CVS Health Q1 Earnings Call Highlights

Key Points

• CVS raised its full-year 2026 adjusted EPS guidance to $7.30-$7.50 from $7.00-$7.20 after a stronger-than-expected first quarter, with adjusted EPS of $2.57 and adjusted operating income of $5.2 billion.
• Aetna drove much of the improvement, helping lift first-quarter revenue above $100 billion and boosting Health Care Benefits adjusted operating income to about $3 billion. CVS also raised its full-year Health Care Benefits operating income outlook by $420 million.
• The company remains focused on PBM and technology initiatives, including Caremark execution, simpler pricing, and an AI-native Health100 platform aimed at improving the consumer health care experience. Management also highlighted continued pressure from Medicare Advantage medical costs and state-level PBM regulation.

CVS Health NYSE: CVS raised its full-year 2026 adjusted earnings outlook after reporting stronger first-quarter results, with management citing improved performance at Aetna, continued execution at Caremark and resilient pharmacy operations.

On the company’s first-quarter earnings call, David Joyner, CVS Health’s president, chief executive officer and chair of the board, said the company entered 2026 with “strong momentum” and benefited from “intentional execution and deliberate actions” across its businesses. CVS reported adjusted operating income of $5.2 billion and adjusted earnings per share of $2.57 for the quarter.

The company increased its full-year adjusted EPS guidance to a range of $7.30 to $7.50, up from its prior range of $7.00 to $7.20. Brian Newman, executive vice president and chief financial officer, said the updated outlook reflects a guidance philosophy focused on “thoughtful, credible targets” while seeking opportunities to outperform.

Revenue Tops $100 Billion as Aetna Improves

Newman said CVS generated more than $100 billion in first-quarter revenue, up more than 6% from the prior-year period, driven by growth across all operating segments. Adjusted operating income rose more than 12% year over year, primarily due to improvement in the Health Care Benefits segment, which includes Aetna. Adjusted EPS increased more than 14% from the prior-year quarter.

The Health Care Benefits segment generated nearly $36 billion in revenue, an increase of more than 3% year over year. The increase was driven primarily by the government business, partially offset by CVS’s exit from the individual exchange business in 2026. Medical membership ended the quarter at approximately 26 million, down about 600,000 sequentially, largely because of the exchange exit.

Adjusted operating income in Health Care Benefits was approximately $3 billion, and the medical benefit ratio was 84.6%. Newman said the segment’s results showed “substantial improvement” from the prior-year quarter as Aetna continued executing margin recovery plans. He said the MBR was better than expected due to favorable prior-year development and “pockets of core outperformance” tied to medical cost management.

For the full year, CVS now expects Health Care Benefits adjusted operating income of approximately $4 billion to $4.34 billion, an increase of $420 million from prior guidance. The company maintained its full-year MBR outlook of 90.5%, plus or minus 50 basis points.

Caremark, Pharmacy Businesses Remain in Focus

In the Health Services segment, which includes Caremark, CVS reported revenue of more than $48 billion, up 11% year over year. Newman said the increase was primarily driven by pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements.

Adjusted operating income in Health Services was approximately $1.5 billion, down about 7% from the prior-year quarter. Newman said the decline reflected continued client price improvements, partially offset by improved purchasing economics and pharmacy drug mix. He also noted that the segment benefited from early recognition of value that had previously been expected in the second quarter. Excluding that pull-forward, he said the segment still modestly exceeded prior expectations.

Prem Shah, executive vice president and group president at CVS Health, said the Caremark team is executing against 2026 rebate guarantee commitments. He said pharmacy drug trends remain a major challenge for clients, with more than 90% of clients’ costs coming from 10% of branded drugs. Shah said PBMs continue to play “a really important role in driving competition and creating value.”

In Pharmacy and Consumer Wellness, revenue was nearly $32 billion, relatively consistent with the prior-year quarter. Same-store total revenue increased about 3%, while same-store pharmacy sales rose more than 3%, supported by a nearly 7% increase in same-store prescription volumes. Same-store front store sales increased 120 basis points. Adjusted operating income declined about 9% to approximately $1.2 billion, with results affected by milder seasonal illness and greater weather disruption compared with last year.

