Elevance Health Q2 2025: Revenue Growth vs. Rising Medical Costs

Today, we're diving into the latest quarterly report from Elevance Health (ELV), one of the nation's largest health insurance providers, known for its Anthem Blue Cross and Blue Shield plans. By examining their Q2 2025 income statement, we can get a clear picture of the company's financial health and the challenges it's facing in the current healthcare landscape.

Revenue Growth Meets Cost Headwinds

At first glance, Elevance posted strong top-line growth. The company generated $49.4 billion in operating revenue for the second quarter, a robust 14.3% increase from the same period last year. This growth was fueled by higher premium revenue from its health plans and significant expansion in its Carelon services division.

However, the story changes when we look at profitability. Net income for the quarter fell to $1.74 billion, a significant 24% drop from the $2.3 billion reported in Q2 2024. This resulted in diluted earnings per share of $7.72, down from $9.85 a year ago.

So, where did the money go? The primary cause was a sharp increase in medical costs. The company’s benefit expense ratio—a key metric that shows how much of every premium dollar is spent on medical claims—rose to 88.9% from 86.3% last year. In simpler terms, for every dollar Elevance collected in premiums, it paid out nearly 89 cents in medical care, up from about 86 cents previously. The filing attributes this pressure to "higher medical cost trend in our Medicaid business and Individual and Small Group ACA plans."

To get a better sense of how revenue flows through the company to become profit, here's a visual breakdown of the income statement.

A Tale of Two Divisions

Elevance's performance is a tale of two distinct parts of its business: the traditional insurance arm and its rapidly growing healthcare services segment, Carelon.

• Health Benefits: This core segment, which includes the Anthem and Wellpoint insurance plans, saw its revenue climb to $41.6 billion. However, its operating profit fell by 27% to $1.6 billion. This segment bore the brunt of the rising medical costs, with its operating margin shrinking from 5.8% to just 3.8%.

• Carelon: This segment, which includes the pharmacy benefit manager (PBM) CarelonRx and other Carelon Services, was the clear bright spot.

  • CarelonRx revenue grew over 21% to $10.6 billion, driven by higher prescription volumes.
  • Carelon Services revenue surged an impressive 64% to $7.4 billion, with its operating profit nearly doubling to $400 million, aided by recent acquisitions.

This highlights Elevance's strategy of diversifying beyond traditional insurance into a broader range of healthcare services, which provides a valuable buffer against the volatility of medical claims.

The Path Forward

Elevance Health's Q2 report paints a picture of a company successfully growing its revenue but grappling with the industry-wide challenge of rising healthcare costs. While the profit decline is significant, the strong performance of its Carelon services arm shows a strategic path forward.

The core challenge for Elevance, and indeed for the entire health insurance industry, will be to manage this medical cost inflation effectively. Investors will be closely watching how the company balances growth in its insurance membership with the need to control costs and improve profitability in its core Health Benefits segment.

For a more detailed look, you can find the complete financial statements in the company's 10-Q filing on the SEC's website.