2026, which is not incorporated by reference into this Annual Report. That Form 8-K should be read in conjunction with the cautionary statements in Item 1 - Business - Forward-Looking Statements and Item 1A - Risk Factors, in Part I of this Annual Report.

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FINANCIAL REVIEW (Continued)

CRITICAL ACCOUNTING ESTIMATES

We consider an accounting estimate to be critical if the estimate requires us to make assumptions about matters based upon past experience and management’s judgment that were uncertain at the time the accounting estimate was made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial condition or results from operations. Below are the estimates that we believe are critical to the understanding of our operating results and financial condition. Other accounting policies are described in Financial Note 1, “Significant Accounting Policies,” to the consolidated financial statements included in this Annual Report. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.

Allowances for Credit Losses: Our receivables primarily consist of short-term trade accounts receivable from customers that result from the sale of goods and services. We also provide customer financing arrangements to customers who purchase our products and services. Customer financing primarily relates to guarantees provided to our customers, or their creditors, regarding the repurchase of inventories. We also provide financing to certain customers related to the purchase of pharmacies, which serve as collateral for the loans. We estimate the receivables for which we do not expect full collection based on historical collection rates and specific knowledge regarding the current creditworthiness of our customers and record an allowance in our consolidated financial statements for these amounts.

We consider historical credit losses, the current economic environment, customer credit ratings, collections on past due amounts, legal disputes, and bankruptcies, as well as reasonable and supportable forecasts to develop our allowance for credit losses. Management reviews these factors quarterly to determine if any adjustments are needed to the allowance.

Sales to our ten largest customers, including group purchasing organizations (“GPOs”), accounted for approximately 73% of total consolidated revenues in fiscal 2026 and comprised approximately 43% of total trade accounts receivable at March 31, 2026. Sales to our largest customer, CVS Health Corporation (“CVS”), accounted for approximately 24% of our total consolidated revenues in fiscal 2026 and comprised approximately 21% of total trade accounts receivable at March 31, 2026. Sales to our next two largest customers accounted for 11% and 10% of total consolidated revenues in fiscal 2026. As a result, our sales and credit concentration is significant. We also have agreements with GPOs, each of which functions as a purchasing agent on behalf of member hospitals, pharmacies and other healthcare providers, as well as with government entities and agencies. The accounts receivable balances are with individual members of the GPOs, and therefore no significant concentration of credit risk exists. A material default in payment, a material reduction in purchases from GPOs or any other large customers, or the loss of a large customer or GPO could have a material adverse impact on our financial position, results of operations, and liquidity.

Reserve methodologies are assessed annually based on historical losses and economic, business, and market trends. In addition, reserves are reviewed quarterly and updated if unusual circumstances or trends are present. We believe the reserves maintained and expenses recorded in fiscal 2026 are appropriate and consistent in the context of historical methodologies employed, as well as assessment of trends currently available.

At March 31, 2026, trade and notes receivables were $24.5 billion prior to allowances of $204 million. Our provision for bad debts was a charge of $100 million, in fiscal 2026, a credit of $130 million in fiscal 2025, and a charge of $819 million in fiscal 2024, respectively. At March 31, 2026 and 2025, our allowance as a percentage of trade and notes receivables was 0.8% and 2.1%. The provision for bad debts for fiscal 2024 included a charge of $725 million within our North American Pharmaceutical segment related to the bankruptcy of our customer Rite Aid, as discussed in the Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report. This amount represented the uncollected trade accounts receivable balance due from Rite Aid prior to its bankruptcy petition filing in October 2023. During the year ended March 31, 2025, we reassessed our initial estimates made in conjunction with the previously reserved prepetition balances, including cash received during the period, resulting in a reversal of $206 million recorded within “Selling, distribution, general, and administrative expenses” in our Consolidated Statements of Operations and included within our North American Pharmaceutical segment. During the years ended March 31, 2026 and 2025, we released $483 million and $237 million, respectively, of uncollectible receivables related to the Rite Aid provision in the Consolidated Balance Sheets.

