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CVS HEALTH Corp (CVS)·Q3 2025 Earnings Summary

Executive Summary

  • CVS delivered a beat-and-raise quarter: revenue reached $102.9B (+7.8% YoY) and Adjusted EPS was $1.60; FY25 Adjusted EPS guidance raised to $6.55–$6.65 while GAAP EPS guidance moved to a loss due to a $5.7B goodwill impairment in Health Care Delivery .
  • Strength at Aetna (HCB) drove results: MBR improved to 92.8% (down 240 bps YoY) and adjusted operating income turned positive to $314M, aided by premium deficiency reserve dynamics, favorable prior-period development, and improved Government business .
  • Offsets: Health Services (PBM/Caremark + delivery) AOI fell 7% YoY on continued client price improvements; management cited contract mix (GLP‑1 compounding not rebounding, specific autoimmune/HIV products) rather than its “true cost” pricing model as the pressure source .
  • Retail pharmacy momentum: PCW revenue +11.7% YoY; scripts +6.9% and market share ~28.9% amid Rite Aid file buys and conversions; segment AOI down 7.4% on reimbursement pressure and investments .
  • Likely catalysts: the guidance raise, disclosure of the Health Services headwind and impairment, and commentary that 2026 Adjusted EPS can grow mid‑teens off a normalized 2025 baseline (excluding ~$0.45 of out‑of‑period items) .

What Went Well and What Went Wrong

What Went Well

  • Aetna margin stabilization and improvement: HCB MBR fell to 92.8% and AOI swung to +$314M, driven by favorable premium deficiency reserve effects and prior-period development, plus improved Government business performance .
  • Guidance raised for the third straight quarter: FY25 Adjusted EPS to $6.55–$6.65 and enterprise AOI to $14.14–$14.31B; revenue guidance to at least $397.3B; CFFO to $7.5–$8.0B .
  • Retail pharmacy execution and share gains: scripts +6.9% and same-store Rx +8.9% YoY; management noted “our retail pharmacy script share grew to approximately 28.9%” and conversion of 63 stores and 626 prescription files from Rite Aid/Bartell serving 9M patients .
  • Quote: “We are pleased to report another quarter of solid results… we are increasing our full-year 2025 adjusted EPS guidance” .
  • Quote: “Aetna is once again the industry leader… over 81% of our Medicare Advantage members will be in plans rated 4 stars or higher, with over 63% in 4.5-star plans” .

What Went Wrong

  • Health Services AOI down 7% YoY: continued pharmacy client price improvements pressured PBM economics despite improved purchasing; pharmacy claims processed fell 1.8% YoY .
  • $5.7B goodwill impairment in Health Care Delivery (Oak Street/Signify unit) led to a GAAP diluted loss of $(3.13) per share; impairment driven by slowing clinic growth plans and revised projections .
  • PBM near‑term pressure not from “true cost”: management cited slower GLP‑1 growth (compounds not reverting), and specific category dynamics (autoimmune/HIV) impacting rebate/guarantee structures; revised Health Services FY AOI down ~$240M vs prior .
  • Analyst concern: Q3 HCB MBR included ~100 bps of “noise” (provider liabilities from 2018–2021 era and worsening exchange risk adjustment), masking core MA improvement .

Financial Results

Consolidated Results vs Prior Quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($B)$94.588 $98.428*$102.871
GAAP Diluted EPS ($)$1.41 —$(3.13)
Adjusted EPS ($)$2.25 $1.81 $1.60

* Values retrieved from S&P Global.

Notes: Q3 GAAP loss reflects $5.7B goodwill impairment; Adjusted operating income was $3.459B in Q3 (vs $2.547B PY) .

Actual vs S&P Global Consensus (Quarter)

MetricQ3 2025 ActualQ3 2025 ConsensusSurprise
Revenue ($B)$102.871 $98.8345+$4.04B (beat)
Adjusted/Primary EPS ($)$1.60 1.3567+$0.24 (beat)

Values retrieved from S&P Global.

Segment Breakdown – Q3 2025

SegmentRevenue ($B)YoYAdjusted Operating Income ($B)YoY
Health Care Benefits (HCB)$35.993 +9.1% $0.314 vs $(0.924) PY
Health Services$49.266 +11.6% $2.050 $(0.154) YoY
Pharmacy & Consumer Wellness (PCW)$36.214 +11.7% $1.478 $(0.118) YoY
Intersegment & Other$(18.735) —$(0.383) $(0.054) YoY
Total$102.871 +7.8% $3.459 +35.8%

Key Performance Indicators (Q3 2025 unless noted)

KPIQ1 2025Q2 2025Q3 2025
HCB Medical Benefit Ratio (MBR)87.3% 89.9% 92.8%
HCB Medical Membership (M)27.1 26.7 26.7
HCB Days Claims Payable (days)43.2 40.9 42.5
Health Services Pharmacy Claims (M)464.2 —475.6
PCW Prescriptions Filled (M)435.5 —461.4
Same-Store Rx Volume YoY6.7% —8.9%
Retail Pharmacy Script Share—27.8% ~28.9%

