CVS Health reported strong first-quarter earnings on Wednesday while acknowledging that medical costs remain too high for consumers, raising questions about whether insurance efficiency gains will translate into lower premiums for working families struggling with healthcare affordability.
The healthcare giant posted net income of $2.94 billion, or $2.30 per share, for the first quarter, compared with net income of $1.78 billion, or $1.41 per share, in the same period a year earlier. Excluding certain items, adjusted earnings were $2.57 per share, above the $2.20 expected by analysts surveyed by LSEG. Revenue was $100.43 billion, up 6.2% from a year earlier and exceeding the $95.09 billion expected by analysts.
The company raised its full-year profit guidance to between $7.30 and $7.50 per share, up from previous guidance of $7 to $7.20 per share. It also expects revenue of at least $405 billion in 2026, up from a prior outlook of at least $400 billion.
Insurance Performance and Medical Cost Concerns
CVS CFO Brian Newman said the majority of the $5 billion revenue increase was "reflective of the tail winds we're seeing" for insurer Aetna. The insurance business brought in $35.97 billion in revenue during the quarter, up around 3% from the first quarter of 2025 and above the $33.28 billion expected by analysts.
The insurance segment's medical benefit ratio fell to 84.6% from 87.3% a year earlier, compared with analysts' expectation of 86.3%. Newman attributed Aetna's performance to underlying strength and organizational changes to processes or technology that have enabled the company to "do things more efficiently."
However, Newman acknowledged that medical costs are still too high. He said CVS has internal programs to "take cost out of the way we do work" and can better forecast medical cost trends, saying he is happy "we're not getting a lot of surprises." He said CVS now needs to focus on using the same tools to reduce medical costs.
CVS said the year-over-year improvement in the unit was also due to the lack of a premium deficiency reserve, which had been recorded in the same period in 2025.
Retail and Pharmacy Services Performance
The pharmacy and consumer wellness division posted $31.99 billion in sales, relatively flat from a year earlier and above the $31.70 billion expected by analysts. The unit dispenses prescriptions in CVS' more than 9,000 retail pharmacies and provides services such as vaccinations and diagnostic testing.
The health services segment generated $48.24 billion in revenue, up 11% from a year earlier. That unit includes the pharmacy benefits manager Caremark, which negotiates drug discounts with manufacturers on behalf of insurance plans, creates formularies and reimburses pharmacies for prescriptions.
The company said all of its business segments — insurer Aetna, its retail pharmacy and health services unit — surpassed Wall Street's expectations.
Executive Outlook
Newman said, "From an investor lens, we said let's put out realistic, reasonable targets and then find pathways to outperform. And we did that throughout at the end of last year and the quarter." He added, "So to beat and raise, which I think is probably the fourth or fifth consecutive, it feels like we're delivering on that."
He also said, "So confident in the year, but still taking a cautious or prudent view," noting that medical costs are still too high. Shares of CVS rose more than 7% on Wednesday.
Why This Matters:
CVS Health's strong earnings come at a time when healthcare affordability remains a critical concern for millions of Americans. While the company's improved efficiency and lower medical benefit ratio suggest better cost management within the insurance business, Newman's acknowledgment that medical costs remain too high underscores the ongoing challenge facing consumers. The question for policymakers and healthcare advocates is whether these corporate efficiency gains will be passed on to consumers through lower premiums and out-of-pocket costs, or whether they will primarily benefit shareholders. With CVS operating as both an insurer and pharmacy benefits manager controlling significant portions of the healthcare supply chain, the company's pricing decisions have substantial impact on healthcare access and affordability for working families across the country.