ELV · Q2 2026 Earnings

Cautious

Elevance Health

Reported July 15, 2026

30-second summary

Elevance beat Q2 consensus by 20% on adjusted EPS ($7.45 vs $6.21) and 2.4% on revenue ($49.83B vs $48.63B), and raised all three FY26 guidance metrics — adjusted EPS to "at least $27.00" (+$0.25), GAAP EPS to "at least $20.10" (+$0.25), and operating cash flow to "at least $6.0B" (+$0.5B). The operating cash flow raise is the harder signal; the $0.5B lift on a base of $5.5B validates that the underlying earnings-quality bridge is real, not just a mix of investment-income tailwinds. Q2 benefit expense ratio printed 89.7% — well inside the 90.2% ± 50bps FY frame — but management held the FY BER framework unchanged for the second consecutive quarter, and Medicare revenue is now -4.2% YoY as the deliberate MA exit flows through the P&L.

Headline numbers

EPS

Q2 FY2026

$7.45

+20.0% vs est.

Revenue

Q2 FY2026

$49.83B

+0.8% YoY

+2.4% vs est.

Operating margin

Q2 FY2026

3.5%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$49.83B	$49.40B	+0.9%	$49.50B	+0.7%
EPS	$7.45	$8.84	-15.7%	$12.58	-40.8%
Operating margin	3.5%	4.9%	-140bps	4.2%	-70bps

Guidance

Strong Q2 earnings beat and full-year confidence boost: all three FY 2026 guidance metrics raised (GAAP EPS +$0.25, Adj EPS +$0.25, OCF +$0.5B), while company reinforces 12%+ adjusted EPS growth target for 2027.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Diluted EPS (GAAP)	FY 2026	at least $19.85	at least $20.10	+$0.25	Raised
Adjusted Diluted EPS	FY 2026	at least $26.75	at least $27.00	+$0.25	Raised
Operating Cash Flow	FY 2026	at least $5.5 billion	at least $6.0 billion	+$0.5 billion	Raised

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Health Benefits	$42.72B	$41.6B	+2.7%
CarelonRx	$11.25B	$10.6B	+6.1%
Carelon Services	$7.975B	$7.4B	+7.8%
Commercial	$13.561B	—	+8.9%
Medicare	$10.962B	—	-4.2%
Medicaid	$14.444B	—	+3.8%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Medical Membership	44.9 million	45.6 million	—
Benefit Expense Ratio	89.7%	88.9%	—
Adjusted Operating Margin	3.6%	5.0%	—
Days in Claims Payable	45.4 days	—	—
CarelonRx Adjusted Scripts	80.9 million	83.3 million	—
Carelon Services Consumers Served	92.4 million	97.3 million	—
Operating Cash Flow (YTD)	$6.245 billion	—	—
Share Repurchases (Q2)	$234 million	—	—

Management tone

Q2 contrition → Q3 "$27 baseline, invest into the trough" → Q4 "FY26 is the trough at $25.50" → Q1 "underlying strength, $26.75" → Q2 "$27.00 — the normalized baseline is here."

The $27.00 baseline arrived one quarter early. Three quarters ago Mark Kaye anchored 2026 modeling at $27, defining it as FY25 stripped of ~$3 of discrete favorables — the normalized earnings baseline for the 2027 12% algorithm. Two quarters ago management guided FY26 at "at least $25.50," ~$1.50 below that anchor. This quarter the FY26 adjusted EPS guide sits at "at least $27.00" — exactly at the Q3 FY2025 normalized baseline, one quarter earlier than the "trough then recover" framing implied. The press release ties this directly to the algorithm: "reinforce our confidence in returning to at least 12% adjusted EPS growth in 2027 off our 2026 earnings baseline." Two consecutive quarterly raises totaling $1.50 — after two years of consecutive cuts — is the most credible signal yet that the reset cycle has ended.

From "actions to reduce medical costs" (Q1) to "accelerating targeted investments" (Q2). The press-release language shifts posture again: "accelerating targeted investments in the capabilities that matter most" replaces Q1's defensive "actions to reduce medical costs" framing. Two quarters into FY26 with BER running below the FY frame, the company is signaling it has room to spend against 2027 rather than continue extracting near-term cost. This is the same "invest into the trough" language Elevance used at Q3 FY2025 — but now delivered from a position of raised guidance rather than defensive contrition. Whether that spend is $1 of EPS (as management quantified at Q3 FY2025) or larger is not disclosed on this print.

The CMS matter has effectively receded as a first-order overhang. Q1's brief was dominated by the $935M accrual and the July 31 compliance deadline. This quarter's press release makes no material update visible in the extracted figures, and operating cash flow was raised $0.5B — implying the historical liability is being absorbed without ongoing operational drag. The fact that management raised OCF guidance rather than reaffirming it (as they did at Q1 "inclusive of CMS matter cash payments") is a soft signal that the cash impact is resolving inside the original envelope.