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FINANCIAL REVIEW (Continued)

An increase or decrease of a hypothetical 0.1% in the fiscal 2026 allowance as a percentage of trade and notes receivables would result in an increase or decrease in the provision for bad debts of approximately $25 million. The selected 0.1% hypothetical change does not reflect what could be considered the best or worst-case scenarios. Additional information concerning our allowances for credit losses may be found in Schedule II included in this Annual Report.

Inventories: Inventories consist of merchandise held for resale. We report inventories at the lower of cost or net realizable value, except for inventories determined using the LIFO method which are valued at the lower of LIFO cost or market. The LIFO method presumes that the most recent inventory purchases are the first items sold and the inventory cost under LIFO approximates market. The majority of the cost of domestic inventories is determined using the LIFO method. The majority of the cost of inventories held in foreign and certain domestic locations is based on the first-in, first-out (“FIFO”) method or weighted-average purchase prices. Rebates, cash discounts, and other incentives received from vendors relating to the purchase or distribution of inventory are considered product discounts and are accounted for as a reduction in the cost of inventory and are recognized when the inventory is sold.

In determining whether an inventory valuation allowance is required, we consider various factors including estimated quantities of slow-moving inventory by reviewing on-hand quantities, outstanding purchase obligations, and forecasted sales. Shifts in market trends and conditions, changes in customer preferences due to the introduction of generic drugs or new pharmaceutical products, or the loss of one or more significant customers are factors that could affect the value of our inventories. We write down inventories which are considered excess and obsolete as a result of these reviews. These factors could make our estimates of inventory valuation differ from actual results.

We believe the moving-average inventory costing method reasonably approximates current replacement cost (“Market”). Accordingly, LIFO inventories are carried at the lower of LIFO cost or Market. At March 31, 2026 and 2025, inventories, net, totaled $24.2 billion and $23.0 billion, respectively, with approximately 59% and 63% valued using LIFO. At March 31, 2026 and 2025, our LIFO reserves were $99 million and $309 million. LIFO reserves include both pharmaceutical and non-pharmaceutical products.

A LIFO charge is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines, including the effect of branded pharmaceutical products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory. We recognized a LIFO credit of $210 million in fiscal 2026, a LIFO charge of $82 million in fiscal 2025, and a LIFO credit of $157 million in fiscal 2024, all within “Cost of sales” in our Consolidated Statements of Operations. The LIFO credit in fiscal 2026 compared to a LIFO charge in fiscal 2025 was primarily due to significant brand deflation in the current fiscal year, compared to the prior fiscal year brand inflation. The LIFO charge in fiscal 2025 compared to a LIFO credit in fiscal 2024 was primarily due to higher brand inflation in fiscal 2025. Our LIFO valuation amount includes both pharmaceutical and non-pharmaceutical products.

Business Combinations: We account for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, including contingent consideration, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business. Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related costs are expensed as incurred.

Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we typically use a variation of the income approach, whereby a forecast of future cash flows attributable to the asset is discounted to present value using a risk-adjusted discount rate. Some of the more significant estimates and assumptions inherent in the income approach include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, and the assessment of the asset’s expected useful life. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information regarding our acquisitions.

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FINANCIAL REVIEW (Continued)

Certain business combinations involve the potential for future payments of consideration that is contingent upon the achievement of performance milestones or other agreed-upon events. The liability for the contingent consideration is measured at its fair value as of the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of projected operational and financial information, the probability of achievement of performance milestones or other agreed-upon events, and the risk-adjusted discount rate used to calculate the present value of the probability-weighted projected financial information. Contingent liabilities are remeasured to fair value at each reporting date until the liability is resolved with changes in fair value being recognized within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations included in this Annual Report. Changes in any of the inputs may result in a significant adjustment to the fair value.

Goodwill and Long-Lived Assets:

Goodwill

As a result of acquiring businesses, we have $11.3 billion and $10.0 billion of goodwill at March 31, 2026 and 2025, respectively, and $4.1 billion and $1.5 billion of intangible assets, net at March 31, 2026 and 2025, respectively.

We perform an impairment test on goodwill balances annually in the first fiscal quarter and more frequently if indicators for potential impairment exist. Indicators that are considered include significant declines in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, or a significant decline in the Company’s stock price and/or market capitalization for a sustained period of time.

Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or a component, one level below our operating segments, for which discrete financial information is available and where segment management regularly reviews the operating results of that reporting unit.

We apply the goodwill impairment test by comparing the estimated fair value of a reporting unit to its carrying value and an impairment charge is recorded equal to the amount of excess carrying value above the estimated fair value, if any, but not to exceed the amount of goodwill allocated to the reporting unit.

To estimate the fair value of our reporting units, we generally use a combination of the market approach and the income approach. Under the market approach, we estimate fair value by comparing the business to similar businesses, or guideline companies whose securities are actively traded in public markets. Under the income approach, we use a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate that is commensurate with the risk inherent within the reporting unit. In addition, we compare the aggregate of the reporting units’ fair values to our market capitalization as further corroboration of the reasonableness of our concluded fair values.

Estimates of fair value result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions at a point in time. Judgments made in determining an estimate of fair value may materially impact our results of operations. The valuations are based on information available as of the impairment testing date and are based on expectations and assumptions that have been deemed reasonable by management. Any material changes in key assumptions, including failure to meet business plans, negative changes in government reimbursement rates, deterioration in the U.S. and global financial markets, an increase in interest rates, or an increase in the cost of equity financing by market participants within the industry, or other unanticipated events and circumstances may decrease the projected cash flows or increase the discount rates and could potentially result in an impairment charge. Under the market approach, significant estimates and assumptions also include the selection of appropriate guideline public companies and the determination of appropriate valuation multiples to apply to the reporting unit. Under the income approach, significant estimates and assumptions also include the determination of discount rates. The discount rates represent the weighted-average cost of capital measuring the reporting unit’s cost of debt and equity financing, which are weighted by the percentage of debt and percentage of equity in a company’s target capital structure. Included in the estimate of the weighted-average cost of capital is the assumption of an unsystematic risk premium to address incremental uncertainty related to the reporting unit’s future cash flow projections.

The annual impairment testing performed for fiscal 2026, fiscal 2025, and fiscal 2024 did not indicate any impairment of goodwill.

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FINANCIAL REVIEW (Continued)

Refer to Financial Note 10, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements included in this Annual Report for additional information.

Long-Lived Assets

Currently, all of our identifiable intangible and other long-lived assets are amortized or depreciated based on the pattern of their economic consumption or a straight-line basis over their estimated useful lives, ranging from three to 26 years. We review intangible and other long-lived assets for impairment at an asset group level whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability of intangible and other long-lived assets is based on the lowest level of identifiable estimated future undiscounted cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset group over its fair value. Assumptions and estimates about future values and the remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.

Our ongoing consideration of all the factors described previously could result in further impairment charges in the future, which could adversely affect our net income. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for additional information on our long-lived asset impairments.

Long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell and are not depreciated or amortized. Fair value is determined based on the total consideration expected to be received by the Company. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale.

Restructuring Charges: We have certain restructuring reserves which require significant estimates related to the timing and amount of future employee severance and other exit-related costs to be incurred when the restructuring actions take place. We generally recognize employee severance costs when payments are probable and amounts can be reasonably estimated. Costs related to contracts without future benefit or contract termination are recognized at the earlier of the contract termination or the cease-use dates. Other exit-related costs are expensed as incurred. In connection with these restructuring actions, we also assess the recoverability of long-lived assets used in the business, and as a result, we may recognize accelerated depreciation and amortization reflecting shortened useful lives of the underlying assets. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for additional information on restructuring matters.

Income Taxes: Our income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax provision and in evaluating income tax uncertainties, including those used to conclude on the unrecognized tax position related to opioid-related litigation and claims, and may differ from the actual amounts of tax benefit recognized. We review our tax positions at the end of each quarter and adjust the balances as new information becomes available.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence including our past operating results, the existence of cumulative net operating losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions including the amount of future federal, state, and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Should tax laws change, our tax expense and cash flows could be materially impacted.

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FINANCIAL REVIEW (Continued)

In addition, the calculation of our tax liabilities includes estimates for uncertainties in the application of complex new tax regulations across multiple global jurisdictions where we conduct our operations.

