Elevance Health, Inc.
ELV · NYSE
Next quarter
Reports Oct 20, 2026.
Consensus is $4.72 EPS for Sep 2026 across 12 estimates, ranging $4.51 to $5.05.
ELV Jun 2026
- 20.55%
- -4.48%
- $6.18
- $7.45
- —
- $50.47B
Reported results
- $50.47B
- 89.12%
- $1.76B
- 3.49%
- $1.46B
- $6.71
Highlights
- Adjusted EPS: Second-quarter adjusted diluted EPS was $7.45, beating the $6.18 consensus by 20.6%, although it declined 15.7% from $8.84 a year ago.
- Guidance: Elevance raised its 2026 adjusted EPS outlook to at least $27.00 from the prior outlook and GAAP diluted EPS guidance to at least $20.10; operating cash flow guidance increased to at least $6.0 billion.
- Operating performance: Operating revenue was $49.8 billion, up 0.8% year over year, while operating gain fell 27.3% to $1.76 billion and operating margin contracted 140 basis points to 3.5%.
- Medical costs: The benefit expense ratio rose 80 basis points to 89.7%, reflecting elevated medical cost trends in Medicaid and Medicare, partially offset by better Individual ACA performance.
- Health Benefits: Segment revenue grew 2.7% to $42.7 billion, but operating gain fell 42.6% to $896 million as higher medical costs and targeted investments more than offset premium yield increases.
- Carelon: Carelon revenue increased 6.0% to $19.2 billion; CarelonRx operating gain rose 8.6% to $582 million, while Carelon Services gain declined 8.5% to $366 million.
- Membership: Total medical membership fell 1.5% year over year to 44.9 million, including a 15.9% decline in Medicare Advantage membership to 1.9 million and a 4.3% Medicaid decline to 8.4 million.
- CMS matter: CMS confirmed that Elevance completed the required steps related to historical Medicare Advantage risk-adjustment data and would impose no sanctions; the remaining accrual was $593 million after a $342 million payment.
- Capital and cash: Six-month operating cash flow was $6.25 billion versus $3.07 billion a year ago; Elevance repurchased $234 million of stock in the quarter and retained $5.3 billion of authorization.
Analysis
Elevance’s second quarter was an earnings beat and guidance-raising print, but the underlying operating result remained pressured. Adjusted EPS of $7.45 exceeded the $6.18 consensus by 20.6%, helped by favorable benefit expense performance and an approximately $0.80 per-share below-the-line benefit. Against the year-ago quarter, operating revenue rose 0.8% to $49.8 billion, but operating gain fell 27.3% to $1.76 billion, net income declined 16.6% to $1.45 billion and GAAP EPS fell 13.1% to $6.71. Sequentially, revenue was slightly below the first quarter’s $50.18 billion, while operating income declined from $2.09 billion, net income from $1.76 billion and GAAP EPS from $8.00.
The defining issue was Health Benefits profitability: revenue increased 2.7% to $42.7 billion, but segment gain dropped 42.6% to $896 million as government medical costs and investment spending lifted the benefit expense ratio to 89.7%. Carelon provided a partial offset, with revenue up 6.0% and CarelonRx gain up 8.6%. Management raised full-year adjusted EPS guidance to at least $27.00 and operating cash flow guidance to at least $6.0 billion, while CMS closed its risk-adjustment enforcement process without sanctions. The company is also accelerating investments in its operating model despite membership declines and a 100-basis-point increase in the operating expense ratio.
Earnings and guidance
The quarter beat expectations primarily at the adjusted EPS level, while reported operating profitability was lower year over year. Adjusted diluted EPS was $7.45 versus the $6.18 consensus and $8.84 in the prior-year quarter. GAAP diluted EPS was $6.71, compared with $7.72 a year ago and $8.00 in the first quarter. The roughly $0.80 per-share net below-the-line benefit helped the adjusted result.
- Revenue: Operating revenue increased 0.8% year over year to $49.83 billion, compared with $50.18 billion in the first quarter; total revenue was $50.47 billion.