Guidance Changes

MetricPeriodPrevious Guidance (7/31/25)Current Guidance (10/29/25)Change
Consolidated RevenueFY25≥ $391.5B ≥ $397.3B Raised
Adjusted Operating IncomeFY25$13.77–$13.94B $14.14–$14.31B Raised
GAAP EPSFY25$3.84–$3.94 $(0.34)–$(0.24) Lowered (impairment)
Adjusted EPSFY25$6.30–$6.40 $6.55–$6.65 Raised
Cash From OperationsFY25≥ $7.5B $7.5–$8.0B Raised top end
Adj. Effective Tax RateFY25~25.7% ~25.3% Lowered
Interest ExpenseFY25~ $3.11B ~ $3.11B Unchanged
CapexFY25$2.9–$3.1B $2.9–$3.1B Unchanged
HCB Adjusted OIFY25$2.42–$2.59B $2.72–$2.89B Raised
Health Services Adjusted OIFY25≥ $7.34B ≥ $7.10B Lowered
PCW Adjusted OIFY25≥ $5.68B ≥ $5.95B Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Aetna margin recovery/MBRQ1 MBR 87.3% on prior-year development and MA improvement; disciplined outlook Q3 MBR 92.8% with ~100 bps noise (provider liabilities, exchange risk adjustment); underlying MA favorable Improving core, noisy reported
PBM pricing & “true cost”Transition to CVS Cost Vantage in retail; PBM focus on lowering GLP‑1 costs and biosimilars (Cordavis) Pressure driven by mix/rebate dynamics (GLP‑1 comps, autoimmune/HIV), “not from true cost” Near-term headwinds; model intact
Health Care Delivery (Oak Street/Signify)Q2: elevated medical costs at Oak; AOI headwind $5.7B goodwill impairment; slowing clinic growth; closing underperformers; recontracting for fair terms Reset; actions underway
Retail pharmacy & shareQ1–Q2: share 27.6–27.8%; strong execution Share ~28.9%; same-store Rx +8.9%; Rite Aid scripts/stores integration Strengthening
IRA/Part D seasonalityWatching Part D seasonality and liability shifts Part D still modestly ahead; prudent stance maintained Cautious
Vaccines & consumerQ1: cautious on vaccine demand and tariffs Maintains prudent outlook for remainder of immunization season Cautious

Management Commentary

  • Strategic focus: “Our leadership team has stabilized operations and is focused on businesses and markets where we can succeed” .
  • On impairment and clinics: “We recorded a $5.7B goodwill impairment… decision to temper Oak Street Health clinic growth over the next few years was the primary reason” .
  • On PBM dynamics: “This is not from true cost… slower growth of GLP‑1s… and specific autoimmune and HIV category dynamics” .
  • On retail momentum: “Our retail pharmacy script share grew to approximately 28.9%… emphasis on operational excellence and superior customer experiences” .
  • On outlook: “Altogether… after adjusting for [~$0.45] out-of-period items, we currently expect a reasonable starting point for our 2026 adjusted EPS guidance to reflect mid-teens growth” .

Q&A Highlights

  • PBM economics and guarantees: Pressures stem from mix/guarantee structures (GLP‑1 and category dynamics), not the True Cost model; recontracting underway; strong selling season (~$6B wins, high-90s retention) .
  • HCB MBR quality: ~100 bps Q3 impact from (1) provider liabilities (older periods) and (2) worsening exchange risk-adjustment; adjusted for these, core MA performance improved .
  • Retail trajectory: FY25 PCW AOI now guided +3% YoY versus initial -5%, reflecting share gains and Rite Aid file buys; continued caution on vaccines and consumer .
  • Oak Street path: Closing underperforming clinics, tech and operational enhancements, and negotiating fair/equitable payer contracts; value-based care remains strategic .
  • 2026 framing: Mid‑teens Adjusted EPS growth off 2025 midpoint ~$6.60 less ~$0.45 of out‑of‑period items; formal guide at Dec. 9 Investor Day .

Estimates Context

  • Q3 2025: Revenue $102.87B vs $98.83B consensus (beat); Primary EPS $1.60 vs $1.36 consensus (beat) .
  • Forward consensus snapshot: Q4 2025 Revenue ~$102.27B; Primary EPS ~$0.97; Q1 2026 Revenue ~$99.85B; EPS ~$2.36 (subject to change as estimates update). Values retrieved from S&P Global.
PeriodRevenue Consensus ($B)EPS Consensus ($)
Q4 2025102.2660.968
Q1 202699.8532.363
Q2 2026104.5521.923

Values retrieved from S&P Global.

Implications: Street will likely raise HCB-related estimates given AOI upside and guidance lift, but trim Health Services (PBM) growth expectations to reflect contract/guarantee pressures and delivery reset .

Key Takeaways for Investors

  • The diversified model is working: Aetna improvement and retail share gains outweighed PBM headwinds and the non-cash delivery impairment in driving a beat-and-raise print .
  • FY25 setup improved with clearer segment contours: HCB and PCW guidance raised; Health Services trimmed to reflect specific PBM contract dynamics; enterprise AOI and EPS raised .
  • GAAP/Non-GAAP bifurcation matters: The $5.7B goodwill impairment creates a GAAP loss but does not alter cash generation (YTD CFFO ~$7.2B) or Adjusted EPS trajectory .
  • PBM narrative: Near-term pressure tied to mix and legacy rebate‑based guarantees, not to True Cost; management recontracting and expects durable long‑term economics .
  • Retail flywheel building: ~28.9% share and new customers from Rite Aid assets should support volume; reimbursement pressure persists but is being addressed via Cost Vantage and scale .
  • 2026 framework: After backing out ~$0.45 of out‑of‑period benefits, management targets mid‑teens Adjusted EPS growth—Investor Day on Dec. 9 should refine the bridge by segment .
  • Watch items: Part D seasonality under IRA, Oak Street cost trend and clinic optimization, PBM recontracting cadence, and immunization demand in Q4 .

Additional Data and Citations:

  • Q3 revenue, GAAP/Adjusted EPS, AOI, segment results and KPIs: .
  • Guidance tables and segment outlooks: .
  • Retail share commentary and PBM contract drivers: .
  • Rite Aid assets press release (integration scope): 63 stores, 626 Rx files, ~9M patients .
  • Prior quarters for trend (Q1 press release and Q2 call): .