We recognize liabilities for tax and related interest for issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and related interest will be due. If our current estimate of tax and interest liabilities is less than the ultimate settlement, an additional charge to income tax expense may result. If our current estimate of tax and interest liabilities is more than the ultimate settlement, a reduction to income tax expense may be recognized. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for additional information on income tax matters.

Loss Contingencies: We are subject to various claims, including claims with customers and vendors, pending and potential legal actions for damages, investigations relating to laws and regulations and other matters arising out of the normal conduct of our business. When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict, and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a material loss is reasonably possible, or probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided. Legal fees are expensed as incurred when the legal services are provided.

We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the potential loss or range of the loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on future negotiations with or decisions by third parties, such as regulatory agencies, the court system, and other interested parties.

In conjunction with the preparation of the consolidated financial statements included in this Annual Report, we considered matters related to ongoing controlled substances claims to which we are a party. At March 31, 2026, our estimated accrued liability for opioid-related claims was $5.7 billion. We are not able to reasonably estimate the upper or lower ends of the range of ultimate possible losses for all opioid-related litigation matters. We are not able to predict the outcome in these matters, and an adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our results of operations, financial position, and cash flows or liquidity. Refer to Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report for additional information.

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McKESSON CORPORATION

FINANCIAL REVIEW (Continued)

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

We expect our available cash generated from operations and our short-term investment portfolio, together with our existing sources of liquidity from our credit facilities, commercial paper program, and other borrowings will be sufficient to fund our short-term and long-term capital expenditures, working capital, and other cash requirements. At March 31, 2026, we remained adequately capitalized, including access to liquidity from our $4.0 billion revolving credit facility and $1.0 billion 364-day credit facility, and were in compliance with all debt covenants and believe we have the ability to continue to meet our debt covenants in the future. In April 2026, our revolving credit facility and 364-day credit facility were terminated and a new $5.0 billion revolving credit facility was executed, with a maturity date in April 2031. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information.

The following table summarizes the net change in cash, cash equivalents, and restricted cash for the periods shown:

Years Ended March 31,

(Dollars in millions)

2026

2025

Change

Net cash provided by (used in):

Operating activities

$

6,155 

$

6,085 

$

70 

Investing activities

(3,432)

(733)

(2,699)

Financing activities

(4,631)

(3,965)

(666)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

20 

(16)

36 

Net change in cash, cash equivalents, and restricted cash

$

(1,888)

$

1,371 

$

(3,259)

Operating Activities

Operating activities provided cash of $6.2 billion and $6.1 billion for the years ended March 31, 2026 and 2025, respectively. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers, inventory receipts, and payments to vendors. Additionally, working capital is primarily a function of sales and purchase volumes, inventory requirements, and vendor payment terms.

For the year ended March 31, 2026, net cash provided by operating activities increased by $70 million compared to the prior year period. This increase was primarily due to the following:

•the Company’s net income increased by $1.6 billion and was impacted by lower net non-cash items of $836 million, compared to the prior year period driven by factors discussed in more detail in the “Overview of Consolidated Results” section of this Financial Review;

•an increase in net cash of $1.9 billion related to accounts receivable primarily due to favorable timing of collections in the current period and the impact from branded pharmaceutical price decreases;

•a decrease in net cash of $4.0 billion related to accounts payable as a result of customary vendor payment scheduling, timing related to the day of the week on which the period ends, and the impact from branded pharmaceutical price decreases, partially offset by an increase in net cash of $1.2 billion due to higher inventory requirements during the period compared to the prior year; and

•an increase in net cash from other assets and liabilities primarily related to lower contract liability and customer rebate payments.

Investing Activities

Investing activities used cash of $3.4 billion and $733 million for the years ended March 31, 2026 and 2025, respectively. Investing activities for the March 31, 2026 included $3.4 billion of net cash payments for acquisitions, including $2.5 billion and $875 million for the acquisitions of the interests in Core Ventures and PRISM Vision, respectively, as discussed in further detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report.

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Investing activities for the year ended March 31, 2026 were also impacted by the receipt of proceeds from sales of businesses and investments of $830 million, including cash proceeds, net of cash divested, of $693 million from the completed divestiture of our Norway disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report. Investing activities for the year ended March 31, 2026 included $436 million and $309 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software.

