CVS Health Corp Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
CVS Health Corp's Q3 2025 earnings call highlighted solid financial results, increased full-year adjusted EPS guidance, and strategic adjustments in Health Care Delivery, particularly regarding Oak Street Health's growth. The call also addressed PBM market dynamics and the company's transition towards more transparent pricing models.
Key Financial Results
Third quarter revenues reached a new record of nearly $103 billion, an increase of approximately 8% over the prior year quarter.
Adjusted operating income of approximately $3.5 billion increased approximately 36% from the prior year quarter.
Adjusted EPS of $1.60, an increase of nearly 47% from the prior year quarter.
Year-to-date cash flow from operations of approximately $7.2 billion.
Increased full year 2025 adjusted EPS guidance to a range of $6.55 to $6.65, up from the previous range of $6.30 to $6.40.
Now expect full year total revenues of at least $397 billion, an increase of nearly $6 billion.
Expect full year enterprise adjusted operating income to be in the range of $14.14 billion to $14.31 billion.
Increasing expectations for full year cash flow from operations to be in a range of $7.5 billion to $8 billion.
Business Segment Results
Health Care Benefits: Revenues of nearly $36 billion, an increase of over 9% from the prior year. Adjusted operating income of approximately $314 million, a substantial increase from the adjusted operating loss recorded in the prior year quarter.
Health Services: Revenues of over $49 billion, an increase of over 11% year-over-year. Adjusted operating income in the quarter of approximately $2.1 billion decreased 7% from the prior year quarter.
Pharmacy & Consumer Wellness: Revenues of over $36 billion, an increase of nearly 12% versus the prior year quarter. Adjusted operating income decreased approximately 7% from the prior year to approximately $1.5 billion.
Health Care Delivery: Total revenues grew approximately 25% compared to the same quarter last year, excluding the impact of exit from CVS Accountable Care business earlier this year. Recorded a $5.7 billion goodwill impairment.
Capital Allocation
Distributed approximately $2.6 billion in dividends to shareholders year-to-date.
Ended the quarter with approximately $2.3 billion of cash at the parent and unrestricted subsidiaries.
Industry Trends and Dynamics
The PBM industry is and will continue to be an extremely competitive space.
Healthcare is unaffordable.
The market demand is down year-over-year, but CVS has been able to offset that with a market share growth in their channel.
Competitive Landscape
Aetna is once again the industry leader amongst national payers for 2026 Medicare Advantage Stars Ratings.
Retail pharmacy script share grew to approximately 28.9%.
CVS is the best run pharmacy in the country.
Macroeconomic Environment
No explicit discussion of macroeconomic factors was present in the document.
Growth Opportunities and Strategies
Continue to strengthen Health Care Delivery business through investments in technology, a new leadership team and fair and equitable contracts with payer clients.
Transition to TrueCost pricing model.
Focus on lowering brand prices in America.
Continue to focus on clients' biggest problems, which is high cost of branded drugs.
Continue to focus on delivering the value, being where consumers want CVS to be in the front store by driving loyalty and improving value proposition.
Continue to enhance technology and operations to drive an enhanced model which will ultimately lower cost and improve quality for members.
Financial Guidance and Outlook
Increasing full year 2025 guidance for adjusted EPS to a range of $6.55 to $6.65.
Now expect full year total revenues of at least $397 billion.
In Health Care Benefits segment, now expect full year adjusted operating income of approximately $2.72 billion at the low end of guidance range.
In Health Services segment, now expect full year adjusted operating income of at least $7.1 billion.
In Pharmacy & Consumer Wellness segment, now expect full year adjusted operating income of at least $5.95 billion.
Expect full year enterprise adjusted operating income to be in the range of $14.14 billion to $14.31 billion.
Also increasing expectations for full year cash flow from operations to be in a range of $7.5 billion to $8 billion.
Expect full year adjusted effective tax rate to be 25.3%.
For 2026, expect another year of meaningful margin improvement at Aetna.
For 2026, expect improvement in Health Care Delivery business, primarily driven by Oak Street Health.
For 2026, expect the Health Services segment to deliver low-single-digit adjusted operating income growth.
For 2026, expect the Pharmacy & Consumer Wellness trajectory to improve relative to long-term expectation of a 5% decline.
Expect a reasonable starting point for 2026 adjusted EPS guidance to reflect mid-teens growth.
