What are the underlying medical cost trends, how were MA/Part D bids for FY27, and is GLP-1 a meaningful growth driver or primarily leveraging existing assets?

Steven Nelson noted strong Aetna performance across all businesses, with Medicare ahead of expectations due to disciplined pricing and medical cost management. He confirmed a similar disciplined approach for FY27 MA/Part D bids. David Joyner and Prem Shah explained GLP-1 strategy: managing costs in funded programs (Caremark/Aetna) and expanding direct-to-consumer cash-pay options (MinuteClinic, CVS Pharmacy) through partnerships with Lilly and Novo, seeing it as a significant opportunity for PCW. “This is an opportunity that we see in PCW that generated some of the strength that you saw in the quarter and as well as you'll see in the back half of this year. But it's a tremendous opportunity for us to create solutions that consumers are asking for and really leverage our 9,000 community pharmacy destinations and created in a manner in which consumers assets.”

Does the FY27 EPS outlook include share repurchases? How sustainable is the strong Pharmacy and Consumer Wellness (PCW) growth given Rite Aid benefits might normalize, and what about CVS Cost Manager and gross margins?

Brian Newman clarified that the FY27 outlook only assumes offsetting dilution, not share repurchases. Prem Shah attributed PCW strength to a multi-pronged approach: improved service (best NPS), empowered colleagues (30,000 pharmacists for clinical services), and sustainable reimbursement via CVS Cost Manager. He stated the business aims to grow faster than the market by creating unique solutions and leveraging operating leverage across 9,000 stores, also noting strong front-store sales growth. “But our expectations for the business is that we'll continue to create unique solutions that customers want with high service levels that allow us to grow faster than market as it relates to this business.”

CVS

CVS Health (CVS) Q2 FY26 earnings call: guidance and Q&A

Q: How is the commercial risk business performing relative to target margins, and what is the impact of the No Surprises Act's independent dispute resolution (IDR) process?

Steven Nelson stated the commercial business is a strong performer, in line with expectations, and priced for elevated trends seen in 2024. He noted strong growth despite pricing discipline, attributing it to innovative product services and Caremark integration. Regarding IDR, he said it's a component of trend that has been accounted for, but the process is being 'abused by a small group of players,' frustrating self-funded employers, and CVS seeks to work with regulators to rectify it. “But as others have called out, it is definitely not playing out as a tenant. No surprises at was put in for a reason to keep patients out of the middle and literally not surprise them. So we support that, but the dispute resolution process is clearly being abused by a small group of players.”

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 5, 2026

Source: earnings call transcript

Executive summary

CVS Health Q2 FY26 — Strong Performance Drives Raised Full-Year Outlook

CVS Health delivered strong Q2 FY26 results, with all segments growing earnings and exceeding expectations, leading to a significant raise in full-year adjusted EPS and cash flow guidance. The company is leveraging its integrated assets, technology, and AI to enhance consumer and provider experiences, particularly in GLP-1 management and claims processing. While facing headwinds in the 340B program and Caremark membership for FY27, management remains confident in its long-term mid-teens adjusted EPS CAGR target, driven by Aetna's margin recovery, specialty pharmacy strength, and retail momentum.

Highlights

Adjusted operating income grew over 35% to approximately $5.2 billion in Q2 FY26.
Adjusted EPS increased over 40% to $2.58 in Q2 FY26.
Full-year 2026 adjusted EPS guidance raised by $0.60 to a range of $7.90 to $8.10.
Full-year 2026 cash flow from operations guidance raised by $2 billion to at least $11.5 billion.
Health Care Benefits segment delivered over $2 billion of year-over-year improvement in adjusted operating income.

