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Fortune 500

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The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

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The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

Fortune Sector Leaders: Health Care

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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WMA 2024-CVS

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

WMA-2023-CVS

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-CVS Health

The health retail, pharmacy, and insurance conglomerate is the largest company ever to be led by a female CEO; Karen Lynch has been chief executive since Feb. 2021. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than anticipated, prompting the company to lower its earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

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The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-CVS Health

The health retail, pharmacy, and insurance conglomerate led by Karen Lynch is one of the nation’s two biggest health care companies. It’s also the biggest company ever to be led by a female CEO. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than expected, prompting the company to pull back on earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-27-CVS

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-10-CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year ended December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS announced a minimum wage increase to $15 an hour, effective July 2022.

Fortune collaborated with the Diligent Institute to rank the most innovative boards of directors among S&P 500.

Modern Board 2022-CVS Health

CVS, the retail and pharmacy giant that ranks fourth on the <a href="https://fortune.com/fortune500/">Fortune</a> 500, scored high on gender equality, board independence, and ESG. Karen Lynch was named CEO in February 2021 and <a href="https://fortune.com/2021/10/04/cvs-ceo-karen-lynch-stores-health-care-super-clinics/">has said the company</a> is “pivoting to become more central to America’s health care.” The company recently made the decision to <a href="https://fortune.com/2021/08/04/cvs-minimum-wage-t15-an-hour/">raise its minimum wage</a> to $15. 
 
CVS counts the former CEOs of Chiquita Brands; AT&amp;T; Becton, Dickinson; Johnson &amp; Johnson; PCS Health Systems; and Applied Biosystems among its directors. The board also has two members with high-level government experience: Nancy-Ann DeParle is the former deputy chief of staff and director of the White House Office of Health Reform, and Mary Schapiro is a former chairman of the Securities and Exchange Commission. 
 
Editor's note: An earlier version of this post misspelled the name of Nancy-Ann DeParle.

Fortune Modern Board 25

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CTW.1122. CVS Aetna

CVS-owned Aetna last year launched an effort to reduce suicide attempts. Its clinicians began asking mental health screening questions of most members, rather than querying only those who showed risk of self-harm; it also reached out to high-risk youth. Aetna has seen an 18% decrease in suicide attempts since 2019 among its 16.3 million adult members with behavioral health coverage—a promising start.

Change the World

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year that ended in December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS has announced a minimum wage increase to $15 an hour, effective July 2022.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-007-CVS

CVS embedded itself on the front lines of the COVID pandemic as one of the central hubs for distributing vaccines to local communities. In the first quarter of 2021 alone, the company, now fully integrated with health insurer Aetna following a mammoth $69 billion acquisition, produced more than $69 billion in revenues. In 2020, revenue grew $12 billion compared to the previous year. Karen Lynch, who became CEO in February 2021, believes that “millions of new customers will engage with CVS Health for the first time through testing and vaccine administration.” The company’s upbeat guidance for 2021, meanwhile, relies on pharmacy sales, rather than retail, to carry the revenue growth.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-04-CVS Health

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-013-CVS-Health

The drug store chain-slash-health care juggernaut got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February. Former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-005-CVS-Health

The drug store chain-slash-health care juggernaut leapt three spots on this year's Fortune 500—and got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February; former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

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Headquartered in Woonsocket, R.I., CVS Health owns the country’s largest pharmacy chain with more than 9,000 physical locations found mostly in the Northeastern U.S. The publicly traded corporation is comprised of more than 300,000 employees and offers pharmacy services, health and beauty products, convenience foods, and other services like photo printing. CVS Health didn’t start adding pharmacies to new stores until 1967, but since then has acquired large companies in the health space such as Aetna, Signify Health, and Oak Street Health to boost its primary care offerings and develop its own insurance arm. Other subsidiaries of CVS Health include benefit services manager CVS Caremark and MinuteClinic, a walk-in health clinic for vaccinations, health screenings, and other quick appointments.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

David Joyner

President and Chief Executive Officer, CVS Health®

Sree Chaguturu, MD

Executive Vice President and Chief Medical Officer, CVS Health®

Thomas F. Cowhey

Executive Vice President and Chief Financial Officer of CVS Health®

Sam Khichi

Executive Vice President, Chief Policy Officer and General Counsel, CVS Health®

Tilak Mandadi

Executive Vice President, Ventures and Chief Digital, Data, Analytics and Technology Officer, CVS Health®

