01—Abstract
Summary
Summary of the 8-K filed July 15, 2026. Cited figures are marked; the original filing is the authoritative source.
Elevance Health (ELV) reported second quarter 2026 results on July 15, 2026, with operating revenue of $49.8 billiona, up 0.8% year over year, and diluted EPS of $6.71 (down 13.1% from $7.72).
Adjusted diluted EPS was $7.45b, down from $8.84, and the company said results were supported by favorable benefit expense performance and an approximately $0.80 per share net below-the-line benefit. The benefit expense ratio rose 80 basis points to 89.7%, driven by elevated medical cost trend in Government businesses, partially offset by better Individual ACA performance. Operating gain fell 27.3% to $1.8 billion, with Health Benefits operating margin compressing to 2.1% from 3.8%.
Carelon was the bright spot, with revenue up 6% to $19.2 billionc and CarelonRx and Carelon Services growing. Management raised full-year 2026 guidance: diluted EPS to at least $20.10 and adjusted diluted EPS to at least $27.00, and raised operating cash flow guidance to at least $6.0 billion. The company also reaffirmed its target of at least 12% adjusted EPS growth in 2027 off its 2026 baseline, while accelerating targeted investments in medical cost management, member experience, provider connectivity, operating efficiency, and Carelon's value-based solutions.
The adjusted operating expense ratio rose 100 basis points to 11.0%, reflecting these investments. Investors should note that the full-year EPS gap between GAAP and adjusted figures is large, driven by a $935 milliond (about $4.27 per share) accrual tied to a February 27, 2026 CMS notice on historical Medicare Advantage risk adjustment data, along with intangible amortization and investment-related items. On the balance sheet and cash flow side, six-month operating cash flow was $6.2 billion, though Q2 operating cash flow of $1.9 billion was affected by timing of a state Medicaid pass-through payment.
Medical membership declined 1.5% year over year to 44.9 million, mainly from Medicare Advantage, Medicaid, and Individual ACA attrition and a commercial fee-based customer transition. The company repurchased $234 million of stock in the quarter, paid a $1.72 per share dividend, and retains about $5.3 billion in buyback authorization. The third-quarter dividend of $1.72 is payable September 25, 2026.
02—Key points
Key Highlights
- Q2 2026 diluted EPS fell 13.1% to $6.71; adjusted diluted EPS fell 15.7% to $7.45, partly aided by an approximately $0.80 per share net below-the-line benefit
- Full-year 2026 guidance raised: diluted EPS to at least $20.10 and adjusted diluted EPS to at least $27.00; operating cash flow guidance raised to at least $6.0 billion
- Benefit expense ratio rose 80 bps to 89.7%, driven by elevated medical cost trend in Government businesses, partly offset by Individual ACA improvement
- Health Benefits operating margin compressed to 2.1% from 3.8%, and operating gain fell 42.6% to $896 million
- Carelon operating revenue grew 6% to $19.2 billion, led by Carelon Services risk-based solutions and CarelonRx product revenue
- A $935 million (about $4.27 per share) accrual for a February 2026 CMS notice on historical Medicare Advantage risk adjustment data drives the gap between GAAP and adjusted 2026 EPS
- Medical membership fell 1.5% year over year to 44.9 million; the company is accelerating targeted investments that pushed the adjusted operating expense ratio up 100 bps to 11.0%
03—Questions
Frequently Asked Questions
Why did Elevance's earnings decline despite revenue growth?
Operating revenue rose 0.8% to $49.8 billion, but benefit expense grew faster in relative terms, pushing the benefit expense ratio up 80 basis points to 89.7%. Elevated medical cost trend in Government businesses (Medicare and Medicaid) was the main driver. Operating expenses also rose 11% as the company invested in its workforce and long-term capabilities, so operating gain fell 27.3% to $1.8 billion.
Why did Elevance raise guidance if Q2 earnings declined?
Management said Q2 results exceeded its internal outlook, and it raised full-year adjusted EPS guidance to at least $27.00 and GAAP EPS guidance to at least $20.10. The company also raised operating cash flow guidance to at least $6.0 billion. Part of the Q2 EPS benefit came from a non-operating item of about $0.80 per share, so investors should weigh the quality of the earnings beat carefully.
What is the CMS notice and how large is the financial impact?
CMS notified the company on February 27, 2026, about potential exposure tied to certain historical Medicare Advantage risk adjustment data. Elevance recorded a $935 million accrual, its current best estimate, in the first half of 2026. This equals about $4.27 per diluted share and is excluded from adjusted EPS. It is the largest single driver of the gap between GAAP and adjusted guidance.
Is Elevance's dividend and capital return still secure?
The company declared a third-quarter 2026 dividend of $1.72 per share, payable September 25, 2026, to holders of record on September 10, 2026. In the first half it paid $749 million in dividends and repurchased $1.36 billion of stock, and it has about $5.3 billion of buyback authorization remaining. Parent company cash and investments totaled about $2.1 billion at June 30, 2026, which supports these distributions.
What drove the quarter's weak operating cash flow and membership decline?
Q2 operating cash flow of $1.9 billion reflected the timing of a state Medicaid pass-through payment, though six-month operating cash flow was $6.2 billion. Medical membership fell 469 thousand sequentially to 44.9 million, driven by a known commercial fee-based customer transition and anticipated attrition in Individual ACA and Medicaid. Medicare Advantage membership fell 15.9% year over year, reflecting planned exits and repricing rather than a demand shock.
04—Continue