Medline Q2 2026 earnings: Sales grew while fire losses pressured profit

Medline (Nasdaq: MDLN) reported fiscal Q2 2026 net sales of $7.685 billion, up 11.6% year over year, and diluted EPS attributable to Medline Inc. of $0.07 for the quarter ended June 27, 2026. Adjusted EBITDA rose 13.4% to $1.06 billion, but consolidated net income fell 58.3% as a distribution-center fire and higher expenses outweighed sales growth and a tariff refund benefit.

Core earnings data

Organic sales increased 11.5%, driven primarily by growth from existing customers and the implementation of customer contracts signed in 2025. Reported sales also reflected an $89 million reduction for accrued customer repayments associated with IEEPA tariff refunds.

Gross margin expanded, partly because Medline recorded $332 million of tariff refunds as a reduction in cost of goods sold. Operating margin nevertheless contracted sharply as total operating expenses rose 44.1%, including a $336 million loss related to the fire at the Tracy, California distribution center.

Adjusted EBITDA and adjusted diluted EPS are non-GAAP measures. Net income attributable to noncontrolling interests was $79 million, explaining the difference between consolidated net income and the amount attributable to Medline Inc.

Business and segment performance

Supply Chain Solutions generated most of the company’s incremental revenue, but its earnings growth lagged sales growth. Medline Brand posted slower sales growth but substantially higher adjusted EBITDA, with all tariff-refund effects recorded in that segment.

Supply Chain Solutions’ 70-basis-point margin decline indicates that rapid revenue growth did not translate proportionately into segment earnings. Corporate and other expenses also increased to $211 million from $156 million.

During the first six months of 2026, Medline secured more than 65% of its annual goal for new customer signings, measured by estimated annual contract value.

Tariff refunds lifted adjusted results while the Tracy fire hit GAAP profit

The IEEPA tariff accounting and the Tracy fire largely explain why GAAP net income declined while adjusted EBITDA increased. Medline recognized $332 million of tariff refunds through lower cost of goods sold and accrued $89 million of related customer repayments through lower net sales, producing a net benefit of $243 million.

That $243 million benefit remained in both net income and adjusted EBITDA. By contrast, the $336 million Tracy distribution-center fire loss, recorded before expected insurance recoveries, was included among the non-core charges added back in the adjusted EBITDA reconciliation.

Consequently, Q2 adjusted EBITDA benefited from the tariff refund while excluding the fire loss. Higher sales also supported adjusted EBITDA, but higher operating expenses and tariff-related costs provided partial offsets.

Cash flow and balance sheet

For the first six months of 2026, operating cash flow increased 28.2% to $1.127 billion from $879 million. Free cash flow rose 37.1% to $920 million after $207 million of capital spending, primarily for distribution-center automation and investments in kitting manufacturing facilities.

At June 27, cash and cash equivalents were $2.327 billion, up from $1.939 billion at the end of 2025, while inventories declined to $4.665 billion from $4.769 billion. Medline reported net debt of $10.073 billion and net leverage of 2.9 times adjusted EBITDA.

Full-year 2026 guidance

Medline raised its organic sales outlook because of existing and new customer demand but lowered its adjusted EBITDA range. Management attributed the profit revision to greater-than-expected inflation associated with the Middle East conflict, additional operational investments, quality remediation spending and softness in the retail channel.

The organic sales outlook reflects the tariff-related customer repayments. The adjusted EBITDA outlook excludes the benefit from IEEPA tariff refunds, unlike the reported Q2 adjusted EBITDA result.

Recent insider transactions

Recent filings included one direct executive purchase alongside several direct and indirect sales. The reported transactions establish the amounts and ownership form but do not disclose the insiders’ motives.

Risks investors should monitor

• Distribution-network disruption: The Tracy fire produced a $336 million loss before expected insurance recoveries and demonstrates the financial effect that disruption at a critical facility can have.
• Cost pressure despite revenue growth: Higher operating expenses, tariffs and inflation contributed to lower GAAP profitability and the reduced adjusted EBITDA outlook.
• Uneven segment economics: Supply Chain Solutions grew sales 16.3%, but adjusted EBITDA increased only 1.5% and its margin contracted.
• Execution spending and channel softness: Quality remediation, investments needed to support customer demand and retail-channel softness are incorporated into the lower profit guidance.
• Comparability of adjusted results: Q2 adjusted EBITDA included the $243 million net tariff refund benefit, while the full-year outlook excludes that benefit.

Summary

Medline’s Q2 revenue growth reflected existing-customer demand and the rollout of prior contract wins, but the Tracy fire and rising operating costs caused GAAP profit to decline. Tariff refunds supported gross margin and adjusted EBITDA, creating a meaningful difference between reported and adjusted performance. The main issues ahead are whether customer-driven sales growth can translate into better segment margins and whether Medline can manage inflation, remediation costs and operational investment within its reduced EBITDA outlook.