Larry McGrath

Executive Vice President, Chief Strategy Officer and Chief Strategic Advisor to the CEO of CVS Health®

Michelle Peluso

Executive Vice President and Chief Customer and Experience Officer, CVS Health®

Mike Pykosz

Executive Vice President and President of Health Care Delivery, CVS Health®

Prem Shah

Executive Vice President, Chief Pharmacy Officer, and President of Pharmacy and Consumer Wellness, CVS Health®

CVS Health (CVS): Company Profile, Stock Price, News, Rankings

legacy

CVS Health

cvs health

Hello, and welcome to CVS Health's Second Quarter twenty twenty five Earnings Call. Would now like to pass

morning, and welcome to the CVS Health second quarter twenty twenty five earnings call and webcast. I'm Larry McGrath, chief strategy officer. I'm joined this morning by David Joyner, president and chief executive officer, and Brian Newman, chief financial officer. Following our prepared remarks, we'll host a question and answer session that will include additional members of the leadership team. Our press release and slide presentation have been posted to our website along with our Form 10 Q filed this morning with the SEC.

Today's call is also being broadcast on our website where it will be archived for one year. During this call, we'll make certain forward looking statements. Our forward looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from currently projected results. We strongly encourage you to review the reports we file with the SEC regarding these risks and uncertainties, in particular, those that are described in the cautionary statement concerning forward looking statements and risk factors in our most recent annual report on Form 10 ks, our quarterly report on Form 10 Q filed this morning, and our recent filings on Form eight k, including this morning's earnings press release. During this call, we'll use non GAAP measures when talking about the company's financial performance and financial condition, and you can find a reconciliation of these non GAAP measures in this morning's press release and in the reconciliation document posted to the investor relations portion of our website.

With that, I'd like to turn the call over to David. David?

Thank you, Larry, and good morning, everyone. This morning, we are pleased to report another consecutive quarter of solid results as we execute against our ambition of becoming America's most trusted health care company. In the second quarter, we delivered adjusted operating income of $3,800,000,000 and adjusted earnings per share of a dollar 81. We again increased our full year 2025 adjusted EPS guidance to a range of $6.30 to $6.4 up from our previous range of $6 to $6.2 Our strong results and updated expectations reflect the power of our diversified business. We are seeing the impact of our intense focus on the execution within our Aetna and pharmacy businesses while managing incremental pressure in health care delivery.

We are encouraged by our enterprise performance and revised outlook, especially in this very dynamic environment. At the same time, we continue to maintain a prudent and respectful outlook for the remainder of the year with clear opportunities for outperformance. Ryan will provide specifics later in the call. As we focus on delivering against our financial commitments to you, we are also taking on the largest challenges in health care, affordability, access, and inconsistent care coordination. The breadth of these problems means that they can't be addressed with a fragmented piecemeal approach.

Instead, it requires holistic solutions implemented by companies with the necessary reach, capabilities, and focus to execute on them. CVS holds a unique position in health care with our diverse and scaled businesses, our national footprint of community health destinations, and the deep connections we have with more than 185,000,000 consumers. We have unmatched reach and powerful insights that drive our innovation and differentiated solutions. Tackling these challenges requires that each of our businesses be best in class. I'm pleased to report that we are making meaningful progress in the Aetna business.

Our recovery has been a top priority. We realigned the organization and strengthened our talent with a clear focus on creating distinction in the marketplace. We enhanced our operations using technology to automate and streamline processes that improve service and reduce friction for our members and health care professionals. We're starting to see the results of these efforts, delivering better experiences while also allowing us to better navigate this elevated utilization environment. But our work is not done.

As we look ahead, we will maintain this intense focus, continuing to diligently execute against our margin recovery plan. While we are pleased with the improvements we are seeing at Aetna, we continue to see pressure in our health care delivery business driven by higher medical benefit ratios at Oak Street. This is partially offset by continued positive performance at Signify Health. Value based care remains a critical component of our Medicare Advantage strategy as we know that it delivers better clinical outcomes, better patient experiences, and a lower total cost of care. We are working with urgency to further strengthen this business and ensure seniors can benefit from this industry leading model.

