UnitedHealth Group UNH-N on Thursday delivered the quarterly financial report investors have been looking for, beating Wall Street’s second-quarter profit expectations and raising its 2026 forecast as it improved its medical cost management.
Shares in the company rose nearly 8 per cent in morning trading after the company reported improvements in its health insurance and Optum health services units, reflecting progress in a year-long turnaround effort.
Chief financial officer Wayne DeVeydt cited contributions from cost controls in the Medicare health insurance business as well as higher government reimbursement in Medicaid plans for low-income Americans.
“These results are not a reflection of a trend bending or coming under control, but rather our efforts to start pushing down what is already an elevated number,” said DeVeydt.
UnitedHealth CEO Stephen Hemsley, tasked to steer the company back to earnings growth, has refocused the organization and refreshed half of its top leadership, exited some health insurance products, and committed US$1.5-billion to invest in artificial intelligence.
Investors had dumped shares of the health care company in April of 2025 after it missed financial estimates and withdrew its financial outlook.
Results clear high bar
UnitedHealth now expects 2026 adjusted profit per share of US$19.50 to US$20.00 compared with its original forecast of at least US$17.75. Analysts expect a profit of US$18.47 per share for 2026, according to data compiled by LSEG.
On an adjusted basis, UnitedHealth earned US$6.38 per share in the second quarter, compared with an average analyst estimate of US$4.90.
J.P.Morgan analyst Lisa Gill said the forecast update cleared the high bar set by investors, who had been looking for a “path” to US$20.00.
UnitedHealth’s results lifted shares of other insurers, which were dragged down in Wednesday’s selloff after Elevance’s annual profit hike failed to impress investors. Shares of Humana and CVS Health also gained.
“Things certainly appear to have stabilized after the crack they had last year and now appear to be improving nicely,” said Greg Halter, Director of Research at Carnegie Investment Counsel. The investment advisory firms owns 104,832 UnitedHealth shares according to its latest regulatory filing.
Cost controls
UnitedHealth reported a second-quarter medical cost ratio – the percentage of premiums spent on medical care – of 86.70 per cent, better than analysts’ average estimate of 88.47 per cent and the year earlier’s 89.4 per cent.
The company said its insurance plan design changes and new pricing on products led to an improvement in the medical cost ratio.
UnitedHealth operates insurer UnitedHealthcare, health services unit Optum and a pharmacy benefit manager, Optum Rx.
The health insurance unit, UnitedHealthcare, reported second-quarter revenue of US$86-billion, compared with US$86.1-billion in the same quarter last year, while overall revenue rose to US$112-billion from US$111.6-billion. That beat analyst expectations of about US$111-billion, according to LSEG.
Higher costs for insurance, however, drove a membership decline, particularly for people purchasing plans through the Obamacare marketplace, where extra pandemic-era government subsidies expired, said DeVeydt.
Recovering growth margins in the company’s commercial business, which includes Obamacare plans, will take longer than originally anticipated, said UnitedHealthcare CEO Tim Noel.
Optum improvement
Second-quarter operating income for Optum jumped 29 per cent from a year earlier to US$4-billion, driven by improved operations at its technology segment and better access to care in its clinical unit.
In the previous quarter, Optum’s earnings had dragged as its operating income fell 15 per cent year-over-year to US$3.3-billion.
The AI tools the company has introduced this year have reduced the administrative burden and increased the amount of time Optum Health clinicians can spend treating patients, DeVeydt said.
“We said, with Optum Health, this would be a multiyear journey to return to historical growth levels and margins,” said DeVeydt, who expects revenue growth to fully return in 2028. “I would say we are ahead of schedule in year one.”