Concerns

The 340B business experienced pressure in Q2 FY26 and is expected to be a headwind in FY27.
Caremark expects membership declines in FY27 due to disciplined client renewals and health plan market exits.
The exit from the individual exchange business in FY26 drove a 700,000 member decline year-over-year in Health Care Benefits.
Regulatory-related price reductions and generic drug introductions largely offset revenue increases in Pharmacy and Consumer Wellness.
The No Surprises Act's independent dispute resolution (IDR) process is being abused by a small group of players, frustrating self-funded employers.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Adjusted EPS	$7.90 to $8.10 high materiality	FY26	High
Full-year 2026 Cash flow from operations	at least $11.5 billion high materiality	FY26	High
Full-year 2026 Total revenues	at least $414 billion medium materiality	FY26	High
Full-year 2026 Health Care Benefits adjusted operating income	$5.03 billion to $5.37 billion high materiality	FY26	High
Full-year 2026 Health Care Benefits MBR	89.75% +/- 25 basis points high materiality	FY26	High
Full-year 2026 Pharmacy and Consumer Wellness adjusted operating income	at least $6.4 billion medium materiality	FY26	High
Full-year 2026 Health Services adjusted operating income	reiterated medium materiality	FY26	High
Full-year 2026 Enterprise adjusted operating income	$16.58 billion to $16.92 billion high materiality	FY26	High
Full-year 2027 Adjusted EPS	at least $8.44 high materiality	FY27	Medium
Adjusted EPS CAGR	mid-teens high materiality	2025 through 2028	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Health Care Benefits Revenue increase primarily driven by government business, partially offset by individual exchange exit. Adjusted operating income and MBR improved meaningfully YoY. Core performance exceeded expectations, largely in Medicare due to strong medical cost management and disciplined pricing. Medicaid and commercial businesses performed in line with expectations. Medical membership: 26 million members (Q2 end)Medical membership change: -700,000 YoYMedical Benefit Ratio (MBR): 87.4%MBR impact from risk adjustment/PYD: 140 bps ($500 million)	Over $37 billion	Over 3%	—	Approximately $2.4 billion
Health Services Revenue increase primarily driven by pharmacy drug mix and brand inflation, partially offset by pharmacy client price improvements. Adjusted operating income increase driven by improved purchasing economics, pharmacy drug mix, and modest improvement in health care delivery, partially offset by pharmacy client price improvements. Experienced pressure in 340B business, offset by broader Caremark outperformance including higher specialty generic penetration rates. Health care delivery revenue growth: Nearly 23% YoY	Nearly $52 billion	Over 11%	—	Over $1.7 billion
Pharmacy and Consumer Wellness Revenue driven by pharmacy drug mix, increased prescription volume (including Rite Aid transaction), and brand inflation, largely offset by regulatory-related price reductions, generic drug introductions, and pharmacy reimbursement pressure. Adjusted operating income increase driven by core pharmacy strength and Rite Aid contributions, partially offset by business investments and consumer dynamics. Same-store total revenues: modestly increasedSame-store pharmacy sales: Approximately 3% growthSame-store prescription volumes: 7% increaseSame-store front store sales: 100 bps increase	Nearly $34 billion	Slight increase	—	Nearly $1.5 billion