This includes improving operations through investments in technology, enhancing leadership with talent from across CVS Health, and improving our partnerships with our payer clients. We know that Oak Street capabilities are best in class and are taking the right actions to improve performance. Let me turn now to our pharmacy businesses. At Caremark, we are delivering on our commitments to clients and members by doing what PBMs do best, adapting to client needs, driving down drug costs, and helping to deliver better access and outcomes. Managing trend remains the most important focus for our customers as they try to balance the benefit of new drug innovations and their higher cost.

Our PBM is saving consumers and clients billions of dollars a year on drug costs, but we must continue to innovate and drive more savings. For example, our clients needed a solution as they experienced the impact of the rapid growth and the use of GLP ones. Spend in this category for our employer clients has nearly doubled over the last two years and now represent 15% of their pharmacy costs. On July 1, we took a significant step to create competition among manufacturers to lower cost in this drug category. We used our unique capabilities to minimize friction, resulting in over ninety five percent of the eligible members adopting a preferred formulary weight loss product.

However, we know drug therapy alone is not enough to achieve the best outcomes. To address this, we offer a powerful weight management program that empowers patients to achieve greater weight loss than drug therapy alone. Importantly, our program participants on average achieved double digit percent weight loss at twelve months regardless of the drug they use. Our innovation, reach, and clinical capabilities differentiate us in the PBM marketplace. We're having a strong start to the 2026 selling season with retention expected to be in the high nineties.

Our approach and commitment to lowering cost is also leading to new wins with the most sophisticated clients. For example, in our new business win with CalPERS, they specifically highlighted our commitment to delivering more affordable drug benefits and our performance based model that emphasizes managing pharmacy cost and ensuring clinical quality. In our retail pharmacy business, we are working tirelessly to be the source of stability as we ensure the communities we serve across America maintain access to their medications. PCW delivered another strong quarter despite persistent reimbursement pressures. Our performance is a direct result of our ability to anticipate market dynamics and take the right actions to lead the industry.

We've made deliberate investments in technology and our colleagues to strengthen our operations, deliver best in class service, and ensure we are the employer of choice in the pharmacy market. Our front store business continues to improve as we grow our customer base and gain retail share. We continue to have best in class generic drug purchasing through Red Oak, and we share those savings with our payer partners through our CVS cost advantage model. Under this new model, we are fairly reimbursed for every script we dispense and the value we provide to our customers. We are encouraged by the transition of our commercial scripts to CVS CostVantage, which continues to be in line with our expectations.

We're making good progress on the next stage of evolving the pharmacy reimbursement model as we transition our government business to cost based pricing models for 2026. This quarter, we made a number of important announcements as we strive towards our goal of improving the health care experience in America. Last month, we announced our pledge with CMS to streamline, simplify, and reduce unnecessary complexities in health care. We've taken a leading role in the industry's initiative to improve prior authorization and deliver a better experience for providers and patients. But we're not stopping there.

We've taken steps to make the prior authorization process simpler for patients undergoing cancer care. We are bundling multiple requests into one upfront approval, eliminating unnecessary complexity. Response to this initiative has been encouraging, and we're working hard to expand the program to additional therapeutic areas. We also recently announced that over the next decade, we committed $20,000,000,000 to support our transformation of health care. We will deliver a better health care experience with reduced friction, greater visibility, and a stronger partnership with doctors and hospitals.

By delivering on these ambitions, we'll enable providers to focus on patient care instead of administrative tasks. Members will benefit from the clearer communication and simpler health care journeys. We will develop new ways to connect the health care landscape so it works better for people. We will use emerging technologies to innovate and drive the transformation of the health care experience of today, making it unrecognizable in ten years. Our investments will allow us to drive change at scale and will empower consumers with the right information to engage on their terms.

We look forward to sharing additional updates and innovations in the near future. We are building momentum as we navigate what continues to be dynamic and evolving environment. We're strengthening our position as we execute against our strategic priorities and deliver solid results. We remain focused on building trust and are setting expectations that are appropriate and achievable and continue to focus on areas where we can drive outperformance. With that, I'd like to hand the call over to Brian. Brian?

