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    ELV
    Earnings call· Jun 2026(Q2 FY26)

    Elevance Health Q2 FY26 earnings call ELV

    Jul 15, 2026 Source

    Executive summary

    Elevance Health Q2 FY26 — Raised EPS Guidance and Strategic Investments

    Elevance Health delivered strong second-quarter results, prompting a raise in its full-year adjusted EPS guidance to at least $27. The company is accelerating strategic investments in medical cost management, member engagement, and provider connectivity, funded by a nonrecurring benefit. Management remains confident in achieving at least 12% adjusted EPS growth in 2027, driven by broad-based performance across its diversified portfolio, despite ongoing dynamics in the Medicaid segment.

    Highlights

    5

    • Adjusted diluted EPS of $7.45 exceeded outlook, driven by favorable benefit expense performance and disciplined execution.

    • Full-year 2026 adjusted diluted EPS guidance raised to at least $27.

    • Medicare Advantage performance improved significantly due to deliberate portfolio actions, favorable claims experience, and care management programs, on track for at least 2% operating margin.

    • Individual ACA business performance developed consistent with plans, with encouraging member retention and favorable 2025 risk adjustment results.

    • Carelon performance is in line with expectations, scaling value-based solutions and becoming a durable driver of enterprise growth.

    Concerns

    2

    • Medicaid operating margin outlook remains prudent at approximately negative 1.75% for the full year, with elevated cost trends persisting.

    • Elevance Health expects to exit additional Medicaid markets over the next 12 to 18 months where sustainable performance is not achievable, following the exit from DC Medicaid market.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Adjusted Diluted EPS
    at least $27
    high materiality
    High
    2027 Adjusted EPS Growth
    at least 12%
    high materiality
    High
    2026 Earnings Baseline for Modeling
    at least $26
    high materiality
    High
    Full-year Medicaid Operating Margin
    approximately negative 1.75%
    medium materiality
    Medium
    Full-year Medicare Advantage Operating Margin
    at least 2%
    high materiality
    High
    Full-year 2026 Adjusted Operating Expense Ratio
    upper half of guidance range
    medium materiality
    Medium
    Q3 Adjusted EPS as % of Full-Year Guidance
    approximately 17%
    low materiality
    High
    Full-year 2026 Operating Cash Flow
    at least $6 billion
    high materiality
    High
    Individual ACA Members
    at least 1 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Medicaid
    Full year operating margin outlook remains prudent and unchanged. Second half margin profile expected to improve from Q2 due to favorable July 1st rate activity and execution against cost pressures. Cost drivers remain elevated in behavioral health, specialty pharmacy, outpatient surgery, and emergency department utilization. 2026 is viewed as the trough year for margins.
    		———approximately negative 1.75%
    Medicare Advantage
    Results were stronger than expected, contributing to outperformance. Deliberate portfolio actions for 2026 are translating to improved performance, disciplined plan design, focused product mix, and favorable claims experience. On track to achieve at least 2% operating margin this year. 2027 bid submissions emphasized sustainable value and appropriate returns.
    		———at least 2%
    Individual ACA
    Performance developing broadly consistent with pricing and planning. Higher mix of Bronze plans creates more pronounced seasonality. Prudence applied by reestablishing majority of prior year favorability in current year risk adjustment accrual. Expects to end 2026 with at least 1 million members.
    Member retention: modestly ahead of expectationsFinal 2025 CMS risk adjustment results: favorable to prior estimate
    		————

    Operational metrics

    13
    Adjusted Diluted EPS
    $7.45
    Q2 FY26

    Exceeded outlook for the quarter.

    Net Below-the-Line Benefit
    $0.80
    Q2 FY26

    Intended to fund one-time investments in the second half of the year.

    Operating Outperformance
    $0.50
    Q2 FY26

    Reflected solid execution and diversified earnings contributors.

    EPS from Targeted Investment Spending
    $0.75
    FY26

    Included in the 2026 outlook from Q1, part of the ongoing run rate of the business.

    CMS Initial Remittance
    $342 million
    Q2 FY26

    Related to a matter discussed last quarter; estimate of potential total financial exposure remains unchanged. Matter is now closed with CMS.

    Days in Claims Payable (DCP)
    45.4up 2.9 days year-over-year
    June 30, 2026

    Reflects consistent and prudent reserving levels.

    Operating Revenue
    $49.8 billionincrease of 0.8% year-over-year
    Q2 FY26

    Total operating revenue for the quarter.

    Medical Members
    44.9 million
    Q2 FY26

    Sequential change primarily driven by non fee-based customer transition and attrition in individual ACA and Medicaid.

    Medicaid Revenue Run Rate
    $57 billion
    Annualized

    Analyst-cited figure for context on potential market exits.

    Medicaid Rate Updates
    mid-single-digit percent rangetowards the upper end of mid-single digits
    July 1, 2026

    Favorable rate activity, higher than anticipated, moving in the right direction.

    Behavioral Health Program Cost Savings
    10%
    Ongoing

    Achieved through stronger member engagement and fewer adverse events in Carelon's programs.

    CareBridge Medical Savings
    mid-teens
    Ongoing

    Generated for members in Carelon's CareBridge program, which extends whole health model into the home.

