CVS Health · 10-Q · Item 2 MD&A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview of Business

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a leading health solutions company simplifying health care one person, one family and one community at a time. As of June 30, 2026, the Company had approximately 9,000 retail locations, more than 1,000 walk-in and primary care medical clinics and a leading pharmacy benefits manager with approximately 87 million plan members and expanding specialty pharmacy solutions. The Company also serves an estimated 37 million people through a broad range of health insurance products and related services. The Company is creating new sources of value through its integrated model, allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

The Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other, which are described below.

Health Care Benefits Segment

The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers through its Aetna® operations. The Health Care Benefits segment offers a broad range of health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, prescription drug plans (“PDPs”) and Medicaid health care management services. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.”

Health Services Segment

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions through its CVS Caremark® operations and delivers health care services in its medical clinics, virtually, and in the home. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers.

The segment also works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products through its Cordavis® subsidiary. The Health Services segment’s health care delivery assets include Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients.

Pharmacy & Consumer Wellness Segment

The Pharmacy & Consumer Wellness segment dispenses prescriptions in its CVS Pharmacy® retail locations and through its infusion operations, provides ancillary pharmacy services including pharmacy patient care programs and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise. The segment also provides pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings.

Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which primarily consists of management and administrative expenses to support the Company’s overall operations and products for which the Company no longer solicits or accepts new customers, such as its large case pensions and long-term care insurance products.

See Note 1 ‘‘Significant Accounting Policies’’ included in Item 1 of this 10-Q and Part 1, Item 1 “Business” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) for further information on the Company’s reportable segments.

Operating Results

The following discussion explains the material changes in the Company’s operating results for the three and six months ended June 30, 2026 and 2025, and the significant developments affecting the Company’s financial condition since December 31, 2025. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the 2025 Form 10-K.

Summary of Consolidated Financial Results

Change

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

In millions

$

%

$

%

Revenues:

Products

$

$

$

$

$

%

$

%

Premiums

%

%

Services

%

%

Net investment income

%

%

Total revenues

%

%

Operating costs:

Cost of products sold

%

%

Health care costs

%

%

Operating expenses

%

%

Total operating costs

%

%

Operating income

%

%

Interest expense

6

%

%

Other income

2

%

6

%

Income before income tax provision

%

%

Income tax provision

%

%

Net income

%

%

Net (income) loss attributable to noncontrolling interests

8

5

%

%

Net income attributable to CVS Health

$

$

$

$

$

%

$

%

Revenues

•Total revenues increased $7.2 billion, or 7.3%, in the three months ended June 30, 2026 compared to the prior year driven by revenue growth across all operating segments.

•Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments.

Operating expenses

•T1Operating expenses decreased $166 million, or 1.5%, in the three months ended June 30, 2026 compared to the prior year primarily due to the absence of $833 million in legacy litigation charges recorded in the prior year, partially offset by continued business investments and operating expenses to support increased volume from the Rite Aid asset acquisitions.

•Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments.

Operating income

•Operating income increased $2.3 billion, or 97.5%, in the three months ended June 30, 2026 compared to the prior year primarily due to improved operating performance across all operating segments, as well as the absence of $833 million in legacy litigation charges recorded in the prior year.

•Please see “Segment Analysis” later in this report for additional information about the operating results of the Company’s segments.

Income tax provision

•The effective income tax rate was 24.7% for the three months ended June 30, 2026 compared to 38.5% for the three months ended June 30, 2025. The change in the effective income tax rate was primarily due to the absence of the impact of the non-deductible legacy litigation charges recorded in the prior year.

Revenues

•Total revenues increased $13.0 billion, or 6.7%, in the six months ended June 30, 2026 compared to the prior year driven by revenue growth across all operating segments.

•Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments.

Operating expenses

•Operating expenses decreased $244 million, or 1.1%, in the six months ended June 30, 2026 compared to the prior year primarily due to the absence of $1.2 billion in legacy litigation charges and $288 million in pre-tax losses on the wind down and sale of Accountable Care assets, both recorded in the prior year, partially offset by continued business investments, operating expenses to support increased volume from the Rite Aid asset acquisitions and the retroactive effect of a change in a state law related to non-income taxes.

•Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments.

Operating income

•Operating income increased $3.6 billion, or 63.0%, in the six months ended June 30, 2026 compared to the prior year primarily due to improved operating performance in the Health Care Benefits segment, as well as the absence of the $1.2 billion in legacy litigation charges and the $288 million in pre-tax losses on the wind down and sale of Accountable Care assets, both recorded in the prior year.

