Executive Summary

Q3 2025 revenue and EPS beat consensus: total revenues were $50.71B vs S&P Global consensus $49.49B*, and adjusted diluted EPS was $6.03 vs $4.94*, with GAAP EPS at $5.32 .
Operating revenue grew 12% YoY to $50.1B, driven by premium yields, acquisitions, and MA membership growth; benefit expense ratio rose to 91.3% on Part D seasonality under the Inflation Reduction Act .
Guidance: FY25 adjusted EPS reaffirmed at approximately $30.00 and benefit expense ratio ~90%; GAAP EPS outlook raised to ~$24.70 (from ~$24.10 in Q2) .
Near-term stock narrative catalyst: EPS beat and reaffirmed FY25 guidance offset by candid 2026 planning assumptions—Medicaid margin expected to decline ≥125 bps and several hundred million of incremental investments (AI, Carelon, Stars)—which could temper forward estimates into 2026 while reinforcing 2027 “balanced growth” setup .

What Went Well and What Went Wrong

What Went Well

Operating revenue rose 12% YoY to $50.1B; Carelon revenue +33% YoY to $18.3B, aided by pharmacy and home health acquisitions and scaling risk-based solutions .
Management reaffirmed FY25 adjusted EPS of ~$30 and highlighted disciplined execution and AI-enabled solutions improving affordability and experience; CEO: “positioning our businesses for long-term, sustainable growth” .
Medicare Advantage costs (incl. Part D) were “marginally better than expected,” with membership and product positioning driving slight margin improvement for FY25 ex one-time items .

What Went Wrong

Consolidated benefit expense ratio increased 180 bps YoY to 91.3% on elevated trend and IRA Part D seasonality; Health Benefits operating margin fell to 1.4% vs 4.2% YoY .
Medicaid margins pressured by elevated acuity/utilization and lagging rates; FY25 Medicaid operating margin now “modestly below breakeven” (~-50 bps), and 2026 planning assumes ≥125 bps further decline .
Adjusted operating margin compressed to 2.7% from 5.5% YoY; adjusted operating expense ratio rose to 10.4% from 9.4% YoY due to targeted investments .

Financial Results

Consolidated performance vs prior periods

Metric	Q3 2024	Q2 2025	Q3 2025
Total Revenues ($USD Billions)	$45.106	$49.776	$50.711
Operating Revenue ($USD Billions)	$44.719	$49.421	$50.087
GAAP Diluted EPS ($)	$4.36	$7.72	$5.32
Adjusted Diluted EPS ($)	$8.60	$8.84	$6.03
Operating Margin (%)	3.1%	4.9%	2.6%
Benefit Expense Ratio (%)	89.5%	88.9%	91.3%
Operating Expense Ratio (%)	11.8%	10.1%	10.5%
Diluted Shares (mm)	233.1	225.8	223.7

Actual vs S&P Global consensus (Q3 2025)

Metric	Consensus	Actual	Outcome
Revenue ($USD Billions)	$49.49*	$50.71	Bold beat
Adjusted EPS ($)	$4.94*	$6.03	Bold beat
EBITDA ($USD Billions)	$2.25*	$2.144	Miss

Values marked with * retrieved from S&P Global.

Segment breakdown

Segment Metric	Q3 2024	Q2 2025	Q3 2025
Health Benefits Operating Revenue ($B)	$38.278	$41.582	$42.246
Health Benefits Operating Gain ($B)	$1.604	$1.560	$0.601
Health Benefits Operating Margin (%)	4.2%	3.8%	1.4%
CarelonRx Operating Revenue ($B)	$9.143	$10.643	$10.997
CarelonRx Operating Gain ($B)	$0.619	$0.536	$0.556
CarelonRx Operating Margin (%)	6.8%	5.0%	5.1%
Carelon Services Operating Revenue ($B)	$4.638	$7.441	$7.324
Carelon Services Operating Gain ($B)	$0.184	$0.400	$0.219
Carelon Services Operating Margin (%)	4.0%	5.4%	3.0%
Corporate & Other Operating Gain ($B)	-$0.999	-$0.071	-$0.081
Total Operating Gain ($B)	$1.408	$2.425	$1.295
Total Operating Margin (%)	3.1%	4.9%	2.6%

KPIs

KPI	Q3 2024	Q2 2025	Q3 2025
Total Medical Membership (000s)	45,760	45,621	45,369
Medicare Advantage Members (000s)	2,047	2,255	2,245
Medicaid Members (000s)	8,926	8,733	8,645
CarelonRx Quarterly Adjusted Scripts (mm)	80.2	83.3	85.0
Days in Claims Payable (days)	42.8 (implied YoY)	43.9 adj. for CareBridge	42.6 adj. for CareBridge

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Diluted EPS ($)	FY 2025	$34.15–$34.85 (Q1)	~$30.00 (Q2 reaffirmed in Q3)	Lowered in Q2; Maintained in Q3
GAAP Diluted EPS ($)	FY 2025	~$24.10 (Q2)	~$24.70 (Q3)	Raised
Benefit Expense Ratio (%)	FY 2025	~90.0% (Q3 reiteration)	~90.0%	Maintained
Adjusted Operating Expense Ratio (%)	FY 2025	10.7% (YTD trend Q1)	10.4% (Q3)	Improved vs Q1, but +100 bps YoY in Q3
Dividend per Share ($)	Q4 2025	Prior quarterly $1.71 (Q2)	Declared $1.71 payable Dec 19, 2025	Maintained