Thank you, David, and good morning. I wanna start off by saying how excited I am to be part of CVS Health and this leadership team. I joined CVS Health because I truly believe in the meaningful impact we can have on improving health care in this country. Our scale and deep consumer touch points uniquely position us to deliver a differentiated experience. After my first couple of months, my belief in our enterprise mission has been consistently reaffirmed.

I am looking forward to meeting many of you over the course of the next few months and sharing updates about our progress. In my prepared remarks this morning, I will cover three primary areas. First, I will provide an update on our second quarter results. Next, I'll discuss cash flow and the balance sheet. And finally, I'll wrap up with our financial outlook for the remainder of the year.

CVS Health successfully navigated another dynamic quarter driven by the strength of our execution. Let me provide some highlights on our enterprise performance. Second quarter revenues of nearly $99,000,000,000 increased approximately 8% over the prior year quarter driven by revenue growth across all segments. We delivered adjusted operating income of approximately $3,800,000,000 during the quarter, an increase of nearly 2% from the prior year quarter driven by increases in our health care benefits and pharmacy and consumer wellness segments, partially offset by a decline in our health services segment. Second quarter adjusted EPS of a dollar 81 was relatively consistent with the prior year quarter.

Finally, we generated year to date cash flow from operations of approximately $6,500,000,000. Turning now to each of our segments. In health care benefits, we generated over $36,000,000,000 of revenue in the quarter, an increase of over 11% from the prior year, primarily driven by increases in our government businesses, largely related to the impact of the inflation reduction act on the Medicare Part D program. Medical membership of approximately 26,700,000 as of the end of the quarter decreased by approximately 350,000 members sequentially, primarily driven by the previously discussed declines in our individual exchange product early in the second quarter. Adjusted operating income in the quarter was approximately $1,300,000,000 an increase of nearly 40% from the prior year quarter, driven by the favorable year over year impact of changes to our individual exchange risk adjustment estimates, improved underlying performance in our government businesses, and higher favorable prior period development.

These increases were partially offset by a premium deficiency reserve in our group Medicare Advantage business of approximately $470,000,000. Trends in our group MA business remained elevated during the quarter and were modestly higher than our expectations. This resulted in a revision of our estimate for trends for the remainder of the 2025 plan year, triggering a PDR. As we previously discussed, group MA contracts tend to be multiyear agreements and reprice less frequently than our individual MA business. We expect to make progress on margin recovery in our group MA book over the next few years as contracts come due for renewal, including the opportunity to reprice approximately half of our group MA revenue in 2026.

Our medical benefit ratio during the quarter was 89.9%, an increase of 30 basis points from the prior year. This increase primarily reflects a 140 basis point impact from the group MAPDR, largely offset by the favorable year over year impact of changes in our individual exchange risk adjustment and estimates. During the quarter, we received final 2024 risk adjustment data for our individual exchange business. As a result, we decreased our risk adjustment payable for the 2024 plan year by approximately $300,000,000. We experienced favorable development across all lines of business during the quarter, predominantly related to fourth quarter twenty twenty four and first quarter twenty twenty five dates of service.

When the favorable prior year development is combined with the favorable risk adjustment, it largely offsets the impact of the group MA PDR within the quarter. In our Medicare business, while trends remained elevated, performance in the quarter was modestly ahead of expectations. This outperformance was again primarily in our individual Medicare Advantage business driven by favorability within our supplemental benefit offerings and Part d. We continue to remain cautious on the outlook for Part d until we have additional experience given the substantial changes in plan liability in 2025. Across our other Aetna lines of business, results were broadly in line with our expectations.

There were no changes to the expectations embedded in the PDR we recorded last quarter related to our individual exchange business, although we continue to closely monitor emerging cost trends in this book. Days claim payable at the end of the quarter was approximately forty point nine days, down approximately two days sequentially, primarily driven by a higher mix of pharmacy costs, partially offset by the impact of the group MA premium deficiency reserve recorded in the quarter. We remain confident in the adequacy of our reserves. Shifting now to our health services segment. During the quarter, we generated revenues of over $46,000,000,000, an increase of over 10% year over year.

