Agilon Health (AGL) Q2 Revenue Falls 6% | The Motley Fool

Agilon Health (AGL 6.77%), a company that supports primary care physicians through a value-based care platform, reported earnings on August 4, 2025. Headline results were meaningfully weaker than expected. GAAP revenue totaled $1.39 billion, missing the consensus GAAP estimate of $1,471.84 million, and GAAP earnings per share came in at $(0.25). The company also announced it was withdrawing its full-year 2025 financial guidance amid ongoing headwinds and a recent CEO transition. Overall, the period was marked by deteriorating membership, falling revenue, and notable negative swings in key profitability measures, setting a cautious tone for the near term.

Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.

Company Overview and Key Focus Areas

Agilon Health helps community-based physician groups transition to a value-based healthcare model. Its platform is designed to support physicians as they shift from traditional fee-for-service care, which emphasizes the number of services delivered, to value-based care that rewards improvements in quality and efficiency. The company forms long-term partnerships, usually spanning 20 years, with these groups and uses proprietary technology, including tools for data aggregation, care gap identification, and quality monitoring.

Recent years have seen Agilon focusing on improving core value-based care programs, deepening its technology capabilities, and reducing exposure to higher-risk features such as Medicare Part D drug spending. Success in these areas relies on strong, consistent partnerships, technical advancement in the data platform, and the stable execution of risk-bearing contracts. The company also prioritizes compliance with complex healthcare regulations and aims to enhance its competitive advantage through network effects among partner physician groups.

Quarterly Performance: Revenue Shortfall and Margin Pressure

This quarter’s results highlight a mix of market and company-specific pressures. GAAP revenue declined 6.0% year-over-year and fell well short of expectations, as GAAP revenue of $1,395 million missed analysts’ estimates by approximately 5.2%, coming in at $1.39 billion (GAAP) versus the expected $1.47 billion (GAAP). Membership also shrank, with total platform members down 5% to 614,000, including a 3% decline in Medicare Advantage members and a 12% drop in ACO REACH members. These declines were largely anticipated due to previously disclosed market and payer exits, but the degree of contraction was notable. the actual numbers met the low end of expectations but limit immediate prospects for scaling the business.

Across all profitability metrics, the quarter marked a sharp reversal. Gross profit (GAAP) turned negative at $(52) million, compared to a positive $32 million in Q2 2024. The medical margin, a non-GAAP metric representing the difference between medical services revenue and related expenses and serving as a key measure of performance in value-based care, also tumbled to a $(53 million) loss after recording $106 million in profit in Q2 2024. Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA, non-GAAP) dropped further into the red at $(83 million), from a $(3 million) loss in Q2 2024.

Underlying much of the financial downturn were retroactive adjustments to prior period expectations. The quarter absorbed a $66 million charge related to negative expense developments from earlier periods, with $20 million tied to exited markets and $13 million related to carved-out drug plan (Part D) costs. There was also a $37 million reduction to risk adjustment revenue for 2024, stemming from new data that revised downward the revenue the company is entitled to under risk-based contracts. A further $48 million shortfall was identified in risk adjustment revenue for year-to-date 2025 after the rollout of a more advanced data platform. This new platform now covers 72% of membership and has provided better visibility into ongoing business, but revealed that past risk adjustment estimates for 2024 and 2025 were too high. While these issues are a concern for financial predictability, leadership points to the improved data visibility as a long-term positive for better management and forecasting, as highlighted in 2025 company communications regarding the implementation of enhanced data platforms.

General and administrative expenses decreased approximately 19% year over year to $56.3 million. Platform support costs and geography entry costs were also down compared to the prior year. Medical services expenses increased 5.2% year over year, contributing to the margin shortfall. No material new compliance issues were cited, but the company highlighted that market and regulatory changes continue to create uncertainty in operations.

A leadership change occurred close to the earnings release. CEO Steven Sell stepped down, and Board Chairman Ronald A. Williams took over as Executive Chair on an interim basis until a new CEO is named. As a direct result of ongoing visibility and forecasting challenges, the company suspended its full-year financial guidance for fiscal 2025 — a departure from its previous practice.

Technology, Partnerships, and Service Programs

Agilon invested heavily in its data platform technology in 2025. The enhanced system now delivers detailed member data for 72% of users, improving the company’s ability to spot patterns, adjust risk assumptions, and support primary care physicians. The immediate effect of this upgrade was negative for financial results, as it surfaced underestimations in risk-based revenue and claims from prior periods. Leadership emphasized that these information gains are crucial for future stability, with the platform now covering 72% of the membership base.

Clinical programs focusing on chronic disease management—such as the heart failure program (targeting early detection and care in heart failure patients), expanded palliative care, and other chronic condition initiatives—remained a top priority. These programs aim to help doctors manage high-risk patients more effectively and improve medical outcomes while controlling costs. Early results point to progress in patient enrollment and risk stratification, but most of the financial benefit is expected to appear in 2026 and beyond, as it takes time to realize cost reductions and improved quality scores in these areas.

On the partnership front, the company’s anchor relationship model with physician groups saw stability within ongoing geographies but overall contraction due to market exits. The total number of platform members declined, reflecting management’s strategy to emphasize profitable, stable markets over broader but riskier growth. This focus seeks to improve long-term economics by concentrating on physician partners most aligned with Agilon’s value-based care approach.

The company’s approach to risk management, particularly in Medicare Part D (the prescription drug benefit for Medicare enrollees, which carries significant financial exposure if not tightly managed), continued to evolve. Agilon further reduced its share of Part D risk, now below 30% of membership, and is working to carve out the remainder in partnership renewals. Persistent industry trends—like challenges in controlling inpatient and physician-administered drug (Part B) costs—remained significant contributors to overall medical expense inflation, underscoring the difficulty of managing spending in value-based models at scale.

Outlook and What Lies Ahead

Management did not provide any formal financial projections for the full fiscal year, having withdrawn guidance due to continued uncertainty surrounding performance visibility and leadership transition. This lack of guidance reflects challenges such as leadership changes, ongoing implementation of performance visibility initiatives, and dynamic market conditions. As a result, forecasting for both revenue and profitability in the near term is much less certain than in previous periods.

Looking forward, the company points to possible tailwinds beginning in 2026, including changes to Medicare’s reimbursement model and continued rollouts of new clinical and technology initiatives. Agilon is moving to reprice contracts for a large portion of its membership base, with 40% repriced for January 1, 2025, and an additional 50% up for renewal on January 1, 2026, reduce exposure to high-risk elements like Medicare Part D, and expand quality-based incentives. However, cash flow, profitability, and membership growth are all expected to remain under pressure until these efforts take full effect. Investors should pay close attention to future quarterly updates, especially signs of stabilization in medical margin, clarity on technology savings, and resolutions to current leadership and forecasting uncertainties.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.