Investing activities for the year ended March 31, 2025 included $537 million and $322 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software. Investing activities for the year ended March 31, 2025 were also impacted by the receipt of proceeds of $189 million related to investments in equity securities, as discussed in Financial Note 15, “Fair Value Measurements,” to the consolidated financial statements included in this Annual Report.

Financing Activities

Financing activities used cash of $4.6 billion and $4.0 billion for the years ended March 31, 2026 and 2025, respectively. Financing activities for the year ended March 31, 2026 included $4.8 billion of cash paid for share repurchases and $381 million of cash paid for dividends. Financing activities also included cash receipts and cash payments of $9.2 billion related to short-term borrowings of commercial paper in fiscal 2026.

On May 30, 2025, we completed a public debt offering of 4.65% Notes due May 30, 2030 in a principal amount of $650 million, 4.95% Notes due May 30, 2032 in a principal amount of $650 million, and 5.25% Notes due May 30, 2035 in a principal amount of $700 million, for total proceeds received, net of discounts and debt offering expenses, of $2.0 billion. The net proceeds from these notes in addition to cash on hand were utilized to fund the purchase of our interest in Core Ventures.

On November 14, 2025, our €600 million outstanding principal amount of 1.50% Notes matured and on December 3, 2025, our $500 million outstanding principal amount of 0.90% Notes matured, and were repaid using cash on hand.

Financing activities for the year ended March 31, 2025 included $3.1 billion of cash paid for share repurchases and $345 million of cash paid for dividends. Financing activities also included cash receipts and cash payments of $15.1 billion related to short-term borrowings of commercial paper in fiscal 2025. On September 10, 2024, we completed a public offering of 4.25% Notes due September 15, 2029 in a principal amount of $500 million. Proceeds received from this note issuance, net of discounts and offering expenses, were $496 million. We utilized the net proceeds from this note issuance along with cash on hand to redeem our $500 million outstanding principal amount of 5.25% Notes due February 15, 2026 prior to maturity at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest through the settlement date.

Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information.

Cash used for other financing activities generally includes shares surrendered for tax withholding and payments to noncontrolling interests.

Share Repurchase Plans

The Board has authorized the repurchase of common stock. We may repurchase common stock from time-to-time through open market transactions, privately negotiated transactions, accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934 (“Exchange Act”). The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, tax implications, restrictions under our debt obligations, other uses for capital, impacts on the value of remaining shares, cash generated from operations, and market and economic conditions.

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FINANCIAL REVIEW (Continued)

Excise taxes incurred on our share repurchases are direct and incremental costs to purchase treasury stock, and accordingly are included in the total cost basis of the common stock acquired and reflected as a reduction of stockholders’ equity within “Treasury shares” in our Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Deficit. Excise taxes do not reduce our remaining authorization for the repurchase of common stock. Excise taxes of $40 million and $26 million were accrued for shares repurchased during the years ended March 31, 2026 and 2025, respectively. On October 30, 2024, we made a payment of $25 million for fiscal 2024 excise taxes previously accrued. On July 30, 2025, we made a payment of $26 million for fiscal 2025 excise taxes previously accrued. As of March 31, 2026 and March 31, 2025, the amount accrued for excise taxes was $40 million, and $26 million, respectively, within “Other accrued liabilities” in our Consolidated Balance Sheets.

Information regarding the share repurchase activity over the last two fiscal years was as follows:

Share Repurchases (1)

(In millions, except price per share)

Total

Number of

Shares

Purchased (2)

Average Price

Paid Per Share

Approximate

Dollar Value of

Shares that May

Yet Be Purchased

Under the

Programs (3) (4)

Balance, March 31, 2024

$

6,615 

Share repurchase authorization increase in fiscal 2025

4,000 

Shares repurchased - Open market

5.8 

$

543.05 

(3,146)

Balance, March 31, 2025

7,469 

Shares repurchased - Open market

3.3 

$

753.61 

(2,500)

Shares repurchased - March 2026 ASR (5)

2.0 

$

940.91 

(2,250)

Balance, March 31, 2026

$

2,719 

(1)This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.

