Why did Elevance's earnings decline in 2025 despite revenue growth?

Revenue grew 13% to $197.6 billion, largely from higher premium yields, acquisitions, and Medicare Advantage growth. However, the benefit expense ratio rose 150 bps to 90.0% on elevated medical cost trend, which compressed margins. Full-year GAAP operating margin fell to 3.6% from 4.5%, and adjusted EPS declined 8.3% to $30.29.

What does the 2026 outlook imply for investors?

Guidance calls for adjusted diluted EPS of at least $25.50 and GAAP EPS of at least $22.30, both below 2025 levels. Total operating revenue is expected to fall at a low single-digit rate, with a benefit expense ratio of about 90.2%. Management attributes the reset to affordability-focused pricing discipline and expects to return to at least 12% adjusted EPS growth in 2027.

Why is Health Benefits underperforming while Carelon is growing?

Health Benefits, which includes Medicare, Medicaid, ACA, and commercial businesses, absorbed higher medical cost trend, producing a Q4 adjusted operating loss and a FY 2025 margin of 2.5%, down from 4.2%. Carelon grew revenue 33% and expanded adjusted operating gain by 10%, driven by CarelonRx performance and Carelon Services risk-based solutions, partly offsetting the weakness.

How is Elevance managing its capital and shareholder returns?

In 2025 the company repurchased shares for $2.6 billion and paid $1.5 billion in dividends. It declared a Q1 2026 dividend of $1.72 per share and retained about $6.7 billion of repurchase authorization. Operating cash flow of $4.3 billion covered these returns, and 2026 operating cash flow is guided to at least $5.5 billion.

Is Elevance's medical cost trend showing signs of improvement?

Mixed signals emerged. Days in claims payable declined to 41.3 days, down 1.9 days year over year, and prior-year reserve redundancies totaled $1.29 billion, which supported results. However, current-year cost trends remained elevated, and the Q4 benefit expense ratio rose 110 bps, so the 2026 guidance assumes the ratio stays high at about 90.2%.

ELV 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 28, 2026. Cited figures are marked; the original filing is the authoritative source.

Elevance Health (ELV) reported fourth quarter and full year 2025 results on January 28, 2026, with operating revenue of $49.3 billion^a in Q4 (up 10% year over year) and $197.6 billion for the full year (up 13%).

Profitability came under pressure: Q4 diluted GAAP EPS was $2.47^b and adjusted EPS was $3.33, while full-year GAAP diluted EPS was $25.21 and adjusted EPS was $30.29, down 8.3% from $33.04 in 2024. The benefit expense ratio rose 110 basis points in Q4 to 93.5% and 150 basis points for the year to 90.0%, driven by elevated medical cost trend, particularly in ACA plans and Medicare Part D. Health Benefits swung to an adjusted operating loss of $0.2 billion in Q4, while Carelon and CarelonRx continued to grow, with Carelon's full-year adjusted operating gain up 10%.

The 2026 outlook is the central investor concern. Management guided to GAAP diluted EPS of at least $22.30^c and adjusted diluted EPS of at least $25.50, a meaningful decline from 2025. Total operating revenue is expected to decline at a low single-digit rate, with Medicaid and Medicare Advantage membership both guided lower, and the benefit expense ratio is projected at 90.2% (+/- 50 bps).

Management reaffirmed its long-term earnings algorithm and said it expects a return to at least 12% adjusted EPS growth in 2027, while recalibrating segment margin targets. Capital returns remained substantial, with $4.1 billion^d returned to shareholders in 2025, including $2.6 billion of share repurchases and $1.5 billion of dividends.

The Board declared a first-quarter 2026 dividend of $1.72 per share, and about $6.7 billion of repurchase authorization remained at year-end. Operating cash flow was $4.3 billion, about 0.8 times GAAP net income, and 2026 guidance calls for at least $5.5 billion.

02—Key points

Key Highlights

FY 2026 guidance: GAAP diluted EPS of at least $22.30 and adjusted diluted EPS of at least $25.50, versus FY 2025 actuals of $25.21 and $30.29.
Benefit expense ratio rose 110 bps to 93.5% in Q4 and 150 bps to 90.0% for FY 2025, driven by elevated medical cost trend in ACA and Medicare Part D.
Health Benefits posted a Q4 adjusted operating loss of $0.2 billion; FY 2025 adjusted operating gain fell to $4.2 billion from $6.3 billion.
Carelon segment grew operating revenue 33% to $71.7 billion for FY 2025, with adjusted operating gain up 10% to $3.4 billion, supported by CarelonRx and Carelon Services risk-based growth.
2026 membership guided down, with total medical membership expected at 43.2–43.9 million versus 45.2 million at year-end 2025, driven by Medicaid and Medicare Advantage declines.
Returned $4.1 billion to shareholders in 2025; Q1 2026 dividend set at $1.72 per share, and $6.7 billion of buyback authorization remained.
Management reaffirmed its long-term earnings algorithm, targeting at least 12% adjusted EPS growth in 2027 and recalibrating segment margin targets.

03—Questions

Frequently Asked Questions

Why did Elevance's earnings decline in 2025 despite revenue growth?
Revenue grew 13% to $197.6 billion, largely from higher premium yields, acquisitions, and Medicare Advantage growth. However, the benefit expense ratio rose 150 bps to 90.0% on elevated medical cost trend, which compressed margins. Full-year GAAP operating margin fell to 3.6% from 4.5%, and adjusted EPS declined 8.3% to $30.29.
What does the 2026 outlook imply for investors?
Guidance calls for adjusted diluted EPS of at least $25.50 and GAAP EPS of at least $22.30, both below 2025 levels. Total operating revenue is expected to fall at a low single-digit rate, with a benefit expense ratio of about 90.2%. Management attributes the reset to affordability-focused pricing discipline and expects to return to at least 12% adjusted EPS growth in 2027.
Why is Health Benefits underperforming while Carelon is growing?
Health Benefits, which includes Medicare, Medicaid, ACA, and commercial businesses, absorbed higher medical cost trend, producing a Q4 adjusted operating loss and a FY 2025 margin of 2.5%, down from 4.2%. Carelon grew revenue 33% and expanded adjusted operating gain by 10%, driven by CarelonRx performance and Carelon Services risk-based solutions, partly offsetting the weakness.
How is Elevance managing its capital and shareholder returns?
In 2025 the company repurchased shares for $2.6 billion and paid $1.5 billion in dividends. It declared a Q1 2026 dividend of $1.72 per share and retained about $6.7 billion of repurchase authorization. Operating cash flow of $4.3 billion covered these returns, and 2026 operating cash flow is guided to at least $5.5 billion.
Is Elevance's medical cost trend showing signs of improvement?
Mixed signals emerged. Days in claims payable declined to 41.3 days, down 1.9 days year over year, and prior-year reserve redundancies totaled $1.29 billion, which supported results. However, current-year cost trends remained elevated, and the Q4 benefit expense ratio rose 110 bps, so the 2026 guidance assumes the ratio stays high at about 90.2%.

04—Continue

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