Guidance Raised, Cash Flow Outlook Improved

CVS now expects full-year total revenue of at least $405 billion and cash flow from operations of at least $9.5 billion, with the cash flow update reflecting improved underlying performance primarily related to working capital. The company now expects enterprise adjusted operating income of $15.53 billion to $15.87 billion.

Newman said CVS generated approximately $4.2 billion in operating cash flow during the first quarter and returned nearly $850 million to shareholders through its quarterly dividend. CVS ended the quarter with approximately $2.2 billion of cash at the parent and unrestricted subsidiaries, and its leverage ratio improved to 3.84 times.

Asked about share repurchases, Newman said CVS remains focused on strengthening the balance sheet by reducing leverage. He said the company will continue evaluating financial performance, leverage and capital deployment opportunities later in 2026, but noted that share repurchase activity is not included in the current 2026 guidance.

Medicare Advantage, Regulation and PBM Scrutiny

Joyner said CVS shares the Centers for Medicare & Medicaid Services’ goal of ensuring the long-term sustainability of Medicare Advantage. He said the final rate notice issued in April was “a step in the right direction” but remains insufficient to offset underlying medical cost trends, which have been above historical levels.

Steven Nelson, executive vice president and president of Aetna, said CVS had a strong start in Medicare Advantage and would take a disciplined approach into 2027. He said the company remains confident in reaching target margins in 2028.

Management also addressed regulatory pressure on PBMs. Joyner said CVS has been moving toward simpler pricing and greater transparency, pointing to the company’s TrueCost model, which it launched more than two years ago. He said federal developments, including the Consolidated Appropriations Act and work toward a settlement with the Federal Trade Commission, are helping clarify the rules under which the industry will operate.

On state-level legislation, Shah said CVS was disappointed with the direction taken by Tennessee, saying the legislation would raise costs for the state, threaten pharmacy access and create complexity for specialty pharmacy operations. He said the law does not take effect until mid-2028 and that CVS is evaluating options, including potential legal action.

Technology, AI and Health100 Platform

Joyner emphasized CVS’s push to use technology and artificial intelligence to improve consumer engagement and reduce friction in health care. He said the company plans to launch Health100 later this year, describing it as an AI-native technology and service platform intended to connect payers, PBMs, pharmacies and providers.

Joyner said the Health100 app is designed to be a consumer’s “front door” to an integrated health care experience, regardless of pharmacy banner or benefit card brand. He said CVS has the scale, consumer trust and data needed to bring such a platform to market.

Nelson said Aetna is using AI and technology to improve efficiency, reduce rework, strengthen forecasting and analytics, and help employees focus on higher-value work. He also cited member-facing tools intended to improve navigation and health care decision-making.

Shah said technology and AI are central to CVS’s operating model across its businesses, including Pharmacy and Consumer Wellness and Health Services. Joyner added that clients at a recent Caremark forum responded positively to the company’s technology investments, saying they reflected frustration with fragmentation in health care delivery.

Joyner closed the call by saying CVS was encouraged by its first-quarter performance and remains focused on disciplined execution, stakeholder partnerships and innovation aimed at improving affordability, access and the health care experience.

About CVS Health NYSE: CVS

CVS Health Corporation is a diversified healthcare company that operates a large network of retail pharmacies, pharmacy benefit management services and health care solutions. Headquartered in Woonsocket, Rhode Island, the company traces its roots to the early 1960s and has grown into an integrated provider of prescription drugs, over‑the‑counter products, clinical services and health insurance offerings. Its operating model combines retail pharmacy locations and in‑store clinics with broader pharmacy and health plan capabilities.

Key business activities include CVS Pharmacy retail operations, MinuteClinic walk‑in medical clinics and HealthHUB locations that offer expanded clinical services.

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