How WBA (Walgreens Boots Alliance) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a healthcare and retail pharmacy giant like WBA (formerly Walgreens Boots Alliance) makes money is essential for investors and anyone interested in the business of pharmacy-led health and wellness retailing. In this post, we break down WBA's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick WBA Overview

WBA operates one of the world’s largest pharmacy chains, providing prescription drugs, health and wellness products, and retail merchandise through thousands of stores in the US and internationally. Revenue comes primarily from retail pharmacy sales, prescription fulfillment, and health services.
The company’s business segments include US retail pharmacy, US healthcare, and international operations, though in Q2 2025, all reported revenue was attributed to "Other Revenue by Geography," reflecting a consolidated reporting structure.

Revenue Breakdown

• Total Revenue (Q2 2025): $39.0B (+7.2% YoY)
  • Other Revenue by Geography: $39.0B (100% of total)
  • International Total Revenue: $0.0B 0%
  • US Healthcare Revenue: $0.0B 0%
  • US Total Revenue: $0.0B 0%
• Growth is powered by expansion in retail pharmacy sales and increased prescription volumes, as well as ongoing investments in health services.

Gross Profit and Margins

• Gross Profit: $6.51B (16.7% gross margin)
  • Cost of Revenue: $32.5B (+8.7% YoY)
  • WBA maintains moderate margins due to its high-volume retail model and competitive pricing, offset by operational efficiencies in store management and supply chain.
• Most costs come from product procurement (prescription drugs, retail merchandise) and store operations.

Operating Income and Expenses

• Operating Income: $53M (-52.3% YoY, 0.1% margin)
• Operating Expenses: $6.45B (+1.7% YoY)
  • R&D: Not separately disclosed for Q2 2025
  • SG&A: $6.49B (+1.6% YoY, 16.7% of revenue) — includes store payroll, corporate overhead, and marketing
  • WBA continues to control costs while expanding health services and digital capabilities, but faces margin pressure from competitive pricing and inflation in operating costs.

Net Income

• Pre-Tax Income: $75M (flat YoY, 0.2% margin)
• Income Tax: $126M (168% effective tax rate, impacted by discrete tax items and adjustments)
• Net Income: $175M (flat YoY, 0.4% net margin)
• WBA converts a modest portion of sales into profit due to the scale of its retail operations and ongoing cost management, but faces headwinds from high operating expenses and tax adjustments.

What Drives WBA's Money Machine?

• Retail Pharmacy Sales: 100% of revenue in Q2 2025, driven by prescription fulfillment and over-the-counter health products.
• Prescription Volume: Over 1 billion prescriptions filled annually, supporting steady revenue growth.
• Investment in Health Services: Strategic investments in clinics and digital health platforms to diversify revenue streams.
• Future Growth Areas: Expansion into primary care and digital health, though these segments are not yet profitable and are reported as part of consolidated revenue.

Visualizing WBA's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, only 0.4% of revenue drops to the bottom line, reflecting the challenges of margin expansion in retail pharmacy.

Key Takeaways

• WBA's money comes overwhelmingly from retail pharmacy sales and prescription fulfillment
• Moderate gross and net margins illustrate the scale-driven, competitive nature of WBA's business model
• Heavy investment in health services and digital transformation, balanced by efficiency in operating costs
• Ongoing growth is driven by prescription volume, store expansion, and health services diversification

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FAQ About WBA's Income Statement

1. What is the main source of WBA's revenue in 2025?

WBA generates over 100% of its revenue from retail pharmacy sales and prescription fulfillment in Q2 2025. Other segments, such as US Healthcare and International, were not separately reported for this quarter.

2. How profitable is WBA in Q2 2025?

WBA reported net income of $175M in Q2 2025, with a net margin of approximately 0.4%, reflecting modest profitability driven by scale but challenged by high operating costs and tax adjustments.

3. What are the largest expense categories for WBA?

The biggest expenses on WBA's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs, which reached $6.49B in Q2 2025 (16.7% of revenue). R&D is not separately disclosed, but SG&A includes store payroll, corporate overhead, and marketing.

4. Why does the health services segment operate at a loss?

Health services, though a strategic growth area, posted an operating loss due to aggressive investment in clinics, digital platforms, and primary care expansion. WBA believes these investments will drive long-term growth—even if the division is unprofitable today.

5. How does WBA's effective tax rate compare to previous years?

WBA's effective tax rate in Q2 2025 was 168%, significantly higher than previous years. This unusually high rate is primarily due to discrete tax items and adjustments, including impacts from share-based compensation and international tax structuring.