(2)The number of shares purchased reflects rounding adjustments.

(3)The remaining authorization outstanding for repurchases of common stock excludes $40 million and $26 million of excise taxes incurred on share repurchases for the years ended March 31, 2026 and 2025, respectively.

(4)In July 2024, the Board authorized the Company to repurchase with no expiration date up to an additional $4.0 billion shares of common stock. On April 29, 2026, the Board of Directors approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion of April 2026.

(5)In March 2026, the Company entered into an ASR program with a third-party financial institution to repurchase $2.3 billion of the Company’s common stock. The average price paid per share and total number of shares purchased under this program are estimates based on the initial share purchase price and initial delivery of shares under an ASR agreement and may differ from the average price paid per share and total number of shares purchased under the ASR program upon its final settlement in the first quarter of Fiscal 2027.

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Selected Measures of Liquidity and Capital Resources

March 31,

(Dollars in millions)

2026

2025

Cash, cash equivalents, and restricted cash

$

4,068 

$

5,956 

Working capital

(9,807)

(6,206)

Days outstanding for: (1)

Customer receivables

22 

22 

Inventories

24 

24 

Drafts and accounts payable

59 

57 

Debt to capital ratio (2)

128.0 

%

125.3 

%

(1)Based on year-end balances and sales or cost of sales for the last 90 days of the year.

(2)This ratio describes the relationship and changes within our capital resources, and is computed as the sum of total debt divided by the sum of total debt and McKesson stockholders’ deficit, which excludes noncontrolling interests and accumulated other comprehensive loss.

Cash equivalents, which are readily convertible to known amounts of cash, are carried at fair value. Cash equivalents are primarily invested in AAA-rated U.S. government money market funds, short-term deposits with financial institutions, and short-term commercial papers issued by non-financial institutions. Deposits with financial institutions are primarily denominated in U.S. dollars and the functional currencies of our foreign subsidiaries, including Canadian dollars. Deposits could exceed the amounts insured by the Federal Deposit Insurance Corporation in the U.S. and similar deposit insurance programs in other jurisdictions. We mitigate the risk of our short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.

Our cash and cash equivalents balance as of March 31, 2026 and 2025 included approximately $1.8 billion and $2.9 billion, respectively, of cash held by our subsidiaries outside of the U.S. Our primary intent is to utilize this cash for foreign operations for an indefinite period of time. Although the majority of cash held outside the U.S. is available for repatriation, doing so could subject us to foreign withholding taxes and state income taxes. We may remit foreign earnings to the U.S. to the extent it is tax efficient to do so. We do not anticipate the tax impact from remitting these earnings to be material. Following enactment of the 2017 Tax Cuts and Jobs Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes.

Working capital primarily includes cash and cash equivalents, receivables, inventories, and prepaid expenses, net of drafts and accounts payable, short-term borrowings, current portion of long-term debt, current portion of operating lease liabilities, and other accrued liabilities. Our businesses require substantial investments in working capital that are susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity and other requirements.

Consolidated working capital decreased at March 31, 2026 compared to the prior year primarily due to an increase in drafts and accounts payable from increased purchasing driven by increased sales and timing, a decrease in cash and cash equivalents, an increase in other accrued liabilities, and an increase in the current portion of long term debt. These were partially offset by an increase in receivables, net, and inventories, net, driven by higher sales and timing.

Our debt to capital ratio increased for the year ended March 31, 2026 compared to the prior year primarily due to share repurchases and dividend payments as well as repayments of long-term debt, partially offset by net income attributable to McKesson for fiscal 2026 and issuance of new long-term debt.

On July 29, 2025, we raised our quarterly dividend from $0.71 to $0.82 per share of common stock. Dividends were $3.17 per share in fiscal 2026 and $2.75 per share in fiscal 2025, and we paid total cash dividends of $381 million and $345 million in fiscal 2026 and fiscal 2025, respectively. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon our future earnings, financial condition, capital requirements, legal requirements, and other factors.