•Please see “Segment Analysis” later in this report for additional information about the operating results of the Company’s segments.

Income tax provision

•The effective income tax rate was 24.8% for the six months ended June 30, 2026 compared to 34.5% for the six months ended June 30, 2025. The change in the effective income tax rate was primarily due to the absence of the impact of the non-deductible legacy litigation charges recorded in the prior year.

Trends and Uncertainties

The Company believes you should consider the following business and regulatory trends and uncertainties:

Business Trends and Uncertainties

•T2Utilization persisted at elevated levels in the second quarter of 2026. Although the level of utilization is difficult to accurately predict, utilization beyond current elevated levels may pressure the Company’s Health Care Benefits segment and its health care delivery assets in its Health Services segment in 2026.

•T3The Company continues to share with clients a larger portion of rebates, fees and/or discounts received from pharmaceutical manufacturers, and typically offers clients minimum pricing guarantees that cannot always be achieved. The Company also faces increasing pressure from pharmaceutical manufacturers with respect to the calculation and collection of rebates. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread.” The Company expects these trends to continue.

•The environment for the federal 340B drug pricing program remains dynamic and may continue to impact the Company’s Health Services segment.

•T4Changes in the economic environment, including inflation, the implementation of new tariffs or changes in tariffs, including the impact of tariffs on trade relations between the U.S. and foreign countries, and labor and other market dynamics could create exposure for increased costs and supply chain disruptions that can adversely impact consumer demand, the ability to deliver client savings or the Company’s financial results.

•T5Consumer confidence and a decline in consumer discretionary spending, as well as a shift to value, grocery and digital retailers, could drive lower front store sales in the Pharmacy & Consumer Wellness segment.

•Heightened geopolitical tensions could contribute to an increase in likelihood of factors that may negatively impact the Company’s financial results, including an economic slowdown, a recession, financial market volatility, increased supply chain costs or supply chain disruptions, fluctuations in interest rates or other monetary and fiscal policy measures and cyberattacks.

Regulatory Trends and Uncertainties

•The Company is exposed to funding and regulation of, and changes in government policy with respect to and/or funding or regulation of, the various Medicare and Medicaid programs in which the Company participates, including changes in the amounts payable to us under those programs and/or new reforms or surcharges on existing programs, including changes to applicable risk adjustment mechanisms.

•T6Legislation and/or regulations seeking to regulate PBM activities in a comprehensive manner have been proposed or enacted in a majority of states and on the federal level. In addition, some states have recently enacted or are considering legislation related to prohibiting pharmacy licensure for pharmacies affiliated with a PBM. This legislative and regulatory activity could adversely affect the Company’s ability to conduct business on commercially reasonable terms and the Company’s ability to standardize its PBM products and services across state lines and/or could limit the Company’s ability to provide both pharmacy and PBM services within the same state.

For additional information regarding these and other trends and uncertainties, see Item 1A, “Risk Factors” and Part I, Item 1 “Business - Government Regulation” included in the 2025 Form 10-K.

Segment Analysis

The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 9 ‘‘Segment Reporting’’ to the unaudited condensed consolidated financial statements.

The Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. The Company’s segments maintain separate financial information, and the Chief Operating Decision Maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The Company’s CODM is the Chief Executive Officer. The CODM evaluates the performance of the Company’s segments based on adjusted operating income. Adjusted operating income (loss) is defined as operating income (loss) as measured by accounting principles generally accepted in the United States of America (“GAAP”) excluding the impact of amortization of intangible assets, net realized capital gains or losses and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance.

See the reconciliations of operating income (loss) (GAAP measure) to adjusted operating income (loss) below for further context regarding the items excluded from operating income (loss) in determining adjusted operating income (loss). The CODM uses adjusted operating income as its principal measure of segment performance as it enhances the CODM’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

The following are reconciliations of financial measures of the Company’s segments to the consolidated totals:

In millions

Health Care

Benefits

Health

Services (1)

Pharmacy &

Consumer

Wellness

Corporate/

Other

Intersegment

Eliminations (2)

Consolidated

Totals

Three Months Ended

Total revenues

$

$

$

$

$

$

Adjusted operating income (loss)

—

Total revenues

$

$

$

$

$

$

Adjusted operating income (loss)

—

Six Months Ended

Total revenues

$

$

$

$

$

$

Adjusted operating income (loss)

—

Total revenues

$

$

$

$

$

$

Adjusted operating income (loss)

—

_____________________________________________

(1)Total revenues of the Health Services segment include approximately $2.8 billion and $2.7 billion of retail co-payments for the three months ended June 30, 2026 and 2025, respectively, and $6.6 billion and $6.4 billion of retail co-payments for the six months ended June 30, 2026 and 2025, respectively.