This increase was primarily driven by pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements. Adjusted operating income in the quarter of approximately $1,600,000,000 decreased approximately 18 from the prior year quarter, primarily driven by continued pharmacy client price improvements and the impact of a higher medical benefit ratio within our health care delivery business, partially offset by improved purchasing economics and pharmacy drug mix. As we discussed last quarter, results in our pharmacy services business can see material fluctuations throughout the year. In 2024, we we saw a strong performance in the second quarter following a slow start to the year, which impacts the prior year comparison. In our health care delivery business, total revenues in the quarter grew approximately 19% compared to the same quarter last year, excluding the impact of our exit from the ACO REACH program and the sale of our MSSP business earlier this year.

This increase was primarily driven by patient growth at Oak Street and increased volumes at Signify. During the quarter, we continued to expand the number of patients served at Oak Street and ended the quarter with total at risk membership up 31% from the same period last year. Results in our health care delivery business were pressured during the quarter primarily due to a higher medical benefit ratio at Oak Street Health. These pressures were partially offset by another quarter of solid performance in Signify, driven by continued strong volumes. Our pharmacy and consumer wellness segment delivered another strong quarter as our focus on operational excellence and technological enhancements continues to enable us to deliver superior experiences for our customers.

During the quarter, we generated revenues of over $33,000,000,000, an increase of over 12% versus the prior year quarter and over 15% on a same store basis. These increases were primarily driven by pharmacy drug mix and increased prescription and front store volume, including some early impact from the acquisition of a portion of Rite Aid scripts, partially offset by continued pharmacy reimbursement pressure. Retail pharmacy script share in the quarter grew to approximately 27.8%, an increase of approximately 60 basis points from the same period last year. Same store pharmacy sales in the quarter grew over 18% compared to the prior year, and same store prescription volumes increased over 6%. Same store front store sales increased over 3% versus the prior year quarter, primarily driven by higher volumes as well as the timing of the Easter holiday, which contributed roughly one percentage point.

Adjusted operating income increased nearly 8% from the prior year to over $1,300,000,000, primarily driven by increased prescription and front store volume, partially offset by continued pharmacy reimbursement pressure. Turning now to cash flow and the balance sheet. We generated cash flows from operations of approximately $6,500,000,000 in the first half of the year. We have distributed approximately $1,700,000,000 in dividends to our shareholders year to date, and we ended the quarter with approximately $2,400,000,000 of cash at the parent and unrestricted subsidiaries. While our leverage ratio remains above our long term targets, it has improved meaningfully since year end twenty twenty four, and we remain pleased by our progress.

We continue to expect our leverage ratio to return to more normalized levels as we maintain disciplined financial policies and make progress on margin recovery in the Aetna business. CVS Health's strong cash flow generation has been an important strength for the enterprise, which I will look to build upon by seeking opportunities to drive greater efficiency in working capital. As I step into this role, I will ensure that we maintain a disciplined and balanced approach to capital deployment. This is critical as we continue to strengthen our balance sheet and make progress towards our leverage target. Shifting now to our revised outlook for 2025.

We are increasing our full year 2025 guidance for adjusted EPS to a range of $6.30 to $6.40. This update incorporates our second quarter performance while maintaining a prudent outlook on medical cost trends and macro factors for the remainder of the year. We now expect full year total revenues of at least $391,500,000,000, an increase of approximately $9,000,000,000 driven by increases across all segments. In our health care benefits segment, we now expect full year adjusted operating income of approximately $2,420,000,000 at the low end of our guidance range. This reflects an increase of approximately $500,000,000 primarily driven by the final 2024 risk adjustment update for our individual exchange business and the favorable impact of the prior year reserve development that we experienced in the second quarter.

We now project our full year 2025 medical benefit ratio at the low end of our health care benefits adjusted operating income guidance range to be approximately 91%. This guidance continues to reflect the deliberate actions we took to improve our operations in the Aetna business. While medical cost trends remain elevated versus historical periods, in aggregate, they are generally in line to slightly better than our expectations so far this year. Given this elevated trend environment, we are maintaining a prudent view on medical cost trends through the remainder of the year. The high end of our health care benefits guidance reflects a 50 basis point improvement in medical cost trend over the remainder of the year, which is worth approximately 10¢ in enterprise adjusted EPS.