- Profitability: Operating gain was $1.76 billion, down from $2.43 billion a year ago and $2.09 billion in the prior quarter. Net income was $1.45 billion, versus $1.74 billion a year ago and $1.76 billion in the first quarter.
- Outlook: 2026 adjusted EPS guidance was raised to at least $27.00 and GAAP EPS guidance to at least $20.10. Operating cash flow guidance was raised to at least $6.0 billion.
Health Benefits pressure
Health Benefits remained the central operating challenge. Premium rate increases lifted revenue, but the segment absorbed higher government medical costs and additional investment spending. Membership attrition in Medicare Advantage and Medicaid also reduced the scale of the business.
- Segment result: Revenue increased 2.7% to $42.72 billion, while operating gain declined 42.6% to $896 million. The segment margin fell to 2.1% from 3.8%.
- Medical costs: The consolidated benefit expense ratio increased to 89.7% from 88.9%, with elevated trends in Medicaid and Medicare partly offset by improved Individual ACA performance.
- Membership: Total medical membership was 44.95 million, down 672,000 year over year and 469,000 sequentially. Medicare Advantage membership fell 15.9% year over year to 1.90 million, while Medicaid membership fell 4.3% to 8.36 million.
- Expenses: The consolidated operating expense ratio rose 100 basis points to 11.1%, reflecting targeted workforce, technology and regulatory investments.
Carelon performance
Carelon continued to grow faster than the insurance operation, though the earnings contribution was mixed. CarelonRx benefited from improved specialty pharmacy profitability, while Carelon Services faced less favorable contract results and lower membership-linked activity.
- Carelon revenue: Combined Carelon revenue increased 6.0% to $19.2 billion, driven by CarelonRx product revenue and the scaling of Carelon Services risk-based solutions.
- CarelonRx: Revenue rose 5.7% to $11.25 billion and operating gain increased 8.6% to $582 million, lifting the margin to 5.2% from 5.0%. Adjusted scripts declined 2.9% to 80.9 million, so growth reflected higher average revenue per prescription and specialty pharmacy profitability.
- Carelon Services: Revenue increased 7.2% to $7.98 billion, but operating gain declined 8.5% to $366 million and margin fell to 4.6% from 5.4%. Consumers served declined 5.0% to 92.4 million.
CMS and transformation
The quarter also marked progress on the Medicare risk-adjustment issue that weighed on first-half GAAP results. CMS notified Elevance on July 13 that it had completed the required steps and that sanctions would not be imposed, closing the enforcement process. The financial exposure is not fully settled, however, and management retains a range around its original estimate.
- CMS accrual: Elevance initially recorded a $935 million accrual in the first quarter, paid CMS $342 million in May and carried a $593 million balance at June 30.
- Potential range: Management estimated that the aggregate liability could ultimately be approximately $320 million below or above the original $935 million accrual.
- Operating model: The 2026–2027 transformation program generated $129 million of charges in the first half, primarily severance and relocation costs, with a $114 million employee-termination liability remaining at quarter-end.
- Investment priority: Management is accelerating spending on medical cost management, member and provider connectivity, operating efficiency, technology adoption and Carelon value-based solutions.
Cash and capital
Cash generation was a relative strength despite lower earnings. Working-capital benefits drove a sharp increase in first-half operating cash flow, supporting debt repayment, shareholder distributions and continued investment.
- Cash flow: Second-quarter operating cash flow was $1.9 billion, while six-month operating cash flow reached $6.25 billion versus $3.07 billion in the prior-year period.
- Balance sheet: Parent-company cash and investments available for general corporate use were approximately $2.06 billion at June 30; consolidated debt-to-capital was 40.8%, down from 42.1% at year-end 2025.
- Shareholder returns: Elevance repurchased 0.7 million shares for $234 million in the quarter and paid $373 million of dividends. The quarterly dividend remained $1.72 per share, with $5.3 billion of repurchase authorization outstanding.