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FINANCIAL REVIEW (Continued)

Material Cash Requirements:

The table and information below presents our significant financial obligations and commitments as of March 31, 2026:

Years

(In millions)

Total

Within 1

Over 1 to 3

Over 3 to 5

After 5

On balance sheet

Total debt (1)

$

6,526 

$

1,267 

$

1,420 

$

1,399 

$

2,440 

Operating lease obligations (2)

2,477 

364 

667 

530 

916 

Other (3)

65 

8 

14 

13 

30 

Off balance sheet

Interest on borrowings (4)

1,550 

256 

444 

297 

553 

Purchase obligations (5)

10,252 

9,729 

297 

226 

— 

Other (6)

458 

136 

272 

9 

41 

Total

$

21,328 

$

11,760 

$

3,114 

$

2,474 

$

3,980 

(1)Represents maturities of the Company’s long-term obligations, including finance lease obligations. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for more information, including certain debt financing transactions which occurred subsequent to March 31, 2026 but are not included in the table above.

(2)Represents undiscounted minimum operating lease obligations under non-cancelable operating leases having an initial remaining term over one year and is not adjusted for imputed interest. Refer to Financial Note 9, “Leases,” to the consolidated financial statements included in this Annual Report for more information.

(3)Represents estimated benefit payments for our unfunded benefit plans and minimum funding requirements for our pension plans.

(4)Represents interest that will become due on our fixed rate long-term debt obligations.

(5)Primarily relates to the expected purchase of goods and services, including inventory and capital commitments, from vendors in the normal course of business.

(6)Includes agreements under which we have guaranteed the repurchase of our customers’ inventory and our customers’ debt in the event these customers are unable to meet their obligations to those financial institutions. Refer to Financial Note 16, “Financial Guarantees and Warranties,” to the consolidated financial statements included in this Annual Report for more information.

The material cash requirements table above excludes the following obligations:

At March 31, 2026, the Company had accrued liabilities of $5.7 billion related to the settlement of opioid-related litigation claims with U.S. governmental entities, including Native American tribes, and certain non-governmental plaintiffs as described in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report. The majority of this amount relates to opioid settlements payable to governmental entities in annual installments through 2038 pursuant to the schedule set forth in the agreements. As of March 31, 2026, $601 million is estimated to be paid within the next twelve months.

At March 31, 2026, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was approximately $1.2 billion. The ultimate amount and timing of any related future cash settlements cannot be predicted with reasonable certainty. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for additional information on income tax matters.

At March 31, 2026, our banks and insurance companies have issued $288 million of standby letters of credit and surety bonds. These were issued on our behalf and are mostly related to our customer contracts and to meet the security requirements for statutory licenses and permits, court and fiduciary obligations, pension obligations in Europe, and our workers’ compensation and automotive liability programs.

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FINANCIAL REVIEW (Concluded)

Capital Resources

We fund our working capital requirements primarily with cash and cash equivalents, proceeds from short-term borrowings from our commercial paper issuances, and longer-term credit agreements and debt offerings. Funds necessary for future debt maturities and our other cash requirements, including any future payments that may be made related to our total estimated litigation liability of $5.7 billion as of March 31, 2026 payable under the terms of various settlement agreements for opioid-related claims, are expected to be met by existing cash balances, cash flow from operations, existing credit sources, and future borrowings. Long-term debt markets and commercial paper markets, our primary sources of capital after cash flow from operations, are open and accessible to us should we decide to access those markets. Detailed information regarding our debt and financing activities is included in Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report.

We believe that our future operating cash flow, financial assets, and access to capital and credit markets, including our credit facilities, give us the ability to meet our financing needs for the foreseeable future. However, there can be no assurance that an increase in volatility or disruption in the global capital and credit markets will not impair our liquidity or increase our costs of borrowing.

RELATED PARTY BALANCES AND TRANSACTIONS

Information regarding our related party balances and transactions is included in Financial Note 19, “Related Party Balances and Transactions,” to the consolidated financial statements included in this Annual Report.

NEW ACCOUNTING PRONOUNCEMENTS

New accounting pronouncements that we have recently adopted, as well as those that have been recently issued but not yet adopted by us, are included in Financial Note 1, “Significant Accounting Policies,” to the consolidated financial statements included in this Annual Report.

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