CVS Raises 2026 Outlook After Insurance Cost Controls Drive Q1 Beat

CVS Health investors got a rare dose of good news Wednesday morning. The company's once-troubled insurance business delivered better medical cost management than expected, powering first-quarter results that topped Wall Street forecasts and prompting the pharmacy giant to lift its full-year profit and revenue guidance. Shares rose more than 4% in premarket trading.

The healthcare conglomerate reported adjusted earnings of $2.57 per share for the quarter, according to figures it released and that both CNBC and Reuters attributed to LSEG consensus data. Analysts had expected $2.20. Revenue reached $100.43 billion, exceeding projections of $95.09 billion. All three major segments beat revenue estimates. Net income climbed to $2.94 billion, or $2.30 per share, from $1.78 billion a year earlier.

At the heart of the results sits Aetna, the insurance unit that has dragged on performance for two years amid elevated medical costs tied to delayed procedures and Medicare Advantage patients. The segment's medical loss ratio fell to 84.6%, below the 86.3% to 87.58% range analysts anticipated and improved from 87.3% a year ago, the company said. CVS attributed part of the year-over-year gain to the absence of a premium deficiency reserve recorded in last year's first quarter. Revenue at the insurance business rose 3% to $35.97 billion.

Chief Financial Officer Brian Newman told both CNBC and Reuters that internal changes to processes, technology and forecasting have reduced surprises, though he stressed medical costs remain high. The company has focused on cutting $2 billion in overall costs, refining Medicare Advantage benefits and improving pharmacy margins at its Caremark unit, which saw an 11% revenue increase to $48.24 billion on a more profitable drug mix. Retail pharmacy sales stayed essentially flat at $31.99 billion.

CVS now expects full-year adjusted earnings of $7.30 to $7.50 per share, up from its prior range of $7.00 to $7.20. It raised revenue guidance to at least $405 billion from a previous floor of $400 billion. Newman described the new targets as realistic yet achievable, noting this marks multiple consecutive quarters of beating and raising. The company has also announced plans to exit nearly 90 Medicare Advantage plans across 34 states for 2026, citing rising costs and inadequate government reimbursements.

The performance fits a broader first-quarter trend of relative stability across major health insurers, though the second quarter is expected to offer a clearer read on sustained cost trends. Rivals UnitedHealth and Humana have reported similar pressures in Medicare Advantage, where government payment increases for 2027 are projected at 2.48% on average, still falling short of cost growth according to Newman. CVS continues to adjust benefits and pricing in response.

Analysts following the results will now assess whether the improved loss ratio reflects structural change or temporary relief. The company has replaced leadership, closed underperforming stores and narrowed its Medicare Advantage footprint as part of a broader turnaround after several high-profile misses in 2024.