Answers to last quarter's watch list

Whether the FY26 BER guide of 90.2% ± 50bps gets formally refreshed at Q2 — Q2 printed 89.7%, and H1 BER (Q1 86.8%, Q2 89.7%) is tracking meaningfully below the FY 90.2% midpoint. Management did not formally re-set the framework — they continued to flow the outperformance to the EPS line ($0.25 raise) rather than tighten the BER anchor. This is the second consecutive quarter of held BER framework despite better-than-guided prints. Status: Continue monitoring

July 31 CMS compliance deadline outcome — The press release does not surface any material sanction, guidance cut, or additional accrual related to the CMS matter, and OCF was raised $0.5B rather than being reaffirmed under the "inclusive of CMS payments" framing used at Q1. The absence of negative disclosure combined with a cash-flow raise implies the compliance deadline was navigated without escalation. Status: Resolved positively

Carelon Services margin trajectory — Segment revenue grew only +7.2% YoY (vs +12.7% in Q1), the fifth consecutive deceleration step. Segment operating margin was not disclosed in the press release, so margin stabilization cannot be confirmed. The top-line deceleration is more concerning than the margin question was originally framed — Carelon Services is losing altitude quickly. Status: Continue monitoring — margin question unanswered; growth trajectory itself now the sharper issue.

Whether prior FY26 revenue framework ("low single digit decline") gets formally replaced — Q2 revenue printed +0.8% YoY, so H1 revenue is running roughly flat versus a "low single digit decline" FY frame. Management did not formally re-introduce a positive or flat FY revenue framework. The second-derivative positive that a formal revenue-frame reset would have signaled did not materialize. Status: Not resolved — the metric no longer maps cleanly to the framework management chose to hold.

Medicare Advantage margin disclosure — Medicare revenue -4.2% YoY confirms the deliberate exit is deepening (worse than Q1's -3.6%), but explicit MA-only operating margin disclosure was not broken out in the press release. The "at least 2%" MA operating margin target for 2026 remains uncorroborated at the segment level. Status: Continue monitoring

2026 selling-season conversion of the "record 2027 pipeline" — The press release does not surface explicit 2027 commercial membership adds or new CarelonRx ASO wins in the extracted data. Commercial revenue +8.9% YoY within Health Benefits is directionally supportive of the underlying-strength narrative, but pipeline-to-bookings conversion detail is not disclosed on this print. Status: Continue monitoring

What to watch into next quarter

Whether the FY26 BER guide of 90.2% ± 50bps finally gets formally refreshed at Q3: H1 BER is running well below the frame (Q1 86.8%, Q2 89.7%). If Q3 also prints below the FY midpoint and management still declines to re-set the anchor, that's a signal they are deliberately conserving guidance headroom for H2 mix or Medicaid acuity — which itself would be a soft-negative tell.

Carelon Services deceleration: growth has stepped down from +63.7% → +57.9% → +47.1% → +12.7% → +7.2% over five quarters. Watch whether Q3 prints above or below +5% YoY — sub-5% would meaningfully impair the "third growth engine" thesis, and force the market to lean harder on Commercial and margin recovery as the 2027 algorithm's underpinnings.

Formal Medicare Advantage margin disclosure: MA revenue now -4.2% YoY, deepening from Q1's -3.6%. With one quarter left in the "at least 2% MA operating margin in 2026" year, watch whether Q3 finally breaks out MA-specific margins or whether the year passes without segment-level validation of the strategic-exit thesis.

Whether the FY26 adjusted operating gain guide ("at least $6.8B") gets refreshed: two consecutive $0.25 EPS raises and a $0.5B OCF raise, with the underlying operating gain metric held unchanged, is inconsistent. Q3 is the natural quarter to re-anchor operating gain — a raise would confirm the EPS lifts are operationally driven; a hold would suggest below-the-line contribution (buybacks, investment income, tax) is doing more work than the press release framing implies.

Explicit 2027 EPS range or algorithm restatement: management has now reaffirmed "at least 12% adjusted EPS growth in 2027 off our 2026 earnings baseline" for four consecutive quarters. Off a $27.00+ baseline that implies ~$30.25+ for 2027. Watch whether Q3 or Q4 introduces an explicit 2027 range — after two years of cuts, the buyside will require a stake in the ground before crediting the multiple.

2027 commercial and CarelonRx bookings conversion: management cited a "record 2027 pipeline" and two marquee PBM wins at Q1. Q3 is when 2027 selling-season commitments should be substantially disclosed. Watch for specific membership add or ASO win numbers — pipeline commentary without conversion evidence loses credibility with each quarter.

Sources

Elevance Health Q2 FY2026 Earnings Release: https://www.sec.gov/Archives/edgar/data/1156039/000115603926000058/a2q2026elvearningsrelease.htm

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