Our medical membership guidance remains unchanged. In our health services segment, we now expect full year adjusted operating income of at least $7,340,000,000, a decrease of approximately $200,000,000,000 from our prior guidance. This update is entirely driven by our health care delivery business as a result of a higher medical benefit ratio at Oak Street. Our clients continue to see the tremendous value proposition of our pharmacy services businesses, including Caremark. The outlook for our pharmacy services business within our health services segment remains unchanged.

Finally, in our pharmacy and consumer wellness segment, we now expect full year adjusted operating income of at least $5,680,000,000, an increase of approximately $200,000,000,000 from our prior guidance. This increase reflects our strong first half performance while continuing to maintain our prudent outlook for potential changes in vaccine market demand and the consumer environment. We are pleased with our transition to CVS CostVantage, which continues to track in line with our expectations. Altogether, we now expect full year enterprise adjusted operating income to be in a range of $13,770,000,000 to $13,940,000,000. We're also revising our expectations for full year cash flow from operations to at least 7,500,000,000.

You can find additional details on the components of our 2025 guidance on our investor relations website. Overall, we are encouraged by our performance. For another consecutive quarter, we're delivering on our commitments and continue to demonstrate clear progress on our path to achieving the embedded earnings power of CVS Health. I'm confident we will continue building on our momentum as we will aspire to become America's most trusted health care company while simultaneously generating value for you, our shareholders. With that, we will now open the call to your questions. Operator?

Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We ask that you please limit yourself to one question this morning.

We will wait one moment to allow the queue to form. Our first question will come from Lisa Gill with JPMorgan. You may now unmute your audio and ask your question.

Great. Good morning, and congratulations on the results. And welcome, Brian. I look forward to to meeting you. Obviously, q two strong performance and HCB up 40%, $600,000,000 beat on the core side by our numbers.

Underlying assumptions and visibility, you know, when we think about how that looks post the quarter and the guidance that you've given, there's a lot of moving parts here. Can you maybe just talk about the level of visibility you have, with some of the underlying assumptions are, your level of conviction moving into to the back half of the year?

Yeah. Thanks. Thanks, Lisa, and I appreciate the appreciate the the question. Before I turn it over to Brian, let me just make a couple of high level comments about the Aetna business. One is we know this has been one of the top priorities of the enterprise.

It's been an enterprise focus on the multiyear recovery, and I'm really pleased with the progress to date, and we'll share some color on the on the back half of the year as well. One of the things I think is equally as important is the innovation that Aetna is driving. So while they're focusing on the recovery, they're equally focused on driving innovation, simplifying health care. You've seen this in the work we've done with the prior authorizations, with the bundled PA process, as well as the new care path and technology that we're rolling out. So I'm really bullish on on the progress that Aetna is making.

And so I'll turn it over to Brian to give some of the financial details, then I'm going to have Steve provide some color more broadly on the Aetna business.

Brian? Thanks, David, and good morning, Lisa. Thanks for the question. In terms of HCB, it was the second consecutive quarter of strong results. We saw our earnings grow by $370,000,000 year over year, so a good quarter.

As David mentioned, encouraged by the performance across our HCB businesses. The notable exception, Lisa, is our group Medicare Advantage business, which continued to be pressured. The medical cost trends, I would say, across all all lines of business remained elevated, but they were modestly favorable in aggregate. The there there were some impact in the quarter, though, from onetimers that I'd call out for you. One, there was a favorable risk adjustment of about $300,000,000 related to 2024 plan year.

Additionally, we had some favorable net PYD. Those two were largely offset or largely offset the impact of our group MAPDR, which came in at $470,000,000 And if you strip out those underlying items, the HEB business beat by about $05,000,000,000 in the quarter, which is a strong performance. The beat itself was primarily driven by Medicare, particularly from individual Medicare, and the two components were Part D and supplementals. And then I would just remind you, as we're thinking about the back end of the year, Part D continues to track modestly ahead of expectations, but we're maintaining a cautious outlook until we have more experience given the changes in the plan liability from the IRA. So Steve, maybe I'll turn it over to you for some more color.

Sure. Thanks, Brian. And Lisa, thanks for your question. So I'll provide maybe a few high level comments about Aetna overall and then get into some specifics relative to the line of business, each line of business. Look, our priorities, as Brian stated, David said in his prepared remarks, remain absolutely unchanged.