(2)Intersegment revenue eliminations relate to intersegment revenue generating activities that occur between the Health Care Benefits segment, the Health Services segment, and/or the Pharmacy & Consumer Wellness segment.

The following are reconciliations of consolidated operating income (GAAP measure) to consolidated adjusted operating income, as well as reconciliations of segment GAAP operating income (loss) to segment adjusted operating income (loss):

In millions

Health Care

Benefits

Health

Services

Pharmacy &

Consumer

Wellness

Corporate/

Other

Consolidated

Totals

Operating income (loss) (GAAP measure)

$

$

$

$

$

Amortization of intangible assets (1)

—

Net realized capital (gains) losses (2)

(2)

—

—

Acquisition-related integration costs (3)

—

—

—

Adjusted operating income (loss)

$

$

$

$

$

In millions

Health Care

Benefits

Health

Services

Pharmacy &

Consumer

Wellness

Corporate/

Other

Consolidated

Totals

Operating income (loss) (GAAP measure)

$

$

$

$

$

Amortization of intangible assets (1)

—

Net realized capital losses (2)

—

—

Acquisition-related integration costs (3)

—

—

—

Legacy litigation charges (4)

—

—

Loss on Accountable Care assets (5)

—

—

—

Office real estate optimization charges (6)

—

—

—

4

4

Adjusted operating income (loss)

$

$

$

$

$

In millions

Health Care

Benefits

Health

Services

Pharmacy &

Consumer

Wellness

Corporate/

Other

Consolidated

Totals

Operating income (loss) (GAAP measure)

$

$

$

$

$

Amortization of intangible assets (1)

1

Net realized capital (gains) losses (2)

(3)

—

—

Acquisition-related integration costs (3)

—

—

—

Adjusted operating income (loss)

$

$

$

$

$

In millions

Health Care

Benefits

Health

Services

Pharmacy &

Consumer

Wellness

Corporate/

Other

Consolidated

Totals

Operating income (loss) (GAAP measure)

$

$

$

$

$

Amortization of intangible assets (1)

1

Net realized capital (gains) losses (2)

—

Acquisition-related integration costs (3)

—

—

—

Legacy litigation charges (4)

—

—

Loss on Accountable Care assets (5)

—

—

—

Office real estate optimization charges (6)

4

—

2

4

Adjusted operating income (loss)

$

$

$

$

$

_____________________________________________

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset

amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)The Company’s net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of insurance liabilities. Net realized capital gains and losses are reflected in net investment income (loss) within each segment. These capital gains and losses are the result of investment decisions, market conditions and other economic developments that are unrelated to the performance of the Company’s business, and the amount and timing of these capital gains and losses do not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services.

Accordingly, the Company believes excluding net realized capital gains and losses enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends.

(3)During the three and six months ended June 30, 2026 and 2025, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related integration costs are reflected in operating expenses within the Corporate/Other segment.

(4)During the three and six months ended June 30, 2025, the Company recorded legacy litigation charges related to two court decisions associated with its past business practices. The legacy litigation charges were reflected in operating expenses within the Pharmacy & Consumer Wellness and Health Services segments.

(5)During the three and six months ended June 30, 2025, the loss on the wind down and sale of Accountable Care assets represents the pre-tax loss on the divestiture of the Company’s Medicare Shared Savings Program (“MSSP”) operations, as well as costs incurred in connection with the wind down of the Company’s ACO REACH operations. The loss on Accountable Care assets was reflected in operating expenses within the Health Services segment.

(6)During the three and six months ended June 30, 2025, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the Company’s evaluation of corporate office real estate space. The office real estate optimization charges were reflected in operating expenses within each segment.