Management also outlined 2026 planning assumptions: Medicaid operating margin decline of at least 125 bps YoY; several hundred million of incremental investments (~$1 EPS) in AI, Carelon scaling, and Stars; formal 2026 EPS guidance to come in January .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
AI/Technology initiatives	“Personalized support, real-time digital solutions” supporting whole-health strategy	Acceleration of digitization/automation journey	Embedding generative AI at scale; HealthOS reducing denials by 68%, peer-to-peer reviews by over 100%; OpenAI training for associates	Expanding scope and measurable impact
Medicaid reverifications & rate adequacy	Higher Medicaid trend noted; membership attrition ongoing	Updated outlook reflecting slower rate alignment; benefit expense ratio up; days in claims payable stable	FY25 Medicaid margin ~-50 bps; 2026 assumption ≥125 bps decline; collaborative state program changes (ABA, GLP-1, optional services)	Persistent headwind into 2026; constructive state engagement
Medicare Advantage positioning	Growth in MA membership; product focus	Disciplined plan design; retention supports margin stability	Slight margin improvement expected in FY25; focus on HMO/D-SNP; exiting certain PPO/service areas; Stars improvement (55% 4+ Stars for PY2027)	Portfolio optimization; improving quality metrics
ACA marketplace	Growth in Q1; higher acuity emerging	Elevated costs; guidance reset; prudent expectations	Risk pool deterioration; potential membership contraction if enhanced subsidies expire; pricing reflects higher morbidity	Cautious outlook contingent on subsidies
Carelon growth & diversification	Carelon revenue +38% YoY; risk-based capabilities scaling	Carelon revenue +36%; services operating gain up 92%	CarelonRx +20% revenue; services momentum; specialty pharmacy integration (Kroger) on track; external growth offsetting ELV membership impacts	Strong, diversified growth continues
IRA Part D seasonality	—	—	Benefit ratio elevated due to Part D seasonality under IRA	New headwind acknowledged

Management Commentary

CEO framing: “In a dynamic healthcare environment, we’re focused on advancing affordability and elevating the member experience through our growing value-based care partnerships and AI-enabled digital solutions… positioning our businesses for long-term, sustainable growth” .
CFO on cadence and baseline: “We are reaffirming 2025 adjusted EPS of approximately $30 and continue to view $27 as the appropriate earnings baseline, excluding ~$3 of discrete nonrecurring items” .
Government segment posture: “States are more receptive to ways that can help reduce overall cost… e.g., ABA services, GLP‑1s… program changes align with new contract years” .
2026 investments: “Discrete investments worth several hundred million dollars (~$1 EPS) in technology adoption (AI), Carelon scaling, and operational/quality initiatives (Stars)” .

Q&A Highlights

Medicaid margin outlook: Management expects FY25 Medicaid margin modestly negative (~-50 bps) and plans for ≥125 bps decline in 2026, driven by acuity/utilization outpacing rate updates; sequential improvement anticipated in 2027 as rates catch up and cost management programs take hold .
ACA subsidies: If enhanced subsidies expire, expect “material contraction” in ACA enrollment and higher morbidity; filings prepared for multiple policy outcomes .
Investment spending: Several hundred million of targeted investments (~$1 EPS) in 2026 to drive long-term leverage via AI, Carelon client onboarding/pharmacy buildout, and Stars improvements .
MA product strategy: Emphasis on HMO and D‑SNP aligned to value-based model; PPO footprint reduced; retention a priority amid selective service area exits (~150k members impacted) .
Carelon specialty pharmacy: Integration progress (BioPlus and Kroger Specialty), migration of scripts by year-end, with continued pursuit of external scripts to diversify beyond ELV .

Estimates Context

Q3 2025 beats: Adjusted EPS $6.03 vs $4.94* and revenue $50.71B vs $49.49B*, while EBITDA missed ($2.144B vs $2.25B*)—consensus may lift near-term EPS and revenue for FY25, but 2026 estimates likely to reflect planned Medicaid margin compression and incremental investments .
Target Price Consensus Mean stands at ~$386.11*, with guidance reaffirmation supporting FY25 visibility, while management’s prudent 2026 posture could temper forward multiples until clarity in January guidance.
Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Bold EPS and revenue beat vs consensus, with FY25 adjusted EPS and benefit expense ratio guidance reaffirmed—supports near-term confidence in 2025 delivery .
Medicaid remains the key swing factor: 2026 planning assumes ≥125 bps margin decline; watch January rate resets and program changes for inflection signals .
Management is front-loading AI and quality investments (~$1 EPS headwind in 2026) to position for 2027 “balanced growth”—expect near-term margin pressure but improved long-term leverage .
Carelon’s diversified growth (pharmacy/services) is robust and increasingly external; specialty pharmacy integration progressing, partially offsetting ELV membership volatility .
MA portfolio optimization (HMO/D‑SNP focus, reduced PPO) and improving Stars (55% contracts at 4+ Stars for PY2027) enhance medium-term quality revenue trajectory .
ACA outlook hinges on subsidy policy; pricing reflects higher morbidity—policy outcomes will drive 2026 membership and margin path .
Capital return remains disciplined: Q3 buybacks ($875M) and dividend maintained at $1.71; $7.2B repurchase authorization remaining provides flexibility .

Other Relevant Press Releases (Q3 context)

Elevance expanded coverage for HistoSonics non-invasive liver tumor treatment across commercial, Medicare, and Medicaid plans in 14 states, impacting ~45.4M members—supports clinical innovation and potential long-term cost/quality benefits .

Elevance Health, Inc. (ELV)·Q3 2025 Earnings Summary