UnitedHealth Group (UNH -5.10%), a leading diversified healthcare and insurance provider, reported results for the second quarter of fiscal 2025 on July 29, 2025. The most significant news was its earnings disappointment: adjusted earnings per share (non-GAAP) came in at $4.08, well below the $4.48 analyst consensus, while revenue (GAAP) was $111.6 billion — slightly above the $111.5 billion projection.
Even with robust revenue growth, UnitedHealth Group’s profitability was weighed down by higher medical costs and a steep drop in operating margins, driven in part by unusually high utilization in its Medicare business earlier in the year and industrywide regulatory headwinds. Overall, the period highlighted strong top-line momentum alongside both operational and margin pressures, with management citing a path to stabilization and renewed growth in 2026.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Adjusted EPS (Non-GAAP) | $4.08 | $4.48 | $6.80 | (40.0%) |
| Revenue (GAAP) | $111.6 billion | $111.5 billion | $98.9 billion | 12.8% |
| Operating margin | 4.6% | 8.0% | (3.4 pp) | |
| Medical care ratio | 89.4% | 85.1% | 4.3 pp | |
| Cash flows from operations | $7.2 billion | $7.9 billion | (8.9%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.
Business Profile and Key Success Factors
UnitedHealth Group operates two principal businesses: UnitedHealthcare provides a wide range of health benefit plans including commercial, Medicare, and Medicaid coverage, while its Optum division delivers health services such as pharmacy benefits, care delivery, and health data analytics. The company serves over 50 million people through its medical plans, with a significant role in public-sector programs like Medicare Advantage and Medicaid.
Recent priorities have centered on integrating advanced data analytics and digital health technologies, driving efficiencies in care delivery, and expanding value-based contracts — payment arrangements where providers are rewarded to improve health outcomes and lower costs. The success of this strategy depends on keeping medical costs under control, maintaining strong relationships with regulators and providers, navigating changes in public policy, and continuing to expand through both organic growth and disciplined innovation.
Quarter Highlights: Revenue, Segment Trends, and Margin Pressures
UnitedHealth Group’s revenue (GAAP) increased $12.8 billion year over year to $111.6 billion, led largely by increased Medicare Advantage membership, with adjusted earnings per share dropping 40.0% compared to Q2 2024, and operating margin narrowing from 8.0% to 4.6%. The most critical factor was a steep spike in the medical care ratio, which reached 89.4%. The largest impacts were concentrated in the Medicare segment, where care activity (especially physician and outpatient visits) outpaced pricing assumptions earlier in the year. The company attributed $1.2 billion in one-time unfavorable items, including $620 million from accelerated anticipated losses in the individual exchange business and additional regulatory settlements.
UnitedHealthcare, the company’s health insurance business, saw revenue jump 17% year over year, reaching $86.1 billion, supported by strong growth in Medicare & Retirement (up 22% year over year), as membership in Medicare Advantage grew by over 500,000 through the first half of 2025. Medicaid revenues also grew 20% year over year, reflecting favorable rate resets and increased membership, while Employer & Individual’s commercial lines saw revenue grow year over year, with new additions in self-funded plans offsetting declines in fully insured plans. Still, operating earnings for the segment plunged from $4.0 billion to $2.1 billion, compared to Q2 2024, and margins dropped sharply due to the mismatch between care cost escalation and premium rates.
Optum, the services and health-tech arm, reported revenue of $67.2 billion. Inside Optum, results varied: Optum Rx, the pharmacy benefit business, delivered the fastest revenue increase (up 19%) with a record 414 million prescriptions processed, fueled by new customer wins. Optum Insight, which specializes in health data analytics and administrative platforms, enjoyed both improved margins and a growing $32.1 billion backlog in contracts.
In contrast, Optum Health, the division responsible for value-based care provider services, faced notable revenue and margin declines, reflecting the impact of new Medicare risk adjustment models (known as “V28”), less-engaged incoming patients, and slowed expansion targets. This unit lowered its planned expansion in new patients served under fully accountable value-based care models from 650,000 to 300,000 to prioritize operational execution amid ongoing challenges.
A key theme across the company was the pressure of medical cost trends outpacing pricing assumptions. UnitedHealth Group’s medical trend in Medicare Advantage is now around 7.5%, higher than the roughly 5% originally forecast. The company expects to adjust pricing and benefit design in 2026 to better reflect these realities, and is in the midst of reformulating plan offerings and risk models in response to recent regulatory changes.
Other notable developments included a decline in the operating cost ratio (from 13.3% to 12.3%), reflecting business mix, Part D program changes, reduced impacts from last year’s Change Healthcare cyberattack, and cost management activities, and a slight rise in consolidated medical membership, up 1.0 million year over year.
UnitedHealth Group has continued to return capital to shareholders, increasing its quarterly dividend by 5% to $2.21 per share and returning $4.5 billion through dividends and repurchases. The period also included $1.2 billion in discrete negative charges.
Forward Outlook and Management Guidance
Management reaffirmed guidance for full-year revenue in the range of $445.5 billion to $448.0 billion, while adjusted earnings are projected at least $16.00 per share (non-GAAP). This represents a downward reset from prior expectations, acknowledging the persistent impact of elevated medical cost trends and regulatory-linked headwinds. The company expects the medical care ratio to remain around 89.25%, and the operating cost ratio for the full year is expected to be about 12.75%, reflecting a continued focus on cost control amid escalated utilization.
Looking ahead, executive leadership has indicated that earnings growth is expected to resume, underpinned by updated pricing and plan designs that aim to more accurately capture the current healthcare cost environment. Investors are encouraged by progress in areas like technology-driven services, with Optum Insight’s backlog providing forward visibility, and the company’s ability to adapt its value-based care models.
However, management has stressed the ongoing risk of margin pressure in both health insurance and provider services, especially as industry transitions such as the phased implementation of the V28 risk adjustment and further regulatory changes take hold.
The quarterly dividend was raised 5% to $2.21 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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