Health Care Benefits Segment

The following table summarizes the Health Care Benefits segment’s performance for the respective periods:

Change

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

In millions, except percentages and basis points (“bps”)

$

%

$

%

Revenues:

Premiums

$

$

$

$

$

%

$

%

Services

%

%

Net investment income

%

%

Total revenues

%

%

Health care costs

%

%

MBR (Health care costs as a % of premium revenues)

%

%

%

%

bps

bps

Operating expenses

$

$

$

$

$

%

$

%

Operating expenses as a % of total revenues

%

%

%

%

Operating income

$

$

$

$

$

%

$

%

Operating income as a % of total revenues

%

%

%

%

Adjusted operating income (1)

$

$

$

$

$

%

$

%

Adjusted operating income as a % of total revenues

%

%

%

%

Premium revenues (by business):

Government

$

$

$

$

$

%

$

%

Commercial

%

%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of Health Care Benefits segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

Revenues

•T7Total revenues increased $1.3 billion, or 3.5%, in the three months ended June 30, 2026 compared to the prior year primarily driven by an increase in the Government business, partially offset by a decline as a result of the Company’s exit of the individual exchange business in 2026.

Medical Benefit Ratio (“MBR”)

•Medical benefit ratio is calculated by dividing the Health Care Benefits segment’s health care costs by premium revenues and represents the percentage of premium revenues spent on medical benefits for the segment’s Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, understand variances between actual results and expected results and identify trends in period-over-period results. MBR provides management and investors with information useful in assessing the operating results of the Health Care Benefits segment’s Insured products.

•The MBR decreased to 87.4% in the three months ended June 30, 2026 compared to 89.9% in the prior year primarily driven by improved underlying performance in the Government business and the absence of a $471 million premium deficiency reserve recorded within the Group Medicare Advantage product line in the prior year.

Operating expenses

•Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses.

•Operating expenses increased $139 million, or 3.1%, in the three months ended June 30, 2026 compared to the prior year primarily driven by increased business investments.

Adjusted operating income

•Adjusted operating income increased $1.1 billion, or 85.5%, for the three months ended June 30, 2026 compared to the prior year primarily driven by improved underlying performance in the Government business and the absence of the premium deficiency reserve recorded in the prior year.

Revenues

•Total revenues increased $2.4 billion, or 3.4%, in the six months ended June 30, 2026 compared to the prior year primarily driven by an increase in the Government business, partially offset by a decline as a result of the Company’s exit of the individual exchange business in 2026.

Medical Benefit Ratio

•The MBR decreased to 86.0% in the six months ended June 30, 2026 compared to 88.6% in the prior year primarily driven by improved underlying performance in the Government business and the absence of $902 million of premium deficiency reserves recorded as health care costs in the prior year, partially offset by lower favorable prior period development.

Operating expenses

•Operating expenses increased $226 million, or 2.5%, in the six months ended June 30, 2026 compared to the prior year primarily driven by increased business investments.

Adjusted operating income

•Adjusted operating income increased $2.2 billion, or 65.6%, in the six months ended June 30, 2026 compared to the prior year primarily driven by improved underlying performance in the Government business and the absence of the premium deficiency reserves recorded in the prior year, partially offset by lower favorable prior period development.

The following table summarizes the Health Care Benefits segment’s medical membership for the respective periods:

In thousands

Insured

ASC

Total

Insured

ASC

Total

Insured

ASC

Total

Insured

ASC

Total

Medical membership:

Commercial

Medicare Advantage

—

—

—

—

Medicare Supplement

—

—

—

—

Medicaid

Total medical membership

Supplemental membership information:

Medicare Prescription Drug Plan (stand-alone)

Medical Membership

•Medical membership represents the number of members covered by the Health Care Benefits segment’s Insured and ASC medical products and related services at a specified point in time. Management uses this metric to understand variances between actual medical membership and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of medical membership on the Health Care Benefits segment’s total revenues and operating results.

•Medical membership as of June 30, 2026 of 26.0 million remained consistent compared with March 31, 2026.

•Medical membership as of June 30, 2026 of 26.0 million decreased approximately 700,000 members compared with June 30, 2025 reflecting the Company’s exit of the individual exchange business in 2026, partially offset by an increase in Commercial ASC membership.

Medicare Update

On April 6, 2026, the U.S. Centers for Medicare & Medicaid Services (“CMS”) issued its final notice detailing final 2027 Medicare Advantage payment rates. Final 2027 Medicare Advantage rates resulted in an expected average increase in revenue for the Medicare Advantage industry of 2.48%, excluding the CMS estimate of Medicare Advantage risk score trend.

