CVS HEALTH Corp (CVS)

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.

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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

Commentary - Three Months Ended June 30, 2026 vs. 2025

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

•Operating 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.

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•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.

Commentary - Six Months Ended June 30, 2026 vs. 2025

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.

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Trends and Uncertainties

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

Business Trends and Uncertainties

•Utilization 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.

•The Company continues to share with clients a larger portion of rebates, fees and/or discounts rece

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (“MD&A”)

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K (this “10-K”), “Risk Factors” included in Item 1A of this 10-K and the “Cautionary Statement Concerning Forward-Looking Statements” in this 10-K.

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 building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of December 31, 2025, 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 more than 37 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). 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.

Overview of the 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 has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs and Medicaid health care management services. The Health Care Benefits segment’s primary customers, its members, primarily access the segment’s products and services through employer groups, government-sponsored plans or individually. The Health Care Benefits segment also serves customers who purchase products and services that are ancillary to its health insurance products. 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.” The Company also sold Insured plans directly to individual consumers through the individual public health insurance exchanges (“Public Exchanges”) through the year ended December 31, 2025. The Company exited the states in which Aetna operated on the Public Exchanges effective January 2026.

Overview of the 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 CordavisTM subsidiary. The Health Services segment’s health care delivery assets include Signify Health, Inc. (“Signify Health”), a leader in health risk assessments and value-based care, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on public and private health insurance exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

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Overview of the 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. As of December 31, 2025, the Pharmacy & Consumer Wellness segment operated approximately 9,000 retail locations, as well as online retail pharmacy websites, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.

Overview of the 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, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources and finance departments, information technology, digital, data and analytics, as well as acquisition-related transaction and integration costs; 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.

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Results of Operations

The following information summarizes the Company’s results of operations for 2025 compared to 2024.

For discussion of the Company’s results of operations for 2024 compared to 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 12, 2025.

Summary of Consolidated Financial Results

Commentary - 2025 compared to 2024

Revenues

•Total revenues increased $29.3 billion, or 7.8%, in 2025 compared to 2024. The increase in total revenues was driven by growth across all operating segments.

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

Operating expenses

•Operating expenses increased $3.3 billion, or 7.8%, in 2025 compared to 2024. The increase in operating expenses was primarily due to approximately $1.2 billion of legacy litigation charges related to two court decisions associated with the Company’s past business practices, a $320 million opioid litigation charge related to a change in the Company’s accrual for ongoing opioid litigation matters and $288 million of pre-tax losses on Accountable Care assets, all recorded in 2025, as well as increased investments in colleagues and capabilities in 2025.

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

Operating income

•Operating income decreased $3.9 billion, or 45.3%, in 2025 compared to 2024. The decrease in operating income was primarily due to a $5.7 billion goodwill impairment charge related to the Health Care Delivery reporting unit and the $1.2 billion of legacy litigation charges described above, both recorded during the year ended December 31, 2025. These decreases were partially offset by improved operating performance in the Health Care Benefits segment and the absence of approximately $1.2 billion of restructuring

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