CVS Health Corporation (CVS) Earnings & Analysis

Latest quarter

CVS Health reported Q2 FY2026 revenue of $106.1 billion, above the consensus of $100.2 billion, while adjusted EPS of $2.58, as the consensus counts it, exceeded the consensus of $1.87. The company’s revenue rose 7.26% from $98.9 billion in Q2 FY2025, and the filing attributed the increase to revenue growth across all operating segments.

The filing reported diluted EPS of $2.31, compared with $0.80 a year earlier. CVS Health’s gross margin was 44.5%, compared with 45.4% in Q2 FY2025, while operating margin was 4.43%, compared with 2.41%. The company said operating income increased primarily because of improved operating performance across operating segments and the absence of legacy litigation charges recorded in the prior year. CVS Health reported free cash flow of $5.7 billion, compared with $1.3 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

David Joyner said each operating segment grew earnings during the quarter and that CVS Health generated adjusted operating income of $5.2 billion and adjusted EPS of $2.58. He said the company’s work on GLP-1 therapies focuses on affordability, access and convenience, including coverage through Caremark and Aetna and direct-to-consumer access for cash-paying patients.

Brian Newman said Health Care Benefits revenue increased because of the Government business, partly offset by CVS Health’s exit from the individual exchange business in 2026. He said medical membership was approximately 26 million at quarter-end and declined from the prior-year quarter primarily because of that exit. Newman said the medical benefit ratio was 87.4%, with prior-year development and individual exchange risk-adjustment items contributing approximately $500 million, and he said underlying results exceeded the company’s expectations.

Newman said Health Services revenue growth reflected pharmacy drug mix and brand inflation, partly offset by pharmacy client price improvements. He said the business faced pressure in 340B and experienced value in the quarter that CVS Health had previously expected in the second half, while higher specialty generic penetration offset the 340B pressure. In Pharmacy and Consumer Wellness, Newman said pharmacy drug mix, prescription volume and Rite Aid asset-acquisition contributions were partly offset by drug-price reductions, generic introductions and reimbursement pressure.

Analysts asked about 2027 Pharmacy Services pressures and client retention. Prem Shah said CVS Health had experienced 340B pressure in the quarter and expects it to be a headwind in 2027; he also said retention was trending below CVS Health’s historical performance but more consistent with industry norms. Shah said CVS Health did not quantify the 340B effect, while Newman said the company would provide further 2027 headwinds and tailwinds on its third-quarter call and detailed guidance on its fourth-quarter call.

Guidance

CVS Health raised its FY2026 adjusted EPS guidance to $7.90–$8.10. The company raised its FY2026 revenue outlook to at least $414.0 billion and its operating cash flow outlook to at least $11.5 billion. CVS Health also raised its FY2026 Pharmacy and Consumer Wellness operating-income outlook to at least $6.4 billion. Newman said CVS Health’s current FY2026 outlook does not assume share repurchases.