Health Services Segment

The following table summarizes the Health Services segment’s performance for the respective periods:

Change

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

In millions, except percentages

$

%

$

%

Revenues:

Products

$

$

$

$

$

%

$

%

Services

%

%

Net investment income (loss)

(1)

(3)

(1)

2

%

%

Total revenues

%

%

Cost of products sold

%

%

Health care costs

%

%

Operating expenses

%

%

Operating expenses as a % of total revenues

%

%

%

%

Operating income

$

$

$

$

$

%

$

%

Operating income as a % of total revenues

%

%

%

%

Adjusted operating income (1)

$

$

$

$

$

%

$

%

Adjusted operating income as a % of total revenues

%

%

%

%

Revenues (by distribution channel):

Pharmacy network (2)

$

$

$

$

$

%

$

%

Mail & specialty (3)

%

%

Net investment income (loss)

(1)

(3)

(1)

2

%

%

Other

%

%

Pharmacy claims processed (4)

%

%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of Health Services segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

(2)Pharmacy network revenues relate to claims filled at retail and specialty retail pharmacies, including pharmacies owned by the Company, as well as activity associated with Maintenance Choice, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order.

(3)Mail & specialty revenues relate to specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as mail order and specialty claims fulfilled by the Pharmacy & Consumer Wellness segment.

(4)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

Revenues

•Total revenues increased $5.3 billion, or 11.5%, in the three months ended June 30, 2026 compared to the prior year primarily driven by pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements.

Operating expenses

•Operating expenses in the Health Services segment include selling, general and administrative expenses, as well as depreciation and amortization expense.

•Operating expenses decreased $236 million, or 20.2%, in the three months ended June 30, 2026 compared to the prior year primarily driven by the absence of a $291 million legacy litigation charge recorded in the prior year.

Adjusted operating income

•Adjusted operating income increased $158 million, or 10.0%, in the three months ended June 30, 2026 compared to the prior year primarily driven by improved purchasing economics, pharmacy drug mix and modest improvement in the

Company’s health care delivery business. These increases were partially offset by continued pharmacy client price improvements.

Pharmacy claims processed

•Pharmacy claims processed represents the number of prescription claims processed through the Company’s pharmacy benefits manager and dispensed by either its retail network pharmacies or the Company’s mail and specialty pharmacies. Management uses this metric to understand variances between actual claims processed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of pharmacy claim volume on segment total revenues and operating results.

•Pharmacy claims processed remained consistent on a 30-day equivalent basis in the three months ended June 30, 2026 compared to the prior year.

Revenues

•Total revenues increased $10.1 billion, or 11.3%, in the six months ended June 30, 2026 compared to the prior year primarily driven by pharmacy drug mix and brand inflation, partially offset by continued pharmacy client price improvements.

Operating expenses

•Operating expenses decreased $440 million, or 19.6%, in the six months ended June 30, 2026 compared to the prior year primarily due to the absence of the $291 million legacy litigation charge and $288 million in pre-tax losses on the wind down and sale of Accountable Care assets, both recorded in the prior year.

Adjusted operating income

•Adjusted operating income increased slightly in the six months ended June 30, 2026 compared to the prior year primarily driven by improved purchasing economics, pharmacy drug mix and modest improvement in the Company’s health care delivery business. These increases were largely offset by continued pharmacy client price improvements.

Pharmacy claims processed

•The Company’s pharmacy claims processed remained consistent on a 30-day equivalent basis in the six months ended June 30, 2026 compared to the prior year.

Pharmacy & Consumer Wellness Segment

The following table summarizes the Pharmacy & Consumer Wellness segment’s performance for the respective periods:

Change

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

In millions, except percentages

$

%

$

%

Revenues:

Products

$

$

$

$

$

%

$

%

Services

%

%

Total revenues

%

%

Cost of products sold

%

%

Operating expenses

%

%

Operating expenses as a % of total revenues

%

%

%

%

Operating income

$

$

$

$

$

%

$

%

Operating income as a % of total revenues

%

%

%

%

Adjusted operating income (1)

$

$

$

$

$

%

$

%

Adjusted operating income as a % of total revenues

%

%

%

%

Revenues (by major goods/service lines):

Pharmacy

$

$

$

$

$

%

$

%

Front Store

%

%

Other

%

%

Prescriptions filled (2)

%

%

Same store sales increase: (3)

Total

%

%

%

%

Pharmacy

%

%

%

%

Front Store

%

%

%

%

Prescription volume (2)

%

%

%

%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of Pharmacy & Consumer Wellness segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

(2)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

(3)Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year and digital sales initiated online or through mobile applications and fulfilled through the Company’s distribution centers, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues and prescriptions from infusion services operations and long-term care pharmacies. Management uses these metrics to evaluate the performance of existing stores on a comparable basis and to inform future decisions regarding existing stores and new locations. Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores.

