UnitedHealth Group’s Q2 earnings are finally in, and the stock is getting CRUSHED still, down another 5% today two days after the earnings. And well, these earnings and the lack of defending the stock by management have given us a lot to talk about. We know many of you have been following the stock’s rollercoaster ride this year, with all the regulatory issues, Medicare Advantage cost challenges, and the recent CEO change.
We’ve been keeping a close eye on all of it, and we told you we’d be particularly interested in this quarter’s results. Now that the numbers are out, let’s break down the key takeaways and what you should know moving forward.
Unitedhealth q2 earnings A Tale of Two Numbers: Revenue Up, Profit Down
The big story from the Q2 report is a mix of good and bad news. On the one hand, total revenue grew by an impressive 12.9% year-over-year, hitting $111.6 billion. That’s a strong number and right in line with expectations.
However, the growth in revenue didn’t translate into profits. Earnings per share came in at $4.07, which was well below what we were hoping to see and a sign that the business is still facing some serious headwinds. We knew this quarter would be a challenge, but the results highlight just how much pressure the company is under.
unitedhealth q2 earnigns’ Elephant in the Room: The Medical Care Ratio
The single most important metric we were watching was the medical care ratio. This number tells us how much of every premium dollar the company collects is being spent on medical claims. In Q1, the ratio was 84.8%, but in Q2, it jumped to 89.4%. This steep increase confirms what we’ve heard from other insurers: members are using medical care a lot more than expected.
The company noted this increase is primarily due to a combination of higher-than-anticipated costs for services and a trend of newer members having more complex health needs than initially priced into their plans.
This Is a Fixable Problem for unitedhealth
Here’s the crucial part: while the higher medical care ratio is certainly weighing on profit margins, we believe this is a problem management can solve. How? By adjusting pricing.
The company can, and likely will, increase premiums on its plans. We’ve already seen reports that Medicare Part D premiums are set to rise sharply next year, and we expect UnitedHealth’s other offerings will follow suit. The new CEO has a strong case to make for these increases, given the hit to profitability this year. It’s not a quick fix, but it’s a clear path to recovery that should start to take effect upon renewals, especially in 2026.
Optum Is Still a Bright Spot
While the overall picture is mixed, the Optum division continues to perform well. The company’s Optum Rx segment was a standout, with revenues growing by 19% to reach $38.5 billion, thanks to strong growth from new clients. This part of the business remains a key driver of growth and a long-term positive for the company.
unitedhealth Guidance and the Road Ahead
One of the most significant pieces of news from the report was the company finally re-establishing its full-year guidance after suspending it earlier this year. The new outlook is for at least $16 in EPS for 2025, a significant step down from previous estimates. This is a bit worse than we had anticipated and is likely what’s spooking the market right now.
However, having this clarity is a good thing. It removes some of the uncertainty that has been hanging over the stock. While the market may react negatively in the short term, we can now look ahead to 2026, where the company expects to return to stronger growth as it implements its pricing adjustments. The new full-year medical cost ratio is now expected to be right around what we saw in Q2, which means the next two quarters will likely be painful from an earnings perspective.
What’s Next?
This was a pivotal earnings report, and the initial market reaction is pretty sour. The stock is historically cheap based on future growth prospects, but it’s important to remember that it could still get cheaper if operations don’t improve. That said, this is a profitable business with strong free cash flow and a healthy dividend yield. The management team has a clear plan to address the pricing issues, and we expect a return to solid earnings in 2026.
Patience is key here. We knew 2025 would be a difficult year, and this report confirms it. We’ll be listening to the earnings call for more color on the ongoing regulatory investigations and will keep you updated.