CVS HEALTH CORPORATION 2026 Q2 Earnings Call

Larry, please proceed. Good morning, welcome to the CVS Health second quarter 2026 earnings call and webcast.

I'm Laurence McGrath, Executive Vice President of Capital Markets at CVS Health. I'm joined this morning by David Joyner, Chair and Chief Executive Officer, and Brian Newman, Chief Financial Officer. Following our prepared remarks, we'll host a question and answer session that will include additional members of the leadership team. Our press release and slide presentation have been posted to our website, along with our Form 10-Q filed this morning with the SEC. Today's call is also being broadcast on our website. During this call, we'll make certain forward-looking statements. Our forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from currently projected results. We strongly encourage you to review the reports we file with the SEC regarding these risks and uncertainties.

In particular, those that are described in the cautionary statement concerning forward-looking statements and risk factors in our most recent annual report on Form 10-K, our quarterly report on Form 10-Q filed this morning, and our recent filings on Form 8-K, including this morning's earnings press release. During this call, we'll use certain non-GAAP measures when talking about the company's financial performance and financial condition, and you can find a reconciliation of these non-GAAP measures in this morning's press release and on the reconciliation document posted to the investor relations portion of our website. With that, I'd like to turn the call over to David.

David? Thank you, Larry, good morning, everyone.

I'm proud to share that this quarter, each of our operating segments grew earnings and delivered performance that exceeded our expectations. We generated adjusted operating income of $5.2 billion and adjusted earnings per share of $2.58. These results reflect a clear and deliberate enterprise-wide focus on building trust by executing against our commitments to consumers, colleagues, and shareholders. Building on this strong performance so far this year, we are raising our full year 2026 adjusted earnings per share guidance by $0.60 to a range of $7.90 to $8.10. We are also updating our full year expectation for cash flow from operations to at least $11.5 billion, a meaningful increase of $2 billion from our prior guidance. These expectations reflect the core principles of our guidance philosophy: credible targets, disciplined execution, and clear opportunities for outperformance.

Brian will provide more details on our updated guidance, as well as some early high-level preliminary commentary for 2027 later in the call. Across CVS Health, our focus remains on helping people more easily access affordable care, navigate the healthcare system, and engage in their health. One clear example of how we're doing this is through our work supporting patients utilizing GLP-1s for weight loss. As demand for these therapies continue to grow, consumers are increasingly focused on three things: affordability, access, and convenience. CVS Health is a leader in all three. For employers looking to provide coverage for their workforce, Caremark continues to lead the industry by taking formulary actions that will increase availability of these drugs at a lower cost. However, despite these efforts, affordability challenges mean not all employers can cover GLP-1s for weight loss.

As more consumers seek access to these therapies outside of traditional benefit designs, CVS Health's comprehensive direct-to-consumer platform provides a trusted, convenient, and affordable pathway to care. MinuteClinic's 24/7 virtual weight management offering is the lowest cost option in the industry, connecting eligible patients with a licensed clinician for just $29. Through our manufacturer relationships and CVS Pharmacy's omni-channel fulfillment capabilities, eligible patients can access GLP-1 therapies for as little as $149 through cash pay options in the way that's most convenient to them. We're also simplifying navigation and making it easier for patients to find the most affordable option available to them. Later this year, through our new partnership with Eli Lilly, eligible Zepbound and Mounjaro patients will be able to access cash pay pricing for same-day pickup directly through CVS Health's app or in our stores.

This builds on our existing relationship with Novo to dispense oral and injectable Wegovy, making CVS Pharmacy a convenient, affordable destination for all FDA-approved GLP-1s. As more consumers begin these therapies, the role of our nearly 30,000 pharmacists is an important differentiator for us. They help patients manage common side effects, answer questions, and ensure they stay on therapy. These trusted pharmacist relationships and our omni-channel capabilities are especially important for seniors. With the launch of Medicare Bridge last month, CVS Pharmacy is helping seniors navigate the program and access these therapies more easily. At the same time, we're creating a new source of prescription volume as affordability barriers come down. Across CVS Health, we are best positioned to improve affordability, expand access, enhance the consumer experience, and capture the opportunities ahead regardless of how consumers choose to access GLP-1s.

Our work with GLP-1s is one example of how we can bring our assets together around a consumer need. More broadly, that same focus on simplicity, access, and engagement is driving our consumer technology strategy. Last month, we began the targeted launch of our Health 100 platform, including HiO, our new AI-powered assistant. HiO is designed to simplify the consumer experience and help people engage more effectively in their care journey. Early feedback has been encouraging, and we are excited to expand access later this year. Simplifying healthcare for consumers also requires making the system easier for the providers who care for them. That is why becoming the partner of choice for providers is such an important priority for us. We spend a great deal of time listening to providers and understanding where they experience the most friction in the healthcare system.

Consistently, we hear the same themes: reducing prior authorization burdens, streamlining claims, and improving access to real-time patient information. Our recent national provider survey reinforced those priorities and confirmed that we are making meaningful progress. Those insights are also helping reinforce the actions we're taking across our businesses to simplify interactions and improve experiences. We've recently launched a new AI-enabled Claims Assist Manager, which will reduce our processing time by over 20% and accelerate payment for providers on hundreds of millions of claims every year. We're also expanding the Aetna Clinical Collaboration Program that we announced last year. This program embeds our nurses directly into the facilities to work alongside hospital staff during critical care transitions. It also helps create a more connected experience for both providers and members through improved coordination and communication.

Together, these efforts are making us easier to work with and helping strengthen our position in the market. Those same principles, better connectivity, less friction, and faster access to information, are also guiding the work we're doing in our care delivery business. We've implemented technology infrastructure changes to modernize our platforms and accelerate data sharing, and connectivity with providers and payer partners. We continue to expand and refine our use of AI and analytics to reduce provider administration burden and support better, more connected care for patients. This includes appropriate use of AI to analyze over 1 billion pages of clinical records to enable more personalized and coordinated care. As we drive towards improved performance in this business, technology enhancements such as these are instrumental in positioning us for long-term success. Across these efforts, we're building capabilities that further differentiate CVS Health in the marketplace.

While we position ourselves for the future, we're not losing sight of the need to deliver best-in-class performance across each of our businesses. At Aetna, we put an industry-leading team in place, and the deliberate, coordinated actions we've discussed over the last two years continue to improve both our results and positioning. We're strengthening our clinical programs, improving the way we operate, and maintaining a disciplined approach to cost management and pricing. What you see now is the cumulative impact of these actions starting to come through clearly in our results. So far this year, we've delivered more than $2 billion of year-over-year improvement in adjusted operating income, reflecting both our commitment to restoring this business to its full potential and the consistency of execution behind it.

In our Caremark business, we've been leading the transition towards greater transparency for several years, especially at the pharmacy counter, where consumers can feel the impact of high-priced drugs. With recent legislation and regulatory developments, including our proposed settlement with the FTC, we expect the transition to net cost price models to accelerate while preserving the value PBMs deliver to clients, members, and the entire healthcare system. Our teams remain intensely focused on executing this transition. At the same time, we continue to build on the strength of CVS Specialty, the leading specialty pharmacy in this country. Success in this critically important, fast-growing category requires the ability to bring together clinical expertise, data and analytics, and personalized engagement to support complex patients across their full therapy journey. That's exactly what we do.