Revenues

•Total revenues increased slightly in the three months ended June 30, 2026 compared to the prior year primarily driven by pharmacy drug mix, increased prescription volume, including contributions from the Company’s Rite Aid asset acquisitions which were completed during the third quarter of 2025, and brand inflation. These increases were largely offset by regulatory-related price reductions on certain drugs, the impact of recent generic drug introductions and pharmacy reimbursement pressure.

•Pharmacy same store sales increased 2.9% in the three months ended June 30, 2026 compared to the prior year. The increase was primarily driven by pharmacy drug mix, the 7.0% increase in pharmacy same store prescription volume on a 30-day equivalent basis and brand inflation. These increases were partially offset by regulatory-related price reductions on certain drugs, the impact of recent generic drug introductions and pharmacy reimbursement pressure.

•Front store same store sales increased 1.0% in the three months ended June 30, 2026 compared to the prior year.

Operating expenses

•Operating expenses in the Pharmacy & Consumer Wellness segment consist of selling, general and administrative expenses which include payroll, employee benefits and occupancy costs associated with the segment’s stores and pharmacy fulfillment operations, advertising expenses, as well as depreciation and amortization expense.

•T8Operating expenses decreased $168 million, or 3.2%, in the three months ended June 30, 2026 compared to the prior year primarily due to the absence of a $542 million legacy litigation charge recorded in the prior year, partially offset by continued business investments and operating expenses to support increased volume from the Rite Aid asset acquisitions.

Adjusted operating income

•Adjusted operating income increased $137 million, or 10.2%, in the three months ended June 30, 2026 compared to the prior year primarily driven by core pharmacy strength and contributions from the Company’s Rite Aid asset acquisitions. These increases were partially offset by continued business investments and the impact of consumer dynamics.

Prescriptions filled

•Prescriptions filled represents the number of prescriptions dispensed through the Pharmacy & Consumer Wellness segment’s retail pharmacies and infusion services operations, as well as through the Omnicare, LLC (“Omnicare”) long-term care pharmacies prior to their deconsolidation during the third quarter of 2025. Management uses this metric to understand variances between actual prescriptions dispensed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of prescription volume on segment total revenues and operating results.

•Prescriptions filled increased 4.3% on a 30-day equivalent basis in the three months ended June 30, 2026 compared to the prior year primarily driven by incremental volume resulting from the Company’s Rite Aid prescription file acquisitions and increased utilization, partially offset by the absence of long-term care pharmacy prescription volume following the deconsolidation of Omnicare in September 2025.

Revenues

•Total revenues increased slightly in the six months ended June 30, 2026 compared to the prior year primarily driven by pharmacy drug mix, increased prescription volume, including contributions from the Company’s Rite Aid asset acquisitions, and brand inflation. These increases were largely offset by regulatory-related price reductions on certain drugs, the impact of recent generic drug introductions and pharmacy reimbursement pressure.

•Pharmacy same store sales increased 3.0% in the six months ended June 30, 2026 compared to the prior year. The increase was primarily driven by pharmacy drug mix, the 6.9% increase in pharmacy same store prescription volume on a 30-day equivalent basis and brand inflation. These increases were partially offset by regulatory-related price reductions on certain drugs, the impact of recent generic drug introductions and pharmacy reimbursement pressure.

•Front store same store sales increased 1.1% in the six months ended June 30, 2026 compared to the prior year.

Operating expenses

•Operating expenses decreased $347 million, or 3.3%, in the six months ended June 30, 2026 compared to the prior year primarily due to the absence of $929 million in legacy litigation charges recorded in the prior year, partially offset by continued business investments and operating expenses to support increased volume from the Rite Aid asset acquisitions.

Adjusted operating income

•Adjusted operating income increased slightly in the six months ended June 30, 2026 compared to the prior year primarily driven by core pharmacy strength and contributions from the Company’s Rite Aid asset acquisitions. These increases were largely offset by continued business investments and the impact of consumer dynamics.

Prescriptions filled

•Prescriptions filled increased 4.0% on a 30-day equivalent basis in the six months ended June 30, 2026 compared to the prior year primarily driven by incremental volume resulting from the Company’s Rite Aid prescription file acquisitions and increased utilization, partially offset by the absence of long-term care pharmacy prescription volume following the deconsolidation of Omnicare.