    Medicaid Expansion and Waiver Members Impacted by Work Requirements
    20%
    Future

    Expected impact from work requirements, which are anticipated to be phased and manageable.

    Industry KPIs

    6
    MetricValueDetails
    Utilization trendselevated
    Stars rate environmentcore enterprise priorities
    Client retention new winsclimbing from prior years
    Membership covered lives by line44.9 millionmembers
    Adjusted EPS EBITDA leverage guidanceat least $27USD
    Medical cost trend vs pricing assumptionstill outpacing program funding

    Deals & partnerships

    1
    District of Columbiadivestiture

    Reached a mutual agreement to exit the DC Medicaid market as part of a strategic assessment of markets where sustainable performance is not seen.

    Risks & headwinds

    5
    Dynamic Medicaid operating environmentFY26

    Full year operating margin outlook of approximately negative 1.75%

    Mitigation: Disciplined management, targeted actions against known areas of elevated trends, and strategic market exits where sustainable performance is not achievable.

    Elevated cost drivers in MedicaidOngoing through H2 FY26

    Concentrated in behavioral health, specialty pharmacy, outpatient surgery, and emergency department utilization

    Mitigation: Clinical oversight, enhanced payment integrity, earlier interventions in behavioral health, and network management.

    Medicaid market exitsNext 12 to 18 months

    Expect to exit additional Medicaid markets

    Mitigation: Regularly assessing each market based on strategic fit, operational requirements, and ability to generate appropriate return on capital.

    Medicaid acuity pressure from eligibility dynamics2027

    Incremental acuity pressure

    Mitigation: Not viewed as a broad-based reset comparable to post-PHE unwind; acuity shift largely behind them. Focus on utilization patterns among remaining members.

    Underlying medical cost trend outpacing program funding in Medicare AdvantageOngoing

    Outpacing program funding

    Mitigation: Submitted 2027 bids with a prudent view of trend and continued focus on sustainable margin improvement.

    Q&A highlights

    7

    Clarify the expected trajectory of Medicaid margins in the back half of the year, given the -1.75% full-year outlook, and provide more color on the criteria and sizing of planned Medicaid market exits.

    Management expects second-half Medicaid margins to improve from Q2 due to favorable July 1st rate activity and continued execution on cost pressures. Market exits are based on strategic fit, operational requirements, and appropriate return on capital, not solely on current year performance, and are targeted actions to ensure long-term sustainability.

    “we do expect the second half Medicaid margin profile to improve from the second quarter, and that's going to be supported by that favorable July 1st rate activity as well as our continued execution against the cost pressures that we've been discussing.”

    asked by Albert Rice · answered by Mark Kaye

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Investments for Long-Term Performance

    Elevance Health is accelerating investments in capabilities to strengthen long-term performance, focusing on earlier detection of medical cost trends, precise clinical intervention, simpler member experiences, and better provider connectivity. These investments are funded by a nonrecurring $0.80 per share benefit from valuation adjustments in net investment income. Key initiatives include enhancing data and AI-enabled tools for faster identification of cost pressures and implementing clinical oversight and payment integrity interventions.

    02

    Medicaid Portfolio Management and Outlook

    The Medicaid environment remains dynamic, with the company managing it with discipline. The full-year framework for Medicaid operating margin of approximately negative 1.75% remains prudent, supported by stronger-than-expected rate updates and broadly aligned membership and acuity assumptions. Elevance Health views 2026 as the trough year for Medicaid margins, with expected improvement over time⏳ due to better rate alignment and maturing care management actions. The company is also undertaking targeted portfolio actions, including exiting the DC Medicaid market and planning additional exits over the next 12-18 months where sustainable performance is not achievable.

    03

    Medicare Advantage and Individual ACA Performance

    Medicare Advantage performance exceeded expectations, driven by deliberate actions to reposition the portfolio, disciplined plan design, a focused product mix, and favorable claims experience, supporting a path to at least a 2% operating margin for the year. The Individual ACA business is developing as planned, with encouraging member retention and a broadly aligned risk pool. The company has incorporated favorable 2025 CMS risk adjustment results but is prudently reestablishing the majority of this favorability in its 2026 accrual, given evolving market dynamics and member mix.

    04

    Carelon's Role in Enterprise Growth

    Carelon's performance is consistent with expectations, scaling solutions for complex and chronic needs. Behavioral health programs, for example, have delivered 10% cost savings on average through earlier identification, appropriate care connections, and coordinated services. CarelonRx is seeing strong demand for its integrated medical and pharmacy offerings in the 2027 selling season, while Carelon Services continues to invest in its platform and scale newer, risk-based programs, positioning Carelon as an increasingly important driver of enterprise growth.

    05

    Commercial Business and Market Resonance

    The commercial market is focused on affordability and experience, aligning with Elevance Health's differentiated offerings. The integrated medical and pharmacy model is resonating, with strong demand for patient advocacy, behavioral health, and digital engagement capabilities. The company noted a record year in its national account business in 2026, with a similarly large pipeline for 2027, and is even winning back customers who had previously left for alternative payers, indicating strong market acceptance of its value proposition.

    AI-generated summary of the company’s earnings call. Not investment advice.