ELV Q4 Deep Dive: Margin Pressures and Membership Shifts Shape 2026 Outlook

Health insurance provider Elevance Health (NYSE:EVH) fell short of the markets revenue expectations in Q4 CY2025, but sales rose 9.6% year on year to $49.31 billion. Its non-GAAP profit of $3.33 per share was 7.7% above analysts’ consensus estimates.

Is now the time to buy ELV? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Elevance Health’s fourth quarter was marked by ongoing pressures in its core Medicaid and Medicare businesses, but management credited disciplined portfolio adjustments and cost management for maintaining performance aligned with expectations. CEO Gail Boudreaux highlighted that the company’s actions to reposition its book of business—such as exiting lower-margin geographies and tightening pricing—were aimed at stabilizing margins and setting a foundation for future growth. The quarter also saw continued revenue momentum in commercial accounts and growing demand for Carillon’s health solutions, despite the headwinds from lower risk-based membership.

Looking ahead, Elevance Health’s guidance for 2026 reflects a year of execution and repositioning, with management signaling a cautious outlook due to policy-driven changes and shifting membership dynamics. Boudreaux stated, “2026 is a year of execution and repositioning,” emphasizing targeted investments, operational rigor, and a disciplined approach to pricing and portfolio management. Management expects meaningful margin improvement in Medicare despite membership declines and is focused on strengthening care coordination, scaling specialty pharmacy, and leveraging analytics to address cost trends—while setting the stage for a return to double-digit earnings growth in 2027.

Key Insights from Management’s Remarks

Management attributed fourth quarter performance to deliberate margin-focused actions in government health programs, ongoing cost discipline, and targeted investments in analytics and care management.

• Medicaid margin pressures: Management noted continued misalignment between reimbursement rates and rising patient complexity, leading to operating margin pressure. Felicia Norwood, President of Government Health Benefits, described 2026 as a “trough year” for Medicaid, with anticipated margin improvement as rates catch up to cost trends and eligibility changes are digested.

• Medicare membership decline: The company intentionally exited certain Medicare Advantage geographies and products, focusing on maintaining margins and prioritizing dual-eligible and HMO offerings. Norwood emphasized that these deliberate choices were designed to strengthen long-term profitability, even as total membership is expected to decline in the high teens percentage range.

• Commercial business momentum: Management cited strong client retention and successful national account renewals, highlighting the impact of disciplined pricing and the integration of Whole Health Solutions, which combine medical, pharmacy, and behavioral health services for employers.

• Carillon growth and headwinds: The Carillon platform saw growing demand for its health management solutions, particularly in complex care. However, near-term growth will be moderated by lower health plan membership, especially in CarillonRx, while Carillon Services remains less affected due to its external client base and value-based contracts.

• Technology and analytics investment: Elevance Health is leveraging advanced analytics to identify high-cost care patterns and inefficiencies, expanding specialty pharmacy and behavioral health programs, and enhancing care management. The HealthOS platform is enabling real-time data exchange and improving care provider interactions, which management sees as essential for future cost control and member outcomes.

Drivers of Future Performance

Elevance Health’s 2026 outlook is shaped by ongoing shifts in government program dynamics, strategic portfolio repositioning, and investments in care management and analytics.

• Medicaid and regulatory headwinds: Management expects Medicaid margins to remain pressured in 2026 due to elevated cost trends and rates lagging patient acuity. New federal legislation, such as eligibility changes under the One Big Beautiful Bill Act, is expected to reduce Medicaid membership and shift the risk profile, but management is working with state partners to navigate these changes and restore margin stability over time.

• Deliberate Medicare repositioning: The company expects a significant decline in Medicare Advantage membership as a result of its decision to exit less profitable markets and focus on dual-eligible and HMO products, which are expected to support improved margins. Management highlighted that these actions are intentional and aligned with a disciplined approach to long-term growth.

• Commercial and Carillon opportunity: Healthy momentum in national commercial accounts and continued demand for Carillon’s complex care solutions are expected to partially offset headwinds in government programs. Investments in digital capabilities, specialty pharmacy, and care coordination are key priorities to drive sustainable growth and operational efficiency.

Catalysts in Upcoming Quarters

Looking ahead, our analyst team will closely monitor (1) state-level Medicaid rate adjustments and the impact of new eligibility requirements on membership and margins, (2) the pace of Medicare Advantage portfolio repositioning and the resulting margin trajectory, and (3) the effectiveness of technology investments in analytics, care coordination, and specialty pharmacy. Progress on integrating Carillon’s services and scaling whole health solutions will also be important signposts for Elevance Health’s ability to stabilize and grow earnings.

Elevance Health currently trades at $338.59, up from $323.62 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.