Sign in
EH

Elevance Health, Inc. (ELV)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a revenue beat but an EPS miss; operating revenue rose 14.3% year over year to $49.4B, total revenues were $49.78B, while adjusted diluted EPS was $8.84 versus S&P Global consensus of $8.96; GAAP diluted EPS was $7.72 .
  • Management cut FY 2025 adjusted EPS guidance from $34.15–$34.85 to approximately $30.00 and GAAP EPS to ~$24.10, citing elevated ACA morbidity and slower Medicaid rate alignment; full-year benefit expense ratio guided to ~90% .
  • Carelon growth remained a bright spot: Carelon Services revenue up ~64% YoY and CarelonRx up ~21% YoY; Health Benefits operating margin compressed to 3.8% amid ACA/Medicaid cost pressure .
  • Near-term stock catalysts: narrative centers on guidance reset, ACA risk pool deterioration, Medicaid rate timing, and Q4 utilization “pull-forward” risk; management flagged a discrete non‑operating tax benefit expected at year-end and opportunistic buybacks pacing .

What Went Well and What Went Wrong

What Went Well

  • Carelon executed strongly: operating revenue rose to $18.1B (+36% YoY) with operating gain up 33% to $0.9B, driven by pharmacy product revenue and risk-based services scaling .
  • Operating expense discipline: adjusted operating expense ratio improved 140 bps YoY to 10.0%, reflecting revenue scale and cost control .
  • Strategic confidence and technology enablement: management emphasized AI-enabled clinical workflows (Health OS, Intelligent Clinical Assist) and real‑time prior auth streamlining; “over half of electronic requests now processed in real time” (CEO prepared remarks) .

What Went Wrong

  • ACA and Medicaid cost trends pressured margins: benefit expense ratio rose 260 bps YoY to 88.9%, driven by ACA morbidity shifts and slower Medicaid rate alignment .
  • Guidance reset: FY 2025 adjusted EPS cut to ~$30 and GAAP EPS to ~$24.10, acknowledging persistent trend elevation through 2H and Q4 utilization pull-forward risk if enhanced subsidies lapse .
  • Membership softness: total medical membership declined ~212K sequentially to 45.6M on Medicaid disenrollments and lower ACA effectuation rates .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Operating Revenue ($USD Billions)$45.0 $48.77 $49.42
Total Revenues ($USD Billions)$45.44 $48.89 $49.78
GAAP Diluted EPS ($)$1.81 $9.61 $7.72
Adjusted Diluted EPS ($)$3.84 $11.97 $8.84
Operating Margin (%)1.5% 6.5% 4.9%
Benefit Expense Ratio (%)92.4% 86.4% 88.9%
Operating Expense Ratio (%)10.7% 10.9% 10.1%

Q2 2025 Actual vs S&P Global Consensus

MetricConsensus (Q2 2025)*Actual (Q2 2025)
Primary EPS ($)8.965*8.84
Revenue ($USD Billions)48.198*49.776

Values retrieved from S&P Global.*

Segment Performance

SegmentQ2 2024Q1 2025Q2 2025
Health Benefits Operating Revenue ($B)$37.16 $41.43 $41.58
Health Benefits Operating Gain ($B)$2.145 $2.217 $1.560
Health Benefits Operating Margin (%)5.8% 5.4% 3.8%
CarelonRx Operating Revenue ($B)$8.774 $10.116 $10.643
CarelonRx Operating Gain ($B)$0.497 $0.602 $0.536
Carelon Services Operating Revenue ($B)$4.545 $6.536 $7.441
Carelon Services Operating Gain ($B)$0.208 $0.491 $0.400
Total Operating Gain ($B)$2.765 $3.170 $2.425