CVS operating KPIs by quarter

CVS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Employees	300K+ Two, our over 300,000 colleagues who reflect the backgrounds and experiences of all Americans and the communities we serve. Source: earnings call transcript	300K+ This is personal for me, my leadership team and the more than 300,000 CVS Health colleagues that work tirelessly every day to earn the trust of the customers we serve. Source: earnings call transcript	300K+ Our future is bright because of the work of our more than 300,000 colleagues who take care of their friends, families and neighbors and communities across our country. Source: earnings call transcript	300K Our leadership team and our 300,000 colleagues work hard every day to make it better and to realize our ambition of becoming America's most trusted health care company. Source: earnings call transcript	—	—	—
Medical members Health Care Benefits	~27.1M Medical membership of approximately 27.1 million was roughly flat sequentially as membership in our Individual Exchange business started to modestly decline in advance of the 2025 rate increases we took in that book. Source: earnings call transcript	~27.1M Medical membership of approximately 27.1 million was flat sequentially as declines in our individual exchange and Medicare businesses were largely offset by growth in our commercial fee-based business. Source: earnings call transcript	~26.7M We ended the quarter with medical membership of approximately 26.7 million, which was flat sequentially and decreased approximately 445,000 members from the prior year quarter. Source: earnings call transcript	~26.6M We ended the year with approximately 26.6 million medical members, a slight decline sequentially and a decrease of approximately 500,000 members from the prior year. Source: earnings call transcript	~26M We ended the quarter with approximately 26 million medical members, which declined sequentially by approximately 600,000 members. Source: earnings call transcript	~26M Medical membership as of quarter end of approximately 26 million members remain consistent sequentially and declined approximately 700,000 members from the prior year quarter. Source: earnings call transcript	—
Medical care ratio Health Care Benefits	94.8% Our medical benefit ratio of 94.8% increased 630 basis points from the prior year quarter. Source: earnings call transcript	87.3% Our medical benefit ratio of 87.3%, decreased 310 basis points from the prior year. Source: earnings call transcript	92.8% Our medical benefit ratio was 92.8%, a decrease of 240 basis points from the prior year quarter results of 95.2%. Source: earnings call transcript	94.8% Our medical benefit ratio in the quarter was 94.8%, consistent with the prior year quarter. Source: earnings call transcript	84.6% Adjusted operating income in the quarter was approximately $3 billion, and our medical benefit ratio was 84.6%. Source: earnings call transcript	87.4% Adjusted operating income in the quarter was approximately $2.4 billion, and our medical benefit ratio was 87.4%, both of which improved meaningfully from the prior year quarter as we continue to execute on our margin recovery. Source: earnings call transcript	+2.8 pt
Medical members Commercial	—	—	—	~18M Andrew, so on respect to our commercial membership, we serve about 18 million members. Source: earnings call transcript	18M And we have 18 million members in our commercial book. Source: earnings call transcript	—	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Eli Lilly Partnership for cash-pay pricing and same-day pickup for Zepbound and Mounjaro patients directly through CVS Health's app or in stores.

Builds on existing relationship with Novo Nordisk for Wegovy, expanding convenient access to GLP-1 therapies.

Novo Nordisk Existing relationship to dispense oral and injectable Wegovy.

Makes CVS Pharmacy a convenient, affordable destination for all FDA-approved GLP-1s.

Rite Aid Transaction completed last year, contributing to prescription volume growth.

Contributed to the strong performance of the Pharmacy and Consumer Wellness segment.

Risks & headwinds

340B program dynamics and pressure Q2 FY26 and FY27

Experienced pressure in Q2 FY26, expected headwind in FY27.

Mitigation:Closely monitoring the environment, working with covered entities (CEs) to navigate program dynamics, and focusing on ensuring value and lowest net cost for clients. Also impacted by large specialty drugs becoming generic.

Caremark membership declines FY27

Trending to a retention rate slightly lower than historical performance, more consistent with industry norms.

Mitigation:Took a disciplined and prudent approach to the selling season to ensure appropriate underwriting and contracts for new business and renewals. Specialty pharmacy business and robust generic portfolio are expected to partially offset these headwinds.

Regulatory-related price reductions and generic drug introductions Q2 FY26

Largely offset revenue increases in Pharmacy and Consumer Wellness.

Mitigation:Focus on core pharmacy strength and cost management to mitigate impact.

Pharmacy reimbursement pressure Q2 FY26

Impacted Pharmacy and Consumer Wellness revenue.

Mitigation:CVS Cost Manager program launched to drive more sustainable pharmacy reimbursement and align with payers on value.

Unconstitutional laws in states like Arkansas and Tennessee Ongoing

Will make care more expensive, less accessible, and more complicated for patients.

Mitigation:Challenging these laws.

No Surprises Act Independent Dispute Resolution (IDR) process abuse Ongoing

Process is being abused by a small group of players, frustrating self-funded employers.

Mitigation:Working with administration and state regulators to resolve the issue. Proactively bringing certain providers into the network at reasonable rates to get ahead of disputes.

What to watch in Q3 FY26

Caremark membership retention rate

Next quarter

Current trending to a retention rate that's slightly lower than our historical performance

Target Stabilization or improvement towards historical levels

Why it matters

Indicates the impact of disciplined underwriting and market dynamics on Caremark's client base, affecting future revenue and profitability.

As we went into 2027, we took a disciplined and prudent approach to the selling season to ensure they have the right underwriting and contracts in place for the new business and renewals that we had. And at this point in the year, we're trending to a retention rate that's slightly lower than our historical performance. more consistent with industry norms.

Find out whether CVS delivers this. Inve re-checks your case every morning.

