CVS Health Services' Q2 AOI Falls Despite Sales Gain: More Risk Ahead?

The Health Services segment at CVS Health CVS reported more than $46 million in revenues in the second quarter of 2025, representing a 10% increase from the previous year.The segment, which includes the Caremark pharmacy benefit manager (PBM), accounted for nearly 47% of the consolidated net sales. Growth was supported by the pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements. Health Services’ adjusted operating income (AOI) fell 17.8% year over year to $340 million, reflecting these pressures. The segment also recorded a $291 million litigation charge, which drove operating expenses up 37.8%.

AOI is also affected by the Health Care Delivery business, wherein Oak Street posted a higher medical benefit ratio (MBR) for the quarter. This reflected persistently elevated medical costs, the member mix, and more robust benefit and supplemental benefit offerings provided by plans. CVS is focused on addressing the market dynamics while working to strengthen the business and boost financial performance over the short and long term, driven by continued strong volumes. Further, ongoing efforts to retain existing clients, acquire new businesses and manage rebates, fees, and discounts from manufacturers, wholesalers and retail pharmacies continue to influence the segment’s AOI.

For the full year, CVS now expects Health Services’ AOI of at least $7.34 billion, down approximately $200 million from its initial guidance. The revision is entirely due to the impact of higher MBR in the Health Care Delivery business. However, the outlook for the Pharmacy Services business in this segment remains unchanged, underscoring the solid value proposition CVS continues to deliver to its clients.

Competitor Update for CVS Health

The Health Services segment faces strong competition from those offering PBM services, including PBMs owned by large national health plans such as the Express Scripts business ofThe Cigna Group CI and the Optum Rx business of UnitedHealth Group UNH.In the second quarter of 2025, Cigna’s adjusted income from operations rose 1% year over year, reflecting strong growth in Evernorth Health Services and improvements in Corporate, partially offset by anticipated higher stop loss medical costs in Cigna Healthcare. CI also reaffirmed its full-year 2025 guidance of at least $29.60 per share in consolidated adjusted income from operations.

Meanwhile, UNH’s Optum Rx generated $38.5 billion in the second-quarter revenues, up 19% over last year, supported by new customer additions and continued contribution from specialty products. Total adjusted scripts were $414 million compared to $399 million in the year-ago quarter. For the full year, Optum Rx expects 13% revenue growth and earnings growth of nearly 4%, driven by low-margin specialty drugs.

The Zacks Rundown on CVS Health

Year to date, CVS Health shares have risen 58.7%, far outpacing the industry’s modest 0.2% growth. The stock also outperformed UnitedHealth Group, which declined 39.9%, and Cigna’s 8.8% gain in the same time frame. 

From a valuation perspective, CVS Health is trading at a forward 12-month sales multiple of 0.22, which is lower than the industry average of 0.41. The stock has a Value Score of A. It is also cheaper than UNH and CI, which trade at just 0.60 and 0.29, respectively.

The consensus estimate for the company’s 2025 earnings has been showing a bullish trend. 

CVS currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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