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Total Medical Membership (000s)45,776 45,833 45,621
Medicaid Membership (000s)9,028 8,862 8,733
Medicare Advantage (000s)2,031 2,255 2,255
Individual ACA (000s)1,281 1,423 1,348
Days in Claims Payable (days)—44.0 43.9 (adj. for CareBridge)
CarelonRx Adjusted Scripts (MM)78.2 83.9 83.3
Carelon Services Consumers Served (MM)102.3 99.5 97.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPS ($)FY 2025$34.15–$34.85 ~$30.00 Lowered
GAAP Diluted EPS ($)FY 2025$30.40–$31.10 ~$24.10 Lowered
Benefit Expense Ratio (%)FY 202589.1% ±50 bps ~90% Raised
Operating Cash Flow ($B)FY 2025~$8.0 ~$6.0 Lowered
Dividend per Share ($)Q3 2025$1.71 (ongoing) $1.71 declared for Q3 Maintained
Diluted Shares (MM)FY 2025225–226 On track 225–226; opportunistic buybacks Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
ACA Morbidity & EffectuationStrong ACA growth; priced prudently; policy uncertainty on subsidies ACA growth; effectuation consistent; hardened commercial pricing Elevated morbidity from Medicaid migration; lower effectuation; EPS guide reset; risk adjustment expectations unchanged Worsening
Medicaid Rate AlignmentElevated BH/inpatient; expected 2H improvement as rates catch up Constructive state dialogue; 1/1 rates insufficient; 7/1 critical Deceleration slower than expected; margins positive but below LT; 1/3 acuity, 2/3 utilization/coding Mixed/Gradual improvement
Medicare AdvantageMargin stability targeted; disciplined bids; post‑acute trend manageable 7–9% MA growth; retention strength; group wins Trend stable vs expectations; disciplined 2026 bids; focus on margin normalization Stable/Improving
Carelon GrowthServices/Rx ramp; acquisitions (CareBridge) Services >50% growth; Rx momentum up‑market Services +64% Rev; Rx +21% Rev YoY; scaling risk‑based capabilities Improving
AI/Technology & Prior AuthDigital/advocacy programs highlighted Continued digital integration AI-enabled clinical assist; majority e‑prior auth in real time Improving
Regulatory/Legal (IDR)——Legal action vs misuse of IDR; out‑of‑network disputes inflating allowed amounts (up to 21x billed) Heightened focus
Part D & SeasonalityPart D redesign impacts; earnings seasonality guidance 1H > 2H earnings; leap-year effect Q3 > Q4 earnings; discrete non‑operating tax benefit in Q4 Stable guidance

Management Commentary

  • “We are revising our full-year 2025 adjusted EPS guidance to approximately $30…anchored in our view that elevated trends will persist.” (CEO) .
  • “Operating revenue was $49.4 billion…driven by higher premium yields…acquisitions…and Medicare Advantage growth.” .
  • “Consolidated benefit expense ratio was 88.9%, up 260 bps YoY…driven by ACA and Medicaid, partially offset by a favorable out-of-period settlement.” (CFO) .
  • “We took aggressive action and filed a legal suit against misuse of the IDR process…payment requests can be significantly inflated, sometimes as much as 21x billed charges.” (CEO) .
  • “We forecast our benefit expense ratio to be approximately 90% for the full year…slightly more earnings in Q3 relative to Q4…expect a discrete non‑operating tax benefit at year-end.” (CFO) .

Q&A Highlights

  • ACA pressure split: reduction in full-year guidance “slightly more weighted towards ACA”; morbidity ~70% of impact, utilization/coding ~30%; risk adjustment expectation unchanged (market-wide shift) .
  • Medicaid: margins positive but below LT targets; deceleration slower than expected; rate alignment constructive but lagging elevated utilization (LTSS, BH, inpatient) .
  • Q4 dynamics: anticipated ACA “use‑it‑or‑lose‑it” utilization pull-forward if enhanced subsidies lapse; discrete non‑operating tax benefit expected in Q4 .
  • Capital allocation: ~$380M repurchased in Q2; pacing adjusted to maintain flexibility; targeting 225–226M diluted shares; lower M&A near term with focus on integration .

Estimates Context

  • Q2 2025 results vs S&P Global consensus: EPS $8.84 vs $8.965 (miss), revenue $49.776B vs $48.198B (beat). Primary EPS estimates count: 19; revenue estimates count: 10.*
  • Implication: Expect downward adjustments to second-half EPS trajectories given higher guided benefit expense ratio (~90%) and ACA Q4 utilization risks; Carelon strength may partially offset.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue beat but EPS miss with a decisive FY guide reset; near-term narrative is dominated by ACA morbidity and timing of Medicaid rate catch-up .
  • Watch policy outcomes on ACA enhanced subsidies; management has embedded Q4 utilization pull-forward risk into outlook, limiting back-half upside .
  • Carelon’s growth engine continues to scale, supporting medium-term margin restoration as risk-based services mature and Rx expands up‑market .
  • Expense leverage is real (adjusted opex ratio down 140 bps YoY), but medical cost trend drives the P&L; emphasis on AI-enabled care management and payment integrity is rising .
  • Medicaid margins positive but below LT targets; trend mix now ~1/3 acuity, ~2/3 utilization/coding—rate alignment will be a multi‑cycle process .
  • Capital deployment remains flexible with buyback opportunism and lower 2025 M&A intensity; diluted share guidance intact .
  • Tactical setup into Q3/Q4: management expects Q3 > Q4 earnings and a discrete non‑operating tax benefit in Q4; monitor ACA utilization, Medicaid rates, and Carelon execution .