Corporate/Other Segment

The following table summarizes the Corporate/Other segment’s performance for the respective periods:

Change

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

In millions, except percentages

$

%

$

%

Revenues:

Premiums

$

$

$

$

$

—

—

%

$

—

—

%

Services

2

2

4

4

—

—

%

—

—

%

Net investment income

%

%

Total revenues

%

%

Health care costs

4

%

4

%

Operating expenses

%

%

Operating loss

%

%

Adjusted operating loss (1)

%

%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of Corporate/Other segment operating loss (GAAP measure) to adjusted operating loss, which represents the Company’s principal measure of segment performance.

Revenues

•Revenues primarily relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products.

•Total revenues increased $51 million, or 53.1%, in the three months ended June 30, 2026 compared to the prior year driven by an increase in net investment income, reflecting increased income from private equity and equity fund investments and higher average fixed income investments in the three months ended June 30, 2026.

Adjusted operating loss

•Adjusted operating loss increased $64 million, or 15.5%, in the three months ended June 30, 2026 compared to the prior year primarily driven by increased business investments.

Revenues

•Total revenues increased $44 million, or 19.2%, in the six months ended June 30, 2026 compared to the prior year driven by an increase in net investment income, reflecting increased income from private equity and equity fund investments in the six months ended June 30, 2026.

Adjusted operating loss

•Adjusted operating loss increased $311 million, or 41.9%, in the six months ended June 30, 2026 compared to the prior year primarily driven by the retroactive effect of a change in a state law related to non-income taxes and increased business investments.

Liquidity and Capital Resources

Cash Flows

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of June 30, 2026, the Company had approximately $11.3 billion in cash and cash equivalents, approximately $2.7 billion of which was held by the parent company or nonrestricted subsidiaries.

The net change in cash, cash equivalents and restricted cash during the six months ended June 30, 2026 and 2025 was as follows:

Six Months Ended

Change

In millions, except percentages

$

%

Net cash provided by operating activities

$

$

$

%

Net cash used in investing activities

%

Net cash used in financing activities

%

Net increase in cash, cash equivalents and restricted cash

$

$

$

%

Commentary

•Net cash provided by operating activities increased by $4.1 billion in the six months ended June 30, 2026 compared to the prior year. The increase was primarily due to the timing of payments and receipts and improved operating performance in the Health Care Benefits segment in the six months ended June 30, 2026.

•Net cash used in investing activities increased by $972 million in the six months ended June 30, 2026 compared to the prior year. The increase was primarily due to higher net purchases of investments in the six months ended June 30, 2026.

•Net cash used in financing activities increased by $3.5 billion in the six months ended June 30, 2026 compared to the prior year primarily due to higher repayments of long-term debt during the six months ended June 30, 2026 compared to the prior year and proceeds from commercial paper borrowings in the six months ended June 30, 2025.

Short-term Borrowings

Commercial Paper and Back-up Credit Facilities

The Company did not have any commercial paper outstanding as of June 30, 2026. In connection with its commercial paper program, the Company maintains three $2.5 billion, five-year unsecured back-up revolving credit facilities, which expire in May 2029, 2030 and 2031. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of June 30, 2026, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Federal Home Loan Bank of Boston (“FHLBB”)

A subsidiary of the Company is a member of the FHLBB. As a member, the subsidiary has the ability to obtain cash advances, subject to certain minimum collateral requirements. The maximum borrowing capacity available from the FHLBB as of June 30, 2026 was approximately $1.3 billion. As of June 30, 2026, there were no outstanding advances from the FHLBB.

Debt Covenants

The Company’s back-up revolving credit facilities and unsecured senior notes contain customary restrictive financial and operating covenants. These covenants do not include an acceleration of the Company’s debt maturities in the event of a downgrade in the Company’s credit ratings. The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of June 30, 2026, the Company was in compliance with all of its debt covenants.

Debt Ratings

As of June 30, 2026, the Company’s long-term debt was rated “BBB” by Fitch Ratings, Inc. (“Fitch”), “Baa3” by Moody’s Ratings (“Moody’s”) and “BBB” by Standard & Poor’s Financial Services LLC (“S&P”), and its commercial paper program was rated “F2” by Fitch, “P-3” by Moody’s and “A-2” by S&P. The outlook on the Company’s long-term debt is “Negative” by Fitch and “Stable” by Moody’s. In May 2026, S&P changed its outlook on the Company’s long-term debt from “Negative” to “Stable”. In assessing the Company’s credit strength, the Company believes that Fitch, Moody’s and S&P considered, among other things, the Company’s capital structure and financial policies, as well as its consolidated balance sheet, its historical acquisition activity and other financial information, including the Company’s expectations for future earnings and cash flows.

Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot predict the future actions of Moody’s, S&P and/or Fitch. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.

Share Repurchase Programs

The following share repurchase programs have been authorized by CVS Health Corporation’s Board of Directors (the “Board”):

In billions

Authorization Date

Authorized

Remaining as of

$

$

Each of the share repurchase programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. Both the 2022 and 2021 Repurchase Programs can be modified or terminated by the Board at any time.

During the six months ended June 30, 2026 and 2025, the Company did not repurchase any shares of its common stock.

Dividends

The quarterly cash dividend declared by the Board was $0.665 per share in both the three months ended June 30, 2026 and 2025. Cash dividends declared by the Board were $1.33 per share in both the six months ended June 30, 2026 and 2025. CVS Health Corporation has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.

Critical Accounting Policies

The Company prepares the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, which require management to make certain estimates and apply judgment. Estimates and judgments are based on historical experience, current trends and other factors that management believes to be important at the time the unaudited condensed consolidated financial statements are prepared. On a regular basis, the Company reviews its accounting policies and how they are applied and disclosed in the unaudited condensed consolidated financial statements. While the Company believes the historical experience, current trends and other factors considered by management support the preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, actual results could differ from estimates, and such differences could be material.

For a full description of the Company’s other critical accounting policies, see “Critical Accounting Policies” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2025 Form 10-K.

Form 10-Q Table of Contents

Cautionary Statement Concerning Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements, so long as (1) those statements are identified as forward-looking and (2) the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions.

Certain information contained in this Quarterly Report on Form 10-Q (this “report”) is forward-looking within the meaning of the Reform Act or Securities and Exchange Commission rules. This information includes, but is not limited to the forward-looking information in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2 of this report. In addition, throughout this report and our other reports and communications, we use the following words or variations or negatives of these words and similar expressions when we intend to identify forward-looking statements:

·

Anticipates

·

Believes

·

Can

·

Continue

·

Could

·

Estimates

·

Evaluate

·

Expects

·

Explore

·

Forecast

·

Guidance

·

Intends

·

Likely

·

May

·

Might

·

Outlook

·

Plans

·

Potential

·

Predict

·

Probable

·

Projects

·

Seeks

·

Should

·

View

·

Will

All statements addressing the future operating performance of CVS Health or any segment or any subsidiary and/or future events or developments, including, but not limited to, statements relating to the Company’s investment portfolio, operating results, cash flows and/or financial condition, statements relating to corporate strategy, statements relating to future revenue, operating income or adjusted operating income, earnings per share or adjusted earnings per share, Health Care Benefits segment business, sales results and/or trends, medical cost trends, medical membership, Medicare Part D membership, medical benefit ratios and/or operations, Health Services segment business, sales results and/or trends and/or operations, Pharmacy & Consumer Wellness segment business, sales results and/or trends and/or operations, incremental investment spending, interest expense, effective tax rate, weighted-average share count, cash flow from operations, net capital expenditures, cash available for debt repayment, statements related to possible, proposed, pending or completed acquisitions, joint ventures, investments or combinations that involve, among other things, the timing or likelihood of receipt of regulatory approvals, the timing of completion, integration synergies, net synergies and integration risks and other costs, enterprise modernization, transformation, leverage ratio, cash available for enhancing shareholder value, inventory reduction, turn rate and/or loss rate, debt ratings and actions taken by ratings agencies, the Company’s ability to attract or retain customers and clients, store development and/or relocations, new product development, and the impact of industry and regulatory developments, as well as statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.

Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements. Many of these risks and uncertainties and other factors are outside our control.

Certain additional risks and uncertainties and other factors are described under “Risk Factors” included in Part I, Item 1A of the 2025 Form 10-K and under “Risk Factors” included in Part II, Item 1A of this report; these are not the only risks and uncertainties we face. There can be no assurance that the Company has identified all the risks that may affect it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial also may adversely affect the Company’s businesses. If any of those risks or uncertainties develops into actual events, those events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.

You should not put undue reliance on forward-looking statements. Any forward-looking statement speaks only as of the date of this report, and we disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise.

Form 10-Q Table of Contents