We're focused on returning Aetna to its target margins and, frankly, a leadership position in the industry. Really encouraged by the strong progress in the quarter, in the first half of the year in totality. And while it's it's early, it's a multiyear journey here. And all respect to the environment that we're in, very, very encouraged how how the quarter is playing out. There's many drivers of that progress, and maybe I'll highlight just a few.

One is the Medicare business, which I'll come I'll come back to, as Brian mentioned. But, also, we've significantly strengthened our our operations and our fundamental capabilities, which allows us to have better insight into our trends and then actually be able to take take action against those trends. So very happy with how we've improved the operations and just our fundamental capabilities. And then we have increased management rigor overall. We remain incredibly disciplined whether it comes to pricing or, you know, just how we think about the business overall relative to our our clear priority.

And we've developed a culture of relentless execution and focus. And so that's all playing out nicely and really encouraged by those results. I I also, yeah, am very proud of the the management team and our colleagues. We've added. We've strengthened our management team, and I really appreciate how the leadership and and our colleagues have come together and just really pouring everything they have into serving our members, partnering with our providers in increasingly innovative and distinctive ways as as David mentioned.

Relative to Medicare specifically, there's several key points I'd like to make that have contributed to the progress of that business and the year to year improvement. One is we have really strong STARS for payment year 2025, and that's a result of returning to a leadership position in in STARS as as our enterprise has focused on STARS and brought the unique and diverse set of capabilities to to impact STARS. And so that that has contributed nicely to the year over year improvement and progress. Also, the moves that we made, not only in the biz, but during AEP to rationalize the products and geographies. So we had an optimal mix of membership, and that is playing out again nicely as we as we think about the moves we've made during AEP.

And then lastly, we've I'm really pleased with the execution and the insights around trend, understanding it, and then mitigating it honestly to the extent that we can where we have opportunities to do that. So and the PDP product, as as Brian mentioned, is is performing well as in addition to that. So individual Medicare business has has shown a lot of progress and and very encouraged by that. The group business, as Brian mentioned, we we did we have seen pressure there. But as we approach 2026, the good news is half that business is up for renewal, and we're taking very disciplined approach to renewing that business.

And we're getting some traction there. And and, really, I I see the entire Medicare business coming together and and and con continuing the momentum through the back half of the year and into 2026 as we think about returning that business to target margin. In terms of Medicaid, that business is also in line with our expectations. Despite the higher trend we see, it is in line with our expectations. And and then, frankly, the execution around our rate advocacy has been, you know, really strong.

We've seen good engagement with our state partners, and that's, again, tracking to our expectations, including the higher higher acuity that we've seen. IFP, we've talked about, took a PDR earlier in the year, elevated trends, but that's incorporated in our outlook. But I just wanna give you a quick update on the exit. So as we wind down that that business, that's that's going really well. We've had very positive conversations with our states.

We've notified all our members. We continue to provide coverage for them, and and we'll we'll focus on that. But we're we're exiting that business, and and that wind down is is going really well. And last, I'll just finish by saying our commercial business is strong. We've seen some really nice wins in our self insured across public and labor, national accounts, and our maritime business.

Fully insured, we do see elevated trends. We saw that early. We took a disciplined pricing approach to that in 2025, which has pressured membership, but we're gonna stay disciplined in our pricing approach to fully insured. But overall, commercial business strong, and it is a platform for innovation. And that's resonating really well with our with our very sophisticated and demanding clients.

So really, really pleased with that. So, look, overall, it's early. A lot of respects for the environment that we're in, but very encouraged about the progress, not just for the quarter, but the foundation that we're laying as we think about the back half of '25 and also heading into '26 and beyond.

Our next question will come from Justin Lake with Wolfe Research. You may now unmute your audio and ask your question.

Thanks. Good morning. Wanted to get your early view on 2026 headwinds and tailwinds, specifically your thoughts on expectations for continued improvement in MA margins post your putting in your 2026 bids, your thoughts on the sustainability of outperformance and share gains in the pharmacy business versus your long term expectation of mid single digit OI declines? And then lastly, potential for improvement in the value based care business versus current losses. Thanks.

CVS Health (CVS) Q2 2025 Earnings Call Transcript

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