Q&A highlights

How will CVS offset anticipated 340B headwinds and manage growth in HSS, considering formulary conversion and specialty dynamics, to maintain its growth trajectory?

Brian Newman reiterated confidence in the mid-teens EPS CAGR for 2025-2028, setting a preliminary FY27 adjusted EPS floor of $8.44. Prem Shah detailed 340B pressure and a more disciplined selling season leading to slightly lower retention rates for Caremark in FY27. He highlighted specialty pharmacy strength, generic pipeline, and innovative solutions like Core Davis biosimilar savings as offsets. David Joyner emphasized Aetna's momentum, retail strength, technology/AI investments, and GLP-1 strategy as enterprise-wide offsets.

“Overall, I would say we definitely wanted to pull forward the headwinds tailwinds early. But again, talking about the fact that we have some pressure in our PBM at the moment, is more than offset by the strength that we have across the enterprise.”

asked by Michael Cherny · answered by J. Joyner

3 min read 6 chapters

Detailed narrative

GLP-1 Strategy and Market Opportunity

CVS Health is positioning itself as a leader in supporting patients utilizing GLP-1s for weight loss, focusing on affordability, access, and convenience. Caremark is taking formulary actions to increase availability at lower costs for employers. For consumers seeking access outside traditional benefits, CVS offers a direct-to-consumer platform, including MinuteClinic's virtual weight management for $29 and cash-pay options for GLP-1 therapies as low as $149.

New partnerships with Eli Lilly and existing relationships with Novo Nordisk enable convenient access and fulfillment for FDA-approved GLP-1s through the CVS Health app or in stores, leveraging the role of pharmacists and omnichannel capabilities.

Technology and AI Investment for Enhanced Experience

The company is making significant investments in technology and AI, viewing it as central to its differentiation and value proposition. This includes the targeted launch of the Health 100 platform and the AI-powered assistant IO, designed to simplify the consumer experience.

AI is also being deployed to improve operational efficiency, such as reducing claims processing time by over 20% with an AI-enabled claims assist manager, and streamlining prior authorizations (83% approved in real-time, over 95% within 24 hours). These efforts aim to reduce friction for consumers and providers while maintaining human touch and privacy.

Aetna's Continued Margin Recovery and Performance

Aetna has demonstrated strong performance, delivering over $2 billion of year-over-year improvement in adjusted operating income. This progress is attributed to strengthened clinical programs, improved operations, and disciplined cost management and pricing. The Medicare business, in particular, exceeded expectations due to strong medical cost management and disciplined pricing, with less membership contraction than anticipated.

The company remains confident in Aetna's continued momentum towards target margins over the next couple of years, applying the same disciplined approach to FY27 bids.

Caremark's PBM Transition and Specialty Pharmacy Strength

Caremark is leading the industry's transition towards net cost price models, expecting acceleration due to recent legislation and regulatory developments. While facing pressure in the 340B business and anticipating membership declines in FY27 due to a disciplined selling season, the specialty pharmacy business remains a key strength.

It boasts high generic penetration rates, adherence rates above 90%, and has generated significant savings for clients, such as $1.8 billion from biosimilar HUMIRA through Core Davis. The focus remains on managing drug trends and reducing costs for clients.

Pharmacy and Consumer Wellness Momentum and Strategy

The Pharmacy and Consumer Wellness segment continues to build momentum, delivering strong results with a 10% increase in adjusted operating income. This is driven by core pharmacy strength, increased prescription volumes (including contributions from the Rite Aid transaction), and 3% same-store pharmacy sales growth.

The strategy involves improving service levels (achieving best NPS), empowering pharmacists for clinical services, and utilizing the CVS Cost Manager program to drive more sustainable pharmacy reimbursement and consistent margin profiles. Strong front-store sales growth of 100 basis points also contributed to performance.

Provider Partnership and Friction Reduction

CVS Health is actively working to become the partner of choice for providers by addressing key friction points in the healthcare system. This includes reducing prior authorization burdens, streamlining claims, and improving access to real-time patient information. Initiatives like the AI-enabled claims assist manager, which reduces processing time by over 20%, and the Aetna clinical collaboration program, which embeds nurses in hospitals for care transitions, are designed to enhance connectivity, improve coordination, and build trust with providers.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.