3 things to know about CVS Health’s 2025 earnings

CVS Health this morning reported earnings in line with expectations. In 2025, the giant healthcare company saw record earnings of $402.1 billion, up 7.8% compared with the year before. The lull-year 2025 adjusted earnings per share of $6.75 exceeded initial expectations by about 15%.

Within Aetna, its health insurance business, revenue increased 9.7% for the year, and the medical benefit ratio dropped from 92.5% in 2024 to 91.2% in 2025. Adjusted operating income for 2025 increased by more than $2.6 billion from 2024, which the company said reflects their focus on margin recovery.

In the fourth quarter, medical cost trends remained elevated across all products but were broadly in line with our expectations. Medical membership as of Dec. 31, 2025, decreased by 504,000 members compared with Dec. 31, 2024, reflecting declines in the individual exchange and government product lines.

Within pharmacy and consumer services, which includes the pharmacy benefit manager CVS Caremark, revenue increased 9% in 2025. But full-year 2025 adjusted operating income decreased by 1.3% year over year, and company executives said they are focused on improving financial performance in this part of the company. CVS Caremark is one of the “big 3” phamarcy benefit managers (PBMs) who dominant that sector of the U.S. healthcare economy.

“Overall, 2025 was a strong year at CVS Health,” Brian Newman, chief financial officer, said during the call. “We successfully navigated unexpected challenges and delivered on our targets. The performance of our diversified enterprise in 2025 reinforces that we are on the right track, building significant momentum into 2026. I'm confident 2026 will be another year of meaningful progress.”

Here are three key takeaways from the call:

Medicare advanced rate notice

During the earnings call, CVS Health’s leadership addressed concerns about the 2027 Medicare Advantage (MA) advanced rate notice, describing it as disappointing and inadequate.

In January 2026, CMS indicated that the net average year-over-year payment increase will be just 0.09 for fiscal year 2027 Medicare Advantage and Part D plans. CMS Administrator Mehmet Oz said the rate is to “ensure beneficiaries continue to have affordable plan choices and reliable benefits.”

In his prepared remarks, David Joyner, CVS Health President and CEO, said the proposed rate fails to match the level of medical cost trend currently observed in the industry. “We are advocating for more appropriate funding to ensure adequate access, as well as the stability and sustainability of a program relied on by more than half the seniors in this country,” he said. “While the advanced rate notice is disappointing, our commitment to margin recovery at Aetna is unchanged.”

The Aetna health insurance business faces the more significant impact, while Oak Street Health, the company’s value-based care division, represents a much smaller portion of the business. Importantly, the company maintains that this will not derail their path to target margins in Medicare Advantage by 2028, with executives expecting continued margin improvement in 2027 despite the rate pressures.

Steven Nelson, executive VP and president of Aetna, said the company is already engaging with CMS and is hopeful the final rate notice will reflect current cost trends. “We spent the last year and a half or so laying down a really strong foundation for the business, and we're going to continue to build on it,” he said. “This business is going to advance toward its recovery and target margin in 2026.”

Joyner said the company remains committed to Medicare recovery. “We think 2025 proved that we made meaningful progress. We expect to continue with that progress into 2026. As we look more broadly at the MA [Medicare Advantage] program, it remains an important offering in terms of lowering costs and improving care for the Medicare beneficiaries.”

Impact of PBM legislation

Recent legislation will create changes in the PBM industry, but Joyner said they are manageable for CVS Caremark. President Donald Trump signed into law on Feb. 3, 2026, a spending package that includes reform measures for PBMs. The law requires PBMs to pass on all rebates and discounts to plan sponsors, and it promotes price transparency by requiring semi-annual reporting on drug spending, rebates and formulary determinations.

“We have been moving in this direction since we announced TrueCost in December 2023 and hope this legislation will lead to greater adoption of this model,” Joyner said. TrueCost is a model that aligns its pricing based on the cost that CVS Caremark pays and not on list prices. It also provides transparency around the fees the company charges.

During the call, Joyner said focused on the fact that PBMs create competition and negotiate for lower prices in the pharmaceutical supply chain. This is a position often stressed by representatives of the trade group Pharmaceutical Care Management Association. Joyner said that Caremark negotiations to deliver an incremental $45 billion in annual savings. Combined, this represents over $280 billion in annual savings generated for clients and members.

Executives also highlighted the company’s strategy of private label biosimilars. For example, its biosimilar of Humira achieved 96% adoption of a low-list price biosimilar with more than 80% of members paying $0 out of pocket. This strategy created more than $1.5 billion in savings for clients and members, Joyner said.

Outlook for 2026

For 2026, CVS Health executives said the company’s expectations for full-year revenue will likely be flat with $400 billion with adjusted earnings per share in the range of $7.00 to $7.20.

In Medicare Advantage, the company anticipates continued margin improvement driven by rational, disciplined pricing in individual and PDP products and repricing of the group MA business, despite the challenging 2027 rate notice. For Medicaid, CVS maintains a cautious outlook given broader industry pressures, though performance has been in line with expectations. The commercial business is expected to remain strong, with pricing discipline maintained while delivering compelling products and capabilities.

The retail pharmacy business established a new trajectory of at least flat earnings annually starting in 2026, reflecting successful investments in colleagues, technology and consumer experience. The completion of the transition to cost-based reimbursement created a more transparent and stable pharmacy market foundation for the long term.